📄 Extracted Text (11,815 words)
[00:00:00] trust in the congressional budget office
[00:00:02] and is a consultant for the world bank
[00:00:04] in the urban institute
[00:00:07] richard
[00:00:10] your afternoon is richard
[00:00:14] richard a good man would they
[00:00:17] [Laughter]
[00:00:19] i'm sure
[00:00:20] um
[00:00:21] he's uh been in the budget modeling
[00:00:24] business for 13 do you houses or just
[00:00:27] okay just just budgets 13 years in the
[00:00:30] office of tax analysis at the u.s
[00:00:32] department of treasury
[00:00:34] richard worked on the taxation
[00:00:37] passed through
[00:00:38] entities and small businesses and
[00:00:41] co-authored treasury reports on the
[00:00:43] owners of pass-through businesses and
[00:00:45] helped develop treasury's methodology
[00:00:48] for identifying small business
[00:00:50] businesses from tax return data
[00:00:53] he's published numerous numerous
[00:00:55] patients
[00:00:56] papers and is really smart and i could
[00:00:58] go on forever about richard but we won't
[00:01:01] ephram
[00:01:04] okay ephraim
[00:01:06] uh lisa the development of the budget
[00:01:09] models
[00:01:10] economic model he's the guy that
[00:01:12] is modeling this stuff for us
[00:01:15] and we very much appreciate the model
[00:01:18] you've created
[00:01:19] and i wish everybody in america could
[00:01:21] stop what they're doing and listen to
[00:01:22] what you got to say but that's not
[00:01:25] possible hopefully our friends in the
[00:01:26] media will spread some of this
[00:01:29] two other witnesses maya i've talked
[00:01:30] about four president committee for
[00:01:32] responsible federal budget maya thank
[00:01:34] you for coming and sharing your thoughts
[00:01:36] and
[00:01:37] mark goldwyn senior vice president
[00:01:39] senior policy director committee for
[00:01:41] responsible federal budget
[00:01:43] so we're going to turn it over to our
[00:01:45] witnesses here and the reason i'm having
[00:01:47] this
[00:01:48] discussion
[00:01:49] is because there are many of us
[00:01:52] on this committee
[00:01:53] who voted with the democrats in a
[00:01:55] bipartisan infrastructure bill
[00:01:59] uh
[00:02:00] people on the right didn't like it so
[00:02:01] much people on the left didn't like it
[00:02:02] so much i thought it was just about
[00:02:04] right
[00:02:05] so we have people on this committee that
[00:02:07] can work with democrats to pass bills
[00:02:09] affecting american infrastructure which
[00:02:11] is in disrepair
[00:02:13] but all of us every republican on this
[00:02:15] committee will oppose bill back better
[00:02:18] because we think it does more harm than
[00:02:20] good we think it's a
[00:02:22] inflation bomb
[00:02:24] we believe it will hurt growing the
[00:02:26] economy rather than help growing the
[00:02:28] economy it will expand government at a
[00:02:30] time when we need to deal with our
[00:02:32] fiscal get our fiscal house in order
[00:02:35] and uh the american people need to know
[00:02:37] the truth as we see it
[00:02:39] about this proposal
[00:02:41] and the models created at wharton
[00:02:45] uh suggest
[00:02:47] that it's not 1.6 or 1.7 in reality it's
[00:02:51] 4 trillion
[00:02:52] and i just will end with this since the
[00:02:54] pandemic
[00:02:56] we spent more money fighting the
[00:02:58] pandemic than we did to win world war ii
[00:03:03] no end in sight
[00:03:05] all of us have spent money and sums that
[00:03:07] we never dreamed we would spend
[00:03:10] the
[00:03:11] total vote has been 90 to 96
[00:03:15] up until uh this congress when our
[00:03:18] democratic friends have gone down a
[00:03:20] different road
[00:03:21] it bothers me that
[00:03:24] we've departed from fighting
[00:03:27] coveted in a bipartisan fashion
[00:03:30] and now we're embarking on the biggest
[00:03:32] expansion of government
[00:03:34] in modern times
[00:03:36] at a time we can least
[00:03:38] afford it
[00:03:40] we're going to pile on
[00:03:42] the spending parade to create inflation
[00:03:44] we're just coming off thanksgiving
[00:03:47] and if you had to buy the food for
[00:03:49] thanksgiving and go to the gas pump to
[00:03:51] fill up the car
[00:03:52] you understand now is not the time to
[00:03:55] create more inflation problems
[00:03:57] for our country with that kent we'll
[00:03:59] start with you and uh
[00:04:03] anybody over here y'all can do it any
[00:04:04] way you want 10 or 15 minutes a piece
[00:04:07] and then we'll ask questions
[00:04:09] thank you senator i'll introduce the pen
[00:04:12] worm budget model and then turn it over
[00:04:13] to rich and ephraim to talk a little bit
[00:04:16] about the buildback better
[00:04:17] uh so penguin budget model was created
[00:04:20] about uh six years ago i really ramped
[00:04:22] it up over the last four or five years
[00:04:25] it was really in response to what i
[00:04:26] heard members
[00:04:28] telling
[00:04:29] me when i was at treasury uh as well as
[00:04:32] cbo and that is
[00:04:34] they want more analytics more insights
[00:04:36] while they're actually writing
[00:04:37] legislation and they also wanted to
[00:04:39] understand what's the impact on the
[00:04:40] economy what's impact on distribution of
[00:04:43] income and so forth
[00:04:44] and so our role goal is always to be an
[00:04:48] honest broker or transparent we do not
[00:04:50] engage in advocacy so we'll never call
[00:04:52] something good or bad we never recommend
[00:04:55] a policy we don't try to guess how
[00:04:57] policies might change in the future and
[00:05:00] one of the things that we also really
[00:05:02] focus on is trying to create a more
[00:05:04] neutral less biased way to look at the
[00:05:06] budget and spending and that includes
[00:05:09] when we think about dynamic scoring not
[00:05:11] just on the tax side but we include in
[00:05:13] lots of detail the impact of spending
[00:05:16] programs
[00:05:17] on economic growth as well so everything
[00:05:20] from pre-k education how that impacts
[00:05:22] families who otherwise may not have
[00:05:24] access to it to roads and how that
[00:05:26] impacts
[00:05:28] productivity in the economy as a whole
[00:05:30] so we use this comprehensive model to
[00:05:34] really look at across lots of different
[00:05:36] types of legislation infrastructure
[00:05:38] covic everything from granular things
[00:05:40] like the global minimum tax to
[00:05:42] things like a
[00:05:44] child tax credit but we can also do
[00:05:45] entire budgets where taxes and spending
[00:05:48] are interacting with each other and
[00:05:50] often with very first order effects and
[00:05:52] so seemingly very subtle differences and
[00:05:55] policies can often have a big impact on
[00:05:57] the tax side for example
[00:05:59] when you
[00:06:00] say take a minimum book tax and then
[00:06:03] combine it with a corporate rate
[00:06:04] increase the
[00:06:06] the sum of those things is going to be
[00:06:08] less in the revenue than the two
[00:06:10] individual because they in fact are
[00:06:12] interacting a lot so really
[00:06:14] understanding those interactions becomes
[00:06:16] important and the spending side
[00:06:18] will model things like you know health
[00:06:21] care and pre-k education and child
[00:06:24] care
[00:06:25] in a lot of detail in terms of who
[00:06:28] already had access to it and so forth so
[00:06:31] we literally start what's very different
[00:06:33] than existing say
[00:06:36] budget models or say wall street reduced
[00:06:38] four miles we literally start with
[00:06:40] almost 500 000 representative households
[00:06:43] uh and aggregate up their
[00:06:46] their decision making and we also think
[00:06:48] about how firms make decisions and so
[00:06:51] forth and so that level of granularity
[00:06:53] we
[00:06:54] explicitly model programs
[00:06:56] in our model it's very different than
[00:06:59] say wall street-ish models where there's
[00:07:01] a lot of human discretion because
[00:07:04] there's not really households making
[00:07:05] decisions they're not really firms
[00:07:07] making decisions there's a lot of
[00:07:09] discretion in those models in terms of
[00:07:10] how you map a particular program into a
[00:07:13] particular number or particular variable
[00:07:16] and so our framework allows us to really
[00:07:18] look at new legislation and not just
[00:07:22] assume some relationship in the past
[00:07:25] so that's really been the focus of
[00:07:27] really just trying to the bottom line is
[00:07:29] you know we're not normative we don't
[00:07:31] make recommendations we work with a lot
[00:07:33] of policymakers that come to us
[00:07:35] initially behind the scenes most of our
[00:07:37] work is actually not on our website it's
[00:07:39] policymakers i have an idea you know
[00:07:42] give me some feedback and so the the
[00:07:44] bottom line really for uh is if you have
[00:07:46] an idea
[00:07:48] come to us you know
[00:07:49] i'd love to talk to you
[00:07:51] about it and
[00:07:54] we now to be very discreet about it as
[00:07:56] well
[00:07:58] and we uh you know are very happy to
[00:08:00] give you feedback and also also run
[00:08:03] uh often very detailed analytics uh uh
[00:08:07] based on our on our framework so let's
[00:08:09] talk a little bit about buildback better
[00:08:10] in particular
[00:08:12] and rich is going to go from there and
[00:08:14] ephraim is going to talk about some of
[00:08:16] the macro yeah so the you know obviously
[00:08:18] you have in front of you there um
[00:08:20] on start on page seven there so we've
[00:08:23] got you know the list basically the
[00:08:25] spending amounts and for our modeling
[00:08:27] purposes we look at each of these
[00:08:29] together and then we have to put them
[00:08:30] into buckets to to to work into afrom's
[00:08:33] model which he can talk about but
[00:08:35] um
[00:08:36] for the the bill is written that's the
[00:08:38] the the one that we've actually seen the
[00:08:40] legislative language is 2.1 trillion
[00:08:42] dollars over 10 years we were asked to
[00:08:45] consider what if the programs were
[00:08:47] continued over time that's that second
[00:08:49] column on that same page where
[00:08:51] you know it's the illustrative example
[00:08:53] where we said okay this the programs
[00:08:54] that start
[00:08:56] um they continue you know forever so it
[00:08:58] goes over that 10-year window and that's
[00:08:59] where we get the the 4 trillion
[00:09:02] in in spending um
[00:09:12] you know that's a question i haven't
[00:09:14] looked at specifically you know
[00:09:15] obviously um you know you might have a
[00:09:17] better sense of those things that's not
[00:09:19] something that we've we've thought about
[00:09:22] so in the the the budgetary offsets and
[00:09:24] taxes there these are
[00:09:26] all of the the revenue there is is
[00:09:28] permanent and and you know our models
[00:09:30] show about 1.8 trillion
[00:09:32] over the 10 years
[00:09:34] again i think some minor differences
[00:09:36] with some other other other groups but
[00:09:37] that's um we're pretty confident our
[00:09:39] numbers there
[00:09:40] um and then we just have um a number uh
[00:09:43] table here just showing the the
[00:09:45] cumulative debt effects over time from
[00:09:47] from the extra spending net of the
[00:09:50] revenue there
[00:09:52] and then those things feed into our
[00:09:54] dynamic model which is what um
[00:10:00] as written was about 2.1 trillion in
[00:10:03] spending 1.8 in
[00:10:05] in revenue so a net of about 275 and
[00:10:09] then the illustrative is about four
[00:10:12] 4.5 trillion
[00:10:16] we don't believe as written it's the 2.1
[00:10:22] we don't make those decisions yeah yeah
[00:10:25] yeah so ephraim do you want to talk
[00:10:27] about the macros from the bill there um
[00:10:29] sure so um just uh up oh okay you got
[00:10:32] that right
[00:10:34] all right thank you
[00:10:35] um usually i talk loud enough without
[00:10:37] the microphone yeah uh well so i just
[00:10:40] wanted to correct a little bit so it's
[00:10:42] not my model we have a whole team and
[00:10:44] i'm proud to work on this team to put
[00:10:46] together this model over the last six
[00:10:48] years
[00:10:49] so what we've been doing uh with the
[00:10:51] model is it's a it's a model that is a
[00:10:53] long run macro model
[00:10:55] it's similar in style to what the cbo
[00:10:58] and jct use for many of their long-run
[00:11:00] macro projections so we're not doing
[00:11:02] anything
[00:11:04] that's you know completely out in left
[00:11:06] field we're following best practices for
[00:11:09] economics we do have a lot of details
[00:11:12] and that's really been our big effort
[00:11:15] in particular which i think has worked
[00:11:17] out well for our modeling of the build
[00:11:19] back better bill is we've been spending
[00:11:21] a lot of time this past year looking at
[00:11:24] the
[00:11:24] labor productivity effects
[00:11:27] that we can put into our model this
[00:11:29] started with the coveted learning loss
[00:11:31] but now you know we're able to use that
[00:11:33] same methodology to look at the effect
[00:11:35] of child care and and preschool
[00:11:38] so
[00:11:39] for uh for the bill as written and and
[00:11:42] even for the uh the permanent scenario
[00:11:44] sorry
[00:11:46] um
[00:11:47] that uh that we do
[00:11:49] most of these effects in terms of having
[00:11:52] a sizable impact on
[00:11:55] gdp or other macro effects as deviations
[00:11:58] from our current path uh show up much
[00:12:00] later than the the 10-year window so the
[00:12:02] 10-year window
[00:12:04] you'll get some some effects but
[00:12:07] primarily we don't see a lot going on in
[00:12:09] the first 10 years because it takes a
[00:12:10] while for
[00:12:12] um the
[00:12:13] the the built-in mechanisms that occur
[00:12:16] uh in the macro economy to to kind of
[00:12:18] come out um so the bill is written um i
[00:12:21] think you know you have the the numbers
[00:12:22] there in front of you uh but you know by
[00:12:25] the time we're
[00:12:27] um you know we're done with this there's
[00:12:29] minimal changes to to gdp uh on on the
[00:12:32] long run
[00:12:34] the permanent scenario that we did um
[00:12:36] obviously has much larger
[00:12:38] impacts on gdp and you have those
[00:12:40] numbers there as well on the following
[00:12:42] page i believe
[00:12:44] so just to put you know summarize uh
[00:12:46] just to summarize it's it's a slight
[00:12:48] negative in gdp over time we actually do
[00:12:51] this projection year by year
[00:12:53] but what effort was saying think about
[00:12:55] some of the child care pre okay
[00:12:57] education
[00:12:59] since we go right to those families that
[00:13:01] are you know represented in the
[00:13:03] household a four-year-old is obviously
[00:13:05] not going to enter the workforce within
[00:13:07] the 10-year budget window that's going
[00:13:09] to take a longer time so one reason why
[00:13:11] we go out over time
[00:13:14] all the way to 2050 in this case is
[00:13:16] because there is a bias in the 10-year
[00:13:18] budget window and that an investment
[00:13:20] like pre-k education is always going to
[00:13:22] look bad in the 10-year window because
[00:13:23] it's going to cost you money and you're
[00:13:25] not going to get the productivity gains
[00:13:26] from it uh until those uh current
[00:13:30] four-year-olds go into the you know into
[00:13:32] the workforce many decades later so we
[00:13:34] try to always keep things very
[00:13:37] level-headed and neutral in the sense
[00:13:39] that we're going to show the longer run
[00:13:40] impact as well
[00:13:44] great thank you senator thanks for
[00:13:46] pulling this group together thanks to
[00:13:47] all the senators who are here it's
[00:13:49] really great to be here with penn
[00:13:50] wharton um kent smatters and i have been
[00:13:52] working together on these issues for
[00:13:53] many many many years
[00:13:55] and the work that they have put out in
[00:13:57] this budget model is really invaluable
[00:13:59] um so kind of a similar mission when it
[00:14:01] comes to all of this we are real true
[00:14:04] believers that we need a bunch of
[00:14:05] unbiased credible numbers not influenced
[00:14:08] by the politics of it we think
[00:14:10] bipartisanship is the way to go we do
[00:14:12] have one clear advocacy position which
[00:14:14] is we are very concerned about fiscal
[00:14:16] responsibility and we are concerned
[00:14:17] about the use of debt
[00:14:19] um when it's not for economic reasons
[00:14:21] there are times to borrow we borrowed
[00:14:23] because we had to during covid
[00:14:25] um particularly in the beginning parts i
[00:14:27] would say but you don't want to borrow
[00:14:29] for political reasons and we worry about
[00:14:30] that on both sides of the aisle what
[00:14:32] i'll do is quickly try to lay out kind
[00:14:34] of what we attempt to do when we put our
[00:14:36] numbers out there how we do it some of
[00:14:38] the numbers on buildback better um we'll
[00:14:40] open up for discussion and then you'll
[00:14:42] also get to know mark goldwein who knows
[00:14:44] every single detail of every number out
[00:14:45] there so um he will be able to go into
[00:14:48] great great detail
[00:14:50] just briefly when we do come out with
[00:14:52] our numbers what we're trying to do is
[00:14:54] put the numbers that we think cbo the
[00:14:56] congressional budget office is going to
[00:14:57] put forth
[00:14:59] um and we often come out with those
[00:15:00] numbers in advance we do so because we
[00:15:03] think they'll be useful for lawmakers
[00:15:04] the media for the public they also give
[00:15:06] us an opportunity to iterate and come up
[00:15:08] with
[00:15:09] proposals that meet the goals that you
[00:15:11] want
[00:15:12] the process of doing that involves
[00:15:14] things like figuring out whether there's
[00:15:16] already a credible
[00:15:18] estimate that we can use whether it's
[00:15:20] from the people who are making the
[00:15:21] proposal outside modelers if cbo or jct
[00:15:25] has done something similar in the past
[00:15:27] if they're numbers that we can start
[00:15:28] with sometimes you get those numbers
[00:15:30] from the media from academics
[00:15:32] if there are not we tend to like to
[00:15:34] build off existing models we don't want
[00:15:36] to have to make our own estimates when
[00:15:38] we can avoid it we like to use cbo's
[00:15:40] numbers first and foremost there are
[00:15:42] referees we use them
[00:15:43] and lots of other credible institutions
[00:15:47] sometimes we will make our own numbers
[00:15:48] we'll use data from cbo omb
[00:15:51] irs
[00:15:53] the fed all of those great places
[00:15:56] and then once we come out with estimates
[00:15:57] we'll let people know are they rough or
[00:15:59] are they precise it will depend on how
[00:16:00] much good data we had
[00:16:02] once the cbo score comes out we try to
[00:16:05] take those numbers and put them in a way
[00:16:07] that's either apples to apples
[00:16:09] comparisons with other things or really
[00:16:12] user friendly and accessible we'll build
[00:16:13] summary tables we'll put together group
[00:16:16] policies by the different topics
[00:16:18] and we'll break out things by costs
[00:16:21] versus offsets which is really useful
[00:16:23] a few in the weeds details and again
[00:16:25] mark is going to go over all the in the
[00:16:27] weeds that you want to know but there
[00:16:28] are lots of things out there like
[00:16:31] we use the cbo's interest matrix for
[00:16:33] interest projections for the short term
[00:16:35] and we have our own model for the long
[00:16:37] term we use their water fl waterfall
[00:16:39] model which shows you how budget
[00:16:41] authority flows into outlays we adjust
[00:16:43] for timing issues like things with
[00:16:45] fiscal years and calendar years all
[00:16:47] sorts of things that are really
[00:16:48] difficult when somebody's trying to read
[00:16:50] these numbers on their own it's as
[00:16:52] though we wrote the budget in a way that
[00:16:53] makes it not accessible to people
[00:16:55] because it's really hard to get apples
[00:16:57] to apples comparisons our goal is to
[00:16:59] make it as easy to use as possible
[00:17:02] sometimes we do more specialized
[00:17:03] individualized estimates on things like
[00:17:05] the cost of extensions dynamic scoring
[00:17:08] second decade effects interest costs
[00:17:12] so
[00:17:13] when it comes to build back better
[00:17:14] there's two things first the
[00:17:16] congressional budget office finds that
[00:17:18] bbb would increase outlay outlays by 1.6
[00:17:21] trillion raise revenues by 1.3 trillion
[00:17:24] and generate an additional 207 billion
[00:17:26] from the irs enforcement for a total of
[00:17:28] 160 billion deficit
[00:17:31] the increase in outlays is not the same
[00:17:33] as gross costs so then what we do
[00:17:36] and wharton also does this is we look at
[00:17:38] the gross costs and so we look at um
[00:17:42] when when we estimate that we look at
[00:17:44] the 2.4 trillion of gross costs
[00:17:47] 2.27 trillion of offsets and some of the
[00:17:50] main differences that get you from the
[00:17:52] outlays to that is when you look at how
[00:17:54] you treat salt a big piece of this
[00:17:57] the energy tax credits drug and health
[00:18:00] savings
[00:18:02] that's gross costs but where i think the
[00:18:04] really important issue in all of this is
[00:18:06] in the expirations um and they are
[00:18:08] expirations that we think are really
[00:18:11] important to look at because the
[00:18:12] advocates of these proposals don't
[00:18:14] really want these policies to expire and
[00:18:17] that is a game that is played by all
[00:18:19] sorts of lawmakers we see it all the
[00:18:21] time but to your point it is very rare
[00:18:23] that something gets put in the budget
[00:18:25] and it isn't extended occasionally it's
[00:18:28] paid for we've gone back and looked very
[00:18:30] very rarely because people make the case
[00:18:32] again both sides of the aisle that look
[00:18:34] it's already it's already part of the
[00:18:36] policy we're just extending something
[00:18:37] that exists we shouldn't have to pay for
[00:18:39] it despite the fact that it's expiring
[00:18:41] because people weren't willing to pay
[00:18:42] for it in the first place
[00:18:44] so this really the big issue is the fact
[00:18:46] that you've got a bunch of policies that
[00:18:47] will expire after one year four years
[00:18:50] six years
[00:18:51] we have just updated our estimates and
[00:18:53] we find that if you look at the cost of
[00:18:55] extending all of those it would be 4.8
[00:18:58] trillion dollars
[00:19:00] 4.8 trillion dollars if they were made
[00:19:02] permanent without offsets
[00:19:04] is that for 10 years that's over the 10
[00:19:06] years yep
[00:19:08] so while it's structured to add 160
[00:19:10] billion over the decade
[00:19:12] it's 750 billion over the first five
[00:19:15] years because it's front loaded
[00:19:17] and the real risk that we see is also
[00:19:19] that it could be closer to 2.8 trillion
[00:19:21] in borrowing if the temporary provisions
[00:19:24] are extended without offsets um so i
[00:19:26] will stop there and look forward to the
[00:19:27] discussion
[00:19:32] i think maya covered everything great
[00:19:34] i'm happy to answer any questions so
[00:19:35] we're going to try this in english okay
[00:19:38] i think i think i got it
[00:19:40] i think i got i think i got the last
[00:19:42] part so maya you're saying that some of
[00:19:45] these programs
[00:19:47] expire after three years two years one
[00:19:49] year
[00:19:50] history tells us that's seldom true
[00:19:53] so if you assumed
[00:19:55] what history tells us is logical to
[00:19:58] assume that they continue for a 10-year
[00:20:00] period
[00:20:01] not expire after one two or three years
[00:20:04] that accounts for the dramatic
[00:20:05] difference
[00:20:07] and the difference is 4.8 versus
[00:20:10] what's the difference full cost would be
[00:20:12] 4.8 trillion and we would be borrowing
[00:20:16] 2.8 trillion okay so that's you'll be
[00:20:19] borrowing from
[00:20:20] trillion as opposed to 160 billion
[00:20:22] that's a big difference for the debt
[00:20:24] that's a huge difference 160 versus 2.8
[00:20:27] 4.8 versus whatever the number was to
[00:20:31] once yeah okay
[00:20:32] uh do you agree with that
[00:20:37] we do not try to replicate the cbo so we
[00:20:40] sometimes do differ differ on that
[00:20:42] including
[00:20:43] i like if you will look back at the tax
[00:20:45] cuts and jobs act we had a higher uh
[00:20:47] score until they did their technical
[00:20:49] revision came up to our number later on
[00:20:53] but for this
[00:20:55] case we for the legislation as written
[00:20:58] we believe
[00:20:59] that the
[00:21:00] that is not 160 bus 274 for as written
[00:21:05] and under the extension scenario which
[00:21:07] we call the illustrative we don't take a
[00:21:09] position whether or not we think this
[00:21:10] will or will not happen
[00:21:13] we estimate the
[00:21:14] increase in debt is about 2.7 trillion
[00:21:18] okay so roughly
[00:21:20] in the same ballpark of what uh maya has
[00:21:23] said for the illustrative but we are
[00:21:25] higher under 10 i'll turn it over to my
[00:21:27] colleagues who know more about this than
[00:21:28] i do but i just for the average person
[00:21:30] at home
[00:21:31] if these programs don't go away which
[00:21:33] they never do
[00:21:36] then the debt
[00:21:37] that we absorb through passing bill back
[00:21:40] better will be
[00:21:42] 2 six two seven two eight
[00:21:45] and the actual cost of the bill is
[00:21:48] in your view about four point eight and
[00:21:50] in your view over four trillion right
[00:21:52] yeah about four and a half okay
[00:21:54] uh senator crapow
[00:22:00] got it
[00:22:02] i'd just like to ask if you've analyzed
[00:22:04] each other's approaches and and can
[00:22:07] either of you can tell us why they are
[00:22:09] different
[00:22:10] that you you reach the same general
[00:22:12] conclusions
[00:22:13] but are hundreds of billions of dollars
[00:22:15] apart
[00:22:17] in your totals on both spending and
[00:22:19] offsets
[00:22:20] is there a difference in the model what
[00:22:22] is the explanation for that
[00:22:24] um thank you senator for the for the
[00:22:26] question so actually both organizations
[00:22:28] find the extensions will cost about 2.4
[00:22:31] trillion for different reasons the major
[00:22:33] difference is in what we count towards
[00:22:35] the gross costs so for example um we
[00:22:38] count the first five years of lifting
[00:22:40] the salt cap as part of the gross cost
[00:22:42] uh the penn wharton budget model treats
[00:22:43] that um over the 10-year period we count
[00:22:46] the increase in the or the uh delay of
[00:22:49] the research and experimentation credit
[00:22:50] in the gross cost and so a lot of this
[00:22:52] is just decisions over what things are
[00:22:54] in the bucket and what things are out of
[00:22:56] the bucket there also are modeling
[00:22:58] differences but they largely cancel
[00:23:00] because they go in both directions
[00:23:02] all right
[00:23:03] yes i mean
[00:23:04] the
[00:23:05] there's a labeling issue there's some
[00:23:07] ambiguity what is spending and whether
[00:23:09] the tax uh change and so
[00:23:12] what we ultimately care about for
[00:23:13] economics is the net effect and that's
[00:23:16] the
[00:23:16] increase in debt of uh for the bill as
[00:23:19] written
[00:23:20] around you know 270 billion we're higher
[00:23:23] than cbo um for the bill as as written
[00:23:27] because
[00:23:28] we you know again we have different
[00:23:29] approaches cbo and tends to be much more
[00:23:32] top-down
[00:23:33] and we tend to
[00:23:35] be much more bottom up in our approach
[00:23:38] all right thank you
[00:23:40] this is more of a conversation than a
[00:23:42] hearing so just jump in
[00:23:44] i have a question on um
[00:23:47] we just had we just had janet yellen
[00:23:49] today in in banking
[00:23:51] and you know she plays pretty
[00:23:54] creatively
[00:23:55] with a lot of this stuff so i read to
[00:23:57] her the cbo the actual cbo language and
[00:24:00] stopped the sentence short um you know
[00:24:02] the three 167 billion or whatever first
[00:24:05] year and all that
[00:24:06] you already know all the assumptions
[00:24:08] built out through 10. and then she said
[00:24:10] however the cbo and she's right
[00:24:13] has this disclaimer
[00:24:14] that is without considering
[00:24:17] enforcement irs enforcement
[00:24:19] and then of course
[00:24:21] in case that's not enough pixie dust
[00:24:23] then she talks about um
[00:24:26] and then the human behavior that that
[00:24:28] comes as a result of that in which case
[00:24:30] you can make any number any number you
[00:24:32] want have you guys done an analysis of
[00:24:34] that irs enforcement piece
[00:24:36] yes so um
[00:24:39] the the team and i have looked very
[00:24:41] extensively at this been discussions
[00:24:43] with a number of different groups i
[00:24:44] think mark as well on on on these things
[00:24:47] so
[00:24:48] those those things i think are standard
[00:24:50] approaches to this kind of estimation i
[00:24:53] think the difference between you know
[00:24:54] the administration and say cbo or us now
[00:24:57] we have more money come from irs than
[00:25:00] than cbo less than the administration
[00:25:03] that's built on certain things so
[00:25:04] depends on what part of the literature
[00:25:05] you want to look at i think it's the
[00:25:07] application of some of the economic
[00:25:09] literature
[00:25:10] the the human behavior the deterrence
[00:25:12] effect one of the things that that
[00:25:14] stands out is that a lot of the
[00:25:15] deterrence effects are built uh or
[00:25:17] estimated at lower income folks so the
[00:25:20] the low-income families that live in
[00:25:22] neighborhoods they react my neighbor got
[00:25:24] audited i'm gonna determine behavior the
[00:25:27] people at the other end the rich people
[00:25:29] don't quite react the same way and and
[00:25:31] so this enforcement is aimed at that
[00:25:33] greater group and so we felt
[00:25:34] that it was more necessary to to kind of
[00:25:36] dial back that effect
[00:25:38] um so again i think the approaches that
[00:25:40] they're taking are standard in the
[00:25:42] economic literature i think the the
[00:25:45] how you apply those things i think
[00:25:46] differs and so we've done a fair amount
[00:25:48] of work on that and two two quick
[00:25:50] follow-ups and i i can jump at is
[00:25:53] first
[00:25:54] one doesn't want to use an average
[00:25:56] response in the literature that goes for
[00:25:58] a low income and then across
[00:26:00] the entire income distribution that
[00:26:02] would just be
[00:26:03] obviously incorrect and so that's what
[00:26:05] you know rich is saying is that we make
[00:26:07] those adjustments for what we think this
[00:26:08] is targeted on and secondly a lot of the
[00:26:10] literature looks at if you actually had
[00:26:13] things that would be equivalent to like
[00:26:15] bank reporting and and a lot more
[00:26:17] information and one doesn't want to use
[00:26:19] those coefficients either if it does
[00:26:21] it's not appropriate for the law as
[00:26:23] written
[00:26:24] and so that that there's going to be a
[00:26:26] big differences on that we actually do
[00:26:28] find a big irs effect if you did have
[00:26:31] bank reporting and we don't again take a
[00:26:33] position on that we know that's not
[00:26:35] always
[00:26:36] probably
[00:26:37] not popular in this room but nonetheless
[00:26:39] uh we did find a much bigger effect with
[00:26:41] that can you help me with the numbers
[00:26:43] here i'm looking at page nine of your
[00:26:45] hand and just to understand what's going
[00:26:47] on here um
[00:26:49] help me understand i'm looking down at a
[00:26:51] line that says change in debt like the
[00:26:52] fifth line down there so this would be
[00:26:55] change in debt assuming uh that this
[00:26:57] these programs are not extended this is
[00:26:59] as written yes i understand it okay so
[00:27:01] change in debt as written so in the
[00:27:03] first year
[00:27:04] it would add 227 billion to the debt in
[00:27:07] the first year is that correct that's
[00:27:09] correct then
[00:27:11] then by year 2026
[00:27:13] the cumulative amount of debt that would
[00:27:14] have been added would be a trillion
[00:27:16] dollars that's right so basically as
[00:27:18] written this bill adds a trillion
[00:27:21] dollars to the debt
[00:27:23] in five years yeah and it's now they you
[00:27:25] know they're assumed they're after why
[00:27:27] taxes and so forth because the programs
[00:27:30] have hit a cliff they they reduce that
[00:27:32] gets back down to it 274
[00:27:34] billion dollars but the reality is it
[00:27:36] adds a trillion dollars to the debt even
[00:27:39] as written and then the line below
[00:27:42] of course is yours with the extension
[00:27:44] which is a very substantial number 2.7
[00:27:46] trillion by 2031.
[00:27:49] help me understand also the first year
[00:27:51] what are the sort of the numbers in the
[00:27:52] first year how much is spent in the
[00:27:53] first year and how big are the offsets
[00:27:56] in the first year the net of that is 227
[00:27:58] as i understand it so there's there's
[00:28:00] 227 billion dollars more being spent
[00:28:03] than revenues coming in
[00:28:05] so clearly this is inflationary at least
[00:28:09] in year one
[00:28:10] where we're we're borrowing 227
[00:28:14] billion dollars
[00:28:16] that's right so if we have budgetary
[00:28:19] offsets and taxes about
[00:28:21] 50 billion in 2022
[00:28:24] and so if we're adding 227 in debt that
[00:28:27] you would be 277 we're spending that's
[00:28:29] right so when you're in year one we're
[00:28:31] going to spend under this bill it would
[00:28:33] we would spend 277 billion and only take
[00:28:36] in 50 billion in taxes so it's very
[00:28:39] substantially inflationary in the first
[00:28:42] year and i presume that's going to be
[00:28:43] the case i don't need to get the numbers
[00:28:45] each year but but for the first three or
[00:28:47] four years that's going to be the case
[00:28:49] so when i read from the administration
[00:28:51] that oh this is anti-inflationary
[00:28:54] they're saying over the long term what
[00:28:56] they're apparently pointing to is that
[00:28:57] in years 2030 or 2031 when when these
[00:29:01] programs
[00:29:02] as written have all hit a cliff and have
[00:29:04] disappeared you just have the tax
[00:29:05] increases at that point so it would be
[00:29:07] anti-inflationary then but of course the
[00:29:09] programs will continue am i reading that
[00:29:11] correctly yeah there's there's multiple
[00:29:13] moving parts here so we
[00:29:15] would not again we tend to avoid words
[00:29:18] like substantial and and so forth but
[00:29:21] nonetheless we could imagine that
[00:29:23] inflation that
[00:29:24] is probably
[00:29:26] could increase it depending on how what
[00:29:29] is actually happening with
[00:29:31] covid or in supply chains and so forth
[00:29:34] so there's a lot of assumptions there
[00:29:35] that one has to
[00:29:38] make a vaccine adoption was much higher
[00:29:40] that in supply chain started to come
[00:29:42] back we would actually have less
[00:29:43] inflationary
[00:29:45] pressure you could imagine a quarter
[00:29:47] point increase in inflation during uh
[00:29:49] the first year do we think it's
[00:29:52] a substantial more than that we that's
[00:29:55] probably uh we don't think it's uh more
[00:29:58] than that uh uh during the first year
[00:30:01] but clearly um it's it all comes to
[00:30:03] supply and demand and where is supply
[00:30:05] going to be where's covet going to be
[00:30:08] where is vaccination rates are going to
[00:30:10] be uh and so forth what the
[00:30:12] administration is talking about there's
[00:30:14] really two different elements to it one
[00:30:16] is the infrastructure bill which is
[00:30:18] separate they're saying that that's
[00:30:19] going to complement private production
[00:30:21] and that should actually increase supply
[00:30:23] and therefore be anti-inflationary
[00:30:25] that is certainly
[00:30:27] possible over a longer period of time
[00:30:30] but that also ignores the federal
[00:30:31] reserve what is the federal reserve
[00:30:33] going to do
[00:30:34] and to neutralize some of that
[00:30:36] inflation anyway because we think over
[00:30:38] long periods of time the fed does have a
[00:30:40] policy it's not going to really allow
[00:30:43] you know significant inflation but over
[00:30:46] the short run there's no question you
[00:30:48] know
[00:30:49] increase in demand for cement and so
[00:30:50] forth could actually have some
[00:30:52] inflationary pressure but it's so spread
[00:30:54] out the time to build on infrastructure
[00:30:56] is so spread out we actually think it's
[00:30:58] the minimus from that component when it
[00:31:01] for this particular bill
[00:31:03] it's a little bit different now we're
[00:31:04] talking about like the child tax credit
[00:31:06] and things like that and that does leave
[00:31:09] money in people's pockets and the
[00:31:10] question is what do they do with that
[00:31:12] money and it's actually what the
[00:31:14] evidence shows is that over three
[00:31:15] quarters of that money actually got
[00:31:17] saved it's not actually
[00:31:19] just people going out and buying stuff
[00:31:21] immediately and so we don't think it's
[00:31:23] going to be you know uh you know a
[00:31:26] inflationary pressure that's so uh large
[00:31:29] but you could imagine potentially a
[00:31:31] quarter point yeah
[00:31:33] help me understand one more thing and
[00:31:34] i'll let my colleagues take over and
[00:31:36] that is as i'm looking at your figures
[00:31:38] here either using baseline or
[00:31:42] a continuation of programs you show this
[00:31:45] as having a negative impact on gdp
[00:31:46] growth
[00:31:47] is that right i mean i'm looking at the
[00:31:49] charts here in each case
[00:31:51] it's it's uh it's a
[00:31:54] i know you don't like the words
[00:31:55] substantial but there's an impact on a
[00:31:57] negative impact on gdp i don't maya is
[00:32:00] that does your yeah we would like that
[00:32:02] neutral though it's that's a pretty
[00:32:04] small effect for us yeah although when i
[00:32:07] see a negative in front of a number it's
[00:32:09] a negative impact maybe not substantial
[00:32:11] but i i was with one senator on the
[00:32:13] other side of the aisle who said to me
[00:32:15] if we pass bbb our economy is just going
[00:32:17] to take off it's going to grow up
[00:32:19] because we're going to be providing
[00:32:21] child care for people that means more
[00:32:22] women are going to want the workforce
[00:32:24] more women in the workforce will mean
[00:32:25] more gdp
[00:32:26] uh and and uh this is going to really
[00:32:29] just really ignite the american economy
[00:32:31] and we incorporate a lot of those
[00:32:33] effects including increase in labor
[00:32:35] supply but net net you conclude this
[00:32:36] does not grow the economy right do you
[00:32:39] both have both both models
[00:32:42] either on the as written or on a
[00:32:43] continuation basis both models suggest
[00:32:46] that the economy will not be
[00:32:48] so we don't specifically model the gdp
[00:32:50] effects but there are pressures in both
[00:32:52] directions right so there are different
[00:32:53] policies that will be pro growth the
[00:32:55] fact that it is debt financed in a lot
[00:32:57] of ways particularly if you make these
[00:32:58] extensions that is anti-growth and so we
[00:33:01] find that the estimates that say it
[00:33:02] could be slightly negative make sense
[00:33:04] given those competing pressures same
[00:33:06] thing on inflation the administration's
[00:33:08] making the point that this would not be
[00:33:10] inflationary because there's some
[00:33:11] policies that would get people back to
[00:33:12] work things like that but there are many
[00:33:14] policies that would be inflationary we
[00:33:16] overall find that this is likely to be
[00:33:19] um on that inflationary particularly in
[00:33:21] the frontiers because it is so front
[00:33:23] loaded and so if you want to avoid the
[00:33:26] really big risks of inflation right now
[00:33:29] one of the best things you do is you
[00:33:30] figure out how you pay for this and you
[00:33:32] don't front load it with all this
[00:33:33] borrowing in the early years of the time
[00:33:35] that we're trying to avoid an
[00:33:36] inflationary cycle
[00:33:38] if i can add something on the
[00:33:40] productivity aspects of it which i think
[00:33:43] sorry
[00:33:44] i'll talk another way
[00:33:46] so uh the the question about the economy
[00:33:49] taking off so we have done um a brief
[00:33:51] it's on our website about
[00:33:53] our
[00:33:54] estimates of the macroeconomic impacts
[00:33:56] of the child care
[00:33:57] and pre-k provisions
[00:34:00] and a variety of programs that was a
[00:34:01] wider wider brief and from our
[00:34:05] reading of the literature that's out
[00:34:06] there
[00:34:08] the the effects
[00:34:09] in terms of broad gdp are fairly small
[00:34:12] from these programs and the reason is
[00:34:13] that you're really helping
[00:34:15] the lower productivity workers
[00:34:18] you can think of it basically in the
[00:34:19] following way if if um
[00:34:22] if a mother was capable of making a
[00:34:24] fairly high wage in the workforce um and
[00:34:27] she has to take care of her kids she can
[00:34:28] trade off working in the market earning
[00:34:31] that money paying a caregiver what a a
[00:34:34] child that has caregivers who can't make
[00:34:37] that money
[00:34:38] would then uh you know force those
[00:34:40] caregivers to
[00:34:42] be uh you know be available for that
[00:34:44] child so these programs from our reading
[00:34:46] of literature boost gdp slightly
[00:34:49] but really not at the level of that
[00:34:51] you're going to have this huge takeoff
[00:34:53] of the economy the big benefit of these
[00:34:54] programs is again that you are helping
[00:34:56] those those people and we do
[00:34:59] an analysis not just insurance gdp but
[00:35:01] also distributable effects
[00:35:04] again
[00:35:05] you know it's all on our website if you
[00:35:07] want to take a look the
[00:35:09] effects for the lower income people are
[00:35:10] significant but in terms of we're
[00:35:12] talking about broad gdp impacts these
[00:35:14] programs in our estimation are just not
[00:35:16] going to do it
[00:35:18] thank you i'd like to go back if before
[00:35:20] we leave
[00:35:21] kevin's question completely about the
[00:35:23] irs and ask a question you're probably
[00:35:26] aware of a report that we asked joint
[00:35:28] tax to do for us
[00:35:30] that we basically ask them where is the
[00:35:32] tax cap that the irs is going to go
[00:35:34] collect
[00:35:36] and on which income cohorts does this
[00:35:38] collection fall
[00:35:41] my question is whether you have analyzed
[00:35:43] when you talk about how the irs
[00:35:46] expenditure is going to generate x
[00:35:48] billion dollars
[00:35:50] worth of
[00:35:51] increased tax collection have you in
[00:35:54] your analysis did you analyze that by
[00:35:56] income cohorts where is the tax cap that
[00:35:59] this money is collecting
[00:36:01] by income
[00:36:03] um so yes we did to answer your question
[00:36:05] so um
[00:36:07] the the tax cap is tends to be people
[00:36:09] with that own they have through income
[00:36:11] so they have partnerships or s
[00:36:12] corporations they own their own
[00:36:14] businesses and that those people tend to
[00:36:16] be further up the income distribution so
[00:36:18] um you know off the top of my head we're
[00:36:19] talking about 300k a year that's where a
[00:36:22] lot of this this
[00:36:23] tax gap is from so that this enforcement
[00:36:27] um as design would be hitting those so
[00:36:29] folks that's different than what joint
[00:36:31] tax
[00:36:32] are you familiar with the joint tax rate
[00:36:33] i haven't seen the report that you asked
[00:36:35] them to do i haven't seen that we'll get
[00:36:37] it to you but sure they concluded that
[00:36:40] just as you said it was mostly an
[00:36:41] underreported income
[00:36:43] in small businesses
[00:36:45] and
[00:36:46] when but when they went through the
[00:36:47] cohorts by the time they got up into the
[00:36:49] three hundred thousand dollar range they
[00:36:51] were over 90 percent had already been
[00:36:53] picked up
[00:36:54] that study showed only nine tenths of
[00:36:56] one or nine percent was above five
[00:36:59] hundred thousand dollars that would be
[00:37:00] different for me that is very different
[00:37:02] so again we've looked at the irs so
[00:37:04] there's information the irs reports
[00:37:06] about
[00:37:07] different types of income and where
[00:37:08] where it goes and and there's lots of
[00:37:10] reports on where the hiding of the
[00:37:11] income comes from and so i'd be very
[00:37:13] curious to look at it i'd like to see
[00:37:14] your data on that too sure it's actually
[00:37:17] publicly available on the irs website
[00:37:19] all right but yeah but um but yeah no
[00:37:22] happy to get you that report as well and
[00:37:23] i'd like mark's answer too i think one
[00:37:26] possibility of the difference here is i
[00:37:27] think that um you may be talking about
[00:37:29] the reporting rate and you're talking
[00:37:30] about the distribution of gaap itself so
[00:37:32] it could be true that um the tax cap is
[00:37:34] relatively low among high earners but
[00:37:36] because they pay most of the taxes they
[00:37:38] would still have a very large portion
[00:37:39] that's the the the joint tax report goes
[00:37:42] into actual dollars
[00:37:44] and so i i think there's a huge
[00:37:46] difference here and what i'm hearing you
[00:37:47] bill say yeah we have we haven't looked
[00:37:49] at the um at the distribution i mean our
[00:37:51] view is
[00:37:52] you write the tax code to make the
[00:37:54] distribution you want and then you
[00:37:55] enforce the tax code rather than
[00:37:56] worrying about the distribution of of
[00:37:59] enforcement but um one possible
[00:38:01] difference here is yeah which kind of
[00:38:03] figures you're looking at
[00:38:05] so i have two questions one relates to
[00:38:07] the tax aspect did you study more than
[00:38:10] just the tax impact of the spending on
[00:38:12] irs i mean did you actually look at the
[00:38:14] increased tax rates and
[00:38:15] and okay so did you come up with a
[00:38:18] different revenue figure than what cbo
[00:38:20] comes
[00:38:21] through their static scoring
[00:38:23] and then what what is the difference i
[00:38:25] mean what what is the cbo score what is
[00:38:26] your score what's your score in terms of
[00:38:28] actual tax rev
[00:38:30] generated so i just want to make sure i
[00:38:32] understand the question so just for the
[00:38:34] revenue raisers us versus cbo sort of
[00:38:36] yeah so there so um
[00:38:39] yes we have looked at it i think ken
[00:38:41] might have it in in front of him to know
[00:38:43] the specifics but so a number of the
[00:38:44] things that change um you know is how
[00:38:46] much income they have say in the top tax
[00:38:48] bracket though that varies slightly so
[00:38:50] our numbers will be off just because we
[00:38:51] have different people of that particular
[00:38:53] income so a number of those differences
[00:38:55] happen there on i'm just i'm literally
[00:38:57] looking for if their cbo's is one point
[00:39:00] what is it 1.5
[00:39:02] yeah i think it's 1.5 uh what what what
[00:39:05] is what is your revenue projection 1.8
[00:39:08] you actually have more revenue uh yeah
[00:39:11] but you do keep in mind some of this is
[00:39:12] terminology what what falls in the
[00:39:14] revenue understand what
[00:39:16] what about yours so we actually don't
[00:39:17] score we didn't do the tax cap numbers
[00:39:19] um we take the cbo numbers let me take
[00:39:22] take a step back on the taxes again
[00:39:24] tax cap is different than literally
[00:39:26] increasing the corporate income tax
[00:39:28] right now i mean i'm talking about their
[00:39:29] entire tax package yeah i think he's
[00:39:31] talking about those
[00:39:33] higher revenues
[00:39:35] yeah i mean you're talking about decimal
[00:39:36] numbers here you've got spending in so i
[00:39:37] just want to know to what is this only
[00:39:39] concentrate on this and the spending or
[00:39:40] did you actually look at the
[00:39:43] static score versus what
[00:39:45] i'm hoping you do more of a dynamic
[00:39:47] score on no so it's sort of different so
[00:39:48] we don't have our own micro simulation
[00:39:50] model so when cbo or joint tax has
[00:39:52] numbers we work off of those numbers and
[00:39:54] then the things we contribute are like
[00:39:56] the cost of extension so we haven't
[00:39:57] modeled that that's kind of what i've
[00:39:59] assumed this was
[00:40:00] i guess my second question then is
[00:40:03] cbo's assumptions in terms of
[00:40:05] inflation and interest rates are those
[00:40:07] already obsolete
[00:40:09] and
[00:40:11] if they are have you factored in
[00:40:14] and made your own calculations in terms
[00:40:16] of what you think the inflation rates
[00:40:17] can be over the 10 years what the and
[00:40:19] what's more important as it relates to
[00:40:21] this what the interest rate is because
[00:40:22] of that
[00:40:24] yes so we um a couple things one is
[00:40:28] on our report on our website for
[00:40:31] uh this the house bill we actually have
[00:40:34] an appendix where we actually do uh
[00:40:36] comparison between us and cbo and what
[00:40:39] the difference in the numbers so we
[00:40:41] definitely have
[00:40:42] differences like uh the share buyback uh
[00:40:45] tax revenues there's this almost twice
[00:40:47] as large as ours and so forth so we we
[00:40:50] we compare on a on a provision uh basis
[00:40:54] there is some definitional uh uh
[00:40:56] differences but your question that about
[00:40:58] inflation uh so what we we do have um
[00:41:02] our own interest rate model in terms of
[00:41:05] what we think treasury will uh issue in
[00:41:08] terms of the the mixture the duration
[00:41:11] average weighted of of treasuries
[00:41:14] and that certainly is
[00:41:17] what we ultimately care about on gdp
[00:41:19] growth because is our gdp growth numbers
[00:41:22] are net of inflation we
[00:41:24] ultimately care is about the real
[00:41:26] interest rate net of inflation over the
[00:41:29] next couple years you could imagine
[00:41:31] something like this again contributing a
[00:41:33] little bit to inflation uh it would
[00:41:36] again i think an upper bound for 2022
[00:41:39] would be about a quarter
[00:41:40] of a point but over time we do uh
[00:41:44] believe that the federal reserve does
[00:41:46] ultimately neutralize they they engage
[00:41:48] in policy to ultimately neutralize
[00:41:50] inflation so we then you know have that
[00:41:53] have that um estimation
[00:41:56] in our model the cbo we don't think that
[00:41:59] we've had differences of with them in
[00:42:01] the past
[00:42:02] and in including with the tax cuts and
[00:42:04] jobs act we had quite a bit different
[00:42:06] numbers there initially until they did
[00:42:09] their revision um after it was passed
[00:42:12] but we
[00:42:13] don't think that their numbers are
[00:42:15] necessarily outdated so so is it safe to
[00:42:18] say as ronald reagan stated that
[00:42:20] the closest thing to eternal life on
[00:42:22] this earth
[00:42:23] is a government program you know because
[00:42:25] of that and that's that's just a reality
[00:42:27] unfortunately uh is the state safe that
[00:42:29] your analysis we've set aside all the
[00:42:32] details is literally that
[00:42:34] you're quite confident
[00:42:36] that the deficit would increase by by
[00:42:38] about 2.7 trillion dollars
[00:42:40] over 10 years versus what the cbo is
[00:42:42] saying is somewhere around 300 billion
[00:42:45] dollars
[00:42:46] be something we would never like to say
[00:42:47] when it comes to budget projections but
[00:42:49] the difference you were going to grab
[00:42:51] and you can explain but the difference
[00:42:52] is two things they're estimates which we
[00:42:54] think makes sense but they are
[00:42:55] constrained in what they are assume
[00:42:58] i know because they're they're they're
[00:42:59] assuming things as you said are going to
[00:43:00] live on as the the proponents of the
[00:43:03] policies want them to we think that's
[00:43:04] more likely or at least it's worth
[00:43:06] looking at the score of what that would
[00:43:08] cost that's the more likely reality
[00:43:10] let's put it that way yeah and i
[00:43:11] understand that cbo's constrained
[00:43:13] they've got to score it a certain way
[00:43:14] but the more likely reality
[00:43:16] because a government program is
[00:43:18] eternal life on this earth
[00:43:20] it just to be clear we don't take a
[00:43:22] position what we think is realistic
[00:43:24] again we score as written
[00:43:27] like the cbo but uh we were asked by
[00:43:30] members for this illustrative
[00:43:32] alternative the same thing we did with
[00:43:33] the tax
[00:43:34] tax cuts and jobs act we also did
[00:43:36] because there's sunsets there as well
[00:43:38] we've also done that analysis in the
[00:43:40] past so your your four point
[00:43:42] uses four point six trillion dollars
[00:43:43] yeah yeah yep that assumes these
[00:43:45] programs end on as their schedule no no
[00:43:48] no that's under the illustrative uh
[00:43:51] scenario where they in fact are all 10
[00:43:54] years oh okay
[00:43:55] so
[00:43:56] senator brown but i want to just put a
[00:43:58] fine point on this
[00:44:01] i like the budget committee there's a
[00:44:02] lot of it i don't understand but i
[00:44:04] understand this part of it
[00:44:06] i've been here long enough to know that
[00:44:08] both parties uh end programs to make the
[00:44:12] bill cheaper
[00:44:14] so the programs that they've started
[00:44:17] they're going to declare to be over
[00:44:18] after three years that almost never
[00:44:21] happens
[00:44:22] when we write a tax bill
[00:44:24] we'll sunset for whatever reason the
[00:44:27] effect of the tax cut and seldom does
[00:44:29] that happen
[00:44:30] so the truth of the matter here is and
[00:44:32] see if i've got this right
[00:44:33] if you look at these programs over a
[00:44:36] 10-year period not three not two not one
[00:44:40] you come up with a deficit of about two
[00:44:43] seven
[00:44:44] 2.7 trillion is that right
[00:44:47] is that right for
[00:44:48] you so what i want the american people
[00:44:51] to know that the bill that's written is
[00:44:53] not the bill you're going to pay for
[00:44:56] the bill you're going to pay for
[00:44:59] is going to be
[00:45:01] almost 10 times larger than the numbers
[00:45:04] we're dealing with here today because
[00:45:06] the game we play here in washington
[00:45:09] you were asked at wharton to assume
[00:45:11] these programs don't go away and you
[00:45:14] came up with almost the same number you
[00:45:16] came up with
[00:45:17] in terms of adding to the deficit
[00:45:20] also you came up with the cost to the
[00:45:22] bill it's not 1.7 it's over 4 trillion
[00:45:26] in both scenarios is that right
[00:45:28] so we're talking about a bill that cost
[00:45:30] over 4 trillion not 1.75 we're talking
[00:45:34] about a bill that will add to the
[00:45:35] deficit not 275 billion or whatever the
[00:45:38] number is but 2.7 or 2.8 trillion
[00:45:42] is that a fair summary of what we're
[00:45:44] talking about again i would distinguish
[00:45:46] the bill as written we project a debt of
[00:45:49] 1.8 trillion
[00:45:50] we do not make the assumption
[00:45:53] uh we we do this illustrative
[00:45:55] alternative because we're requested for
[00:45:57] that information but we're not going to
[00:45:58] take the position that this bill costs
[00:46:00] that much money no i got it but you
[00:46:02] understand what i'm saying i've asked
[00:46:03] you if these programs don't go away you
[00:46:05] gave me a number that's that's correct
[00:46:07] what's that number yeah and i agree
[00:46:09] that's that's okay that's that's simple
[00:46:11] all right senator brown
[00:46:13] so i think senator graham and senator
[00:46:15] johnson we're getting at the
[00:46:17] inevitability of where we're headed
[00:46:20] and i really don't think you need i love
[00:46:22] cutting edge modeling because that's
[00:46:24] kind of where i came from so often you
[00:46:26] get it you never pay attention to it
[00:46:28] anyway
[00:46:29] i'd like i know you don't want to
[00:46:31] advocate
[00:46:32] but i'd love to hear your opinion
[00:46:35] over 10 years
[00:46:37] if our structural trillion dollar
[00:46:38] deficit now looks like it's going to be
[00:46:40] between 1.2
[00:46:42] 1.3 up to 1.5 trillion
[00:46:46] what happens in 10 years
[00:46:49] when we then add what is that 15
[00:46:52] trillion dollars more
[00:46:54] to our existing nearly 30 trillion
[00:46:56] dollars worth of debt just it's pretty
[00:46:58] close on the numbers
[00:47:00] how does this all play out
[00:47:02] in terms of without advocating for
[00:47:04] buildback better let's just assume
[00:47:07] in 10 years we're at that level of debt
[00:47:10] 45 trillion
[00:47:11] how long can we keep extrapolating into
[00:47:14] the future
[00:47:15] those kinds of
[00:47:17] deficits annually that seem to grow
[00:47:20] rather than ever go back the other way
[00:47:22] and what are your best guesses
[00:47:24] on how this whole thing starts to
[00:47:27] cascade into a disaster what are some of
[00:47:30] the first triggers that would initiate
[00:47:32] it like
[00:47:33] busting the medicare trust fund
[00:47:35] the chinese maybe getting involved in
[00:47:38] reforming their capital markets interest
[00:47:40] rates go up historically four to five
[00:47:42] points
[00:47:43] what is your best guess
[00:47:45] of what happens then to the system
[00:47:49] avoiding using words like cascading and
[00:47:51] busting
[00:47:53] so that's happening literally in front
[00:47:55] of us right i mean we start with the
[00:47:58] current baseline increase in debt which
[00:48:01] like you said is going to increase
[00:48:04] over the next decade um and then
[00:48:07] relative to that baseline under your
[00:48:09] scenario of all these programs were
[00:48:12] what we call illustrative that is they
[00:48:14] were made permanent a reduction in gdp
[00:48:16] about 1.1
[00:48:18] relative to the baseline which already
[00:48:21] has slowing economic growth yeah and
[00:48:24] we're adding trillions to the debt where
[00:48:26] do where do you think
[00:48:28] just
[00:48:30] in putting on some type of idea of where
[00:48:32] we end up how do you start to
[00:48:36] remediate it
[00:48:37] and what happens inside i'd like to see
[00:48:39] the modeling on where in the hell
[00:48:42] things end up
[00:48:43] not what we can extrapolate basically
[00:48:45] from the proof we've had over the last
[00:48:47] 10 years
[00:48:48] what does 45 trillion dollars in debt do
[00:48:52] to us as a country
[00:48:54] and do we have any chance of ever
[00:48:56] wrestling it back yeah and
[00:48:58] in our model is not based on the past
[00:49:14] let's face it the baseline debt
[00:49:17] without any change in law already is
[00:49:19] growing
[00:49:20] and so this is relative to that baseline
[00:49:23] which already has the increase in debt
[00:49:24] and that is reduction of this gdp of 1.1
[00:49:28] if things are made permanent
[00:49:30] and then that reduction is even larger
[00:49:32] over time again under this illustrative
[00:49:35] alternative
[00:49:36] if you were to also reduce the baseline
[00:49:39] amount of debt and that is you were to
[00:49:41] do something to increase revenue or
[00:49:44] reduce costs even outside of this
[00:49:46] legislation just about the baseline you
[00:49:48] could also
[00:49:49] have very similar levels of increase in
[00:49:52] gdp
[00:49:54] as as as a result of that so you can
[00:49:56] imagine um if we were to tell you know
[00:49:59] the debt gdp ratio at something closer
[00:50:02] to 90 percent we've done those
[00:50:04] experiments on our website
[00:50:05] where we slowly bring back the debt gdp
[00:50:08] ratio back down uh you you
[00:50:12] what happens if we don't do that well it
[00:50:14] happens because if you're taking what
[00:50:16] you're modeling is showing currently in
[00:50:18] past behavior
[00:50:20] that is a very uh
[00:50:22] nice uh assessment of what might occur
[00:50:24] that's i'm interested in looking at yeah
[00:50:27] and where i agree keeps going in the
[00:50:28] same direction yeah and that's why our
[00:50:30] model of being for looking away these
[00:50:31] capital markets where investors are
[00:50:33] making decisions and they uh there's no
[00:50:35] question if they get
[00:50:36] ultimately they think this is off the
[00:50:38] rails and they get spooked then you
[00:50:40] could actually have a significant
[00:50:42] economic uh
[00:50:44] oh i'm sorry you could have you know
[00:50:47] declines in gdp not
[00:50:49] forget about the word significant uh but
[00:50:52] if you if you were to have uh hope they
[00:50:55] don't fire you yeah that's right
[00:50:57] fire myself yeah but if they
[00:51:00] you you you would have uh a a
[00:51:03] a a reduction in gdp and the capital
[00:51:05] stock potentially of even double-digit
[00:51:08] in terms of the capital stock
[00:51:10] that's about baseline law yeah so we
[00:51:13] actually this is one of the
[00:51:15] issues with these kind of very bottoms
[00:51:18] up you know you have investors making
[00:51:19] decisions ultimately they have to
[00:51:21] believe
[00:51:23] that congress
[00:51:25] is going to balance things eventually
[00:51:27] because if they didn't believe that
[00:51:29] then think about the forward-looking
[00:51:31] nature of investment why would you
[00:51:33] believe that why would you believe that
[00:51:35] why would you believe that well that is
[00:51:36] clearly capital markets
[00:51:38] because if capital markets did not
[00:51:40] believe that that
[00:51:42] they because they didn't believe that
[00:51:44] well
[00:51:45] okay this is all fascinating if we take
[00:51:47] over the senate we'll have long talks
[00:51:49] about this
[00:51:51] can maya comment on it too i'd like you
[00:51:53] to
[00:51:55] sure
[00:51:56] okay good well i mean i think i think
[00:51:58] senator it's really helpful to
[00:51:59] understand where we are and where we're
[00:52:00] headed right now debt is about as large
[00:52:01] as the economy if we do nothing we're
[00:52:03] going to be at record levels above world
[00:52:05] war ii 107 by the end of the decade if
[00:52:07] we passed buildback better than
[00:52:09] extensions we'd be about 117. if we also
[00:52:12] extended the tax cuts that expire the
[00:52:14] tax extenders grow discretionary
[00:52:16] spending as we normally do we're going
[00:52:17] to be about 130 135 percent of gdp by
[00:52:20] the end of the decade that's without
[00:52:22] accounting for potential interactions
[00:52:23] with gdp and interest we'd have um
[00:52:26] interest rates at sort of the highest
[00:52:28] level they've been back to their 1990s
[00:52:29] so that's the path we're on yeah why the
[00:52:32] capital markets still believe that we're
[00:52:33] going to do everything great it's a
[00:52:34] little bit surprising to me but they do
[00:52:36] and you should take advantage of that
[00:52:37] because your interest rates are low and
[00:52:39] that means you can make changes slowly
[00:52:41] and gradually you don't have to make
[00:52:42] them abruptly because you've interest on
[00:52:44] your side is that because we're the only
[00:52:45] reserve currency currently is that what
[00:52:48] giving us that
[00:52:49] i mean i think
[00:52:51] yeah i mean i think we're the finest
[00:52:52] horse in the glue factory i'm not sure
[00:52:53] that um we don't need to be the reserve
[00:52:55] currency we print on our own currency we
[00:52:57] are the strongest economy in in the
[00:52:59] world there are a lot of reasons to
[00:53:00] believe in the u.s government but it may
[00:53:02] be the bigger you are the harder you
[00:53:03] fall type situation that um you believe
[00:53:05] until you don't and then there's a
[00:53:06] global financial crisis so the worst
[00:53:08] case scenario is the interest rates are
[00:53:10] low for a number of reasons so it's the
[00:53:12] result uh this is fascinating discussion
[00:53:15] we're not gonna fix this before
[00:53:16] christmas will you give me 30 seconds
[00:53:18] yeah i will but we're going to vote on
[00:53:20] this bill before christmas
[00:53:21] the reason we're having this hearing
[00:53:23] this discussion is i want people to
[00:53:26] understand what we're about to vote on
[00:53:27] up here we're not voting on a bill that
[00:53:30] costs 230 billion 270 billion we're
[00:53:33] voting on a bill based on reality call
[00:53:35] it whatever you want it's going to be
[00:53:37] about two seven or two eight we're
[00:53:39] voting on a bill it doesn't cost 1.7
[00:53:41] it's over 4 trillion that's the point of
[00:53:44] this both of y'all have come to similar
[00:53:46] conclusions
[00:53:47] assuming one thing these programs don't
[00:53:49] go away
[00:53:52] yes please quickly say because i think
[00:53:54] the question is why should you care
[00:53:55] about this and the debt issue is really
[00:53:57] important because it leads to
[00:53:58] undermining your economic strength your
[00:54:00] economic growth won't grow as
[00:54:02] quickly if you
[00:54:03] bring your debt up too much it means
[00:54:05] that you're not able to respond to the
[00:54:07] next crisis when something comes along
[00:54:08] and you do need to borrow it means that
[00:54:10] as we are in dangerous geopolitical
[00:54:12] competitive environments we're not able
[00:54:14] to be our strongest and it means we're
[00:54:16] vulnerable not just economically but in
[00:54:18] terms of our national security means
[00:54:20] that we're not able to develop the
[00:54:21] programs that we need looking forward
[00:54:23] for the threats and opportunities we're
[00:54:25] still stuck in the past and we don't
[00:54:26] have the ability to have the flexibility
[00:54:28] in our budget so i do just want to put
[00:54:29] it here
[00:54:30] amen human story on it because it's lots
[00:54:32] of models and baselines and that's what
[00:54:34] we all do all day right but there's a
[00:54:36] real effect on this country and our
[00:54:37] well-being and our positioning in the
[00:54:39] world senator scott so are neither of
[00:54:41] you have you taken match the machine
[00:54:43] okay
[00:54:44] on on for either of your models have you
[00:54:46] said what you believe interest rates
[00:54:48] gonna do over the next 10 years
[00:54:51] our model follows cbo's trend on
[00:54:53] interest rates which assumes they
[00:54:55] get up to about halfway where they were
[00:54:58] before the breaker
[00:54:59] so
[00:55:00] and what so what would your top what
[00:55:02] would it be your top number
[00:55:04] in your model
[00:55:05] i'd have to check i think about three
[00:55:06] and a half percent and what's the what's
[00:55:09] the you know 50-year average for 10-year
[00:55:11] treasury
[00:55:12] much higher interest rates if it's
[00:55:13] almost six hours it's almost six and you
[00:55:16] guys do you guys do anything on interest
[00:55:17] rates oh yeah we have our interest rates
[00:55:19] also increase we have a different model
[00:55:21] than cbo on that how high do yours go uh
[00:55:23] we we do go a little bit higher
[00:55:25] especially outside the 10-year window
[00:55:27] we're a little bit higher with a
[00:55:29] relative cbo within the 10-year window
[00:55:31] but not much and it's outside the
[00:55:33] 10-year window because we have these
[00:55:35] feedback effects of debt on the capital
[00:55:37] formation
[00:55:39] uh we tend to go higher so on either of
[00:55:41] your models
[00:55:42] are you when you when we're running
[00:55:44] deficits as a result of this bill are
[00:55:46] you adding in the interest expense each
[00:55:47] year for the deficit sure that's that is
[00:55:50] some part uh there's conventional
[00:55:51] interest rate though yeah
[00:55:53] oh sure yeah and but the interest rate
[00:55:55] then 50 year average
[00:55:57] uh it is and they but it is on the path
[00:56:00] investors understand the path going
[00:56:03] is going up over time it's still what
[00:56:05] you're saying is half what our 50 year
[00:56:07] average
[00:56:08] of interest rates are yes and
[00:56:10] yeah and if rates go up in historically
[00:56:12] if historically if rates are low rates
[00:56:15] go above that what two seven becomes
[00:56:17] four depending on the interest rate
[00:56:19] whatever the interest rate is right so
[00:56:21] it's something it's yeah it's not all
[00:56:22] right no i get i get what you're saying
[00:56:24] there's no question that there's the as
[00:56:27] interest rates are going to go up
[00:56:28] there's really two things going on one
[00:56:30] is the
[00:56:30] duration average of treasuries has
[00:56:33] shrunken over time that means that we
[00:56:35] haven't locked in these low interest
[00:56:37] rates for that long so let me ask you
[00:56:39] this question along with senator scott
[00:56:41] how do you combat inflation do you raise
[00:56:42] interest rates to combat inflation
[00:56:45] uh
[00:56:46] there are commonly known taxpayers there
[00:56:49] there are multiple ways of combating
[00:56:51] inflation so this is where
[00:56:53] matters usually well let me tell you
[00:56:54] what's going to happen america we're
[00:56:56] going to eventually have to raise
[00:56:57] interest rates or we're going to i
[00:56:59] remember i bought my first house it was
[00:57:01] 17
[00:57:03] because the carter years we had rampant
[00:57:05] inflation well how do you control
[00:57:06] rampant inflation one of the things
[00:57:08] we're going to be looking at doing is
[00:57:09] raising interest rates well when you
[00:57:11] raise interest rates that means you got
[00:57:12] to service the debt eventually that
[00:57:15] affects one thing affects the other uh
[00:57:18] but i want to put a fine point on this
[00:57:20] the reason i wanted you to come is
[00:57:22] because this is my words not yours this
[00:57:24] whole bill's a fraud
[00:57:26] it's a complete lie well fraud lie
[00:57:29] whatever term you want to use you're
[00:57:30] right it doesn't cost 230 billion
[00:57:33] dollars in terms of additional deficit
[00:57:36] spending 270 whatever the cbo number is
[00:57:39] it costs 2728 somewhere in that range
[00:57:42] because these programs don't go away
[00:57:44] here's the good news cbo has told me
[00:57:48] in response to my letter that they're
[00:57:49] going to try to do what you did
[00:57:52] cbo has the ability to do what these two
[00:57:55] groups did not exactly right-wing groups
[00:57:57] here
[00:57:59] these two groups were asked to assume
[00:58:01] for a moment
[00:58:03] that the programs don't go away and you
[00:58:05] interact everything then you come up
[00:58:07] with a vastly different number a number
[00:58:10] that is
[00:58:11] totally different in terms the actual
[00:58:13] cost and the actual addition to the debt
[00:58:16] so in my view the whole damn thing's a
[00:58:18] fraud
[00:58:19] my words not yours if you assume these
[00:58:22] programs don't go away cbo in case
[00:58:25] you're watching this
[00:58:27] you need to do what these folks did
[00:58:29] sooner rather than later so we can make
[00:58:31] an informed decision about the what the
[00:58:33] hell we're going to vote on before
[00:58:34] christmas if it's going to be that quick
[00:58:37] i want to raise one other question
[00:58:39] that's being debated in the actual bill
[00:58:42] um and it gets back to human behavior
[00:58:44] and the productivity question
[00:58:45] particularly workforce productivity
[00:58:46] question that senator romney asked
[00:58:49] the bill as it came out of the house has
[00:58:51] no work requirements for all these
[00:58:52] things that are supposed to
[00:58:54] add to our workforce and you touched a
[00:58:56] little bit on what income levels are
[00:58:58] affected by this well without a work
[00:59:00] requirement why would it why would uh
[00:59:04] you know a poor
[00:59:06] family
[00:59:08] go to work if they're gonna get more
[00:59:09] money
[00:59:10] to not work i i i failed to understand
[00:59:12] how productivity gets added to all of
[00:59:15] because of all these programs when
[00:59:17] nobody's required to work to get them
[00:59:20] so we take it at very much the program
[00:59:23] level so things like pre-k education
[00:59:26] that does actually target
[00:59:28] uh families who otherwise could not have
[00:59:30] acquired pre-k education so we actually
[00:59:33] will look at families who otherwise
[00:59:34] would have had that access and who
[00:59:36] otherwise would not have had access but
[00:59:39] of course that
[00:59:41] it takes years for it to come into
[00:59:43] effect and that's why we in fact do go
[00:59:45] beyond 10 years so that we really have a
[00:59:47] balanced view of that other provisions
[00:59:50] you're right they create what economists
[00:59:52] call the income effect that you feel
[00:59:54] something feel a little richer and so
[00:59:56] you can buy more things and part of that
[00:59:58] is more time more leisure and in fact
[01:00:01] we've done analysis of things like
[01:00:02] universal basic income we talked about
[01:00:04] before the hearing or this
[01:00:07] discussion the alaska permanent fund and
[01:00:10] you know the evidence there is that
[01:00:11] labor supply actually went down in those
[01:00:13] cases
[01:00:14] with those with those transfers but then
[01:00:16] there's other programs that i
[01:00:19] could actually free up
[01:00:20] parents to actually
[01:00:22] work join the workforce and so forth so
[01:00:25] we are looking at each program
[01:00:27] individually and allowing those things
[01:00:29] to interact you know
[01:00:31] you're not going to pick that up on kind
[01:00:32] of the the wall street-ish type models
[01:00:35] because there's too much human
[01:00:36] discretion to figure out how to map to
[01:00:38] you know lots of programs into one or
[01:00:40] two variables and just just add to that
[01:00:42] um a few of the programs for example the
[01:00:44] child care subsidies which which have
[01:00:46] their own issues and the paid leave
[01:00:48] actually do have work requirements
[01:00:49] associated with them yeah i think the
[01:00:51] bigger issue is how much money you're
[01:00:53] spending to subsidize people that are
[01:00:54] going to be getting child care or have
[01:00:56] paid leave anyway and in some ways
[01:00:58] that's sort of wasted money it's a
[01:00:59] transfer that's not boosting anybody's
[01:01:01] child care or boosting anyone's ability
[01:01:03] to to work but um but sort of lost
[01:01:05] dollars
[01:01:06] so do you think will will the bill cause
[01:01:09] more inflation
[01:01:11] it's
[01:01:12] not going to cause less um yes it will
[01:01:15] cause
[01:01:16] maya what do you think it will cause
[01:01:18] more inflation but it's not going to be
[01:01:20] again we think in 2022 the child tax
[01:01:23] credit
[01:01:24] large the larger driver there it may be
[01:01:27] a quarter a point
[01:01:28] on that we think it's modestly
[01:01:30] inflationary we think the risk of
[01:01:31] inflation isn't really borrowing money
[01:01:34] trillions of dollars is not inflationary
[01:01:36] so it's the time it's the it's the
[01:01:37] amount of time it's paid over so
[01:01:38] compared this to the bill that we the
[01:01:40] american recovery act which was very
[01:01:42] inflationary because it was so much in a
[01:01:43] short amount of time this is spread out
[01:01:45] however it's still front loaded the risk
[01:01:47] of inflation is serious you really want
[01:01:49] to err on the side of caution when we
[01:01:51] have inflation now
[01:01:52] exactly and it could start a spiral so
[01:01:54] the best thing to do is not borrow for
[01:01:56] this bill that is the way that you would
[01:01:57] make this less inflammation if we have
[01:01:59] if we have inflation
[01:02:01] so what's the federal reserve have to do
[01:02:03] they have to one they only have one
[01:02:05] thing they can do actually now yeah
[01:02:06] they've done everything else right yeah
[01:02:08] it's only one thing that they i didn't
[01:02:10] go to wharton but i figured this one out
[01:02:11] they're gonna raise interest
[01:02:14] they've done everything else the only
[01:02:15] thing left is to raise interest rates
[01:02:17] right
[01:02:19] what else can they do so
[01:02:20] yeah i mean
[01:02:22] if you were a betting person would you
[01:02:24] bet that that that would be the way they
[01:02:26] would here's how it gets worse so when
[01:02:28] interest rates go up what's going to
[01:02:29] happen to the stock market
[01:02:31] yeah people substitute the way yeah it's
[01:02:33] going to go down number number two go
[01:02:35] back to senator graham's idea about the
[01:02:37] house if interest rates if interest
[01:02:39] rates to buy a house go up if they
[01:02:41] double yeah what happens to the value of
[01:02:43] the house it goes down houses sell based
[01:02:45] on on what it costs a month to pay for
[01:02:47] the the mortgage right right
[01:02:49] so so the most important investments we
[01:02:51] have our houses are going to go down in
[01:02:53] value
[01:02:54] and the stock market's going to go down
[01:02:56] if the stock market goes down the income
[01:02:58] effect
[01:02:59] is the opposite
[01:03:00] people are rich are poor
[01:03:02] right
[01:03:03] to put a fine point on that according
[01:03:05] what you did based on the bill is
[01:03:06] written there's about a 275 billion
[01:03:09] dollar
[01:03:10] deficit 250 in the first year right
[01:03:14] that's that's next year uh
[01:03:17] the fed has eventually got to deal with
[01:03:19] inflation
[01:03:20] so in the first year which is like next
[01:03:23] year
[01:03:24] you're adding inflationary pressure
[01:03:26] through the spending side
[01:03:28] right
[01:03:29] the fed is most likely going to have to
[01:03:31] do something on the entry side and
[01:03:33] that's a
[01:03:34] triple whammy for for working people out
[01:03:36] there that's the point of all this the
[01:03:39] bill is written in a fashion that i
[01:03:40] think is a fraud
[01:03:42] it's just a complete fraud this bill
[01:03:44] doesn't cost 1.6 or 7 trillion it's well
[01:03:47] over four it doesn't add 250 billion
[01:03:50] dollars to the deficit it adds two seven
[01:03:52] or two eight and you combine all this
[01:03:54] with the times in which we live and we
[01:03:56] haven't even talked about what it does
[01:03:58] to gas and oil production
[01:04:00] their provision in this bill this is me
[01:04:02] not you it's going to make it harder to
[01:04:04] produce gas and extract
[01:04:06] uh oil harder to produce oil and extract
[01:04:09] gas in america
[01:04:10] so the sum total of this i think it is
[01:04:13] inflationary it sure is held a lot more
[01:04:16] debt than their advertising and it cost
[01:04:18] a lot more than people are saying
[01:04:20] and the reason i know that is i've asked
[01:04:22] people who don't have a dog in this
[01:04:24] fight to look at it through a
[01:04:26] prism of realism and these are the
[01:04:29] numbers we come up with and you could
[01:04:30] probably do the same thing to us on
[01:04:33] tax cuts
[01:04:34] we did yeah so
[01:04:37] right you did so yeah i just believe tax
[01:04:40] cuts help the economy because you're
[01:04:41] giving people back their money you're
[01:04:43] taking more of their money away to grow
[01:04:44] the government they can't afford that's
[01:04:46] just the difference inflation goes up
[01:04:48] right which is going to cause interest
[01:04:50] rates go up which is going to cause the
[01:04:52] stock market to go down come down and
[01:04:53] allow your house to come down other than
[01:04:55] that it's great
[01:04:57] anything else y'all are like awesome i
[01:05:00] mean you know the fact that i'm doing
[01:05:02] this is amazing only in america can you
[01:05:04] have my background and be on the budget
[01:05:06] committee
[01:05:07] but i do know this i did come from a
[01:05:10] family that had a liquor store a pool
[01:05:12] room
[01:05:13] and a beer joint to run
[01:05:15] and i remember you can't there's a work
[01:05:17] requirement
[01:05:18] if you don't open up you don't get paid
[01:05:22] i remember that really well i remember
[01:05:24] that every time some new rule came along
[01:05:26] it took money out of
[01:05:28] the bottom line i remember when we
[01:05:30] bought our first house
[01:05:31] it's the one thing that my parents were
[01:05:33] able to pass on to my
[01:05:35] sister and myself i do remember times of
[01:05:38] 17 interest rates because we had bad
[01:05:40] physical policy if we don't watch it
[01:05:42] we're headed down that road buildback
[01:05:45] better is not building better
[01:05:48] it is a fraud is written
[01:05:51] and we're going to do everything we can
[01:05:53] to kill this bill
[01:05:55] because it's going to hurt america more
[01:05:57] than it helps my word's not yours and
[01:06:00] this is the same group of people some of
[01:06:02] us anyway who voted with democrats on
[01:06:04] the last bill
[01:06:05] understand the benefit of one bill and
[01:06:07] the danger of the other
[01:06:09] and it's not me saying this you've
[01:06:11] analyzed this bill using realism and i'm
[01:06:14] hoping that the american people listen
[01:06:16] to what you've told us because they need
[01:06:18] to know
[01:06:19] what they're in for if this bill passes
[01:06:22] anything else
[01:06:24] thank you very much and
[01:06:27] see you soon
[01:06:28] happy holidays
[01:07:09] you
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