Honoring Gramlich part 5: Reflections on current fiscal and budget policy

May 30, 2014 1:40:11
Kaltura Video

Douglas Holtz-Eakin, June E. O'Neill, Rudolph Penner, Robert D. Reischauer and moderator Douglas W. Elmendorf speak about current budget policy at the "Honoring Ned Gramlich and the Importance of Policy Research" conference. May, 2014.


[ Noise ]
>> So as I think most of you know among the many things that he did in his amazing career, Ned Gramlich served as deputy director and then acting director of the Congressional Budgeting--Budget Office.  And so, today's final panel in honor of that comprises past CBO Directors, Doug Holtz-Eakin, June O'Neill, Rudolph Penner and Bob Reischauer.  And we are really delighted and honored to be joined by Doug Elmendorf who is the current director of CBO.  Ned's mission was to inform and improve public policy.  Doug and his predecessors are exemplars of that mission.  And so, I'm going to turn it over to Doug and hear what we have to hear.
>> Thank you Paul very much.  I'm delighted to be part of this event honoring Ned Gramlich and to be joined by four of my distinguished predecessors as Director of the Congressional Budget Office.  Let me begin by introducing each of them briefly.  I think they only need a brief introduction.  Rudy Penner served as CBO director from 1983 to 1987.  He's also spent time in the American Enterprise Institute at OMB at the Department of Housing Urban Development at the Council of Economic Advisers at the University of Rochester.  And Rudy is now Institute Fellow at the Urban Institute.  Bob Reischauer served as CBO Director from 1989 to 1995 after helping Alice Rivlin set up and run the organization between 1975 and 1981.  Bob has spent most of the rest of his career at Brookings Institution and at the Urban Institute where was president for 12 years.  He's also the senior fellow of the Harvard Corporation, a job that at most universities would be described I think just as the Chairman of the Board of Trustees.  June O'Neill served as CBO Director from 1995 to 1999.  She also spent time at the US Commission on Civil Rights at CEA, the Urban Institute Brookings.  June is now the Director of the Center for the Study of Business and Government at Baruch College at the City University of New York.  And Doug Holtz-Eakin served as CBO Director from 2003 to 2005.  He's also spent time at the CEA at the Pearson Institute for International Economics, the Counsel on Foreign Relations, Columbia University and Syracuse University.  And Doug is now the Founder and President of the American Action Forum which describes itself a center-right policy institute.  Of the five of us, indeed all of us in this room are gathered here today to honor Ned Gramlich and to honor the importance of policy research.  As others have noted today Ned was the formidable producer of policy research on many different issues.  Just earlier this week for example some of his work on the benefits of government investment and infrastructure came up in a conversation at CBO.  Ned was also a formidable consumer of policy research when he was a governor at the Fed and I was here on staff and we talked with him, I knew that I'd better have a lot of facts and analysis in my head and I better have them straight or it was going to be an embarrassing experience.  Because Ned was both an excellent researcher and a wise policymaker, he was a model of how policy research and policymaking fit together.  He knew that good policymaking was founded on policy research.  And thus that getting policy research right was crucial to getting the policymaking right.  And of course the importance of good policy analysis to policymaking is the reason that Congressional Budget Office exists.  Congress established CBO so that it would have access to good information as it made decisions.  And Congress has supported CBO for almost 40 years despite the recurring awkwardness of analysis that is inconsistent with policymaker's views because the members of Congress recognized that unbalance they are better off with the analysis than without it.  CBO is very lucky to have Ned for two years, first as deputy director and then as acting director in the mid 1980's.  Ned helped to build and sustain an organization that believes as he did of providing Congress with good analysis will help to generate better policies and that better policies will help to make a better world.  And that brings me back to our panelists.  They're each going to offer their perspective on budget and economic policies and on the process of policymaking.  After they speak each in turn then they'll get a chance to ask each other questions.  I'll ask them questions and then you'll have a chance to ask some questions.  So let's dive right in.  Probably we'd go in chronological order of being CBO Director?  No.
>> Alphabetical.
>> Alphabetical order.
>> Or whatever is less to do.
>> So you would like well--I'm OK with--
>> I want to go last.
>> Do you want to go first, Doug?
[ Laughter ]
Would you like to start?
>> I don't care.  It's fine.
>> Please go ahead.
>> Well, thank you very much for the chance to be here today.  When I left graduate school a long time ago it was relatively unusual to have the opportunity to have a job market talk before the meetings of the American Economic Association.  But at that time I lusted after a job at the University of Michigan and indeed I got invited out to give a job talk on imperative meetings and I was so happy.  Ned Gramlich was the chairman at the time.  I remember meeting with him and saying that were really excited.  This is great.  It's going to be a wonderful opportunity.  And then I went in and I gave what was probably the single most horrific seminar ever in the history of job candidates.  And I walked and walked back into Ned's office sat down.  He looked at me.  He's the kindest man I've ever met.  And he said you're probably never going to grace the roster of University of Michigan event again.
[ Laughter ]
I'm here.
[ Laughter ]
And I'm very pleased and he was just a fabulous, a fabulous person.  I mean on top of all of his professional accomplishments.  And to be able to contribute something at an event that is dedicated to the principle Doug's mentioned which is the production of high quality information to help policymakers understand the implications of the choices they make is really a great treat.  I believe the CBO is continuing the great tradition of producing high quality information.  We're not making great decisions.  I do want to stipulate that.  You know, what should we be doing from a national fiscal policy point of view.  I think there might be some disagreement about the specifics of policies.  But we know that fundamentally we have three pieces of the budget.  We have the large, mandatory spending programs conventionally called entitlements, the Medicare's, Medicaid's Affordable Care Act's, Social Securities of the world.  And they in particular the health programs have been documented exceedingly well by CBO to be growing more rapidly than we can sustain over the long term.  We have the second class of spending programs, the discretionary spending programs which fund all the thing that founders would recognize as the roles of government, the National Security Base Research Infrastructure.  These are currently camped and shrinking as the share of the budget indeed projected to go to all historic lows in many cases.  And then we have the task code which I think there's a pretty good consensus, is a great deal to be desired in terms of high quality tax policy.  So, what should we be doing?  We should be doing tax reform.  We should be doing major entitlement reforms so that these programs can be put on a sustainable track and serve their constituents better.  I mean, I think the part that gets missed when we start talking about the budget is that those programs are in fact not serving their beneficiaries as well as they should.  I'm always appalled by the fact that Social Security is kept actually sound on the books by the promise to cut retiree's benefits 25 percent across the board in retirement, 20 years from now.  That's a disgraceful way to run a pension program.  And so, certainly we need to have a Social Security program that's financially sustainable.  We also need to have one where people know what the deal will be in retirement and we should be doing that now.  And the same kinds of observations can be made about Medicare, Medicaid and some of the other entitlement programs.  They're not the high quality programs that they can and should be.  And they can also, are financial dangers.  You know, we're not fixing those and we need to.  But we are starving the discretionary programs.  And in the process, we are letting the legacy programs of the past literally crowd out our future because of those discretionary programs are where all of the investments of the future take place.  And so, what we should be doing I think is very straightforward.  We should be doing those kinds of reforms and we're in fact doing exactly the opposite.  We are failing to undertake tax reforms, something that we fail at regularly.  We are probably world class best practice at failing in tax reform.  And it's troubling--and what will probably happen on the next couple of years is we'll remain roughly on this auto pilot and literally just push the period where we come to terms with the reality further out.
^M00:09:54  That concerns me a lot because if you look at the basic CBO projections about the budgetary outlook, the current law projections are in fact pretty good projections now because with the gridlock and practically guarantees that's what we'll do.  If you look at those, we stabilize that that is a fraction of GDP and we stabilize the debt as a fraction GDP to a roughly 2017, maybe '18, it sort of depends on what the economy does.  And then everything starts to head north.  That means that the moment the next president of the United States comes into office, there will be an enormous urgency to come to terms with this.  And the idea that we can do a single reform quickly I think is open to some question.  The idea that we can do the multiple reforms on both sides of the budget that we desperately need that quickly makes me quite nervous.  And the failure to do it I think sends a very bad economic policy signal.  If you are standing outside the US thinking about locating a plant in the US or hiring people, if you're thinking about the future of your operations in the United States and you look at the rising and unsustainable debt under the current law projections you really have three futures.  And future number is one where these policy changes we're undertaking you control the growth and the mandatory spending.  You put the debt on a stable trajectory and hopefully declining as a fraction of GDP and that's a comforting future.  Or you can do nothing and literally run into a sovereign debt crisis.  That's not exactly a pro-growth future that would make you want to invest in the US.  And the third is that you can sort of muddle along and ad hoc--in ad hoc ways never come to terms with the fundamental spending problem, raise taxes in small bits and pieces to stave off trouble.  And over the long term really make this a much less attractive place for investment and for expansion, that's not a particularly pro-growth future either.  Given the very difficult recovery that we've had, I think a premium has to be placed on better growth policy.  And so I'm concerned about the political economy of where we are from a fiscal policy point of view right now.  I think it's the number issue facing our country.  I mean all CBO directors believe that like when they wake up in the morning.  But I generally think the--the moment is a serious one, how do you solve that?  You know, the favored solution of all politicians in these circumstances is to blame the process.  And sometimes to blame the CBO director.  But I don't think this is an issue of process reforms.  I think this is a deep issue of leadership and of the willingness of people to do unpleasant things.  And we haven't seen anyone willing to do that on either side, they offer quite some time.  And so, I'm in the end a very optimistic person despite all the troubles that--the phases we have as a nation always dealt with these things.  And so, I'd close by saying if you're looking at the politics, there could be some leading indicators of how we get, do better than we were doing in the moment.  And for me, the key leading indicator would be supposed Republicans in the Senate, Republicans do in fact regain control of the Senate.  Then I would argue that the most important question will be how will they govern?  Will they in fact invite Democrats into the process, pass bills that have input from both sides and the chance that the President will sign them or will they make a point for two years in the interests of the 2016 Presidential election and nothing gets done.  So, we're going to find out and I think that's one of the most important things for every one in this audience and any audience to be looking for going forward.  But the most important thing is to say that I'm delighted to be here.  I wish Ned was here.  He was as everyone said wiser than--than I certainly am and probably could have fixed this all and so we miss him dearly.
>> Thank you much, Doug.  So June?  Please.
[ Pause ]
>> Sitting here, I've sort of changed what I was going to say, what I originally had planned to talk about was the problems of prediction and forecast and which are extraordinarily difficult especially when it comes to economic matters.  But I think that what might be of more interest, I had the fortune or misfortune of having worked both at CA for a while as well as at CBO and twice, once in different capacities originally when CBO was rather new I was--I was head of one of the units of budget analysis.  Well, at that time, CBO was smaller.  So, I did human resources but that covered welfare, labor, Medicare, Medicaid, veterans and some other stuff.  But it was--and that was an extremely interesting experience.  And actually one of the things that I worked on then is something that is still not resolved.  It had to do with Social Security.  Should we have wage indexing or price indexing and I wrote a paper on budget.  But it's still obviously the long run in Social Security is, as Doug has said, you know, that's not only Social Security.  But the major--all our major, you know, programs of that sort are really key.  The long run deficit is because of the problems related to Social Security and Medicare probably more than any other thing, Medicaid not so much.  But there is an enormous difference between the White House working for the White House and working for Congress.  I was at CEA when Nixon was President and I was a fairly recent PhD graduate.  And I was fortunate actually.  It was in a very exciting experience.  Nixon was president and had panicked when the unemployment and inflation rate went up.  They were--each just around, this is 1971.  They were each around six percent.  And the election was coming up in 1972.  You know, as I've remarked to some people I think Nixon was one of the few people in the country who really believed that McGovern had a good chance of being elected.  But in order to ensure it and I think this is an example of the--Nixon was extremely intelligent man.  But politics outweighs in your on--your political survival and that's because I think in his case he really believed that he could do really good things and should be president.  So, what did we get?  Well, he was seduced by Arthur Burns into the idea that the Fed could be used to increase that his reelection would be guaranteed.  I don't know if he exactly said those words.  But that was sort of the essence of what we all gathered folks of us on the staff at CEA that Arthur Burns had said, "Well, I'll pump up the money supply and that will get the economy going."  There is a danger of inflation.  And you will solve that with income's policy which was then invoked and we could have a wage and price freeze and that'll take care if that.  And no one thought that this would really be done but it was done.  And I was--I remember exactly when it happened.  It was in August of 1971.  Everyone was shocked.  So we got wage--a wage price freeze.  And the next year, inflation and unemployment dropped by half.  So, it might have seemed like a great thing to do initially.  But then, the predictable problems arose, shortages everywhere.  You know, it--and eventually, I think it put a pole on growth in the economy for at least a decade.  It really it ended up causing slowdowns.  But there is--from the perspective of the White House, one thing was that the president was very accessible to the Chair of the CA.  And we were physically in the old executive office building so we were close.  And then I stayed on during the Ford Administration when Alan Greenspan was the chairman and he too, he had quite--he had a close relationship with Ford.  And even though Nixon didn't follow, I'm sure it was not the advice of McCracken or Herb Stein to have--they argued otherwise.  But they did have contact with the president.  And--But we were allowed quite a bit of latitude actually in writing the economic report.  I think that the staff was serious economists and the chapters in the economic report actually Barry Chiswick and I had written several chapters jointly and we did put the chapters together to make a book.  So it was--we were encouraged to do research, genuine research such as would be done for a journal article in the university.
^M00:19:58  Congress, on the other hand is a totally different type of thing.  You're not employed by a particular person.  When I was appointed director, it became sort of--it was a highly political choice.  I didn't know any of the people who were interviewing me.  I has no political connections.  But I was believed I think by Newt Gingrich who was sort of leading the search that I was a conservative woman which was true.  I would be conservative economist sort of a Chicago type person.  And Rush Limbaugh had endorsed me, I never met him.  So I guess maybe that's what did it.  But at any rate, the Congress itself is you have all of these people, all of whom are worried about their political futures, and all of have different kinds of constituents.  So, although we are at CBO where some were removed.  We don't have members who aren't coming into our office telling us on what to do.  I don't think that--that doesn't happen.  But they--But it's a difficult situation and you do learn a lot.  One of the things is that, you know, as Doug has said as economist we know what has to be done.  But how can you convince people whose futures might be ruined if they followed a particular advice, you know, for example, its--I think the one real problem is when it comes to the different possibilities for changing Social Security.  It's very complicated.  It's hard to explain to people what it would actually mean.  It's very easy for someone who is opposed to it to terrify the public.  So they'll say, "Oh" they don't understand that if nothing was done, their benefit--and that seems far in the future.  Their benefits would all be cut by 25 percent.  They can be easily led to think that they themselves along the way will have much lower benefits than their parents or grandparents or anybody else had had.  Newt Gingrich was constantly tormented.  He had actually some good ideas for Medicare but as soon as he began talking about them they were sort of along the lines of Medicare advantage plans.  He was easily sort of vilified and there was a TV ad that showed him morphing into some horrible monster, you know, as he talked about reforming Medicare.  So, I think that it's--the difficulties of doing it of course shouldn't stop those of us who, you know, know who have some insights and some program for trying, you know, for doing the best research that we can, and convincing as many members as we can to go along.  But the politics of the situation really cannot be ignored.  I was personally dragged in with the Fannie, CBO was one a few organizations that was asked to study Fannie Mae and Freddie Mac and we did and the paper we--found a very good analyst at CBO, had written an excellent report about Fannie.  When I came to testify at the Banking Subcommittee that was the Oversight for Fannie and Freddie, what I was faced, well, the staff that was a very brave person chairing the Subcommittee and his staff was friendly.  They called me, he said, you watch out because when you get there every member of that Subcommittee has been sent a draft of something they should read than what's written by the staff fetched at Fannie Mae and they're all of course just trying to destroy our study.  But--And that was the case.  The various members of that Subcommittee that had the direct oversight of Fannie Mae and Freddie Mac were all receiving generous contributions from Fannie Mae.  And they were not about to cause them at least not publicly, so it made it difficult to do any reforms.  So that's, you know, one thing--oh, not that Fannie Mae did not stop there.  They sent.  We were--I and a few other staffer at CBO met with Vice President of Fannie Mae and a couple of Vice Presidents.  They came in, it was sort of like a visit from the mafias.  They said, "You had better not released--they had not been publicly released, the report.  And they said, "You would better not release this report or you will be sorry.  They didn't say exactly what they would do but they tried to be as menacing as they could.  They also have took out ads in the newspaper that said CBO or a bunch of digit brains and pencil heads or something like that.  Well, am I out of time?
>> We published in [inaudible] but I'm enjoying the story.  It's going to be happening to somebody else.
>> I did have one serious thing to say and that was something and thinking about my talk here on a serious side, is that one of the things that will make forecasting of the future difficult is that the elderly population have been changing.  I don't know how widely that information has been disseminated but they're much more likely to work, they're much more educated and they're richer.  They have more assets and so I think that in the minds of many people I certainly, the press writes about it.  They envision these Social Security recipients as being widows who are totally impoverished and depend totally on Social Security.  But that picture although it exists and certainly the lower quintiles of those receiving Social Security may fit that description.  But Social Security recipients that are coming along the way are not in that mode.  They're a different type of group.
>> Thank you very much June.  Rudy, please.
>> Well, it certainly is an honor to be here at this conference remembering Ned.  He was such a great guy and we had a fine time together when he served as my deputy at CBO in the mid 1980s.  As Doug implied, there are some temporary good news on a fiscal outlook.  The deficit is less than one-third.  That's a proportion of GDP than it was in 2009.  The long run outlook has improved some because of a pause in healthcare cost growth.  But it would be sacrilegious for anybody in the budget business to be happy.
[ Laughter ]
You have to point that CBO's baseline has a deficit increasing again after 2015.  And I think there is some evidence that at least some of the pause in healthcare growth is a very temporary phenomenon.  I really do strongly believe that if a new President after 2016 was at all far seeing, he or she had to make a full court press to resolve the long run budget problem.  Otherwise, you're just going to see a lot of floundering.  It will be very hard to mount initiatives and things like infrastructure, education or much of anything else with that GDP ratio have bring in the 78, 80 percent range and threatening to rise.  Now, I say that fully expecting that the severe caps on discretionary spending will in fact be relaxed perhaps as early as 2016.  But even if they are relaxed they will remain very, very tight, absent thorough going fiscal reform that starts to restrain health spending and social security.  Do I actually expect the next President to make a full court press in that regard?  Probably not but it is interesting to dream and there will still be a lot of dreaming in this talk.  Being so depressed by the current situation with regard to fiscal policy, I have turned to studying fiscal history a lot.  I don't think you can exactly emulate the past.  But you can identify characteristics of past successes and failures that might, just might help to push things along currently.  To me, really the ideal reform of the past was not a broad fiscal consolidation but rather the social security reform of 1983.  It was provoked by the trust fund going broke.  That was deemed the crisis.
^M00:30:00  It did scare a lot of old folks but it was a nice crisis and that it really didn't hurt anybody directly economically.  It could have been solved by a modest infusion of general revenues but that would erratically change the philosophy of social security which gained so much of its political clout by creating the illusion that everyone pays for their own benefits.  Well, President Reagan responded by proposing a rather dramatic cut in the benefits of early retirees and that met a total fire storm.  So he created the Bipartisan Greenspan Commission which was supposed to solve the problem.  Now, it's often said that this is one instance in which a commission seemed to actually work.  But that's probably a false lesson.  In fact, the full commission got absolutely nowhere.  If you look back at the rhetoric, the Republican seemed does adamantly against any tax increases as they are today.  And the Democrats strongly opposed benefit cuts.  It was only when a lump group or excuse me, a rump group was created under the skillful leadership of Senators Moynihan and Dole that progress was made with the mix of payroll tax increases and benefits slow downs that appeared balanced in the short run.  And looking at that history, really surprising to me how the rest of the commission went passively along with this rump group except for a very few Republican Senators who still objected to the tax increases.  Nevertheless, that commission only made the system financially sound for 50 years instead of the 75 years that was a tradition of the system.  And it was J.J. Pickle, a member from Texas who engineered the most important single reform outside of the committee on the floor of the House by very gradually increasing the normal retirement age and that did make the system whole at least temporarily for 75 years.  Now, the Chairman Alan Greenspan will tell you that the whole effort wouldn't have gone anywhere were it not for a silent agreement between President Reagan and Speaker O'Neil that neither of them would oppose the recommendations made by the commission.  So I think that the main lesson from all of these is not that commissions can be successful sometimes but that bipartisanship can be very successful if you really work at it as did Senators Dole and Moynihan and President Reagan and Speaker O'Neil.  The latter too had lunch almost every week, a practice that might have served the current President very well.  Even once a month might have helped some.  And I know that a lot of people might say that attempts and such cooperation would be feudal today given the intense partisanship.  But if one looks back at 1983, the rhetoric was really intensely partisan.  I think the main difference is that there were people who were then much more willing to deal with one another than we see today.  Well, another bipartisan effort at fiscal consolidation occurred in '85 with Gramm-Rudman-Hollings with the fact of the phase then Reagan tax cuts that have been passed in '81 and the defense bill with that.  The Congress didn't do very much between 1982 and 1984 but raised taxes and tried to limit domestic spending growth.  And that was a very unpleasant range of activities.  And after all of that, they were quite frustrated by the fact that the deficit didn't come down.  And there was Phil Gramm who came up with this radical plan to specify declining targets for the deficit and to enforce them with a cost of lowered spending cuts.  The deficit targets were based on our medium term of deficit forecast.  And even though our error in an optimistic direction was really quite modest compared to usual forecasting errors, achieving the targets was much harder politically than the Congress originally anticipated.  They in fact loosen the targets once and then confronted by a gigantic sequester in 1990.  They backed off and they went into something that Bob knows very well, arduous negotiations at Andrews Air Force Base.  That came up with a plan of spending the restraint and tax increases about a plan that was promptly defeated on the floor of the House.  The plan was finally tweaked by a group of a few leaders and ultimately passed.  And so, one can ask whether the summit was a necessary preamble to the eventual agreement.  One can ask whether some kind of summit, a large summit or maybe a small summit of leaders would work today.  I think few would think it possible but we did come sort of close with the Boehner-Obama agreement prior to the fiscal cliff that soon fell apart unfortunately.  I think a clear technical lesson from Gramm-Rudman-Hollings is that if you want to automatically trigger actions to achieve some fiscal policy, the deficit is a terrible variable to use as a trigger.  It's just simply too hard to forecast, it's too volatile and it's controlled by outside forces.  And only a little bit in a very short run by laws that the Congress passes.  Once they establish the 90 agreement, they'd have the wisdom to pass the Budget Enforcement Act which made sure that that agreement wouldn't erode through time.  And with that act, and its pace you go rules and it's spending caps, the Congress specified targets that they have direct control over as opposed to this deficit thing which kept getting out of control.  But it's important to point out the act was truly an enforcement vehicle.  It was not something that reduced the deficit by itself.  When the act took form under the leadership of Leon Panetta, I'm afraid that I testified against it in the Budget Committee arguing that it would never work because it was totally fraud with loopholes.  But in fact it worked very well and the Congress did not exploit those loopholes over the late 1990s when they were confronted by a budget surplus totally by surprise.  Well, those efforts at fiscal consolidations were followed by the '93 and '97 deals.  The former was purely partisan in the sense that it only got Democratic votes.  And the Democrats suffered mildly as a result of it in the '94 election.  It really tells me that any party trying to foster a budget deal should really bend over backwards to try and get some cooperation from the other party.  It's become a cliche to say that significant progress will only be made if the two parties join hands and jump off the cliff together.  But it is a true cliche I'm afraid and I think both parties have learned the lesson unfortunately that it is politically careless to attempt to anything alone.  So what we need is a very strong political leadership and the courage to reach across the aisle, and whether that's forthcoming is a total mystery at this point in time.
>> Thank you very much Rudy.  Bob, the last who come at the end of the alphabet.
>> Yeah.
>> Go now.
>> We could go to the audience and Ned, I can., you've heard from the optimist.
[ Laughter ]
>> I just want to start with a few reflections from a personal standpoint with respect to Ned.  He and I were pretty good friends.  We played tennis together.  We played volleyball together, battering of other sports.  Any of you who knew Ned realize that if you put a racket or a ball or a bat in front him, he would want to play, begin suiting up.  And so we had a lot of fun and we were both colleagues of each other, both at Brookings in the early 70's and then again at the Irvine Institute three decades later.  And I might add that the book that everybody has been talking about was largely written while he was at the Irvine Institute and we published it and we're very proud of that book and having Ned as our colleague.  Ned and I were also interested in a lot of the same kinds of policy issues and broader issues that faced society and the world.
^M00:40:00  In the policy space, we had common interests in poverty and income distribution, community development, fiscal federalism and of course federal budget.  I'm sure each one of you has a different group of topics that you and Ned in a sense shared, and if we put them all together, we probably have the encyclopedia of important public policy issues and we'd have a few pages each of us but Ned would be cited on everyone of the chapters because he was so amazingly broad.  In a non-economic related space, we spent time discussing a wide variety of things including how to manage shared family summer homes when the adult children and the grandchildren of the original owners have very different interests in the property and very different economic and--economic capacities and skills that they can bring to sustaining the property which actually turns out to be a complex issue on which many books have been written in.  And you know, I was opining on these and Ned was reading the books which was so typical of him.  He came to the argument with expertise and I often didn't.  We also spent a lot of time discussing alternative financial models for elite institutions of higher education in a world in which federal research spending is declining, tuition increases or limited by slow growth of--of incomes and growing student aid policies and endowments of--aren't increasing the way they did before.  Everybody got wise about the modern way to invest.  It seemed to me that there was no--the answer to no interesting public policy question that Ned couldn't add value to.  He was a natural teacher as many of you know, and extremely generous with his time to his colleagues.  I mean the amount of time he spent commenting on papers or advising you on research outlines.  It was just amazing.  But what always impressed me most about Ned is you had this guy who was very sophisticated and methodologically and very well-trained who could have easily gone off and have been great theoretical contributor to the field.  But what he wanted to do was make a difference in policy and policy is that we're practical that we're politically-viable, we're implementable and that's what, you know, students at this at Michigan, I think, are striving for and that's what CBO has been applying.  Now, I had assumed that since I was listed last, I would be last.  And everything worth saying would have been said at least twice and probably three times before I came up.  And if I had thought of something new and different from what they were going to say, they will probably be wrong so I should probably keep my mouth shut.  But then, I listened to them and I realized I learned a whole lot.  I thought--I'm the only Democrat by the way on this list I think but not appeal to your sympathies.
[ Laughter ]
I mean we're talking about the underprivileged so, you know--I realized that I really did learn something.  I learned from Doug something new, from Doug that the Republicans are going to win the Senate, right?  And I learned from June that, you know, wage and price indexing are still an issue that we're going to resolve in the future.  Yes, a lot of people would be interested in that.  But, what I thought I would do since I didn't want to repeat them is just to add a little color by looking back rather than forward to the period where Ned was Rudy's deputy and then acting director, and reflect on the differences and the similarities in the budget world at that time.  And of course, the most stark difference then versus now is that, then, we had a political system which--well, it wasn't without its friction, so as Rudy has mentioned, was not totally dysfunctional and we have a totally dysfunctional political system now.  And it was able to pass important legislation, some wise, some not so wise that was then signed by the President.  We had affixed the Gramm-Rudman, we had the Tax Reform Act of 1986.  We had budget resolutions that actually passed.  They didn't pass on time but they still were passed before the fiscal year ended which is always nice.  There wasn't a huge amount of harmony and there's certain similarities in the three years there, you know, '86, 7, and 8, absolutely no appropriation bill was passed before the fiscal year began.  So, you know, that's similar to the world in which we are now in.  There were government shutdowns.  There were two government shutdowns in that period, people forget these, '86 and '87.  But they were short, three days each.  Most of the days were over the weekend so there wasn't huge disruption one way or another.  These were the days of, as Rudy said, Gramm-Rudman-Holling Sequestration, I was rummaging around in my shelves in my office and I came across the Office and Management and Budget and Congressional Budget Office Joint Sequestration report signed by Ned and Jim Miller III which goes through all the accounts that we have here and shows you that the 19 percent non-defense discretionary across the board cut took 3.4 million dollars out of CBOs, 17.8 million dollar budget and a proportional amount out of it.  Of course it never went into effect.  But, I'm actually going to Antiques Roadshow right after this with this if I don't get a better offer.  I actually have the one you signed too.  But, you know, as Rudy said, we had a system, it was crazy.  I've written a couple of papers that suggest that a lot of the criticism of Gramm-Rudman-Holling, he says, sort of overstated because it did moderate the growth of discretionary spending rather significantly from the trend line that it was on even though with a very few instances that it did yet or the BEA have a direct impact.  So, what's another difference between then and now, I think were, we were a lot more innocent about the future back then.  CBO did projections that were five years long, OMB did too.  CBO didn't do its multi-decade long term projections.  And the baby boomers' retirement was still a quarter of a century away.  So we weren't obsessed with that, I mean the assumption was, well some time in a not too distant future, something will happen.  We had a new tax structure that I think people thought maybe would lead to incentives that help the economy and thereby generated more revenue, rather than that, we would be into a decade of undoing each part of it that we could and squashing whatever effects those incentives might have.  It strikes me that, you know, we didn't have a consensus on policies that would get us out of this problem because we weren't looking at the long run future.  Now, we do, it's, expert-ally [phonetic], in the country, I think is pretty much on the same page, not of the exact policies but here's two or three approaches.  But the probability of our political system responding to that is as close to zero as one can find.  And you know, hope as I do that Rudy is right, you know, the fact of the matter is, when you have a relatively narrow balance of power between the two parties, and the almost--and a change in communication which allows through modern media, this information to get out rapidly, strong views to be shared even if they're by small groups of people, they can appear to be like a wave.
^M00:50:22  The perception by politicians is that, if you are strong, if you are courageous as Rudy said, you'll also be gone at the next election and that strongly has been the recent historical truth.  And so, I think, if we want to talk about the future of fiscal and budgetary policy, you probably need political scientist and psychologists up here, not former CBO directors. That's it.
>> Well, can we go now?
>> Yes.
>> No, no, no, not yet.  So, I have some question I'd like to ask all of you but do you want to start your questions or comments for each other that you'd like to dive in with or can I ask?  So the first thing I was going to ask is, you all talk a little bit about the views of policymakers and their willingness to compromise and their--but can we talk a little bit about the views of their constituents?  This goes to this question about how brave they would have to be.  So we know that the basic arithmetic of the budget is that to put the Federal Budget on a sustainable path, we will need to either cut current MOA benefits from the largest most popular benefit programs or raise taxes notably above their historical share of GDP or both.  So, but if you ask people, regular people, not CBO directors, what they like about the government, they want to keep the big benefit programs, they want to keep taxes low, they want to make the cut some other place.  But the other places as we know don't have the money that is needed.  So what is it that could change that?  What element of that, of those basic pieces will voters ultimately be willing to support?  Will they actually support cuts in Social Security, and Medicare benefits, relative to current law are recognizing maybe higher benefits than people are getting actually getting today, will they be willing to raise taxes above their historical share of GDP?  If you can't do either of those things then you can't solve the problem.
>> Well, if they've described--I'm sorry.
>> Yes, please.
>> If they're described simply as cut, people will say no.  But I'll suggest this when anybody has asked me, you know, you--I feel it would be more useful if people saw what monthly benefits or annual benefits would look like on the different schemes and you can do it in like current dollars so that it's something that people can understand.  It would help, enable people to understand what's actually happening because it's, none of the proposals would slash benefits to such an extent that people is, what people imagine they would be cut to.  Most of them in most cases, they would be going up, and you know, if they were adjusted in today's dollars.  You know, but, they have to get maybe gifted writers or cartoonists or somebody who could portray what the policy is exactly so that people will know, is this a terrible idea or is it good and what the benefits would be you know, otherwise to the economy.  People might not be that enchanted by benefits to the economy but some of them would be, I think.
>> But you also have to convince them that doing nothing is going to create harm.  And, you know, they basically, you'll look around and you say no, and you say, what's the problem?  Problem is there's too much employment.  Problem is we need to invest more in infrastructure, the problem is one that's going to be solved by making the deficit worse.
>> But the other thing as Doug mentioned, the real question that's embedded in the current Social Security Law when the fund is exhausted, it's, you know, it's a huge cut and it's not a bigger cut than any of the proposals.
>> So, I have a--
>> Well, there have been other countries where they have turned it around.  They maybe had these advantages over what we have done but if we take my home country of Canada, they did, totally turn around public opinion in the mid--oops, sorry.  They did turn around public opinion in the mid 1990's from a situation where the public was cheering on spending to one where it's really hard for a political party to advocate anything other than the balance budget these days.  If you talk to politicians up there as to how they did it., they had an argument that we don't have because the Fed people here are keeping interest rights so low.  But they, they reach the situation where interest was absorbing 40 percent of their revenues.  And the politicians of both parties made a big deal of this and it really convinced the public that it wasn't great to borrow under those circumstances.  So what we really need is a big increase in interest rates, you Fed people.
>> Well you came to the right place, right?  So a couple of thoughts, I mean first, I think that's too strong.  One of the things that I have fallen in love with which I love the story about Ned and the CRA asking the examiners you know, what the truth was.  I think it's very usual to ask people.  And so I've now spent a lot more money on polls of my think tank, I never thought I would.  And it turns out that if you ask people, you don't get the caricature that you would suggest.  You know, the most recent example, this is actually in immigration reforms not on the budget issue where we, you know, we polled Steve King's district.  And his constituents would say, the system is broken, we agree with all these policy issues, but most importantly, they would say, I will go for someone with whom I disagree on immigration.  They're not going to lose their job.  And this has come true in poll we've done in Medicare reforms, for security reform as well.  So I think the notion that there's this automatic punishment is overstated.  You're like, you know, on the ground, it doesn't look like it's there.  Second point is, it does matter how you frame it.  If you just say, we're going to do this without saying because the alternative is, this dangerous path which will harm your children and their children and the children thereafter, where the Pentagon says that, this large amount of debt in our trajectory is our single greatest national security concern, you frame it, you know, with the counterfactual being something important that you get different answers.  There's no doubt about it.  So they need to be educated which is the third point.  You know, the greatest thing that election is doing in the United States is they are the moments of public education.  It's very difficult to, you know, get people to, correctly, difficult, get people to stopping intentionally, all things in our lives and worry about Medicare reform.  I mean, they don't do that.  I mean you, I'm sure you've had this experience, I gave lots of speeches when I was a CBO director and I went, I remember going to the Dallas morning club or something and, explaining how the world was going to end and they were outraged when they said, "Why haven't you said this?"  And I said, "I say it everyday," I mean, you know.  In elections, instead of saying to people he wants to cut Medicare and portraying this from graining off the cliff and she's very tough, she comes back every election, it's going to have to be a kind of a genuine conversation about how we're going to have to change Medicare.  And the only question is how.  And the numbers are getting forward that has to happen at some point so I think that's optimistic.  And then the last point is, we're going to, again, get the test case.  We're going to get the trigger because the Social Security DI Fund is going to bankrupt in two years and so we're going to have a relatively small but important entitlement that's going to be, need some fixing and so we'll see how it plays out.
>> You know, I was going to come back on my blog, or my, the thing I'm going to say, and he just told you that Medicare was going down the tubes and we got to do something about it.  Did you know that in 2012, per beneficiary, Medicare spending in nominal terms rose by four tenths of a percentage point?  And in 2013, it was flattened to zero.  And you know, that I can tell you why that's all irrelevant and all like that.  But, my guess is, there's more people out there willing to listen to that message than to your message.
>> We will see.
>> I want to just say one thing at Bob Avery to make him feel a little better, well I mean, he told the story about Ned kicking him under the table and it was because Ned fell asleep.  And I thought, you know, well that's pretty damaging to your ego, you're talking and your boss falls asleep because he thinks it's so boring.  Ned as some of you might know, Rudy certainly does, fell asleep in exciting times too.  And I have a story on that, he and I were out in Los Angeles and I think it was a RAND conference and we left the motel to go a, to the dinner and he had rented a car and we're going down the expressway at you know, 65 miles an hour.  And you know, the car go, you know--
^M01:00:12  It gets going over the side and I said, "Ned", you know, "Oh" he drive like that and he keep going over the side again.  And then, suddenly he just drove over to the breakdown lane and he got up and he said, "You drive I'm going to fall asleep."  And it was pretty exciting at that time, and he said, "Wake me up when we get to the restaurant," which is what I did.
>> So comment.  Hi Bill.
>> Bob only your comment was we talk to people about the budget they say, "Well that's not the biggest problem," they're worried about unemployment, or worried about something else.  The question I want to ask all of you is sort sacrilegious question coming from director of the Congressional Budget Office, because as Doug, noted our job is to wake up worrying about the budget.  But have policymakers devoted the right amount of attention to the budget deficit and projections of the deficit and debt over the last few years?  But the questions put to me, has put to me often in a forum, well, the debt is not the biggest problem, we're not like to make much progress on it.  And the focus on it has crowded out policymaker's attention to a whole set of other issues on which progress might have been made.  So, what do we thought my answer of course is I don't make policy recommendations being a CBO Director.  So I don't have to tell them what they should focus on but what do you think?
>> Progress might have been made without spending more money.
>> Well that's [inaudible] so I'm asking you to offer your sense of this.  I mean, so I've heard you Doug testify, that we've made essentially no progress on budget issues.
>> Yeah.
>> So does that mean that the time has been misspent or is it just a, it takes us a long process.  And you just spend a lot of time talking about it, in educating people that's what we've been through in the past few years.
>> I think it's a little both I mean to be honest.  One of the problems has been that we have this tremendous success in the late '90s and many people thought well we will just do that again right?  We went from deficits to surpluses and the difficulty was, we also had a productivity bloom.  We didn't know where it come from, that was awesome and that revolution just roared in, the debate almost 25 years away from retiring.  We had a discretion spendings that down a part of the budget.  And you could, you know, put the caps on there.  And we got a piece of them to help smooth out everything and that's all gone.  But we ran the same play book, we have this discretionary focus and in a different environment.  And so that's the part that was misspent like the sort of a--we finally got their attention, they paid attention to budget.  They look at the history and they misapplied it and that happens.  Then there was the, what I think, the productive laying the groundwork was, you know, through things like, you know, not because you like might like the Paul Ryan budget the house.  But because of its focus, people really did have to come to terms with, what do we think about when we think about really doing a task form, what do we think about, when we think about the manage or spending programs.  By the time they got to that, they were so exhausted they didn't do anything with it.  But I don't think there was time that's misspent really, I don't.  It's just that we started off on the wrong direction.
>> OK.
>> Bob, you mentioned all the things haven't changed the--over the decades.  Since I was at CBO certainly, but I think one of the frustrations I had already which has gotten a lot worse, is that frankly it was very hard to get a Congressman to focus on policy issues and private conversation.  They were so darn busy raising money that they really had not a whole lot much time to contemplate policy issues and I think that's a lot worse now.  That the amount of time they actually spent about policy is just a limited portion of their day.
>> Did you mean, the difference between budget issues and other things like the thing that always bugs me is when someone says, "I can bring you jobs."  Well members of Congress I mean they might be able to create an atmosphere where jobs would be created better.  But nobody really knows how to do--it's--that's something that really has to emanate from the private sector.  You have to have sort of an atmosphere--an economic atmosphere where individuals who are who can have businesses are, you know feel it's to their advantage to start businesses.  And but there's nothing--there's no act that Congress can pay us I don't think that can make that happen.  So, and as Doug said, the semi [phonetic] days of the 90s were entirely and actually, they were one reason why the CBO forecast was wrong every year.  We never--we're always behind because we didn't imagine that year after year the market would go up and up and up and would bring in tons of revenues.  And another thing is once we got the surplus, it turned out I think to be more ruinous than the opposite because, you know, with just spending like crazy and on programs that you've been, can't just shut off.  So, it's--
>> I never do that thing, every time I go to Washington we had a recession went to war in the Middle East.
>> No.
>> No.
>> Now, we know what the solution is you guys can go to California.
[ Laughter ]
>> So let me ask one last thing then we'll turn over to all of you to ask questions.  I'm wondering what your perspectives are on the role of objective information on the sort of research that Ned did that you folks have done.  The role of that in policymaking?  So one view that I hear is that it is less useful than it used to be because there is this, a more entrenched partisan divide, more people listen to the TV station or radio station or look at the cable news site of their choice so that there's a greater drumbeat of non-objective information and that's that the sort of objective research that we do.  And that Ned did is less important.  There's also a view that I hear that well, particularly in an environment where much of what is coming across the airwaves and across our computer screens and phone screens and so on is not real analysis, that makes analysis even more important than it used to be.  Do you have a sense of that or maybe a sense about how we all could make this research as policy research more relevant than it is?
>> So I mean, this is a true story.  So this constitutes my profession.  I left Columbia, I left Princeton, I got a job at Columbia University.  And I taught there for three years.  And I've published in places that you, you know, these weird exotic journals that you can't find on news stands and seemed to go off into this another world.  And I watched, you know, I taught my classes and watched my students arranged their social lives in front of me pretty indifferent to what I was saying.  And I got seriously depressed about whether I've chosen the right profession.  There wasn't any social value to this at all.  So in crisis, she always go home.  So I'm back to Princeton for a year and then my advisers had Jen has been left crisis and we--they went off to Washington I followed them, so, Harvey Rose [assumed spelling] and John Taylor [assumed spelling].  And--I never intended to go back to academia I thought I've had it.  This is a point that was exercise and the production of this research was not worth it.  And then what I found out was at the White House, people could and did say anything in the pursuit of their favorite policies.  You know, if you cut the capital against tax rate, we will never have teen pregnancy again.  I'm sure of it.  And I learned that the only check on this was not any single paper but was the vast accumulation of genuine, serious research which could not tell you the answer.  But could tell you definitively many things were not the answer and could give you the boundaries of what effect the policies might be.  It was the most important thing that I learned there.  And it renewed my faith in the entire enterprise, went back to searches for a long time.  And I think about that a lot because it's still true.  You know, I know there's a lot of competitor information out there that isn't as good.  But it is what the foundation of the policy process.  And I think that the second lesson I've learned overtime is, these high quality productions do not sell themselves.  And we have to be better with communicating them.  And there's no doubt about that, that the--in the end, what I've learned is that you have to make good policy, good politics and you have to be able to talk in English to non-specialists cognizant of the political environment for that research to have a voice and that becomes the challenge.  And so, the stakes have been raised.  But I don't think they've been raised by the competitor research.  It's about conveying in a very noisy environment to what your research says.
>> I'm a huge optimist on this dimension and I think there's has been a fundamental transformation over the last 30 years.  And what people who question the impact of policy research objective policy research don't understand is that its main contribution is to stop bad things from happening.
^M01:10:03  And a whole lot of bad things have been stopped.  You know, I used to hear people say "What is CBO?" and I said "Well, CBO really is a speed bump on the road of physical irresponsibility".  That, you know, if you choose to drive your car down into a 100 miles an hour, you can.  No one is going to stop you.  You're going to have to replace the springs and the brakes and everything else a lot sooner.  But the amount of stuff that CBO stops when they do an informal cut a cost estimate for some member who has a great idea in his head.  And it, it's very attractive politically, is really quite substantial.  But the other thing that's happened is, we have people the media, the elite media, the New York Times the, you know, even the CNNs or the world with want-to-be analysts who can judge good stuff from bad stuff, who appreciate their contacts with people in places like the CBO and analytical departments everywhere.  I mean spent a huge amount of time and I'm sure all of you did talking to people in the press not for quotation but sort of like, you know, I have this study that says, you know, the skies going to fall tomorrow.  And this one says "That sea going to dry up", you know.  What was the right story and walk me through it and then they are very appreciative because they seem so smart afterwards.  And, you know, if you take a newspaper an elite newspaper from, you know, 25 years ago versus now and look and see what's in it.  I mean they all have health section.  And health sections are all reporting, you know, summaries that are really well written about what's in JAMA and various medical and New England Journal of Medicine.  Bringing information forward that educates the public.  And so I think this is all well worth it and coming back to Ned.  Ned was sort of uniquely capable of taken complex ideas and explaining him to people who are interested.  But have no real expertise and he was a great sort of teacher and communicator in that and, you know, a lot of people have talked about this book he wrote, you know, 100 pages long.  And yet, you know, it can be understood by anybody it has all the right messages coming through so I, you know, more.
>> I think that.
>> Yeah well, I think all of that it's true but I also think that we policy analysts should put a dose of modesty into what we do.  Policy analysis is a science of sorts.  But it's also a lot of art too.  And we do know that very good conservative economist and looking at something like the employment effect to the minimum wage or come out with a different answer than very good liberal economist and it's pretty predictable.  So the congress gets a lot of very different views that appear to be scientifically based.  Now the science does restrict this range of views.  That's a good think about it.  But I always looked at it like the various expert witnesses you have in some court cases.  So where the jury has to decide, you know, between one or the other.  So I don't think we should get to arrogant abut all of these.  But again I return to the point that the science at least restricts the range about but outcomes.  CBO always takes something in the middle.  There somewhere.  But the standard deviation can be very large.  And at the bottom at it all when it comes to the things like macro forecasting or revenue forecasting, unfortunately we're not very good at it.
>> One thing within the economics.  The statistical analysis that has become much more complex, so the average individual and I would include, the average economist may find many articles and accessible that maybe dealing with very important issues.  And they may have a very good way of doing it.  But it's just not something that's accessible.  So you do need some sort of intermediaries like at CBO who can read the articles and explain what it is that they are saying.  And it's hard to say we'll evaluate it like the minimum wage studies or, you know, a good example there.  I strongly believe that demand curves sit down with sloping so.  I always reject something that suggests otherwise.  But the--but that is a barrier, you know, and I think to get hired in universities, you have to demonstrates that you can do this, do very complex statistical kinds of analysis.
>> So in that way Bob your point about the reporters who are reading the JAMA articles and is still in them with guidance perhaps from off the record guidance from various people can help to do some of that in between step that you talked about June.
>> I spend more of my time talking to reporters not for--as Bob described, I've spent most of my days talking to reporters not for attribution.  But because they just, they'll talk and we're going to work on this, who were the five people I had to talk to, you know, I don't understand what these issues are.  And that's all just a legacy of having gotten to know them at some point during this process.
>> OK, so your turn what questions would you like to put to the folks up here?  I have more if you don't ask any.  But really it's time for you all Jean [assumed spelling]?
>> So since we have a current in all of these former CBO directors.  I'd be curious what you think a CBO could do better.  And you can add a caveat if it had the distal [phonetic] resources.  Doug and I have an ongoing conversation about are there ways to put together packages for instance of changes as opposed to one at a time that might say, solve problems like regressivity which shouldn't be the only criteria.  You could make something progressive by combining two things together or should they be doing more graphics?  We try to help them out by making--to understanding points about graphics by hiring away one of their top graphics or person recently, so.
>> Yeah.
>> Yeah thanks for your help Jean.
>> So, but I'd be very curious so, among you there.  I mean what are the things in your ideal world which would do you think CBO could perhaps do better?
>> You have to do all the talk and I'll take notes.
>> One of the things with a limited amount of time it really is and a huge array of topics.  It's really very high.  I've it's hard for me to think of anything.  You know, and I think that CBO has done better, you know, you're very, you know, put out this, you know, huge volume of material.  I mean maybe it could be better sifted through if you wanted to draw up people attention to some things rather than other things.  So because I was hunting for something in the CBO website and I knew that I've seen it.  But I couldn't remember where I saw.
>> Well, the CBO doesn't have to be careful, not to do too much and not ask for from the Congress.  I mean they've tread dangerous ground let's say, analyze policies that nobody wants to analyze.  But I'm glad June mentioned the website.  I have a lot of comments about that.
>> It had a lot of paper.
[ Laughter ]
>> Well it doesn't stay still.
>> I think while Jean and I have often discussed different ways of displaying budget data which shouldn't get them into trouble.  But things like sources and uses of funds table that just in nominal terms showed where the money comes from and well, where the increase in revenues every year and then barring [phonetic] is allocated to various mandatory programs and discretionary programs and so forth, I think would show more clearly the results as Jean would say at the laws passed by dead man long ago.  And put them on a more equal basis with discretionary spending I think.  I think right now the playing field is so uneven between the discretionary accounts and the entitlement accounts where the ladder are not looked at.  And the built-in growth is accepted as a baseline when you really don't have to do that.  There are other ways of displaying it.  I'm not complaining about how you display it now as more suggesting alternative to ways of looking at.
>> Yeah, any suggestion or thoughts?
>> No.
>> OK, other questions.  Yes sir.
>> I'm curious about the inter-relationship with OMB and CBO.  And how often do you interact with things.  And is it congenial, is it conflicting, is it overlapping?
>> So I think the answer is it depends a lot on the era.  I was at CBO at that time when they had given up all pretense of fiscal discipline.  I mean, there were no, so there were no big disagreements that mattered on how you score things.  We weren't going to run up against the cap.  We weren't going to have, you know, have a Gramm-Rudman enforcement mechanism.  When those are in place as they were doing the tenures of someone to my left here, OMB and CBO could get in more conflict.  I had a very benign period and it was characterized largely by staff level conspiracy to make sure that I didn't know what was going on and Mitch Daniels [assumed spelling] didn't know what was going on, it was all good.
[ Laughter ]
>> When I was the director, there was the Clinton healthcare proposal.  And we were developing a lot of models.  We were developing a lot of data they were as well at the staff level and few times I was involved in this, our people would meet informally.  And very collegially to make sure the other side knew what, you know, not the other side but I mean what they knew what we were doing and they were a little more reticent to show us what they were doing.  But, you know, we were different on certain things and for a highly contentious issue it was a constructive relationship.
>> When I came to CBO there was in fact very little discussion between OMB and CBO on particular things even when there was disagreements about oddly rates or cost estimates.  The one good thing that I think Gramm-Rudman really did it force us to work together.  And that forced the staff to work together.  And as Bob said, I think in that time period, we developed collegial relationships and learned a lot from each other, especially identifying differences and assumptions for cost estimates and so forth.
>> Well, in the mid-90s, that was when Clinton was president and Newt Gingrich was running the show.  There was a budget impasse, you know, there were the shutdowns and a snow storm which made it seemed that their shutdowns were even longer, but it was shut down because of the snow.  But anyway, there was--it looked like no budget would be passed.  The complaint was that the CBO estimates the Clinton complaint that the CBO estimates were faulty and he said, "The suggestion was made that we were to have sort of a general meeting of the economist from the White House.  It wasn't OMB but the economist from the White House with the economist at CBO," and we didn't meet.  It was perfectly cordial meeting, you know, sort of all of the main guys were there, there was Joseph Stiglitz and Larry Summers and so.  And we talked about different things, you know, they were also pondering, you know, how significant is the part--what do we missing in productivity growth?  And then we went about and did a new forecast.  But the other things that happen, it's a little reminiscent of the period today weather wise.  It was, if was the weather was terrible in which I think had really slowed growth during the winter in the 90s.  And come to spring, I had a feeling that that thing would improve anyway.  But so we did a new forecast and the new forecast was somewhat more optimistic than the old one and it ended everything the, you know, the White House accepted our numbers.  And we went along and then it became unnecessary because the economy was booming, and it was conflicting about the growth in the economy.  And actually one funny thing is when it started out, one of the disagreements was the contract for America said that the budget would be balanced in seven years.  And Clinton came back, so that would be inhumane, we couldn't have anything to achieve a balance budget in seven years would cause such draconian cuts that couldn't be done.  And then of course, the budget, there was a surplus within three years, so which just goes to show.
>> So that over the years, as CBO's reputation has risen increasingly, you have gotten people at the secretarial level and the high level of political appointees in the situation wherein CBO comes out with something that's very different from what their staff has done, they ask their staff, "What's the difference?"  And so I think there's more communication at a low level as things go on, sort of where are you on this higher or lower than this?  I mean, nobody puts their cards on the table.  But there's relationships that are developed and sort of an understanding of nobody wants surprises.
>> And the estimates and forecast have converged as well.  I mean during my time there, we were contending with the so-called Reagan-Rosy scenarios where there was big differences on the short run forecast.  But the press tended to side with us on the debates set ensued.  And I think over the years as a result of that, administrations have been much more reluctant to diverge from the consensus kind of estimate which is a kind of estimate that CBO is likely to put forth.
>> I would just ask in the current era, the analyst of CBO are--interact with counterparts at OMB and then the various agencies that are implementing the programs they're studying.  But we have very limited next to no contact at the senior level.  I don't talk to the OMB director because I think there is a risk of looking like we are collaborating in some way.  And given the current level of distrust among the folks I worked for that seemed like a risk not worth taking.  Other questions?  David?
>> So the CBO itself was an important institutional innovation in the mid 1970s.  One thing I talked with Ned about quite a bit was whether there were other potential institutional innovations, I sort of doubted, we've arrived at the, end-state, the best answer about the fiscal institutions in the United States.  And I'm curious for your thoughts about potential fiscal institutions that might improve the state of policymaking in the United States today.
>> So I have reluctantly after years of opposition come around to the notion that we may want to move to something that has a budget resolution signed by the president, call it whatever you want.  I mean, the reality is that the federal government doesn't have a budget.  And the president has his proposals.  The House sometimes passes a budget resolution.  The Senate sometimes passes a budget resolution.  They sometimes conference and agree but never do all three-part is given the same page, never is there a comprehensive plan for what you'll spend discretionary, mandatory what you'll borrow, what you'll raise in taxes, it doesn't exist.  So, you know, we don't have fiscal policy.  We have fiscal outcomes, usually bad.  And, you know, I can tell you a million reasons why this is a bad idea that it would force people to talk to each other again which I think is a good idea.  And it would force us to actually come in terms of the plan.
[ Inaudible Remarks ]
So, you write down a budget every year or every other year to take your pick and the House passes it, the Senate passes it and the President signs it.  You have to have that before you can do any appropriations.  But that's all it does and then what?  It's dead on arrival, you hear--do you read the first verse there on the Bible it doesn't matter.  The House passes its budget, dead on the arrival in the Senate.  Senate may or may not pass its budget, never do all three.  There's nothing that forces all three to get together and actually have a plan.
>> Well that question, we have a fall back of some kind that something automatically becomes the budget.
>> I know, I thought this for years, but I know well.
>> Yeah, OK.
>> What are we going to do with it?  I'm with--I am with you.  There are a thousand reasons why this might not work, but we need something.
>> When you have different parties in the two houses, it makes it much more difficult though, you know.  If one is Republican and one is a Democrat.
>> Yeah.
>> That makes--
>> I was there when there are Republicans.  It was still pretty difficult.  So it's the same.
>> OK, other questions, yes woman at the back?
>> OK, I have a couple of questions.  The first question was are there certain CBO analysis on maybe the top two policy topics today, which would be inequality of climate change that sort of help us understand [inaudible] before this country and then the other question was, with respect to social security, it could mean this would lift the tax policy and it would be--solve it from [inaudible] and people let's say 100 or 200,000 you know, they think that operate this, [inaudible] the taxes up basically don't implement it against 200,000 or whatever.  Isn't it a simple thing, so just lift the tax up and we would be able to do whatever your total, that's it.
>> Well, so I can say what we've done recently so on your first topics, we have published report every year about the distribution of income and taxes paid.  And last fall we for the first time also published for the distribution of federal spending.  So you can look at the federal spending and taxes together, and get a sense of the overall impact of the federal budget on the distribution of income.  And on climate change, we've done succession of work over the last decade or a dozen years or so, that has really--I think done a terrific job of analyzing a set of alternative policies and their consequences for economic growth for distribution of well-being as well as for the federal budget.  On a social security I would say, you know, again if you can find your way through our website, there's a very nice report analyzing collection options for you know, social security, as you know, we don't make recommendations.  We just present them in.  We offer the menu.  We don't tell you, "well tonight the chicken is especially good."  But that is one of the options.  And we look at the effects not only on the federal budget but also on the effects, benefits paid, received.  And taxes paid by people born in different generations and with different levels of income during their lifetimes.
>> I mean, there's a lot of simple answers to these questions.  And they tend to be politically unacceptable.  You know, I don't think raising the tax cap will get you there.  But, you know, it'll get you a long way there.  And, you know, the downside of that is there're not many people who would sign on to it.
>> And there's a crucial question on whether you'd continue to compute benefits the way you do now.  And a lot of strong advocates of the social security system think that if you broke the relationship between taxes paid and benefits earned as--where, that that would hurt the political strength of the system.
>> OK Jim?
>> CBO has stood for two propositions that are propositions that economics stands for also, which is that policies have incentive effects.  And that there's a budget constraint.  And these two propositions tend to make CBO the bad guy.  And you know, most policy discussions.  Query, is that an inevitable?  I mean, are you guys just the bad guys?  And is there a way to make yourself the good guys.  And if so, would then the message be more effective?  Or is that just impossible to do?
>> I think you're the bad guy.
>> I mean, as you know, I spent two years of my life on the McCain campaign.  And there is nothing more unpleasant than being the policy person on a political campaign.  Because it's your job to say things like, "Well that's not true."  Or, "You can't say that", and they hate you.  I mean they just hate you.  So yeah, they're always going to be the bad guy because they--they are, you know, in that position.  All you can do is try to ameliorate it by saying, "Look sir, I know you're the politician and I'm the policy analyst.  Here's what I know about this."  You're now informed.  You're--you know, you're an adult with an army gun.  Go do what you want to do.  But this is what you're about to say.  But you're the bad guy, no doubt about it.
>> I'm surprised that you think that CBO is now considered a bad guy.  I've--from where I sit usually, I mean in the press, CBO is considered God--like the word of CBO as like Moses, right?
>> Yeah I know, I know where you're coming.
>> But remember some of that is artificial too.  I mean, I was taught one of my roles.  I don't know how the other feel about it, is you--you've had this psychosocial being the person they can blame for their troubles.  And they vent, and they scream, and yell and lie a lot about how CBO didn't have the scores done on time and this is just all wrong.
>> Oh conscience doesn't--
>> You get called by members and committee chairs and things like that excoriating you, you know, for what is happen.  And then you run into the person in some less heated environment.  And they say, you know, I'm so thankful for CBO.  You know, it's like a kid, you know, blowing up but then realizing that boundaries have to be set.  And, you know, most of these individuals, they're smart, they are capable.  And, you know, they are appreciative of what CBO does I think.
>> And one of the interesting things going on now is that you're having many CBO's pop up all over the world.  Even in Westminster parliamentary systems where you wouldn't think they would have that bigger role.  But there's a new, relatively new one in Canada now that serves the parliament.  And people like them because in a parliamentary system, the minority has a terrible time getting any information at all.  And then the CBO type organization does provide them with some expertise.
>> People come to visit us.  Come from other countries that talk about how they might setup institutions like ours.  From Australia for example, we were visited by a delegation of people in the parliamentary majority.  And separately on a different occasion, a delegation of people in the parliamentary minority, both trying to understand how they adapt to something like CBO, it would work.  Bob Sunshine, he's the deputy director and he's here on the front, has gone to conferences in other countries and explains how we do what we do.  Now we're forced to confess that it's not like US fiscal policies turned out a whole patent.  Impressively, so you shouldn't think this--well that's true, that's the point, which is that, it is having an organization--having CBO organization like CBO is not like having a magic wand, to stop your budget problems.  But, I do think very strongly that the absence of an organization that can produce objective numbers would make the current situation far, far worse.  I think I would--since I am currently working for the Congress I think I will not offer further characterization of my relationship with them, then wait for my memoirs.  Maybe we have time for one more, one more quick question, please.
>> Well CBO has very good information on the budget allocations at the--in the Federal government.  But of course there's a lot of other governments that are spending a lot of money in the United States.  And they have implications for, you know, as we've already talked about fiscal policy as well as many other policy issues that Ned was interested in.  Is there any interest in members among members of Congress to have CBO do more to sort of upgrade their quality of the information that we have about state and local government budgets?
>> So that question is asked occasionally.  And our answer is simply we'd study the federal budget.  And I think there are organizations in some--I mean in states, some have greater strength than others that do analysis.  Some of it now gets to what CBO does.  But I think we don't have.  And we do, we've done a little work in that area.  We've looked at state and local pensions a bit.  We look--we looked obviously at the state's side of the programs that are shared with the Federal government.  So we talk to some extent about how Medicaid changes will affect the states.  But that would be a huge, I mean a huge project well beyond what we could possibly achieve in our current situation.  OK, so we've come to 5:15 and we should stop here.  And I don't know if Susan or Paul have more to say at this point.  Thank you all very much.
[ Applause ]
>> Well clearly these are very important, but prickly challenging issues I think.  And many of you who are here knew Ned much better than I did.  But I suspected if he were here he would tell us that we've got a lot of work to do.  And it's time for us to roll up our sleeves.  But as Sheldon [assumed spelling] said in the very first panel, but we shouldn't lose our optimism.  And so with that, I'd like to just particularly thank Ruth Gramlich joining us for today as well as a number of the members of the Gramlich family.  I'd also like to thank our hosts, the federal reserves.  It's been wonderful to work with them.  And we really appreciate all of the hospitality and the partnership.  This conference would not have happened without a lot of hard work from both Fed Staff as well as Ford school staff.  And I wanted to particularly express appreciation for the great work that they did to have everything go so smoothly.  And then last but not the least, in addition to thanking you our audience for joining us, I wanted to ask all of you to join me in around of applause to thank our moderators and all of a panelist for the entire session.  So thank you very, very much.
[ Applause ]
>> There is a reception and I invite you to stay.