Federal tax reform: A dialogue

0:00:02: Okay, it is my pleasure to welcome you all here today to debate and discuss federal tax reform. It's been an exciting few days, with hundreds of billions of dollars being shuffled around in a matter of hours. So the end result is that both the Senate and the House have passed bills to fundamentally change our tax system. And we, luckily have come together at this moment to have a civil civic discourse on the matter. So, I can see there's lots of interest, the room is completely packed and I also want to welcome all of you who are watching by live stream, we're thrilled that so many of you are participating. We are incredibly fortunate to have two very, very knowledgeable people here to discuss tax reform. I, along with the entire Ford School, welcome and thank our honored guest, Chairman Dave Camp, who as a member of congress for over 24 years, who was the chairman of the committee on Ways and Means and has been recognized for his leadership in advancing tax reform is I think no better person than could be here today to talk with us about his views of tax reform right now. And he's joined by our very own Dean Michael Barr.

0:01:32: Who himself is a distinguished policy maker, beside being our Dean and a distinguished academic, served as the US Department of Treasury's assistant secretary for financial institutions, and was a key architect of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. They are joined by our very distinguished moderator today, the University of Michigan's 14th President, Dr. Mark Schlissel, who is the first physician-led President, physician scientist to lead the institution. And so I think while his knowledge may not have started on tax reform and his current... In his current role, I'm sure he's been brought directly up to speed on these issues as they impact him, both professionally and personally as they do to all of us. I want to thank all of them for being here, I will tell you that we'll have some time for questions, and I encourage all of you to fill out those note cards and ask questions, and I will be joined by two Ford School Master's students, Paula... Now I'm gonna botch your last name Paula Dafne Avila Palomares, [laughter], and Phillip Lee, whose name I won't botch. [laughter] But two of my students who have been studying public finance with me all semester are gonna sift through your questions and ask the most pertinent ones, so let's have no further ado and kick this exciting discussion off. Welcome.

0:03:20: Welcome all. Welcome everybody, a special thanks to Congressman Camp, and of course Dean Barr for agreeing to discuss this hot and timely and sometimes contentious topic. Thanks all of you for your interest in coming here today. One of the great things about not being an economist or public policy guy is they're gonna have to explain things at a level that a physician scientist can understand, [laughter] so I think that would be very helpful for many in the audience. And before we begin, it's really truly important and one of the critical functions of a research university, a public university, to provide a forum, forum for civic discourse around topics of the day particularly in areas where there is not broad agreement and consensus, and then to make sure that we really can best represent a diversity of thinking, so that we can learn from one another and to challenge our own views.

0:04:19: And that's why it's wonderful to have somebody who, like Congressman Camp, Republican from Midland who ran the Ways and Means Committee, the Tax-writing Committee, and Dean Barr who's not just a scholar and an attorney, but also a former official in the Treasury Department under President Obama. So we'll see a spectrum of thinking here and hopefully the audience will also tap into that breadth of perspective. The first thing I wanted to ask, specifically the Congressman Camp, since things are moving so quickly, this is a very auspicious time to have this event. When we scheduled it we didn't realize that 36 hours ago or something, the second of the two chambers the Senate would have passed their bill, the House passed their bill a couple of weeks earlier, technically, what happens next and how do you think this is gonna unfold in the coming week or two before the holidays?

0:05:12: Well, thank you very much, and thank you for having me at the University of Michigan, it's great to be here. Well, now we'll be looking at a conference committee, and that's typically what happens after a bill passes and under our system, the exact same language has to pass both the House and the Senate before it's sent to the President. These bills are different in many ways, and so they'll have a conference committee. Now, I think this will be a relatively short conference committee because they're on this really this time deadline, and a time deadline really is driven, I think partly by the election in Alabama, that they don't wanna lose any votes, and I think there's an understanding that no matter who wins that Senate race in Alabama, they're probably a no vote on tax reform. So they really have this December 22nd date that they need to conclude everything by. I think this conference will a be a couple of weeks at the most.

0:06:00: The House and Senate will be appointing conferees this week, the House tonight, frankly, and it'll be interesting to see how many people they put on that conference. I think it could be smaller than some of them, so they can expedite this and get this done. The other issue that people are gonna wanna know is, it's big inside the bubble of the Capitol is who chairs the conference? Is it chaired by the House? Or is it chaired by the Senate? And obviously if you chair the committee, the conference committee, you control the paper and it's your staff that are writing that. Obviously, they trade it back and forth. And so there's a little bit of a question this morning, which side would get to chair the conference, but often then your policy positions and sort of get priority, but it really is very much gonna be a compromised document at that point.

0:06:50: The last successful effort to tax reform if I'm not misremembering, is back in the 1980s, was it '86.

0:06:57: That's the last comprehensive...

0:06:58: It's been 30 years since a major re-do. And I know very late in your career in the House when you were in Ways and Means, you led the process of coming up with a pretty darn comprehensive, well-considered multiple hearing, attempt to tax reform. Why now and why not back in 2014?

0:07:18: Well, there are several drivers of tax reform back then, and some of them have continued. When I got into a leadership role on the committee, obviously we had had the recession of 2008. It was continuing, Michigan went deeper, I think than every other state but Nevada; and I saw tax reform as one of the ways, partially one of the ways to help get our economy growing again, getting people back to work. So that was really an important issue for me. But in other areas, we haven't been keeping pace certainly in the international field, other countries have been reforming their tax codes regularly over this period of time, and we were really falling behind on that sense. And what I saw is companies were re-domiciling for tax purposes. They were going to another country to have there headquarters, even though their main operations were here in the United States, they would merge sometimes with a smaller company, and then the headquarters would be in another country. Being from Midland, I mean, we have a large company there, whenever we need to raise money for the United Way, we go to employees who work for that company, they chair the hospital board, they chair United Way campaigns.

0:08:25: And so when you're talking about strengthening the fabric of a community beyond the power of government to do it, you wanna have a strong and vibrant business and manufacturing sector. And sometimes those headquarters jobs are very well paid jobs. And so I think that was also another area. And the third reason was I had lived through sort of working both on the super committee and on the Simpson-Bowles Commission, where revenues to the government dropped significantly in the '08 recession. Republicans and Democrats could never agree on... Republicans wouldn't raise taxes and Democrats wanted more revenue. How could we thread that needle and one way I thought we could do that is through economic growth so that you would have more revenue come to the government, but it wouldn't necessarily mean that Republicans wouldn't be raising taxes. So I worked on a revenue neutral tax reform package that didn't increase the deficit. Then I also thought it was very important to be distributionally neutral, and then I worked very hard. We can talk about these more further, to introduce this concept of dynamic scoring, which is, you use the real world analysis of what is going to happen when you pass legislation, not an artificial static model which says that, no matter what you do on tax reform, people do not change their behavior. And we know that tax policy can result in people changing their behavior.

0:09:51: So Dean Barr, I think that people on both sides of the aisle would probably agree that taxes are necessary to fund essential functions of the government. That's probably one of the few things that both sides of the aisle would agree on about taxes. From your perspective, what other sorts of things should be considered in shaping a tax code at a high level?

0:10:15: Well, I guess I would hope that the first supposition you put forward would be true, but I think it allied lots of differences even on that basic level. There's agreement that more or less that taxes should support the functions of the government, but wide disagreement on what those functions are that should be supported, and therefore different people, different sides of the debate. Republicans and Democrats have different views of what the overall level of taxation in the economy should be. So we've seen fluctuations over time in the amount, for example of revenue collected at federal, State and local taxes. We're about to go into a period when that level is going down below the historical post war average.

0:11:06: That suggest at least to me that we're gonna be in a bit of a mismatch for quite a while with pressure, either to cut Medicare, Medicaid, other government services to match that level or running significant deficits for a long period of time that will increase the ratio of debt to GDP rather dramatically. So I'm worried even about the thing that was the underlying assumption of the question which is that we think that government should raise taxes to fund essential services. Then you can get into more complicated questions, which is, what else should the tax code do besides raise revenue? And there, I do think there are differences not only between the Democrats and Republicans, but within each of the Democrat and Republican parties about which kinds of incentives ought to be deployed to foster which kinds of activities.

0:12:03: The Obama administration wanted to use tax incentives for example, to foster renewable energies. There's a long standing provision that favors oil and gas production. There's not any agreement about which particular kinds of things ought to be favored or fostered or encouraged in the economy. I would say there's one area where historically, not uniformly, but historically Democrats and Republicans for the last number of administrations have been in favor of something called the earned income credit, which goes to support families who are working by supplementing their income. And there's been a good bit of bipartisan support towards the earned income credit that I hope would be a basis for cooperation going forward.

0:13:01: Good. Congressman Camp, how do you think the parties differ in their basic philosophy behind taxation?

0:13:07: Well, the parties have not come to agreement on how much revenue the government ought to have. That's been going on for quite some time. And you'll have periodic agreements for a year or two, but this has always been a difficult issue. And then within that, you're right, even within the parties there isn't necessarily agreement on that. I think for this tax bill, this idea that we needed more growth in the economy was really the priority. And then the second one was, how do we align ourselves more with the rest of the world in terms of international tax policy? But if you looked at months ago when this Congress... They put out what they called a blueprint. The House did a year and a half ago. The word "growth" was in there many times. What they're attempting to do by lowering the corporate rate, by trying to lower individual rates, is their message was, let's try to have growth within that. In this bill, obviously, they're giving a priority to sort of pass through entities.

0:14:17: And it looks like they're giving a priority certainly to reducing the corporate rate significantly. And that would be what I would analyze the priorities of this particular bill in both the House and the Senate, aligning themselves internationally. I'd say less simplification than I would have expected certainly on the individual side, the House is trying to go to four rates, the Senate's at seven. But if you look at some of the other provisions, whether it's interest deductibility for companies or whether it's the international provisions, even the pass-throughs, they're more complicated than current law.

0:14:53: Yep. Now, we were joking a little earlier before we came into the room that when Congressman Camp was head of Ways and Means back in 2014, there was a similar effort. A very thoughtful, very public effort. The effort under Congressman Camp was revenue neutral and distributionally neutral. Something that's confused me as just an educated observer, is why is it that this go around the Republicans in particular have given up what seemed to have been one of their central premises, which is deficit. "We don't want a deficit, it has to be revenue neutral." All of a sudden we're at $1.5 trillion and who knows if that number is correct within an order of magnitude.

0:15:37: Well, the tax bill I worked on was the first tax bill to be dynamically scored. And it was an analysis that we got... I got the requirement to do this in the House rules. And then we worked for years on getting the economic modelling correct. But when I introduced my bill and then the Joint committee on taxation, which is the referee who analyzes is non-partisan, said that the bill that I introduced, even though it was revenue neutral on a static basis, they said, "The policies in there would result in revenue to the government between $50 billion and $800 billion in additional revenue". It's this big range of revenue, but it was the first bill to do that. What they've done this time is said, "We think that the growth will make up for... " While it is on a static basis scoring as increasing the deficit, they believe the economic growth will make up that difference. Now, the score they got from the Joint Committee, literally as the Senate bill was on the floor, was that it would raise about $400 billion.

0:16:37: They agreed on a budget and the budget passed the House and the Senate that they would allow for $1.5 trillion in deficit creating tax reform. So they gave themselves quite an opening there to do that. And they believe that the joint committee isn't accurate and that over the next few years there will be enough growth to make up that provision. Looking at the numbers... One of the things that is interesting, it is very difficult to analyze more than a few years in the future. And so the reliability of a 10 year score I think is, from anybody's perspective, certainly a question mark. But that's what they've done and I think I saw that if the economy grows by 0.4%, they will be able to meet that. But what they've done is said, some tax policy will expire in order to stay within that $1.5 trillion that they gave themselves to write the bill.

0:17:34: What about the politics though? The message was so simple coming from the Republican Party that deficits are bad, we can't afford to spend money we don't have. It's our children and grandchildren that are gonna pay the bill. And there was almost... The discussion you gave was the most detailed discussion [laughter] I've heard through this month long debate of why this may not be a big deal but we might be wrong. [laughter] So what is it about the current political moment that has led us to stop worrying about something that was the front burner tagline of a whole party.

0:18:04: You're right. In 2010, I would say the deficit was just a white hot issue. And clearly that has receded significantly and there could be a number of reasons for that. But in this last presidential election, we didn't really hear about the deficit at all from either side. Which I was actually kind of surprised at. I mean, in this sort of policy free on many levels in 2016.

[laughter]

0:18:26: But, the deficit clearly has receded. Now whether that's a result of low interest rates or sort of the easy money, it just has not, or the fact that people are used to the deficits where they are, it's just not an issue. And, so, as a result, when they talk about this balancing, they're talking about balancing it with economic growth that, is yet undetermined. But they think that they'll get there.

0:18:53: Yep. Dean Barr how do you think about this with your treasury department... Your former treasury department hat on, how much do big deficits of this order of magnitude, and for me, I can't tell whether a trillion dollars is a big number or not...

[laughter]

0:19:08: But that [0:19:08] ____ number's a big number. I can't tell whether a trillion dollars is a big number over the course of a decade for the US economy, but how would you think about it as a treasury guy?

0:19:16: Well, so, let me say that a trillion dollars is still real money...

0:19:21: Okay.

[laughter]

[overlapping conversation]

0:19:23: Even in today's economy. If you were to offer to increase the Ford School budget by a trillion dollars, we would deploy that effectively.

0:19:31: You were a good negotiator, but you weren't that good a negotiator.

[laughter]

0:19:35: That's real money. And just to put it some context, President Obama worked with Congress when he first came in, when the economy was really crashing on the rocks, on the shoals. And a trillion dollars was thought of as politically too impossible to get and too big a stimulus to get in that environment. And there was... The stimulus bill got quite close to that, but that is a very large, significant sum of money. In the current context, a trillion dollar effective stimulus is a little bit strange as an animal because you think of stimulus spending being quite important when the economy is on the ropes or it can be, there's debate about that, but certainly can be important. I think most people would say right now our economy is pretty close to full employment. We've had a long run, range of growth. There's not an urgent need for injecting deficit spending into that picture. Deficit spending in the long term crowds out private sector investment. It means that you're paying interest on the debt. It can mean higher interest rates in the global capital markets. There's a long-term drag from that kind of spending. It doesn't mean you should never do it.

0:21:02: Sometimes you should do deficit spending 'cause you need to invest in the economy right now, but I think the case for doing it right now is pretty... Would be acknowledged to be pretty weak. If you're talking about static scoring, which is kind of the traditional model, the Joint Tax Committee says the bill scores at about... Both bills intentionally scored about 1.5 trillion. The Joint Tax Committee, which again, is... You might agree or disagree with their methodology, but it's supposed to be the neutral, non-partisan arbiter. Joint taxes, even under dynamic scoring, it's over a trillion dollars. So, that's a significant hit to the economy and something I would worry about even independent of the choices being made within the bill.

0:21:53: Congressman Camp's proposal back in 2014 was quite a serious effort at crafting a bipartisan compromise with deficit neutrality, distributional neutrality, and simplification. I know that people call this thing we're doing now "tax reform", but it's really basically a big tax cut. It has only kind of superficial resemblance to the work that Chairman Camp did in 2014. I didn't agree with everything in that bill, but...

0:22:23: You weren't alone.

[laughter]

0:22:25: It was hard to find the votes, I gathered.

0:22:27: Right.

0:22:28: On either side. But it was certainly reform. And this, I think, is not really in that category.

0:22:34: Yeah. And if I could just comment on that one point. One of the things that's driving this is that median incomes have basically stayed flat. They've come up a little bit in the last year or two. But it was really an issue in the 2016 election. And the parties describe it in different ways, but I think they're talking about the same thing. Some would say there's income inequality, others would say we haven't had enough economic growth. And even last year with the economy improving as Michael said, and you had people entering the workforce or getting part-time jobs, if you had a full-time job you did not have a wage increase in 2016. So that part of what they're trying to do is increase investment in the United States, which increases productivity, which increases wages, which improves families' lives. And so this idea that the American dream is not there for me or my family, which I think was very much a part of the debate on both sides in the last election, this is one of the things they're trying to get at. Now it's another issue if we think the policies in this bill will help get there.

0:23:36: Right. [chuckle]

0:23:36: But that is one of the things that they are trying to get at. Even though things have improved, there's a sense that it hasn't improved enough for average people. And often when I was in Congress, and I was... People would say, "Well, the stock market's doing well," and I'd go home and nobody would talk about the stock market. The average person... So, it's great that that number is doing well but that that does translate sometimes into retirement funds, in pension plans. But often people don't see that in their daily lives as they're trying to go from week to week and month to month.

0:24:11: I was just gonna say I think that's the funny thing to me about this reform. In your 2014 bill the focus was really on simplifying the corporate tax. And you could get big efficiency gains even on a deficit neutral level from doing that. And I think there was bipartisan agreement about that. Maybe people disagree about this or that provision, but you could find agreement on that. This bill if you say the basic goal is helping the middle class or working class people, there are much more direct ways of doing that. You could expand the earned income credit. You could not do some of the other provisions having to do with eliminating health coverage. You could lower the rates at the bottom and increase them at the top where there's more direct methods of achieving that particular aim. Whereas the corporate side you could say, "Well I get what the corporate aim was, let's go about it this way."

0:25:09: Yeah, I agree. On the individual side, I mean this is both business and individual but the compliance burden when I was working on this just a few short years ago was about six billion hours a year.

0:25:19: On the corporate side?

0:25:20: Business and individual. And now the total compliance burden is about nine billion hours a year. So the complexity of the code is significant particularly on the business but even for individuals, the record keeping and whatever. They do have in this bill where 95% of people will file a simple... I don't know if you can get in on a postcard but it'll be a page or two maximum return. And you will be able to do it yourself. Now there's other issues that this raises and we've talked about some of those. But most people will be able to either fill out their own form or go on TurboTax and the time of it, so that should help and that will help with some of the smaller businesses as well.

0:26:02: Let me shift the focus a little bit. You mentioned that a central component of this bill is reforming or altering business taxes.

0:26:10: Yes.

0:26:11: What's the big idea? It's easy to understand a big drop from 35% down to 20%. What is the policy trying to accomplish with this big drop and how will it work?

0:26:22: Well, when you look around the world and the, I mean we have globalization. Whether we like it or not it is there. And so our US companies are competing around the world. Other companies, other countries I mean have lowered their corporate rates significant with that highest statutory rate of any developed economy and the second highest effective business rate of any developed economy. So you saw the one unifying issue in all of this that has sort of kept the business community on board with all the different changes that have occurred is the fact that the rate is getting, is going low and is going to 20, at least we think. The President tweeted out he might be happy with 22 at this stage of the process. I don't know why he did that but...

0:27:04: We haven't checked twitter in 20 minutes, it might've changed.

[laughter]

0:27:06: Both the House and Senate are at 20% corporate rate. The Senate delays it a year. But they've really aligned on that and that is the only thing that different sectors, different businesses, that's the only thing they have in common. After that it splinters pretty quickly. So they're trying to do that. And they're trying also... We're the only large economy left in the world with what we all a worldwide system of taxation. In the US, we tax companies when they earn money in other countries. They don't have to bring it back but if they do they have to pay and plus up to the US tax. Now they get a foreign tax credit for what they've paid. The other difference we have with other countries is we do not have a Value Added Tax. And they aren't aligning on that piece and I don't see them doing that in the near future.

0:27:54: But those are the significant parts of it. When you go to the system that everybody else in the world has, you have to make certain that you don't incentivize companies moving their intellectual property or moving their operations to other countries or moving their profits to other countries. It's often called base erosion. They're looking at the tax base and are worried that it will be eroded to other countries. And so there are ways of dealing with it. The House and the Senate are dealing with this in very different ways. It's a very complex area of the law and... Of tax law and I'm not sure that either one is where it needs to be at the end of the day. So there's going to be a lot of work there. I think there will be a lot of unintended consequences from those provisions particularly and others are well.

0:28:43: Dean Barr. We were talking earlier about something that affects small businesses, lawyers and law firms, my spouse is a lawyer in a law firm, about pass-through taxes. What was the need to make that or was there a need to make that change? And can you explain a little bit about what a pass-through tax is? Or the pass-through income, forgive me.

0:29:03: Sure. There're basically two ways that you can think about tax. You can tax at the entity level. That is a company. Or you can tax at the individual level. Those taxes even at the entity level flow through eventually to individuals in a variety of ways, either to the owner of shares or to laborer, to other stakeholders of the firm. The idea of pass-through taxation is that most businesses in the United States are not organized as a separate taxable entity as a C corporation. They're taxed at the individual level. And the people who want to have a lower rate for pass-through say, "Well, corporations are gonna get this low rate. Shouldn't other kind of businesses too?" That's sort of the basics of the argument.

0:29:53: I personally think that's a big mistake. I think it's gonna lead to a lot of gaming in the system a lot of relatively wealthy individuals taking their income and translating that into pass-through income, lawyers, accountants, doctors and others and the effect of that is just to lower the top rate for wealthy individuals, which I think is a mistake I think we ought to be maintaining the progressivity of the code and I'm worried a lot about the gaming and the abuse that that would entail and I guess I would take it even a step further and say I think it's a mistake to think of the taxation of pass-throughs as being something that will actually help the competitiveness of those firms. If you look at the main thing that can be helpful to a small business which is really not the kind of businesses where most of the income is gonna... Most of the tax benefits are gonna go, but if you're really worried about small businesses, we have provisions in the code that allow immediate expensing for small businesses. The rest of the provisions of this bill already dramatically increase immediate expensing for all businesses and that's where most of the action is, so this is kind of I think both unnecessary as a policy matter in thinking about comparability and a bad idea in terms of the negative effects it will have on distribution and gamesmanship.

0:31:26: What do you think, Congressman?

0:31:27: Well, on the current law a pass-through pays at the individual level, so they pay individual rate, so if you are a pass-through you just look at the individual side of the tax code and that's what you pay. The higher income pass-throughs will pay the higher rate so if you are in the high 30s for individuals and corporations are at 20 there is an issue, there is not as big an issue with corporations at 35 right now. So when you lower the pass-through rate, it makes a big difference, but for policy makers particularly in the majority right now, they view these as small businesses. They view this as a key constituency. They think of a pass-through entity as mainstream, and many of them are, but there are also some very large pass-throughs as well. So it's not just a small business issue but that's the sort of driver behind this. And they have different approaches here. The House has a mechanical formula 70/30 split, 70% would be at regular rates, the other 30% would be at this lower rate, or they have this formula, this ratio, so it's more complicated than looking at the individual side of the ledger.

0:32:40: And the Senate does a totally different approach in their bill, they do a 23% deduction and they allow... The House doesn't allow any service, I believe lawyers, doctors, accountants, to participate in this. The Senate does have a cap of about 250,000 if you're under that and you're a service firm you can achieve that, but they have this 23% deduction. Both sides were trying to do what they could to satisfy the pass-through community. I did not go with either of these approaches when I did my bill; I was worried about the compliance side. But as a result of that, the pass-through community which is a significant lobbying group did not support my bill...

0:33:21: But they weren't alone.

[laughter]

0:33:22: They weren't alone, I could give a long list, maybe by the end of this we'll go through every group...

[laughter]

0:33:30: So I think they felt like in order to move a tax bill across the finish line, they needed to do something for the pass-through community and give them a lower rate so this is why they are in this, but to fence off that as we know, to say it in a different way, but the state of Kansas moved pass-through income to 0%, they had a lot of compliance problems because people would quit and become a pass-through and that is a concern here and so they have been trying to fence this off and so this is where you get the complexity on the pass-through side compared to current law.

0:34:03: And let me just also say one final thing about this, if you are a pass-through now and you liked the corporate rate, you can just check the box and become a corporation, so a lot of the complaint is I think really mistaken.

0:34:15: Now obviously when taxes get cut for business from 35 down to 20 or the pass-through provisions change, creates a big hole in revenue, so this tax bill looks for other ways to make up for some of that fore-gone revenue and one of the ways which will affect me profoundly is to eliminate the deduction for state and local taxes. That has geographical implications, different parts of the country it works differently, it has re-distributive challenges. Is this a welcome re-adjustment or is this creating a new problem?

0:35:00: I think the thought behind this was we are doubling the standard deduction most people won't be itemizing, they also were gonna repeal the individual alternative minimum tax which would have had some help there, so they were trying to move a number of pieces around. But in '86 they tried to do as well, in 1986 and obviously it was all put back in, you've seen both the House and the Senate say "you will be able to deduct upto $10,000 in property taxes" so it was initially totally repealed in the Senate bill, the Senate bill changed as it went through the process to allow this deduction, it was interesting.

0:35:37: I saw an interview with the current chairman of the Ways and Means committee Kevin Brady and he said "We may need to do more on that issue in conference because of California" obviously high tax state and I think the philosophy behind it was why should the people of Oklahoma subsidize the taxes in New York or New Jersey, so they were really looking at not having a break there but it clearly... It isn't just a partisan issue, it's really a regional issue from a high-tech state. You're gonna fight for that provision to be in there. I think there will be some more adjustment on this before they finish, but whenever you do this, it costs revenue on the balance sheet. And so they're gonna have to find a way to do that. And this is maybe where the President was referring to the corporate rate going up to 22. Because this is a very expensive thing to fix. And that maybe where that's coming from. I'm guessing.

0:36:36: What do you think Dean Barr, do you agree or?

0:36:39: Well, I have, I guess, a different view of what it means to have a country. So I think we have a country because we have lots of states and localities with different approaches to what in their local and state communities it means to live a good life and to build a community the way they wanna build it. And then we share resources across our country to make that all work as a whole across transfer programs, Medicare, Medicaid, state and local support programs. Money is flowing through our economy from the federal government to make the system work as a whole for our country. So I think it's a mistake to penalize states that have chosen a different path to getting there and I would hope that they would reverse course.

0:37:33: Yup. Now, one of the reasons why I've had to become an overnight expert, well of sorts, in tax law has to do with many implications of this current bill for our students. So one of them is the interest on student loans would no longer be deductible. Another that we're really enormously concerned about is the tuition forgiveness that comes along with a graduate just like in a PhD student gets, forgiven their tuition, and one version of this bill would charge tax on this. And there are number of other things, all of which have the sum, it seems, of diminishing or making more difficult people becoming educated. Dean Barr, are the proposed changes the right approach to take regarding the taxation of higher ed? And what's the logic behind tax preferences being given for education?

0:38:28: Well, this is a little bit similar to the answer that I gave before but I do think we use the federal government to support lots of activities in the economy that we think are important. And it's hard to imagine a part of the economy that's more important than investing in our human capital, in our students and our young people to get their education. So we do that through the tax code, we do that through student loans, we do that through a variety of means. There's always room, I think, for maybe a simplification of that process. We have now quite a complex system of support for higher education and for other forms of education. But if I were making the choices, I would be doubling down on the tax support we provide to our students, not reducing it. I think it's punitive, and I worry about it undermining our ability to effectively get the resources where they need to go which is in higher education.

0:39:32: You know it's a tough answer to give in the middle of hundreds of students. But are we thinking about this the right way or are we missing something with the intentionality of these bills?

0:39:40: Well this is where the bills are in two different places. The Senate bill does not change student loan deductibility, and the Senate bill does not address this tuition waiver issue. So they're gonna have to resolve these differences. We do use the tax code for social policy, obviously, we reward home ownership, there was a lot of debate initially, the House repealed the adoption tax credit. Actually, that was a provision I worked on. Adoption issues were very important to me, they had taken it out, they ended up putting it back in, so we do use the tax code to find a way to support social policy. And I think that's certainly, as you point out, that debate continues and they're in very different spots here and they'll have to figure out a way to resolve that. There is though on private universities, this endowment tax, not on public institutions, but on private universities and I think that will stay in. It's in both bills. I think that one stays and I think the theory behind that is certainly some foundations are taxed on very similar activity, and they look at it as giving parity to similar activities being treated similarly.

0:41:00: Some of these issues are fall into the category of... And I repealed almost everything, but in fact, I cut the size of this tax code by a third. That you shouldn't necessarily reward individual types of behaviors. One of the complaints that you get as you travel around on this issue is, "I don't fit any of the categories that the government rewards." And so by raising the standard deduction, they were trying to find a way to reward sort of everyone at the same level and not have pick winners and losers. Now, there's certainly a reason to do that if as a country, we decide there's certain policies we wanna adopt. But they were trying to simplify this and have fewer favorite activities. Now, as we know that is difficult to get through the Congress but that's I think sort of the philosophy behind why they even look at some of those things that you might think, "Gee, that's a no brainer. We shouldn't allow people to deduct student loan interest" and I think that's really some of the reasoning behind it.

0:42:10: Really related to that, both versions of the tax bill because of their increase in the standard deduction have the potential to diminish charitable donations to universities, to churches, to foundations. If you don't itemize, you at least lose some of the some of the real benefit of the donation. Congressman, what do you think? Will it have that have effect and if it does, should the tax code be used to incentivize charitable contributions or is that one of those areas where we should decide as a nation, people should be charitable and the government shouldn't help them?

0:42:51: Well, having analyzed this issue, what we found particularly for smaller donations, it really tracks the economy. If the economy does well, people give, it really doesn't track tax policy. I had a similar provision in my bill and it was analyzed that charitable giving would have increased under that proposal largely because it was analyzed that the economy would do better not so much because of the tax policy. If the economy does continue to improve, I think you'll see charitable giving go up. I do think that tax preferences make a difference on larger donations. I think there's no question on that and whether it's estate planning and I think particularly, if the estate tax is repealed which is in the House bill after a few years, certainly the caps on that increase significantly in both bills to $22 million for married couple, $11 million for singles in both bills so they're making a significant change there. I think that could have an effect not knowing all the wherefores in terms of university giving about whether it's primarily through planned giving at estate time or whether it's gifts during life time. But I think particularly in the smaller donors, those are gonna continue no matter what if the economy stays strong.

0:44:08: What do you think, Dean Barr?

0:44:10: Well, [chuckle] I think as you said earlier, we're gonna have a grand experiment. We're about to find out. I think that... This again, I think goes back in a sense to how you think about the partnership we have in the United States between the private sector and the public sector. We have a smaller government than many of our peer economies and part of the reason we have a smaller government is philosophical and we make up for that smaller government by having a very active and vibrant nonprofit sector. And so if you diminish the resources for the nonprofit sector, you're gonna end up not doing things your society needs or you're gonna need to have a bigger government. I think it's a mistake to go down that path.

0:45:00: I think that both political parties whether they're running for election or they're in power, tend to play their discourse towards the middle class and how what they're gonna do is gonna advantage the middle class. I think there's a debate around the consequences of this tax bill that we don't know the final form yet, but we know pieces that will end up in the final form, whether it will end up benefiting the wealthy or benefiting the middle class. Given the paucity of really detailed analysis and validation of all these presumptions because this is rushed by so fast, how do you think about this, Congressman Camp? Is this gonna be a boon for the middle class, is this gonna take the 1% and help them even more?

0:45:45: Well, when I was working on my legislation, I met with a Republican former secretary of the Treasury James Baker III and then the Democrat leader of the House at that time was Dick Gephardt. I met with him privately and then they also testified before committee in Congress. They both said, "You want to be revenue neutral to the extent, you can because otherwise everybody goes to their corner and tries to protect what they can." I felt that distributional neutrality was important which meant that every grouping of taxpayers would pay, would have the same tax burden that they had before, but that you can still improve things through the economy. I think partly, we had just come off the Romney campaign and I think it was an important point. They're trying to get there. I think because of this... And the other really significant differences is, I did not write a bill for reconciliation.

0:46:41: I wrote a bill that I was working with my Democrat counterpart in the Senate at the time Senator Max Baucus, I knew that I would have a version, he would have a version. My version would change with the process and somehow we'd settle the differences. But I knew that I wanted to show there were policy wins for members of both parties in this bill, but this is a Republican only process. And because of that reconciliation, they've had to have some of the tax cuts on the individual side expire. And that has thrown off their distribution schedule. We'll have to see at the end of the day whether they can fix that. I also think they went to the floor or they went to committee at least before they knew all of those numbers.

0:47:27: I didn't put out anything until I knew all of the numbers and knew where they were. But they're on this very truncated timeline as I mentioned earlier and that makes it challenging because these provisions are interactive so that when you change one, you change another. That is something that you can't just analyze overnight. It takes some time so we'll see it before they get to the end whether they're able to do that. It certainly is a goal that they're trying to achieve and I think that actually makes the Bill much more appealing because the middle class tax cut sort of fits into the narrative we got in the 2016 elections is that maybe progress in this country isn't for me. My upward mobility isn't there and if you can show that, I think it fulfills what people in the country are feeling and if they can't do that I think that could be a challenge in the next election.

0:48:22: In the next election.

0:48:24: Yeah.

0:48:24: And, Dean Barr, what do you think? We don't have access to all the information analysis seems like its barely been done, can you even pick winners and losers based on what we know?

0:48:35: Yeah, you can make a lot of progress on that actually, I mean I do think... I agree that with Congressman Camp that the process is been really quite rushed and lots of the kind of normal order of things was not followed in this legislative process that is meant... The Joint Tax Committee in-houses was rushed, as Congressman Camp mentioned in an earlier question that in-houses came on the eve of the Senate vote in terms of the dynamic score and static score and not much before that. Congressional Budget Office review of its effects on health insurance came rather late in the process. So I think that they made it more difficult but we now do have maybe not perfect scores but we have lots of information both from Joint Tax and from CBO which are that, neutral arbiters on the distributional consequences of legislation and that distributional consequences are significantly different from the aspiration that Congressman Camp mentioned.

0:49:39: So if you look at the distributions, the overwhelming bulk of the benefit goes to people who are the most well-off in our society and many of that provisions are designed for that purpose if you look at the changes in the estate tax moving to $11 million for individuals and $22 million for couples are eliminating the estate tax are designed to help the highest income people. I think if you look overall at the distribution of the bill it's quite clear where it goes. Now there may be growth effects that benefit the economy as a whole that hopefully will benefit more than just the wealthy people. But even there, I'm quite concerned if you look at for example, at the changes, the reduction in the corporate tax, the argument was that that was gonna flow through to higher wages and there were some really quite implausible ranges of numbers put out about wage increases in association with that, that most economists thinks are on the outside the upper end of plausible ranges.

0:50:51: If you look at the stock market reaction to the legislation, you can interpret that as a view that shareholders believe that benefits will be accruing to shareholders. And if you look at statements that CEOs have been making about the bill, it indicates that some portion of that at least will be taken out in the form of stock buybacks and dividend payments which flow through and wealth effects to the economy but are not certainly aimed directly at wages. I guess I'm quite skeptical about the distributional effects the bill being positive for middle or lower income people.

0:51:29: So it sounds like another experiment, right? Where there will be data. We'll be able to track in the coming years what happens to personal income at different tiers in the economy and we'll figure out who's right.

0:51:39: Well, there's no question that there will be technical corrections to this bill. That there will be legislation later on because of this process. That will require 60 votes now there is... They can do another "reconciliation bill" in the next budget year, I think its unlikely, its theoretically possible but in that sense will the other side say we are gonna fix this or will it be similar to Republicans said about the Affordable Care Act, "we are not gonna help fix this" so this will... Remain to be seen.

0:52:11: Now, you mentioned the Affordable Care Act which I'd be remiss if I didn't ask briefly about because I believe it's a Senate bill that repeals or proposed... It's in the bill right now to get rid of the individual mandate and for a minute or two it didn't make sense to me because I don't think about all this everyday of how would you save hundreds of billions of dollars by getting rid of the individual mandate. Professor Barr, explain how that would save the government hundreds of billions of dollars to stop having people have to buy insurance.

0:52:45: So it works through a few different channels. First of all the Senate bill would, as the President said would repeal the individual mandate in ObamaCare and that has a direct effect of, according to the Congressional Budget Office, reducing the number of people with health insurance in the United States by 13 million. That's a lot of people. Some of those 13 million people, a number of them have in addition to their mandate get a subsidy from the government and that subsidy costs money. So eliminating the subsidy when you eliminate the mandate is one source of that budget saving. There's also some saving that's through a signaling effect of other people who decide to sign up for health insurance primarily Medicaid who would otherwise not sign up and so even though the individual mandate isn't required with respect to that pool it shrinks Medicaid expenditures also. Either directly or indirectly you are saving a little bit more than $300 billion and you are losing coverage for 13 million people who will still have the same set of needs they have.

0:54:06: That expenditure will come back into the system but not in the form of a direct expenditure, in the health exchanges around Medicaid but when people go to the doctor or to hospitals or otherwise, those funds will be spent but just not directly in the federal budget channel.

0:54:25: Does it make sense?

0:54:27: Yes. But this has been this big issue for many many years, and the reason the individual mandate is in place is they needed young healthy people to help support the entire system and so there's an issue that, "will the system come down as a result of them not being required?" But there're a couple of things, this was the first time that the federal government required people to buy a product, so it was very contentious in terms of that. And secondly, there was an issue about the cost of the product that you're buying and, maybe they can't afford it. So you've heard senators who want the individual mandate repealed, talk about "This is a tax on low-income people." And so there really are sort of two sides here but it's not in the House bill. I think that does survive the conference, that provision. And I think it really raised itself in the Senate bill because it also raises all that money because they're not spending money on tax subsidies and other issues.

0:55:30: And they'll need that going forward in order to get it done. And also I think the senators were very embarrassed when they couldn't repeal and replace the Affordable Care Act after promising it for seven years. They feel that this is a way that they can politically say we've achieved that what we promised all this time.

0:55:49: And just if you're keeping track of relatively of the repeal efforts, this is at the level of what, the last failure on the Republican side was called skinny repeal, kicked off about as many people as this provision in the tax code. So that's just to say it's a big deal, it is a very significant change in the...

0:56:09: So I think this is in the category...

0:56:11: In the healthcare system.

0:56:11: Using a tax bill to do something else as well. There're other things in the tax bill, a provision to allow drilling in the Alaskan Wildlife Refuge has been contentious for a long time and it was necessary to get the support of a critical senator. Allowing churches to lobby and not lose their tax exempt status. So in the end game there were a number of things that were opportunistic things added to the bill. Good governance or is it making sausage or what is it?

[laughter]

0:56:44: They always say there are two things you should never see being made and one is legislation, and the other is sausage. But particularly in the Senate where there were unlimited amendments in the reconciliation process. But ANWR or drilling in the Alaska National Wildlife Refuge has been an important issue for the senator from Alaska, and they needed every vote and it was attached, it's not in the House bill of course, but I think that survives through to conference because it also raises revenue that they will need in order to do the other things they wanna do in the bill.

0:57:16: And I'll ask one final question and then we'll get to audience questions, so if you have questions, hand your index cards to the end, we're almost there. It's a little bit of a process question that you've addressed but also a consequence question. So if it turns out that the scoring is correct and this would significantly increase the deficit, presumably with future election cycles there'll be pressure to compensate, to diminish the deficit and cutting the budget. Is that what you see the future holding? We create a trillion dollar deficit and then two years later we say, "Oh my God, we created a trillion dollar deficit, we need now to cut." Or is it really so much confidence that the economy is gonna grow it's way out of a trillion dollar deficit that I shouldn't worry I should go about my business?

0:58:14: And in fairness to them, they really think it's only about 500 billion, that's sort of halves the problem because they believe that current tax law will be extended, and so that takes another 500 off the chart, they will disagree on that. But whatever the number is, if in fact the economy doesn't meet those. There was an attempt to put a trigger in by Senator Corker and I think Senator Flake which said that if we don't meet these metrics, taxes will go up basically or as it was explained to me, the tax relief will not occur as they wanted to sort of spin it that way. [laughter] But because they were in this reconciliation process, it wasn't compliant with the Senate rules that allowed this expedited with only 51 votes. There were people who raised those issues, they will have to go back in and address that if it's significant. But again, if the economy grows, it really is not as much the number as it's the percentage of GDP or the percentage of the economy the deficit is, and that obviously has increased over a number of years the debt and deficit.

0:59:26: They will have to track that and they will have to make changes. There really has not been an attempt to address the long-term drivers of our debt which is the entitlement programs, and those are pretty much off the table. The President said he will not touch Medicare, or Social Security. They tried to do Medicaid reform in the repeal of the Affordable Care Act. Whether you agree with it or not, it didn't get there. There was not a policy agreement to do that. So the part of the budget that they vote on and those programs are not voted on every year, those are on automatic pilot, those are renewed and increase every year. But the part of the budget that is voted on actually has declined. And there's only so much that you can do there, because you even have splits within parties there. For example, in the Republican party, there are those deficit hawks who wanna spend more on the military, who don't feel that we're doing enough there. So there's always this pressure and we're gonna be facing another debt limit issue next year in the first quarter. Probably, of next year. And we do have them debating how to fund the government. I think, certainly by Friday, I think it'll be a short term extension, but again, you've seen them over a number of years grappling with this issue and doing short term fixes and not dealing with this larger question.

1:00:41: Good. Well, thank you both very much. Let's turn things over to questions from the audience. We have about 15 or so minutes to go. Please.

1:00:52: Hi. My name is Phillip Lee, I'm a first year MPP student. Here is the first question from the audience we have today. The first question is this. The Senate bill puts back in both the corporate and individual alternative minimum tax. The corporate alternative minimum tax will have the same 20% rate as the regular corporate rate. This undermines incentives for R&D investment. Do you expect the alternative minimum tax to be eliminated in the final bill? And if the goal is economic growth, shouldn't more be done to reduce the amount of cuts going to shareholders and increase the amount spent on innovation and expansion?

1:01:31: Well. I agree. I think that's the effect of the alternative minimum tax and it also affects their ability to move to this territorial system. So by putting the AMT back in in the Senate bill, it had consequences that I'm not sure were realized at the time they did this. So I do think they'll have to address that and I do expect that they will try to repeal AMT in the final product.

1:02:00: My name is Paula Avila. The second question... I'm also a first year MPP student. So if Republican wants to increase household incomes, why not support refundable tax credits? And why weren't previous bipartisan efforts to expand the EITC included in the current proposals?

1:02:23: Yeah. There seems to be some bipartisan support on that issue. It didn't find it's way into this bill. I'm not exactly sure why. I know there is a debate about refundable credits and the ability of the treasury to actually get those dollars to the right people. The compliance issue is significant there, or the unintended payment issue is a significant number there. So I do think they wanna try to find that maybe on it's own in a separate piece, but it didn't find it's way into this particular legislation.

1:02:55: Is it a good policy, the EITC?

1:02:57: Yeah. I would say yeah, and I think there is actually bipartisan agreement. It's been expanded under both Republican and Democratic administrations in the past. And I would've thought if the concern were centrally around expanding the middle class and helping working people that that would be the place to go. Expanding their earned income credit, particularly for workers without children is an area that's been a problem. And also for families with children making more of the Child Tax credit refundable and helping with childcare expenses on a refundable basis, the adoption, tax credit and other measures can all be done in a way that benefits people at the lower end of the spectrum. If you're asking where I would put dollars in a tax reform design to help working people, that's where I would put it.

1:03:51: And I think Speaker Ryan is on record supporting EITC for childless workers. But I don't know why. I'm not exactly sure why it didn't get in this bill.

1:04:00: But it... Of all the things to be spending money on, that has not made it in.

1:04:03: No.

1:04:05: Next question.

1:04:08: We've been at low unemployment for a while, but wage just haven't gone up. We have also seen prior tax cuts lead to a higher corporate profits not wage increases. Why should we believe this corporate tax cut will result in higher wages and income for workers?

1:04:23: Well. It's thought that if we align ourselves more with the rest of the world, we're an attractive place to do business, that companies will continue to operate here. That their headquarters wouldn't move overseas and that they'll invest here. And so one of the things they do in this bill is require, they allow the dollars that are stranded overseas now which some estimated almost as high as, getting close to $3 trillion. They'll tax the accumulated amount. Require that to be brought back. And then allow current dollars to be brought back. Some of the changes in the tax code. It's all about increasing investment and if you can increase investment, and one of the things that has occurred over the last 30 years is investment in the United States has declined. Pretty dramatically.

1:05:14: It's pretty much a downward trajectory and if you can increase investment that does increase worker productivity. And if you increase worker productivity, you increase wages. So it isn't, it's an economic theory that does work and a lot of people do support that. Even some Democrat leaders, I think it was the former secretary of the treasury Larry Summers said a piece that, "Don't put a lot of restrictions on the dollars coming back. Let them find their way into the economy, however they do." And one view is, yes, if in fact it's a shareholder buy back or pays higher dividend to shareholders or they build a new corporate headquarters. Those dollars are getting back into the US economy, maybe not in a direct way, but if the government tries to restrict that, then you don't have those dollars flow in the way that they need to. That is the thought behind that. It's two things, one, we want to stay in pace with the rest of the world, so other places don't become more attractive; and two, that if we can increase investment in the United States that's investment in people as well.

1:06:29: Let me just say on Congressman Camp's point, I do think that there is some benefit to a corporate law reform, or corporate tax reform that would increase efficiency, that could increase growth, that could lead to more wages, but the bill that's currently being debated is actually significantly different from that kind of bill. If you look at the base erosion provisions that Congressman Camp mentioned before, they're pretty weak and the incentive to place jobs overseas under the legislation is actually pretty strong and it depends a little bit on which bill ends up being enacted. And there are a lot of dollars that are overseas that are actually already deployed in the US economy, so in the purchase of Treasury securities and bank accounts in the US that are treated as offshore for tax purposes. The net benefit of that international change in this bill as opposed to in an ideal bill are quite modest.

1:07:35: Yeah, I would agree the base erosion provisions need some work.

[laughter]

1:07:41: Time for another question or two, yep.

1:07:45: Prominent Republicans have acknowledged that campaign donations are at stake if the party fails to pass the tax reform. Meanwhile, public support for the bill is below 30%. Does success of this bill reveal a need for campaign finance reform?

1:08:03: Is there any campaign finance reform in this legislation?

1:08:06: No.

1:08:06: I don't see any provisions on that...

[overlapping conversation]

1:08:07: But does it reveal the need for it? [chuckle]

1:08:09: Oh, does it reveal the need for it? Well, there's always an issue on campaign finance reform and some of the reforms have been helpful and some haven't. I've always felt the best thing on that is the disclosure side of it, people know, and with the internet now you actually can know. People used to talk about disclosure before you could actually find the information and now it's pretty easy to do.

1:08:36: I think that they're worried more about the political consequences frankly than the campaign donations. I think there are many members that feel that if they don't pass this it's like "Why did we elect you?" and that it will demoralize their supporters. That their supporters thought they were going to get not only Healthcare repeal and replace but tax reform. I think there's just a lot of pressure on support and obviously when you get into an election you wanna have the energy on your side and clearly in '16 the energy was on the Republican side but right now the energy is on the Democrat side. So I think they thought that if they don't fulfill this accomplishment it will be a real challenge. What would you run on? Why would you say "You need to re-elect me?" so I think it's also not just about donors are gonna contribute but it's also about what message will you have in the campaign. Now I think their message is gonna say "We've passed a middle class tax cut that's gonna improve the economy and gonna make your life better." They're gonna try to move it in that way but that's the challenge here. Almost more a political challenge than I'd say a campaign finance challenge.

1:09:57: That makes sense.

1:09:58: And I have another question. [chuckle] I'm worried that this reform does not comply with the equity principle of a good tax reform, talking about economic theory because it allows companies and big economic agents, like wealthy economic agents, to deduct more taxes than the average person wage earner in the United States. What do you think about that?

1:10:29: Well there's no question that if you add up sort of the benefit... The dollar amounts in this legislation it's tilted more on the business side than on the individual side. More on the corporate side than on the individual side. That is true but part of that is for reasons that we talked about earlier, that they felt they needed to write the comparison between us and other countries on that. And they didn't do it exactly the way other countries do it as we've discussed but that's the theory behind that.

1:11:01: And again it reveals value choices. You could've had, as Congressman Camp had in 2014, you could've had a deficit-neutral change in the corporate rate by simplifying and broadening the base which is kind of classic tax reform in the way that 1986 did and the way that Dave was working on. And added to that was this set of changes in the individual rate so they have the corporate rate which is skewed in one way and the individual rate is skewed in a similar way and that's mutually reinforcing. I would've made different choices.

1:11:41: When I did it I balanced the corporate... The business and individual sides so that the amount of resources were approximately equal. There's lots of balancing that has to go on when you do it that way but it can be done that way. They just moved in this direction. The policy choice they made.

1:12:01: Do you regret not being there this year?

1:12:02: No, I don't.

[laughter]

1:12:06: I was just curious.

[laughter]

1:12:14: So next question is that if the increase in growth is more in line with what the Joint Economic Committee or other outlets predict. How do you think Congress will address our growing debt? And does it threaten social security and Medicare?

1:12:31: Maybe I'll say a few words and then you can jump in.

1:12:35: Yeah, go ahead.

1:12:35: I think, correct me if I'm wrong but I think that Speaker Ryan already said that he wanted to take a look at social security and Medicare next. So I think that they're thinking about cuts to those programs regardless of the tax bill. The tax bill adds further impetus to that. I think we oughta be going in a fundamentally different direction. I think we oughta be raising our revenue, and this goes to one of the President's first questions. I think we oughta be raising revenue consistent with our commitments and the kind of society we wanna live in and that means in part paying down the debt, it means part keeping faith with seniors on social security and Medicare, and those programs are fundable.

1:13:23: Health is actually a harder problem than social security. Social security is really just a math problem, if we took the cap off, the limits off payroll taxes, we'd be a long way there. Health reform is actually a bigger deal, we can see under the ObamaCare reforms that the health curve has started to flatten a bit, but it's still a major societal problem. That's not so much a funding problem, as how we organize ourselves to deliver healthcare and we get into the President's area of expertise and far out of mine.

1:14:05: Revenues to the government have been increasing, and I think last year was the biggest amount of revenue that the government had ever gotten. The problem we have is that spending is growing at an even faster pace than revenue. So they're both going up, and so at some point this has to be reconciled. And it hasn't really been reconciled for decades. And this is been both parties have done this so, it is an issue. I do think there are areas clearly in social security that we need to reform as well, but I don't think that can be done on a partisan basis. There are a number of good ideas, social security as you point out, is more an actuarial issue than it is substantive issue, and obviously the workforce has changed. There are people who are working successive jobs that don't really get caught. They don't really get to become a part of the social security system, so particularly low wage workers who are working a number of jobs.

1:15:01: Think of somebody maybe cleaning houses for a living, they don't really get the benefits, so there are improvements you could make to the system. But I don't know that that's gonna happen in this particular atmosphere. And particularly in an election year, I just don't see it. And the President isn't really behind doing anything to either one of those programs. I think that's gonna be a challenge to see any progress on those this year. But if either the deficit increases or they try to do something on the spending side, whether that's the discretionary side they vote on, or the mandatory side they don't vote on. But at some point they're gonna have to do that. This was really where the Simpson-Bowles Commission was going, this was where Super Committee tried to go and neither of those were successful even though they were bipartisan in nature. They just have not been able to grapple with that because nobody wants to make the hard choices and also it can become very, very political. And because we're facing elections every couple of years, it makes it a real challenge to get it done, but at some point they're going to have to address some of the changes that have occurred in the workforce, and longevity, and other things to address these issues.

1:16:21: If we have time, is there one final question?

1:16:22: I think this would be the final question of the day, given our time.

[chuckle]

1:16:32: The question is, are you concerned about the lack of bipartisanship happening in drafting the tax legislation? And the seeming degradation of legislative norms, such as the Senate passing the bill in dead of the night, not allowing Democrat senators time to read it? Handwritten notes, the involvement of more than 6,000 lobbyists in crafting the Senate bill, etcetera?

1:16:55: Yeah, I think tax policy should be done in a bipartisan way, with members of both parties. I think healthcare would have been much better if it had been done that way. Unfortunately it wasn't. And I think that that's how you want things to last and I think you can try to take the best ideas from both parties so I would have preferred to do it that way. And I think I could have done it that way, part of the problem we didn't is we just had had the fiscal cliff, and so there was a big piece of tax policy that moved through. And so I think both leaders in Congress and in the administration thought "well, why do we wanna open this up again? We just sort of resolved some of these issues." But again, I think it would have been a better way to go, but they did it the way they could get it done.

1:17:43: Well, what I would challenge everybody to think about, what is the next big issue on the plate for us as a society that we should approach the way you're talking about, saying we should take the best ideas from both parties and use that as an example of how to find the overlap necessary to move forward and to be stable as a nation.

1:18:00: But look, let me thank very much Congressman Camp and Dean Barr. Appreciate it.

[applause]

[background conversation]