>> well, i could see via a one semester course in constitutional history, while people who were involved in making the american revolution in making the federal constitution all believed that constitutions generate over time. even if they have optimal constitution eventually it will generate in every society will end up in tierney at one point or another. it would not be surprising to many people who are formative thinkers in the process of creating either virginia's constitution, certainly church may send believed governments to generate over time. madison believed that he was almost universally holiday dia but over time there will be change. if it is good it can only get worse. that is unsurprising to find happy.

>> i understand you went to college and university so he didn't have to have his slaves belying -- is that the main reason he went to new jersey so he would have to earnestly to fund the slaves that were inherited? >> and outcome of the reason he went was physically unwell and he believed that the environment to williamsburg was unhealthy. so to be avoided yet this is a common kind of idea among division elite. richard henry elite, president of congress did not participate in the ratification convention in 1788 because he was on while anti-richmond was a sickly environment. he didn't want to go there while he was unwell. so that was not the reason.

in fact, not ascend took slaves with him when he would to congress in new york and philadelphia. there's interesting exchanges between him and his father over what to do about the fact that the slaves had become accustomed to more latitude in behavior while they were away from virginia. in one case he freed a man because he's used to being freed now. i camping and that. that was not why he went to the college of new jersey. >> in hindsight, could he be considered a deiced and an atheist? and also, did he believe in absolute state rights in spite of what he said about congress? >> and 30 words or fewer? now, we have no evidence that he was a deiced. we have no evidence in the talk after 1800 after what he said about christianity.

we know he attended christian church while he was president and we know that apparently he had been interested in christianity enough to stay on a steady heber after graduating from college of new jersey. we know he was an active member of the vestry, which is the committee of the layman who ran an episcopal congregation in cooperation with the minister. that he intended for us not to know what is specific religious beliefs were again because he did not exist as a kind of thing your politicians should be telling you. you don't need to say vote for me on a catholic, anglican, jewish. this is not supposed to be a ground of our politics. so keep it out. don't ask me. i'm not going to tell you. apparently when he died he had his correspondence called it to remove this kind of thing besides personal letters there's

no love letters from james madison to dali. you can't quite imagine him writing a love letter. but assuming it was romantic at any point, we don't have any evidence of it. why was that? well, these people although they knew there would be people like me who made careers of reading their mail, they didn't want us to read all of it. so they took that stuff out. well, he certainly believed that today would be seen at the very conservative conception of the state's rates. he believed in a federal system instead of the national and here the government should be decentralized and at various points was a great pain to describe how it should be bad. if you're interested in his views about.com you could go to the internet and google the phrase, james madison bonus describe how it should be read. if you're interested in his views about.com you could go to the internet and google the phrase, james madison bonus and you can find a long message if you're interested in his views about.com you could go to the internet and google the phrase, james madison bonus and you can find a long message from him and his fine act as president was to

veto a bill sponsored by his closest ally in congress and here he is excited by and gives what to would be called a states rights explanation of the constitution. this is entirely consistent with what he said at the beginning of the constitution in response to alexander hamilton's bank bill. he said the same thing. the government has few powers and so on. now seems the classic jeffersonian republic position but another area in which jefferson gets the credit for something madison did save the.into virginia religious freedom has been found in the jeffersonian party. it is madison's party, jefferson made a better face for it and madison recognized that. it became the jeffersonian party quote, unquote. billy was madison thinking that delayed the thinking about the constitution. >> would you say that on the same switched from sort of his position -- nationalist position

of the convention distorted his views in the veto message was not -- which you character that is a conversion or nearly the fact once the constitution is ratified as written he just felt that he had -- he was obligated by that notwithstanding his earlier nationalist views? >> i think the latter. i think he felt the proper way was that it had been explained to the people when he was ratifying it. so although he favors some came before it was agreed to in philadelphia, he always after that called for it to be enforced at it then explain to to people during the ratification process. although this is not the subject of tonight's top, i devote a whole chapter to it in james madison in the making of america. so if you're interested i'd be happy to sign your copy.

>> it seems to me that ahmed the tax memoranda -- it seems to reveal the thinking -- madison thinking that seems more disjointed on the matter of religion and concise. i was when i come it did in fact have a concise idea of what religion is that these but it should be as opposed to what it shouldn't be? >> well, he didn't say what it should or shouldn't be. so this section of the detached memoranda that is about revision is not about prescribing or proscribing religion. it's about not prescribing a proscribing religion. in other words, his concern was the government should be telling you and politicians shouldn't be telling you. vote for me in the catholic. vote for me i'm an anglican. but for me i'm jewish. that's an anti-madisonian. if you asked about his religion he would've told you go away.

he apparently took great pains to ensure that this correspondence that survives to us in these people by the way for very egocentric and the sense that some of them from a freakishly early age saved other correspondence. thomas jefferson was a teenager when he wrote some of them said say this letter. one day people are going to read my letters. john adams when it's in his early 20s when he wrote abigail smith, his soon-to-be wife and said from now on say whatever i write. you people are going to want to read this. so madison knew that people were going to be interested in his ruminations on these questions, but he also believed we shouldn't be. this is not the issue. just because some guy at the politician doesn't mean he knows anything about god or not god. it's not what they're about. you shouldn't inquire of him. go ask your minister or mom or the sun. that was madison's attitude.

>> just a second. this way for the for the microphone, please. >> buttress his position on who could go? to be the position? >> on who could vote? voting rights. >> well, i mentioned an attack that in the virginia convention when he was 25 that the committee drafted the declaration of rights that all men are born free and equal in government is responsible for taking their right. and when the committee reported that the full convention, one of the members that this will lead to social compulsion. do we really want to sell want to sell men are born free and equal. i propose a menace by sabin entered into a state of society

government has to protect the rights and the implication being black people weren't allowed to enter into this pocket society. so you have your contact on the way virginians that the people within virginia's territory are not allowed to participate. madison did not object. he didn't say i approve. he just was silent. but this was not an issue that came up this is not an issue i am unaware he would have to consider. he had a key role in drafting them what she had a key role in explaining the federalist series this was left entirely to the state to decide. that's kind of saying that the federal system that's supposed to be up to the state to decide. again we don't get any information about whether he thought blacks or women or whoever should about.

he was involved in this in 1829 and 1830 and they did extend the suffrage from formerly only man who held a certain amount of land to men who were renting land and men who had less well from now. i guess you could say at the end of the life you give up liberalizing the suffrage requirements. this not been as liberal as we expect. everyone can vote. he never propose such thing. >> during the time of madison in england, there is christian persecution. i should say catholic persecution. there is a rule you have to be an episcopalian to attend oxford or cambridge.

there were other disabilities use the third if you're not an episcopalian. there were many which were not subject and put it down for her. there were many which were not subject and put it down for her. there were many which were not subject and put it down for her. is faster process, but not subject and put it down for her. guess that's fair price, but keep in mind that in spain you have to be catholic and orthodox. and in england you made no allowance for some dissenters, even if that was on the other protestants at least it's more liberal in any other place. there is no christian persecution per se. by the time the revolution and

rhode island there is another colony of maryland had no state and eventually was forced to adopt and clement son and the rest as the mall had state churches. anyway good unless you read what i than you had to pay for puritanism and you could be punishing very safe if you want it. 10. he had to be an anglican including in new york they have at least on the books the official church of england. this place is called new york and named with the duke of york and he was an anglican. so they set up a state church in the beginning of english rule here, even though it was not energetically enforced because the population is highly heterogeneous bert -- unlike virtually any other good >> a chapter ratifying the constitution you talked about in the middle of the chapter may

send talking about how the confederate state -- confederacy of states could actually form different confederacies within that. there wasn't this pledge to union is one of those gatherings. and that corrector is set -- can you summarize the thoughts of the time as far as whether states could succeed from this union been established? >> i do want to give it away. >> later on in the chapter -- i guess you haven't gotten that far. but they ratify the constitution, george nicholas and governor randolph or two of the three leading spokesman along with madison in the virginia convention are going to explain that if this government abuses the powers giving we can reclaim them. they can use the word the secession yet. it had not been brought into wide use, but clearly that is what this means. we can reclaim them and take it that.

this is one of the novel discoveries that this boat. i am not aware of any other book that is pointed this out. so the leading fabulous set in the convention that virginia could make him the powers granted to federal government. >> you should note that in new york state catholics are not allowed to vote until 200 years ago. >> catholics were persecuted everywhere in north america except again in the earliest maryland, in new jersey, pennsylvania and rhode island. >> he abolished to that. >> even in the civil war -- after the civil war the religious and connecticut if i'm not mistaken. >> not only dared.

>> before you made the case for the presidency, what accounts for the fact that there is a rupture in his own party when john randolph and speaker make in bro quit then. was it morality or politics? >> the break was during the jefferson administration in the issue had to do with what day -- with the quiz that about what was going on in the jefferson administration. but when madison had to provide formal interpretations of the constitution, he always came back to the same argument as it made against a bank bill in 1791 the congress had few enumerated powers that were specified in article i, section eight and that is the basis of his veto in 1817. he did make an exception. he said because there's been a bane for 20 years from 1791 to 1811 he had to defer to the judgment of past congresses and

presidents and he could not roll back every question in every administration. but in general he appeared to the same principle through his presidency. there is discussion of the criticism in the book. so i agree with you that is an interesting passage. what he is talking about for those of you who don't know as the thomas jefferson administration in which jefferson's cousin, john randolph who had been the majority leader when jefferson broke with jefferson and start a third party to oppose jefferson. so your cousin is now a senator majority leader is now chief opponent. that's a very interesting passage in the size that in the book there is a sketch from life as the deformed randolph has never been published before. you see him on horseback and he looks very unwell, which he was, unlike madison.

[laughter] >> i was just wondering, like what is the reason that you, like, are investigating madison anyways. is he a conservative populist aura that should be like exam and, like, in an age of populism -- as just curious about that. >> perhaps if i'd begun writing about him last or that would've been the reason. but actually i first encountered not assume any serious way in 1993. i was writing a book about revolutionary virginia and what i found them and what i sound sense in writing a couple books about the constitution was there were several points in madison's career which i thought the generally accepted version of his five was just mistaken. it was inconsistent with the primary sources. so after i came to six or seven

points at which major junctures in his life that which i thought that with this ethos that was just wrong, i realized i should write a book about them and not for the book came from. it was that we have occupy wall street had better read about james madison. that had nothing to do with it. >> you know what his opinion about immigration us at the time if he had a strong feelings about it? >> was a segment talk, he thought one reason to oppose the idea of general assessment was deleted because from virginia. there is a competition to see which could be most welcoming and one reason you want a liberal policy we see what people come from foreign countries to virginia. the negative effect on slavery and people in the south that had eventually would be far more populous than in the north because the environment was more

salubrious as they would have said. the weather is better, land was smart for them. by when people move here. in his old-age madison saw had happened. they said why not? people don't want to compete with slave labor would make an move to ohio and so they've done not even know ohio is cold and windy. the land is as good. >> i believe i read in one of tom woods' books that new york state made it a condition of signing the constitution that it had the right to succeed. >> yeah, i think he got that from me actually. last night that's true, they did say they could -- well, yes -- the short answer is yes. >> can you say a little about

his foreign piracy because the secretary of state and president? >> well come in the area foreign policy is the big flap with madison's career. madison beginning in the mid-1780s wanted to experiment in economic coercion instead of military coercion and ultimately secretary of state persuaded jefferson to try the experiment to basically disbanded army and navy and relying on militia in the first instance with farcical gunboats as the means to protect in american ports in the end result was that the british burned on the capital in the white house. it didn't work. it is a grim passage. basically it was, i think, irresponsible in the middle of a world war into which it is obvious the united states were going to be in some way to say

here is our rule. you don't play by our rules will take our football and go home. the british and french were not going to play that game either. so i said ultimately madison called to declare war without first preparing financially or via a military buildup and then the british had no difficulty invading maryland and burning down washington. so that's why i didn't give a talk on james madison's wonderful foreign policy. [laughter] any other questions? i think we have whenever they are. >> outside of virginia at the federalists like you described there were certain centers i guess of the country that would like dominant as far as

controlling politics or whatever. would you say like texas is another state -- would there be any other centers? >> texas became a state in 1845. >> i know, that saddam hussein. there were originally 13 t around that time before.es at to describe, like you said he was a fatter list. the federalists was like they were just separated. there was that uniformity, which you are talking about earlier. were there certain areas of the colonies were certain areas of the country that he felt which should be more dominant than others as far as representing a nation? >> well, not a fan died in 1836, so the question of taxpayers

points west was not the issue. i use the word federalists. that's a very confusing word because people who favored ratifying the constitution in 1787 to 90 colleton federalists. in 1792 there's a political party called the federalist party. that's a different party from the people say they're ratifying the constitution. madison was an opponent of the second group. what he meant was the favored the principle of federalism, decentralized government. yes, he did and consistently. after the constitution had been bitten. so as to whether he favored an particular region or another, he was a southerner, but wanted to incorporate northerners entered the jeffersonian coalition and that is why they chose first george clinton from new york and aronberg from new york to be jefferson's running mates for president. i don't know where to go beyond

that. just a minute. we can hear you. just a minute. we need to get the microphone to you. >> at the beginning you are saying his stand was one of the largest -- one of the largest families and you mentioned a lot of flake, it seemed like a state politics. wasn't like they were lake based in like the franchi said talking about france was what it looked that, like the french system? but like the state of virginia, mostly wasn't that one of the biggest areas that the united states, where light, british culture was like, still exist today. i didn't understand on the state level. you talk about local politics than he favored, like a french kind of like -- you mentioned -- you were saying --

>> i don't know what you mean by favoring french. >> no -- on the local level when you're talking about -- i think you touched on property right and you're talking about like politics and ideology and philosophical politics or philosophical politics. i'm curious how that was. >> virginia was a british colony and it became independent during the revolution. i don't know what you mean by france. i have no idea. >> i am just saying as a culture and the state of virginia. like i thought it was more than any other state, maybe like massachusetts with the another state that would be similar to

that. so i thought i heard you mention when you're talking about when his family was interacting with the other -- with the other families that had he asked interacting with the other population in its areas and he was getting political ideas are a debtor, he mentioned in your attachment that religion then you said that, like, you said that -- yeah, you mentioned the difference but being anglican and french. he talked about that a little bit in the french influence as far as political rhetoric. >> i really have no idea which are talking about a regard to france. i don't think i talked about the french religion at all. a couple people asked questions about catholicism, but i don't think i said much about it. so i don't know what you're

referring to. any other questions? >> thank you. >> okay, thank you. [applause] .mac ..

>> i don't regard this biography of lyndon johnson. it will examine the political power in america. i'm saying this is the kind of political power, seeing what a president can do in a time of great crisis. how he gathers all up round and what did he do to get legislation moving? that is the way to examine the power in a crisis. i want to do this in full. it takes 300 pages so that is why he said let's examine this.

>> the brookings institution hosted a forum today on federal tax policy and ways to change the tax system. former treasury secretary von summers, budget director alice rivlin and former white house chief of staff john podesta. first to hear from former treasury secretary robert rubin. >> good morning. i am bob rubin and on behalf of all of my colleagues at the hamilton project let me welcome you this morning to our program which as you know will be a discussion entitled economic facts about taxes, rates,

revenues and reform options. the project began six years ago and it brought together a truly distinctive group of policy experts, academics and practitioners. in that context we don't endorse specific ideas that we do organize serious discussions around issues that are critical to our economy and in that respect we have events like we had today with academic and policy experts and practitioners. when we have papers, those papers are such as to rigorous peer review. we believe that the objectives of economic policy should be growth and competitiveness, broad-based expansion of living standards and opportunities and economic security and we also believe that they can be mutually reinforcing. we support market-based

economics, but we believed equally that it is vital to have a strong government to perform those functions that markets by their very nature will not perform. the hardship that many americans have been experiencing and continue to experience requires a serious commitment by policymakers and in support of that commitment the hamilton project has had a number of discussions and events around short-term policy challenges but our primary focus continues to be long-term economic policy. we believe that our country is well positioned well-positioned in transforming global economies because of our enormous long-term strings but we also believe in order to realize that potential potentially to put our fiscal situation on a sound basis. we need to have strong public investment in areas critical to our economy and we need reform in the areas that are so central to our economic success.

including health care, immigration and tax reform. and that takes us to today's program. there is widespread agreement that our tax system is badly flawed and badly in need of reform for the future of our economy. beyond that however, the agreement breaks down. there are many different views as to the purposes of tax reform and as the changes necessary to accomplish these purposes. are ejected two days to better understand these different views, the effects of various proposed tax reforms and the criteria for evaluating tax reform. in that respect let me make a few brief comments as framing observations with respect to discussions that follow. number one, major changes in our

tax structure and in the level of taxation. for example, increase revenues that increase confidence could promote growth, reduce inequality and contributes substantially to salvaging a sound fiscal trajectory and that was my point before about increased revenues contributing to deficit reduction with room for critical public investment. number two, having said that there were vigorous debates about what purposes tax reform should have, with the effects would be of particular changes in what the level of taxation should be. number three, many substantial tax reforms will have major winners and major losers, and that creates a very difficult substance with respect to tax reform and very difficult politics. number four, any substantial tax

reform will inevitably have multiple effects on our fiscal position, on inequality and on growth and finally, as we all know, the postelection period of 2012 and in the first two months of 2013 will pose fiscal issues of enormous importance. whether that leads to destructive action or the political system fix those issues down the road remains to be seen but it is our view tax reform at least has the potential for helping catalyze destructive response and could play an important role in that response. with that let me outline our program and briefly introduce our panel members. as you can tell from looking at the program this is a truly remarkable set of individuals and remarkable may be an overused word but i think

clearly it is applicable to the group we have today. i'm not going to go into their resumes because they are in your materials. we will begin with an overview of the hamilton projects well received and eliminating paper, that doesn't economic facts about tax policy. the paper will be presented i adam looney policy director at the hamilton project, senior fellow of the brookings institution and one of the nation's leading experts on the economics of the tax policy. also if you look at the extraordinary working group on the front page of the paper that helped guide this paper, it will give you a sense of the truly distinctive strength of the hamilton project being able to bring together such an extraordinary group. then we will turn to our first roundtable titled the economic case for tax reform, and again this is a remarkable group for this discussion. the discussions will be martin

feldstein professor of economics at harvard university, president emeritus of the national bureau of economic research and former chair of the president's council of economic advisers. and lawrence summers, charles elliott university professor, former president of harvard university and former secretary of the treasury and former system to the president through economic affairs. the moderator will be zanny minton beddoes, economics editor of the economist. i said i wouldn't comment on the resumes and i won't but i would like to make a few personal observations. marty feldstein and larry summers are friends of whom i've had the opportunity to discuss economic issues, and marty's case for many years and in larry's case for decades. both are excellent listeners though challenging. they are challenging but they

also process what they hear, are open to changing their minds and then give you reason to conclusions with strong grounding. so in addition to their preeminence they are exceedingly well-suited to their recent discussion that tax reform need so badly and so seldom gets. i i've also had the privilege of being on panels with zanny and she is not only a decisive moderator but she. i knows more about the subject at hand. when i'm on the panel she surely knows more than the discussants. our second roundtable key principles for a successful reform effort, the discussions of the honorable john engler, president of the business roundtable, former governor of the state of michigan, president and chief executive officer of the national bureau of economic research and professor of economics at m.i.t..

john podesta, chairman and counselor of the center for american progress, former chief of staff at of the white house and alice rivlin, senior fellow at turkey's institution, former deputy director of omb four for -- 5 former vice chairman of the federal reserve board. and 3m professor of environmental economics at m.i.t. and a former chief economist of the cea. as i said at the beginning this is a remarkable group of people. again i'm not going to go into the resumes but i like to make a couple of personal observations. john engler was a committed republican but he also worked across the aisle with both parties and that is the spirit that we are going to need both to accomplish tax reform and more generally to move forward on the issues of our country. i was in the clinton administration was john podesta and arguably the chief of staff is the most difficult job in the

government other than of course being president. john was chief of staff is was a friend and in a sense been a major force for serious policy by founding the center for american progress and an advising members of congress and the administration. i also have the opportunity to serve with alice rivlin. she was always an effective and thoughtful colleague and has long been a major voice for what arguably is our country's most fundamental economic rob lum or economic policy challenge i should say, and that is reestablishing sound fiscal conditions. jim has what is thought by many to be the most important job in the american economic profession and he has accomplished enormous challenge of successfully succeeding a giant in the profession, marty feldstein it is never an easy task. by the way, in terms of the

president of the head of the national hero of economic research being the most important job marty was that and i asked him if that was true and he said yes. [laughter] finally, michael has provided outstanding leadership at the hamilton project, and is also provided frequent tutoring for me and so many members of our project and has really done a remarkable job from this morning's program. today's program will give all of us the opportunity to listen to and engage with preeminent thought leaders on on the economic issues of our country. for developing the electoral construct in bringing this program together i would like to thanking particular akel greenstone, karen anderson the deputy director of the hamilton project and add a money. i'd also like to recognize les samuel and former assistant

secretary for tax policy the department of treasury. and key as always to the work at the hamilton project i thanked the enormously talented committed and hard-working staff of the hamilton project without which nothing we do what happened. with that, adam i turn the podium over to you. thank you very much. [applause] >> he thank you for that warm introduction. since the last major tax reform in 1986 tax codes have been more complicated, less efficient and increasingly uses less fair. tax reformer tell us i brought in the tax base we could have a simpler system with lower rates but increasingly that is not all

they tell us. some tax reform is an opportunity of reinvigorate economic growth and unleashed economic to the create jobs and a way to boost revenues without raising rates and help solve our deficit problem. today we want to provide the foundation for a discussion of what tax reform should accomplish but also to put up guardrails on a conversation to keep it grounded in the evidence of what tax reform realistically can accomplish. drawing on the expertise of the many tax experts among its advisory council, the hamilton has put together tax reform to facilitate policy discussion and i hope you all picked up a copy on your way and. our starting point is the observation that the economic context today is far more challenging than in earlier tax

reform areas and that is not just a statement about today's unemployment rate or the political situation in the tough fiscal choices we must make by the end of this year but it's also about the fact that we face at least three important long-term economic issues that relate closely to tax policy. the rising budget deficit concerns about growth and competitiveness and rising inequality. any tax reform is likely to be judged at least in part and how it impacts those three issues. so the first issue, if i can get to it, is a daunting outlook at the federal budget. the basic purpose of the tax system is to raise revenue to pay for government services and in that regard u.s. system comes up short for instance 2015 the federal government predicts to spend $12,400 for to receive only $9700 per person in tax

revenue. as a share the economy of the economy over the next several years then we have spent any chair of the past four decades. that compares and understates the challenge is an aging population and continuing rise in health care costs will increase federal spending well above historical levels. it's difficult to envision a scenario in which revenues are not part of the deficit problem and to that and and to examine the role of revenues and broader fiscal debate the document provides evidence about how tax revenues in the united states compared to those in other countries, examines the various tax reform options affect revenues and contrast the scale of popular budget options to the magnitude of our future deficit. the second long-term economic issue is increasing international competition for business activity, the rise of more educated and capable workforces around the world and other economic changes have

contributed to reduce opportunities for many americans and challenges many businesses. one side of the impact of these trends is the stagnation in earnings for many american workers over the past several decades. concerns about competitiveness have encourage greater scrutiny about how rules, regulations and cap provisions affect or impede economic activity. indeed the tax reform has widely been touted as an opportunity to boost economic growth. in the document we summarize economic evidence for learning how the current tax system impedes economic activity and how much we can expect the tax changes to improve our economic prospects. finally, there's the issue of growing income inequality in its relationship to the tax code. pre-tax incomes have risen by more than 250% since 1979 for

households and the top 1% of the income distribution at the same time households in the middle and bottom have experience less growth. changing the tax system have tended to it exacerbate these inequities. the great people who have received the biggest income gains have also seen the largest tax cuts. it is already quite clear that issues related to inequality will be paramount in discussions about the tax system and to inform that debate we provide evidence on how alternative reform options affect the productivity of the tax schedule. the document expands these three areas and provides facts on a dozen individual aspects of tax policy and to pique your interest i will highlight a few. fact that examines how individual tax rates affect the employment and earnings of workers.

the key consideration in text form is how much tax rates hold back the u.s. economy, how much lower rates would spur economic gains and whether increases in income can help offset losses from lower rates. the figure in your text illustrates how a 10% cut in marginal rates would affect the employment and labor supply decisions of a typical american family drawing on the evidence of 23 published studies. the average estimate across all the studies suggest that this family would increase their earnings by roughly $450 on a basis of $70,000 at and an increase of 0.7%. that same 10% tax credit predicted to reduce federal income taxes paid by 8.6%. in short the evidence suggests that type of tax cut has a large effect on revenue but relatively modest effect on labor supply.

facts six examines the limits to base quality text form can accomplish in terms of lowering tax rates. we also hear tax plan highlighting their low top rates, 20%, 20%, 15% and even 9-9-9 but those plans are sometimes light on details and how they affect revenues were how they change tax burdens have fallen different groups and so we put together a cheat sheet that starts with the constraint of maintaining both current tax revenues and the current progressive tax structure and from that starting point then ask how low tax rates can go under alternative based broadening proposals. under current law the top or the table tax rates are scheduled to rise to the level of 40%. skip to the punchline, it's only through dramatic tax reform and

eliminating all tax expenditures and those for health insurance retirement savings savings owner-occupied housing, preferential rates on capital recent evidence that one can lower rates even to 27%. that analysis illustrates a broader take away of the document which is just how difficult it is to achieve those efficiency enhancing lower rates before revenues fall in the tax codes become less progressive for tax references are dramatically scaled back. i encourage you to look over the facts and we hope it is useful to you and your future conversations. thank you i look forward to a very interesting panel. [applause]

[inaudible conversations] >> we are having a few technical issues. i think you should sit on the left here. it seems the appropriate place to be. you are not lawrence summers? i'm sorry. welcome to the first panel. tax reform has been on the agenda in washington pretty much for as long as i've been following u.s. economic policy which i hate to say is getting on to two decades. the complexity of the u.s. tax code distortions have again and again brought debates over the past decades of flat tax,

wholesale reforms, and the stones are from 196 tax reform but even if that happened the tax code got more obligated as politicians have added more pages and deductions to. seems though that debate is taking place in the homely context in the context of a weak economy, widening inequality and an immediate call to action with the expiration of the bush tax cuts at the end of year. the year. not only tax reform is on the agenda but in a way that may result in action that hasn't been the case in the past. this conversation about what kind of tax reform we should be doing has an importance and urgency that can't be exaggerated which is why this discussion is important and we have two extraordinarily well-placed individuals on different perspectives to discuss what sort of tax reform would you be doing in a debate and what sort of tax reform are to be doing? you all know them.

president emeritus of the nber and former chair of the present council of economic advisers and larry summers pore pressure at harvard and former student and former -- [laughter] so i think let's start with you. i want to start this conversation by actually looking at what should be the priority for tax reform today because tax reform as all kinds of good parties. people talk about growth and competitiveness and improving progressivity, raising revenues. many of these are somewhat at odds with each each other and depending on what your priorities are you would put forth different kinds of reform. can you just lay out what you think given where the u.s. economy is right now which is easy priority? >> i will begin by saying larry and i come at it from it different respective and that is

probably not quite right. larry and i, that it from different political -- but larry and i have been talking about taxes for 30 or so it is not too surprising there is a lot of agreement. i hope that comes out as we talk about the specific issues. i think about tax reform in terms of its long-term impact. we have got a serious cyclical problem now but i think the tax code that we have put in place, i hope congress put in place next year, we have to think about for the long-term. what are the things it has to accomplish? you? you are right that there is a conflict among them but there are always trade-offs and so it's a question of picking things that do better and these different goals. what other goals? i think there are four basic goals. one of them is to raise revenue.

as adam looney's chart shows we need to raise some revenue. how much we need to raise will depend on how well congress does at limiting the growth of entitlement but that is not today's agenda. raising revenue can be done in ways which have good side effects or ways that have bad side effects. that brings us back to the discussion about tax expenditures. the second goal in addition to raising revenue is reducing wage. what economists would call inefficiencies are dead weight losses. the tax system hurts productivity in and therefore idea voiced by hurting savings and investment and by hurting labor supplied largely defined. the picture that adam showed us about how it affects ours is just a small part of that. it also affects the form in which people take their conversation so we are induced by the fact that all kinds of

fringe benefits are excluded from attackable income to taking compensation in ways that are less valuable to us but on a netted tax bases are more attractive and it also affects the kind of spending that americans do because sometimes the spending is tax favored. a third thing is complicity. you mentioned that and people are just overwhelmed with the complexity of the tax love. it makes compliance more difficult and it makes people feel that probably everybody else is getting a better deal than they are and everybody else has figured out some deductions today, some credit to say, some ways of changing their behavior and lowering their taxes. so we need a simpler tax code. finally, there's the important issue of fairness. fairness is more than just in my

judgment, more than just a question of productivity or tax rates. it's also the tax base. fortunately inflation is low now so it even in today's low-inflation individuals pay capital gains taxes on nominal gains even when there are real and non-gains or real losses. i think people rightly feel that is unfair. so i think there are a lot of things about the way in which -- which adds to the unfairness of the system. but that is my -- >> in that order? >> i don't think of it as an order. i'm not going to say we get revenue and it doesn't matter what kind of fairness we have are we get fairness and it doesn't matter what it does to revenue. i think you have to think about any given change in terms of what does it do for each of these four things.

>> can i go to the question of fairness? t. think it might of the fact that pre-tax income inequalities have widened so much, the goal of narrowing them and creating a more progressive tax code should be a go? >> i noticed in the background material one of the things that was suggested was combating inequality and my feeling has been for a long time there are problems in the income distribution area and we should be concerned about combating poverty, not about combating inequality. if a couple makes $250,000 which is probably not hard to do at the hamilton project or harvard university, that is not something to me that needs to be combated. >> larry, do you have a similar set of priorities?

>> overlapping. i would just begin by saying that while it is not our subject today, whether we get this expansion to a sustained, reasonable growth rate is consistent with return to full employment. is the single most important economic issue facing the united states and we will not achieve any other objective, whether it is sustained fiscal health, the ability to combat poverty, the ability to be strong in the world if we do not achieve that. and therefore, maintaining the momentum and expanding the momentum of demand has to figure centrally in any economic policy discussion going forward and has to have a very large effect on any thinking about timing and phasing in, any set of reforms with respect to the tax system or with respect to entitlements.

but that is not our primary subject today. to take your four objectives, you obviously cannot rank them and give indications of their importance and i would agree with marty on the central importance of revenue raising. doug elmendorf, the director of the cbo, gave a very effective presentation at harvard a month or two ago on this long-term fiscal situation in which after going through a lot of stuff, he reduced it to the following statement. that in order to get to a stable ratio, not a balanced budget but a relatively modest goal of the stable debt-to-gdp ratio, after making what he regarded as being at the edge of credible optimistic assumptions about

discretionary spending cutting and making -- i am very optimistic about the capacity to cut defense. his conclusion was if you need it either to reduce all entitlement spending by a quarter or raise all revenue collection if you wanted to get to the goal. you need some combination of those two cool -- two things. i think it's a little worse than that. i don't think it is on this planet that we are in a decade going to reduce entitlement spending by anything like a quarter and therefore, relative to the baseline, therefore i think it is a near certainty that we are going to need a significant increase in revenues and it seems to me any discussion of tax policy needs

to start there. it seems to me that to suggest that the current baseline is possible to cut taxes substantially and pay for it with as yet unidentified spending cuts is close to inconceivable and do not represent claims that should be taken seriously in the public discourse. there is room for debate about what the balance is between the corner on spending a and tax increases but the idea that we can be cutting taxes which implies cutting entitlements by more than a quarter i think is frankly laughable. so revenues are at the center. second, and here's where marty and i have a different in

orientation. i think we do you need to address the question of progressivity and we do need to address the questions of fairness in a central way. there has been a major change in the pre-tax income distribution that has been generated over the last 25 years. roughly speaking, a generation ago the top 1% got 10% of the income. today, the top 1% get 20% of the income and if anything, that trend has accelerated. now it seems to be reasonable people can argue about whether in the face of a change of that kind the tax system should operate to offset it or not offset it. but the few that it should

operate to reinforce cutting taxes by more at the high-end band and the in the rest of the distribution seems to be very hard to justify on any way of thinking about it. i share marty's concern for the poor but that it seems to me is not the only valid concern. it seems to me that something about the health of a society has something to do with the ratio of what those who are most fortunate are earning relative to those in the middle class, sometimes reduced in the public debate so the ratio of ceo wages to the average worker wage. in conservative thought in this area it actually surprises me a bit ago i would have thought the

right pro-market view to take what is you should let the market grind out whatever income distribution it does, not interfere with the market and then the tax system as a collects revenue should be based on ability to pay in a way that raises the burdens on those who are getting the most fortunate and given what is happening in the income distribution. so the idea that you should be reducing the taxes on those who are most fortunate seems to me to be quite a surprising when. when marty talked about complicity, he referred to issues of legitimacy. i think the legitimacy of the tax system and the legitimacy of the government on which it depends, depends much more on a perception of fairness, depends much more on the idea that those who are in a position to take advantage of the double-dutch

irs and which are maybe the irs -- and which are paying their fair share in taxes and those questions of simplicity of complexity. i would come third to questions of economic efficiency and neutrality. but here i think i would put less emphasis on these questions right now in the united states then i would have over most of the last 25 or 30 years for a couple of reasons. for the next few years, our economy is going to be demand constrained rather than supply constrained. the economy is demand constrained, increasing the willingness to work if not everybody who wants a job can get one. you will actually increase the total level of employment. moreover, whatever has been sure in the past in the current world of 2% interest rates, it

slightly strange credulity to believe that excessive capital costs represent a major in addition to investment and the way that i suspect was true to an important degree at various points in the past. so yes, we should level the playing field and yes we should reduce very -- various kinds of tax biases that are present and it would be desirable but i will put would put less emphasis on that in our current demand low capital cost context. finally simplicity. how can you be against simplicity but i would just caution that much of what is said about base broadening and simplicity is itself oversimplification. people always think of taste broadening as being about

reducing tax expenditures and if you don't have the tax expenditure you have a simpler form in the whole thing works better. in fact, much of base broadening is about eliminating exclusions from income to increase complexity so for example, the vast majority of base broadening proposals include the repeal of the provision that says this seller owner occupier of the house doesn't have to pay capital gains taxes as long as you have a capital gain of less than $500,000. that may be a good provision or of maybe a bad provision. i promise if you repeal it and everyone who sells the house has to go back and look at what they pay for it, calculate the improvements they put into it and do the calculation. you are significantly increasing the complexity of the tax code. that is not an isolated example. i am in favor of various things

that assure that all taxation, all income is compensated, club memberships, free martini lunches and all of that. they want we want to go after more of that but we should not kid ourselves that we will have a simpler tax code than we do. i'm sympathetic to ideas that are widely part of tax reform proposals to convert the directions into credits so they can be claimed at the same rate, mortgage interest for example is 15% for everybody, not 35% for some people and 15% for others. the result will be more americans will be able to take advantage of the credit and they will use that instead of the standard deduction and they will find the calculation of their taxes more complicated. and i could proliferate these examples. it is just wrong to assert that base broadening and supplication

are objectives that go in tandem. more likely, comprehensive base broadening is a complex of fire. my reality and my sense of the reality is that almost everyone who has any complexity associated with the tax return either does it themselves with software or have somebody, pay somebody to do it with software. in that context, things that once would would have been subsl complications and many different rates for example, at essentially no complexity to put the information and that the software in the and the software puts the number out. so i don't believe that many of these traditional concepts of simplicity are exactly right. i don't believe much of what is advocated in the name of simplicity is to actually simplified and i think that we would be better off recognizing simplification for an issue in

the way that marty framed it, which was as about creating a system that has more perceived fairness and i think a system that has more perceived fairness i don't find it possible that simply increasing payments to the poor will it entirely satisfied the objective of achieving fairness as long as there is a justified reception that those who are most fortunate coffin are most successful in escaping taxation as well. >> i hope we have got three hours here. i do want to start where you both agree. revenue raising coming mentioned it first. you both agree it needs to be a top goal. was seems to me is, why is the debate been narrowly debated in the u.s.?

one could say that a crude character of the u.s. system is that it may be narrow base income. relies on much less than any other industrialized country and much less on environmental taxes. if it is so high on agenda, shouldn't the tax reform debate be a much more efficient debate than the one going on in washington now? >> well i think my consumption you mean a value-added tax and the reason i don't like the idea of a value-added tax is if you had a value-added tax you would make it so much easier for congress not to deal with controls on spending. i think there is a consensus now that we have to come, in addition to raising revenue, and various entitlements, look for other savings and in the discretionary part of the

budget. if you could pick up four, five or 6% of gdp with a value-added tax everybody could relax. >> larry? >> i have had the same view for about 25 years, which is that we haven't had it because conservatives like marty think it's a money machine for government and progressives think it's not that progressive and we will only get it the day that progressives decide that the money machine is for government and they want more government. when conservatives like marty believe it's a less discretionary tax. i don't believe that day they day has quite yet, so i don't expect it to figure prominently in the next couple -- in the next debate. look, i think whether we have had value-added tax or not in

the 10 or 15 years is going to hinge on the question which i don't think anyone really should believe that they completely know the answer to which is this. what is the structural increase in health care costs going to be and how successful are we going to be in controlling it? the truth is it's not going to be possible to control public health care costs for private health care costs because if we do then our public programs won't work and it won't work when half the doctors opt out of medicaid so that success in controlling public health care costs is ultimately going to be hostage to the success in controlling overall health care costs and given the interplay of technology, given an increasingly affluent society, probably is right to want to devote more resources to health

care to give it the kinds of relative price changes that take place in health care and other things. i don't know how rapidly health care costs will grow over the next 10 or 15 years. if they continue to grow at the kind of rates we have had and we continue to treat health care as an export and -- import extend of obligation i suspect the revenue will be such that there won't be a viable alternative to consumption and value-added taxation. its efforts to contain health care costs are successfully keeping health care costs as rates only growing and rates only slightly greater than gdp even with an aging society, then i suspect the debate will play out in these terms because there won't be a taste for consumption taxes to pay for broad new government initiatives and i am

uncertain as to what our success will be in containing health care costs. >> larry is right, there's no way to be certain about it but i think the issue comes down to how much will middle and upper middle income people continually rising affluent middle-class pay for their own health care and how much it will be financed by the government? even if health care costs grow more rapidly it seems likely that doesn't mean health care costs have to run that much more rapidly. bowles-simpson proposal is a good one in limiting the growth of government financed health care costs to grow a gdp plus 1%. that means that i will have to pay more out-of-pocket either for my insurance or for my

health care or both. those are separate issues from what our focus is on. >> we could have a long discussion about health care reform but let's not. i think your point larry that if health care costs are growing maybe a political environment for value-added tax changes but let's go back to here and now for the debate is simplified. won his tax expenditure and the other is the taxation of capital so the corporate tax and what happens to capital gains taxes. that's also a question of production and larger rates. >> one thing on value-added taxes. i don't think it's pretentious. doesn't make any sense to have a value-added tax that raises less than two or 3% of gdp. once you will set up all the apparatus it doesn't make any

sense for two or 3% of gdp so we won't do it until and unless there is a political consensus for needing that much revenue and there isn't any political consensus for raising that much revenue now. that is why i am saying the value-added tax is not an important part. >> there is any consensus about raising any revenue now but let's go to the current debate and particularly the taxation capital and marty and want to start with you because it's traditional and economist low taxation of capital is more pro-growth and yet we have a corporate tax which if you saw the article in the sunday "new york times" and then there's the question of taxation of capital gains at the personal level. how much of a problem is the corporate tax and what needs to be done with it? >> well, common opposition

correct me about the above u.s. corporate taxes that the margin of the corporate tax rate is higher than in any other country, any other industrial countries. there are a lot of special features that make the effective corporate tax rate lower than that. the thing that strikes me about the corporate tax rate is that we economist don't have a clue about who old smartly paced the corporate tax, how much of that is borne by shareholders and how much is borne by capital more generally that we understand that in a world where capital can easily leave the corporate sector going into other things, housing, unincorporated businesses, the rest of the world, then the corporate tax is not born by shareholders or may not even be borne by capital at

all and ultimately then is borne by workers rather than by capital owners. we don't really understand that, but the perception of the corporate tax is that it is borne by corporations or by their owners that makes it is very hard text to give up. every country in the world has a corporate tax. what distinguishes our corporate tax from others is that we tax in a very inefficient way. we tax worldwide income of american corporations but allow those corporations to pay their u.s. tax only if and when we bring those funds back to the u.s.. so the net of it all is that we now see that more and more multinational u.s. corporations

earn profits in the rest of the world and don't bring the profits back to the united states the coast of the extra tax they would have to pay. that is why one of the key reforms that i think would be a good one with the if the u.s. was doing what almost every other country does, and that has to have what is called a territorial tax system which says that you can bring the funds back by paying a relatively small tax, as long as you have paid your tax where he earned in the rest of the world. that is what all of the countries are doing and he would eliminate a lot of the game playing of that story in "the new york times." >> what about you larry? would that be your priority, corporate tax? >> i'm a little more enthusiastic about corporate

taxation and marty is. first yes the incidence of a corporate tax is complicated but corporate executives seemed in very little doubt about it. nobody ever comes and argues for a major cut in the payroll tax that there are literally thousands of people employed in the city by corporations with the objective of reducing the tax rate on corporations which suggests at least some fairly strong view on their part that burdens corporations and their shareholders. i think over the reasonable run, that is a good approximation but there are substantial effects. second, i think it's important to understand that our marginal taxes is very verdant sum at all. if i consider advertising which will build my brand, which will

pay off over time, i spend a dollar advertising, i deduct 1 dollar so it only costs me 65 cents, 35% of the costs are shared with the government and 35% of the profit i earn is the consequence of the advertising are shared with the government. whatever maximizes my profit if there is no tax will also maximize 65% of my profit. the same argument works for research and development. what about with respect to putting in place a new factory or a new building? the last couple of years with respect to the new factory, we have let you write that investment off the first year. we don't do that going forward. we require you to depreciate it so there is a sense in which the government sharing more the profits than the sharing of your costs and that was a really big deal in the old days when the

interest rate was high. but in the current world where the interest rate is 2%, the fact that you have to defer your tax depreciation tax for five years really doesn't reduce very much in value and all. so it is far from clear if the corporate tax is operating as a major deterrent to investment right now. the most vexing issues do involved as marty said, the questions of international allocation, offshore income, all of that and there you have to decide on what your philosophical approaches. we probably are caught in a bad deal right now in there basically are two approaches that the world can take. one is you can basically give up. right now to say that with a lot

of trouble and effort the irs and dutch standards and stuff you can do investments abroad and not pay much taxes on them and it is really not worth all the effort so we ought to just make it official that you don't have to pay any taxes on your foreign income and that is what the territorial system does. that is a reasonable argument. part of the view is that we ought to attempt to crack down in serious ways on the allocation of income. we had to raise questions about the borough and read wreck to cooperate with other countries, and so we don't head towards a world where multinational income is taxed at a very low rate because of their ability to pit one jurisdiction against another given the distribution of that income. so it seems to me that right now

the u.s. tax system is like a library. we are running a library. the single dumbest thing you can do. to have everybody think that there is going to be in amnesty on overdue books but then not actually ever have the amnesty. then you are sure that no books are ever going to come back and there always is not bringing back the book to see who never comes never gets money and that is what the u.s. debate is now. nobody in their right mind would ring in money right now with people thinking who knows what will happen after the election and there will be some kind of repatriation. even if you thought you had to ultimately bring the money whom you would be surely waiting right now. this is a debate in which my hope would eat the clarity comes more in that direction of internationally collaborative efforts to tax income rather than the avoidance of the income.

of clarity in a different direction would be better than the current place which assures that the money will not be brought back and doesn't tax it and generates -- >> we would have to persuade every other investor in the country to give up the territorial system and to crack down on their companies. >> can i say one other thing? larry was very careful to say something about short-run versus long-run in terms of a corporate executive. yes the prospect of a corporation in 2012 are not going to depend on the corporate tax rate or the pre-tax profits in that is probably chew in 2013 and therefore it's not surprising that if i am the ceo of a corporation i would like to be taxed at a lower rate.

really is what happens over the longer-run and i think that is where and as economists we don't know where that tax burden is going to fall and therefore we are relying on the corporate tax to me is a very strange way of bringing in revenue because we don't know. >> we need to move move on to the corporate tax incentive. >> there is an issue have to think about which is i don't know what the percentages. i guess it is on the order of 40% of u.s. corporate shares are owned by pension funds or endowments and ways where there is no individual income tax paid. so it's one thing to say you should eliminate the corporate tax but the income would be taxed anyway by dividends and capital gains. it's another thing to see that when the income will be held live for nebraska pension fund or the harvard endowment and

there's going to be no taxation ever on the income, they will be so much more capital accumulation that actually it feels like a corporation is in paying taxes. ultimately because there's so much more capital accumulation, profitability will be less in the economy and wages will be hired so ultimately cutting that tax will benefit workers but that is an argument with a lot of steps. >> clearly moving to a territorial system crackdown if i can summarize it, needs to be personal taxation of capital so capital gains and dividends where one argument might be as in 1986 they were equal men now there's a pretty big gap. what direction should the taxation of capital gains and dividends go? >> a think the fundamental question is do you want to tax

capital gains and dividends with interest as well? do you want to tax the returns and we have a kind of mixed system. we say put your money into an i.r.a. and get a deduction for savings. you put your money in a roth i.r.a., you don't get a deduction but we don't tax from those savings. so for a lot of people, we have a system that in my judgment correctly doesn't tax returns to saving so it does not tax savings. ..

taxes people who want to consume. come later and want to save now on consume it later, tax reform and a higher rate than the fellow who wants to consume his income now. so i think from pure neutrality come affair unshed fairness point of view. >> dividends, maybe nobody sees a rather low tax rate than fellows whose income and wage income. >> i wanted to start with the wage and say if i divide that income, save some of it, consume some of it now, the interest, dividends, capital gains i get

by postponing it is just a question of timing, spending at that income just like the division of my income between vanilla and chocolate in vitro with respect to that. >> depends on what examples do choose end double taxation of savings is a fair one. but it's not the only kind of example that you can imagine. imagine that she start the next phase spoke. and your karachi is god some idea. you get your friends to loan you some money, make some investments and use on the third of this thing in your garage. the moment you get the third, there's no income because the thing is not really worth anything. you're a thing ends up being worth $100 billion in new end up being worth $33 billion.

many of us would feel that she should pay some taxes. under the law you pay no taxes. now, you might think that at some point you will want to diversify, want to sell your facebook, your zanny book stock, but if your have competently advise you will find ways to borrow money and fame $3,133,000,000,000 without ever incurring any tax liability. you might ask, what will have been 60 years from now you die and get the money to your children and then your children will sell the stock. with pay capital gains stock? answer come and know they will not. so you have an issue around great fortune is at a moment

when the top 1% or 2% don't have wealth and large portions is kind of the significant issue and you have to factor that in to the capital income taxation. so i do not favor the idea that we should not have capital income taxation for reasons that i think go crucially to fairness. we cannot miss the country figure out that a guy who runs a private equity company is earning income by working. we let him call his income capital gain. and so on a country where he can't figure out how to do that, if we cut the capital income tax rate to zero, there'll just be mass immigration of fairness and progressivity, so i will not point to that agenda at all. >> all sit on your site for a second. >> conversely you do have to be realistic about these things have capital gains. in our current world, where we

tax them only when they are realized and where we don't try to -- where we allowed them to entirely escape taxation if they are passed on their estates committee estimates of the joint tax committee and the estimates of the treasury are that the revenue maximizing tax rate is about 30%. raising the rate 30%, 40% you actually lose revenue. if the revenue maximizing rate is 30%, a sort of follows freezing the rate from 25% to 35% and you will impose a very large burden on people per dollar of revenue you'll generate for the government. so i think atop all approach to capital gains taxation does involve recognizing these elasticities of realization behavior and does lead you to

lower capital gains rates and certainly the rates we now impose, certainly at the top rates that we now impose. i am less pleased with the case for reductions in dividend taxes because you don't have an issue like the realization issue and because we do need to raise -- we do need to find ways of raising revenue. i do think that this whole area has escaped the russian, all of that does require more attention and i am told that those who dice people much wealthier than i that was good advice the

capacity to substantially avoid estate taxation is quite substantial and reforms that address that issue would be constructed without requiring higher rates. >> i want to come back -- very briefly i talked about the fairness, but results and efficiency of distorting people's decisions about whether to consume now or consume in the future and am not affect not just capital gains. so i think it is worth distinguishing between the person who in the prep or i'd start a new business and then had to capital gains and peoples whose capital gains, dividends and interest come from savings. we do that with iras, 401(k)s and roth iras. the question is should they have the kind of feeling they have now or should individuals want to postpone the taxation of

income be able to put it into an ira? or pay the tax and then not be taxed from the dividends capital gains by putting them in a roth ira and there is a very strong case, but the fairness case and efficiency case for allowing that. >> there's a separate issue of whether you should be excited off the current work to work on technology by giving you the chance to get very rich friend that innovation and that is currently with the current lies designed to do. >> i think the question that's just the second comment briefly one issue we haven't covered which is the question of tax expenditures. so your initial remarks, larry, you didn't find an enormous priority to limiting tax expenditures, the whole debate about, should you cap them, get rid of them, come back with a

credit, very briefly, how high should a priority and what should they get rid of? >> if you heard me that way, i misspoke. i suggested that i did not believe that substantial base broadening done in the likely waves would produce a substantially simpler tax code. i do believe would produce a substantially better tax code because it would be fairer and avoid a variety of kinds of distortions that we have and there is a place where marty and i would be in agreement. marty has put forward a variety of proposals, the obama administration has put forward ones that are somewhat less ambitious that are direct did not limiting the full use of all

the existing directions on the premise of both efforts is the strategy that you're better off attacking deductions and exclusions as a group than you are trying to choose which ones to go after and i think that it's a good thing to do. i think with respect to most of them, but not all of them, there is an oddity that if an affluent individual is a dollar to charity, take it at 30% reduction in the middle and can give money to, dig it if it came than seduction. so i would for the most part either the conversion of the deductions into credits and then some limitations on the deductions. how best to do that, you can debate the tech go means. >> so when i talked about raising revenue, i said there's good ways and bad ways.

raising tax rates in marginal tax rates is it that way because whatever distortions there are in the tax laws, they exacerbate and whatever disincentive there are, in mix versus well. so what i think should be time is to cut back on these tax expenditures, but poll since incorrectly called spending through the tax code. insensitive spending, since his government saying we would like to encourage you to have a bigger house, bigger mortgage, and bigger health insurance policy, we don't write you a check for that. we hope you exclude it or deduct it, somehow seems republicans and democrats out to be a little come together around not. democrats say we want to raise revenue. republicans say we want to cut spending in marty seemed to republican friends, that is

spending. it just happens to go through the tax code rather than the outlay side of the budget. and therefore what we ought to do is get the extra revenue that we need by cutting back on that spending. so there shouldn't be a division between those who want to cut spending and those who want to raise revenue. it's the way we get the revenue by cutting tax expenditures. a specific way i think we should do it is to say you can keep all of the current tax expenditures that you have, all of the deductions come the exclusion of health insurance, but you just can't be too greedy about it. you can't take too much of a tax saving from it. you add up what the tax savings might eat for all of the scheduled deductions, one line on the tax return and your health insurance exclusions and if that succeeds some percentage of your adjusted gross income,

that access is not allowed. everybody gets to keep all of the current tax expenditure benefits, but only up to a certain amount. and i've done the calculations i'm not, putting a cap of 2% and that produces roughly the same percentage tax that every broad gross income class, so it doesn't change the progressivity of the system, but it produces an enormous amount of revenue. of course you could start with the last binding cap. you could taste it up over time. i wouldn't put it in next year for the reasons that larry said because of the concerns about the cyclical situation. >> also avoid the fights between which kinds of tax incentives? >> let's go to questions. we have very little time left. gentleman in the fourth row on

this site. just wait for the microphone. >> i'm a retired individual. i'm concerned about inflation as far as what it does for net worth. but i think is unfair is the fact that long-term capital gains, whether it's house's third stocks or firms are not indexed to inflation. i'm curious to hear some conversations about that. >> in my opening remarks i thought that one aspect of the unfairness of this, they don't take into account inflation and the definition of capital gains, that wouldn't be hard to do if we continue to have the capital gains. >> i think you're right on capital gains. i've noticed over time that there's rather more enthusiasm for recognizing the inflation component of capital gains for

recognizing inflation of interest deductions. and of course on the same principle that one destined for capital gains, when she do it for interest deductions and there's a reasonable case for doing that. he would be surprising to me if the country have been thought about doing this and deciding not to do it had a moment when we had 5%, 6%, 8% inflation and 78 a.d. the now ratified to this issue enrollment when inflation is very, very low. >> next question. >> i heard a lot of talk about base broadening. i want you to are in should know a few of the howard endowment about the base broadening of and the tax expenditures vary. >> i wouldn't call that a tax

expenditure. because we've decided is not a taxable entity. it is not a question of the measurement of their taxable income, but whether their income should be taxed. so there is a border question, which is how we should treat a nonprofit in this country. should we allow contributions to simply means in museums and all that. there's two choices. we can do it the way they do in this country or we can do what europeans do and make those government financed organizations, the university's companies pms, symphonies and so ones. and i think the diversity in the way you do it in this country is preferable. >> banks. question for professor feldstein. a great many republican legislators have signed up to pledges not to increase taxes.

and as i understand those who promote the pledge and clued filling in the polls than anything other than a revenue news show way. given what you say today, does that worry you, it do you see a way of financing it? >> some republicans that i've talked to think that even though they signed up for that kind of an agreement, if there is a tax reform, which is progrowth, tax rate lowering, then even though it raises revenue they could go along with it. i hope once we get past the election and people move from their hardened positions both with respect to entitlements on the democratic side and respect to tax revenue on the revenue side, we will see an operational way of dealing with this problem.

>> i am afraid for a time. that's actually an appropriate place to end. he seems to me that we have had an extraordinarily interesting discussion, but one that shows from two different perspective there's a lot of agreement. a lot of difference in emphasis and hopefully the next panel will put some are concrete flesh on that in terms of what we actually get to in the next two months in terms of a concrete tax reform. thank you very much indeed. [applause] [inaudible conversations]

>> thank you very much for joining us for the second panel. fortunately we have a star-studded cast here. i will begin by introducing alice rivlin to my last. alice may well have the best budget resume in washington d.c. she's been a director of the omb. she's the founding director of the cbo. she served on the president's commission on fiscal responsibility, cochaired the domenici rivlin task force on debt reduction and in addition to all of that commission is vice chair of the fed for several years. i said to my left, we have john engler who served three terms as michigan and was manufacturers. it's currently the president president the business roundtable. when i was looking at his

background last night on the web, i was struck by the statistics that belong to the roundtable have annual cells of not 6 million, not 6 billion, the $6 trillion. i think to speak authoritatively to the business community. to my right, we have john podesta who has had an almost possible number of influential provisions in washington d.c. and the clinton white house with several key positions in what was ultimately the chief of staff. after his time there he found it was center for american progress and is now the chair counselor an american progress and i should add john has been an incredible friend and we've collaborated on offense. part of the reason we are so excited to have done here today is because when there is a mass

of confusion about policy and economics in their intersection, john has unique ability to somehow shed light and clarity of an otherwise very complicated situation. and then we also have to my right, jim poterba, my colleague at m.i.t. and in addition the president of the national bureau of economic research and a fellow of the american academy of arts and sciences among many other honors. one of the most influential accountants in the world and one could go on and on about jim's accomplishments, but i would just add fortunate to have him as a friend and is willing to use than advise professional and friendship and give advice on how to manage her freedom children which i thought i'd mention. i thought i would begin with alice. could you give us a sense of

economic stake at this moment time and how big of a reform you're looking forward and placed in the context. >> yes, we should be looking for a very big reform for some of the reasons that were talked about in the earlier panel. every once in a while we get an opportunity to solve a problem like reforming our tax system that should've been solved a long time ago. it has something else to be solved. or something else that has to be solved is the fact that her dad is going faster than our gdp because we have the enormous number of retiring baby boomers who need health care and their expenditures of the federal government will go up rapidly over time to meet that obligation on our revenues are well.

here's the opportunity to do the really big tax reform that will get us a better tax system. i think it can be fairer. fairness, as larry stressed is really important. right now our tax code is riddled with dean's that not only make it more complicated, but much more important, and make it less progress is common things like the home mortgage deduction, which benefits people at the income scale more than people in the middle or at the bottom. and we just built a large number of houses for very high-income people. we really don't need to encourage that, so we could convert that to credit. but we need to do is look at our whole tax system and see what

these deductions and exclusions that i've accumulated over the years for worthy purposes could be eliminated or reduced to a more progressive form in a way that will allow us to have a fairer tax system and one that raises more revenue. were going to need more revenue. we can't get to a stable dad we can't get to a stable dad we can't get to a stable dad we have more revenue. we also have to reduce the growth of creative entitlements, but it's not realistic to think we can accommodate this many older people who need medical care and we have a high standard of medical care but out more revenue. >> thank you. tuskawilla for two governor engler. there's something approaching a consensus about corporate tax,

that the rate is too high and there are too many people. it appears to have provided the broad outlines of the deal. what is the business community looking for an tax reform? and more broadly, what could they suffer to the american economy? >> is a great question. i think the business community generally speaking is looking for certainty and predictability to see what so many areas of uncertainty. i do want to spend a little time on that because the text of a and fiscal debate are very much part of the risk and uncertainty that confront somebody deciding about investments today. not to suggest their own a lot of risks and fidgeting in other parts of the world, but we go from a country that could make big decisions and move on to set

a direction charter path to a country that doesn't seem to be capable of making very many decisions. it's not just taxes and spending. its energy policy where rico at health care, regulatory policy and you sort of get the point. and i think there is, i'm sort of the discrete question of corporate tax reform, a recognition that today the u.s. has the highest corporate tax rate in the world. that is a competitive dearth among nations. one thing is a former governor i was very much in the 90s involved with the conversation of competition among states. i think people get it, the states will not himself out. i'm looking to put a plant somewhere in america and every governor is on the phone. the economic government officials themselves are on the

plane. choose s., choose us in here are the reasons why and here's what we'll do for the workforce. here's how we can build you a road. what is not understood in washington among top policymakers today is just a vigorous that competition is among nations. and virtually everyone -- is at the milken institute for today from los angeles this week and having to walk by the canadian booth in canada and the canadian argument as to why canada makes sense. one of the things i mentioned is they are a very low tax rate among other things. as for michigan governor paid a lot of attention to canada in the 90s. one of the secrets of some of the success we enjoyed when we had five years in michigan below the national average was that canada was in the last decade. unemployment in canada with 9.7% average for a decade. budget out of control.

they changed a number of things and some of those are on her agenda. one was corporate tax reform. and believe it is possible to do and we worked hard with the committee told to have a proposal in front of them do what is given as corporate tax reform that would have been -- he would give us back towards average and today we do need the world although diane has a higher corporate tax rate than the u.s., but none of the other industrial nations. >> i wonder if you could elaborate on that a little bit. you had a more competitive tax or a pupil with a mean for the average american family? >> it has to be and how do we get the american growth of? if it's around 2%, that's not adequate. you really need to see the robust job creation that will get that on get the unemployment rate below 3%, get the workforce participation in the what is almost in historic and decades

even, you'd need that gdp to get above 3% to 3.5%. of 1% of gdp at the billion dollars contribution -- as part of the growth agenda. and so i would say by itself it is an important contribution. a competitive tax system fixes or territorial problem. the less said about $2 trillion in the corporate balance sheet. much of that is trapped up short. let's bring the trapped dollar summit not to be tax free go anywhere else in the world without paying tax incentives and the helmet by you pay additional taxes if you're wise and bring them back home. that can't be the right tax policy for america. >> sachin, in addition to many academic accomplishments he served on president bush's eyes three panel federal tax reform in 2005. i wondered if you could talk a

little bit about the challenges we faced at the budget and from governor and learn about tax reform. a seven-year experience in 2005, if you could give us a sense of how we can pull everything together and get coherent tax systems to include corporate taxes, in the previous panel was a discussion about environmental taxes. you have two minutes. [laughter] >> second time that bacteria. >> i should start by saying and acknowledging the folks in treasury and others who were so helpful in doing the work on the other panels, the recommendations didn't exactly create a lot of ways than washington. so i think i'm not sure we succeeded at the task, but i think there's two lessons i would point to with this. one is that it is really important to think about tax

reform as an holistic activity. something that will affect components of the tax system and to avoid the risk of getting cherry picked and people saying come you put together a plan which is great except for this provision has to be pulled out because the essence of tax reform is there are likely to be winners and losers, particularly if we do tax reform and a revenue-based environment there are likely to be many losers in that situation. but we may be able to get to a system, which is more efficient, better for growth and makes the ultimate burden of the tax system of the taxpaying budget smaller. but it does put a great deal of pressure and keeping everything together so you can say we've done a whole collection of reform here, which i'm not don't leave you too much worse off but as soon as you start to say we can take that out and to unravel. the second thing i would point

to is the importance of putting the corporate and individual tax together in taking about this. there's really two reasons. one of the early panel certainly suggest it, thinking how you tax income is likely to be very important in the coming discussions about tax reform. you can't talk about capital income taxation because you really need to think about projects, which began in the corporate sector in many cases and collect all taxes levied on them before they get to their investors. you heard earlier the many different combinations of corporate and investor tax treatments, which can go into that. you got a tax-exempt investors in a taxable corporation. an s. corporation doing a project that is only taxed at the household level. a taxable individual and collect taxes at that level. you need to think about what she

retrieved to the playing field about those different ways of taxing investment projects. not only does the corporate revenue feature in this, it's also important for the distribution analysis because when you get to the top 1%, when congressional budget office, for example looks at the distribution table, significant example comes from the imputation of corporate tax liability to those households. so if you want to get an accurate measure of total burden, you need to picture the corporate tax as well. the other piece of this we did things in 86 to change the relative tax burden on p. versus s. corporation and a lot of the data we look at on the race and inequality for my son tax returns and if you change where income is in the corporate actor versus households that are it shows up in different places of the system and that can have a substantial impact on measures of inequality. it looks as the number is that there a discrete lip and the

concentration amongst taxpayers come individual taxpayers after the 86 act, which could be attributed to thrifty and avoid this wary. >> thinks. >> so we've got a lot of work to do to solve all this. and that's why we have john podesta at bat for cleanup. i thought it would make this as quick as possible and just review what's coming down the pipe. so i guess were going to the land before the year-end. the bush tax cut expire at year end. there's the expiration of payroll tax cuts from the stimulus. an increase in and see. there's a sequestered in domestic spending another status on the politics that. on the political side, i hear there's no election in november. i went and looked up on an trade to out when. according to intrigue, the

president will be reelected with a 50% chance. the republican is a 66% chance. 70% chance -- sorry, senegal go republican. plus we have a lame duck section. what's going to happen? [laughter] >> i think it takes someone who has been burned so many times over their career to think of this as an opportunity. but i do this as perhaps the circumstance under which you can actually find your way. so i actually view this as something of a time where this debate can come together, not just because of the argument that outset which i agree with, but political construction that

could likely results in a deadlock in a lame duck session, but people with a strong degree of interest in reforming the code has one of the things you mention in particular, which is what we look at on january 1st is a snap back to a code that actually, you know, we look under the clinton administration goes back to more or less the circumstance under which president clinton governed via company and did exceedingly well. so that becomes a new baseline i think for the discussion and a new contacts for which we look at the ideas that have been already discussed this morning in the panel with marie and larry and have come forward here. i would say that most importantly what that produces

is a revenue level that is substantially higher than current policy. so current, that is what happens if nothing happened, if gridlock prevails, which is probably in washington a pretty good guide is a level of revenue that goes back to 20%, 20.5% of gdp once it's fully recovered. the earlier panel already described the problems with that in the very short-term, what happens in 2013. if the economy is still operating with high levels of unemployment. but that actually gets to substantially higher than what we've been operating under. under obama's first three years, we've been at 50.8% of gdp, which is where we were under the truman administration.

so i think that she begin to have the circumstances in which revenue is at a higher level in the choices you need to make therefore, the trade-offs are trained a great base broadening and lowering rates operate in the context of the different tender when we've operated in the last couple years are really in the last decade under the bush tax cuts. so that would be my first thought about this. i would say just a couple of other things. one is i think general agreement about widening the base and lowering the rates and i think again that context is the possibility to take a look at that. but if you think about the rate that they currently exist, we have the lowest top rate since world war ii in existence now

and we had the lowest capital gains rates. so i think there's only a certain amount of lowering that one can do even as he brought during the base. the base broadening exercise has to do with the big huge revenue shortfall that is facing the u.s. and i could go on, but i just want to make one last point on that topic, which is that governor engler raised the issue of canada and how that -- [inaudible] economy is doing reasonably well these days. but if the united states actually had revenue equivalent to the revenue of canada at state and local and federal levels, which is below the levels in the oecd, it's good enough for the canadians cannot say maybe it's good enough for the americans to try to get to a

revenue battle in 1999, 2000 where we balance the budget, created surplus for strong economic growth and strong job growth and people are doing well across the income spectrum and most importantly people in the middle were doing better and the question of wage inequality was just not a topic on the table because wages were going to. >> thinks. i'm going to pose this question to the whole panel. one theory is the case we put out for three important factors have an impact on growth, impact on productivity and impact on revenues. i want to propose to everyone here, suppose we do something about that and some big changes.

what is the probability we will end up with the tax system that is worse than the one we currently have? >> well, it's not zero. [laughter] we've done that before. >> we had these wonderful set of problems. everyone agrees on them. how could we end up with a worse situation? >> i think two ways. one is we could do a really good tax reform, which would be positive on all the things you mentioned. it would be progrowth and lower the race, though i agree with john it's terribly fired. it would be more progressive or at least as progressives, but i would hope for more progressive and it would be -- what was your other criteria? [inaudible] >> yes, it would raise substantially more revenue.

we could do that. we have that opportunity and the models do exist. they came out of bowles/ simpson, domenici would win. we know how to do that in principle and we might even do it. and then, unless we put some kind of safeguards in place that prevents the congress from doing what they usually do and did quite quickly after than 1886 reform, we risk having things added back in. of course we want to have this worthy programs that we don't want to spend money for it. we want to put it in the tax code and then the tax code arose again. so i think that is a serious danger that we should do what i'm sure would please governor engler and his friends. put some impediment to continual

change. we need a tax code that we have really fixed. >> your view is we could end up with a much better tax code but then all slowly combat. >> if we are careful, yes i do. >> i would just say alice is right. the risk is not zero. actually fire from zero because you can make all these changes and they can be temporary for two years. we have 60 provisions that expire last year. 41 more expire this year. we actually don't have a tax code. that's the real secret. we've got a glaciation and nobody can plan on anything. so permanency is a fundamental of reform. and then you leave it alone. where we were coming in now, a quarter century ago things were pretty good, but there was a lot of work undermining and changing and tweaking and i think the

broader fair tax gets us where we want a direction we want to go. jim made a point that's really important to me. without with the committee of 12 they were trying to get an agreement of 1.4 trillion with a budget reduction there is an opportunity to do corporate tax reform to maybe standing alone. not uppercut after the 01, 03, you're really talking at a minimum of the business that gets us, that's when you talk about individual race because i didn't. he made another point, which is tied to tease out, but a lot of the quality -- there's so much business and can in that top end of the tax code today because of the past or entity partnership and all that. there has got to be some sort of equilibrium across the way and we've gotten us rather confused

and absolutely trumping the substance here. there's a lot of things you could do that would be problematic and could be more problematic. the other thing you could do is visit piece of what the administration talk about. sort of good and bad in the framework types that are lower rate of 20% come at the direction of good conversation. but on international income i don't want to be the only nation in the world that requires immediate recognition of earnings subject to his. that strikes me as a big disincentive and two consequences could have been. one of them -- you could end up receiving some company is hard to do, but suddenly the headquarters not here. you see in others. i mean, we love budweiser and nobody ever thought they'd be done by brazilians. the tax comput that transaction,

made perfect sense. when they put that together, everyone thought u.s. headquarters. the flaw was it would be a french company. i like headquartered companies in the u.s. i don't want to have a policy that over the next decade says it makes sense to be exported somewhere else in the world. >> michael, i think the biggest risk is you walk in a very low level of risk, but all of the discussion up battening the basin marine rate and subflooring rates of up widening the base and then i think we're really in the soup because he built a huge structural deficit in that after 2013 will be even more difficult to get better i think you know the other possibility i think is that you begin with sort of a theory that

will just figure it out as we go along. we'll set the rate at the front end and then figure out how to get there. and then i cannot very negative consequences in the middle-class because if you begin by dropping the top rate as the first part of the equation and bill got out by essentially building and come back and, targeted at working people in the middle-class, you think you could end up with a situation that's even worse than what's happening. >> that's a very real danger coming out of this campaign because the candidates are saying, at least public and candidates are all saying we're going to lower the rate and they are telling you how they're going to make up the revenue. >> 25% top rate without any way to pay. >> imac showed little more pessimistic than the other panels. if your scenario of quote tax

reform by december 31st will appear there's a very good chance we could get something that would make things worse while. true tax reform requires going through some consensusbuilding around key issues embraced and key principles will guide your new tax system. think back to the way we got the 86 reform. treasury one came out in 84. that didn't get the full consensus. it was treasury to which did somewhat better. we nearly didn't get that to work and finally there is a senate finance committee which read by a person support which led to the agreement. they were trade-offs, compromises. treasury one and treasury to both preserve some favorable treatment of capital gains on the grounds that the inflation issue. we ended up with a single top 328. that is a lot of horse trading to get there. almost anything that came out quickly -- there are things that could have been quickly that

would be improvements in the limitations on tax expenditures party mentioned earlier and that would have the effect of broadening the base in a very simple way and generate international revenue on the way. that would be an example of some of that would move us in a good direction. many things could be simple tweaks at the end of the calendar year that could move in the wrong direction about also give up the important option value of having a serious debate about where we want to go to could then lead to more fundamentals. >> another transistor will if you go from a lower corporate rate, let's say business rate and use tax expenditures and credits, there is a phaseout and transition required. if you screw that up you can do short-term damage. >> let me just add a plug for promotional projects. part of the reason we wrote it was so we could vandalize

several industry and so were you here the future a 20% tax rate whatever that thing is you can turn right at total fact. what is that going to need mean for progressivity and internal revenue? >> isotopic qaeda related to all of this and as with many issues, there's not really a consensus in washington about it. but there's very different viewpoint that's another thing recovered in the 12 fact. i wonder if i could start you off, which is an economics research there is kind of in a growing body of research and the high income distribution would not reduce the 50% to 70%. i know not everyone agrees with that, but i wondered if you wanted to take that.

just more generally, the question is, to what degree to tax rates affect work out for and gdp? it's a central part of the narrative. >> let me take a stab, mike. it's a very hard question. the thing to recognize is there is only so much economic research can deliver, that the essence of studying the history of tax rate is we have relatively few changes and we unmake national scientists can't hold constant throughout the other things going on in the world. moreover, it is like the experimenter in the lab who actually settled with the petri dishes, tax rates themselves respond to circumstances in the economy. the classic example is to look at whether the tax credit was available. it is more investment or less investment.

it is turned on precisely because investment is when you discover its correlation to do what you might otherwise think. that is the first problem. we don't have that much evidence to look at. doing comparisons of the growth rate and top tax rates i think is a remarkably low power way to study the questions. at the very top end of the distribution, measuring something like hours of work is not what we're after. if you thought about the top executive for entrepreneurs or others who are in those parts of the distribution, aside from lawyers wary of careful billing records, how many hours they work, it's hard to pin down what is labor supply. but it's much harder to think about is an engineer at a company like hp to decide they are going to leave the firm and do some game with three other friends from college in a garage and see if that pays off.

so we can describe what the ingredient is an tax rates on different parts of that may create incentives to do one thing versus another. if you then say can you point to the simple data series you can look in some book and relate to the tax rates. we don't have anything as easy as that to do. i think there are two things i would take away from it. i am absolutely sure that incentives matter even at the top end of the distribution. folks who are trying to decide whether to read and easier, call my life or take more risk would be more competitive, i'm not exactly sure what that is. second, we do have evidence that the taxable income response to a marginal tax rate higher. when you lower rates capital gains unfolded to us the best example when you lower the rates you in some cases have more revenue out of time.

but even for other parts of taxable income, that seems to be true. deductions are sensible to raise , even income generated. what is hard to get to the bottom of your question, which is how does that map into the underlying economic activity which feeds back to the growth we care about. it's dangerous to dismiss the notion of behavioral response. at the same time i think the existing body of evidence does that leave us in a place where we point systematically or we can dismiss that. >> it won't be shocking to hear me say this, but i think we have to experiment with this. with higher marginal rates, higher capital gains rates from 1992 until 2,092,000 until 2007 before the recession, whether we get? 10 dives the jobs rates,

investment growth coming median wages in median income and average wages going up versus down. the burden now is on the people who keep arguing for cutting capital rates and cutting taxes overall to show why that won't result in what it resulted in the first decade. i think it should make us wary of political claims that for example if you were to raise the top rate back to where it was in the 90s that this would kill a lot of jobs in the public ought to say these assertions are being made all the time and

people who make them say it as if they really do that, but they don't. >> i'm not sure that is the question i worry very much about. i look at today's economy. 3 billion jobs where people don't have the skills to fill them. that worries me. if a child is born in the district of columbia where we are today, i think under current spending -- that sees 25 come close to $30,000 per year spending, we are prepared as taxpayers versus $325,000 to help that child be up at the person by the time their high school graduate. what is happening with the $325,000? because drop-off rate unacceptably high and that's unacceptably low. so we've got a lot of other factors that come in.

and whether or not somebody works when your lover or not by works a little bit harder or wants to do overtime, i'd like to have those problems versus the one i'm talking about in the fact is that labor participation rose because there are jobs, we really need to save this carefree growth going nuts for the focus has to be. i think there's a lot of fiscal and tax questions that are important, but i also think the whole question of insurgency and a lot of other areas but the bigger broader political set of questions where we should spend the citizens to entitlement reform a clear message about the rules are going to be in when you'll be able to retire and draw social security. which are obligated to do have to redo medicare reform are what we'll do for people who can't

pay for relying on medicaid because all of those are economic singles that are going to impact people's decisions about how much i work, how prepared i am going to be or understand they need to be when you have cut military leadership saying more than the majority of young people aren't eligible to be inducted into the military service. we have a national challenge that all of that comes in -- factors back in. i do want to make this overwhelming, but the tax rolls or how to play the game, but we've got a bunch of other rules that impact how we play the game. they're also just as unclear and justice uncertain. i don't get too worried about the question you pose about where those incentives lie. i think that's all we have to worry about will have a vigorous debate about it. >> let me pick up on the thread mentioned there.

there is no mention of the recession moved into everyone's living room several years ago and i think collectively from the nations living room. also as i had barely jumped up with having all these tax events happening at the end of the year, how should we try to balance the continued weakness in the economy would his kind of sending tax credit and the fact that in several scenarios that could be quite discretionary? >> my view is that the discussion on the previous panel that should think about this in terms of how you phase-in and what implications and i think there is here you have this knot back in i think you mentioned you have the looming threat sequester built-in to the

provisions passed last summer amid the up and that was last raised. that's another $1.2 trillion out of federal spending that would come over the decade and a significant amount out of defense, which the political system was towering that amount. i miss certain, but there's definitely contraction built into current law and night think that again is an argument why the spring of 2013 is actually an important moment, and optimistic moment tissue could find a thing because neither party really wants that outcome, that she could find may be some common ground. ..

>> that is a project that can take -- at coakley years

but helps the market participant. the kiss we've borrow at relatively low interest rate we have the window to take that on. it may close and we cannot have the discretion to think before we respond. we see the european counterparts have to do things very quickly. >> we need to go beyond the phase we don't want the big increase of taxes right now in the week economy and to cut expenditures especially mind the less. i would argue we need to invest more in the short run

to fix the problems we were worried about not only the infrastructure but to do that the same time we phase-in, at a predictable way our debt. the spending and the taxing the. >>

the poor guy a who had the building was not happy. he could not rented or sell it to

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now going into our second decade. because we are building please turn off a new electronic. we will hear from the speaker than there is q&a session and then a book signing. books are for sale at a discount. you can pick up a schedule for future events. in the question and answer period we are filming bad as well.

please come to the microphone. by participating you give us permission to use your image and progress gins as part of our programming. to introduce that i am pleased to introduce duty miller who has served as the specialist of american history and to add shortly after she spoke about her new book abandoned. you have authors and readers coming from all ingalls. let's give to the miller a and. [applause] >> our speaker today beth

taylor, a doctorate from the diversity of california berkeley. director of the interpretation act monticello and not the year and the virginia foundation. now the author of the book "a slave in the white house" i might add she has appeared on "the daily show". [laughter] i met her when she came to the manuscript division. she realized the collection of leading colonial figures contained papers of those who surrounded them and very often they were slaves. sometimes farmers but also

the slaves. that is the case of the paul jennings letters. documents still serve five often because they were swept up into the papers of prominent people sometimes it is the zero leave recorded evidence of their lives. she could excavate the story and now i am proud to introduce beth tailoress. [applause] >> thank you for having me today. a slave -- "a slave in the white house" of great labor

of love three years researching and one year by teeing it. i have on this -- fondness for pieces and i enjoy when they become with anecdotal the. i adapted that approach the chapter starts with they've been yet. if i give the weather is documented by say the overcoat is olive green, i have a witness. i thought i'd may interspersed my comments with three being excerpts. they put jennings at an

opening one time it is that half hatch of the ship or an open grave. >> onward 80 no one, montpelier the madison plantation orange county virginia. the master died in the very. on the way to the burial they passed by a the slave graveyard it was cold. passing between the tobacco fields and the homestead to the west of the madison family graveyard was in the backyard of the main dwelling long burned to the ground and then to the georgian mansion.

once they circled around the house servants raised their eyes to the new owner james madison, jr.. this day and that their mother and son president. the name of the toddler was paul jennings. the mother held his hand not to transmit anxiety. the death of a master was a time of tension. they have little control over the decisions of their future including pm members. james madison, jr. was the fourth president of united states. paul jennings journey would play out in the highest circles of idea and powers. the white house.

james madison and steadied and as an author had the first white house memoir. the full text is included as an appendix of the "a slave in the white house." my familiarity with the memoir the first drew me to the jennings story titled "a colored man's reminiscences of james madison". as it implies, it is more about the great man and the author himself. i set out to to discover elements of his biography, uncovered circumstances and track down and interview direct descendants. ball was 10 years old when

he came to washington 89 comatose then from among 100 montpelier slaves to be a part of the domestic staff. he found washington to be dreary. it was. not only was he homesick at that time it existed on paper more than on the ground. but soon the nephew realized he had a great adventure to be a foot man eight years and come of age through the aged 18 and an important witness to history in the

making. may 31 covet 80 known nine, the first of dolley madison's white house drawing room. paul jennings had the duty to meet the guest at the north entrance with an umbrella. there was no protection. the first of all, the madison's drawing room with the presidential mansion in all bid for anyone who was introduced. or gentlemen attended the and ladies as would be expected. had more ladies been president dolly madison would still be a part not because she was seated on a

platform but because the intertwining of her personality and address. jennings describe her ensembles. white satin, turbines of five materials. president madison left the limelight to his wife. he had britches and powdered her. paul jennings had no idea he would be his ballet and responsible for his close. servants came through with trays of refreshments ice cream and tea were literally served. he may have been among the servers put more like the was a runner to replenish food or tote things up from the seller. both frightening and exhilarating experience.

of years, the chandeliers, music, sophisti cated and political conversation. he received the eiffel and earful this evening. >> as i began research what was paul jennings like? i eight added to it to characteristics became clear. he was a listener and networker. to traits to serve anyone well wants to get ahead. his life is a deliberate successful pursuit of the right to rise which is the most american. after his eight years in

washington thought about running away instead of returning to the plantation. evidence is a letter written in by jefferson's nephews it -- nephew warning him there was a rumor. i visualize is jennings window of opportunity to chance that illegal run but also realizing that plantation was his home. could he leave the scene of his boyhood never to return? this would be forever. in the event, he did indeed

return and promoted to his personal attendant or body servant. assets he was present as madison received an notables. and very many young men madison's in these said the was enamored with freedom. those cnn would rhapsodize about spend-- one e-bay to listen again to the father of the constitution.

jennings was present for hundreds of those. he could absorb the underpinnings to support his yearning for freedom and identify as a natural right of man. >> late three urie 1837 jennings prepared this city house for future reduce by the widow dolley madison. he had returned to lafayette square for the first time in 20 years. james madison died the past summer and dolly said she would make use of this city

house and sent him ahead to ready. in anticipation -- anticipation of the new ministrations the atmosphere must reminded him of his inauguration 28 years earlier. one block from the house the rebuilt white house had porter coast. half of the charred walls were rebuilt and then dug out the dinner display jennings prepared the day they torched the mansion. the george washington 10 portrait had been retrieved where it was arrested and return to to the white house. as four jennings he was still a slave nevertheless

now husband and father had a life of meeting taking a vantage of opportunities. he would always have resistance against legal and social and other impediments. hopelessly e alcoholic never seem to lack purpose altogether. he certainly had taken a vantage of his mother and stepfather. as you know, every family needs an embarrassing family member. [laughter] this was dolly son from the first marriage. that filled out the role for me as a foil to call denise. he had no advantage in life

period managed to carve out a meeting for himself when maddest then died jennings was disappointed he was not freed but then to understand madison made an agreement she word free all of the slaves but that would not have been. they began selling slave's right away all the owe in hurt well she did read jennings. the only one. he was not so sure. he got on her bad side. the wife and children are

owned by another master. he had not lived with them. only visiting on sunday but now a geographic leaves separated. dolly madison and hired him at two james quote so he went back to the white house. at this point* the president and mistress gave him permission to go back to virginia. but the stay longer than approved and dolly madison said paul jennings will lose the best place. i want to stop for a second

to about research and how it was here where i got my first hint to paul jennings family. it is interesting because it illustrates historical research and a likely path. at often starts with google books. you do3 books. you don't know what you will get to and use the what comes up. i tried this before but in

the manuscript division was a 29 page manuscript entitled paul jennings. i was director of education. let me call ahead to make sure they have the item and i must say everyone who works here as always assisted me with kindness. such as the case to say he'll look it up and do you have another minute? i said i will be happy if you read me all 29 pages.