committee. the first was senator reed smoot who chaired the committee from 1923-1933, and he was perhaps, unfairly, remembered best for the test bill that but bears his name. fortunately, chairman hatch has a very different view of economics that senator smoot did. i would also like to note that senator hatch is only a third senator to serve simultaneously as president pro tem and chairman of this committee. ..

our recovery still has a way to go. too many middle-class americans

hounded by decades of flat wages are still struggling to make progress. and i want everybody to understand my bottom line for this congress. when working families see bigger paychecks, america's economic recovery is going to go from a block to a run. i spend time working with businesses and my state about the challenges they face. it's pretty clear that there are a lot of oregonians and americans waiting for the economic recovery to kick in for them. for the middle class moving the recovery from walk to run comes down to technology jobs, tax

reform, trading done right, transportation and temper. my guess is probably every senator on the committee on both sides of the i/o could come up with their own list and there is no question in my mind there would be a lot of overlap. there are a lot of lessons to be learned is that policymakers work to strengthen the foundation of the american economy. 70 years ago after winning world war ii and making a slow climb out of the depression, the country took new steps to build a thriving middle class. the congress came together and expand access to education and it connected every corner of the nation from portland oregon to portland maine to los angeles to miami with the world's best infrastructure. over time and perform to the tax system to better fit the modern economic challenges and found opportunities in the markets abroad for our companies to

seize. they help policy and economic boom and grew the paychecks of the working americans and small businesses for decades year after year people felt confident that their kids would do better than they did. true economic recovery in my view well restore that confidence and it will mean more jobs with a strong letter to the middle class to build their savings and send their kids to college. jobs that don't leave the family is stretching every paycheck month after month. so, in my view there is a question for each of us to ask in the the bills we consider and vote we take in the congress. that question is how well this road the american worker's paycheck. so the overall tax code that the senator mentioned, let's ask how

this is going to grow the paycheck. when we take on the job of building the infrastructure again the question is how will this grow the paycheck as we work worked to get more students in the college once more how will this grow the paycheck and as we try to ensure that the companies can be competitive in a cutthroat global economy the issue is still how will this grow to paycheck. we can be proud of the fact that the finance committee has taken a starring role in so many of the important policy debate so there are going to be many opportunities for us to come together in a bipartisan basis to ensure more americans share in the recovery and getting better paychecks. i believe i can speak for the democrats on the committee saying that we all look forward to working to grow the middle class to lighten their economic

burden and we believe there is an opportunity to pursue this in a bipartisan fashion. the first witness is governor john engler. since 2011. it was $7.4 trillion in annual revenue to deploy more than 16 million people. prior to the time he served for six years as the president and ceo of the national association of manufacturers area and of course he was also a three term governor of the state of

michigan. the universal projects k-12 inc. independent past chairman of the national governors association graduated from michigan state university with a bachelors degree in bachelor's degree in intercultural economics and later earned a law degree from the law school in lansing michigan. we welcome you to the committee and i hope that this is just the first of many appearances before the committee to help us to the work and do the work and i want to thank you for being here. please give your statement and then i will introduce the other two witnesses. >> thank you very much mr. chairman. congratulations on your receipt of the gavel earlier. i'm pleased to be here to testify on behalf of the business roundtable. in 2015 the roundtable will like to see a strong economy creating

more jobs. the question properly before the committee is how can we get there. we've released a achieving america's full potential more work, greater investment, unlimited opportunities and i asked for a copy of the report to be included. >> it will be included. >> the expanded trade and tax reform and fiscal stability, fixing the broken immigration system, the infrastructure investment and the smarter approach to regulation. today i want to focus on two main topics trade and tax reform. business leaders believe strongly in the benefits of trade, high standard of trade agreements bring to the united states. the trade is also an opportunity for congress and the administration to demonstrate bipartisan cooperation early on in 2015. our agenda includes recommendations related to trade. first we recommend the congress and administration and act

updated authorities as soon as possible. second we recommend that the administration in consultation progressively pursue and secure high-quality favorite agreements particularly the transpacific partnership and transatlantic trade partnership and the trade services agreement. the trade promotion authority legislation is the critical tool for achieving high standards trade agreements that will create strong and enforceable rules and will result in u.s. growth and jobs. a 21st century helps to ensure congressional input and oversight of the u.s. trade negotiations and and ensured the international trading ensure that international trading partners that washington is committed to reaching and enacting strong trade agreements business support crosses all sectors of the economy and in 2013 the roundtable created and trade benefits coalition and it is a broad-based growth of more than 230 u.s. agriculture business associations and

companies all committed to educating on the benefits of trade and strongly backing. our coalition members are eager to work with this committee to get it passed as soon as possible and i offered their help today. on the next topic i think everyone agrees that u.s. tax code is broken and it desperately needs to be fixed. mr. chairman, the formation of the five working groups that you reference today on the u.s. tax code represents an excellent start to the kind of bipartisan efforts that can make a daughter in a globally competitive tax system a reality. just yesterday the secretary of treasure reiterated the administration's desire to work on business tax reform. and we urge the administration and congress to enact tax reform this year. tax reform should be designed to improve the competitiveness of all businesses.

that is corporate and corporations alike. business roundtables keep the tax reform recommendations for the corporations have to. it is worse than the world. it's not up to the middle. we get a lot more competitors and that is within our reach. at the second in addition to the rate is the adoption of the modern international tax system that ends the double taxation of u.s. corporations for an in

earnings and thus eliminating the policy that resulted in the more than $2 trillion of earnings trapped offshore. they analyzed the tax reform proposals and the studies showed the increase in the u.s. annual gdp of 2.2% after ten years and a boost in the after-tax wages for the american workers of 3.8% after ten years. we look forward to working with you to see even stronger growth outcomes. this additional growth could help address the fiscal challenges as well to return such critical issues in the nation's long-term entitlement

reforms. cbo says that each one tenth percentage point sustained increase in the growth rate of gdp, one 10% reduced the deficit by $300 billion over a decade. we want to went to kick off the hearings to address many parties of the nation and those those of it as a healthy economy with more jobs and help america achieve its full potential. thank you. >> we appreciated and your statement. >> a professor of economics at stanford university. as a distinguished fellow and as

a member of the national academy of sciences the professor is a fellow of the american academy of arts and sciences the econometric society and the society of the labor economist. he serves on the national bureau of the committee on business cycle dating which dates the period of the recession and has advised numerous government agencies on the national economic policy including the treasury, federal reserve and the congressional budget office. he received his phd in economics from mit and ava from the university of california berkeley. we want to welcome you doctor hall. we welcome you to the senate finance committee and we thank you for appearing before us today. so please proceed with your opening statement. >> thank you for the opportunity to discuss the u.s. labor market such as a specialty of mine and

i will also comment on the international trade improvement and taxation particularly the latter. with respect to the labor market, the labor market is now back to normal. it's not in the doomed state either. it's in between. for example the unemployment rate in and the 5.6% is just below on there than average. employment hasn't grown by its normal amount in the expansion. that is the reason the family incomes haven't grown satisfactorily. they have grown the problem is that it isn't grown and the combination of the two is left with stagnation. to continue on this point with respect to the availability of jobs for example short-term unemployment is at an all-time

low. at the time it takes employers to find a new employee is at a record high which means that it's hard to find workers and it's easier to find jobs. on the other hand there are negatives on the labor market today. long-term unemployment and the voluntary part-time art above normal levels and it's gratifying to see that they are declining. and i think they will approach normal fairly soon but as i stress it is disappointing and the reason is the labor force participation in the fraction of the population has declined remarkably. a trend that began and has continued to decline despite the restoration of normal job availability. it's not the result of

demographic shifts. it reflects long-lasting changes the participation has remained constant and high levels for those aged 35 to 59 and its increased for those 60 and above the decline in participation has been larger among young people in households with above median income so it's not restricted as some people mistakenly believe that low-income families. we need policies with the impact that would bring improvements to the labor market and improvements in the performance to the economy as a whole.

to close the gap at the wage growth of the high wage workers. i want to pull through one point and that is earnings should be measured in terms of purchasing power. if we allow american consumers to pursue pardons that are available in the global markets that raises real incomes. that's one of the major objectives of this committee and of economic reform in general. we should welcome input from the countries that are providing products at the low prices. there's lots more to see the trade but that isn't my specialty. but he turned tax reform which is an area that i have been active in. the plan that we put together about 30 years ago is a simple

progress of personal tax and an airtight business tax which are completely integrated. integration of the personal tax and business tax should be the top priority of tax reform. there's too much doublecheck station of income for example we have a corporate income tax. that is a mistake. we need to integrate the two. it's a very consistent approach to that. it has the as the right incentives for saving the investment. it can be tailored to the modern standards it doesn't have to be a flat tax even though some people call it a flat tax. it's the right way to go. it would provide the kind of stimulus that we are all looking for something to mr. tremaine again for the opportunity to testify. >> thank you very much. last but certainly not least

professor of public policy at the general school of public policy at the university of michigan and professor of economics. "macroeconomics economics of the family, social policy, law and economics and behavioral economics. he is a research associate with the national bureau of economic research the research affiliate with the center for economic policy research in london and an international research fellow at the institute for the world economy in germany. he earned his phd in economics from harvard university and a valid chillers degree from the university of sydney. we welcome you to the committee and want to thank you for being here in attendance today. please proceed with your opening statement as well. hispanic members of the committee particularly my home

state and my brother in orange paisley senator cornyn. we are in an improving economy right now and last year we created 246,000 jobs per month on average just the fastest rate of job creation since 1999. the unemployment rate now is down to 5.6%. and importantly for this recovery unemployment has been falling at a full percentage point a year it's down from ten percentage points. so the 5.6 is folding per year that tells us that sometime this year depending on how far we can go the economy will finally be back to normal. but i should urge as much as the natural projection that we should not declare mission accomplished prematurely from historically we've recorded a

5.6% unemployment rate as being a bad outcome and it's certainly the case i think that we can do better. it's for the unemployment rate rather than fight point something percent and i hear a lot of talk that we might be needing capacity but there is good reason to be optimistic that the recovery could run a little further. that's all i want to say about the short run. the first we still have elevated rates of long-term unemployment. historically in the u.s. we would measure unemployment and a member of the split people were out. you have another job in six wasn't installed weeks that the new development for us.

they don't have a we don't have a system in place so there is a need and also perhaps we need to think about the social insurance that they be necessary if long-term and when it is good to be with us for the longer run. during the recent recession, congress saw fit to extend unemployment insurance for the emergency compensation for those that were out of work for long period@. and it seems to me that we want to be prepared for the next time something like this happens again which is to say that it would be better than acting on the spur of the moment it would be useful to have a program that triggered on the longer unemployment insurance when the next deep recession hits. i think that is part of the second thing i want to talk about which is what we've learned we have learned from this recession is the federal reserve can't necessarily do all that it needs to do to offset the downturn. we are at zero interest rates right now and they haven't been

able to be as aggressive as that it would otherwise be. that suggests a role for automatic stabilizers. if when the downturns hit the taxes could be lower in the spending could be higher that i think would lean against and it also has the advantage that we would be spending money at a time when the labor and materials are cheap. but i would urge the committee to do this look for opportunities in the legislation to try to building triggers where we spend more and tax less during the recessions and in turn we tax less, tax more and spend less during the booms and we could imagine doing this for things like how brands, we could do it for highway spending and all sorts of things.

we are not seeing that for a lot of families out there. we are seeing a sharp shift in the share that goes to labor. this is the issue of the wage stagnation and we are seeing it almost where the historical economic growth went to the rich as much as the poor over the last 30 years most of the gains of economic growth have grown to the top 10% in the bottom 90% of the distribution to almost no rise in average incomes whatsoever. there is a debate on capitol hill about the right scope for the government into the right side of the aggregate taxes but i think there is a separate and far more useful debate he had which is what is the distribution of those taxes. are there other groups who need greater work incentives and others who could use those marginal dollars a little better i would like to talk about the

importance of education. one is to try to enforce the education of the united states for the last century as the rising levels that have come out of the high school movement and that is at its cost. the generation was the first ever to not get more education than my parents and my kids at the moment it looks like the next generation isn't getting more education than their parents and it is the president's idea. they have the ways to be engines for growth. let me stop there. >> we do have a quorum now so i went to think my colleagues and we will now conduct a few items in the business. the business before the committee is to organize for the 114th congress. to organize, the committee must do a few things today. number one adopt the committee

rules and authorize the committee budget. a sign for senators to the subcommittees of this committee. designate the senators to serve on several panels as the members are drawn from the members of the finance committee. and regarding the first item of business the committee rules also senators should have a copy before then. we would like to know the materials contained in exchange to the previous set of rules. specifically the change to rule 18 re: the transcripts for all of the committee meetings. the change will allow the committee to continue the transcripts of all executive sessions on the committee website and to ensure that we are not in violation of rule 18 when they remain on the website after the end of the congress following the date of the meeting. i will now entertain a motion concerning the rule three is to make mr. chairman i will move to the committee now adopt the committee rule. is there any debate? that there is no debate without objection the committee rules

are adopted. the next order of business is to report the committee budget. all senators should have before them a copy of the proposed resolution. i will now entertain a motion concerning the budget. >> i would move that the committee report the committee is a motion concerning the budget at this time. >> is there any debate? >> if there is no further debate without objection by the committee budget is ordered. the next order of business is to assign the senators to the subcommittees. senators have before them the list of senators on each subcommittee and should be aware of the assignments. i will now entertain a motion to make those assignments are you >> i would move to make those assignments. >> if there is no further debate and without objection the committee assigns the senators to the subcommittees this did. the next order of of business is to designate the finance committee members on the joint committee of the joint committee on taxation on the congressional oversight group and as the

congressional trade advisers on the trade policy negotiations. a statute and tradition, the committee designates its most senior five senators to fill the roles. that is the dissertation proposed in the papers before every senator. i will now entertain a motion to make those designations. >> mr. chairman, i would move to make those designations at the time. >> i think that distinguished ranking member. if there is no further debate, then without objection the committee does it make the senators for the panels listed. and i want to thank all of the senators and now we can resume the hearing. we will turn to the questions now and hopefully everybody will enjoy participating. perhaps i can start off the questions. governor, there is bipartisan interest in this committee to continue to carefully examine options and trade options involved in the tax reform and to get things.

.. we talk about the united states in terms of its maximizing its economic potential, and it is the sense of the business roundtable ceo of the most important single thing that we could do for the u.s. economy is

to modernize and restore our tax code to a competitive state. and that is, as i testified means addressing rate addresses the international sister which and. we believe the tax form should be -- international situation. and that if this were to be done, it has a dramatic and direct impact. we think that there is an opportunity for the united states today to lead even more vigorously a global recovery. bringing $2 trillion back home is part of this would be an abort a contribution. but we also look at things like mergers and acquisitions. we actually have a deficit when it comes, we look back in time. we would like to see u.s. companies being acquirers, not being be acquired. we would like to see the u.s. as it seeks to meet one of the presence goals of dublin

exports, the more competitive to do that. we have a great energy advantage as a nation to we are attractive to foreign direct investment coming here. all of these are enhanced by tax code more competitive, mr. chairman. one of the things will bring in trade a little bit. both of these have the opportunity impact jobs and wages in this country in a very positive way. >> thank you, governor. appreciate those comments. dr. hall, we just went through a devastating financial crisis the so-called great recession. and financial deleveraging by american households. now, i wonder what the effects were of all those things on labor markets in terms of how long it's taken labor markets to recover and whether there will be lasting damage. i also wonder what the federal government should do to support job creation. before you respond let me note some people such as larry summers, the former economic

adviser to president obama, seem to have somewhat of a pessimistic economic outlook long run or what he calls quote secular unquote stagnation. that is the future with persistent sluggishness, near zero interest rates, lack of an ability of monetary policy to do much here quite he seems to see will be a need for a far greater will for the federal government in the economy. so i would like to your viewpoints on those things as well. >> thank you, senator hatch. i was larry summers teacher at mit, and he and i have been debating these issues. recently we had a number of too, very interesting debates on the subject. there's a right part enters upon part to the concept of stagnation. and i've just recently released a paper on my website if anyone wants to see more about this. stagnation is a real thing in the u.s. not so much in the areas that

larry summers has talked about but rather the earnings that families take from labor market has been stagnant in purchasing power terms since about 2000. prior to that they enjoy substantial growth. when you take that apart it falls into a number of interesting, important categories. one is that that's also when productivity growth slowed down. the number one priority by far for restoring growth and prosperity is to get productivity growth up. it's a proven fact that the benefits of productivity growth vary widely in the economy it raises the earnings of many different groups. the other factor, the one i mentioned in my previous remarks, that we've seen this withdrawal on the labor market of certain types of people, especially teenagers. if you want to know what's most

wrong with youth economy, is a simple fact. in 2000, half of all teenagers worked. today only one quarter of teenagers work to the withdrawal of teenagers from labor market i think is a symptom of what's going on. now, i wish i could say that's because they're getting more education or there's other useful things but that's not what the data show. instead, teenagers are spending more time enjoying themselves. it is not itself a bad thing by think it's important to understand those are the two big factors. dr. wolfers mentioned a third factor which is that there has been a shift of the destitution of national income away from labor and towards capital. we are not really sure why that's happening that it's been the third important source. but that doesn't mean that the outlook is uniformly bad. i think there are reasons, first

of all we could restore part of to the, especially with tax reform. there are certain changes for example, disability programs which could have a factor in declining participation that badly need reform and, therefore, which there are good ideas for reform. so as i'm not nearly as pessimistic as larry summers is. he made a big splash with that but i think when you actually look at take apart the numbers carefully, a lot of his pessimism is not right. with respect to the united states, one overwhelming fact that we all need to be proud of is the performance of the u.s. economy has been so much better than other advanced economies especially those in southern europe. we should be very proud of how well the system works and i think it's going to continue to work. >> ninety serve. we'll get to you dr. wolfers later. my time has expired. >> thank you, mr. chairman. element, for years this committee has debated the merits

of supply-side economics often as the consumer sees it trickle-down economics. my own view is that that kind of approach is a particularly poor fit for an economy where two-thirds of the economic activity is driven by consumer spending. i think we all understand the affluent can only buy so much. what's needed for sustained economic growth is more people buying homes and cars and other goods and services that make life better for them and their family. so what you really need our policies as i was touching on data going to put more money in working family paychecks. and i think what i'd like to do is just go down the road and at each one of you give me your sense of a policy that would do the most to increase the pay

check of the typical american worker we will start with you governor. >> thank you senator. i think that a 1% boost in u.s. gdp would be the thing that would result in many americans coming back into the workforce. it would raise wages for workers in the workforce and that is achieved in a set of policies that are not simply one thing but focus on infrastructure. is doing many things but it's getting the tax code right. it's having the right trade agreement. it is investing in infrastructure. it's delivered on the promise of her education investment both at the k-12 and university level. i think immigration reform is part of the. i don't think -- with a very complex interrelated integrated economy, a global economy here in the u.s. and we've done well.

i think it's been testified to today we've made great strides in our recovery, but there's so much more upside potential. >> dr. hall, the governor is right that it's a complicated economy. i would just like to get your sense if you can do one thing what would it be to help raise the paychecks of the typical worker? >> i think tax reform for sure. i think that there's a lot of improvements that come in our economic performance, that we could achieve by, mainly by rationalizing the tax system and eliminating double taxation so that we have closer a uniform tax rate in particular for example, entrepreneurial income which is subject first to the corporate income tax almost all startups are organized as a c corporation, and then taxed again as a capital gain or dividend on the capital gains.

i think that is definitely holding things back. i think that we would see we could restore earlier rates of productivity growth in particular which as i said before would be a huge factor in improving paychecks. >> i think certainly tax or form is part of it. senator coats and i, and we are pleased that former chairman camp picked up on this in our bipartisan tax reform bill what we do is we've tripled the standard deduction for middle-class people. we think that's the kind of thing that can help raise paychecks. dr. wolfers. >> you have very much, senator biden, said the important increasing the size of paychecks but even more important increasing the number of paychecks and getting people back to work. you get a second paycheck any family that will double the income were as if we raised waged with little it will increase it by maybe 3%.

so anything that keeps the economy moving forward and gets more people back to work will be hopeful. governor engler described importance of a one percentage point rise in gdp. that was exactly the right this option through two about the 1970s. it used to be an economy where it rising tide would lift all boats. that appears to be broken today. so we cannot just raise the sides of the pie but make sure some of the kids out there. that's why think the important work of the tax system is most critical. you asked for a very specifics just in, what we put more money in people's paychecks but i think the earned income tax credit is a great way of ensuring that those who work get the rewards that they deserve. at the moment we mostly reserved up to parents. why not nonparents? and to be clear, a lot of the beneficiaries under the childless eitc what exactly is wouldn't be parents, they would be non-custodial parents. i think this would have a huge

effect in increasing a company. >> i was even get one of the question in. dr. hall, let me also note you may not be aware, my mother was a research associate at the hoover institution when glen campbell was president. people were very nice to her and what our member most they would always tease and say, they liked mrs. wieden so much they have chosen to ignore the fact that she's a democrat. there was a lot of teasing. is my question. it's on infrastructure -- >> i feel the same way about him. [laughter] >> that you are. >> this is on infrastructure investment which is something you been interested in. we are clearly falling behind the american society of civil engineers, gives us a d+ but you cannot have big lake economic growth with little big infrastructure. the recently, there was a forum in chicago on global markets. you said united states needs user charges for roads and bridges. when you said that i picked up

on at the time what do you mean by the kind of user charges that you would be interested in funding infrastructure? >> senator wyden, in california and other parts of the country we've adopted rational pricing of infrastructure as highway andthat a so-called real-time pricing. so there are lanes in san diego in one near where i live where it's guaranteed that you can go 60 miles an hour in that lane because there's a knob that it turns on automatically the raises the price. that does two things. it released congestion, which is a good thing, because congestion is pure economic waste. and it generates government revenue, which is a great thing. so i would love to see better pricing of our infrastructure all types but especially congestion pricing of highways. it would give a signal about where additional infrastructure

is needed. that would be ones where the pricesprice is always i wrote it to have much it would cost to expand. it would be a huge step forward relative to where we are today. where there is expansion of infrastructure highways in particular, often generates highways that are not very heavily used. there's not really serious congestion. in the short one weekend relief congestion by pricing and use a price signal to decide where to expand the infrastructure. it would be a whole new ballgame. we're seeing that all over the economy real-time pricing of private areas like airlines in particular there's been huge increase in airline efficiency because all airplanes fly full now and that by itself is a 10% productivity improvement and the airline business, that's all real-time pricing. >> thank you, mr. chairman. >> senator cornyn. >> i'm still thinking about glen

campbell, did you say? that's not a rhinestone cowboy? different glen campbell? i was beginning to see a theme developed dr. wolfers talk about orange paisley coming back come anyway. we would get to mark serious topics. so thanks to each of the witnesses for being here and thanks, mr. chairman, for having this hearing. i have really two items briefly i want to touch on. one is since the recession in december of 2007 1.2 million jobs, net jobs have been created in my state, texas. only 700,000 net jobs have been created in the other 49 states. it is no coincidence i would submit that texas is the number one exporting state in the country since 2002. we make a lot of stuff and we grow a lot of stuff that gets sold to markets all around the world.

and so i am extremely interested and share the president's commitment to see trade be high on our list of bipartisan things that we could work on. because i think it will provide the kind of economic growth that governor engler alluded to and that you have mentioned. but i know the president was celebrating a high quarter of economic gdp growth last quarter, but i'm wondering whether he is spiking the football a little early. and here's my concern, and i would appreciate your comments on this. we have accumulated $18 trillion in debt. the federal reserve has a huge balance sheet because it has been purchasing our own bonds that it is going to have to at some point unwind. and interest rates will go up. and i worry that for all of the things the american taxpayer pays for via their federal tax

dollar, that we're going to spend more and more money servicing that federal debt and crowding out other important priorities from national security to safety net programs. but i would be interested in hearing from each of you briefly what you see in the future in terms of the prospect of this looming debt challenge and rising interest rates if the federal reserve does what i think we all expect them to do and begins to obviously reduce the pace at which they are buying u.s. bonds but also begins to unwind that program. governor engler would you care to tackle that and then maybe we'll go down the line real quickly. >> thank you senator cornyn. not an easy question. i'm not sure my crystal ball is any better than anybody else's, maybe not as good as some on this committee. looking ahead, i guess it is one

of the fundamental principles that we have tried to articulate at the roundtable, comes back to this idea of growth. because i use the statistic that just point to 10% increase in gdp is probably $300 billion for the treasury. looking ahead, 1% than you have $3 trillion. we've got to have a growth economy in order to generate that kind of revenue that the government needs, doesn't have to be accompanied by prudent decisions relative to spending. ultimately and tom reform has to be addressed because so much of the spending is nondiscretionary. you are exactly right. i don't know that we are close to a rising interest rate environment are rapidly rising giving what's going on around the world, what the eu is up to today. on the other hand, the numbers are scary when you look, project

if it did go -- we are very liquid market. it's time to invest and i certainly want to support the notion that in this committee rent and my fellow panelists infrastructure investment is also an optimal way to be thinking about leveraging its low interest rate environment that we are in. we've got a lot of rebuilding that needs to be done in the country and there are some creative ways public-private partnerships out there some of the very transportation systems that dr. hall talked about. ecn senator waters sticker i think he played a role as governor the i think those all priced and built privately. there are mechanisms but there are still big public decisions that need to be made. inland waterways of america the air traffic control system, the electric grid. there's tremendous work that needs to be done to the also be accompanied by tremendous demand for trained and skilled workers to do that.

>> i hear with all due respect i hear a lot of ideas about how we can spend money but i don't have, i don't hear a lot of great ideas about how we can pay down our debt as opposed to pass it onto the future generations. dr. hall, dr. wolfers, i know my time is limited. i would appreciate your thoughts thoughts. >> senator, first of all i strongly share your concerns about the balance between revenue and spending. i ran a spreadsheet that looks 100 years into the future. obviously, not accurately, but still worth doing. one of the assumptions and cbo that does the same thing on a shorter time span has, factors in the growth of interest rates and that, of course, feeds back into further requirement for revenue to pay that. it's scary. the trend is adverse to the trend is for revenues is a fraction of gdp to rise

substantially more slowly than spending. that's a long-term, and it hasn't changed the it's remarkably stable your according to this spreadsheet than, say by the end of this century we would be just immersed in debt. we would have way more debt that we could possibly pay. something has to give. it's got to get in the sense of even more revenue or less spending. i think our democratic system sitting here needs to take these very seriously be concerned about that. i share your concerns. >> if the chairman will permit dr. wolfers -- my time has expired but please go ahead if the chairman will allow. >> let me make four points. the budget deficit is roughly less than normal now the around about the 40th average as of last year. and such improve somewhat stated are you talking deficit or debt speak with deficit. the flow of new debt the deficit. second, if you look at the

projections and the sorts of spreadsheets bob wishes talk about, to gdp ratio from which i think is the right way thinking about this is likely to be roughly stable over the next 10 to 15 years. it's only beyond that it starts to explode and the truth is we don't actually know much about what's going to happen to the economy 30, 40 years out. these as that's my gripe at the range of uncertainty as such we may find yourselves in two decades wondering why the debt is too low rather than too high. the third is to say should be worried about the sustainability of this the very sophisticated pinstriped folks on wall street who trade in government debt seem to think it's not. the 10 year government bond right now is 1.7% would suggest not only does proceed to be little risk behind us but also it looks like interest rates are going to stay low and low for a generation. and, finally what is the role of infrastructure in all of this? your concern which i think it's

an important one is we don't saddle future generations with debt. is equally comport we don't saddle future generations with crumbling infrastructure. so then the question is it's not just a crush of how much spending to do but when to do. i think the important issues let's try to the spending when it's cheap. it's most important, it's going to be cheap as to infrastructure spending when an economy is slack resource or when interest rates are low. it's the case for infrastructure spending today. the most interesting piece of economic research i've seen in recent years is the imf has done some calculations. they suggested that government infrastructure spending in anaheim like this with low interest rates can actually end up lowering the debt. it's the most sufficient economiceconomic activity that began i'm not quite sure, i'm going to go so far as it will actually lower the debt but the long run cause when you think about have the benefits come out the growth benefits inhabiting comes back and the tax revenue, along when cost can be fairly small.

>> senator stabenow. >> thank you very much, mr. chairman. congratulations on holding the gal. i want to congratulate you, that you out of your 31st witnesses are from michigan. so it reaffirms my confidence in your good judgment. >> welcome if we can get good witnesses every time, michigan is going to be impolite. >> thank you. let me first start by saying i have always gotten, been taught that if something works, we should do more of it and if it doesn't work we should do less of it. when we look at the economy we can see clinton years focus on education, innovation, much more focused on middle-class incomes booming times, lots of reasons but booming times, 22 million jobs added. we go to the next administration, bush administration focused on tax cut policy, predominant for the

top with the theory it will trickle down funding wars without paying for them, creating massive debt, lack of oversight, financial institutions and we ended up with what we now call the great recession. and so i am concerned that we do what works and now what we are seeing, we are not out of the yet by any means but we helped save american jobs for the outer industry. and even though folks lost home equity in 401(k)s and jobs and having that happen in the great recession, it's beginning to come back. dr. hall, you mentioned that fewer young people are working but i just want to say for the first topic into my mind is it's because folks in the '50s, '60s and '70s are taking the jobs now at fast food restaurants because we've got way too many folks that our seniors better having to come back into the workforce to supplement their income or folks

that lost their job manufacturing coming back and doing jobs that used to be done by young people. but we are turning things around the jobs are up 11 million jobs. wall street doubled deficit down by two-thirds yearly deficit. and it seems to me the challenge really is for us to make sure now that everybody wants and needs to job that pays well whether they can have one job to pay for the down instead of two or three has to. i'm pretty proud that henry ford had the right idea when despite everybody's criticism at the time, folks, business community thought he was crazy we need actually more than doubled wages and paid folks top dollar in the grid the middle class of this country. i'm pretty out of that, happen to michigan to so i would like to ask each of you what i hear from our manufactures in

michigan right now is just in the announcement, mr. chairman with magna a great country withstand in michigan, hundreds of jobs. and what they said was i need skilled people to match the jobs. number one issue is job training, these skilled the phone. i know our state's focus on the the president talked about that. so if we talk about how do we capture this and grow middle income jobs there are lots of things, but i wonder if each of you might speak to the desperate need for skill development matching that job not that people don't have skills, they're just not the skills for the jobs being created. of job training, costs of college, the fact that those are coming out of for your schools, maybe they should be going to tear your schools but they're going to for your schools coming out with massive debt, can't buy a house. i hear from realtors all the time, terrific concerned about young people not being able to get credit, by house because of

all the debt. seems to me that's a huge issue that we can be coming together and working together on. business community public-private sector and so on. so governor engler i wonder if you might speak from your perspective? >> thanks. i be happy to. i think this is an important issue. there are 4 million jobs today until in the american economy. it is because people don't have skills. they certainly are not the right skills and i think in some cases they flat out don't have skills. for too long without a dropout rate that is too high. we invest of the nation $700 billion roughly on an annual basis in our k-12 system and we have done a system that can send people off to college without needing remediation when they get there. if they're not going to go to college, about 40% in the country don't, those who don't they may need to have a skill which hopefully i would say measured and certified a long industry standards so that they

are work ready. the dropout rate has to be zero. that's the biggest mistake that a young person can make. i am an advocate and the round table stronger works on policies in one area we think is the labor market analysis. we don't have to know where the 4 million jobs are. we don't know enough about what the skills are that are needed to hold those jobs. i think industry needs to to do a better job of saying these are the competencies that we require, but then in its decline with the training. i think the federal job and perspective that we should stop spending money when we enroll people and reward people in the graduate with mastery of the competencies required to go to work. certainly the innovative programs in the country that are bringing community college training down into the k-12 level, we can scale up and people much earlier than waiting until the kids, finish high school. we need to get rid of wasted senior year for a lot of these kids. i think senator, this is an area where there's tremendous

national need and opportunity on a bipartisan basis. i know senator alexander and members of his committee are interested in this issue. some of you on this very committee i'm senator wyden is focused on some of this. giving young people the information they need and we need to a much better job of labor market analysis for the coach. it's a dismal status. ..

let's let the market work and not constrain the policy of the lawyers rip them in germany and they have by far the best experience after the financial crisis. so that is what works. if you ask what doesn't work which touches on the themes you were talking about which is the failure of secondary education, when kids get to college they are at a big disadvantage. a very they have very effective secondary education. we need a major. it is the responsibility of the local government, not the federal government but whatever the federal government can do to try to boost the quality and the appropriateness of what's done in high school that would make a huge difference in terms of all

the things you talked about. >> thank you mr. chairman. >> if i could just get one. >> we have a five-minute rule. we have three witnesses and some if we can try to keep it within five minutes. >> i appreciate that. >> i will try to show that i can be brief. first of all talking about what was used as the example and if you use average is if instead you look at today at the american middle class they are nothing better than for instance our neighbors north to the border and so there has been a long-running stagnation.

the most important place to look at the schools is of course education. there is a presumption that widely understood. we now accept that at the time it was put forth that was ridiculed by elite co- widely. we look at the arguments for the greater involvement in pushing the post secondary education that should be the middle-class aspiration or try before they ever appear. >> think you. >> mr. chairman, thank you for congratulations on the chairmanship i look forward to working with you and members on our side as well as the members on his side in front of the committee they are so important to the economy. i want to thank the panel today. it's been mentioned to me the median household income is down $3,000 in this country from where it was in 2009 in the

participation rate is at a historically low level. a lot of people have dropped out of the labor force and those are big issues and we have a lot of work to do to try to fix that. i maybe be a lever that comprehensive tax reform can unleash a lot of economic activity and i know the governor it's been a strong advocate for tax reform and i know they represent primarily larger companies in this country. i'm interested in knowing with regards to tax reform as a way to improve tax reform for all businesses how we treat, how you think we might deal with the issue. a pass-through entities and it's in the form of some subchapter or partnership so given these realities would you think congress ought to do to ensure that all businesses benefit from

the reforms into simplified tax code. >> we always talk about complaints of business reform because it is the corporate entity and there are many more numerous. we look also at which ones are facing global competition and which ones are more domestic but it's important even when looking at that to understand that many are part of the supply chain which feeds into the global economy so we would argue that both need to be dealt with. doctor paul talked about the two different types of structures and he has thought about how that might change in the future. we probably are not as optimistic that that kind of a fundamental change can be achieved here in the short term. so in the realm of possibility it seems to me that we have to do something fiscally

sustainable. how do you achieve benefits for everybody without the cross subsidization were not asking individuals to give to keep give her corporate relief. the structure is a little different but there's still a double taxation. we have those enamored membership as well. we spent considerable time trying to think through how can we make similar progress. after the 86 tax reform, we saw people moving from the corporate to the unincorporated status

because they deemed that deem that to be a better position to be in. i would hope in the business structure we could improve the competitiveness because you have 71 million americans that are engaged in the kind of work where there is globally competitive companies that are impacting that and we also have seen the increase the hiring can be led to get to the global part of the script not ignoring the domestic side. >> both of you mentioned in your testimony that decline in the labor participation rate. other than the demographic changes assisted. ditka -- associated i'm going to ask this question and then a follow-up and you can take them both since we have limitations

on time. what is the factor keeping more americans from seeking work and what if anything can congress do to reverse that and then a specific question having to do with your testimony you mentioned the rise and the number of in the number of americans receiving social security disability payments. so what's causing it but can congress do about it and how does social security disability payment issue contributed out? >> the research i've been done on the participation rate focuses very much on young people so especially the fact that they are different from high income families.

with respect to what's what happened in the participation among the older workers i think the disability program does call for the reform. the social security disability program essentially prohibits people within a program to even think about working again. he would lose your benefits instantly if you are found working. and the scholars that look carefully into reforming have been very clear that the right answer is to do what has been done in some other countries which is to turn it into a transition program which workers are helped. the work in the u.s. is not physical and people sitting at their desks and get there is no

channel by which people who are driving the disability can be placed back in the labor force working at desks which they are physically capable of. everybody looks at us and disagrees it should be a prosperity and it is for the last participation in the labor market. >> thank you mr. chairman. i will try to stay within the five-minute limit. i'm going to raise a point and ask the panelists to give a brief answer because i would like to get to questions in here if i can. you stated in your proposal here that you gave to us the javascript three times faster than the last decade and paid about 13 to 18% higher than other jobs all of which are trade policy issues that we need to deal with.

but i'm wondering if the roundtable or either one of the three of you have agreed with that and if that is true that can be a dynamic aspect in improving our economy and a lot of emphasis should be put there on the street agreements and so forth. does it give you pause when we receive reports back in china that the growth was less than anticipated. europe has looked into the negative growth. the instability in the world not just in the middle east but its impact on europe and other markets it clearly is going to be a factor. so obviously we should go ahead with these trade initiatives. should we be concerned about these factors not achieving what we would like to achieve?

>> two points perhaps. the written testimony that has been submitted as footnotes that provide documentation for good wages. so that information is there and i won't go into that. i thought about other nations a minute by the fact that where we have them in place just for 26% of the document in the countries where we have been in place we have a positive trade balance. it's a negotiation with the asia-pacific countries and it's the 28 members of the eu. those would be about 60% of the gdp and 40% of the world trade

and we think that the opportunities are too good and the experience is highly relevant to what we had previously. it argues to go forward and so yes there are details and much of those are addressed in your directions to the trade negotiations with the think the risk is outweighed by the opportunity. >> i hope that is the case. any comment on that? >> one very quickly to reiterate the benefits of opening up trade through agreement or by other means. one is as the governor just indicated it's a way to get good jobs in the u.s.. the other thing that is equally important is that it's a way to get cheap goods into the u.s. in return. don't neglect of the import side. there've been huge increases of real income in the united states

as a result of having very inexpensive products available at wal-mart and elsewhere that are astonishingly cheap imports always. and that raises u.s. standards of living. the research shows unambiguously the trade is great for these two reasons. >> i the >> i would make two observations. your comment the trade is great when japan is in recession. japan is a huge economy. the fact if japan were not in recession would be huge plus 3%. so the returns are not that different matter what is going on in the business cycle or the trading partners. the second is to the extent you were talking about the world becoming more chaotic what does this mean about the return for trade. and i think that arguably that raises the return to the trade. the interrelated world has a greater share of interesting this is where it also becomes a foreign policy as well.

greater terms cooperating with neighbors when you have the economic linkages with them and even if you want to produce more bluntly in terms of the foreign policy, you know it had a huge effect in russia because we used to trade with russia and the sanctions are being quite effective so i think there would be foreign-policy issues on the table as well. >> those are reassuring answers and we hope that the numbers are correct and that this can be a very a central element of helping drive economic growth in the united states. i just wanted to get your thoughts relative to the potential instabilities in sluggish trade partners intact but thank you for that and my time is expired. i will with hold my second question and try to get in on another time. >> senator menendez? >> i want to congratulate you on your sentencing to the chair and i look forward to working with you. since my time is limited to five minutes i'm going to go to my questions. [laughter] let me say i appreciate the

panel. we have made some enormous strides in our economic recovery since the financial meltdown and recession starting in 2008. we've seen some robust job growth in the declining unemployment and growing gdp but there's still there is still work to do and in my mind, the focus on the measures that we should be looking at are strengthening the middle class incomes and investing in our infrastructure and improving educational opportunities so with that in mind most i think of the members of the kennedy belief that there is a pressing need to reform and simplify our tax code. however, opinions begin to diverge when we are talking about one of the goals for the reform. it should be how we are publishing from those goals and the president made it pretty clear where he stands on this question and i strongly agree with him that we need to be

focused on the measures to help middle-class families instead of keeping the the loopholes geared towards the special interest with high paid lobbyists. so along this prayer at a station, very simple what is more beneficial to the economy and individual families measures targeted towards the middle class such as the tax credits to help working families afford child care and further tax breaks for those that are at the top of the bracket who don't mean in many cases they are not asking for them? >> they are going to yield a bigger dividend. there is an emerging body that the inequality may be an important force so we are going to a military that so it would

be an important pressure for growth and then there's another point the issue is what is the point of it delivers nothing but most. i also think that there's some simple stuff when someone first explained to me was the so-called stepped-up basis was in the trust fund loophole it was mind boggling and i think of it be true for most of your constituents. these are all loopholes that basically had no economics behind them and no economic benefits of a potentially free up a whole bunch of money to something far more useful. >> if we help educated workforce in the private sector in order to deal with the human capital requirements in the global economy and at the same time helps more middle-class families

have greater resources to help educate that child and/or to be able to get to work so they can have their child be taken care of without losing so much of their disposable income they will have more income to spend in our society and that will help fuel our economy would it not? let me ask about the importance to our economy investing in the infrastructure particularly at the time when interest rates are near historic low and there is a continued slack in the construction industry today there's a report that came out in new jersey that is led by a nonprofit transportation entity they said that the bad roads and bridges are costing individual drivers almost $2000 contribute to higher numbers of clashes and it goes on to talk about a host of elements. when we get to the salesforce is

getting out sales force is getting out there and being able to sell the products to move into the marketplace and whatnot can you talk about the importance of investment in infrastructure? because we always look at this with a transportation trust fund that continuously seems to be broken if the dividend short-term entities and instead of looking at the investment and the ripple effect can you respond to that? >> i'm a believer i am a believer in infrastructure and investing in infrastructure and you have to break it down. there's elements of infrastructure investment where the user can pay and there is there's a great return on investment that allows for that investment to be made up front and paid off over time. examples of that you've got everything from the air traffic control system to i mentioned the electric grid earlier.

there's a tremendous upgrade that can be done and water systems. all these kind of things. roads and bridges. it's getting harder to insist upon the user paid approach because some don't pay traditional fuel taxes. the efficiency of the fleet is such today that we pay many more -- we drive many more miles for that sense of the tax paid so i think that's going to have to be adjusted over time. you've been fixing the trust fund with the general fund borrowing and that's probably not sustainable and we have a big hole coming up this spring again. one of the things that is driving all of america crazy is the inability to plan longer-term for anything whether it is a tax provision that expires. we had a code for two weeks. we go back to december. infrastructure is the same thing especially in the states we get a few northerners around the table and you can't build roads year-round in some parts of the

country. if you can't budget your money accordingly you underperform that way so i think that in this low interest rate environment is a tremendous opportunity. many of them if you borrow money you have to pay it back and i think many of them have a value proposition that allows to take place and in other cases there is public investment that is required and you should fix it. >> i think about the impact on the job creation in the country. i think it could have a significant impact and i think about the that the recent attacks of versions that have

occurred. can you comment on what you think the long-term impact on the research and development and other aspects of the companies who invert their companies to companies with job creation in the country clicks >> the secretary yesterday in his remarks referred to our backward international tax rules and ruled out part of the system to the company shift to the income overseas. that's exactly what we've got in the current code for part of the changes to get what the rest of the world is and allow those to pay the taxes in the country where it's turned into profit from. that has to be advantageous to the united states to allow that and i think once it is home then that money is available whether it is capital spending and coming you know, were hiring or the high your dividend.

let's bring it home so it gets spent for any number of productive purposes including research and development. the r&d is a good example. it's a tax code since 1981 at the time it was put in your the best in the world. we are not in the top 25 today. it's a devalued overtime plus it is temporary. we don't have one as of today it is expired. so we need permanency in the code and we need predictability and i think it needs to be competitive as i said in response to the senators questioned we think that there is improvement across the entire spectrum whether one is a corporate status or non- corporate entity we can improve that we particularly want to think about anybody in either status but having to compete globally because today we have the worst competitive environment. >> on the labor force participation i would note with

some interest that if we were using about the same labor force participation rates at the end in 2009 65% versus where we are now, there would be 7 million more folks in the labor force if you counted. it doesn't seem like all of that can be distributed code to the scsi six contributed to retirement. can you help me understand the percentage of folks working and involved in the labor enforcement? >> there is a table in my prepared testimony that breaks it down by age and sex. as i mentioned earlier the big decline in participation have been among young people. there is a theory that entertainment this is most relevant for teenagers, but the compelling entertainment has become quite cheap and that makes a difference in how they decide how to allocate their

time. >> maybe things like that. i think you should be encouraged to see that this is perhaps not a total disaster. for one thing, these are not in most cases primary earners. we are not talking about the middle class. if you look at people in the peak earning family responsibility has been no decline in their participation. i think that is a very good thing. that decline has been people under 35 especially teenagers. we may figure it out and some of this may reverse is always the possibility. it doesn't cry out for any policy change until we understand it better. what impact would that have especially when you think of the

backdrop of the constricting capital leaving the banks going towards entrepreneurship what impact would that have on the more entrepreneurs and the job market long-term? >> it is already pushing up on the high tax so they entrepreneurs create an operation by the worldwide standard set a very high rate and then it gets taxed again before it goes into the hands of the entrepreneur so the tax rate are high and i don't think they should be elevated. i think think we need to straighten this out and have an integrated tax system that is careful to get the rage right for everything. that goes the other direction and that is something where it

is sneaking in only as capital gains and that is previously under the corporate system. so we need to change this and we need to get the rate up on the entrepreneurial activity. we need to straighten all those things out with a usable tax fund activity. >> my time is up. >> chairman, first of all, thank you and we look forward to working with you in the committee and we wish you the best. i think the senator expressed the view we are looking forward to a very productive time. >> i want to thank our panelists. i think this has been extremely helpful. we are looking at ways in which america can have a stronger eight connie build on the success that we have two create

more jobs and particularly increase real wages in the country to keep up with productivity gains that is a major concern. so there's a lot of focus on the business tax. so when we talk business tax used to talk about not only the corporate rate at the individual rate since so many businesses pay at the individual rate and we hear frequently that the united states has some of the highest marginal income tax rates in the industrial world. and i find it somewhat surprising considering when you look at the reliance upon the public sector among the industrial nation's of the world of revenue into the public sector and the united states is near the bottom of the industrial countries. and of course the reason is that the united states relies on the income tax is where the rest of the industrial world has a heavy reliance on consumption taxes. and when the world trade

organization was developed, we thought it was just fine to allow for the border adjustments on the consumption taxes where the income taxes are not adjusted to putting the united states at a real competitive disadvantage. so, i want to try to get the code of to the core of the problem. i am not sure that just by every arranging the chairs on the deck is going to make much difference if we still rely heavily on income taxes that are not the border adjusted whereas the rest of the industrial world relies on consumption taxes. and when i suggested that we do some change i usually hear from two groups of people. one says we don't have a revenue machine from government and there are ways of doing that through some form of an automatic rebate if the revenues exceed which you anticipate it being so you can deal with that issue and the other of course i hear that we don't want middle income families to be more of a burden than they already are

today. and for the use of the rebates based upon income you can deal with that issue. with its complexities etc.. so my question from the point of view of america as a competitiveness why wasn't it advantage over country to take advantage of the natural advantage but is that we rely less on the governmental sector for the revenues than the industrial competitors in the nation's why shouldn't we be looking at a way to take advantage of the competitively? >> the key idea you mentioned is

that you can have a rebate built into it so you can get the right distribution of the burden from paying the tax at all and then have a low average tax rate in the middle income as opposed to higher income. it is a consumption tax just as they were suggesting most think it is a great idea. our proposal didn't include border adjustments that it's easy to come up with a version of that soap economists are not as enthusiastic about the border adjustments because we think when it comes out of the wash in other ways but i know other politicians love the border adjustments so all the advantages that you discussed and that i've mentioned, too combine into making a turkic idea. >> governor, do you want to comment? >> we used to look at this because what anything it would

be if the border put the tax on everything coming in and take it off on everything going out and then it has a real attractiveness. it is a heavy lift for the congress but you can't make things like the tax credit permanent to be able to get their. >> it seems like small things are heavy lift. >> all i know is that the conversation of the flat tax conversation and your legislation on the presumption tax that you introduced i'm kind of tax want g. and i would like to talk about all these different kind of things but with respect to the chair and ranking member and some of the work they've done recognizing that probably we have a room of possibilities on certain things and put that on the committee that gets formed to take a look

at the long-term structure it is a big change and we are willing to talk about anything that makes the u.s. more competitive. >> i know we don't have a consensus gets so it is the is the need to bring about a greater consensus. everything we are talking about has been tried in other countries so nothing is new. we know what will happen and the united states will be much more competitive and we are today. we didn't have to worry about competition taxes and today we do. again i think the panel further discussions. >> senator heller. >> i look forward to working with you and i want to thank the senator. i look forward to working with you. it's great to be on the committee and i'm pleased the first issue that we discussed his economic growth and creating jobs. i think for most of the american people that's where they come

down. hello, governor it's good to see you and everybody on the panel thank you for being here and for your words and efforts. the economic recession affected everyone that in my home state of nevada that was especially harmful. nevada experienced the highest unemployment rates nearly 14% at the peak. i would argue today it is north of 9% as well as the highest foreclosure rate in the nation and highest personal bankruptcy rate so it's been a rough few years. though the situation has improved, the unemployment rate remains one of the highest in the nation. recovery has been slow. thousands of families are still waiting for true economic recovery that they can see and in fact feel in their pocketbooks. americans have been told of the economy is getting better but they are not feeling the effect especially in my home state and though the national and unemployment rate has gone down many of americans have dropped

out of the workforce entirely. the fact is this administration has put up policies to economic growth. we've already not a tax code that has become more complicated under obamacare. businesses continue to face mountains of new rules and regulations and we have a healthcare law that makes it harder to see your doctor, more difficult for employers to grow and it raises taxes for hard-working american taxpayers. to grow the economy there are key factors to deserve the attention of congress. americans deserve a clean simple tax code. trade policies that ensure american competitiveness in the growing international marketplace and health care policies that actually focus on improving access, affordability and quality. as a member of the committee i look forward to working with the ranking member to move these issues forward and with that a few questions today. there's an article today that came out. as you know we haven't had a tax

reform since 1986 and i think there's good reasons why that occurs today i will just read two paragraphs out of the article it says lawmakers in and the white house are overstating the benefits of the business code rewrite. some say that predicting any likely overhaul will do little for growth and may even hurt the economy. that's because for all of the complaints complaints of special-interest loopholes and skyhigh rates the biggest corporate tax breaks are generally by economists to promote growth. so i think that voice is going to get louder and louder as we work together in the committee to improve the corporate tax code that we have but i guess my question to you is is there any truth behind these comments and what are the risks that you see looking forward on the corporate tax reform? >> one of the risks not of not moving forward is that we continue to retain a patchwork of temporary tax code that we have to come back every few

months it seems to try to be to extend it and was nobody to plan in advance nobody to rely whether you are an individual or a business taxpayer and as far as the economist has a certain provisions of benefits of course but many of those benefits are put into offsets some of the negative effects of the code we've got. that was the whole goal. since 86 we have seen the changes made about what has really changed is what the rest of the world has done in reaction to our code so that we react to some of those designed to try to make us more competitive against another region of the world or some other practice out there. i think that a simpler tax -- i certainly enjoyed the competition with the senator that is a long way to get there to where he would like to go

but we can see a simpler tax code in the future if we act now on some of the things that i think are doable in the committee. >> we talked a little bit about education and i know we have a solid position and i would like to get your view on this but in nevada about 30% of high school graduates go into a post high school education. unfortunately 65% of the jobs in the country will need post-high school education. how do you feel about the president's proposal for the community colleges? >> the three community colleges are spending a lot of their time doing with the high school didn't do in the first place. so i'm frustrated by that proposal a little bit. and i'm certainly frustrated by what is offered as a way of trying to pay for it. nobody has seen the details on

what he's actually specifically proposing, but i would say that clark county and nevada we really need to have each individual plan. going to college they need to get there and be able to do college work when they arrived. they aren't going to go directly to college may be in the gaming industry where the resource industry. what kind of jobs and skills are needed and can't we start earlier than post 12 grade? what started it and prayed and help people. and what we are seeing in the real world is that people that get skills often than also gain confidence with and conclude i want even more education than go back to school to gain that and often they are able to pay for it because they are now employed. it's a virtuous circle and the other thing if you drop out you are really dropping out of the whole economy. >> governor, thank you. my time has run out.

>> i am going to be very brief but i wanted to note that each of you raised one of the 64,000 other questions on the tax reform so i want to assign you a homework assignment to get us back an answer to the questions you raised. we appreciate the many great things you've done for the country and and/or state and appreciate you being here. somewhere there is a list that can't be used. i'm sure it must be there. can you tell us that we go through a comprehensive reform using tex treatments to offset the reduction in revenues from the percentage rate is there a sacred catalyst or could we possibly come up with a consensus for this committee of what could be used to bring the rates down? >> yet there is absolutely a list that i think works.

there is a reluctance the chairman may be against somebody's advice for a little excise tax and the next thing we find out now it is a proposal to pay for new spending so there's a reluctance sometimes do that all the cards face up on the table until it's that magic moment when we are ready to do a deal. but we've done enough and the math and there is no question that fiscally responsible way we put together a plan that works and we are still certainly looking hard at the past and how much can be done and we are optimistic great progress can be made on all types of business entities. >> i would love to see that list. thank you very much. doctor you made a statement and i couldn't find it in your testimony in a statement in the verbal testimony you recommended the triggers for automatic stabilizers. of those things that would lower tax rates on the times were tough and raise taxes when they were good and we are of course

going up and down. can you supply but those are and as a professor of economics where you would have those coming in and how you would have them coming in? >> if you want a simple formula right now, the unemployment rate is about seven and a half%. >> so you use the unemployment rate versus some other index. >> it strikes me as the biggest. >> there are many types of taxes as we know. what's tax is what you trigger in that mode lacks >> i would need to think hard about the question. for sure come in from taxes but beyond that i would need to think. >> if you think about that it is an interesting concept and it does beg the 64,000-dollar

question that his tax is tax policy drives economic outlook and if you have automatic stabilizers based on raising or lowering the taxes it tells us any time we raise or lower taxes that economic consequence we better do it correctly which brings me to doctor hall you are an advocate of tax if i'm not mistaken and in one of the answers he gave you talked about the tax code that we have right now and you get an income to determine the tax code that has 28% on the proposed capital gains or 23.4, whatever it might be. are you taking that as a dividend rate that was a testimony for the flat tax is that correct? >> if i am correct in my assumption the biggest stumbling block is the transition from the code that we

are in. for example you have longitudinal tax treatments depreciation investment tax credits, low and moderate income credits and i could go on and on. have you ever define the model for if you want a look at that all of a sudden there was an 18% flat tax just pulling out of the air, what would you grandfather from the previous code where people invested their money? >> okay, so a while ago 20 years ago, i went through that topic in detail. depreciation there's -- in that proposal is the first year right off so then the question is forward-looking and that's easy. the question is than how you treat the hangover of previously promised the appreciation

deductions. .. i would like to learn and i get bored at night watching tv, so i would love to read it and see what happens. the reason i raise the point

windbreak in reform taxes and 86, the one thing that made the mistake odds was way took the lives end changed in midstream investments which have a large segment of the economy commercial investment real estate. you have to be very careful when you change the treatment of taxation when they've are debated. got to make sure they have the recession. that's the reason i ask. with a sad, i am going to turn over everything to the ranking member senator wyden. >> thank you, senator isakson. i share a lot of your concerns as well. look forward to working with you. if i might go back governor engler do what you had senator thune talked about. they feel about bipartisan comprehensive tax reform.

it will come down to pete oddo supply in the hardware store. if they walk away thinking that all the discussion in washington d.c. about the big guys that get the break in pete and fran are going to get at the numbers, they may think they are going to have to pick up some of the cost in order to have to break for the big guys, that is a showstopper both substantively and politically and you to your credit have indicated you are interested in talking about this. i understand that there is some discussion going on in the business community in an effort to try and think this through and you have to find a paid for and the like. they given the fact that the small businesses while over 80%

pay taxpayers, i understand there is discussion about the concept of perhaps coming up with a small business credit, and something that would allow the small businesspeople on day one to see that there was an absurd to try to ensure as we do tax reform we want everyone to get ahead and we are recognizing the small business. i know that this is not the time talking with specifics, but what is your sense of that discussion where it might go? >> well, i think that first of all, it is an unavoidable discussion. it has to be part of the whole conversation. i think as long as when we work with the constraint of described in a fiscally responsible tax

reform to bring rates down which cost revenue then as it was just mentioned by senator isakson what then would offset the revenue loss, i personally would tank that there is a fairly dynamic crack if that is they are. they're some effect if you cut tax rates. i happen to think it's a beneficial effect that will be seen in higher revenues. i understand the scoring rules that we use. so if we say okay, what is fiscally responsible and how do we deal with the corporate ratepayers. what do they pay those that are not corporate at the individual rate. nobody should subsidize the other. they shouldn't be subsidizing corporate relief. i would argue vice versa the corporate shouldn't be subsidizing their relief. how do you get them a better tax code? how do you get the corporate taxpayer a better tax cut.

we have figured out where we are in the corporate site. the pastor entities are more than $2 billion in revenues. so as we look at this your question about a small business credit or something, all of those are intriguing. we are very open to working with the committee to see what could be done. we certainly always speak of comprehensive tax reform and if it's comprehensive, that means they are not left out. >> one other quick question if i might and then i'm going to recognize senator carper. one of the most troubling aspects of where this country is economically is the huge gap

between economic recovery in urban areas and economic recovery in rural areas. the national association of counties recently released report noting the 3000 rural counties only 65 r. and economic recovery. no county in my state has seen a full economic recovery. the 23 rural counties in my state have arrived wealthy on this a smart urban and populous counties. clearly, in my state and they just came from townhall meeting in rural oregon. i'm not going to accept those rural communities and to sacrifice us. we just write them off and say that's the way it goes. the end. i would like to go down the road to senator carper. if you would like to start dr. walters. if you had an idea, just one because time is short to deal with this huge gap in rural

areas. i'd be interested in an idea from each of you. >> i'm going to profess the usual cannot, which is to reject the question rather than answer it. >> fair enough. >> there's enormous variation across the country. black and white, men and women, states and urban and rural. i think we should wait each of these as real people with dignity and that doesn't mean favoring one group over the other. i think the important part of the question is implicitly the claim that the economic recovery goes a lot further. we can push down to a 4% something rather than 5% unemployment rate doing anything particular for rules that the difference is that the groups. >> dr. hall.

>> the trend towards urbanization has been going on throughout the history of the u.s. exactly what comfort should be given to people who are still in rural areas. but it's very important to understand that especially big urban area as that are at the other extreme, for example, the urban area is 4%. it's a huge magnet for people from rural areas and rural populations are declining as urban populations rise. we have a progressive tax system which helps a lot in that respect and we have a social safety not. i am not sure it would be appropriate to go beyond that to

have something specifically aimed, certainly europe one of the huge problems in europe is very consistent attempts to prevent people from migrating to big cities. that has been one of the many drugs on the growth productivity in europe. i'm against the europeanization of the u.s. even one of those and not correction. we have her best safety net. the bottom ends we do give an excuse them. we do a reasonable job was still recognize. >> i want to go to governor carper. i can tell you in oregon can the people are first and foremost interested in family wage jobs and while the opportunities and

trade, improved infrastructure balanced approach on natural resources. nobody this weekend said the answer was safety net programs. evan or come anything else you want to add? then i want to go to governor carper. >> will quickly and kind of one of those communities i do think technology has a huge role to play in stopping that gap. i really felt that the idea that everybody has high-speed access, we could take the work towards where the people are today in many cases. doubling down on those tragedies. one thing that is simply not negotiable is even enrolled schools that technology come you cannot the very best education available in the world. but you've got to get it. you got to insist upon it and built that. if i am leaving one of those communities today i put my emphasis on educational workforce. the skills are delineated as in terms of opportunity and income going forward and it's just going to get more cute eared >> while that your governor

carper. >> thank you. he knows how to warm me up when he calls me governor. people around the country say what you do? i'm a recovering governor. and i am. >> please don't recover. >> all never fully recover. when johnny and i used to work together, we worked on a lot of welfare reform. we got married later in life. we had our kids and the national governors associatassociat ion got to spend a lot of time together. we show passion for a baseball team with the best pictures in baseball and those washington national should be pretty good this year. we'll see how good our tigers are. i am hopeful. we still have plenty of months. having said all that, we also are always interested in economic growth and whether the governors or senators president create jobs. we could help create a nurturing

environment. he focused on some things that can create an even more nurturing environment for job creation and preservation. one of those is the trade policy will be easier for us to sell our goods and products into foreign markets. talk about the tax reform and a longtime interest in stirring the race in moving towards territorial tax system and the corporate side. we spent some time in cybersecurity. we've got a lot of folks trying to steal her the corner from places like dupont astor zeneca, in universities, michigan ohio state delaware you name it. i think we are doing a better job, but it is a big job. he spoke to immigration reform. i don't know who it was mentioned that the immigration reform actually over a long time will reduce budget deficits and foster greater economic growth. this is where i'm going on transportation and investments

on infrastructure. governor engler for the current job after being governor, one of the things he's done is let the national association of manufacturers. they put out work done by some very smart people, looking at what kind of gdp growth we get if we fully fund the transportation system transportation plan for the next six years. a fair amount of gdp growth in economic news to put in six or 700,000 people to work building roads, highways, bridges. a lot of them are unemployed here the real growth are from fully funded transportation and a just-in-time economy to be able to move goods and products across the country, out of the country and into foreign markets. that is where we get the real gdp growth. the big question around here has always been how do we pay for this stuff.

the last five years we've seen 12 times we kick the can down the road and have not done much of anything. we borrow money from the general fund and china and other places around the world. i don't think it's a very smart policy. we do stuff that has nothing to do with transportation. one of you, i think it was you dr. hall may have mentioned the user fees. governor snyder is still your governor. i know he tried to to double the gas tax. i think it passed the senate. now they are going to go to referendum to see if they can pass it back that way. i chaired until 10 days ago the senate subcommittee in transportation infrastructure. the environment and public works has a great interest in math and a name for the subcommittee here is my question. senator our ranking member here former chairman has been working on something called the road user charge. it's another way