[inaudible conversations]

>> this afternoon a discussion foreign policy agendas within the republican party from the american enterprise institute. watch that live at 3:00 p.m. eastern on c-span2, online at c-span .org or listen live on the free c-span radio app. aiken is theltz president of the american action forum and also served as a former director of the congressional budget office from 2003-2005 joining us this money to talk about economic issues in the biden administration. good morning to you, sir. >> good morning. >> one of the key, i guess, takeaways from the release of the budget last friday was this topic of that ultimately what happened to it, summarize what you saw from the report and then talk about what that means for people who look at these things, such as yourself.

>> well, the report was quite striking. this is a budget the plans to spend more as a fraction of our national gross domestic product on averagemi over the next ten years than we ever have, including the world war ii time so it's a very expansive view of government spending to finance that they will raise $3.6 trillion in taxes and we will average more in taxes with a fraction of the national income that we have in any modern economy history. they will also add another $1.4 trillion to the national debt by running deficits over ten years. it is a lot of spending, a lot of taxes and yet, more continued borrowing. >> if the0' trillion dollars in deficit, that's the budget or the highlights, where would you see those contribute is coming from? is it from the proposals of this and ministries and or what of make up that number?ri >> the deficit will total 14.5 trillion over the next ten years and of that 1.4 so like 10% are new proposals by the

biden administration and the rest is the legacy of the past and we have been running large deficits for somee time now. >> host: that factors into the previous administration its pending issues and particularly the tax cut from that era as well? >> guest: goes back to the george w. bush administration beginning in the early to thousands when we ran deficits steadily to fight the iraq and afghanistan wars and the obama administration inherited a very big recession and, huge deficits, by the standards of the time and never really got back close to eliminating those deficits. trump administration, as you know, cut taxes with a big tech scott in 2017 but spent money freely as well so we have seen this for the past 21 years. >> host: philosophically then, where is capitol hill particularly washington when it comes to this idea of debt and deficits and if they matter ultimately? >> guest: i don't see any real concern at the moment.

certainly the biden administration has no concern about the enormous deficits they intend to run and we learned, i think, in the pandemic that running large deficits to bolster the economy in the face of an enormous which there was o was the right thing to do and i agree with that in the question is what happens when we are 2025 or 2026 and at some point we have to a control the access of deficit spending and get our debt under control. >> but the tax proposals under the biden administration is -proposing, how much of that covers its current spending plan? >> it doesn't cover it. they're planning to spend, you know, about 140 billion more every year than they plan to increase taxes so there is or some attempt to pay with things that we will see what but by no means is this a balanced approach. >> our guest with us until a 45:00 if you want to ask questions about the budget and

deficits and economic policy of the biden 2 administration if yu want to call (202)748-8001 for republican, 2027 or 80001xt -- u can text us to at 2,027,488,003 omak, two other features from the budget to ask you about o projections and growth of theme economy. 5% production in 2021 and is also adding that it would estimate 4.3% growth next year, 2% for the rest of the decade and what do those numbers look like to you as far as a reality? >> guest: they areor baffling, h be honest. i think we are much younger than that this year. most people put 20, 21 at something between six and 8%, well above what is in a budget and they could be fairly strong next year as well but certainly the 1.8, 1.9 and the 2.0 that is a fairly pessimistic view of economic growth and quite frankly the problem this has

been but the big spending here quote investments in infrastructure of different types that is supposed to increase growth but there is no more rapid growth in theired projections then we have seen in the past so it doesn't hang together with the rhetoric and the proposals we seeor in the budget. >> when you say then as it doesn't hangg together, what do you mean by that? >> guest: i think the standard way to do the budget is to have the economic projections reflect the end administration's policies and so, every administration says that their policies are going to grow more rapidly in this economy that they have in their budget isn't growing more rapidly in the recent past soo that is at odds with the kinds of things they are saying about the proposals with investments in infra structure, supposed to improve the productivity of the economy, grow more rapidly, have childcare and paid family leave to get people into the labor force and increased the pace of economic growth so they are not reflected in their economy productions and that seems odd to meat.

>> host: those numbers then are they based from the cbo which you are the head of or are they based on other factors to? >> guest: those are entirely the ministrations both economic and budget productions and economic projections are traditionally put together by the council of economic advisories and cooperation with the budget and treasury and omb provides the spending hours and treasury the tax revenue so this is entirely and administration document and statement of the president's vision and it will now go over capitol hill and the congressional budget office will analyze those proposals and it will say what they think n they will cost as it goes to what omb said and the look at the economics and say this is what we think will happen and that analysis of the president's budget is the core pieces of the cbo here every time we see the budget. >> because you watched it play out or lease you did at one time play out on capitol hill and it's a blueprint once again against congress and what is the expectable role of democrats and republic and now that they received this blueprint?

>> guest: i don't think it will expect much. it is not a signatureen piece of the administrationsly policymakg and i think we know that because they put it out on the friday before memorial day and they weren't trying to get a lot of attention for it. we already know that the core pieces of what they want to do are the big and for structure proposal known as the megan jobs plan and second plan called the american family plan which is the pay leave another proposal so the kinds of things they want to do are well-known and we arer watching the negotiations on capitol hill to see of her publicans and democrats could get together and execute on some of them or will the democrats go it alone and that remains to be seen. >> host: give me your assessment of the current state of the economy. >> guest: economy is in very good shape, by and large. the only thing holding back remains the coronavirus and that has been the, you know, real force that has stopped people from going to work, stop people from spending, stop people from eating in restaurants and is

that recedes we are seeing the economy pick up quite well and in particular the service sector which has been badly hit has come back strongly. i see no real headwinds for the economy, assuming we continue to make progress on the public health mission. >> host: last week president biden was in cleveland ohio talking about his blueprint for america as he described it and talked about the state of the economy and the role of the administration in it and i want you to play a little bit of what he had to say they get your response to it. >> we had record job creation and we are seeing reckoned economic growth and we are creating a new paradigm, one that rewards workil, the working people of this nation, not just those at the top. we did a study, 85% of my jobs plan or 95%, jobs plan you don't need a bachelors degree. 75% you don't even need a degree

that ise a community college degree. it helps but guess whatno? the bottom line is that peoplegr are going to be going back to work. there is a new bargain. everyone is going to be in on the deal this time. now, as our economy recovers that will be some bumps in the road and we know that and of course there will be. you can't reboot a global economy like flipping on a light switch because there will be ups and downs in jobs and economic reports and there will be supply chain issues and price distortions and on the way back to a stable and steady growth. >> host: that was a present from last week. douglas holtz-eakin how much does this president take for the current state of the economy? >> guest: every and menstruation takes credit for what happens in our watch but every they done very little to see the growth that we have seen. this was already happening based on the actions in 2020 both congress and administration's bipartisan do things that were

very necessary and large support for the economy and large in the care act and almost a trillion dollars of support and at the time the end administration's very first effort was passed in march most of the projections was for 6% growth in the first quarter and we got 6.4% so that was already happening and now the issue is what more can they do and if you listen the real claim there is that this administration will somehow deliver better to the less skilled b or less educated that has happened in the past and that's a real challenge because one of the things that was true in 2018-2019 was on a plane it was at record lows for many communities of color and for t many of the lease skilled in america and wages were rising more rapidly at the bottom than anywhere else and so we have already accomplished a great deal there and can do so again for more question will what will

the end administration do? >> host: first question is from andrew, texas, andrew, go ahead. >> caller: hey, good morning. good morning mr. holtz-eakin prayed thank you for being on today. my question for you is do you think thatat when facing the det crisis and i'm sure you seen the debt counter that is continuously going higher and wrong higher do you think that congress can find a bipartisan way to look at that and deal with that and thank you verymy much. >> guest: great question. it is the one that keeps me awake at night. there is a lot of discussion now a lot of debt is a badho thing or doing it need to get the national debt down and a normal devoted to into we have a higher low level of debt relative to the size of our economy but the key fact in all

of that is that we are picking the level of debt and we could have less debt and the u.s. has shown no capacity to pack in the 21st century and we have seen the debt rise and rise in absolute terms, relative to the size of the economy and all the protections are for it to rise and on toward projection going forward and we have yet to demonstrate on a bipartisan basis and ability to control the size of the debt and until we do that i will remain concerned. >> host: so you may not be able to see if we will show the folks at home the debt clock is where it currentlyes stands. the number is as it stands which calculates to about debt per citizen 85000 and he said that keeps you up at night so what is the responsible resolve going forward that as far as reducing that debtey. >> the key is not the debt per se but the keyt is where does it come from and one of the enormous drivers of the debt is

our social safety net and the things that we think are essential for taking care of americans. social security, medicare and portable care act are key features there and in every case those are sending outon more moy than they are bringing in and delivering a lot of debt, medicare alone prior to the pandemic was responsible for one third of all the debt outstanding and so that is something that needs to be tackled and we need to care about those to make sure the financially sustainable and make sure they deliver the benefits so that they are counting on them and we have not done that and we have not done anything with social security but it will run out of trust fund money in the decade and the clock is ticking to something like four years prior to the pandemic and could be less now and those are important issues. one of my deep concerns about the biden administration and their proposals is that they are essentially promising a whole lot of new social programs, paid

family leave, childcare, earning come in tax credits, expanded health subsidies and a whole lo. of credits for children and checks going out on a monthly basis and that sounds great but they are using the money to pay for those programs, in part and they not pay for all of it, that we need to fix the existing programs and we are not taking care of business that we already have problems with.k so that's what we need to do, we need to make it a strong decision as a nation about which programs we will have to make sure they are sustainable in the future. >> host: to get a sense of l the biden and menstruation is going to tackle those big programs that you initially started about social security, medicare and the like? >> guest: we have not heard a word about social security and we not heard a word about medicare and you talked about lowering the eligibility age to 60 on the campaign trail but neither of those things bodes well for the sustainability of those programs.s >> host: charles is next up.kr charles, fort collins, colorado, independent line.

good morning. >> caller: hi, yeah, i believelo bidens programs would be sustainable to a point but we just need to camino, pay for them and i just notice that like in the fdr i years look at the effective tax rates back then were 60, 70% and we are not going to be able to pay this on the average joe out there living paycheck to paycheck and who will pay for this is the jeff bezos of the world and the guys that are making $180 billion and not paying taxes and skating through this as we go bankrupt and now you look at this and this infrastructure thing and i'm looking at the republicans who want to put the tax burden and the gas attacks, is it? and wouldn't that just be anothere tax on the average person where the biden

administration wants to put the tax burdens on the people who are making over $1 million in making the money off the backs of americans. thank you. >> guest: the proposals of the administration are to finance them using exclusive taxes on those making then $400,000 and they have an array of proposals as i said raising it to $3.6 trillion but that does not even cover their spending plan. there is an arithmetic problem at a minimum and they may run into some genuinely economic problems. a feature of the proposals is to raise the corporate tax rate from 21% to 20% and when the u.s. corporate rate was 35% back in 2015, 2016 leading to 17 we had a continual problem of losing the headquarters of large global companies and they left the united states at a rate of basically one or two or three a year for ten straight years. we lost an enormous number of very important headquarters.

only cut the rates, it puts the u.s. inn the middle of the economic pack, competitive with europe and great britain in japan and china and that seems fine but to go to 20% puts us again outside of the pack well above everyone else and i fear when we start the problem of losing the headquarters but what happens when we lose the headquarters? to the executives move to another country, no, they are fine and the folks that you are right about and properly is so are the ones most likely to be impacted by that proposal and so my concern with their stated goals sort of keeping the burden off the average person is that the average person will end up bearing the ill fruits of a bad economic possibly. >> the desire from the biden administration and is it a reality every two not or do you think that might happen for a slightly lower rate. >> guest: i said more slightly lower rate because that makes more economic sense.

in the end what you want is for there to be healthy economy with a lot of job creation and wage growth in 28% does not deliver that but something lower will. >> host: roger in abilene, kansas. democrat line. good morning. >> caller: good morning. i guess i am trying to figure out how the biden administration itexpected first thing they did was shut down our oil flow which that pipeline was the most absolute, the most economic way to pass oil around which what that did was it put a stress on our trucking that trucking situation but the stress on everything elseos and so everything else would be going up and there is no way around that i'm in agriculture and everything i buy has gone up 30

or 40% and that happened within 100 days. in his first hundred days that was the biggest economic goal and everything he's done has been economically wrong and it's hurting our money or our dollar has devalued now and everything i buyca cost more and this will keep going on is a good thing is i was early enough to buy a lot of things to pre- buy and i went out and borrowed money and brought my supplies so i'm sitting good this year but we have next year. >> host: that is roger in kansas, mr. holtz-eakin. >> guest: things going on here. the firstng is that the a administration has stated repeatedly that climate is their number one priority and that they are going to push the united states pretty aggressively towards a cleaner

energy foundation, heavy use of renewables and less use of carbon -based fuels in particular coal, natural gas, oil and that carries with it economic cost and there is no question about that. to move in that way you have to make the things you want cheaper so that requires taxes and subsidies or the things you don't want more expensive whichm is what we are seen with the oil and natural gas and things like that. that is going to go on and that is their goal and that will be a costly venture and it is hard to transform the economy of the united states to change its fundamental fuel in a rapid whfashion. that is going to be a hard thing to do simultaneously with growing rapidly so they're trying to manage that. second thing which is just a mistake, in my view, refund mental mistake is we passed nearly one 20th dollars, $900 billion in thehe stimulus n

december and as i said beforet the economy was growing rapidly and we had it in place support for those people who were still out of work because of the virus and then the administration came in and passed a new to trillion dollar rescue plan which is simply too big. it is more stimulus in the economy needs and thehe unappointed rate is down near 6% and it is not up at ten, 11 or 12 where he may be justified and so they have built some overheating into this economy and we have seen that money flow into first peoples bank accounts because they saved at a rate of 21%, three times normal in the first quarter of this year and then it flowed into all sorts of assets and we sell the stock market go up, housing market is going up, house commodities with oil and now it is starting to show up in prices. producer prices are up, construction costs are up and we are starting to see pressure on consumer inflation as well. this will be an issue for the

administration because 1.9 is bluntly a policy error in going to have consequences and the question is how will they manage that? >> host: mr. colt,ch some republicans may be argued that the federal unlimited boost seen from the passage of the coronavirus packages are keeping people from going back to work. to see that correlation? >> guest: that is a concern for here is why, there is a lot of research that shows that in regular neighbor markets by which i mean those not impaired by the coronavirus which we are dealing with but in regular labor markets the fraction of someone's usual wages that you replace with unappointed is a key indicator of how long people will stay unemployed but the higher the replacement rate, the more you give them compared to what they usually earn the longeraf is the longer on appointment and that is well-established in the research. right now with the federalil bos replacing more than 100% of the wages and that's an enormous replacement so about 30% of americans would make more on unlimited than in the previous job and in a normal labor market

that would have to increase the length of unemployment and raise the unemployed rate. as we move hopefully successfully to aluminate the coronavirus from the way we think about the economy that will become a bigger and bigger headway. how biz is now? a lot of things are going on in some people are afraid to go back to work and they are just afraid of getting sick with health conditions that make them at risk and some people have issues with school and childcare in those kinds of things and then the third would be this unemployment issue. they are all going on right now but increasingly it will be the unemployment that will be the concern. >> host: to that last point, this is tony from florida who text us asking the question are we going to experience growth from pent-up demand? the economy was artificially curtailed so why would anything need to be done other than deal with the public how the crisis? >> uti think that's the perfect. he's got exactly right. we are seeing that. we are seeing the big growth in

the first quarter prior to any think that the biden administration did in the only real concernrn in the caveat to that was we did have this two-part economy where there were some parts of the economy that were essentially unaffected by the virus and then there was the service sector, particular leisure and hospitality which really got shut down and you cannot go to restaurants or concerts or airplanes and go to hotels and things like that and so there was a chunk of the labor market that was long-term unemployed and needed support and that got put in place in december and i think that was exactly right and the rest of the pent up demand is enormous and i think we will see the spending and growth coming from that. >> host: douglas holtz-eakin serves as the president and tell us about the former folks and how are you financially supported. >> guest: we are a standard 501 c3 nonprofit and we are supported by donations and i would be thrilled if everyone chose to donate today paired that would be great. we are interested in

understanding public policy, tax policy, health policy, regulation, environment and essentially the waterfront of domestic and economic policy issues that the american action forum was built like the commercial budget office which iran and love the job and it was the highlight of my public service and this gives me a chance to, you know, weigh in on the same kinds of issues from the perspective of a center-right market philosophy. >> host: american action form .com, the website and this is gloria in maryland. republican line, you are on with our guest. >> caller: oh, me? >> host: yes, that is you. >> caller: yeah, i've got a good idea for saving the nation. how about writing books for saving the nation. people don't like to write books because they have to pay so much to get them made well, how about writing a children's book, two

sides of a piece of paper. one children's book and charge five dollars for the book in the government could run it and we could write the book and then anybody social security could start at 50 instead of 65 and any man that works before 50 should not have to write a poem but. >> host: thank you, gloria. part of what the viewer said, mr. holtz-eakin, this is a viewer from twitter saying that when it comes to the president he needs to remove the cap on social security also adding to thatot increasing taxes on the wealthy and removing tax loopholes on corporations and also asks about military spending if it needs to be addressed. i >> guest: i think the key and the one i talk about the most are the big social programs and that is where the money is,

quite frankly. increasingly the annual decisions made by congress on defense spending and non-defense spending are a small part of the budget and 30% below depending on the year and so my concern is, you know, know where the money is to control the growth of the deficit and, you know, it would be a good thing in my view if we didn't squeeze out of the budget those annual decisions because non-defense s spending is basic research and infra structure education and all the things where you can generally invest in the future of the country in defense spending is where you establish national security and t the capacity to project values around the globe and to have those get shortt is a concerns r budget his two big problems in my view print one is the mismatch between revenues and spending and the inability to get those to line up in second is the fact that we are letting these large social nets push out

the budget in places where our founders had the most important role. >> host: aside from the taxation efforts to paper infrastructure do you think investing in it for structure is a good idea? >> guest: yeah, no question. we have a little bit of a need for someor infra structure spending and we do a lot but we can do some more at this point in time. we do so pretty effectively and you know, the issue of how to finance it to go back to one of the things the caller said comes down to do yous , the user the method which is to say have a gas tax or a vehicle miles traveled tax or a harbor fee or an airport fee o so that those o are using the infrastructure and those imposing the wear and tear pay for it or do you do it out of general revenue, which in that case, you have a tax proposal and that is really the dividing congress right now. >> host: wall street journal highlights that some republicans when it comes for payingay for every structure would like to see unspent funds from the

1.9 trillion covid relief law used and also they would want to see user fees on electric vehicles. >> guest: yeah, one of the issues with the gas tax is that it wouldn't impose a fee on drivers of electric vehicles and a lower fee on the hybrids so there is a lot of interest in moving towards fees based on vehicle miles traveled so if you travel on the road and you pay a fee and if you do those kinds of proposals you can bury the fee based on the weight of the vehicle and the number of axles which is really just a way to make sure that the trucking industry pays for the vast amount of wear and tear they oppose on the road spirit that is real missing piece right now. >> host: republican from georgia, jonathan, you are next. >> caller: good morning. >> host: good morning. >> caller: gentlemen, i will take her you are going -- we are going insane. when i first voted the federal

budgetet was $500 million and nw we are spending 6 trillion, our deficit was in the billions and now we are approaching 30 trillion dollars in debt. what is the unfunded liabilities, douglas in 100 trillion plus range now? this is beyond insanity. we spent $5 trillion a year now we are talking about crumbling bridges and roads. why are they crumbling when they flee so much wealth from the american people? >> guest: i share your concern about the scale of these proposals and the large deficits we are running. no question about that. when iran the cbo we ran a deficit of 432 billion people yelled at me and it wasn'tad my decision yet people yelled at me about how large the deficit were. we will average about 1.4 trillion over the next ten years in these projections. it is well over one chilean, well over 5% of the gdp for the

next ten years so there isn't, at this point, a collective sense that we should do budgeting the way we use to budget which is tot decide on e priorities, pick the ones we are going to spend money on and those that we are not and how much we will spend and then raise the taxes to cover it. that is not the kind of budgeting that is going on and we are seeing a lot of let's do what we did last year and add some things and not have a very comprehensive view of how it addsd up. >> host: here is an argument from a viewer off of twitter. she says jersey girl is how she is identified saying how are your european countries able to provide so much robust and all-encompassing social programs that we are in the u.s. and remaining out of debt. they tax the wealthy citizens and businesses appropriately and they don't blow a huge chunk of their budgets on the military. >> guest: and they tax their middle-class extensively. the real truth is there 21% of

added taxes of 20% of every time you spend you are going to pay in taxes and that is across the income group. the real mismatch between the biden aspirations on the spending side and the european model is they are stated unwilling to havee the middle class pay for the benefits they will receive an that is why it doesn't add up very well. >> host: georgia, independent line, kilkenny, hello. >> caller: yes, if you look at the u.s. debt clock it says the dollar to gold ratio is 33000 per ounce. here is my question. if we could get the speculators to quit suppressing the price of gold and let gold be the real price that it should be couldn't the u.s. selloff its gold reserves to pay off the national debt? thank you. >> guest: at one time, maybe but not now. there isn't an asset the federal government holds that has lots of assets, whether it is

buildings or financial assets that can solve our physical problems. asset sales are but a band-aid and when we have seen them at times but they're not going to solve this problem. it is a problem solved by deciding to slow the growth of spending, raise the growth of tax revenues and nothing else will do. >> host: quit sidebar, what you think of the crypto currency craze? >> guest: crazy. i think the right thing to think about these is they are not currencies. currencies are things which are stable meeting of exchange or stable place to hold value in something that is readily acceptable and that doesn't match what is going on with these assets. these are boutique assets with a lot of risk and people can invest in them or not but looking forward there will be a adigital currency. i think there is no question about it. i think the issue is going to be whether they monitor authority establishes that digital currency and i'm suree the fed s

looking at that closely and mother the dollar, which has been the reserve currency in the currency in which international transactions are made will also be the digital currency of the future. >> host: what you think of the impact of china developing its own digital currency? >> guest: china has every intention of having the remnant -- it's currency be a reserve currency if not the reserve currency. it's are placing the dollar and they would like to establish the first digital currency and be the widely accepted digital commerce. ... was give away money and tax cuts. that was the money clinton decided to pay down the debt. then, i don't and now we are talking about parts of the country, i don't understand. the first thing that george bush did, the son bush, the first thing that he did was giveaway