businesses get to places that they're trying to get to in terms of their lives. so it's been wonderful. fi get to talk with folks like you for a half hour and it's really been great. i'm just so grateful every day and i do thank them for the opportunity to do this. >> it's been a fantastic way to start off the conference. thanks so much. [applause] >> happy first day of spring.

i'm jeff holland, vice president of research for the future g peterson foundation and i'm honored to be here today with this distinguished list to be discussing perspectives on us fiscal policy. we have a great panel of current and former cbo officials. let me briefly introduce them and we will get rightinto it . on the left we have wendy had over who's the director of the director of economic studies and former chief economist and the ceo. next to wendy we have phil who's the current director of the congressional budget office the next day him doug deakins who is with american actionforum and a former cbo director . we have a lot to discuss . as a reminder send any questions to those of you in the chat room. okay. so to get started, a couple

of the big topics in economics these days are rates of inflation, we've heard a about that this morning . so i think cbo got to work on this recently whether it's with senator crepo ranking member smith. could you give an update on their thinking ? >> it's a pleasure to be here with wendy with feedback in person with everyone. as jeff said, we recently responded to questions on two ranking members from the house budget community and finance committee. they're interested in inflation and interest rates, elevated inflation and the possibility of higher interest rates on the

physical trajectory. that's where it doesn't work. we have more work coming up this week on thursday and friday. it's focusing narrowly on that. it's an elaborate scenario and one can imagine market scenarios but it's focusing on what happens if scinflation is higher. and taking it from the blue-chip, from some exogenous sources. our last economic update was in the first half of last year and obviously a lot has happened in the economy since then . and we are working on a new update. thinking about higher interest rates with those spending and revenue and all of it is a component. what's interesting is higher inflation affects both revenue. where the tax system, much is indexed in various ways of

inflation but not all of it and that indexation happens that allowed. so if inflation goes up and not only wages go up eventually the tax bracket will change but that doesn't happen for this year especially if inflation starts to accelerate in the first half of 29. so revenues go up, spending does as well. there's some outlays that are indexed to inflation and there's other spending , not interest spending that effectively index inflation that would cover a lot of the cost of nursing homes in various ways including medicaid and that effectively index to inflation in some ways just throw wages and so on. so those actually over a 10 year budget window under the scenarios we look at with the two ranking members nearly canceled each other out. but of course the key at what's happening is net interest.

and there higher inflation, higher interest rates over time at least in much higher outlays for net interest. so that is the fiscal challenge of higher inflation is coming through the flow burden of the gap. if it's moderate and we have scenarios of the high and of the blue-chip forecast again for interest rates and inflation, even by the end of the 10 year window the flow burden has still been pretty moderate. and of course the denominator is going up as well. if you look in the letters will have more to say later this week. the challenge is what we don't have in our letter thinking about what happens is the numerator and denominator both in a challenging direction.

it's interesting if gdp falters and blue-chip, that's one challenge. if you look at the blue-chip, the people who see inflation as the highest and interest rates at the top of the blue-chip, they actually have real interest rates going down. they have the incremental inflation outpacing what they see mefrom interest rates. you can imagine different scenarios. >> you want an offer ranking member smith. >> i can but i will tell you go to our website. in the interest of time. >> after this session, not right now. >> do you want to talk about your view of interest? >> i thought it would be useful to provide context as

to what the main factors have been along the extraordinary surge in inflation. so the main context that i just encourage us all to keep in mind is that the recovery has been a lot faster than most forecasters and it may likely be true that anyone in this room thought at the beginning of the crisis. so what this chart shows is where actual gdp has been, that orange line at the top is cbo's projection in january 2020 and then i handful of projections from early in the crisis. you see the projections were for gdp to continue falling even after the second quarter . similarly there's a projection of the unemployment rate, cbo's projection was for it to rise above 15 percent and none of these much more dire outcomes

passed in large part, not completely but in large part because of the extraordinary fiscal report congress put in place with some varying degrees of success over the course of 2020 and 2021. so we are certainly in the midst of an unwelcome sosurge in inflation. but this important backdrop should be kept in mind as we think about the trade-offs of doing too much versus doing too little. so reallyquickly , my view is that one of the biggest reasons that we've seen a surge in inflation is the extraordinary gap in consumer spending so overall consumer spending has been pretty robust over the course of the recovery but as you can see in this orange line, these lines are not particularly low. sorry about that.

so the orange line you'll just have to trust me.it's the most recent recovery. and it's compared to previous recoveries. you can see the recovery of goods relative to pre-pandemic levels have been much faster than in previous recoveries. we've seen off the charts demand for goods in this country over the last 2 years . and some months it's been as high as 20 percent higher than pre-pandemic levels. in contrast service spending hasn't even recovered to its pre-pandemic level let alone where you would expect it to on if it had stayed on trend. so it's typically not very difficult and this has been an unusual episode for our service sector and for good. why does this matter for inflation?

i think basically goods demand has reached the vertical part of the supply search. goods sector is, it cannot bring any more vista market but services sector is not, yes there's a lot of soft demand there. it's not fully offsetting what's happening to inflation in the goods sector just because services produce such lower prices and because the fact that they really are on different these curves are quite different. so now what have we got? we have staggeringly high goods. goods inflation is far and away higher than it's been since 1970. and service inflation is coming up largely because of shelter prices but it's nothing like we haven't seen before even in recent years.

and so why this matters going forward. what this means is that past is not necessarily agood compass for what is going to happen to inflation over the next year . we are going to eventually away from goods eand back towards services. look at us all here in this s room. we're eventually going ito get more comfortable with face-to-face services and demand for services is going to rise. we will see out right reflation in the goods sector and as we can see from the lines , disinflation is often negative. about half thetime from 2000 to 2019 those prices out right declined after adjusting . so it is very likely that over the next year we will see some months without right goods deflation. but at the same time we're going to see an extraordinary increase i hopeand demand for services . that's where the worrying reinflationary portions are and

where we should be looking so with this being the 70s and 80s, not a compass and even lastyear is not a good compass . that's otthe context i want to provide for what inflation is going to do over the next year. >> doug, you talk a lot about inflation. is there anything that fiscal lepolicy can do to try to alleviate discretionary pricing? on the holders little fiscal policy can do. we need to end this and let it manage the inflation pressures in the economy. but there's things they could do, a large taxinflation on the middle class . they're not going to do that so i think this is really a sideshow for the congress and whether they wanted it or not the fed has this problem and they have a small problem addressing inflation.

i'm going to talk about how we got to this point, ... [inaudible] i don't have any fancy slides, i did my first powerpoint in front of george w. bush and it contained an error . i gave up powerpoint in 2001. that's been the record for fiscal policy. that year we had done the budget update and we were going to run a $7 billion budget deficit and the president said if we do your all unemployed . ms. daniels found $5 billion of the relabeling over the treasury , less of an off budget. i found another couple billion by changing the way we do price and wageinflation . after the six decimal point

we got a $1 billion surplus. [inaudible] anyway, this is where rei think we are. 1.4 percent year-over-year up to 7.9 most recently. you if you look historically we only had to comparable one year jumps . one was 1951, where believe it or not the us economy was growing at 10 and a half percent toward the end of the year and we raised spending by 10 percent during the korean war. that's access stimulus in a hot economy and you get inflation. second was the opec oil embargo, you get quadruple the global oil prices. huge cost a lot and you get another jump in a very weak economy. we have a combination of both of those. we have the well-publicized supply chain challenges with

the coronavirus. it always reminded me the most of the tax from september 11 which was a big cost shock. as we figure out how to operate the economy, it's expensive to operate oin the face of this threat and cost shock is an important component. it comes from the cares act, selling appropriate and then the american rescue plan, $1.9 trillion. it's growing at 6 and a half percent, when we output that it was less than a third of the 1.9, 2 billion in hot economy and you can just look at europe, europe's inflation and us inflation, it's up a quarter in 2021. less than 0.5 percent. and in the us it goes one percent in the first quarter q and jumps three times that after the tragedy .

so the demand part is going to update over time and the fed takes on a lot of that. the supply trucks are i think going to take a longer time to get worked out. >> i just want to add is interesting and great chart. this is what our work for senator crepo and mister smith, to me that's what was interesting is inflation we've all learned the last couple of months is baked into our costs. people don't like it. i think that's pretty clear. the physical danger is interest rates. just because the revenue and spending side of inflation is more or less offset at least within a 10 year window. and of course the central today. does that tree is does not fund itselfwith 30 day

t-bills . we have the time, this slow ramp-up as interest rates rise is the challenge of the composition of treasury that is not superlong . less than a decade. so that is the danger is the acceleration of interest rates as we point out in our work. >>. [inaudible] >> so looking at cbo projections, interest from july and i'm guessing all of your projections, interest rates are predicted to rise over the next decade and in fact cbo at least in july has been rising quickly. a two-year rate maybe 3 and a half percent over the next decade.and yet net interest cost because of the slow rollover of federal debt and in fact it's rolling over the

next couple of years. it's rolling over to lower interest rates than a lot of that federal debt was locked into in the last couple of years . net interest costs do not obviously they're going to rise over the decade but they don't rise to worrying levels in my mind. the worry is more outside the 10 year window. the reason i say all that is because i think it's important for us to not think that rising interest rates are at risk to the fiscal outlook. rising interest rates are baked in to the fiscal outlook and the fiscaloutlook at least over the next decade to my mind does oonot look particularly dire . >> i guess it's our third year horizon for special task force when it comes to budget, even by cbo projections over a year ago interest costs account for nearly half of revenue a year

from now. but nevertheless given the fed thinks interest rates will eventually go back to some long-term safety even in the new economic projections for a longer-term rate of 2 and a half percent for long-term. what are your thoughts? should there be bonds out there thor time to enforce the , some discipline on the market? >> i think the discussion gets off on the wrong foot when it starts with ends like the burden of interest costs or whatever financial indicator you have. the first thing we always hear people say is we can manage it . it doesn't mean you're doing real well. what you want to accomplish is a better question. then it leads you back to the course which is why are we taking these resources into the public sector? is it to solidify that or

move taxes ?what are we getting and what are we getting up? that i find troubling because we don't bring resources into the public by and large for productive investments. we talk about them a lot but by and large politicians run on consumption so the federal budget is stacked to slow growth by taking investment for consumption and we have a lot of debt in the foreground . the tail debt, is that core what i think of as mismatched in a waythat the budget is structured that i'm more worried about .>> people talk about investing and in the next generation or entitlementsgrowth , they were not until recently doing a genuine hard h brick-and-mortar investment to the extent we should.

climate is a pressing issue. but that's not where the money is going. the money is going to social security, medicare and all of those and there we have big financial problems with all those programs. that'swhat we should be focused on . >> other things that might be worth taking out additional debt or what sort of other investments should the federal government be involved in? >> you just said the magic word of should and of course the cbo doesn't normally do analysis. analysis and not our opinion but let me hear what wendy thinks the government should do and our comment on it. >> you just described a world that doesn't sound so bad to me in terms of improving all the ways the federal government could be investing our resources.

so yes, to be doing more on climate change, doing more towards investing on children. i believe the social insurance system is a critical part of our infrastructure. i think it makes our economy more resilient and i think it has good effects on economic growth and to the degree that it oldoesn't it's absolutely a trade-off . if i retain there are lots of ways that are reorganized fiscal policy but i think we also have to keep in mind how big the economic hoeffects are of the kind of perhaps dramatic reduction in the deficit of ... sorry, i've lost where the subject and verb are how big are the effects on

our economy if we reduce the deficit . we're worried about when we change the structure is that we're worried about thefiscal crisis . we're worried that at some point financial markets lose faith in lending to the federal government and abrupt bad things happen. we have to take drastic action all at once. that's a risk and it's worth keeping track of. financial markets don't tend to be at all flashing yellow, let alone read. in terms of what the other positive effects would be of the cbo, given the analysis a few years ago where it dramatically reduced the trajectory of debt as a share of gdp by 60 percentage points. rather than rising 20 percentage points over the next 15 years is going to fall 40 percentage points . that's a world just so you

understand the magnitude of those sorts of changes, but a world we recognize in terms of the things the federal government is doing for us and the ways the federal government is taxing us. the result was 15 years out real gdp, gnp per person was a few thousand dollars higher. and it was something like the numbers there but it was something like 79,000 versus 77,000. and it's hard. that doesn't sing. there's no reason why we are not taking as a society this drastic, painful action to stabilize or bring down debt re as a share of gdp. the economic effects of doing that given how we think interest rates are, the deficit and given how productive we thinkprivate investment is , the economic effects are notlife-changing .

>> let me pick on this a little bit. and actually wendy described one of the questions i did is when i started as director in 2019 . i'm getting familiar . policymakers are focused on the composition of spending and investment. sometimes investment is used as a synonym for spending that i like. so i'm not saying that. and we see those challenges. over time if you look at our website you see that interest payment is taking up a rising share of the federal outlay. so interest payments are depending on size of overall spending, these interest

rates are crowding everything else,whatever it is. defense spending, support for education, college .g keeping the washington monument over open and everything else. in the near term we saw it. a week or two weeks ago there's discussions about the composition of spending aand the appropriations act that just was enacted. that came down to support for data, local and tribal governments and against investment spending on covid related issues. these are things that the administration sent a letter to congress last week about the sorts of things, the trade-off. the spending ton the shelves and all of your parents, in-laws, grandparents. there's not enough of it. and it's a prophylactic

against covid but those are the kinds of trade-offs we see immediately as a cause of spending. it happened two weeks ago . the two small issues are effectiveness, government spending and that's something the cbo after work on on the return of government investment. private investment and how that's used over time. it's a real issue that came out last august for senator portman about investing in physicalinfrastructure. that's another issue and then just the last one i'll mention is generational . it eventually there is a fiscal adjustment the longer that adjustment is the lady that has generational consequences. the present generations are not sharing, they're not taking on the full share of the burden of the heschool adjustments. i'm not saying who within a generation or you think okay,

any adjustment is progressive. that means high income or household with high lifetime incomes are escaping the burden. right, the burden is delayed where those present families don't share in the burden. its compositional effectiveness and generational . >> rai'm not worried about a fiscal crisis, i'm not going to get a sovereign debt we've seen . the real issue is going to be that on our current trajectory we will steadily take resources from the n private sectors that are more productive and put them in less productive things in the private sector and we will slowly match the pace at which standard of living rises. it won't be very noticeable in real time but uover a long time it will add up and that is a terrible thing to leave to the next generation. there's no evidence that this economy is dynamically over investing in capital.

we don't have a big consumption party, that would be fine if we're in that position we're doing it to the extent of the next generation and making that more judgment i think that's appropriate. >> some people say the future generation will be richer than we are today so it's okay then to do this. >> then you also face problems, they need that wealth so let's give them as much as we can. >> gdp is around 100percent, that's one metric .s but what i'm hearing is there's not much to pull back on that. if we had this conversation three years ago we would have been concerned about this level. i you concerned about the size of the gdp right now? >> the lens through which i worried about debt as a share

of gdp was insurance. it was about how willing financial markets were to take on us debt. and i have been surprised by the low level of interest rates and to the degree that interest rates are lower than i thought they would be it makes perfect sense then that i am updating my view of the costliness of federal debt. so yes, for me the big new piece of information i'm taking on board is these very t low levels of interest rates . >> i'm worried about it, i'll flatly say that. i'm more a because number one i don't think the public is at all aware of the level or the trajectory of deferral. and that's actually understandable. bush said were going to win the war on global terror at all costs, we can talk about budget.

president obama said there's nothing wrong with the budget, the rich need to pay their fair share. donald trump said nothing so in the 21st century there's been no public education of the need for a fiscal policy that makes sense. there hasn't been any. as a result in the 21st century we had a political economy or the debt rises relative to gdp. we don't have a political capability to stabilize wealth and sense at some point you have to have that capabilitythat troubles me a lot . >> what if interest rates don't stay low? they sort of trended down and there's all the protections, some suggest that will be the case but are we putting ourselves in a bad position if interest rates rise and the federal budget increases? >> again, we have projections of interest rates rising over the next decade.

and we can see in those projections what that means for primary deficits, total deficits as a share of gdp. but nothing particularly worrying. now, that isn't to say that i think we should pack up our stuff and go home and not worry about the issue. i think we have a long-term issue. i think that we are an under taxed country. i think that we are, we don't spend money on the right things necessarily. and there are lots of things, lots of conversations that we need to be having about how to remake fiscal policy and i just think we need to be more humble about how urgent of a problem it is.

>> our framework, is that solid way of looking at our situation giving the primary deficits coming up in the future? >> i mean, that's olivia blanchard, it's got to be one of the most influential. it's one of the most influential sums milton friedman and it's interesting , wendy alluded to this. the flow in a sense of the debt. the challenge at the primary deficit before the pandemic was wide.the economy before the pandemic was in good shape. but you have rising income and importantly incomes are rising throughout the distribution most strongly of the bottom.

incomes are rising at the bottom. incomes are rising faster at the top but wealth especially at the top but income through the bottom, this is the late 90s. the same constellation of changes happens with widening, worsening inequality in the late 90sbut rising incomes at the bottom . shape.are in good our mst was helpful but not enough given what's happening with the primary deficit. we are updating our budget outlook now as cc ralph said. alluded to the president's budget, economic part of the president is hung up behind it. the cbo budget update is similarly on decline from last year so we're waiting for that and we will update the budget so we understand the trajectory is daunting. jeff, i think staffing is the

right word and the composition is shifting over time towardsnet interest payments because the primary deficit is so wide . even with r minus g, there's no reason to apply that. >> all right, so we had a bunch of dissension in the ranks and we wanted to ask for a prediction . the interest expense to gdp beyond which any of you would expect. >>. >> go ahead. >> i wouldn't link them. i think of fiscal crisis occurs cawhen investors change,

dramatically change their expectations of the behavior of the federal government going forward. that's not ... that's not necessarily investors worried about what they're seeing today. that's investors worried about what their expectations are for the future. so you can have the current situation look somewhat benign but investors worry about what's happening over the next 10, 20 years and that immediately gets them vice versa. you can have the federal government say we need to increase borrowing by $5 trillion in financial markets drug because that doesn't change their expectations for the future . i wouldn't link them. the issue around interest payments is simply that it ... fundamentally the end of the day the next interest payments is where doing a lot

of this borrowing from overseas investors and those are the resources that were making widgets and sending them overseas. at the end of the day that's really the only problem with net interest. >> it's all about expectations so if you go back to the last trying to raise the debt ceiling for example, this puts the us on watch for downgrade. why? the ability of the us to manage and make interest and full payments. and do it in a certainfashion . some of them having to do with the local economy and debt ceiling in the us. it's that kind of change in confidence and expectation for whatever reason that we're in a severe financial crisis. >> one thoughts, the

organization is good at doing this analysis . i wouldn't give normative advice to congress but they do this work and they have the analysis and the article for, the last article 4, the us just wasn't especially challenging and i was on the other side of it before. i when i was in the what gives it critical. i would love to see that in the fun. really zoom in and do a debt analysis on its own it's not like the one they just did . anyway, it's more constructive criticism. >> is there a relation or a threshold of the debt togdp ? >> again, i'm going to say no

and here's why. it's not about a snapshot. it's about the trajectory. so and it's about, not about the trajectory for the current flaw because even other current policy. it's about the expectation of financial markets for that trajectory. so you know, i'm worried i'm being redundant. >> i would add and this is i wrote thing that up the entireconstellation of what's going on. that jet that dgp reaches a certain level , is it going down austin market you can imagine the fiscal adjustment that it's different phases over time. it's not an immediate in a crisis now, now this was in the last cbo outlook and in years there'srisks .

but we have time and this is really i talked about wthis before, the generational issue, that's when challenges are, the longer we wait to address the deficit, the is fiscal adjustment the more difficult the adjustments will have to be and it's just arithmetic that to me , that's the challenge.to >> nominal interest cost versus real cost, the problem is that there's eathey all had vertical uptick at some point and that's the introductory period i'm worried about that trajectory, i think there's been some confusion about those indicators because they're all indicators on fiscal policy over time.

you wanted to actually do something, you don't control interest rates so those indicators are much noisier that they essentially change. you set tax policy so in terms of things to use us indicators for targets, i think it's something to think about. >> lets switch gears a little bit so you said that people have been expected lower goods spending for over a year but wehaven't seen it yet . so maybe this is the year? >> fiof course, we don't really know why the composition of spending is what it is. but you know, my strong intuition is that it's related to thepandemic . and that we are just as a society really reluctant to

spend money on face-to-face services. and so as the pandemic continues to receive or as we become more inured to the pandemic, i think that will mean spending goes up. we also have seen goods demand come down a little bit so there's signs that it's happening. and then lastly we are surely running out ofstorage space at home .re >> i would add, i think early on in the pandemic the rebound 20/20 in march and april were shut down and the economy bounced back pretty

surprisingly in may and june. i think last year 2021, the pandemic peaked january 11. the 12 deaths, maybe the 14th. the vaccinations reached its stride that same week hitting 1 million shot today.and we've seen the economy and that was 2021. i think the effect of fiscal policy on the economy in the beginning of 2021, we saw that reopening of the economy as vaccinations started to broaden. the fiscal policy first in december with the probation zach. and then the american rescue plan heis another one. this is spending and the

economy was pretty much in upswing really in 2021 and that got accelerated even further so people are adjusting to the pandemic. we all understand there's going to be another way. we understand the wastewater specific. so we're at the trough here. we're all in this room together at the trough in three weeks and there's an upswing, would we do it again ? will have to see. we all have our personal preferences. my sense is asa society we will . that we've adjusted to the pandemic. >> speaking of the pandemic, specifically fiscal drag is likely to be happening. the legislation really is aspiring or reigning.

is this an underappreciated risk to theeconomy ? >> i'm less concerned because the standard measure that you increase the deficit by $100 million and that expires, you got a negative hundred fiscal drag. that assumes that the timing is you do it and you have to and when you don't do it, it transcends. >> .. and that's all previous fiscal stimulus will offset the drag. the household sector is well-equipped. >> i want to add something to that, totally agree with doug that a lot of the fiscal support is going to still have an effect

going forward what it wanted to say couple of other things first. i want to put 2.5 trillion of excess savings in context of what happened to the value of people's wealth,pl more broadly. i can offer an advertisement they have projects putting out tomorrow describing what's happened to household finances since 2019. andel we'll well, even after accounting for inflation, real wealth is up like $24 trillion over the over the last two years. it is an order of magnitude more mostly fromni house prices and e stock market than the increase in excess savings from just people putting more money into bank accounts. household finances are doing pretty darn well and that's good to continue to support overall economic growth. the other thingth is economic growth is goingng to slow.

and we need economic growth to slow. economic growth is going to slow. that does great risk. our economy is not great at slowing. that's been a c concern on the horizon, a least one i fed for a good long time now, but we need economic growth to slow. >> i was a good to bring up the terrible situation in ukraine but will probably be part of every discussion with in this conference but there is a question about it. given thet. russian invasion of ukraine and response by the u.s. and itses allies, what are the implications for fiscalmp polic? >> i think probably what we will see his so-called supplement which we saw one already for ukraine. then they willl come back for more money because of the money they spent getting the troops ready for potential department. that costs a a lot.

don't normally build that in. i think what we were probably csr repeat of this overseas oves contingency account operation we had for a long time where the was part of the defense budget wasn't baked into the base because they don't want to admit it's going to be there for her but which for every year that had to come up with that money. that's going to be a number the looks of initially something like 15-20,000,000,000 and one hopes it goesd down and not up. >> any thoughts about revising the tax code and with that revision how the closing wealth gaps? >> lots of ideas about -- >> here's your opportunity. >> i think we might need to start another session. >> it's like an entire session on its own. maybe i will say a few words. obviously jgc does an analysis, changes in the tax code.

doesn't announce on the impact of gdp and revenues so and it matters. we do a lot of work, that a dynamic analysis of changes in taxes. one for the december tax actiq cbo did a dynamic analysis of repeal of the affordable care act, remove the taxes, some of the taxes that fund that. cbo past announces thatcb its impact on the economy but also has distributional impacts as i think the question alluded to and you can see that in an analysis that we released, wendy probably knows a better than i do, the date, within the last two years are looking at distribution because the change in distribution of earnings, the income, with taxes come with transfers we looked at the change from 2016 to our projection of 2021. this was done before the pandemics we o did not project a

pandemic in their, but you can see in that analysis the distributional consequences of the 20177 taxes. we do a lot of analysis on this so i don't have the correct answer to the question other than to say it matters and look for our website for more information. >> certainly we should be thinking hard about tax reform. in my view the 2017 act was a major supplement to this taxation and we gone in the wrong direction. [inaudible] it a a sense come back and noe else left. that had been an enormous problem for a decade and after it was a big advances and now i think we're making mistakes on the international tax front. negotiation is turning out quite

poorly. when we think about the business tax, and it didn't solve a lot of problems. i think it would be, i need to address the deficits going forward and i think the way no way to do that without getting a revenue. you have to think hardre about what kind of tax codes you want and begin the march towards that tax by broadening the base as much as possible a lot is left undone there. we have to raise rates, raise rates but don't do it first. >> now i have to weigh in. so first, we have an entire book that we put out right before the pandemic on a bunch of ideas to raise more tax revenues in efficient ways. i think the 2017 tax act we can greatly improve on the provisions that particularly affected income of multinationals. there were a lot of good ideas bounced around over the last year and i would love to see

them get taken up again. and it created i really unfortunate,up abrupt change in policy that we're going to experience in tax policy which just temporarily lowered rates for a while and is going to rise. it was not great policy to lower them and will not be great policy to let them abruptly rise. there's a lot we need to go back and fix. >> what about on the spending side? what can we do to alleviate that? emigration, for example? >> we have a lot of forces on immigration of. emigration is way down as a result of the pandemic we probably have at least 1 million fewer people in this country than we would have projected before the pandemic. and immigration then was already down relative to trains over

previous years. for a lot of reasons including steps that the trump administration tookk to make the u.s. just a lot less of a place to be for immigrants. and it's a problem for lots of reasons, and you know, yeah. >> i feel bad we're about to talk about cbo analysis, and like not sure, i think you should own the cbo analysis. >> okay. i'm going to jump in then. talk, what i will say as a complement to what wendy talked about. in addition to immigration with demographic challenges, aging of course is one. the fertility rate in the u.s. declined after come during the global financial crisis and it

stayed lower here and receive the same dynamic happening again that fertility decline during the pandemic. we project it to rise, you know, somewhat, our last projection and we're we redoing thoss now, but not to retain certainly not the pre-financial s fertility. there's some good news. one of the report in recent fertility is down is because teenagers are having fewer babies. there's some normative positive there. it's a negative for sources could become a negative for fiscal trajectory so that's another challenge. fertility roads during the pandemic, of course goes in the opposite direction in someoe was fiscally but certainly not good news. >> i've been advocating this for a long time, your success, one mores time. for a long time nativeborn population has had sub replacement for two and it's come lord recently. which means in the absence of

immigration or japan would get progressively older, we get smaller both in population and the size of our economy our ability to project our valleys on the globe you name it. the flip side to that is we get to dictate our future with our immigration decisions. the u.s. has alwayss. used immigration primer and as a tool for family education, refugee, asylum status,io things like th. global objectives. we never used it a tool for global policy. i think wouldld make a lot of sense to doo a serious immigration reform, focused much more on the skills and attributes of the labor force now and in the future, and you can raise the pace of economic growth, you can improve the quality of labor force. this is an opportunity that we have never really pursued in the u.s., and something that was high in my list of things that will change the dynamics were forged. >> can actually add one more

thing? it does make me feel more positive. we talk so much -- he's saying that we have options and maybe options other countries don't have. >> a member of the audience said you said there was little or no -- to educate the public on the dangers of debt to gdp but what the public is g hearing about modern monetary theory. comments? >> true. >> no, i have found this troubling. really i think of elections as important moments of education and presidential elections are teachable moments here and things that they can choose to elevate our things people do that. ms. allies, not going to the website and read my papers, thus i could happen so we have to find a way to say here's an important issue we need into a

little bit about it and here's the options going forward. that discussion has been absent literally in this century. there has been a a chatter about how, there are no consequences. we are living to the inflation now, and so now when you do educate them on the other side of the ledger, things that we can and needer to do. >> i would like just to make things. one, i think the public actually talks a fair amount about federal borrowing and fiscal trajectory. what i find frustrating is the metaphor i i was thinking of e federal government as like a household or a small business that's like running its budget. it's just a terrible, terrible metaphor. so i would love to just, i don't know, like between that and like stacking of dollar bills to the moon and back, there's lots of

unhelpful ways that politicians have talked to their constituents about the federal debt. the other thing i wanted to say, oh, shoot, i lost my train of thought. i lostgh my train of thought. >> i want to join you and get rid of the american -- >> mmp, mmp, mnp. the one thing t i i wanted toy but mmp is where it loses the thread, i think i'm in a way i understand it, is it wants monetary dash in a way that i thinkay it's had -- it wants monetary policy to be completely passive and it wants fiscal policymakers to be the ones who are actively, for example, right now on a current environment trying to control inflation. and as doug said at the outset of this conversation, the tools the fiscal policymakers have at hand to control inflation are things that we a don't want fisl

policymakers to do. like, we don't want fiscal policy, or i don't, i don't want fiscal't policymakers to take money away from people who have lower propensities to save and give it to people with higher propensities to say. like i just don't like the distribution effects of that, and i mean, we do not want fiscal policy to try to be actively controlling inflation. we want them to be like trying to improve supply chain. we want to get the pandemic behind us. like there's things we want them to perhaps even take some policies off off-the-shelf e the child tax credit fully fundable so people who are really financially insecure can manage the inflation surge. but wee don't want fiscal policymakers actively trying to fine tune aggregate demand in order to bring down inflation. the dissipation of effects of monetary policy makers doing that much preferable.

>> you want to take the final 12 seconds? >> sure. i would say again the composition of investment is going to be crucial, and we have the infrastructure investment and jobs act was enacted and the administration has an opportunity to really focus on the effectiveness and quality. they could alsoli focus on other goals and will just be like trade-offs are involved. >> with that, please join in thanking our panel. [applause] [inaudible conversations] [inaudible conversations] ♪ ♪ >> good morning. i'm george kahn and it's my pleasure to introduce cecilia rouse, the 30th year of the council of economic advisers appointed by president biden