incredibly important victory for lowering tax on capital. and to the extent that we can just preserve that because there's momentum going the other direction, i think it would be an important way to get consensus. that was tremendous. good for the economy, good for revenue. i think leave them at 15. that's good. and try to prevent them from rising. >> and then that underscores something very important about those who would do a preemptive surrender. if you'd said 10 or 12 years ago, could you have a president and a congress seriously pass thing is that looked so favorable to capital, they'd have said, impossible. but by asking for the complete elimination of the tax on personal dividends so you don't get doubletachiation, they got about 60% of it. and the john's right. the revenue came in. companies started to pay dividends again which was good for management instead of companies wasting capital they

didn't know what to do it with, they sent it to shareholders and let them decide where the capital should efficiently go. >> i want to talk about state taxes for a second because governor brownback, earlier today, governor christie spoke and talked about how in new jersey he cut spending before he approached the question of cutting taxes. and on a panel of other governors, there was some disagreement on that question whether you do them at the same time, whether you cut spending first, whether you cut taxes first. what's your view on that? >> well, my view is what i practiced basically is we made minor tax cuts last year but we really fixed the sinking sip. we had a $500 million budget hole when he came into office. it's in a $14 billion budget. so it's a substantial piece of it. so we fix the hole first by cutting spending. then when you get your growth that takes place and it has been

taking place, we've got now $400 million surplus and we're cutting taxes in a major way. cutting our rates down, taking the tax completely off of small business, the proposal i just put in front of you, by trying to compete. i'm tired of getting beat by the texans and mary fal lynn is here from oklahoma in the same ballpark. we're going to get these rates down and attract the capital in, but i feel like we had to convince the citizenry, look we're going to be responsible. we're not doing this in a vacuum and we're going to be able to pay for angeles services. so we cut a bunch of spending but we kept our essential service. didn't cut anybody off of medicaid. we didn't cut any payments on medicaid, didn't cut any services off medicaid. we made sure our schools were funded. but now we did the eliminate a bunch of other funding areas and had discussion what's the government's role for funding of the arts and other things which i got all sorts of criticism about. offer point was, if you can't

pay your mortgage, would you be buying a piece of art? if you can't pay your mortgage? and people said, well, yeah, i would probably pay my mortgage. well, what about your government then? we got our spending under control and now we're making it major changes in the tax code to move forward on growth. >>en an you said that when you got your spending under control, growth began to rise? it did. it did. you showed it to the business community, look, we know how to manage this. we're getting our costs under control and it starts attracting more capital into the place. one of the things we've got to do in the public sector is get on top of the pension systems. and that's something that people are talking about more but we're talking about a cash balance system where you guarantee a 5% rate of return but anything over that, we pay back into it. or going to a defined contribution system. allowing the employee the option of getting into either one.

i'd rather go to a defined contribution system overall, i'm having trouble selling that and the price tag's pretty high on just moving whole stock into that. but public sector's got to do a lot more discussion on that, and the final point i'm talking too much on this, but now is actually the time to propose bold public solutions. most of the political space is occupied by incremental time. where you just you can only propose an incremental solution to something. the public is scared now. they're scared for the future of their country. you could you go across the state of kansas, get a crowd of any 100 people and ask how many of you are scared for the future of your country? and you'll get 90% of the hands shoot up. maybe people like my parents who have been salt of the earth farmers all their life. they're scared. they don't think the smart people are willing to dig in and handle it or they can't figure it out or nobody's got a plan. you know, about what are we

going to do? and they are smart people but they're just saying, where's the plan and i'm scared that people aren't thinking and they're not willing to do the tough things. well, now is the time the public is willing to engage tough discussion. and real and major solutions. so now is the time to be bold and aggressive with good thoughtful plans. >> one question for john stossel and then we're going to take questions from the audience. so the title of your book is "no they can't." how the does that relate to taxes? >> no, they can't was the take off on the obama slogan of yes, we can. and the sub title is government fails but individuals succeed, and the much governor talks about cutting spending first. i would agree with that. i think you lose people in much of the discussion as soon as you even say depreciation or carry forward, even defined benefit.

most of the public stops listening. maybe in kansas, they're scared. i think in the upper westside outside this building, this he don't think there's a problem and they're just happy to go forward spending as much as possible. a simple budget proposal that says government capital do these things, go back to basic principles we feed a department of defense, even an epa. a census, a justice department to enforce the rules, and that's about it. we'll start over. but i don't think the public's ready. maybe after greece, riots again in japan blows up, maybe then they'd be ready. >> thank you. questions from the floor? >> yes. just wait for the microphone and then identify yourself. question over here. question over here yes. >> i'm with the manhattan institute. . some people say that we already have in essence a consumption

tax because people can shelter the income that they do not spend through i.r.a.s and college sachings accounts and 401(k) accounts and people don't -- most people are not up to the maximum in those accounts. so according to your recommendations, all we would have to do is move to full expensing of investment for businesses and we would practically already have the system that you propose. what does the panel think about that? and that would be actually simpler than putting in a value added tax or some of these methods. >> i agree with you, dianne. that's essentially the proposal that the bush tax panel came up with. that was the idea. we scored that, by the way, and compared that to the effect of that on the economy of cutting the corporate income tax rate, hank and i ran a conference together on this and treasury scored it. and the bang for the buck is about four to one in terms of expensing versus cutting

corporate tax rates. when you cut corporate tax rates is you're grandfathering in old capital when you're giving full expensing, you're only affecting new capital. so for any dollar that you're spending on reducing taxes, you're only affecting the new capital when you do the full expensing. that's the main reason for. i think that's the primary argument most economists would use in favor of going in that direction. i think you're quite right. we're almost there. it would be a pretty simple step to move in that direction. it wouldn't do everything but it would probably get us 80% of the way in terms of encouraging economic growthing. >> larry, you want to -- >> well, i think, and i hate to the enter wonk dom but you'd have to get rid of deductibility of interest. that would be the flipside of it. >> anybody else? >> okay. question over here. >> hi, i'm bud weinstein within

smu. i'm also a bush growth fellow. i have a question for the panel. in the past, whenever that vat trial balloon has gone up, it's been shot down by the governors associations, the mareses associations, who say consumption taxes, that's our sand box. the feds should stay out. so has perspective of the governors and mares changed? and if not, what can be done to change that perspective? >> first of all, i this i we have to say if you get rid of the phrase consumption tax when you say value added tax. consumption tax is related to income and things like that. value added tax is a business cash flow tax that's border adjustab adjustable. >> maybe you should unpack that so everybody understands what a value added tax is. >> here's the deal. i make cars. i sell my cars. i get $5 billion for selling my

cars. from that, i subtract the billion i paid the steel company, the glass company, da, da,da,da, da. $4 billion. i send 25% of that to the government. i'm done. that's it. that's the whole thing. so the cash comes in, cash goes out. cash is only deductible if i send it to somebody who is going to pay tax on it. the steel company or the glass company. and it's very simple to adminster tax. there's no definitions of income to worry about. and how about toyota? when toyota of america gets a car, it comes off the dock in san francisco or long beach, well, it's coming over at $30,000. it's then subject to 25% v.a.t. right there. and by the way, if toyota of america has a markup on it, the whole car is subject to that tax. you have the level playing field between a domestically produced carin a foreignen car. and the depreciation doesn't

take care of that problem. think about our needs. we need simplify indication, we need a level playing field competitively. and we have to get rid of the multiple definition of income. i think, by the way, in fact, i was on a panel before the senate budget committee. and there were four of us. we hadn't compared notes. we were across the political spectrum. and the senate budget committee was asking us, what would we do. all four of us separately in answer to the question said the country is going to end up with a vfrl a.t. we were then lectured by the senators on how the senate had voted 93-3 to never ever consider a v.a.t. ever in its history which talks about the political problem. we are going to be boxed in a corner if, we have a fiscal cliff we're going to go over. we have a huge debt overhang, we have to solve our budget problem. we are no longer going to be able to afford all this and then

we are going to turn to solutions that are the most efficient way of paying for government. i'm sorry to say it, i know it's politically unpopular, but if you want efficiency and you want growth, it's the only way to go. >> and would you have an amendment to the constitute or undoing the 16th amendment which allows the income tax? >> you can try and move it. i don't think it's necessary. i think once you abolish the corporate tax, abolish the personal income tax and the social security tax, if i'm a politician and says now that we have a vat, i want to bring back the income tax, i don't think it's going to get any votes. i don't think we need a constitutional amendment. i just move forward with it, abolish the current taxes, put in one simple tax to replace it. >> so in answer to bud's question, i wanted to turn to governor brownback. would you be kind of jealous if the federal government instituted a vfrl a.t. or even a more transparent consumption tax? would you say that's my sand box, stay out of it?

>> well, and i stated earlier, i think the field is more open toe bold solutions now than it has been anytime during my political lifetime. because people are -- they're looking and we're getting boxed into a big hole like larry was saying. i'm sorry to hear what he thinks is the answer. i love you, but i just -- so i think there would be less of a response what you're saying. i just think it's a steve forbes political problem. i don't think your problems's going to be mares and governors but people standing for election and saying i'm for 20 percival u added tax and somebody put up the ad here's your price of mick now, here's your price if bud is elected. >> on which you don't pay any personal income taxes. >> it would be higher than 20%. >> that would be lost in the discussion because people won't have -- half the people aren't anyway. >> by the way, that could be

another problem. this side of the supreme court hasn't said anything recently. so how big a problem is it that half the people aren't paying any taxes anyway as steve forbes says? is. >> i have a piece in the "washington post" a couple years back on tax day. >> we don't read the washington post. >> i know. i have another one in the "new york times" on the same issue. no, the idea is that in fact, you can't fund a big government without taxing everybody as we see the buffett rule will raise you know, 30 to $40 billion over ten years by the joint taxes estimates. and so all this hubbub over the buffett rule is really a tiny pittance of revenue. so you have to tax everybody. what politicians have done, probably of both parties is reached equilibrium where they attack rich people with taxes that are highly visible and tax poor people with taxes that are difficult to attribute.

if you if you look at the taxes relative to income across the income distribution and there is what i did in the article that you didn't read, it's pretty much always about 30%. so poor people pay about 30% of their in many in taxes because they pay a lot less income tax, some of them pay no tax at all but they pay a sales tax, cigarette tax. i included in the analysis lottery because people at the bottom play the lottery a lot. that's an unfairway to gamble. go to atlantic at the city. the taxes right now are prol flat. there'ses in ornate, ugly unefficient system that does it in a way satisfying for politicians. >> other questions. >> things like fica. >> i can't see. >> right over here. go ahead, john. >> i was going to say on the issue of people not paying income taxes, remember it used to be that we were, we would be excited about tax reform proposals that would take $5 million off the tax roles.

that was like a positive thing to say. i would say we should stop thinking that is a positive thing to do and think about your tax reform in the other ways we've been talking about it. that's maybe got to hold it at this point where we are. >> question? >>. >> there's a lot of the discussion recently, maybe six months ago in "the wall street journal" about a flax, tiered flat taxes and whether or not the deductibility of home mortgage loans would be included in that. i haven't heard of that which seemed to be much more politically feasible. i'm a television producer so that's something i think about. your comments on that? >> anybody have -- >> yeah, i mean, again, that's what the x tax is. the x tax is the forbes flat tax but it's a bit more progressive. one of the things, again, that when president bush put me in this uncomfortable position of being on the tax panel and having to say things that were definitely unpopular, one of the things we talked about was the

deductibility of mortgage interest. the other thing was the nontaxability of health care benefits that are provided by the employer. and in fact, we were able to cut rates at the margin even for the highest tax bracket but it was only by eliminating those deductions and that's how we paid for it. and that creates a firestorm. so again, he doesn't allow me to talk about politics so i won't. that's for others to do. but it certainly is not something that's easily accomplished. >> and that's why, again, you give people a choice. you have a simple flat tax pure. and then say if you want to stay with the old, you like to punish yourself, you have low self-esteem, you want to go through that, fip, go ahead. -- >> there's just one other thing to add in defense of the lindsay plan which is that most value added taxes tax new things but they don't tax old things. so you wouldn't tax a used car sale but you would the purchase

of a new automobile. this has an unusual and unappreciated effect on real estate markets which is that the value added tax would apply to the purchase of a new house but not to the purchase of an old house. so if you have an old house today, it's really good for you because suddenly have you you have a tax advantaged vehicle. so the prices of old houses can surprisingly respond to the introduction of 5i value added tax. >> homeowners will love that one. >> of isn't that part of 999? as i recall you? we've come to the end of our day of discussing growth and taxes. and i think it's -- it may be appropriate to end, in fact, with something that governor brownback said. now, actually twice. thax now is the timetom propose bold public solutions. i think we've heard a range of solutions, and a lot of the

decisions about which solution to choose has to do with how we gauge politics, but maybe this is the time in our history to propose and then ultimately enact bold public -- bold policy solutions. i want to thank president bush, first of all. there would be no bush institute without president bush and his participation today has just been stunning. and i really, really appreciate you being here, sir. and everyone just merely assumes that a kchbs like this runs just incredibly smoothly all by itself but it doesn't. and i wanted to thank andrea while and kristin king and all the people on our events team for making this work and thank stacy who makes the entire institute work. so thank you all.

and i should finally, this is sort of the part after the opera is over and the curtain comes down, somebody comes out with roses for the diva, and as we all know, the diva is amity schlaze. we have no roses, but we do thank am fi for everything she's done. and thank you all for being such a wonderful and tremendously engaged audience. one of the things that we do at the bush institute is we do this little survey, you know, after the conference is over because we're big on metrics and goals and that sort of thing. one of the things we've learned as we've done conferences before is that people really like the times when they can mingle with the other people who were at the conference. and so we have reserved plenty of time to do that at this conference. so there's a little reception outside sponsored by the u.s. chamber of commerce. so please have lots of fun, and thank you all for coming.

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programs at our websites. and you can join in the conversation on social media sites. chicago mayor rahm emanuel and commerce secretary john bryson called on congress to extend funding for the export/import bank. funding for the bank expires may 31st. mayor emanuel also talked about chicago's economic plans and export strategy. this is about 40 minutes. good morning. good morning. we need to get started. we've got a very full morning. i hope you had a good night

sleep because you know what politico called us? they called us a sleepy enclave. does this feel like a sleepy enclave? i don't think so. anyway, we had a terrific day yesterday. president clinton spoke, obviously. that was a spectacular speech yesterday and strong endorsement of xm bank. i was able to attend a number of the sessions on china. we had a spirited discussion on this economy, james fallow, ambassador huntsman. we had two very strong panels on nigeria, and i know we have a large delegation from nigeria here in terms of some of the opportunities here as well as what we look forward to see in vietnam and some of the other foreign delegations that were here. today we have an equally exciting morning. we will be -- shortly we will hear from secretary bryson and mayor emanuel. we have two plenary sessions designed really to look at how

the world has really changed in the last year, both economically from the -- and considering the arab spring and just some of the forces that we need to be thinking about as we try and look forward ahead to next year, two and three years both from a business point of view and kind of understanding the kind of global trends that are happening. we'll then also have a panel on global infrastructure, which is going to be one of the things that really is going to keep powering our global economy. you know, for many years, the united states and the world relied on the u.s. consumer. those days in terms of u.s. consumer pulling the global economy are largely behind us. we've been looking at an era of infrastructure that's really going to be powering the global economy and i believe our own economy. and speaking of which yesterday the commerce department released our export numbers. we exported $181 billion in federate alone. that was a new -- a great high.

and to put in perspective, a year ago it was $165 billion. so that's a very strong increase from just 12 months ago for the month of february. we are again exporting over $2.1 trillion at an annual rate right now, making very good progress on the national export initiative. two or three quick things i want to announce as well. one of the things we've done at xm bank, those of you who work at the bank, obviously you've been working hard on this and our customers most importantly, is is a greater customer focus. we announced yesterday, al is albright from this podium, global credit express, a new small-business lending product for loans up to half a million dollars. we have launched that, and we're looking -- when we see you next year that we will have rolled this out in a robust fashion. so i'm very excited by that. and importantly, just this week, we've been working for the last

year with secretary lahood and his colleagues at the maritime division at department of transportation and have come up with a new plan. this is really going to work mostly for many of our larger exporters where we will have greater transparency and more information on how u.s. exports that are shipped on american-flag carriers can be done more economically so we can also make sure we can meet our goals of doubling exports and creating more jobs here in the united states. all of this is really part of what we want to do as the title of our conference is giving our exporters and american workers a competitive edge. and as we called our conference last year, moving government at the speed of business. you're now going to hear from secretary bryson. i was pleased that within one week of the secretary being confirmed he and i sat down for lunch and began to map out how

we could work better together. and importantly, i thought for xm bank, it's rare to have a commerce secretary who's also a customer of the bank. and when john was in the private sector at edison, we financed a power project in indonesia. the good news is they paid back the loan, so we like that, and created a lot of jobs. so it was -- john is both a satisfied customer and we're is a satisfied banker with his company's performance in that regard. he recently led a trade mission to india. our director, larry walter, was part of that trade mission and saw a lot of infrastructure opportunities there. he is going to be introducing rahm emanuel, but rahm emanuel and i have been friends for at this point 19 years. we met when he was just married and before he and his wife had three spectacular children. and i will only say that, you know, in politics, it's often

important to have what's called as a rabbi. a rabbi is someone not just a spiritual leader but a rabbi who guides you through things, is able to sort of give you private -- and counsel and coaching so that -- and rahm was very help informal my very first appointment with president clinton at the small business administration. and i just felt fortunate not only to have a rabbi in rahm emanuel but to have a jewish rabbi, because i thought that lent it even greater credibility, the fact that he was my rabbi. he is going to be speaking to you this morning, and we are working closely with the city of chicago. we have an office there. and i want to call you rahm, not just mayor emanuel, but rahm is very much looking at chicago as a point of export and engaging in the rest of the world. you know, we see that in many port cities like new york. we see that in seattle. we see that in the port of houston. but he is really taking

exporting to a whole other level in chicago and we're very excited to be working with him on that. without further ado, let me bring up my good friend and colleague john bryson, secretary of commerce. >> well, thank you, fred. and it is a great, great pleasure to join in welcoming all of you to this second day of this critically important and also wonderful annual conference. i'm going to jump right in to what i do as the commerce secretary and tie it in to what we're most focused on here, and that is xm bank and the critical role it plays. it won't surprise you, i think, to know that a principal priority of mine is increasing u.s. exports. and we want to do absolutely everything we can to