and federal levels.

this regulatory burden of leverage more private capital, encourage the efficiency and insurance comprehensive housing finance. letters of endorsement one of

which is signed from both sides of the aisle the obama administration without objection so ordered. i asked unanimous 200 to the record bipartisan support letter bob told george. without objection. so ordered. congrats to both of you and thank you for your willingness to serve. >> a long resume with development programs and the

silent housing crisis as long as part of america's time citizens into the arts included manufacturing ohio communities and we have seen the administration threatened reform and take away health insurance from 23 million people and 11

million renters pay over half their income and rent. one thing) their lives and they effectively and their children how to vote a different school. 500,000 people are homeless and

eliminate funding for 250,000 next year and lead exposure 99% of the homes have led. tomorrow is one of five or six

who voted for legislation. his budget about the president promised across the country to revitalize inner cities. i hope we can strengthen our nation while providing good jobs in ohio. the budget will only add and i look forward to tackling the many challenges in this country selects are too many americans

think letting me do this is my friend who just spoke, it's a pleasure delighted to who is the chair? he had known each other for a long time. i respect him and he continued to serve as a policy the clinton administration try to reform the textbook and that's one of his

specialties and a lot of respect on both sides of the aisle excellent served as senior economist his economic advisor and five campaigns. an expert on reform and i think this will be incredibly important and have a textbook that gets rid of references with lower rates and what we need to get the economy moving.

wages are flat and reform the tax code something we can address. it's the right person at the right time and it will be much easier. i hope the committee will send him to the board. >> like to place the nominees under oath please rise. >> you swear or affirm the truth

of the whole truth and nothing but the truth? you may be seated. each of you may take a few moments. >> thank you so much. i am humbled and honored to be here before you today. i am grateful to have a chance to get to know many of you and i wish the people who worry about washington and witnessed the members of this committee and staff in the last few weeks and i like to begin to introduce my

college sweetheart my sons, john and james behind me. i'd like to acknowledge my father john could not be here today. i was raised by teachers. my mother was a kindergarten teacher and my father taught english in high school and still lives in the same house i was growing up in. plants closed and families moved

away is something policymakers can do for prosperity? workers can hi wages in the supply of and policy recommendations and there are many complications the data often surprises me. the observation led me to learn from the data. my early career was spent setting government policy.

sheds light on the circumstance like those my hometown who lost their jobs. i explore causes we see in america today. there's an interactive map dark color red in the council of economic advisors to provide objective economic advice and

they have done so admirably. in 2009, apples to the integrity and make it a center for unbiased analysis. let's eat to you that i will do the same is the ethically take the helm of this country. >> i would like you future within 60 seconds to discuss your priorities as confirmed you look my first priority would be to recruit a lot of economists

are not a lot of agencies they turns over a lot so that would be first order of business and 35 to ten and increase transparency of modeling and communication occurs on so i would like to ring that transparency in your opinion, is 3% growth reasonable target

please explain what policies would be to recycle. >> 3% growth is something americans used to be used to. for some time now but that seems to slow down now. and it has been disappointing growth the things that i've

researched this capital investment and get going then possible to get growth that would include. >> that is correct and i think it was high but there is a survey where congress in fact the economic growth was about 1% tax reform is one of the. >> a debate over the growth

rate. the rate 1.9% and 3% growth rate we experienced. many place more weight than the upside% growth rate over the next decade work is kevin hasek of 2006. >> for sure if we don't take. if they don't envision in a

bipartisan fashion proposed the% tax report zero private sector job growth. not just, can we get anywhere close to this? >> i think that is fair. >> a wonderful family my temperaturethe think tank

you've been a part of has played a role in power writing perfect things in a perfect world let me say this as my temperature cools

down. obviously you are qualified but can you talk with me about the world playing here? hopefully share a little understanding that we represent 320 million people here and there's something to consider in the world removing the country ahead. >> thank you for your time in office. the hallmark of my career as if ever been that person to that, you are a traitor people on all

sides and the role to provide objective advice we need expert analysis. >> that's actually not what people say. they are not staying in a perfect world, they are actually undermining legislative process. ...

as financial markets evolve it's important regulation of speed what i was asking was if you have one thing to keep an eye on or not to worry about right now what would it be? >> i think, i think that we've got a recovery that is very long in the tooth. recovery very often end of old age and something need to be attentive to and think the policies we can adopt that we

can extend recover. >> thank you, mr. chairman. >> thank you for your work at aei. i watch you from a distance and appreciate your commitment to our economy and the way you have said things, paint pictures like long tooth recovery, interesting. you have also said while certain areas of the country doing remarkably well, the recovery has profoundly been an even with large swaths of the country facing chronic rates of long-term unemployment and historically low levels of new investment. can you elaborate on the social and economic cost of this an even economic recovery? and also what can we do to bring more resources into distress community? >> thank you, senator. i think one of the things economists have learned really the last decade of research that really starting to be how extreme it was was there so many

people that if they lose her job and don't get a job back in a little while, then they start to despair and have personal problems and that often, they can happen, turn into a spiral that takes into a very bad place. we know there are pockets of our country where because the mill closed like in my hometown after a number of people that end up having substance abuse and so on. nobel prize-winning economist just wrote a moving piece on this. when i give economic talks of an country if you ask americans about this problem they recognize it. something i've noticed is everyone wants to do something about it. everybody does but they don't know what to do about it especially the really concentrated geographic inequality. what we need do is think of ways that only policies with individual by info we can help people make a difference. i know americans want to. >> there are two individuals have been working on this, myself and cory booker.

we have legislation called to investigate opportunity act which seeks to do for the capital gains tax up to seven years if folks are willing to reinvest those capital gains into distress committees using the new market tax credit designation, i'd like for you to look at the legislation come back with how we might have some success in impacting long-term poverty and unemployment in those distressed communities. >> thank you. if confirmed i would look forward to working with you on it. >> final question since have according to the folks who as question before, two minutes and 38 seconds left in this conversation, i thought that was funny. the question i have is on the notion of the workforce participation rate as you just described impact of long-term unemployment makes it difficult to return to the workforce center workforce participation rate has been declining for the last eight or nine years. i think about the economy to,,

gig economy or shared economy, technology economy. it seems like our focus on workforce investment is going to be a very important part of how to navigate the future challenges that will displace millions of workers in a way we have not seen in the past. how do you factor that into the goal we have growing our economy? >> it's an urgent call for us to address the problem that the share of our population is 27 out of 35 oecd countries come that we need help people get back to work. the sharing economy to be part of that but also presents a number of challenges. >> thank you, mr. chairman. >> thank you. senator cortez masto. >> thank you, mr. chairman, ranking member and thank you for the time he spent with me in my office talking about the issues that obviously are important to so many of us particularly in nevada as well.

it's nice to see her family here. welcome. appreciate your commitment to public service. dr. hussan let me start with you. we had this conversation me follow up. in 2013 you said in a written research peace quote, with lackluster gdp growth rate become our new normal, allowing more immigrants to enter for the sake of employment is one of the few policies that might restore our old normal. has he was doubled its immigration portal to bring in new workers picket at more than half a a percentage point hero expected gdp growth, unquote. despite the clear evidence indicating you are correct, here we are in 2017 with the administration pursuing precisely the opposite policies. the president's policy of mass deportation is sparking panic and fear many latino community is causing consumer spending to fall by double digits. this is threatening these

communities, confidence in economy just as a starting to restore after the financial crisis. by the way financial crisis that was hardest hit in nevada. the question is what you said in 2013 2013 still true about immigration and economic growth? >> thank you, senator. there are a lot of policy angles on immigration. one of them is the border security. i'm not a border security expert but economists are very good at inputs and outputs. if you have input of labor we will get more output.

>> so what you said still holds true? >> i don't know if i advocate specific number of exactly how much immigration should go up anything like that. that's not the role of -- but if there were more workers we would have more. >> i appreciate that. and the pass you characterize wall street reform as quote the worst piece of legislation i've seen in my entire life unquote. and that the law quote needs to be repealed as soon as possible. is it still your view that wall street reform should be repealed? >> i would have to look back at what i don't recall, i would have to look back what is talking about and get back to you on that. it would take more than come to review what wasalk about and why i i was so adamant abt it. i'm usually not so -- >> so let me just say this because, i just said came out of

the worst financial crisis would sense of the great depression and differ going to continue to make economic progress we can't eviscerate the rules were put in place after the collapse. i would hope you consider that and take that into consideration when you're looking at this. thank you. >> senator tillis. >> thank you, mr. chair. thank you both for being here and congratulations on your nominations. mr. hassett come also with you. would go back briefly to the discussion about immigration. the point of your report had to do with legal i would assume legal denigration, guest worker programs, they create an economic multiplier. some would even argue they create american jobs as a result of that reliable, predictable guest worker program that ebbs and flows in this country and is something we need to get sex. was that the essence of your analysis? >> yes, sir.

>> i am looking forward supporting your nomination but now with a little asterisk since i read your report on deflategate. i'm not a patriot samper ensure the folks in new england love you. no, i thought of remarkable. it's going to have to make a go and change my -- not going to use the hearing to drill into that. i do want to talk about a report, you are very well published in very impressive list of writings. what i want you to spend maybe a minute or two on is the spending taxes and certainty roadmap a 4% gdp. in your current role how would you cut through the noise we have right now and emphasize what we think we have to do to build the momentum to actually get to a sustainable 4% gdp growth? >> thank you, senator. it's essential if you were to move forward and make policy changes we need to get higher

growth, that we have to build consensus by having rigorous modeling that draws on empirical evidence and is -- >> but is the tax both, regulatory policy? what are the top point understand that do not have expertise? >> thank you for referencing the specific article that are number of challenges. look at the long run a budget balance and help remove uncertainty about what the future holds. because we haven't fully funded the promises we have made. if you look back at each of those the countries that have gotten their act together of those things have experienced surges in growth and there's every reason to expect that could be an opportunity for the united states. >> dr. hassett and i had the opportunity to collaborate together on workshare program. unimpressed this is not only

knowledge but his thoughtfulness and his analytical skills. we don't always agree but we do agree on workshare. in that vein, dr. hassett, i would hope in your new role you would continue to promote this as an option in every state. with your help we've expanded to about 19 or 20 state. could you comment on that as an appropriate way to deal with it? >> thank you, senator. i commend the senator force leadership on this issue. if there's now an empirical literature evaluating your efforts that says rhode island outperform a lot of other states because you not only help state change unemployment insurance to help serve workers better but make sure the people of rhode island knew they could take advantage of this federal program. i know now there's hard peer-reviewed evidence that our successful. absolutely if unemployment insurance reform were to be on

the agenda again the stop and large body of economic evidence in washington, d.c.

>> okay. i think it's not a three-time excitement to start. i'm on the film, washington bureau chief of the christian science monitor. our guest is kevin hassett, chairman of the white house council of economic advisers. this is his first appearance at a monitor breakfast so welcome, chairman. first a little bit of background. like yours truly he is a native of the great commonwealth of massachusetts dopey from more rural part, greenfield. >> and it didn't get to vote for either of my home state senators. >> that's terrible. he's a graduate of swarthmore college and earned his phd in economics from university of pennsylvania. before his senate confirmation last september to his current post chairman has it was a resident scholar at the american enterprise institute here in washington. he was professor c-span3

c-span3 house. now for the ground rules. we are on the record here so please no live blogging or tweeting. in short no filing of any kind on the breakfast is underway. there's no embargo in the session ends at 9:30 and we will e-mail pictures from this breakfast all the reporters here as soon as the session ends. as you know as many of you know some of your first-timers but as most of you know, if you'd like to ask a question please send me a signal and i will call on as many of you as time permits. chairman hassett if you like to make brief opening remarks for issue. >> thank you linda. what an honor it is to be your at this very well known breakfast. i'm not sure how long the breakfast has been a washington visitation but the christian

science monitor has been institution since i think 1908? >> very good. >> the thing that sticks out about love the christian science monitor compass companys first there is a prayer and often it's a nice way to start the money but also it's got an unusual level of stability just over the years i've noticed, imposed old-fashioned standards, the way we are to treat one another. i'm calling for stability today. you guys can be as aggressive as you like. >> i'm calling for stability. >> it makes it a special honor to be here. i have an additional ground rule, which i apologize about and it's actually something i should notice on the schedule but it's the law that the white house is not allowed to comment on today's data until 9:30. and so there are a couple of

releases that came out at 8:30 and i'm just not allowed to discuss them. so you might have noticed there been a few cases were some accidentally did that in the winter and got into a lot of trouble. if you specific questions about that, then see me afterwards. also had my chief of staff here for many of you know from her time at brookings. if you follow questions i'd be happy to talk to anyone on the phone after this morning and to arrange that can just reach out to tj who presumably has a lot of cards with her. without i will open up for questions. i think that would be way more opening. >> also start with a few softball questions and then moved to reporters around the room. if you do not ask a question please raise your hand. i've got a list going here.

first of all the congressional budget office is projecting next year deficit up almost $1 trillion. do you believe there any negative effects or are you okay that? >> i think the academic literature is clear that growth is impeded by higher deficits. these effects are nonlinear in the sense what's deficit to gdp ratio gets above around .9, then that leads to slower growth. i could add there's another result, government spending compared to gdp is a big negative for long-run growth as well. the intuition for that result, and in long-run growth comes from innovation and if you have 50% of the gdp devoted to

government and its 50% 50% p this pilot have a lot of reach. i've written in the past before started in the white house about how to think about the influence of spending and deficits growth and i think the literature is subtle. what it means so you can say it's a risk to the outlook for ads to the downside risk but it's also an opportunity because countries around the world that it had unsustainable trajectories like our own navigation fiscal consolidation which is a term of art have tended to see growth surge from that. with all of the growth progress we've made over the past year with deregulation and taxes, i think any medium-term called consolidation would be something that would get growth positive as well. >> okay.

i will throw in one more. if deficits continue to increase despite fast economic growth would you suggest revisiting the president pledged not to address major changes to mandatory spending programs? >> i think if we go outside of politics and look at economics, i disagree with the letter that was signed with some of my colleagues for chairman of the past like jason furman. i think most of the deficit problems in the long run i don't. in a paper that jensen and i wrote maybe have half a dozen years ago, when looked at the fiscal consolidation attempts in world history and we look at him so fiscal consolidation as congestive deficit situation out of control and the kind do something about it.

countries generally adopted two approaches. one is they divided the pain 50-50 with a with a 50% tax tax increases and 50% spending cuts. there was another bunch of countries that tended to be mostly spending cuts. what matt and i found was the countries that accomplish the fiscal consolidation with spending cuts achieve their own objectives. they would have an objective of reducing the deficit and the people or the countries that use the 50-50 approach did not achieve their objectives. my speculation at the time was that when you increase tax revenues that it basically gives release to fiscal discipline in the future and the politicians tended to spend the money that they had but if you make difficult choices to spending giving a consolidation that works.

alberto at harvard university has done some work to estimate growth. my job as a -- to give anyone political device, but to be a conduit, literature to people at the white house, and so of course that kind of an atlas will be something we could talk about. >> how often do you talk to the president? >> i'm not supposed to talk about that. i've spoken with in many, many times at a much enjoy doing so. he really likes to be in the meetings where there are a lot of different viewpoints and very often in a setting like that is serving as a referee. our job is to provide objective analysis to talk about the data and so very often that's the role i will have. not always but there've even been one occasion with was a meeting going on and they called

me over, and the president told everybody in the room to shut up and don't talk to kevin for he asked the question because clearly there was some dispute going on and are hoping that the cpa gaza's come over and tell them what the facts are. that's the primary role is to give vision of the 1946 employment act. there was a staff of around 50 if you can't interns, 50 people with academic backgrounds, many of them i would say probably three-quarters of them, i don't know their political parties, they are professors on leave from around the country and with people want to know what happens if we do this for what happens if we do that, then we give them an estimate of economic literature. >> all right. jonathan from -- remind me who

you are with. the new jersey star ledger. i think you might get a new jersey question. [inaudible] >> taxation report last week that come in and talks about most middle-class households will not be able to claim the state and local tax deduction anymore because of the high standard deduction. some states including new jersey, new york are trying to find ways around by setting a charitable funds. with will the trump administn oppose those efforts? >> thanks. the state and local deduction, the idea, the economics of the idea is that by allowing it, the federal, puts its finger on the scale in favor of high tax states. one of the first laws is the

county should try to avoid favoring one thing or another. when i taught it in public finance class at columbia that i would always get example, so supposed to raise some money that will protect ourselves and were going to do with a tax, should we tax only apples or apples and oranges at the same rate? everybody says let's tax in both. we tax only apples then there will be green houses in oranges. i think the basic principle if you're trying to raise a given amount of money which is a way we find a problem for southcom given amount of revenue with a tax is to not do it in a way that favors one thing over another. previously did was because state or local deduction was much more valuable for people from some states and from others, in some sense the federal government was

taking money from a resident in mississippi and giving it to resident of say connecticut to compensate the connecticut person for the fact they had potentially luxurious or inefficient government. and so i think the theory is getting out of the way is pretty sound and i know that it's putting pressure on states that in the past have been pretty inefficient and have high taxes but not always in efficiency. if your state with high income, think about the counter if you're in town with a really high income and the people of lots of leisure time and so they want to invest a really expensive parks, right? that's not in efficiency. it's just a choice that they make. they could be a poor town that didn't have the money for fancy jungle gyms and stuff like that. we'll think we should take money from the poor town and give it to the fancy village and so support that part of the code. i have seen some legal attempts

to relabel things and everybody believes in the economics of the analysis i just gave on her team, at least. [inaudible question] >> i think i give a talk at the new york fed which we would be happy to e-mail to anyone, but we just went over everything that's been happening with the forecast from nonpartisan

international agencies of the outlook for the u.s. it's 30 stunning how i think the average output now counting the imf and the oecd and we also have wall street firms, that those average forecast have all got up around 3% which the cea was saying during the tax debate we passed the tax bill should probably get about 3%, then was ridiculed by partisans opposed to the bill. if you look most everybody looking at it is a you would get growth like that. we think it's not just serendipitous but it's completely sensible that growth would go up about that much because of the tax bill and they can without referencing today's durable goods release which is the key capital spending source of capital spending data, if you look at 24, the fourth quarter

that capital spending advanced 11%. so building an enormous spike in capital spending. our models predicted a spike about that scale because the technical term, dependent which type of u-uppercase-letter looking at we were expecting ten to 50% of expected level of debt would rise about one for one. i think we would guess there's a ten or we expected that will continue into this year. therefore, if it does, in september and the growth has come in at what we said, if people think back to the fact when the president took office the storyline was we were stuck in 1% growth land forever.

relatively quickly with a few changes in policy focus we were able to move people to a better place and a better place with a pattern that is consistent with our models of saying how so that happen. all of a sudden mena from heaven came down at 3%. it is the things we said were going up were going up. with that kind of evidence i would hope that people on a bipartisan basis would say how can we move to make our country better off and there would be a second bite of the apple on taxes. i know the president is serious about that. the first target would be to make -- reporter: last week, the imf meetings, christine the guard cited record high public debt is one of her biggest concerns. did that cause you to rethin any elementsk -- re-think any elements of the tax plan?

mr. hassett: the public debt being high is something economist agree -- economists agree is a downside risk for growth and that is an upside opportunity because if you have a smart fiscal consolidation you can get ahead of the curve on that. and increase growth significantly. some places in literature suggest you can have as much as a percent to expected growth in the medium-term through fiscal consolidation. the politics of how that might work, that's outside of my lane. with how the models work and what they say, what i said before and what i said are the best characterization. >> jerry from the buffalo news. reporter: another question about tax deduction. governor cuomo has said for months now curtailing the

deduction will absolutely devastate the state's economy. high income people could flee the state. it is a blow to new york's economy. is the governor exaggerating? why or why not? mr. hassett: the question is, does the state and local destroy the new york economy? it is empirically relevant that the governor is unable to make policy changes that seamen formed -- seem informed. if we had a policy change in response, you can imagine cutting government spending and cutting taxes and making government more efficient, whatever impact the models would spit out on the state and local deduction would not be there. i think economics, if we impose

a tax on something, if the thing that is going to change a lot because of the tax, you can expect the tax to cause a lot of harm or deadweight loss or distortion. if you are taxing something that is not really elastic, you don't cause much harm. if you think of the state and local problem that we have people -- i know what property taxes look like in upstate new york. it is very high tax. if you have people in those places, then the question is what are they going to change? for moderate and low income people, it won't affect them. everyone will take the standard deduction. for higher income people may be some will move. right now mobility in the u.s.

is about the lowest it has been in modern times. seeing a big spike in people moving out of the state is something inconsistent with the latest data. the most likely outcome is that high income people are the ones affected by this and will have a bigger tax break. their state has chosen to give it to them. the question is, if that happens, what happens to the economy? if it affected moderate income people, we would be concerned that would reduce consumption and cause local economic problems. for high income people, consumption does not respond much the changes of this scale. my guess it is not going to tell cause a calamity. >> bloomberg. reporter: i would like to ask about the bond market. we are having to issue a lot more debt. treasury has seen issuing $1 trillion this year depending on

how you slice the pie. there are questions about the global central banks raining an extra neary monetary policy -- reigning in monetary policies. the u.s. has a top-notch rating. is there any concern you have for oversupply in the market and the underlying reason for that oversupply? mr. hassett: my job as chairman is to respect the independence of the federal reserve. i look at forward guidance and my job is not to look at forward guidance and give advice. as far as the ch, the fed is independent and we have great faith in them, especially now that there is appointees there and more to be confirmed. an anecdote.

the level of collegiality amongst ch'ers is very high. it's a difficult job. you can call somebody up. i won't say which one but i asked a former ch'er. jim i have been you that with the story. i was at an event and someone asked about the full employment. hey. you are saying rick will have lots of growth this year -- we will have lots of growth this year. i talked about i wonder about the models, how useful they are. then speculated maybe it was lower than you think. i think there was a bloomberg news story. someone wrote a story about white house attacks the fed. i was not attacking the fed. they have their views about nehru.

my former friend told me one of the things you are not allowed to talk about because you have to respect the independence of the fed. if my question is not spot on what the economist think about the bond market, i apologize but that is my role. >> the los angeles times. reporter: we will get the gdp number for the first quarter. all the estimates are it will be significantly lower than what we have in the fourth quarter. how can that be with the stimulus of the tax cuts? what does that bode for the rest of the year? mr. hassett: i look forward to seeing the number, the standard error is pretty high. the mean revision is pretty darn high. it's important not to overreact to the first one.

the final what could be a percent different. -- final one could be a percent different. there are special factors. looking to see how the end up affecting the bottom line number. one is that because of the tax bill being retroactive to september, and it was retroactive to september effectively in the house bill that passed at the beginning of the quarter. there was this period within an usually strong tax incentive to locate capital spending in the fourth quarter. i talked about the capital spending jumping a lot in the fourth quarter. you got to expense but expensed at a higher tax rate. if you take a deduction at 39% instead of 21%, that is attractive. there was a lot of moving stuff for the first quarter to the fourth quarter and things like that that could put downward

pressure on q1. the other thing we looked at and probably the agency i respect the most until someone could give me a counterexample is the bureau of economic analysis. they are politically unbiased. they are career professionals. they know the data better than anyone. if you have a question, they always take your call and explain why it is like this are that one thing i have seen in the gdp data lately, which you can make a chart yourself of, is that there appears to be some residual seasonality in the first quarter. if you look at first quarter gdp for a number of years it has tended to be the lowest quarter of the year. exactly what that residual seasonality is, the cause of academic debate. one simple back of the envelope method i use to think about it

suggested it might be as high as 20%. -- .8%. i will pick a number outside the range complete lease it's not forecasting. if you saw a five, it is really 5.8. if you believe in the residual seasonality story. when we get the details that we think we understand where the seasonality comes from, we will see of those are the parts that have the pattern consistent with this view. it could be the number -- there is a wide range of down casting models now. my favorite is the atlanta fed gdp now. it is two-ish. they might have changed in response to today's data. imagine that is the number. it could be the way we think about what that does for our outlook for the year. it's about nothing, because of

seasonality. reporter: in terms of 3% growth, you said close to 3% growth. the part the president said was 3% or over. the forecast for this year, the fed and imf are for less than 3% and going down afterwards. how do you account for that? why do you think the tax bill will get us over 3% when in the first year it is not going to get us to 3%? mr. hassett: we will see what happens this year. we think we will get to the 3% this year. the average for the cbo -- if i state a number and you want to write it, double check. i'm averaging numbers in my head . the average cbo for this year and next is 3.1%. i look at the 10 years thing. in my new york fed lecture i

went to the forecast revisions for folks all around the world. there are lots of people that moved up around 3%. i think that given we were in a world where we were thinking we would be stuck in the ones, that is quite an impressive movement. if it ended up being a 2.9% year, a 10th office 3%, -- off of 3%, that would be a good year. >> paul on the washington examiner. reporter: two unrelated questions. you have worked with so many politicians, how is trump different being a businessman? how does he approach your information differently than they would? what is the chance for dow 36,000 under trump. mr. hassett: president trump -- each person you work with has their own style and so on.

for the most part president trump's style is similar to that of romney's and a little bit of mccain and terms of the way he runs the meetings. even just going back to teaching governance in graduate school , you have a lot of decisions to make it a high-frequency. you have to accumulate -- recruit experts who will not be lying to you. construct a process that you can figure stuff out and make decisions that it -- in a timely fashion. each person has their own style for that a little bit. president trump is really good at that. i have seen long meetings move towards positive outcomes in front of him in a way that is similar to the kind of thing that would happen with mitt romney.

he disagrees with that guy and knows those two guys disagree and asks them to disagree with each other in front of him. the basic problem he is solving is solving assemblies of the problem presidential candidates have to solve -- is the same as the problems presidential candidates have to solve. it matters to the future of our country with the decision is. it is a high-stakes process where you have together experts and decide what to do. do you have a second? i think that the equity premium now is about 3%. if you look at -- you should expect a real return going forward of whatever your favorite gas for the real 10-year buying yield is at 3%. that is what that model is. use the equity premium to think about with the return on equities is. as numbers get larger, it takes

smaller percentage changes to get the bigger numbers. sure. >> i will throw in in here. talking about people disagreeing with each other. earlier this month, you told the wall street journal robert lighthizer has everyone stressed , meaning everyone at the white house regardless of their views on trade. given your views on trade versus the president's, explain what that means. how does that work in the white house with a president with such strong views on trade and his trade advisor and having economic advisors, chief economist larry kudlow on the other side of that question? mr. hassett: i don't know that we are all on the other side of the question. i don't mean to be disrespectful. as an example, the 301 action on china is based in part on work

the cea did estimating the cost to the u.s. economy and intellectual property theft from china. i think that -- i have said in previous events if china will be the largest economy in earth, they need to start to act like it. they need to respecting such intellectual property rules and not require people to joint venture if they will operate in the country and transfer their technology to the chinese. the cost of those actions to our companies is north of $100 billion a year by some estimates. the idea that everything everybody in the trade space wants to do is hated by a subset of the team is not accurate. we have other things we debate. in the end, i think that the president's agenda, the trade agenda, which is described to the president, it's interesting

that chapter has not been attacked by economists left and right. the objective of the president is a worthy one, which is that we need to move towards a world where trade barriers around the world come down. not just for us but for trading partners. if you look at the asymmetry of the global structure, they are notable. at times disturbing. i have a speculation. speculation is always dangerous. my chief of staff gives me a nasty look. don't do that. i have a speculation we are in the process that president trump is beginning the process of moving us to a 21st century trading structure. what happened in the 20th century was a conflict between the soviet union and the united states. we were each recruiting countries to be under our umbrellas. one thing we did was set up the global trading system where we unilaterally disarmed, set

tariffs out almost nothing. tara various practically don't exist. -- tariff barriers practically don't exist. countries joined our system and cap their tariffs up and their barriers up and it was a deal to get them to embrace capitalism. become a liberal democracy at the end. i think now that the world is more mature, we have trading partners per capita incomes north of ours. the idea that we should tolerate that kind of asymmetry which disadvantages blue-collar workers in the u.s. is one that i think we should all revisit. i know that the purpose of all of the trade policy instituted towards a more reciprocal move to a more reciprocal world where the asymmetry that exists in the data is carefully and extensively documented.

the report to the president is fixed more towards low tariff, low nontariff barrier free trade around the world kind of model. if you were to take the imf's models where the estimate the impact on the u.s. global gdp of such a policy, it is quite an opportunity for improving welfare around the world. it would reduce their trade barriers and make the economy more efficient. linda: mark trumbull from christian science monitor. reporter: in the economic report there is quite a bit about labor participation. how to improve it. the need to improve it. now we have senator sanders and others on the left saying let's get a job for everyone. maybe a government provided job. the economic report talks about

work requirements. those are two different approaches to the problem. i wonder if you could comment on is there some common ground? do both sides see a big need? some solutions are on job-training or the opioid crisis. is there an opportunity? how much could you maybe bend the curve of declining labor participation? mr. hassett: i think the curve you are referencing, virtually everyone here with a slightly different angle could write an interesting piece on what is happening to labor force participation now. if you look at the chart, it was basically headed straight down. if i look at the outlook in previous economic reports to the president, it was inspected to continue. one reason we were in the new

normal is we did not have the workers. labor force for to sufficient was continuing in a downward trend. i think i'm remembering that right. the obama administration's estimate at the end was that we would be dropping .4% a year. i apologize if i got that wrong. now it is maybe even heading up. the charge is quite striking. i think that is because the stronger economy, the tight labor market and the increasing wage growth is attracting people back into the labor force. the news is spreading. we are on a couple of tv shows now. i'm sure people got discouraged applying for jobs because they kept applying for jobs. you can decide i will stop doing

that because it's an emotional strain on me to apply and not get a job. you should try again right now. labor markets are tight. there has been an enormous cement of successor people attached to the labor force -- i know miss amount of success for people attached to the labor force. they were policies that separated people in a way that did not make much sense. the unappointed insurance extension may people long-term unemployed people that are hard to reattach. the affordable care act raised the margin. they did a lot of stuff to drive it down. we are reversing it now and that will continue. i'm quite hopeful. i am hopeful by the time we write the economic report to the president and release it next february we will have a significantly more optimistic forecast for participation then we had in this economic report. whatever you are suggesting that something will break off a

trend, that is a risky forecast. it seems like that is the deal right now. one last thing about that. the increase in labor force with dissipation makes digesting the wage data a little challenging for economists. when people join the workforce after being out for a while, they tend to be low wage people. they have to reskill. when you look at wage measures, you are averaging over a different sample. it includes more low-wage people. as we think about the wage effects of the tax bill, we are watching closely. keeping track of what is happening to the median person as opposed to the average. linda: we have 20 minutes ago. i think i have eight or nine people. mr. hassett: i will try to answer quicker. linda: the tenement in the glasses. i'm sorry i don't know your name.

>> simon from the financial times. i want to ask about capital gains and the prospect for indexing to inflation. there's been speculation about the revival of larry kudlow and the nec. how big a priority should this be, if at all? is something that can be executed via regulatory action? mr. hassett: i have seen speculation about that but i have not participated in discussions on that matter. i'm not informed on that matter. if there is something cooking or not cooking, i can't say. there are a lot of things going on and a dual writing thing is something that i'm not informed. reporter: your views on capital gains tax? mr. hassett: as a public finance economist indexing capital gains for inflation is a where the idea. it is probably not nearly the

big deal now that it was back when inflation was at a big number. if tax is supposed to be on real income, you should index capital against her inflation. -- for inflation. it is not a common around the world to do so. if someone told me the u.s. decided to figure out a way to do that, i would not see that as a negative. linda: inside u.s. trade. reporter: thank you, sir. i want to ask about trade. there's a lot of concern about the country's trade policy on capitol hill and the business community. the downstream effect is the steel and aluminum tariffs and potential retaliation from china and other countries that has gone into effect and the uncertainty with renegotiation of nafta. some groups said this could undo some of the benefits of the tax

reform, the growth we talked about. does the cea share that assessment? the trade actions could undermine the growth effects? mr. hassett: there are a lot of negotiations and discussion underway. it was not until i joined government that someone explained to me the discussions of negotiations are different -- an this coul -- discussions and negotiations are different. i cannot comment on those. it is underappreciated that the global effects of barriers around the world coming down to the u.s. level would be really quite positive. if you are only thinking about the worst thing that can happen, you are not accurately balancing the risks. reporter: the president talked about adding back into tpp. most recently. do you think the u.s. should get back into tpp? mr. hassett: that is a question

for ambassador lighthizer. as a global issue outside that question, i was on a panel along time ago. i was a mccain advisor. we were talking about trade. austin, as he often does, said something really brilliant about the role of the economists in the tray debate. -- trade debate. it would be one sentence. it would say free-trade. the trade deals are thousands and thousands of lines written by lawyers. when we as economist talk about trade, we can talk about what trade looks like in our model. that can be interesting for academic purposes. when you think about what we should do with this, the deal has thousands of pages. he was then being humble about his ability to discuss the question was on nafta.

maybe it was something else. when you ask about a trade deal there are 70 things going on in trade deals. things that we have agreed to that make no sense. negotiators are competent. lighthizer is really good at this. really mindful of economics. i talked with him all the time. what he thinks about the economic impact on this are that. i know he can deliver what the president has promised which is better trade deals. mr. hassett: -- linda: george from national journal. reporter: you asked about phase two of tax cuts. you talked about the wisdom, the second bite at the apple. i don't think you answered the question about the timetable. along those lines is or any sense of urgency about getting that done while republicans still control the house? mr. hassett: i am not mark

short. i only have a little more than he does. mark -- that is out of my lane to discuss the timetables. i think that a second bite could make sense and make things permanent. removing uncertainty could make sense. when it happens, i'm not sure. one of mark's top priorities, something i encourage you to think about and write about is we have these nominees whose confirmations are being held up. it is unacceptable to those of us that are working in government that often but we went to have a topic to address there are these appointees that have not been confirmed and have been in the process for more than a year, some of them. as we look forward to the legislative calendar we are extending hopeful the senate

will confirm people. we have about 180 that any other previous administration would have been confirmed by now. reporter: [indiscernible] mr. hassett: i am not the person who sets the schedule. i know the president thinks it is a good idea and was celebrated happening. whether that can be done given the limited number of days available to the senate is something you should ask mitch mcconnell. linda: jeff mason from reuters. reporter: good to see you. follow-up on georgia's question about infrastructure. is that something you are advising the president and team to push this year? what kind of an economic impact with and have? secondly, on the trade issue, have you put together numbers or advised the president or anyone else at the white house about the economic impact of a trade

war if some of these issues are not resolved with regard to tariffs? mr. hassett: for infrastructure, we have a chapter on if a structure in the economic report to the president. i think it is a lot of interesting food for thought, like the idea of if everybody -- if everybody is driving around electric car, how was the gas tax is paying to fix the bubbles? the upper structure team that is on leave at cea, including the economist paul worthington, did a fantastic job going to the president's infrastructure policy and how it relates to economic growth. would you get a tenth or two out of infrastructure. smart infrastructure spending. the president's approach is a

sound one. i know that legislation -- one big bill is something that everybody hopes for and it might still happen. our infrastructure plans are so detailed and nuanced that i think one could expect infrastructure components every time it is possible until the big bill comes, because that is so much work to do in the space that is important to the president. one of the biggest opticals we think to the attraction of iva capital into the info structure space -- private capital into the infrastructure space. you can do a project and it can take a decade. i have not found out which one it is but i have been a meeting for people say there is one project awaiting approval that was submitted in the 1930's. we have to find that project.

there are things we can do by managing government better to get the permit delays down and get projects a concierge nation of the -- to make sure the other agencies are cooperating. we meet -- we need to make decisions in a timely fashion. if we can get that down to two years, the capital would come and and be a forcible. i think everybody agrees infrastructure in the u.s. needs a lot of work. it is not up to international standards and it's causing serious economic harm because of congestion. it is something we need to focus on. if we don't get a big bill, we will put part of the planet every bill we can. we should watch for that because i think it will happen. linda: second question? mr. hassett: the trade work. reporter: the trade were

implications economically. mr. hassett: the trade team is in active negotiations and active discussions. they are doing that because they are hopeful they can reach agreements that are good for our trading partners and ourselves. i think that is the intent, to move the world towards that better place i described. reporter: have you put together forecasts for the scenario in which that does not happen? mr. hassett: my work product advises the president and has two different classifications. one is the things we make public and the other are things we provide to the executive as an internal document. internal documents are privileged and i'm not allowed to discuss them. white house counsel has coached

us on things we can talk about and when we can't. it is not a public document. i'm not allowed to answer. linda: did you have your hand up? reporter: are you concerned about the impact of the trade war on long-term economic growth? could we sustain a 3% economic growth with a real trade war with china? are those two things compatible? mr. hassett: i think trade is an upside opportunity. china specifically has 25% tariffs on cars sold their. they require people locating in china to get access to their markets, a joint venture with chinese companies and that slows the activity between our countries in a way that is bad for the global economy. the objectives are sometimes

lost as people think about the worst i can possibly happen. the objectives are were the ones. there are negotiations going on now that i don't participate in and i cannot comment on. everyone is hopeful it will reach a positive outcome. reporter: have you made projections about the impact if the u.s. were to pull out of nafta? what a renegotiated nafta -- the impact it might have? mr. hassett: that's another one of those questions. linda: are you harriet? harriet tori from the wall street journal. reporter: i wanted to ask a question about the american consumer and tax reform. this year was the first time people saw more money coming into their bank accounts. consumer spending has been rather weak. mr. hassett: in the first quarter. reporter: i wanted to ask about that and any concerns about whether tax reform is giving people impetus to spend?

you mentioned possesses earlier. hey quick follow-up question as well. -- a quick follow-up question. you wondered about neru models. can you go into details? mr. hassett: that is the think i'm not supposed to talk about according to my friend out of respect -- they have a specific estimate and i respect that. let me start with the consumer and then we will come back to the second triad that for you. -- try at that for you. consumer spending in the first quarter, after a blowout fourth-quarter, is a positive for gdp. we will find out tomorrow how positive. if you look at the retail sales data, the retail control, it suggests it has gone down a little bit from the fourth quarter. that is one reason why the olanta fed's gp now is

suggesting lower than what we can expect. -- atlanta fed's gdp now. it will be healthy and that will be consistent with the other data we have seen. we expect incomes will rise sharply this year which is a part of consumer spending. is the policy on the first quarter related to the tax cuts in any way? i think that probably the driving force since there was some much consumption in the second half of last year people were looking at their savings account and rebalancing. don't forget that withholding was only changed in february. the wage effects, the bonuses -- 5.5 million people got bonuses and presumably they will spend

those in the coming months. consumers would start to see it in march. we were having this old-timers versus youngsters discussion at the cea. i can remember when i got my first job in first check. i was scrutinizing every line. why did they take this much social security? now everybody gets direct deposit. they are not necessarily scrutinizing their checks right away. it could be the eyeball demonstration effect of withholding changes has changed over time. people are not necessarily checking their direct deposits to see how it changed. there is some speculation the extra money, which is definitely there, will take longer for people to turn to consumption. i would expect march-april we would see those effects on consumption. reporter: since you can't talk about neru, your points about

labor force participation. one interesting fact is that the u.s. is the only western big economy where labor -- female labor force participation has been a decline for the past 20 years. what do you think is going on there? mr. hassett: i would have to get back to you on that. he would really just be speculation. -- it would really just be speculation. we have domestic economists who know every thing about that. they would be happy to set up a call to go through what we know about it. i can speculation output it would not be as good. linda: the gentleman to your right. brian bennett. reporter: thanks a lot for doing this. my question was about fiscal consolidation. you looked at the record and saw a preference for spending cuts and tax increases. my question is looking forward,

whether spending cuts that are better than others? is there a way to tackle these large projected deficits without touching entitlements? can you talk to that menu of options? mr. hassett: again, i'm referencing my paper before i joined the white house. not speaking to white house policy. in the u.s., the problem -- probably outside the next 10 years and past that that the problem is one that looks like an entitlement-driven problem. the high debt is also an issue. if interest rates were to go back to normal, that contributes as well. hi think that getting ahead of the curve on that would require basically getting ahead of the curve on all types of spending. if you did not make progress on

entitlements you would not be able to solve the problem. reporter: in the 10-year timeframe, can you make a dent on non-entitlement spending? mr. hassett: as an economist, if we accept the fact the long-run thing would be entitlement-based, then the important thing is that you give people to the extent you change them lots and lots of time. think back to the greenspan commission on social security, a very successful reform on social security. they did not change much for 20 years. they gave people 20 years notice that they would increase the retirement age. the reason you do that is that you are a pretty young fellow. if we were going to do anything that affected your thinking about retirement, we should give you plenty of time to adjust your saving patterns so you still have the healthly retirement you deserve. as an economist from that literature it is clear.

alan our back and bill gail had a piece on the long-run budget deficit. it is clear that moving earlier is better than moving later. it does not mean you affect current retirees. it is like giving people a chance to plan to minimize the impact from reforms you might make. linda: you have survived your our. -- hour. thank you for coming and i hope you will join us again. mr. hassett: thank you. >> more from the c-span archives now of kevin hassett, the president-elect's take to chair the national economic council. in 2019 he joined the national review institute's idea summit in washington, d.c. to discuss the first trump administration's economic policies. >> ladies and gentlemen, please

welcome chairman kevin has that -- hassett and ranesh puru. [applause] >> brooke is so inspirational. listening to her reminded me of that speech john belushi gave an "animal house." i was ready to charge out here. >> good morning. a good week of speech. kevin is a longtime friend of the nash review. if anyone is an old friend from too many meanings, i have noticed her contributions have fallen off lately. we should work on that. the cea is described as an in-house think tank for the white house. kevin: that is right. i was humbled by it.

i went to swarthmore college and i was very liberal. i came from massachusetts and my college roommate subscribed to that review. there was no intervention -- internet or nothing. if your roommate had a magazine, you read it. it fundamentally changed my life. fast forward a decade and rich lowry called me up and said buckley has this view that the review should start with this cool start. he never -- cool chart. he never did it because he could not find anyone that did cool chart. he thought there was a chance i could make a cool chart and could i write the first piece he had. i was so humbled the thought i might be able to do it. i did it for about 20 years. we shared that spot, me and jonah. ramesh: i am so glad your remake did not subscribe to the nation. [laughter] history could be very different.

chair hassett: my roommate became a white house press corps member. we keep that secret. ramesh: i will not ask you for stock tips, at least not in public. what is your assessment of where we are with this economy? chair hassett: i think when people, historians look back at 2016, then they will see they were two candidates out there that had a message for basically blue-collar america. there was one message that was basically, sure, you lost your job. your factories closed. sure, there is a lot of despair in your town and folks are getting addicted to opioids and that kind of stuff. that is just the new normal. that is what you can expect. it is not our policies. president obama's policies were

awesome and had nothing to do with this. it is like this exogenous thing that affects the whole world. then there was this other candidate that said, hey, if we change policy there is hope. let's work on this together. i know he said a lot of other things, that candidate. that message of hope which, you know, he delivered on in the sense that president trump went and office. he stayed focus on the policies that would revive those places. if you look at the data, there is something going on here that everybody thought was impossible. we can go through the manufacturing jobs, down a couple of hundred in the previous eight years. up about 500 now. blue-collar wages growing the fastest we have seen in 20 years. my favorite fact is that the bottom 10% of the wage distribution -- the people that

are lowest skill and most respond to favorable views in the manufacturing sector -- movies in the manufacturing sector. the bottom 10%, their wages last year group six percentage points. 6.5 percentage points. there is no decile that grew faster than the bottom 10%. when i think about where we are as an economy, there's an enormous amount of momentum from the incoming growth. just like historically, it is the kind of big satellite view historical perspective the national review is always focused on, going back to the beginning with a discussion of socialism and capitalism. it is a big story of the last two years. the story they will write for 50 years is that president trump offered hope to people that were told to be hopeless and he delivered. the momentum from that is still

carrying forward. ramesh: how much does the tax cut have to do with economics? if you read the critics, it was basically a transfer from the treasury to reach people and large corporate -- rich people and large corporations. i take it that is not your view. chair hassett: it is the case that people use the word science denial a lot. if there is anyone out there that is willing to go to the blackboard or sit in a seminar room and try to make the case that the tax cuts have had no positive effect on the economy, i'm happy to face-off with them in front of whatever audience they are willing to face off in front of. there is this massive literature reviewed in a long and boring lecture in economic association meetings in january that shows tax cuts designed the way ours were designed should increase gdp growth by about a percent.

at the beginning of the year our forecast art with a baseline forecast of about 2%. then we got to 3.1% for 2018 based on massive peer-reviewed literature that showed with careful mathematical modeling of the tax cuts they showed we would get a 3.1% in 2018 if the tax cuts were passed. the advanced gdp release had 2018 at 3.1%. the number we got this week revised data 3%. i am off but -- down to 3%. i am off i attempt. that is not a statistically significant error. sure, maybe the tax cuts will affect gdp. gdp is 3% but the effect of the model tells you the effect is that this thing will go up by this much. that will qualify that much --

will go up by that much. capital spending should go up by 9%. capital spending went up 9%. the model ashley got the economy right. it is not because the cea is brilliant. economics has become a science. there is all this work that allowed us to model the tax cuts. it gets the backdrop of what would be going on the economists would be celebrating this victory of their science. instead it seems like, at least in the media, a lot of discussion is people in science denial trying to come up with an illiterate discussion and statements that are inconsistent with modern literature about how the tax cuts failed. my favorite one of those is they conflate the fact that we had all this money offshore that was stuck offshore. people brought it home. there's maybe four chilean dollars when the tax cuts were passed of money u.s. firms had earned offshore and avoiding u.s. taxes.

there's this one time shift of all this money offshore back here people using for dividends and purchases. then there is the permanent shift of the cost of capital is lower and we are getting this investment. it is not a serious argument. ramesh: the sugar high argument. chair hassett: there is gnosis thing is a sugar high. you will not get high. ramesh: you sound like you are speaking from experience with chair hassett: i googled it -- experience. chair hassett: i googled it. you spend all your money on twinkies and your money is gone and you are fat. you are pretty upset about it and sorry you did that. that is what a sugar high is. people said the tax cuts would have no effect on the economy. when we passed the tax cuts, now

we have a booming economy and it's a sugar high. it is not. what happens is, we build factories. it is not like we bought twinkies. we bought machines and buildings and put people to work. now this factories are turning on. they are producing output. it is not a sugar high. it is exercise and vitamins and so on. the sugar high argument is hysterical. there is a one-to-one mapping of the sugar high argument to people he said the tax cuts would have no effect. you can go back and look. probably worth a ramesh article. ramesh: what are the threats to the economy? chair hassett: one serious that we are following closely now which is that it -- a big chunk of europe is very close to being in recession.

parts of southern europe have financial situations that are sketchy. that kind of thing at times can spin out of control. we are watching it closely. we think things are contained but europe is very close to recession. china, per session -- they have grown faster than we have in 20 years but their growth is disappointing. that's an immediate risk. the biggest risk is that if you were building a factory right now, you are not just thinking about the next year. you were building a factory for the next 20 years or 10 years. we have seen a massive response if you go back to the election, positive response to this idea that the war on business is over. we will start deregulating. we will be an attractive tax climate and so on. all of a sudden factory started to go up again. if people think those policies are going to be reversed and

reversed soon, they should stop investing now. if in two years there will be a 70% marginal tax rate on everything there are deftly people advocating policies like that. maybe you should put your plans on hold right now if you are a forward-looking rational firm. the challenge going forward is basically respond to these proposals that are getting further and further to the left. give a positive vision to the future so the inspected value of u.s. policy is still a promising thing. what is the risk? the market wakes up tomorrow and decides is a 50% chance somebody who is going to nationalize american histories -- i don't see anyone who proposed that except for health care -- someone who will nationalize industries, ban fossil fuels, ban the airplane, ban the cow,

stop having children so we can get no labor force. imagine all of a sudden the market thought that is what america is going to be. it could impact the economy this year because people would be pessimistic about the future. ramesh: the cea has done work on socialism, which we thought a couple of years ago was may be obsolete topic. it seems to have come roaring back. that was somewhat controversial that the cea got involved in the discussion. what do you make of the apparent loss of faith among a large segment of the population in the free market capitalism? chair hassett: first of all, i know you have already it already, a 700 page book we put out a week ago. in the economic report we remind people of -- senate confirmed by

81 votes. if you look at the 46 employment act that created the cea, it did so at a crucial time in american history. -- 1946 employment act. it was studied carefully by buckley. we had just won the second world war. we had won by nationalizing industries or centralizing production. freedom's forge is a great book that talks about it. we were not exact the socialist in world war ii but we had nationalized and centralized production. there were two schools of thought at the time. one was referred to in the first economic report as the roman view, which we think of as the socialist view. we have already centralized production, we might as will go the rest of the way and we will have a stable productive economy and another great depression.

the opposing view was that was called the spartan view, which we would call the capitalist view. this competition, natural competition between people and firms with the to prosperity. -- would lead to prosperity. everyone understood they had a great decision to make back then. they were not sure all the politicians in washington would be fully informed about what we know about the roman and the spartan view. they created the council of economic advisers at the white house to be a staff of 50 folks, people that are economics professors mostly on lien for your come to the white house to advise the president on what economists think about this or that. they were brought in in the beginning to tell the president with they thought about socialism. the joint economic committee was the arm of congress created to help them think about that. if you look at it, really the

job of the council of economic advisers -- he mentions it when my job was created -- is basically to help washington craft policies that guarea and e people going back it really old socialist proposals that there's a massive academic listen that shows they could fail our country and lead us into economic despair and you don't write about it then you are not doing your job. so the people who say cea was partisan because they were writing about socialism they are reviewing their illiteracy because the first economic report to the president the one

topic was socialism and what do we do about it. i will continue to draw on the academic literature and discuss what happens if the federal government takes stuff over and if people want to get upset about that then god bless them it is their right but if you go into the chapter on socialism you will see all sorts of academic work that has been even handed in the sense that shumpeter thought all the universities would be taken over by socialism and there would be no good work on socialism but we have 11 pages of academic cites of with what happens when a countries becomes more socialist. i traveled it denmark it speak about their evolution away from socialism. they were social inches of the

1970's but there's a rule of line which is that if you take something that is produced by an economy and make it, organize it with the government, then the production drops 50%. it is almost like an iron law of socialism. let the government take it over production is going down about 50% and we have charts that showed and venezuela it is 58% for oil. but it really is the case that this is something the cea was founded to do and as being tell i'm emotional that i have to do it. ramesh: there is kind of emotional by the way. mr. hassett: that's right. thank you, man. ramesh: when i asked you about threats to the economy you immediately went to the international contexts a lot of people have expressed concern

that trade conflicts could be a problem for the global economy. is that something that concerns you? mr. hassett: i think that the president -- i will rewinds a little bit. there was a time when i was, i think, it was that presidential campaign so i was one of john mccain's top advisors. i was as an events with austin ghouls by who was president obama's top campaign advisor. it could have been brookings we were tacking in the economic plans and he said on stage or backstage but i think it is ok to reveal when economists models trade then it is just like free trade is like a feature of the models that he could describe in a sentence but free trade deals they are thousands of pages so like the actual trade that

exists in the real worlds is way different from what economists think it is. it is something i grew to appreciate. i have been in the white house staff about two years that president trump inherited a bunch of trade deals thousands of pages that were negotiated by people who were less capable than the guys who negotiated the iran deal for president obama. so, it is just crazy the stuff we agreed to. we had a free trade deal with korea, i opened up our market to korean automobiles, they are great automobiles, they captured a lot of market. they opened their market to our automobiles but put in a barrier that made it impossible for americans to sell cars in korea. president trump inhered these and aware spending money protecting south korea and they are sticking in footnotes in the

trades deals to mess with our ought toe guys. so he was serious that if people don't renegotiate the deals then well take strong action to level the playing fields appear the goods news that approach has worked. with korea we have negotiated a deal with mexico and canada, we have a significant improvement for nafta that hopefully will pass congress. the secretaries are in china right now unless they are over the pacific. but those talks have advanced tremendously and everything is not about disadvantaging our friends. it is really about leveling the playing field. i think that lots of other presidents probably wanted to make progress on that but they have had not had success.

you can see president trump has had it with the korean deal but we are hopeful about the progress we made in talks with china. we will see how that goes. ramesh: when i talk to your colleagues in the administration particularly about china some seem focused on bit r getting the bilateral trade deficit down and spwhrebgts wall property theft. what is the overarching objective of the negotiations? mr. hassett: here is the bake thought. the negotiation have lots of objectives but the bake thought is if you want to think of the relationship with china the ce a reporter: puts outs a report we studied technology transfer and spwhrebgts wall property theft that they were engaging and puts the number in hundreds of billions of dollars a year. the transfer is that say you

invent the best widget of all time and everybody wants it and he wants to sell it to china and a lot of people in china will enjoy it but the chinese government says you can have the widget but you need it make it with a chinese partner that owns half the equity and your chinese partner knows year spwhrebgts wuhl property and before you know it the chinese partner has ditched you and they are making it themselves. so, if you look at it, here is the interesting thing about the chinese data. if you look at the total stuff when sell to china and total amount they sell to us it is not that different. you say wait a minute we have this huge $500 billion trade deficit with china. what do you mean? the point is that the u.s. firms sell a lot of stuff to china but they have to make it in china to sell it in china. the chinese sell a lot to us and

they make it in china. about if you are a u.s. firm and want to sell in china they are requiring you to make it in china. some stuff i think you should make in china lining one of the biggest things when sell is fried chicken, kentucky fried chicken. i'm not saying we should make it here and ship it but there's a lot of stuff i think is that way because of barriers. there is room for progress that -- but it would evolve lake ramesh's widgets shouldn't have to have a domestic partner to operate there. ramesh: thank you for looking out for me. we have a question hear. what are your views on the $15 minimum wage? there's been a lot of dispute among economists about what the effect of a higher minimum wage are. mr. hassett: first, since we're going into that i would like it

state at the outset how deeply saddened everybody at cea was to learn of the really untimely death of alan kruger who is a genuinely good guy, a mentor and helper for me as i was navigating entry into the council of economic advisors. he was incredibly generous with advice and also very collegial. if he noticed something i didn't get right he would let me know but it would call up and say did you think about it this way. we really miss him. he and david carter have a famous paper that shows if you lift the minimum with wage it doesn't have a big employment effect and other papers dispute that. but i think the contribution of alan in that space is because there's a methodological advance

he was in the forefront that led to that conclusion. in the listen i think that i len more toward the people that disagree with him. but the fact that if you were to lift the minimum wage that were you get a disemployment affect. but the thing that i can say is wage growth is so high right now, remember the bottom is 6.5% the disemployment effect of minimum wages are smaller at this point in the cycle than on average. that certainly doesn't mean there's academic support for a $15 minimum wage. a heck of lot of leskilled people with lose their jobs if you do that. but the minimum wage that, if the entire wage distribution continues to grow and shift right the way it is because of the capital spending in our economy, the minimum wage will be way down on the tail of the

wage distribution an little changes are likely to have much of an economic impacts. but $15 with move you wake-up in the meat of the distribution. ramesh: what do you say it people who are concerned about deficits? mr. hassett: you should be concerned about deficits. i think that the president's budget calls nor 5% across the bore discretionary spending cuts. i think that that would be a good next step. you have to understand though that when president trump came in and we were first looking at the challenges ahead we will not passed the tax cuts. with respect the highs corporate tax place on earth. in 2016 as when arrived the data have this thing called capital deepening which means there's more capital for level of output and contributes to productivity

growth because if you go from a lawn mower it a sever propelled it is faster and you can mow more lawns. that contributes to the growth of the economy in a way that is extremely predictable. capital deepening was negative for the first time since world war ii because the climate was so antibusiness and regulations were growing we came up with 8% a year and there was not a lot of new activity and capital deepening back to worlds war two will never gone negative until 2016. we had problems to fix. the tax cuts i think were essential to going from a new normal to an old normal. but the military, you know, the stories of not having enough spare parts to get planes off

the ground were vivid when a hurricane wiped out planes because they didn't have the parts it fly them to spending. there was military spending that had to happen. but now a lot of those problems have been addressed and we are returning to the deficit and the president wants to address it. i think we all wish we could biological the budget sooner tan that but sooner than the out years but the fact is that if we can get the 5% across the board spending cuts it would be a great start. ramesh: that is discretionary. what about the entitlement side. is there restructure there? mr. hassett: economists would say that is where you have to go in the end. right now it seems like you could have the simplest resolution and have to way of getting it through congress. i had lunch yesterday with an old friend bill beach who has

taken over the bureau of liberal statistics and he is a very pleasant erudite economist nominated to be head of the b.o.l.s.18 months ago. he was just confirmed yesterday. it is terrible. thank god he is confirmed but the point is that i think that -- ramesh: he is a patient guy. mr. hassett: he is. but i think that the idea we would get ledge live spwaoeuplts the next year or two is met far fetched. ramesh: is no hope on that front for time being. mr. hassett: that is a safe call. why we have one and a half minutes left. i did want to touch on something else you have written about controversial people do not like hearing that the poverty statistics have gone in the right direction over the last generation or so. mr. hassett: it was one of the things that i found most

interesting feels that we put out if you go back it read hendon johnson who actually cared a lot about poverty but wrote very informed smart things about it. if you go back it look at war on poverty he declared and try to come up with a scorecard of how we are doing the official poverty numbers are not much help and they look leak we have not made any progress but they exclude any like all of the poverty programs so imagine if you're trying it track how are we doing with poverty and the american doesn't account that there are foot stamps is kind of a stooped thing to do. we went back to and took johnson seriously and came one a measure with the poverty programs and found that -- this was the sentence in our study that caused so much controversial the war on poverty is over and we won. you along the a johnson's own

metrics of what we ought to accomplish we have done that. but the war on self-sufficiency or for sever sufficiency is the next thing to focus on because it is within thing to left people out of poverty, that is good but to let them be self-sufficient is something that lyndon johnson said we need to focus our policies on and we are not doing a good job because we are 20 seconds over but the programs are for the most part don't have a work requirement so people, most of the welfare payments of the u.s. go it performance who are able-bodied and working age and we think that if you look at arthur brooks' work if they become self-suffer their lives are more fulfilling for them. they are happier people. happiness about doubles if you go from dependent to sever suffer so we think there's a huge policy opportunity in a

human makeup way to move toward sever sufficiency. but the idea that capitalism fails that there's this misery everywhere and there seems to be a high demand for this view but it is not consistent with the data. ramesh: we are flashing red, i don't want to finds out what lindsay will do to us. i think we know. ramesh: join me in thanking you. [applause] >> that was kevin has set speaking at the national are you idea summit in 2019. four years later he would taken the same event again to discuss the state of the economy and how the trump administration economic policies differed from the biden's economic agenda.

>> thank you, everybody. hope lunch has been good. we are going to talk about free markets. as might expect, kevin was advisor to president trump and is also an advisor to national review capital matters. first thing we should say it is especially fitting we are talking about free markets what

would have been walter williams's 87th birthday. he was born march 31 and and passed away in 2020. i was fortunate to take my enter medicines microclass and he was so many things, syndicated column eurps. fill in host for rush limbaugh. economics professor researcher on labor markets, unemployment. affirmative action. but when he was in the classroom he was a teacher and it was remarkable and one thing we you would have said if you were seeing his class he is going to teach until the day he dies and he passed away about 12 horse after he taught his last class in 2020. so, a remarkable man. a remarkable voice for free markets. what do you think is sort of the state of play in free markets

today and what deserve actives can -- conservatives can do to carry it forward? mr. hassett: i think that we all have to face up to the facts that free markets are under assault in a way that we have never experienced in our lifetime and that the threat to the countries and system that has delivered so much prosperity is the highest that it has ever been. i think that if you want to understand free markets and how they relate to politics one of the first things i would ask my graduate students to read is high @'s road to serfdom. as we watch collapse of rule of law that is like a political thing but lie -- hayek thought it had to do with everything

with economics. he said that there really are two kinds of absorbists. there are socialists who mean well and they feel bad for the little guy and see the rich guy and think he doesn't need to have all of that and help the starving baby. the problem with that hayek said is they are going to be incredible bring ineffective because socialism doesn't work and if you let that warm heart the socialist run a country the countries will be in such bad shape that person will lose their job. but he said by far, that is why the road is the road to serdom because of the second type of social eupls that we see right now. that is a person will really doesn't care about anything other than their own power and

wealth. the kind of person that would bring a lot of business to the u.s. but it has to go through hunter biden. that person can appeal to sort of the warm hearted leftist voter with socialist discussion. and they are not going to be any more effective than the warm hearted socialist so their economy will stink, too but they are brutal. and ineffortably they abuse the rule of law in order to hold power. because the voters would vote them out but the effective socialists the mean hearted socialist is able to neutralize voters with voter fraud or in many countries they stop having elections. so we are at a point where the mean hearted socialists, the ones that don't care about our

institutions and talked about last night with the judge and will talk about later on are in control. and we have to think of how do we stop them. we will talk about that because that is why when built capital matters. we recognize that our country is under a threat. but let's look at what is going on right now with what they are doing. do you remember when president trump took offerings that the story from all the elite economists of the democratic party and obama administration was that sure, growth was really terrible and sure between 2016 wage growth was zero. you may early in real terms. so, the median household was no better off in 2016 than 2008 and grew bush and obama policy

together, president bush was not a supply sider and what happened is the obama people told us it is the new normal. and they said it is not our fault. it is not our policies. but we pushed free surprise with her tankses, lower regulation and president trump and over the three years before covid that thing that was flat 20102016 increased by $6,000 per family. then rather than -- manual you are a person who actually cares about voters and not like a politician and you saw the wages grow would the first thing you do is reverse everything? if you are at all curious no.

so you wonder why i say it the evil socialists were in charge they didn't care that the little guy was better off. so we can go into a lot of things that president biden's team have done but here is the fact oid they care so much about the little guy. real hourly wages have declined in the u.s. now for 22 months in a row. that is the longest streak on record in u.s. history. we have never had 22 months of decline in a row until when get joe biden and it is astonishing to me that these people who could do things like abuse the rule of law and all the things we have seen can destroy the economy like this and the only place being read about it is capital matters. so when have you seen president

biden was out bragging about manufacturing boom that has happened on his watch. manufacturing is down on his watch. so people who are really apparently indifferent to the welfare of the order knar citizen and very effective at destroying the economy are in control right now. and they are a real threat to the future of our country. dominic: you wrote a piece 10 steps of stagflation. i promise we will get to positive stuff. where do you think we are on the 10 steps it stagflation and how do you see flagrant out the next five to 10 years maybe? mr. hassett: like i have had friends with substance because problems and a lot of regard for 12 step programs and i got to admit though the one good thing i can say about the biden

administration is they finally made it to step one and hitting you have a problem. but the fact is that what happens with inflation i'm not going through all 10 stems but you get an inflation shock and it can happen if say you mail checks to people and finance that by printing money. then you say helicopter drop the money, inflation shock, wages don't adjust because they move slowly so everybody's real wage goes down. we just talked about 22 months of declining real wages. then you have less money to buy stuff. so you have a recession which we had last year. if president trump were in the white house the two negative quarters would have been the worse recession in america. so then what happens is defense starts to see the inflation and

starts angsting and they are able to get inflation down this is sort of in the middle of the process, until price and wage inflation are equal. this is a historical pattern in many countries and this country, too in the 1970's. but once terror the same, then the fed has a problem because firms won't cut the price below what it takes to cover their wages because if they do they go out of business so price inflation six to wage inflation and the fed tries to raise interest rates to get wages up. we are at that point. we are still at that point. the fed has been moving wages local way too mildly and the history is the interest rate has to be well above the inflation rate for inflation to go down. we are not there even with the numbers out today.

and so until the fed whacks the economy so much that the employment go up they will stay around five and they have been that way, we are in that holding pattern and with bank issues going on potentially getting the fed an excuse to stop there's a real risk that inflation will be there high a long time. in the 1970's what happened is that they tried to act to get inflation under control and there would be a little bit of negative effect on the economy, small recession an fed would say inflation is 7% but i don't want to hurt people any more so i will start tightening. if you do that for a few years in a row you end up with double digit inflation. so my final thought about inflation and we will find lots of upbeat things to say, not to

bring forth bad memories but the way it think about what is going on with the economy and inflation is it will be just like covid in the sense that there's going to be waves. that you will think right now we had a mild winter so energy prices are a little low and used cars are helping and inflation will be down a little bit. but it will go right back up. the bank deal is $2 trillion of new money in the economy. how do you do that and not make inflation go up. the waves will get worse if the fed acts lake it did in the 1970's. i'm pleased they lifted rates even with the bake crisis but imanxious they are not going to give us the four more rating increases to get inflationen control and if not it will be like the waves of covid. dominic: there's a lot of positive history in our country's economic history and

one thing that alan feels talking about yesterday is how much economic growth has improved people's lives over the last, say 100 to 150 years in a way unprecedented in human history. for thousands of years people lived at basically at same level of somebody cyst tense an -- somebody cyst tense and there was a handful of wealthy people but the vast majority of people were poor and there was really nothing they can do because we didn't have modern economic growth. now we have had that for the first time in human history huge waves of people all around the world being able to come out of extreme poverty, able to provide for their families and make a better life for their children. obviously in the united states the last 20 years or so we have been stick around low 1%, 2%

economic growth after being able to have 4% or 5% in previous decades. that solves a lot of problems. it solves the recession problem by definition but the national debt because if you have a faster growing economy you can bring the debt tkpwourpd and with defense spending because a wealthier country can afford to spend more on national security. it helps with poverty alleviation, himself bringing down welfare cost because people support themselves. how do we get back to that history that we know we have in us but also often something is in the way? mr. hassett: first of all i will remind of the history when i started in the white house right after president trump took office and we put out as the chairman of council of economic advisors the head of something

that sounds cool and science fiction the troika. it is like this thing that will harm us but the head of troika is in charge of the government forecast and we went back and we said to the president and to the cabinet members that we know that the president has made a promise of 3% growth. we know that everybody thinks it is the new normal and we come out with that there are going to be people who say you are putting out a political document. what we did is calendar everybody to give us policies that could take you from 1% growth to 3% growth. so, we designed the tax cuts the way we did to go after the business sector which is the highest tax placed on earth and

we used really hard science to estimate what would happen to growth if we had those tax cuts and did the deregulation and really aggressively push energy exploration and help pipelines form and stuff like that. so, if you look at the first economic report to the president where we laid out where 3% growth comes from we built it peels by piece with soup policies and we got 3% growth. if you ever zoom with me when i'm in my office one of my favorite possessions which i didn't make for myself but a friend gave me is after, near the end of the trump administration the "wall street journal" editorial board looked at what i said a what would happen with growth pre-covid then wrote a long unsigned editorial he was right about every single thing. and in a marriage where i'm not right about anything there was

really a refreshing -- it is funny how we get warm delivered but i couldn't find the journal that day. but we were right within a 10th or two. that is like the other thing i want to say is why were we right? it is not that we are geniuses. it is just that we thought about it a little bit. what is going on now is so detestable to me because it is so obvious. i will give you an example. i was talking about this yesterday. suppose that you increase government spending relative to georgia b.p. about 5%. and suppose that you don't do anything to make supply go up. in fact you attack supply. but say it just stays the same. so you have 5% more g.d.p. of

nominal demand but no more supply so by construction inflation has to be 5%. that is the only way because the got will spend the plutonium but they won't have more stuff because they have been attacking supply. so inflation goes to 5%. i can remember i don't know if rich is in the room but he interviewed me at capital matters we were the first ones on the internet to say inflation is coming and i said i'm 100% it will be 7% and i said that in what was april, i think. and why was i 100% sure? because if you lift g.b.p. by 5% but don't do anything to make supply go up you will have 5% inflation. yet we have an entire administration an party that is in science denial about this. so, i think the good news is that this is easy to fix. maybe we can move toward the

happy ending of our talk because we have done it before. it is a road map that is pretty easy to follow and the beside administration has messed stuff up so much it would be really easy to give you 4% growth really fast just by reversing the really stupid stuff they have done like global minimum tax and removing the tax benefit for research and development spending a trillion dollars on green energy it subsidize green energy. if you subsidize green energy with trillion dollars you are doing that because green energy is less ever so by construction you are making the economy less ever. i know how to make the economy more efficient. if you do things can boom. that is with we are talking about at capital matters when the biden administration says stuff that is patently wrong then when call it out but we are building an agenda for the next person who actually cares about

the economy be that a democratic or republican to make the economy better. the good news is the agenda is to the that complicated. it is not rocket science. dominic: earlier you mentioned why we write about this. it is not because we are geniuses many i think that is the right attitude and one more politicians need to have because we are not geniuses but in are lots of people that are and they have great ideas and want to start companies and do stuff and that is where the american people are. that is a big one and what they need to do is be allowed and permitted to be able to do that. like you said, that is kind of what we are arguing at capital matters pause sometimes the conservatives there's attitude of being apologetic of

supporting free markets and attitude recently that you may have detected like free markets when things are nice but if there's an outside threat or domestic problem we need the government it step in and make things right and that the complete backwards view of how there is supposed to work. free markets are not just a thing that is nice but a necessary ingredient to a flourishing growth and things that come off of that. the ability to spend more on defense, ability to solve the debt problem, get people off welfare. that is really something that is missing from the conversation and what we have been trying to do is bring it back. mr. hassett: that is right. again, the fact is that one of the things the left does is first they control a lot of media but not us and we will

never be canceled, never. then they attribute authority to the people that spout the socialist clap trap that they like and attribute respectability. hand out nobel prizes to paul krugman and when he says something that makes no sense at all lake you go back to the 5% example of course you have 5% inflation but he will say no. you will be lowly kevin or dominic that you will have 5% inflation and it be will on cnn or in the post or times they will say well nobel prize winner paul krugman says we won't have inflation and the partisan right wing says we will.

dominic:we can do that with hayek. mr. hassett: it is hard to find i'm not sure there will be another conservative nobel prize winner. but my point is we're actually right and we have documented it every day. that is why traffic is skyrocketing to capital matters. i think in the end people who are right are the ones who truly control respectability and can dish it out. i think that is with we have built at capital matters. dominic: we get so many great contributions from outside people that have good expertise on specific areas and i think that is one of the ways we can really add value. we just had a piece yesterday ran from an israeli economists talking about israel's industrial policy and why it didn't work for that country and the success they have who has been getting government out of the financial sector is the

argument he made. it was really great to have all of those different perspectives who don't work for national review and wouldn't write for us every day but have really good take on one issue and can right that and capital matters is the platform. mr. hassett: we have built an arena it is one of the things i have done in my career with the team that i'm most proud of because what the left wants to do is make it so that you are a fundamentally discredited person. you are a conspiracy theorist if you support and defend free enterprise. what we have done -- and everything in this room knows that is going on appear is really pissed off about it you want to do something and we believe if we made a place where a bunch of us started writing there would be people from all over the world that would be sending unsolicited man knew

scripts saying i want to be part of that. we talk about big things but i also like the little important things that we do and one of my favorite ones is the work that dominic has done on the banning of goes stoves. just really quickly, if you benghazi stoves then -- if you ban gas stoves gas consumption in the u.s. goes up. it is really efficient to bring the gas it a house and you light it up and the network is there. but if you don't let the guy have the gas stove you have to generate the electricity 100 miles from his house appear send in wires where they lose a lot of electricity language the way. so this is -- the reason i love this we are fighting an opponent that doesn't care about what the truth is. they just care about like the

posture that they are able to make when they say they are for this or that. it has been fun to watch us expose things like that. the big things and little things. the little things for me have been more entertaining. dominic:it is great illustration of the mindset when can't trust people to make decisions for themselves. we know what is best and we will impose it. i think that it is so contrary to our spirit as a country and things we have done. until this in our history we are unusual in western democracies we do not have a explicitly named social ill party. certain parties have taken bits and pieces, biden administration especially bad now but we have never had that because there's something in our national character that is repulsed by that that doesn't like being

told by planners and government bureaucrats that this is the way you have to do things because we have seen in our history that government tries to do things, doesn't work and we have seen all the different ways that the private sector has been able to innovate and make our lives better in ways the government could never do. right. and in my book the drift which you guys have probably seen mentioned on tv because a friend of mine says too many nice things about the back but it is all about what is happening to free enterprise but it is stopping american's life of socialism. we can. we can do it. we have almost run out of time, but there's like a deep firmly rooted in the great writings of the pass of shfrp shfrp terror

-- shumpeter and hayek and friedman and people like us stand up to defense free enterprise then it will win. so, capital matters i'm just thrilled that fat review came to me and we formed this place where free enterprise can be defended because it is almost like step one of the how do we stop socialism is you have to recapture respectability, take it from the idiot socialists who claim they are respectable and always wrong and you have to create a place where people who defend free enterprise are celebrated and not intimidated. dominic: the national review we are not moving on this, this is where we stand. standing in history is our thing and this is definitely an issue where we know that this is the right thing do and we are not budgeting on it no matter what

politicians might say and the editor of the section and he will talk about we get these big pieces that are 3,000 words, we ran one from a guy who used to work for black rock and used to -- knows a lot about esg but he is becoming skeptical and wrote a big piece walking i know there better than anyone and this is why it is not working and not effective. and that is the kind of piece who else is going to run that, 3,000 word piece. you can't fit that -- the warm can't fit that in there. they have within main street public indication "new york times" will never touch that. so that is the advantage we have in terms of spots to run things of all different lengtnd