tv After Words CSPAN August 2, 2015 9:00pm-10:01pm EDT
that they think we have beaten it because the deficit is down a lot in the last couple of years than people think that will solve the problem but the reality is we are in a very temper revel and within a year or so below sea the deficits go back up as we add to the debt every year we have not even begun to see the problem ticket with medicaid and medicare and social security start to add up and if we don't start to act now while the sun is shining we will be in trouble when the rain starts. >> host: what does through the numbers. people probably don't understand the difference so what does through the numbers with those fiscal metrics. >> guest: the dead is a much more we spend then retaken with revenue that is about $450 billion range that sells a lot of money
bet 34 years ago we were 1. $4 trillion so we are doing a lot better. but that is just temporary it will go back up each year you get the debt that is the total amount that we owe if you think of it as a household budget if you read a short this week it is our deficit that this is every week that next week and the week after that that is the debt the will of. talking about how the deficit has or -- added every year that consist of both the debt held by the public then did your portfolio with government or treasury bonds of course, it
is mitt said foreign governments told that is one type of debt that the economist talked-about a lot but it also includes that intergovernmental that that one part of the government rose another like the highway trust fund or social security or medicare where the government proposes money and that adds up to $18 trillion and that is the national debt. but there is a third kind that is the intergenerational roll or unfunded liabilities but we know how much we owe under current law to pay these benefits but we also know pretty well love retaken with tax revenue a and a gap between the two while that is not as solid as the
treasury bond is still plenty we promised to pay solely through all of that it is a real dead where between 70 or $120 trillion depending how you measure that. >> is eye-popping numbers. talk about the debt held by the public that is twice the average historically. what does that mean? so what should people think when they hear it is twice the historical high? what does that mean for them? >> we're an unfortunate set of circumstances that the world is so messed up we still can low interest rates and we're not as bad as we might be but debt held by the public there is a lot of
problems but it is because of slow economic growth that the level we are at so businesses find it more difficult to borrow money and people are less willing to take the risk of investment because they see that as something they will have to pay back through higher taxes. all of that slow steady economic growth and our children to be $2,000 per year every year for each earning less simic's simply because of the amount of debt we are carrying right now and we have to pay interest on this that and that begins to crowd out other government spending eventually you spend a lot of money they pay to foreign investors the you cannot invest and what you want to
the republican or democrat but we spent that to pay back interest for investors collecting government bonds that seems like a big waste of money. >> host: people say if we just get rid of the waste it is silly thing to think we will fix the budget but if you bring down the interest payments that is the fastest-growing part of the budget if it comes to the thing back to the historic rates of interest it does not do anything. it is simply money that will pay them to lend us money so it is a real waste of money. just like your credit cards
but if you pay that interest on the credit card that is just money that you pay to the bank. >> host: if interest rates were to go up one percentage point that would cost $130 billion every year so they are staggering numbers. rates are very low right now with that will increase the cost and that they could squeeze out if you want to cut taxes and fewer spending interest is not on those priorities. one of the things you talk about is that we owe it to ourselves back that is the classic keynesian argument that says we shouldn't worry about that because in the end riel led to ourselves and we could argue that
borders called a certain amount and we'll hold their summit = out but the bigger problem is the distribution of who holds the debt is not the same as to benefits today. to make the argument in a classic stance if you borrowed money to go to college and keep you then turned higher wages when you got out and use that to pay back the debt you are no worse off. became to borrow the money but a lot of that is not to make our wages better in the future or do something that will make a higher economic growth to make it easier to pay it back instead it is redistribution today essentially be part of that money so it is not impacted in any way it is consumption
the second part is the person who ultimately will pay it back will not be the same one who benefited from today so it could be someone else so there is is that of fairness to be followed as well and people will think about that in the future that has to be repaid to affect the decisions they make today's a rebate not see those benefits that the college education may not necessarily be there if that business has to pay back your load instead. >> host: and the interesting part is you is are we were spending they say don't worry it is all in this country orrery barley from ourselves betted is into generational so if you were investing for the next generation is very different
so talk about that intergenerational issue that is a part of that. >> is the unfair type of taxation without representation we consume and the kids pay the bills even those that are not even born yet will have to pay for all consumption that is like saying you will have all little party and sent the bill to my kids. in addition a think people realize how little investment reaction lead to only 13 percent is considered an investment that is just of broad investment not roads or bridges or so on so when we talk about federal spending we don't talk about investment it is talk about taking money from person day and it does not do anything to grow the economy for the
future. >> host: talk about discretionary spending for entitlements. >> this is what people say that social security is not the entitlement program i paid into it when i was working plus the interest. it is not a welfare program. but the reality is it is wrong. entitlements is a legal term that it is mandatory spending that congress does not vote on there is no annual appropriations bill. people are entitled and they have met the criteria and congress spends whatever is necessary to meet to those benefits. that is all it means but so
are farm price supports surprisingly but traditional welfare is not because they appropriate the money on the a annual basis. so that is what people mess. >> host: but one-third of the digit goes to the appropriation process to a third sonata and also how do they decide which is a mandatory process is the pretty tricky process how did they determine which is which? >> with the original and acting legislation whether are not how that is legally defined in terms of the budget process for every five or tenures some programs like medicare and medicaid security so you
could the those that our domestic discretionary spending the the part of the commerce department and that is defense spending or discretionary spending. that is it that is all congress basically talks about that is what the budget bill is all about with those two sets of programs while everything from the entitlement programs such as security medicaid with interest on the debt, multi-year programs is all outside congress able vote. >> host: antenna is sequester replied that it plays a couple years ago. >> basically that was the cap on how much could be spent over the next ted
years but that only affect did it to the types of discretionary spending and defense and it limited decided to impose some costs that would be split evenly. now we already see in the budget we take money from discretionary to ruth pass it over to the war fighting portions of that does not apply to to that portion of it but it's essentially there was no sequester reduction there was some things with medicare but that was outside the pier sequesters so it is a cap of those two types of programs and largely responsible for the slowdown may have seen in spending the last couple of years.
>> host: is something we do is the budget gimmicks. the overseas contingency operation is becoming a slush fund for other parts of the budget to talk about putting money in judy emergency area then they can spend more than they are supposed to. we see that all the time as a way to get around things. >> clearly with the defense spending. >> and they were in a situation from defense spending for domestic spending so essentially they took money that is not overseas or emergency spending and took routine spending and congress does
this all the time with the emergency spending whether natural disasters that had nowhere near that natural disaster or defense spending for the iran and iraq war was fought off budget that did not apply to normal budget rules so congress does this sort of thing all the time and makes honest budgeting very difficult and their raises questions how much you can trust promises into the future that says we will balance the budget ted years from now in some way not exactly trustworthy often they involve savings that are very mysterious. one of my favorites is they continue the saved money by not invading countries.
adding or half a trillion over two decades, it is significant. it was hailed ted as say big bipartisan success. the only time the republicans and democrats can agree. >> that is the problem is that we have right now in their party watch is the balanced budget democrats are happy to tax and spend and the republicans will borrow and spend but the idea to iraq to reduce spending is something that neither party seems to be serious about. >> host: and talk about that. there is a difference of opinions. what is the responsibility? you pay for what you spend. and balance the budget but over a certain amount of
time you pay for what you spend. you say it is less just about bringing your deficit down by your spending so touche talk about cato is the spending issue. talk about that. >> milton friedman said the real cost of government is how much you spend. taxation and borrowing take resources out to transfer to the government that it is not invested it is consumed. weld different people play taxes -- and pay taxes they take it out of the economy and transferred to the government and both are equally bad.
handed given this book to try to make the point ultimately you can have a government that is so big to consume so much of the economy, and the economy cannot function regardless of how you pay for it. also we spend 21 percent of gdp by the government and other tedder 15% at the state level and one-third of the economy. we're going up to a point to spend 40 or 50% under current projections. so even if you pay for it all. >> host: what would to cut? >> guest: i think we should cut across the board. the usual suspects they
really don't get you very far. listening to the republicans of waste fraud and abuse cut foreign aid or killed big bird or planned parenthood. that will not get you anywhere. foreign aid is 1%. people believe we spend all this money but it is 1%. and some we want to keep going frankly. of planned parenthood is 1,000th of a percent a year are not budgeting the balance budget that way. defense has to be on the table. despite the current climate there no doubt there is a great deal of waste in the budget we pick up defense spending for a lot of other countries that spend a lot less because we will do for them there is a reason why we spend 4 percent of gdp
europe is 1.five the b-2. nowhere near what we spend because we are there are me. we have to cut their as well. but the big money is the entitlement programs. 47% on medicare and medicaid security alone. you cannot really do much with anything unless you are willing to take on those three programs. >> host: we will talk about them in detail. would you agree with the taxes you are willing to raise with then they have lower taxes today and i don't trust that reduction would like to see that then
we can talk about whether or not tax is needed to be raised. i am not opposed to any specific taxes being raised as opposed to overall revenue there are some tax breaks out there that our extortionary. like aversion for ethanol, those sorts don't benefit the economy nor how it but don't think that any particular tax break is sacrosanct. >> host: expenditures are $1 trillion per year of lost revenue so you want to get rid of them to broaden the base for spend them on something else there is a lot of money there and many people are more going
through the tax cuts. >> unless you believe the government owns all the money bet that said every jews from the mortgage interest deduction over the tax break you currently get for employer provided health insurance that is the biggest deduction actually these are harming the economy some favor to eliminate nearly all of this is a much flatter system. >> you get a lot of people best off if they don't know those are targeted they pushed up the price so if you have a home loan mortgage interest deduction and makes house is more
expensive to as it goes to the industry. >> guest: that's right. it goes to second homes and the money is passed through or direct spending it is passed through to the final end user just like call a jade it drives up the cost of college then they raise their tuitions. >> host: so let's step back before we talk the specific program but talked-about the cato institute and your of the richer areas. >> considered one of the big four also with the heritage foundation is a conservative on the right the brookings institution on the left the american enterprise institute i think is where old politicians go to hang out until the next administration but cato is
center-right. we are libertarian which means we take the idea of limited government very seriously. government does not belong in your wallet or a bedroom or business or medicine cabinet so we would reduce government control over pretty much all aspects of people's lives part go probably be settled uneasily what to cut defense and domestic spending and legalize drugs. to favor increase emigration and increase free trade as we are across the board with individual liberty. >> what are issues you think about the most? >> is a senior fellow i have no fixed address is generally work on the domestic side with social welfare including poverty poverty, welfare programs
programs, health care from the affordable care act, medicare, medicaid or afford it at the local level and retirement issues like social security as it feeds into the overall budget deficit. >> you aren't looking for those things? >> rand there is the couple's love books on welfare reform the pull ultimately should not be more comfortable but half to lift people out of poverty program they. >> host: a different book the was it is one thing we could do? >> guest: one of the most important things is to end the war on drugs that
destabilize is the inner cities increases crime to lure people lot of jobs that is the first rung on the economic ladder because they could make big profits on the short-term that these to the criminal justice problems. all smell a it is what government can fix. >> host: and now the big parts of your book start with a government biggest program social security. talked-about how it works and what we need to reduce to one i think it is misunderstood people think when they paid those taxes that pays for their retirement but when you pay your social security taxes none of that is put away for your retirement. has nothing to do with you
you are paying the benefits for people who are already retired to dave parker you hope when you come to retirement you hope there are those that our behind you to support you. it is like the pyramid scheme the people on the bottom support the people at the top and generally the first retirees get off pretty ball -- well. but now the pyramid is inserted we had 16 people paid for every person but today is about three and now we are heading slightly less than two. now we are making higher wages but still ultimately the system will break down you could only tax them so much before they resist. and in fact, that tax burden is enormous so after that
but we are living longer. >> but rate -- retirees are living a lot longer in retirement. we could expect to spend one-third of our working lifetime in retirement that is a long time to collect. >> host: when the program for started retirement age was 65 life expectancy was 62. now the retirement age has moved up at 67 that many people are living into their 90s. >> people discuss we do need to raise a said they become social security i think you'd have to raise it at 7172 to bring that into balance. for some reason it is the
least popular. people feel that you move the of goalposts they want their retirement or the second career so politically it doesn't seem to fly. hopefully that will change in the future as a more practical issue raising the retirement age will not make a difference. i will shuffle papers and tell that i am 90. if you are a coal miner miner, that is a big deal you also take into account every age and in, all discrepancies of life expectancy you already have - - three black men that pay social security taxes but died before they collect benefits. so it is not as easy to raise the retirement age as you would think.
>> host: you have to build in different combinations for those who are working if they cannot work do 67 in the field. >> but then it europe you have a different retirement age so teachers retire at this stage door truckdrivers that this sage or farmers and you have fights food gets to retire earlier and it gets to be complicated and of course, they push to lower the age but increase their dressers have their retirement age of 55 because they have hazardous chemicals. >> host: so what about social security? that we made more promises than revenue? >> it is about $65 billion without will only increase every year it never goes
away a just gets worse. >> so the payroll tax is more than enough. >> you don't have a lot of choices if you have more money going out there and coming in but the future unfunded liabilities so that is real money that we will have to find one way or another but i don't thank you can bring in enough new money without seriously hurting the economy and we are fair to the young people who will pay a lot to get a lot less out so we will have to face up in the future will get less than reformist we talked about raising the retirement age the best way to do that has to do with how you calculate benefits.
right now the 35 higher wages adjusted according to wage growth i think it should be inflation instead that is a wage price index. >> host: explained that. >> guest: when dey calculate the first set of benefits then you get a cost-of-living increase there is the intricate formula that redistributes so lower-income people get a greater proportion back then higher income people but that formula if you work 40 years five years don't count just the 35 so money you earned then is worth different than today with inflation so you have to adjust those wages 35 years ago. additionally that is inflation adjustment based
on how much wages have grown. so to get up higher than inflation benefit that was adjusted so every year that retires gets the higher after inflation benefit then the people who retire the year before them. that is not fair and very costly in the system. if you change the to inflation adjustment it could come back into balance over 30 years. >> host:. >> such you tell these young people in essentially that we will get less than a promised but if they're
willing to eat their spinach then they should eat the ice cream that allow the younger people to take their current payroll tax to save them in a personal account that is a real asset. that does increase the short-term deficit. >> because you are saving that. >> basically the debt that is out there in the future. to talk about the transition and cost if that is 100 hours i say give me $50 to date we will call it even you would say i don't have a $50 transition cost but if you don't have that then you have a problem so it is
difficult to make that transition. >> so is essentially we face the same problems to raise taxes is are cut spending in other areas which are my submission or borrow that money boltzmann the you have to face one of those. >> host: other program you devote a lot of time is medicare. >> that is either dead worse shape. i hear policymakers all the time. >> is the program for the elderly by and large 65 and older with some type of insurance. there is issues the more
sick less it pays it phases out to cover up front but not long-term care that is one of the problems with medicare but medicaid is trickier people think of it as a health care program for the four. that it drives the health insurance benefits for the poor but a lot of money spent for medicaid is back on the elderly again because particularly those in nursing homes because you don't have that long term care company in the medicare the next four or five years in a nursing home takes money from the medicaid program to pay for that. >> host: they are a little more interrelated.
and another program for the elderly. but medicare is also coming from the same demographic problems. >> plus those to our elderly that is where they go. so the net result so with the middle age income couple they will pay $150,000 of medicaid and medicare taxes plus premiums as 65. >> there is a payroll tax
and raised slightly so 8% of their over $200,000 per year. you pay the payroll tax and you pay a premium. that is a small portion of medicare all lots is funded out of general revenue and to pay $150,000 of premiums to collect $450,000 in benefits. >> a lot of people saying they're just getting out.
>> people say i paid for it. >> but they didn't pay enough. [laughter] >> we all do but as a combination of more people collecting with the cost of health care going up we lose money with every transaction to make it up in volume. >> as the health care cost goes up there is a whole economy even though the growth has slowed is one of the faster growing areas of the budget over the last decades it goes back 10 years and we don't really a know why. the experts say a lot of that could have helped end the recession to have less money in health care we go
now well have been in the future but look at different estimates if that cost will go back up to where that was then medicare could really balloon. >> host: what do we do? >> guest: interestingly both sides tend to have the same target how fast they want to let medicare grow with all the debate you can see the president's budget was paul ryan budget the same target that is 1 percent faster than the economy but i think is too fast but i think it is interesting they come in at the same place. >> host: that is so rare that they even agree on of gold. >> and how they both want to destroy medicare they all have the same numbers but
medicare unfunded liabilities is between $80 trillion depending on future growth of health care cost. they come into the same point of where they want to go they want to push it down from the top with various ways to reduce reimbursements to pay them less and hope that encourages them to provide less health care if we do not cover as many procedures that doctors would not do as many test. that all that would help to reduce the overall cost of the health care system. but to go from the bottom up with the premium support system to give people a certain amount of money, it really is of voucher bayou give them money to pay for a certain amount of health care if you want more than
that then you have to pay for the additional on top of that. he hopes they will choose not to get quite as much health care that will bring down the cost but it is just if that is made by those at the top for the consumers at the bottom. i generally favor consumer directed health care because they can make individual choices. so to talk about rationing health care the reality is every system russians health care there is no such thing as a system that gives them all the health care they want you europe for the united states everybody rations. but the debate is who makes that decision? one example is if we have
every american get the ct brain scan every year as the annual physical a good catch a few dozen early enough to save lives that we will not do that. no country will do that so how do make a decision? some countries ration to say you simply cannot have the ct scan some countries like canada say you can if you want but we only have one available seat might have to wait six months we ration by price and cost about $1,000 you can pay for it if you don't you don't get one the chances are infinitesimal a small but made your father or an uncle died of brain
cancer may be with just sleep better so allowing you to make that choice is the best answer the most people will not take that. >> with other goods and services when refer started you are a lot younger than i am a computer cost a half million dollars was decided -- the size of a house with a two-year contract. why? not because of government price controls. >> it is complicated from the medicaid programs. explain how medicaid works. >> is funded out of general
tax revenue would only partially funded by the government the rest as by the state government there is a complex formula some of that is to be based corestates give more than richer states but those with big congressional delegations get more than the states that don't. but the mix between the two with the broad guidelines they can make those determinations with the types of doctors or procedures of the new is eligible and who is not. the problem is the state governments are spending more and more and in most days medicaid is the fastest growing of not the single largest line-item they spent more than it presents or education and it will squeeze everything out.
that is a big problem for states. >> host: the same solution for medicare or medicaid? >> i think i would turn it back to this day have stayed have federal that has not worked very well. think i would turn it back to the states with the federal money going in the form of love block granting and let them experiment because we really don't have a lot of good answers how to reduce cost. we know we are causing problems if we squeeze down reimbursements but one of the problems it is very hard for people tuesday primary care doctors because most will not take the program at solo reimbursements of that is why they end up in the emergency room. how much money do they want to give to the elderly in
nursing homes? that should be the states to determine that not the federal government. >> host: are there lessons from other countries what they have done wrong or right that we could learn as we are struggling with this fact and as we have a a dysfunctional congress. we do have some big challenges. >> i think from what is going on in europe to learn what not to do with huge unsustainable obligations and find it impossible to collect the taxes because they evade them and you see that increased to day then you have a greek system that is between a rock and a hard place. no way they can pay back the debt they owe the european banks with some of reforms that they tried to force on them is so painfully
political i don't know what that would look like but to have that goal one year after year but even to have very innovative approaches its limits how much debt they can run up if they want to run up more than they have to spend more money than they have to raise taxes and in order to do that you have to get up pass and nationally so it is hard to raise taxes as well and that has forced them to restrain their spending along the way also baltic nations like lithuania and estonia with the recession hit they did a lot of cutbacks in terms of government spending. they made that a recession worse in the short term and was much deeper but now they are coming out of it that
europe went more of the al shape but they have not come out. but britain is beginning to come out of there is fairly strongly with reelecting david cameron because they did some austerity over there with some cutbacks. >> host: you are not a big fan of stimulus what should we did do or not do? >> stimulus spending does not generate long-term growth. what it did is makes that trough deep but keeps us from bouncing back from where we were. when we talk about the stimulus spending it is the bag of money theory i have this bag of money but the reality is it comes from
someplace else. in the book i talk about the french economist and the example he gave was supposed to resume french farmer planning to irrigate his field and before he can do that the french government takes the money to tax that they he was going to use to hire the ditch diggers then they hire people now they're hired to go dig up the road river ready says the french government hire the people to give them jobs meanwhile the farmer did not hire them, we did not create any new jobs but now he cannot irrigate his fields so his crops wither and everybody is worse also look at the unseen consequences or to tax a great deal of money
that our temporary. >> bet you could say the same from borrowing too much? >> with the simon short-term borrowing i am not a zero dash person as a rule but i also believe to borrow yourself out of prosperity. >> also talked about paul krugman who has a different point of view. >> we disagree on pretty much everything. he is clearly a believer that deficits and debt don't matter as he would argue by reducing it to retire right now he is a big believer in the keynesian stimulus that we can run big deficits
today if we spend that in ways that the to greater productivity tomorrow. we talked about calling ourselves with investment and there might to be a case but i think he would have a stronger case but the reality was most of that was various parts of consumption but not investment. so some of the shovel freddie jobs were not so shovel ready it was not targeted to that type of investment. >> host: my husband has a lot of disagreement about keynesian spending. >> guest: and you argue about that? [laughter] >> host: tell me what you want people to know about your book for the big take away? >> the problem is a lot
bigger than we think politicians are very happy to ignore the deficit because fixing it involves on pain to the constituency. so if they can pay that over a few years that is someone else's problem they are happy to do that. we spend time worrying about the crisis of the day and not enough at the long-term problem in this country but we need to. we have a little respite as period it is down because of stimulus and sequester and we paid back t.a.r.p. with some weird accounting measures. but the reality is we have a little breathing room but if we don't take advantage and that and we wait to until day climb again then the entitlements kick in and the baby boom collects medicare and social security it will
be very, very painful. there is as saying something that cannot go on forever eventually stops. eventually it will stop but it will lead these offshore really hard? look to europe like greece to see the results of the hard landing. i don't think we want that purpose if restart to make changes now alternately we can and soften the of landing. >> host: hopefully we have politicians toucan come together to help us get that soft landing. thank you so much for talking about your book today. >> guest: my pleasure.
book by a guy named delbert king. is about the life of thurogood marshall before he was ever anyone's judge but was mitigating cases in the south at tremendous risk to himself but basically fighting for justice. so those are just three of them and i'm reading at least two books at all times so that's what i will be doing in july. booktv continues with a look at the increasing importance governments and businesses are giving to the idea of happiness in order to increase economic performance. will davies author of "the happiness industry" takes a look at this trend and questions if it really is good for us.
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