Tags: Holtz-Eakin | House | Johnson | Feldstein

House Ways and Means Hosts Leading Economists

By    |   Wednesday, 14 January 2015 08:44 AM

The House Ways and Means Committee held its first hearing of the new 114th Congress Jan. 13 titled "Moving America Forward: With a Focus on Economic Growth." A panel of star witnesses included two Republican panelists — former Congressional Budget Office (CBO) Director Douglas Holtz-Eakin and former Council of Economics Advisers Chairman Martin Feldstein — and the Democratic witness Simon Johnson, former chief economist at the International Monetary Fund.

In his opening statement Chairman Paul Ryan, R-Wis., announced that the Ways and Means Committee would play a central role in addressing the major issues holding the economy back, which he listed as tax reform, where the corporate tax code is the worst in the world and the individual code is notoriously complex; trade, where he plans to work to give the president Trade Promotion Authority to negotiate pending agreements that will boost the economy; healthcare, where Ryan seeks to dismantle Obamacare and replace with a system that responds to patients first; spending and deficit control, to correct the course leading to potential debt default; and help more people move from welfare to work.

In the Democratic response, Rep. Sander Levin, D-Mich., displayed a chart showing a dramatic turnaround that has created 11 million jobs and reduced the unemployment rate to 5.6 percent while cutting the annual budget deficit by two-thirds and making healthcare widely available. He urged attention to the issues of flat wage growth, rebuilding infrastructure and tax reform.

The witnesses all made crisp, succinct presentations. Leading off, Holtz-Eakin stressed the need for pro-growth policies, because even the improved growth is sluggish at 2.75 percent, but the CBO estimates the longer-term growth rate at 2.3 percent, so he quipped that if the current performance represents the "boom," it's not much of a boom. He offered the gee-whiz number that historically the standard of living should double in 32 years, but at the present rate it would take 90 years to double. Holtz-Eakin pointed to capital investment and improvement in productivity as sources of growth and cited pending trade deals as a means of spurring growth while tax policy and the healthcare law hamper growth and need to be reformed.

Feldstein confined his remarks to the need for tax reform, and he gave some startling examples of the anti-women effects of current tax and Social Security rules that discourage married women, in particular, from working. He repeated the well-aired complaint that corporate tax policy is the most anti-growth in the industrialized world and called for measures to bring the deficit to a manageable level by cutting the annual deficit from 3 percent to 2 percent. However, this would require an array of steps to improve the household savings rate, which has fallen from 9 percent to 3 percent, and to cut the growth rate of programs that benefit middle-class seniors. Also, while the life expectancy has only increased by three years since the 1980s, it is timely to increase the retirement age by three years and bring more seniors into the labor force.

Johnson placed the growth picture in a global context and praised the administration for using temporary fiscal stimulus to achieve the best recovery among industrial nations, but one still marked by stagnant wage growth, as all of the industrial economies are affected by the powerful forces of technological change and global competition. In contrast to Holtz-Eakin, Johnson credits Obamacare for bringing down healthcare costs, and Democrats urge that both Obamacare and Dodd-Frank be given more time to work rather than be dismantled by this Congress.

All of the witnesses agreed that Congress should give high priority to conferring Trade Promotion Authority on President Obama so that the administration can conclude negotiations on the current round of deals. However, Johnson urged that the issue of currency manipulation be given high priority in the negotiations. Coincidentally, news reports indicated that the Chinese are about to pursue additional reductions in the value of the yuan. Johnson said the objective of the negotiations should be not just more trade but better terms of trade for U.S. exporters.

Of course, the historical record is discouraging, and most of the arguments presented at this hearing have been presented at similar hearings for decades, especially by Feldstein. Now a Congress with an energetic reform agenda confronts an administration that appears bent on running out the clock, with the possible exceptions of trade agreements and corporate tax reform.

(Archived video and witness statements are available here and here.)

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The House Ways and Means Committee held its first hearing of the new 114th Congress Jan. 13 titled "Moving America Forward: With a Focus on Economic Growth."
Holtz-Eakin, House, Johnson, Feldstein
Wednesday, 14 January 2015 08:44 AM
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