 My name is James Galbraith. I am the Chair of Economists for Peace and Security. And I would like to welcome you to this Bernard Schwartz symposium entitled, Who's Afraid of the Fiscal Cliff? Economists for Peace and Security, EPS, is an organization of professional economists concerned with questions of military security, national security, economic security, social security, with the broad questions that we have all been grappling with intensely for the last four or five years. We are, strictly speaking, a professional organization. We are not an advocacy or lobbying group. We gather together professionals working on these questions who represent only themselves and who have the advantage, I believe, of being able to speak to you with clarity and conviction. EPS is also a membership organization. Our website is www.epsusa.org. And I would invite all of you who are here and all who may be watching to visit the website. And if you share the goals and objectives of the organization to join us or to lend us your support. We have the great advantage and privilege of having a very strong supporter and great friend in Bernard Schwartz, after whom this symposium is named. Bernard planned to be here this morning, was not able to get here, but I do want to say that we at EPS are tremendously appreciative, Bernard, of your encouragement and your backing over quite a long time now and of this symposium series. Stripped to essentials, the fiscal cliff is a device constructed in effect to force a rollback of Social Security, Medicare, Medicaid, among other programs. As the price of avoiding tax increases and disruptive cuts in federal civilian programs and in the military, it was partly fortuitous, given the expiration dates of the tax cut, but also partly policymaking by hostage-taking. Timed for this moment following the 2012 elections, a contrived crisis. The plain idea, which is now unfolding, was to force a stampede. In the nature of stampedes, arguments become confused. Panic tends to flow from fear compounded by doubt, especially when multiple poorly understood forces, economic and political, all appear to be pushing the same way. Our task today is to sort through those forces, to ask whether any of them, taken singly or together, justify the voices of fear and doom that we are now hearing. I would like to break down this issue into, let's say, four major questions, which, broadly speaking, frames the structure of the morning's discussion. First of these is, is there really a looming debt and deficit crisis facing the government and the economy of the United States in such a fashion that urgent action, major involving major sacrifices, is in fact needed now? There is obviously a very broad belief that this is the case. What is the foundation of that belief, and is that foundation sound? Or is it possible that other issues should be considered more compelling and should be brought to the fore in this next period of economic and political choices? Secondly, narrowing the question from the broader financial and fiscal position of the United States government, is there a crisis looming in the administration and financing of Social Security, Medicare, Medicaid, which demands reform of those programs? Or is this, again, a manifestation of a political agenda not justified by concrete economic facts? That's the subject of the third panel. Third, would the military sequestration, which is built into the fiscal cliff, be the calamity that many have announced it to be? Is it something that must be avoided by action within the next six weeks? That's the question which will be discussed in the second panel. And I believe that that panel will also take up the question of whether, given that we are 21 years after the end of the Cold War and that we have learned hard lessons in Iraq and Afghanistan, whether this is an appropriate moment to begin to reconsider just what our national security posture and force structure should be. Speaking for myself, and I won't prolong my opening remarks, I can give you my short answer to the three questions. Is there a looming fiscal crisis for the United States government? No. Are there compelling separate reasons to impose long-term cutbacks on Social Security and specifically on Medicare and Medicaid, the federal component of our health care insurance system? No. Do we face a disaster if we fail to act in the next six weeks but instead defer decisions on all of these matters until the early part of next year? No. Those are my short answers. My professional as well as personal message is, don't panic. This is not a moment of high drama. It's a moment for no drama. The American people have expressed their confidence in the president against a very clear alternative who promised higher rates of economic growth, a return to past prosperity at the price of and following very severe cutbacks in public functions and social insurance. The people expressed their disbelief in that formula. They did so, I think, very wisely. They also removed the argument, which I think was widely expected to hold, that we must act now because political conditions will be worse in January and that this represents a kind of last chance to get our house in order before entirely different political forces take control. Not going to be true. The public ensured that it won't be true. Political conditions will be quite different in January from what was expected. In a personal view, they will be dramatically better. There is, in any event at this moment, space to think and consider what we should be doing, what our national priorities are, what a correct, defensible economics tells us about the balance of risks that we face. And we should use that space. And I suggest that this morning's symposium is really designed in that spirit. And I'm very happy to be introducing it and to turn the podium over to Stan Colander, who will moderate the first panel on the question of the fiscal court. Thank you, Jamie. I appreciate you turning the podium over to me, but I'm going to sit here if no one really objects. In fact, we're all going to be sitting here. So just a word to the cameras that are following us. Good morning, thank you. I often wonder what was going through Ben Bernanke's mind when he used the phrase fiscal cliff for the first time, or when they decided that they couldn't say what they really wanted to say, which is that the combination of tax increases and spending cuts that will go into effect on January 1 and January 2 will cut the deficit too far, too fast. And therefore, what he was really saying, well, cut the deficit too far, too fast, given the state of the economy and the fact that the other elements that contribute to GDP growth weren't able to absorb it or offset it. So what Bernanke was really saying was he recommends that the deficit be higher than it will otherwise be under current law. Now, anyone who thinks that in February, when he first used the phrase fiscal cliff for the first time, when he first used the phrase fiscal cliff, he wants this back, is that what you're saying? Excuse us while we work this out. Anyway, anyone thinks that the chairman of the Fed could have gotten up in February? And instead of using the phrase fiscal cliff, so to say, I recommend that Congress increase the deficit compared to current law, is not reading the tea leaves correctly. Back in February, and probably still today, someone recommending that the deficit be higher, explicitly recommending the deficit be higher than it would be under current law, would have that bullseye painted on the forehead a little bit brighter and a little bit bigger and become more of a political target? If you'll notice all of the discussion about fiscal cliff so far, all of those who have been strongly recommending that it be avoided, eliminated, prevented, mitigated, whatever, don't use the phrase, and we think the deficit should be higher. Two things that, even though that's the inevitable conclusion, mathematically, that's what has to happen. Think of the letter that the 15 CEOs from financial services companies released to, well, I think it was a public letter they put in the newspaper, to the 15 CEOs from financial services companies sent to the president in Congress about four weeks ago, in the six paragraphs in the letter, they mentioned fiscal cliff, the phrase fiscal cliff seven time, never use the word deficit once. Two weeks later or so, there was a letter from 80 CEOs of various other sectors saying don't let the fiscal cliff happen, never mention the deficit once. So it's an interesting communications challenge. That is, how do you say you don't want the fiscal cliff to happen, but you want spending to be higher and revenues to be lower, and therefore the deficit to be greater than it would otherwise be? That's one of several things we're gonna be discussing as a panel. I'm gonna impose some rules here. We're gonna, each one of us give, oh, five minutes or so, on what we think are the key elements of the fiscal cliff. But you see the two microphones. I would like you to interrupt us as we go along. We will take questions at the end, but it'll make it a lot more fun, interesting, worthwhile, and substantive for everybody, especially for us up here. If you just challenge us, ask for more information, ask us to repeat something as we're going along. All we ask is that you, did you have a question already? Okay, all we ask, I was thinking, what could you possibly be asking questions about? All we ask is that you get to a microphone to do it. We are recording, and that's the one thing you need to keep in mind, that if you get up in front of a microphone, your face will appear on C-span at some point. So with that in mind, let me quickly introduce very, very briefly the panel. Stephanie Kelton, at the end. Jamie, you know I'm not going to introduce him anymore to say that's Jamie. Stephanie Kelton is the head of the economics department at the University of Missouri, Kansas City, right? I get that right, okay. Bruce Bartlett is someone I've known forever. He used to blog with me on my blog, Capital Gains and Games. Thank you for asking, Bruce. But is now one of the foremost authorities, actually has been for quite some time, on tax policy, tax reform. You can see him and his writings in the New York Times, the great economics blogs. Bruce also writes for Fiscal Times. And he would be shooting me if I didn't mention the book. He's got several, but the latest book is The Benefit and the Burden, published by Simon and Schuster. It's a history and review of issues related to tax reform. I get my usual 10% now, right? Right, until the Caimans account. Right, and then Chad Stone is chief economist at the Center for Budget and Policy Priorities. For those of you who don't know the Center, it is the place where budget analysts go to talk to budget analysts. They do just spectacular work. So, Stephanie, I'm gonna start with you, all right? There's the basic question, just to be, did you see the look or shock in her face, all right? Basic question to start with. Jamie said we shouldn't panic. But you cannot turn on CNBC or Bloomberg and hear talk from people who are, in fact, about to panic, if they're not over the top. Economically speaking, is there a reason we should be concerned about the fiscal cliff? Is the damage that great, that fast, that this is something that has to be prevented absolutely under any circumstances? Please use the microphone. Sure. No, I agree with Jamie that... Okay, we can move on. Right. No, I think that the clear and present danger is not the deficit or the debt or the so-called fiscal cliff. The clear and present danger is really that we still have a very weak economy. And we're looking at, as you said, an environment in which people are really in panic mode over the fiscal cliff. And I think there is a lot of support, actually, because the population doesn't seem to understand what exactly the fiscal cliff is and what it means and what they're hearing on television is an awful lot of hype about what's going to happen if the fiscal cliff isn't avoided. And I think that's what that's doing is it's actually generating quite a bit of support for both sides to come together. It seems adult, it seems like the right thing to do, put your partisan differences aside and do what's best for the country and figure out some way to avoid the cliff. And what that means in practice is striking some kind of a deal. What we have probably all heard referred to as a grand bargain. And I think what is important to keep in mind is that the grand bargain itself is really a form of austerity. It's an austerity plan. And so when you've got an economy that is still struggling to fully find its feet and you're at the same time talking about imposing austerity, I think we've seen pretty clearly watching what's been happening in Europe for the last three and a half or so years. But that's not a good idea. We definitely have time to stop and think and get this right before we end up following Greece down a terrible path. Well, let me just to follow up before we go to Bruce. The Congressional Budget Office says that GDP is gonna fall by 2.9 percentage points if the fiscal cliff hits. First of all, could you explain, I don't think that happens on January 1st. Is that correct? Well, the full effect certainly wouldn't happen. These are of course estimates about what might happen during the fiscal year. So sometime between January and September 30th, the estimate is that you would see a fairly sharp increase in unemployment and GDP growth actually turned negative so that it would result in a return to recession. But on January 3rd, it's not really like, this is actually, I'm gonna steal a little bit of a chat stunder because the center has talked about this as a fiscal slope, not a fiscal cliff, would you agree? Right, because as these tax increases go into place, they don't go into place all at once. You don't have billions of dollars on day one or day two or day three. The cuts are the same way, right? Spending cuts are phased in over a period of time. So this is something that would work its way up over the course of many months to be something that could be fairly devastating for the economy. But in a matter of days or weeks, no, you wouldn't get that kind of an outcome. Okay, Bruce, can you hold for a second since I just mentioned Chad's report? All right. The center's report, which came out October, September? No, it actually came out in... In the microphone, please. Oh, sorry. The first version actually came out almost six months ago. The reason I remember that is I finished the draft the night before going in for Achilles tendon surgery and I'm just about healed. So that was six months ago. It got updated in November. Yeah, and we were concerned that people would be panicking and would strike a bad budget deal and wanted to emphasize that it was not what everyone is, what many people are now calling it, it was not a wily coyote moment where the economy goes out and then goes down. It's just, as we said, a slope, not a cliff. Now, we still talk about cliff now because that's what everyone's using, but I try to remember to call it a slope. Well, all right. So just explain that a little bit further though. So what actually happens on January one and January second in terms of the economic impact? Well, if tax rates go up, that means that people, well, tax rates go up, the unemployment insurance, that the additional federal unemployment insurance expires, the temporary payroll tax cut expires, and so long-term unemployed workers have lose an average of $300 a week. People see a reduction in their withholding, see a reduction in their take-home pay, but it's a weekly amount or a bi-weekly amount or a monthly amount. It's not that all of a sudden you get a bill for the whole thing at the beginning of the year, and so over time it starts to build up. The alternative minimum tax kicks in for high-income people, but that doesn't hit if it happens until they actually file their returns in April, and so things start slowly and there is plenty of time to work out a smart response. Bruce, on the tax side, can any of this be done, be fixed retroactively? Yeah, it all can be fixed retroactively. There is no constraint whatsoever, and that's one reason why I'm frankly very optimistic about this whole situation. You see, for at least four years now, the main barrier to doing any kind of sensible economic policy, especially related to dealing with the debt or the deficit, has been that one of our parties is nuts, and it's the Republican Party. They're completely out of their minds, and their attitude is, and they've torpedoed every single effort to do anything meaningful about the deficit or the debt because of one reason. They adamantly refuse to raise taxes by so much as a single penny, and this is what created the crisis that we're now facing. Remember that the crisis all began because the Republicans refused to allow the debt limit to increase. They were prepared to default on the debt. They're so obsessed with their ideology, and finally they were brought to the bargaining table, and they agreed to this sequester mechanism, and they agreed to 600 billion cuts in defense and 600 in domestic programs, and every single Republican thought, well, this is never gonna happen because what we're gonna do is gonna create the super committee. Everybody remember that? And they will come up with something better, and everybody agrees that that's a smart way to do it, but the super committee went completely down the drain because the Republicans wouldn't accept the single penny of tax increases. Now this might be a justifiable position if we were at a position where taxes were extraordinarily high. In fact, taxes have been extraordinarily low for quite a long time. The post-war average is 18.5% of GDP federal revenues. Right now they're 15.8% and they've been considerably below that for the last several years. If there was one iota of truth to the Republican obsession with the idea that low taxes stimulate growth, the economy would be booming. So basically they have zero credibility, they just lie about everything, but for some reason, the very serious people in this country take them seriously. Obama does not take them over his lap and spank them as they deserve. He treats them with undue respect, and but that has all changed. That has all changed now because you see the tax increase is gonna take place anyway. The Republicans can only stop it by taking some positive action to extend these tax cuts that they are so obsessed with. And by the way, Republicans don't think there is any problem with any level of spending cuts. Only the tiniest little bit of tax increase is what devastates the economy, contrary to everything the Congressional Budget Office has said, which is exactly the reverse. And so the taxes will rise automatically if they don't do anything. And they thought they were so clever two years ago, they just sat on their hands and didn't do anything and finally at the last minute, quite predictably, Barack Obama caved and said, okay, okay, we'll extend everything for two years and we'll take out everything that I demanded that you do as a requirement. And he just totally caved to them and they congratulated themselves and patted themselves on the back, but now things are different. We've had an election. It's clear that the American people have repudiated the Republican ideology, the exit polls showed quite clearly 60% of people support higher taxes to reduce the deficit and so they're holding a very losing hand. And what I say in my column this morning is all Obama has to do is just have the courage to wait. Let's wait until the taxes have actually gone up, then anything that fixes the problem is per se a tax cut, you see, relative to the situation that will exist on January 2. So all of a sudden the political dynamics change. He has all the power. All he has to do is sit there and say, this is what I will accept. Anything that you send to me that I don't want, I will simply veto and you can just start all over again the longer we wait, the fiscal cliff goes on and on and on and the Republicans are absolutely guaranteed to panic and they will be the ones who will cave if the president holds to his guns, which he has shown no evidence of being willing to do up in four years before, but maybe now he will finally decide that he really means what he says and he's really gonna do something about this. So I'm really very optimistic and think about the long term. I mean, in my opinion, this will probably be all fixed within the first couple of weeks of January, made retroactive, nobody will notice it, it will have no impact on the economy whatsoever. But suppose that, but we still got the problem of Republican and Transigence. So here's the deal, whatever is done in January, we make it temporary and then we just come back and do the same thing in a year. Now people will say that's irresponsible, we'd be facing another fiscal cliff. I view it as another opportunity to force the Republicans to face reality on taxes. That's very, very good because our problem is a revenue problem primarily. If we were raising the historical share of GDP as revenues, 18 and a half percent of GDP, nobody would be saying we have to do anything. We need that revenue because that provides the foundation that gives confidence to bond buyers that they will get paid the interest that they are primarily concerned about getting. So I'm really very, very optimistic. My only qualms are about the president's willingness to negotiate hard with people who deserve it, hard. Bruce, two things. First of all, no more caffeine for you. Second, I think it's important, given your opening remarks that we remind everybody that you used to be a Republican. You were a, what, Deputy Assistant Secretary for Tax Policy? Economic. And for Economic Policy in the Reagan Treasury Department. Actually Bush HW. Bush, okay, sorry. And you were Jack Kemp and Ron Paul's Chief Economist at one time? Yes, I drafted the Kemperal Tax Bill. I was Jamie, well-remembered. So. All right, Jamie, you got somebody who I think, you're cut off from caffeine too before you can get started. But can you possibly top that? Oh, question, I'm sorry. Stephanie, well, I guess my question for you is, bringing Greece into discussion, does that do a disservice to the discussion concerning the scale of America and Greece or so drastically different? I hear this a lot out there and it just seems kind of unrealistic. To, I believe Alan Simpson, although maybe not in his plan, but at least his personal view is that the taxes should be increased for everyone and stay that way. Are there any current significance politicians that are actually in power now that are promoting that view? Is that clear? Good. Well, there aren't any. Oh. So we can move on. Okay, Stephanie, did you have a question? Well, when I mentioned Greece, I wasn't referring to the US becoming Greece as the way that we often hear that we're becoming the next Greece and it's used to create hysteria and force people to start thinking about ways to reduce deficits and bring down the debt and so forth. What I was actually referring to is that we've seen what the impacts of austerity look like and it would be rather foolish knowing what we know to go ahead and implement the same sorts of policies here when the economic conditions call for something exactly the opposite, right? Entirely different. We need a pro-growth. We're not gonna cut our way to prosperity. Austerity is not the way to go. I'm hoping actually that we are gonna get a chance to give the formal talks and then I can do some more. Yeah, sure. But we've got one more question and then Jamie goes formal talks you want. You must be a professor. Okay, please. So since this has come up, maybe this question also is for later on and I completely accept the idea that this problem is a demand-based problem. But the argument in the back of all of this is that a social welfare state with decent benefits like social security and Medicare is simply not sustainable. That it is the generous social welfare system that has brought on the Euro crisis. France, in Italy, in England, and of course in Greece. Jamie, it sounds like it's a lob for you. Yes. The Euro crisis is the European manifestation of a worldwide financial crisis. It's primarily a crisis of the financial system, of the banking system and the principal victims of that crisis or the peripheral countries of Europe who are severely constrained by the fact that they are part of the Eurozone arrangements and cannot finance themselves and are therefore basically subject to the dictate of the European Union and the European Central Bank, the IMF. The United States is not in that position. It's in, in fact, exactly the opposite position. It is the country to which capital flows in a crisis, not the country from which capital retreats. The United States treasury has seen or is rising bond prices and falling interest rates on a long-term basis in the last five years. And that is a sign of two things. It's sort of a sign of the world situation, but it is also a sign of the fact that our institutional arrangements are such that the United States government is a good credit, is a good borrower. It is a borrower in which one can have complete confidence because it pays its bills in a medium that it entirely controls. There are risks to that, but they are extraordinarily remote. They're basically the risk of inflation and the risk of currency depreciation if you consider that to be a risk. Maybe I didn't ask the question quite right. The question is, is there a robust defense of a generous social welfare system? In neither case is the social welfare system to be blamed. Now, it is true that in Europe, you can't write a check if you're the government of Greece, if you don't have money in the bank. But there is no bank, no comparable institution in the United States. The United States government writes checks as required by law. Is our social welfare system such that it somehow poses a burden on the economy that cannot be sustained? No, it is exactly the opposite, in fact. What happened in the crisis, and it's very clear in the data, is that our system of social security and related programs, including the medical insurance programs, provided a massively stabilizing force that would otherwise have deeply aggravated and accelerated the crisis. The real crisis in Greece right now is the cutbacks in these programs, which are resulting in massive reduction in pensions, massive increases in the poverty rate, a 25% unemployment rate, and the immigration of anybody who has a professional credential and can see a place to go, elsewhere in Europe, Australia, the United States, which undermines the social institutions of that country. It is the consequence of the policies that they have been ordered to follow. The United States has the option of not following those policies, and we have not followed them, in fact. We have produced followed policies which have been substantially stabilizing with the result that we don't face the same crisis. What we are being urged to do, as I said before, stampeded into doing, would, in fact, make our situation dramatically worse, not better, and would do so, I think, quite quickly if those policies are implemented. Thank you. Let me explain something. European welfare state is not too large to be managed. The whole, this is really all mythology about how Europeans have big government. What the, virtually all of the difference is accounted for by one thing. Instead of paying for health insurance privately, they pay through government. So just think about all the money that is taken out of your paycheck or that your employer pays to pay for your health insurance. If we relabeled all that money taxes and everything else was the same, then we would have a system more like what theirs is. And now we're obsessed with not having government control of health expenditures because we're afraid that this will lead to higher health spending. But this is just the opposite of the truth. The truth is that every single country with national health insurance pays about half as much for health as a share of GDP as we do. We pay 17 or 18% of the entire GDP goes to health. We could have a health system, health outcomes, no worse than Britain. Many of people who visited Britain, the people in Britain love their national health system, their mortality rates and all this other kind of stuff is no worse than ours. And we could have a huge tax cut of 8% of GDP. That's the promise of health reform. Unfortunately, that argument was never made back in 2009 and we still have to make it. But the point is that it's all mythology that somehow or other they've got big government. We're the ones who have big government. We call it the health sector. And also the real problem here insofar as we have any kind of problem at all is that people, our taxes are simply not high enough to pay for the spending that people absolutely insist on having. And that's fine. But we have one party that basically are criminals and blackmailers and they won't allow those revenues to rise and yet they want all the same benefits. They say, oh, we can't have higher taxes because this will destroy economic growth. But back in 1993, I remember this very clearly, every single Republican economist said Bill Clinton's tax increase was gonna cause a massive recession. Every single one, just like every single Republican pollster said Mitt Romney was gonna win. There were 100% wrong and we had a boom instead. So they have zero credibility. They're wrong about everything and they lie about everything. You feel better? Yes. Okay. Jamie, did you have anything else you wanted to get off your chest? Okay, Stephanie, you've indicated that. You have a formal thing you'd like to discuss or you have some opening remarks that we're gonna give you even though we're already opened. So would you please? Well, no. You could get up there if you'd like, absolutely. Yeah, I'm slideshow. Oh, a slideshow, I'm sorry. I'm slideshows. You're gonna make the rest of us to look bad, you know? I thought everybody would have one. So I guess when I started thinking about the fiscal cliff and what the options are, I came up with essentially three. One is to do nothing and hit the cliff and let the cuts go into place and tax increases go into place and what we've been talking about here. The other is to act with a sense of urgency, to avoid the cliff, to strike some sort of a grand bargain, to jump before you hit the cliff. And the last one is the one that everybody here seems, I think, to favor, which is to not do anything rash, to stop, take some time and think about what you need to do to get the policy right. I'm not sure. Can we have somebody move the, can you forward the slides? There you go. Okay, so if we do nothing and we reach the fiscal cliff, we get pushed over the cliff, right? And what does that mean? Well, the estimates are that this means something like a reduction in the 2012 budget deficit somewhere on the order of about half, not quite half, but a fall in total, a cut in the deficit of a magnitude of around $487 billion. This is too much even for the Peterson Foundation, right? Get two slides, go back. The Peterson Foundation says it's too big, it's too soon, it's coming too fast, it's too much to take all at once. It will push the economy back into recession. What we need is to go more slowly. We need that grand bargain. We need something, I think, with entitlements on the table because they're not on the table with the fiscal cliff. And what the Peterson Foundation advocates is that we address the fiscal cliff by striking some kind of a deal now to avoid it, but to put our nation on a more stable, sustainable path fiscally. So far what we've heard, I think, from the president is quite a willingness to go after the grand bargain. From the previously off the record, then subsequently on the record interview with the Des Moines Register, the president says, I'm absolutely confident we can get the equivalent of a grand bargain in the first six months. We can meet the bull Simpson target and more. I genuinely believe that the best things we can do for the economy are to settle the issue of government spending, entitlements, and revenues so that we can provide the kind of certainty that the business community is looking for. Okay, so what to do? Most economists agree now that if we don't reach a deal and we hit the cliff and no deal is struck after some sufficient period of time, it means a recession for the US economy. The business community is putting pressure on the president and others to come up with some way to avoid the cliff, get the deal done early. The population, as I mentioned earlier, seems eager for cooperation and compromise, a deal. So will we jump at the chance to strike a grand bargain because it's perceived as the best way to avoid a recession and deal with our longer term deficit problem? Okay, these are the estimates of what would happen if we hit the cliff versus the CBO's alternative scenario where you keep the Bush tax cuts and you avoid the sequestration, but some other portions of what we'd be facing with the cliff go into effect. In other words, the payroll tax, the extension, the payroll tax cut goes away. Unemployment compensation for long-term unemployed goes away. Hey, but you keep the Bush tax cuts and you avoid the sequestration, the spending cuts. So if you hit the cliff, you go into recession. GDP growth by next year turns negative and unemployment rises to 9.1%. Under the alternative scenario, you avoid recession. The economy continues to grow, but at the expense of rising longer-term debt. So what's the right solution? What's the right choice? Center on Budget and Policy Priority says there's no single magic number, but they've come up with a single magic number of sorts and their magic number is two trillion. So both Simpson four trillion is too big plus they argue we've already gone a good ways toward getting toward that four trillion. So what we need is an additional $2 trillion in deficit reduction over the course of the next 10 years. That would stabilize the debt to GDP ratio and put the economy's long-run finances in order. The goal here is to bring the deficit as a share of GDP down to around 2.5% on average. Over time, 2.5% on average over time. Under the Bull Simpson, the original version, I know you can't see that, but highlighted there in red, you see that the deficit would have gone from around 5% next year all the way down to practically zero 10 years out. So the goal is gradual deficit reduction over time so that the deficit shrinks almost to zero at the end of a 10-year period. So you've got these three different scenarios, right? Is there a pointer in this? Because I could use that. The red one at the top. The red one at the top. All right, so the black star is the fiscal cliff outcome. 2013, if we hit the cliff and nothing is done, the deficit falls from where we are here to about here, between four and 5% of GDP. That's a sizable reduction. What the center on budget and policy priorities is advocating is a $2 trillion reduction over time which would stabilize the debt to GDP ratio and put the deficit at around 2.5% of GDP right here. Simpson-Bowles starts with a larger deficit but aims to shrink the deficit to essentially zero at the end of 10 years. So which of these makes sense? Are any of them reasonable? I never ever answer a question about the right size of the deficit or what the government's policy should be regarding the deficit without thinking of the deficit in context. I never consider it in isolation. It makes no sense to do so. So putting the deficit in context means understanding how the government's budget position impacts other sectors in the economy when other sectors outside the economy also matter. So in other words, we can divide any country into three parts and examine that country. Pull the domestic government sector out. Pull the domestic private sector out. Everything else is the rest of the world. So you have these three pieces and they fit together perfectly because financial flows out of one sector go somewhere. They end up in another sector. If one sector is going to accumulate a surplus, it can only be done if some other sector is running a deficit, right? That's math as we've heard so much about. Okay, there's a reason that that graph looks like a perfect mirror image. It's because it is. On balance, in net terms, everything has to net to zero. So one sector's deficit is another sector's surplus. The red here, this is the public sector's budget. You can see going back as far as the 1950s that the government is almost always in the red, almost always in deficit. The private sector, which are the domestic households and domestic firms together combined, we, the private sector, are almost always above zero. That is in surplus. The green is the rest of the world. And there was a time years ago when the United States ran trade surpluses against the rest of the world. The rest of the world ran deficits. We had the surplus. Those days are over. We now run budget trade deficits. And those trade deficits mean that the rest of the world is accumulating a surplus on us. So the only way that we can keep the domestic private sector in surplus is for the public sector to be in deficit. And the question is, how big does the deficit have to be? Look what happened during the Clinton years. This is the last time we had budget surpluses in the US. Democrats love this, right? This is the badge of honor. We were the party of fiscal responsibility. We brought you budget surpluses and they got squandered after Clinton left office and pushed Peter to weigh the budget surpluses. Those are widely hailed as a very, very good thing. But what do they really mean? And if we're striving for balanced budgets or surpluses in the future, we better step back and figure out what that means for the domestic private sector. And what it meant was that if the government is going to collect more from us, then it's going to spend, that is the government's going to run a surplus, and the rest of the world is gonna take more from us than it's going to spend buying our goods and services, then it drives the domestic private sector, us, into deficit. It has to, it adds up exactly. So if you got a four and a half percent trade deficit and a 1% budget surplus, the private sector is gonna be in deficit five and a half percent, right? The only way you keep the private sector in the red above zero is if the government's deficit is big enough to more than offset the trade deficit. So if the US is running trade deficits, current account deficits on the order of four and a half percent of GDP, the government's deficit has to be at least four and a half percent of GDP or the private sector will fall below zero every single time, okay? So here's the CBO forecast. This is what's projected to happen to the government deficit. If we hit the cliff, and this is the alternative scenario, if we hit the cliff, the projection is that the government's deficit will shrink to around 2% of GDP. Deficits of 2% of GDP together with trade deficits of four and a half, 4%, mean the private sector is by definition going to be in the negative. We'll be running the deficits. Here's that same image flipped over. It's how to create the mirror image of that. It just says that if the government reduces its deficit, it is reducing the surplus of the non-government sector. You have to be able to put these things in context. Why does it matter? What difference does it make if the private sector's in surplus or deficit? Turns out it makes a big difference. The private sector's budget balance is shown here in the blue line. Those gray bars are recessions. We've had 11 of them since the Second World War. In every single case, leading up to a recession, you'll see that the private sector's budget position, its surplus, shrank, and then the private sector tried to retreat. So you see them trying, each time leading up to a recession, they're trying to say, I don't want my surplus to get any smaller, I'm getting uncomfortable. At that point, if the public sector doesn't loosen its belt as the private sector's trying to tighten its belt, we end up in a recession. If I leave with outmaking any other point, the point I want to make is this very fundamental one, which is that the government's deficit is equal, always and everywhere to the penny to the non-government surplus. Not just in the US, in every country in the world this is true. The government's deficit is the non-government's surplus to the penny. Their red ink becomes our black ink. Their deficit is our surplus. The grand bargain means austerity. Those reductions in the government deficit, if the government continues to reduce its deficit, it means that the private sector's surplus will fall. And I just showed you what happens when the private sector surplus falls too far. This picture has no economic meaning. It drives lots of concern and hysteria, but it has no economic meaning. Allen Greenspan was asked a question by Paul Ryan. This is years ago. Paul Ryan posed the question and he said, wouldn't it be a good idea to introduce personal savings accounts? Wouldn't that help put Social Security on a more stable, secure footing going forward? Wouldn't this improve the solvency of the system? And Allen Greenspan gave what had to have come as quite a surprise to Congressman Ryan, very surprising response. He said, well, I wouldn't say that Social Security is on unsound footing today because there's nothing to prevent the federal government from creating all the money at once and paying it out to someone. That's a quote. There's nothing to prevent the government from creating all the money it wants and paying it out to someone. The issue, he said, is will the real resources be there in the future for retirees when they're needed? So he turned the focus away from the financial resources, which he says can always be there, to the real resources, which is what we should be focusing on, employing people, producing the capital, the goods that are going to be there for the next generation, having the real resources is what matters. It's just time that we realized that the federal government is not like a household. The US dollar comes from the US government. It doesn't come from China. Okay, we control our currency, as Jamie said a moment ago. We are very, very different from the countries that adopted the Euro, that gave up their currencies, that can no longer issue the currency in order to spend. The United States government is not revenue constrained. That was Greenspan's point. We cannot be forced into default. Another point that Alan Greenspan has made very powerfully over and over again. There's no economic reason for a grand bargain. We are living way below our means. We're told we're living beyond our means. We're living way below our means. The red line is our potential GDP. The blue line is where we are. The difference between the two is all of the output and income that we sacrifice every single day we fail to bring this economy back to full employment. We've got tons of spare capacity. Factories aren't operating anywhere near historically high capacity utilization rates. There's all kinds of extra capacity to produce. We have millions of people who want to contribute and we have useful things for them to do. This is our infrastructure report, right? What do we need? $2.2 trillion to bring our grade up from a D overall. Important, meaningful work, people who want to work and the financial capacity to do it and the real resources to do it. What we don't have are enough jobs. And here we sit focused on grand bargain which is another way of saying austerity. President Obama got it right when he said this. Companies are awash with cash and what they've been missing are enough customers out there to prompt demand and justify them spending more on plant and equipment. Businesses need customers, sales create jobs. Austerity is the opposite of income creating sales. It reduces income, tax increases reduce income, spending cuts reduce income. Both I would argue are the wrong medicine for the economy today. We've seen the effects of austerity. We don't wanna follow these countries over the cliff gratuitously. Thank you. All right, I'm gonna ask Chad since your CBPP was mentioned, do you wanna respond to add to, you know, take the next? Yeah, I just have a couple of things to say. Our $2 trillion figure is not a recommendation. It's actually a response to the fact that everyone thinks that $4 trillion is what's needed to achieve that a deficit reduction or a debt stabilization goal of stabilizing debt to GDP to keep it rising, to keep debt from rising faster than the economy which ultimately is unsustainable. How long that's unsustainable is another question and how fast it's rising is also predicting the future which is a hard thing to do as Yogi Berra or Nils Bohr, an interesting pair said about predicting the future is hard. So just to be clear what our $2 trillion says and some of the arithmetic behind it, it's not a recommendation, it says that if you wanna stabilize the debt to GDP ratio 10 years out in the budget window that everyone's talking about, you don't need 4 trillion which is the number that everyone thinks both Simpson would entail, you need 2 trillion and you can get 1 trillion of that and you could choose to take longer before you stabilize the debt and you stabilize at a higher level of GDP and so you don't need as much deficit reduction or you can do it faster if you want to pursue the dangerous austerity program but you get a trillion dollars just from the Bush over 10 years, just from the Bush high income tax cuts. We argue very strongly that you definitely need a balanced deficit reduction program, balanced meaning revenues have to play a part and you don't balance, you don't stabilize the debt, we're not talking about balancing the budget, we're talking about stabilizing the debt. You don't do that on the backs of low income households. Every past major budget deficit agreement we've had has been balanced and low income programs have been exempted. The 1990 budget agreement when Read My Lips, George Bush did allow taxes to go up in 1990, there's an expansion of the earned income tax credit. 93, there's an expansion of the earned income tax credit. So when I say grad bargain, I'm not thinking austerity, austerity, austerity. When we say grad bargain, my notion of it is what Ben Bernanke has said whenever he testifies, but as Stan said at the beginning of the conversation, accept larger budget deficits than we would otherwise have now when we have all that economic slack in the economy that Stephanie's picture showed. And defer stabilizing the debt to down the road. And I don't think we have to do a lot of thinking about that. We have all the ingredients, we could do it immediately if it weren't for the political problem that Bruce identified. Don't point at Bruce when you say that. It's a, before we get to your question, Jamie, you've been scribbling few resources. Three points about the long-term future. First is, as others have said, it is very difficult to forecast the fiscal position of the United States government 15 or 20 years out. The past record is atrocious. Anybody who was here in the early 1990s would remember that no one then was expecting that there would be surpluses just a few years later. Why did that happen? It happened because of the force and power of the information technology boom, creation of private credit, and therefore rapid increase in tax revenues. And so what Stephanie showed, this was something that was not forecast at the time. At the time, those who were there in 2000 remember that the secretary of the treasury at the time was, and the chairman of the Federal Reserve were talking about a 13-year horizon for the complete elimination of the public debt. And the Congressional Budget Office was not forecasting that the information technology boom was an aberration that would come to an end, but it did. From 2000 onward, we were back into the much more normal position of the United States government running substantial budget deficits and as the private sector rebuilt its financial position. So that's the first point is that long-term forecasts, the idea that one can control the future position of the debt and the deficit by actions taken today is an extremely tenuous and debatable idea. The second point is that there are certain assumptions being made which create extremely ostensibly scary scenarios. Those numbers that show, again, Stephanie's presentation, the Congressional Budget Office expectation that the public debt would rise close to 200% of GDP by 2035. What are they based on? Two important assumptions drive these projections. One of them is that healthcare costs will continue to rise more rapidly than output, therefore that the share of healthcare in GDP will rise to some extraordinary fraction, 40% or so, by I guess the 2080s. This is something that we know is not going to happen. It is in violation of Herbert Stein's famous law, Stein's law which states that when a trend cannot continue, it will stop. All right? The reality is we're not gonna spend 40% of GDP on healthcare, it's not going to happen. So building that into a forecast is a mistake that should be corrected. Secondly, there is an assumption that interest rates will rise to levels that are consistent with perhaps what they have been in the past, but short-term interest rates, if they rise more rapidly to levels more rapidly higher than the rate of GDP growth will generate a compounding effect which will greatly increase the debt-to-GDP ratio. But ask yourself, how likely is it that short-term interest rates are gonna be driven up 400 basis points or so in three or four years? I think it's not likely at all. If it happened, the economy clearly would collapse. People's houses would lose value even more rapidly, they would default on their mortgages, you would have a disaster, not gonna happen. And so adjusting these assumptions to give you a less tendentious forecast would greatly, I think, ease the political climate surrounding this discussion. And then the third point is we need to consider particularly in light of these uncertainties what our priorities are. Right now, what are the problems that we can tackle? Unemployment, foreclosures, climate change, infrastructure, these are problems that have a very concrete form and a very immediate and pressing, place very immediate and pressing demands on us. Why is it that this very uncertain, very, and in some respects, highly improbable and in any event, let's say, uncertain and improbable deficit scenario is driving our short-term, our immediate policy discussion? To me, it makes no sense at all. In three or four years, if it turns out that the people who have been wrong for decades on this question, in spite of repeatedly asserting their position that the markets are going to turn against the US government, if they're trying to start their right, then the US government can address that problem at that time. But there's no reason to assume it based on the record that we have so far, nor on the position that's being taken by the capital markets. You do have people and institutions, banks, foreign central banks, with a lot of money at play. And what is their attitude toward the United States government's fiscal position? It's very clear. Look at the long-term interest rate, the 10-year, the 20-year, the bond rates on US Treasury bonds. They're at historic lows, and that reflects the true attitude of people who look at this with, as I say, large amounts of money on the table. Question from the audience. Yes, sir? Yes. I think so, but you may have to lean down or raise the microphone to do it. I'm Basil Scarless. I've lived most of my life in Europe, and it always impressed me how central and northern Europe, the core countries, had no difficulty financing both a welfare state and public investment. We seem to look at trade-offs here. Is there, in your view, a trade-off between growing entitlement spending? And it is growing with the retirement of baby boomers, the costs of medical care. Is there a trade-off between entitlement spending and more public investment? And I noticed we don't have a separate investment budget. We seem to regard all spending, government spending, as equally evil or good or doing the same thing. Instead of dividing it between entitlement spending and consumption and public investment, could you comment? I would say very briefly that you would see a trade-off when you would see a strain on physical resources, a strain on the capacity to use a capital equipment or a strain on the supply of labor. And there are no such strains. In fact, quite the contrary, as Stephanie pointed out, we have a vast excess supply of labor, vast underutilization of capital equipment. And the one issue that we need to face is resource costs and energy prices. But that is not a question which is being driven by overuse at the moment. It's being driven by other factors. I'm not as optimistic as Stephanie is about the long-term potential growth path, but is there a trade-off between what we should do to protect our elderly population and to provide adequate medical care to the whole population and what we should do to reconstruct our infrastructure, address energy and climate issues? No, we are underperforming on both fronts. But there's a, it's not a budgetary trade-off, it's our, as long as we think revenues can only be this high, then there's a fight among those priorities. We have to accept having higher revenues to pay for the things we want, that softens that trade-off. The entitlements are not a drain on real resources. They're a transfer. But there is a question of public sector investment versus what's going on in the private sector in that. When we're at full capacity, we have that trade-off. But the issue is we think taxes should only be here. And that's, it was probably too low leading up to now. And it's certainly too low going forward. If I can just add one thing, your last point about capital versus operating expenses. I was a member of the President's Commission to study whether the U.S. should have a capital budget this was created during the Clinton administration. I went into it thinking absolutely we should and came out of it thinking we can't only because the decisions about what will be included in the capital budget will be made by politicians. And as opposed to accountants or someone else like that. Under those circumstances, and there were also definitional questions, but think of what happened to New York in the 70s when the police department was considered a capital expense and therefore was borrowed against. Try to imagine those same types of decisions being faced at the federal level and suddenly education would be classified as a capital expense. Now it may be from an economic point of view, but it was those types of definitional questions as well as one other. What do you classify a missile as? Well it's a capital expense when you build it and it's an operating expense when you press the button. And so there, it was just, it was getting too complicated. So I came out of it thinking you shouldn't divide it. One should be very careful about arguments that hold that we should be spending more on what's classed as investment and less on what's classed as, let's say social security or what's called entitlements. For one thing, military procurement counts as investment, but we should only be doing that to the extent that we actually need it for legitimate national security purposes. And the president's point about not having as many horses and bayonets as we had in 1917 could be appropriately applied to other items of equipment. And secondly, you're right, the education is, I believe, counted now as investment. And it's really hard to see why education expenditures should be counted as investment and healthcare expenditures that counted as a current operating cost. Well and then you're gonna get veterans saying, when you spend money on us, that's an investment. What seniors are gonna say, just because we're a little bit older than the kids you're educating, you can invest in us as well. It became a definitional nightmare. That's not what we're here to talk about. Quick questions, please. My name is Pat Molloy. I'm a lawyer. I'm not an economist. Pat, this is not a 12-step program. You don't have to do that, so. But I'm delighted. Don't rub it in, Pat, okay. But I'm delighted to be here because I am interested in peace and security. Stephanie, when you were putting those charts on, there were two things that I... Economists always tell me that our trade deficits are caused by the lack we don't save enough. One, I wanted, is there causation in that formula or is that just an economic accounting? Secondly, net exports, in my understanding, when you're running minus net exports of a major portion of your economy, that's a drag on economic growth for your country so that a big part of producing economic prosperity in this country may be to go after the trade deficit and reduce those as a part of our GDP growth. Is that... Are these correct things to be thinking about? Or are they right analysis? Okay, well, let me take the last one first. Is it, in fact, the case that trade deficits reduce GDP? They act as a drag on GDP, yes it is. If the deficit were a surplus instead, we would have higher GDP, presumably higher employment and higher economic growth. Could we do even better? Could we achieve full employment domestically with the right mix of macroeconomic policies and be able to consume everything that is possible to produce here at home plus anything the rest of the world wants to produce and ship to us? I think that is certainly something worth thinking about, it's possible. We don't tend to think in those terms, we tend to think in terms of jobs leaving, corporations leaving, producing abroad, whenever we buy something that's produced elsewhere, it means we didn't buy something domestically produced in its costing jobs. We could have a jobs program that allowed us to run our own economy at full employment, take advantage of the ability to produce at capacity, have all the goods and services that we can produce domestically and also on top of that, enjoy whatever the rest of the world wants to produce for us because right now the rest of the world, much of the rest of the world, does rely on exports as part of their economic growth strategy. They want the U.S. dollar, as long as they're willing to produce and send things to us in exchange for the U.S. dollar, it could be a benefit to us if we got our own macroeconomic policy, correct? Yes, sir. The IR News Service, a question for Professor Kelton. I didn't hear, unfortunately, I didn't hear all of your presentation, I didn't hear everything you proposed, but if there's no monetary debt crisis, if there's not a fiscal cliff, but a physical economic cliff, what would you, what would be your response to a Hamiltonian debt reorganization, creation of a national bank for purposes of pursuing infrastructure platforms and related development and assumption of such categories of debt or associated with that or Congress would think by that national bank that would have to be accompanied with a Glass-Steagall reform, but what would you think of that way of proceeding? Well, it's an interesting proposition. I think that most of the motivation for schemes like this are driven by the belief that the debt's too big and the way to get around that, to be able to finance things would be through direct money creation that didn't involve the offset in terms of borrowing. So this is something Congress could do. Congress could decide that it's not going to offset dollar-for-dollar deficit spending with increased borrowing and that would, I suppose, reduce some hand-ringing and anxiety about the size of the national debt, but if I think we had a better understanding of what the risks and challenges are in terms of a growing debt and I really keep coming back to, for me, it's not the debt-to-GDP ratio that needs to be stabilized. It's the debt service that becomes an issue. It's not the debt-to-GDP ratio per se, but the debt service. So I just think that, for me personally, I think I prefer a better understanding of how the monetary system actually works and understanding that the debt isn't the risk that many people make it out to be. And so I don't know. James, do you have thoughts on the hand-ringing? Well, I think it comes down to the fact that the financial system on which we have relied to finance, support economic growth and to set the direction of economic activity. In the 1990s, this was largely information technology. In the 2000s, it was housing in real estate, disastrously. This financial system is not functioning as it should. And this public deficit discussion distracts our attention from the fact that these central institutions that are central to the functioning of any private capitalist economy need to serve the larger public purpose of supporting economic activity and of doing so in a way which is constructive for the country as whole. And they aren't doing it. And so long as they aren't doing it, the private sector is going to be performing below par. And so long as that's the case, the public sector is going to be running substantial deficits because the tax revenues will not be there. And so there are, I think, structural issues. I think you cannot run an economy like ours on a centralized basis. You have to have decentralized decision-making institutions. That's what basically private banks are. Until we cope with the very substantial insolvency of the household, home-owning sector, with the problem of private finance, the public sector is basically going to be playing with a very weak hand. We're coming close to running out of time. So I'm gonna ask the three of you. First of all, the three of you will be the last three questions from the audience. If you keep your question short and if we could keep our answers shorter, that would be much appreciated. Yes, sir. Hi, my name is Tyler Healy. Dr. Kelton might recognize my name. Isn't it true that- Weren't you in the fourth row, third seat? Yes. Isn't it true that federal taxes do not pay for federal spending? This question is for Dr. Kelton. Short answer. Short answer. Yes. So, yes, sir. Quick question. What about the kind of extra national economy? When we talk about raising revenues by taxing the rich more and everybody, I mean kind of the standard cynical responses that the rich will avoid paying taxes. And we know that people offshore money, and also I've been reading lately about how the U.S. is also a haven for offshoring money from other countries. How much is that a problem in our current situation and how can we prevent it from being a problem in the future? Bruce? Well, the main problem is with corporations, multinational corporations, which are able to arrange their affairs in such a way that they don't appear to realize any profits anywhere. And so this is not just a problem for us. If you read the British newspapers, it's a huge problem over there. Starbucks apparently has never paid any taxes in Britain because it claims it's never made any profits. And there's lots of ways that these things can be done that take too much time to explain. But it's essentially a problem related to multinational corporations. At those prices per cup, they don't make much. Never mind. Last question for the audience. My name is Jean Athe and I'm with Peace Action, and I do some lobbying on the Hill around military spending. And I know that you're gonna be talking about that later. What I've been finding is that when I talk to anybody in politics, they don't have the same understanding that you guys have about the deficit and the budget. And everybody thinks that this is just a horrific problem. And so I'm trying to argue, so I find myself in a weird position because I've read some of Jamie's papers and I'm convinced that this is not a problem. On the other hand, I would like to see some changes in the way that we spend our money. I think that we don't need to be spending what we're spending on the military in that we could use that money in better ways. I think that we could require the drug company, enable the government to negotiate with the drug companies and we could save a lot of money there. So if people are interested in the deficit, there are ways to address it. But I find myself a little bit confused about how to do the argument and I wonder if you guys had any ideas about that. I'm gonna let Chad actually, you feel like talking about that? Because I mean, you guys do a great job in describing these kinds of basic issues. Sorry, I didn't mean to. No, I'm not sure exactly. I mean, there are a lot of, seem to be a lot of parts to the question of really how to talk about the fact, how to talk about the priorities sensibly and the deficit and debt sensibly. And the problem is, humans think that a budget is a budget and a household budget is the same as a government budget and it's very different. There's a lot of arguments we've had up, a lot of discussions we've had up here about why that's always a wrong road to go down about why they're the same. What really matters in the longer run is the productive resources of the economy and having our priorities straight. And so arguing the priorities, arguing that, I don't know, I'm floundering because it is a big question and it's a tough question when you're confronting people that are in panic mode about the deficit. So the first thing is, calm down about deficits and debt. What really matters is having a strong economy, focus on that first and then think smart and with arithmetic and with actually knowing what's going on and with your values. Jamie? Very much the same message. I think we have all had the experience of being on the receiving end of a high pressure sales job, right? Where you gotta make up your mind now and the only information you've got is the one that I'm giving you, right? And that, if you recognize that from a condominium sale or a car deal, I think you recognize that that's exactly what we're facing as a country in this post-election period. A high pressure sales job based upon the extraordinarily confident assertion of things that if you may suspect if you examine them closely you would find out we're not true. And the right approach is to take a walk around the block, take a deep breath, get a cup of coffee and think things through. And I think that's the approach we're trying to encourage here. And there are differences of view on this panel. As between some who say, well, really there is this long-term deficit problem that we need to address but we should do so in a sensible way because it's not urgent. And those who say really we need to place our priorities on the immediate concrete problems that we actually face. And at the very best defer this other issue which is highly speculative to some other time when we perhaps have a better understanding of the facts and can make a more mature and informed decision. And I want to say, I recognize that in the political climate that we've been in it's extremely hard to find a footing for that argument. But this is a moment, a really a gift from the American public to take that deep breath to be realistic about the world as it is and to approach the next two years, four years with a kind of a new spirit of determination and realism and practicality. And I hope we can move in that direction. Okay, 30 seconds. Yeah, Stan said the center, we do do a lot of talking to members of Congress and others and persuading the public. And what you want to do is be armed with some facts and analysis because when you start to get the hysteria there's always the well actually and point to some analysis of what's really going on with social security and what's really going on with Medicaid. We have to end in about a minute and a half. So I want to end, I'm going to do two things. First, one quick question for everybody, same question. Bring it back to the fiscal cliff. Has the debate over the cliff, the fact that the defense industries and others have said this is going to cause massive layoffs and things, have we finally put to bed the argument that federal spending cuts don't affect jobs? Is that now, can we now conclude and for at least a couple of years say that spending cuts do affect the number of people being employed? Jamie? Yes. Stephanie? Yes. Bruce? I still don't think Republicans believe it. Defense cuts cost jobs, other cuts create jobs. Okay. Right, do we feel vindicated, those of us who believe that argument? Yes. But does the other side believe it? No, so I'm with Bruce, no. But we do have something that's occurred over the last several months with particularly the aerospace and defense industry saying this is going to cause massive layoffs and sending out layoff notices and et cetera. All right, here's the last question. Do you have a Twitter handle or a blog you'd like to tell everybody about, Jamie? I do not. I would simply once again recommend that you visit the website of Economist for Peace and Security at www.epsusa.org. Stephanie? I do. My Twitter handle is the opposite of the deficit hawk and the deficit dove. It's at deficit owl. And I blog at a blog called neweconomicperspectives.org. Bruce? I tweet at Bruce Bartlett. CBP.org, you can find what our Twitter is, what our Facebook is, and our regular website and blog site. And I asked this question so I could tell you mine. My Twitter handle is at the budget guy. My blog is capitalgainsandgames.com. And would you all join me in thanking everybody on the panel? Stay where you are, the next panel is going to start almost immediately.