The U.S. Economy and Fiscal Policy

Thursday, November 21, 2013

Douglas Holtz-Eakin and Vincent Reinhart discuss the U.S. economy amidst continuing fiscal uncertainty.

MURRAY: Thank you for coming. My name's Alan Murray, and I'm going to begin this session with a prediction. And the prediction is that a decade from now, or maybe two decades from now, there will be untold graduate students writing an untold number of economic theses on the period we are living through right now, obviously, an extraordinary period, with debt at record highs and interest rates at disappearing lows, and nobody seem -- no one quite sure what to do about either one of them.

So we're very fortunate today to have two men who have seen fiscal and monetary policy inside and out from all conceivable angles, Doug Holtz-Eakin, who is the head of the American Action Forum, former head of the Congressional Budget Office, and Vince Reinhart, chief U.S. economist for Morgan Stanley, formerly with the Federal Reserve.

And I guess let's start, Doug, with fiscal policy.


MURRAY: Not long ago, there were a lot of people running around telling us that this was the biggest problem we've faced as a nation. Now nothing -- we've kicked the can down the road several times, and it looks like we may kick the can down the road again. Nothing much seems to be happening, and nobody seems to be too concerned about it. So what's going on?

HOLTZ-EAKIN: First, I want to stipulate at the outset that the U.S. doesn't have a fiscal policy. It has House budgets, Senate budgets, White House budgets. They never agree on anything. What we get is budgetary outcomes usually bad, so step number one.

Step number two is that, compared to a lot of the rest of the world, we're -- you know, we're the -- you know, the best looking horse in the glue factory, and so we haven't gotten into international capital market problems in the way that some people worried about, and I thought legitimately.

Step number three is that...

MURRAY: You thought they worried about it legitimately, but it turned out to be wrong so far?

HOLTZ-EAKIN: So far. I mean, this is an issue of timing. And what's happening is, with the economy recovering -- albeit slowly -- and with the Budget Control Act, the deal that was cut in August 2011 in place, deficits and debt as a fraction of GDP are basically stable through 2016-'17.

Then everything goes north again, and we're back to the same conversation about what a horrible position we're in, but, you know, now that 2017 is conveniently a political eternity, gets past this administration, becomes the next administration's problem, so nothing's happening.

MURRAY: So one part of that sort of short-term pleasant picture is health care costs, which suddenly surprisingly, over the course of the last four or five years...

HOLTZ-EAKIN: Absolutely.

MURRAY: ... have moved up, what, 1 percent or 2 percent?

HOLTZ-EAKIN: You know, the long-run -- the 40-year phenomenon was that health care spending per capita outpaced income growth per capita by 2.5 percentage points on average every year.

MURRAY: Every year.

HOLTZ-EAKIN: Every year, so, you know, costs versus resources, costs are winning. And then suddenly this has gone away in the past three years, especially. It's basically flat.

MURRAY: Well, so if that turns out to be permanent, then the problem is solved?

HOLTZ-EAKIN: There was an "if" at the beginning of that, right?


So here's the problem. We've done this before. We had this happen in the '90s, where we actually had four years where it just flattened out and everyone declared victory, and then the American publicity split the bid on HMOs. They didn't like them. And costs came right back.

And so if you just look at that horse race, it's not always been the case every year. There have been these other places where it's gone away for a while and we got our hopes up, and then it reversed. So I'm more cautious than declaring victory.

Second is, let's just remember, there was a recession. That's part of it. It's not all of it. That is part of it. And, third, there is the Affordable Care Act, which when it's up and running is intended to make people spend more. That is the goal, cover people, allow them to get medical services. That is going to guarantee we go the other direction, at least to some extent. So I don't think we should be...


MURRAY: Well, is that right? I mean, I've talked to businessmen who have said this is going to push people out of business plans into -- put much more the monkey on their back and ultimately, over time, that will bring down costs.

HOLTZ-EAKIN: Again, it's not unambiguous. The Affordable Care Act has it in some things which are intended to change the cost of care, the sort of core driver, but I don't expect that to happen quickly, if at all. And there's a lot of this that's really just the entire health sector, you know, realizing that they're under the microscope. And so they're all being very cautious now. And some of that's going to go away.

MURRAY: One last question before we move on to monetary policy, which is equally troubled, but if the dynamics are the way you describe them, and Washington and Congress is basically in a fistfight anyway, hard to get anything done, there's really no reason to expect in the foreseeable future that you're going to see any kind of a grand bargain, serious compromise on...


MURRAY: Not going to happen.

HOLTZ-EAKIN: No, I mean, the -- you know, the 25-year Mexican standoff was Republicans saying to the Democrats, we're not going to raise taxes until you fix those entitlement programs, the Democrats saying to Republicans, we're not touching our beloved entitlement programs until you raise taxes, and it just went on. And then there was a bit of a tax increase at the beginning of 2013, and Republicans waited for some entitlement reforms, and now they're just more angry than ever, and I don't see any hope of a big bargain in this environment.

REINHART: Last time I checked, next year is divisible by two. And if the White House is hoping to campaign for Democrats in the House on the platform that Republicans are obstructionists, then what incentive do they have for a grand bargain?

HOLTZ-EAKIN: To do anything.

REINHART: And on the Republican side, they have to at least rehabilitate their reputation away from being obstructionists, and that's a recipe for politicians neither doing no harm nor doing no good.


MURRAY: I mean, there are -- we should say there are some interesting talks going on between Paul Ryan and Patty Murray, although the best I can tell is that all they're really talking about is putting back some of the money that's been sequestered and paying for it by cutting some other little things along the way.

HOLTZ-EAKIN: That's exactly right.

REINHART: Fruit has been hanging low for a very long time, though, right?

HOLTZ-EAKIN: I think they'll get a deal like that, I do, quite frankly. It'll be a small deal. But there are some -- you know, it's not all the numbers, right? I mean, I love the numbers. You can love the numbers. There's a policy underneath the numbers.

And the defense policy, for example, has this $20 billion sequester in January, it's a sharp move down. It then reverses, and it makes no sense from a policy perspective to do that to the Defense Department. It's already had some readiness impacts. And so smoothing that out, which will be a main objective of what Ryan's trying to do, makes sense from a policy perspective.

There will be a price, and that Democrats' price will be, hey, we've got some non-defense discretionary programs that are getting starved by these caps. Help us out. And the only way to pay for that is to go to the other part of the budget.

MURRAY: So -- OK, so we've put fiscal policy to rest. Nothing's going to happen. Don't -- monetary policy...

HOLTZ-EAKIN: Did a great job.

MURRAY: Really. I mean, but monetary policy is in kind of a similar position. We've had zero percent short-term interest rates for, what, four or five years now. And they look like they will continue at least for some time into the future. We have no idea what the effects of -- I mean, that is a grand economic experiment. We have no idea what the long-term effects of that are, do we?

REINHART: I think we first have to appreciate the extent to which the previous discussion has created the second part of the discussion.

HOLTZ-EAKIN: Stole my line. I think that's true. No, it's 100 percent true.

REINHART: I also -- I often think about the classic scene in service comedies of the '40s and '50s, where the officer comes in and says, "Men, we need a volunteer for a dangerous mission. You probably won't come back alive, but your nation will be grateful. Please take two steps forward." And then everybody takes two steps back, except the hapless hero.

And the hapless -- right, the hapless hero is not the person you would pick for the job who doesn't have the tools for the job, but is only going on the mission because of the failure of all his comrades. And...


MURRAY: And our new hapless hero is Janet Yellen.

REINHART: That's right.


HOLTZ-EAKIN: He's right. I mean, you know, everyone says...

MURRAY: We have to do it, because nothing else is...

REINHART: There are two ways you put it. They have to do it because no one else in Washington is doing it. On the other hand, that they are doing it makes it easier for everyone else to want to...


MURRAY: But it seems like we know the odds are high that there are going to be some horrendous unintended consequences. We just don't know exactly what they are.

REINHART: So I quoted William of Orange so many times in the boardroom on my retirement, they gave me the quote on bookends, which is, "One need not hope to succeed" -- and -- no, one not hope to undertake nor succeed to persevere. It's the job of the Federal Reserve to pursue the goals of maximum employment and stable prices. They have a limited number of policy tools, the level of the policy rate and the size and composition of their balance sheet.

If there are headwinds on aggregate demand, associated with, first, the financial crisis and, second, incoherent fiscal policy...

HOLTZ-EAKIN: Fiscal policy.

REINHART: ... there aren't that many other things they can do.

MURRAY: But this gets back to what I was saying at the outset. Don't you think that we're going to -- that we're going to wake up a few years down the road and find that this extraordinary policy period is going to lead to some extraordinary consequences that we can't quite imagine right now?

REINHART: So one could raise the possibility that the Federal Reserve is this serial bubble blower, that as the channels of monetary policy influence get narrower and narrower, all that policy accommodation first went to the equity market in the '90s, then to the housing market in the early part of the 2000s, and now to the government bond market, because that's the levers of policy.

MURRAY: So there are some other issues I want to talk about, particularly because what you're both saying is that nothing's happening on economic policy, so there's only so much we can say about it, but there are some -- but before I do that...

HOLTZ-EAKIN: We can say it again, though.

MURRAY: Yeah, I keep saying it. No, it's your business. I understand.

REINHART: It's also endlessly entertaining.

MURRAY: But what should...


MURRAY: ... what should be happening?

HOLTZ-EAKIN: Yeah, I just -- you know, I -- you know, there is this game. I'll take this bullet so that Vince doesn't have to about, you know, the Fed exit and the timing of the exit and the pace of the exit. And what I have believed for some time now is, it doesn't matter whether the policy's effective or not. They can't exit, because someone has to appear they're trying, and they can exit as quickly as they get the fiscal house in order, really. And so we'll see. I mean...

REINHART: But the flipside of it is, if they don't get the fiscal house in order, then the Federal Reserve will be invited to be part of the solution, and that is higher inflation.

HOLTZ-EAKIN: So my fantasy...

MURRAY: Don't -- don't...


HOLTZ-EAKIN: We're going to go back to that.

MURRAY: OK, good.

HOLTZ-EAKIN: But, you know, economists talking about their fantasies in public is a bad idea, but my fantasy was that the next Fed nominee -- in this case, with Janet Yellen -- would sit down at the table say, we're not rescuing you anymore, OK? If you confirm me, you should know, you have to fix this problem. We're not stepping in. And thus...

MURRAY: That...

HOLTZ-EAKIN: ... change the deal. Change the deal.

MURRAY: Come on. That was a pure fantasy. The chances of that...

HOLTZ-EAKIN: I said that, Al.

MURRAY: ... were less than zero.


HOLTZ-EAKIN: I do budget work. I fantasize a lot.


I mean, come on.

REINHART: Well, for instance, that's as hollow as the debt ceiling standoff, because you know at the end of the day the secretary...


MURRAY: They'll step in.

HOLTZ-EAKIN: They're going to do it.

REINHART: They'll step in.

MURRAY: Of course. But what -- spin out the scenario that you referred to just a minute ago. So inflation seems like the last thing we should be thinking about right now, not a problem, not a worry, it's not a serious issue. How -- and what the Fed policy -- what you would say if you were still in office, you can -- you don't have to say it now because you're not in the building anymore -- but what you would say is, we have the tools to deal with inflation when it becomes a problem. So why is it something we have to worry about?

REINHART: So first is, I think there is an understanding that risks are asymmetric. Paul Volcker and Alan Greenspan told you how to deal with inflation when it's above your goal. Japan gives you the warning of what goes wrong when inflation is below your goal. And so the risks are asymmetric. And you can understand why you would be, therefore, leaning to accept the risk of inflation.

And output, I think that output is growing more slowly than Janet Yellen thinks, that we have impaired our ability to produce over these last six years, but I also think there is some resource slack now, and so inflation is not a near-term problem.

However, in the end, monetary policy isn't independent of fiscal policy. If there is not a meaningful fiscal consolidation, and -- the good news is, we're so inefficient in delivering fiscal policy, it's not that we have to do one thing. There are many different ways we can improve our lot. But if we don't do that, then at some point the Federal Reserve will have a very large balance sheet, face market pressures, and at the end of the day, fiscal policy wins in the sense that the monetary policymaker concedes. And the way you erode too big a debt is by having higher inflation.

MURRAY: And just to play that out a little bit more, basically what happens is that the Fed has a choice between intolerable levels of interest rates or inflating, and you're saying they'll probably -- given the intolerability of the interest rate level, they'll probably go for inflation?

REINHART: Exactly right.

HOLTZ-EAKIN: So my take on this -- and I'd love to hear Vince -- my take is that the Fed has a track record -- it's got tools, but it has a track record of always moving late coming out of a recession. You always get a little bit of an uptick, and then they take it back.

This Fed in these circumstances is going to move as late as you could imagine coming out of this recession. I mean, it's stacked that way.

MURRAY: Because?

HOLTZ-EAKIN: Because it's a bad recession. They don't want to cut off the recovery too soon. This is a Fed that's worried about the downside risks disproportionately, and it's not going to worry about...

MURRAY: So it's a dovish Fed?

HOLTZ-EAKIN: It's a very dovish Fed, it is. And so it's almost ordained to create some inflation. Plus, the exit's hard. I mean, technically, it's difficult. I mean, we're in uncharted territory. So I -- I don't know when, but I'm betting dollars to donuts we see a noticeable uptick in core inflation in the U.S.

REINHART: Now, we're having this...

MURRAY: The when is important. We're talking about...


REINHART: ... three to five years, three to five years.


HOLTZ-EAKIN: This is not -- right.

REINHART: But the basic story is, you look at any policy interest rate, any central bank, any period of time, policy interest rates go down a lot quicker than they come up. Why? Because at the beginning of the tightening episode, you can't discern how much of the momentum in the economy is self-sustaining, how much...


REINHART: ... usual policy accommodation, so risk averse, you tend to delay. That's just a policy interest rate. When the composition of your accommodation is so complicated in terms of the balance sheet and its own composition, don't you think they'll be even slower to that? And, oh, by the way, I think the Federal Reserve officials will convince themselves that a little bit above goal inflation isn't such a bad thing, because you've been below goal for so long.

MURRAY: So I was around -- I'm old enough to have been around when we went through this in the late '70s. As a cub reporter, one of my jobs was to chase the big man, Paul Volcker, around and, you know, try and get him to give inscrutable answers to questions.

And you needed a big man. I mean, it was a big -- you know, when that happens, when you get the spike in interest rates and you're faced with that tradeoff of real pain right now in order to fight inflation in the future, that's a hard thing to do. Is the current Fed -- and in particular, is Janet Yellen up to that job?

REINHART: So, first, we have a six-month case study of the importance of leadership at the Fed. A lot of monetary policy now is about forward rate guidance. It's not the current rate that matters; it's the whole future path for rate. For the last six months, Ben Bernanke really couldn't provide that guidance credibly. Why? Who's going to really listen to him when he says we're going to keep rates low in 2015? By that time, he's going to be the commissioner of baseball.


And Janet Yellen, up for confirmation in the Senate, can't say anything about monetary policy. And so in some sense, the drifting of expectations about the Fed, the market volatility is that's what happens when you don't have a leader.

MURRAY: Will we get one in time?

REINHART: We will get a leader who believes strongly in the -- her model of the U.S. economy, who believes very strongly in forward rate guidance, and who is also not as self-effacing as Ben Bernanke. One thing you've got to remember is -- I mean, he really was the global, you know, maximum in that regard. He went into the enterprise wanting to be a democratic chair, wanting, believing that groups make better decisions than individuals, and one thing you do then is you never front-run the outcome of the democratic process.

MURRAY: So I should confess here that she was my macro professor at the London School of Economics for my graduate degree. I learned the model from her. She drew a very nice Phillips curve up on the board in...

REINHART: So now we know who to blame.

MURRAY: No, I just watched. I just watched.


Let's talk about some good news, which is what's happening with energy in this country, and an extraordinary renaissance, still not fully -- our polling at the Pew Research Center shows it's still not fully recognized by Americans, what has happened here in the last few years. That has to put some wind behind this economy, doesn't it?

HOLTZ-EAKIN: It's -- the energy sector's roughly half the jobs we've gotten in the recovery. I mean, it is huge. And the character of this is very important, because it gives you jobs upfront, and then income in the out-years, so it's a very -- at a time when you need sort of the jump-start, it does that. It's sustainable in the out-years.

And, you know, I think as everyone knows, we finally hit the magic where we produce as much oil as we import. We're sort of getting better. We've done some, you know, macro simulations of what this does to our exposure to the traditional devil, which is the international oil price shock, and it's dramatically different when you aren't strictly on the consumer side. When you have some of the production side, the exposure to the economy and the budget to this is a lot different. And so this changes the landscape completely.

REINHART: So it's an important offset, in our view, to the very wrenching effects of the financial crisis on aggregate supply. We are good in the middle portion of the country extracting a form of energy we don't like to ship. That gives a comparative advantage in the middle part of this whole continent. And if we take advantage of it, it means we'll have to do more capital spending to site manufacturing there. And it's a continent-wide advantage, because we can extract, manufacture, and assemble up and down -- down these three nations.

MURRAY: So then -- then it's not just aggregates supply. You begin to increase productivity and long-term growth rates.

REINHART: And remember that oil and gas extraction itself is up -- almost up to a quarter of all structures investment.

MURRAY: You started your comment with an if, if we take advantage of it. Are we -- are we taking advantage of it? Are we doing what we need to do?

REINHART: So, right now, we're doing the 50 state laboratories. And I think an important thing to look at is, which way do pipelines get built? If they get built north to south, it means that we're going to keep that relative price advantage in the continent. If they get built east to west, it means the Canadians are getting...

HOLTZ-EAKIN: Going to sell it off, yeah.

REINHART: ... getting impatient with us and we don't keep that relative price advantage.

HOLTZ-EAKIN: I think that's right.

MURRAY: You watch Congress closely and the White House closely. Is Keystone going to be approved?

HOLTZ-EAKIN: Yes. The only question is, when? I mean, you know, this...

MURRAY: At some point -- does at some point it become too late to...

HOLTZ-EAKIN: Yeah. At some point, the Canadians say, we've had -- I mean, they're very frustrated now, I mean, very frustrated. And -- but, you know, I think this is something that the president does late in December on a Friday afternoon at 4 o'clock and gets it out of the way before the election year, because if it gets into 2014, it's a bad news thing from an electoral point of view, and then it gets too late entirely. So I think it's going to happen.

MURRAY: What about the notion that the energy boon can create a manufacturing renaissance and a manufacturing renaissance can recreate the middle class in America?

REINHART: There's going to be some of that, that is, if we re-site manufacturing...

MURRAY: Big, little...

REINHART: And, remember, in terms of emerging market competitors, there's wage pressure in China, there's wage pressure along the Pacific Rim. The advantage comes when you put manufacturing there. It is true that the really energy-intensive industries don't export a lot, but they're upstream to -- and produce the things that -- for manufacturers that do export a lot more.

However, you want to curb your enthusiasm a bit, because it's a closed economy, right? In the -- at the end of the day, and we'll probably have a stronger currency than we would have otherwise, and if we have a stronger currency...

MURRAY: So that's where the difference is.

REINHART: ... it means we're crowding out some other exports.

MURRAY: So the advantage of lower -- the advantage of lower energy prices, which comes largely from the fact that you can't easily ship national security overseas...

HOLTZ-EAKIN: Natural gas.

MURRAY: ... is not just a pure windfall. It will have offsetting effects in terms of...


HOLTZ-EAKIN: Yeah, it's going to affect the composition of economic activity dramatically. I mean, it already has. I mean, you know, Dow is back in the U.S. in a way that wasn't true, DuPont, you know, this sort of -- the direct chemical companies who need those feedstocks, it changes their price points, and they're back in the U.S. in a big way. But it's not just a pure win.

REINHART: But at the end of the day, we're going to have a bigger capital stock than we would have otherwise, and that really is the source of wealth, and it's a good thing.

MURRAY: So I spent some time earlier this week at the Wall Street Journal's CEO summit, which is 100 CEOs, big companies, based in the -- mostly based in the U.S., not all based in the U.S. They did some private sessions where they talked about, you know, what are the greatest priorities for economic policy in the U.S.?

This is a quiz now. Can you guess what was number-one on their list? Number-one policy?

HOLTZ-EAKIN: Education. Education.

MURRAY: Before education, because it's shorter-term than education.

HOLTZ-EAKIN: Tax reform.

REINHART: Corporate tax reform.

MURRAY: You're getting closer. All good. But it was immigration.


MURRAY: So, I mean, how important is that?

HOLTZ-EAKIN: It's huge. I mean, this is -- this is something that is long overdue. And, you know, we have -- immigration affects every part of American life, and that's why it's so hard to get done, but it is also a powerful tool of economic policy. And we forget that in these debates that, you know, the native-born population has sub-replacement fertility. In the absence of immigration, we don't grow in population, we don't grow in our labor force, the size of our GDP doesn't rise.

So the immigration decisions we make dictate our future labor force, our future productivity, and our future economy. You couldn't get a more important issue.

MURRAY: Do you agree with that?

REINHART: Our policy is completely illogical. And think about, at the high end of that distribution, the fact that we educate so many people and send them back home. We just stapled an H-1B visa to...


HOLTZ-EAKIN: ... core visas -- I mean, think about this. Core visas -- forget the temporary stuff -- 6 percent of our visas are awarded for economic reasons. We have a long and proud tradition of family reunification, political asylum, refugee, but this is a powerful tool of economic policy that we don't use.

MURRAY: We aren't using. So at the beginning of this year, the punditocracy was in sort of general agreement that the one issue, maybe the only issue that could get dealt with this year in a rational way by an agreement between the two parties was immigration. Where are we now?

HOLTZ-EAKIN: Closer to the finish line, not dead. I mean, I think the -- all the big reforms die several deaths along the way, as you know. Tax reform, immigration, name it. You know, John Boehner has decided to take over the immigration in the House and personally put his staff behind getting these bills through. And the president has signaled his willingness to do this on a bill-by-bill basis, and I think that's promising. There's a window now to do something. I think the calendar's against them. And then there's a window after the filings are done for Republican primaries in the late spring, and that's where you'll see the action.

MURRAY: Are you counting on anything happening?

REINHART: That's the assessment. Lower probability, I think, event.

MURRAY: So when my colleagues at the Pew Research Center went into the field this spring, did a poll in 39 countries, one of the questions they asked was, what's the leading economic power in the world today? And the options were U.S., China, E.U., Japan, as you -- and other. As you can imagine, the E.U. didn't get a lot of votes.

HOLTZ-EAKIN: How did "other" do?


MURRAY: "Other" got quite a few. But in the United States, 44 percent said China and only 39 percent said the U.S.

HOLTZ-EAKIN: That's just wrong. I mean, sorry.


MURRAY: Vince?

REINHART: Size matters. And they may be growing faster than we are, but are you confident that the Chinese growth model is sustainable over even the medium term? I'm not at all.

MURRAY: And so then cast that 10 years down the road. If the question were, 10 years from now, who will be the leading economic power in the world?

HOLTZ-EAKIN: I think my answer would be the same as it is today.

REINHART: Yeah, I agree.

MURRAY: Twenty?

HOLTZ-EAKIN: I don't think -- I don't...


HOLTZ-EAKIN: I really -- I mean, look, the U.S. is the largest, strongest economy on the globe, period, and all of its problems are self-inflicted. There is no reason why, in any foreseeable future, we don't stay at the top.

MURRAY: If we just get our act together.

HOLTZ-EAKIN: And we traditionally do. I mean, you know, the founders made it very hard to get things done. The system is rigged to be hard.

MURRAY: Oh, but that's...


MURRAY: ... that's the "things have always been bad"...

HOLTZ-EAKIN: No, no, and this is worse. I have no question about that. But traditionally, you know, we muddle through in a pretty successful fashion. And I expect us to do it again. I mean, there are five things to get done. Think about it. If we do entitlement reform, tax reform, education reform, immigration reform, and some regulatory reforms, the 21st century is wide open, and we're going to get some of those things done, because we're going to have to. The constraints will bind, and we'll get it done.

REINHART: I think voter anger is an important discipline in this process. And our history is, we keep churning, and as long as things aren't right, then we'll have regime shift, regime...

MURRAY: Vote the bums out.

REINHART: Leadership happens to be channeling the voter anger in the right direction. We haven't had leadership for a while to get to the right place.

MURRAY: Well, right, that's the key. I mean, voter anger has been fairly unproductive, it seems to be, in the last -- because there are no rewards for doing the right thing. You know, occasionally, you'll see an outbreak of courage on Capitol Hill. I would argue you've seen a couple -- John Boehner, you know, at moments. He got no credit for that, no -- you know, attacked by his own party, attacked by the other party. So leadership doesn't seem to have much of a public reward at the moment.

HOLTZ-EAKIN: So the -- my answer on that would be, for the kinds of big reforms that we need, they have to be bipartisan in nature. And that means that the White House leadership has to be very strong, because only the White House is positioned to do the things that you need to do to get it done. So you send up bills and give the Congress air cover, because then they get to say to their constituents, I didn't want to do this, the president asked. The bills that come up are by definition flawed, so they get to fix them and claim victories.

MURRAY: So it's the president's fault?

HOLTZ-EAKIN: And -- it has -- the past two presidents have not done that. They've sent out principals. They've made the Congress do all the drafting. And that's not going to work for these kinds of problems.

REINHART: Yeah, how does health care reform hinge on what the Senate Budget Committee does? American Recovery and Reinvestment Act, 717 pages of how to spend money, it wasn't top-down design. And sort of just the way I -- I would put the fiscal policy problem generally is, what's the most overvalued asset in the U.S. today? I think it's the net present value of entitlements that we think we're going to get, because we don't have a fiscal system that can deliver on those promises.

HOLTZ-EAKIN: No question.

REINHART: But it also tells you why politicians haven't stepped up, because it requires starting a conversation with your voters by saying you're not as wealthy as you think you are.

MURRAY: Interesting. All right. Let's open it up to questions from the audience. Please state your name and affiliation before asking your question. We'll start right here, Chris. There's a microphone.

QUESTION: I guess this is a question, obviously, for both panelists, but, Doug, I wanted to pick up on a bit of your optimism on the five major challenges, because I was at a book launch with Glenn Hubbard yesterday, and he might take the under part of your over-under trade. So specifically what -- why are you more optimistic in that regard, given, you know, some of these challenges require also tackling, you know, political dysfunctional system? And as a specific example of that, how do you handicap the likelihood of a repeat of the fiscal imbroglio that we had in October now again -- what, in March, or whenever the debt ceiling is? And what gives you confidence around that?

HOLTZ-EAKIN: I don't think we're going to see that again, because of a couple of things. Number one, the crashing Republican success that watching the Affordable Care Act self-destruct, right? I mean, they just happen to stand there and they're doing better, and they're not going to want -- seriously, I mean, you know, they're not going to want to mess that up.

And we have some very striking polling about what went on before and after. We went into the swing districts -- my think-tank did this -- we went into the swing districts that matter, the battleground districts. Before the shutdown, on policy grounds, people agreed with them, including the independents, who were very important, and many of the Democrats, didn't like the Affordable Care Act, defund it, defang it, whatever, you know, just -- go through that list, they're fine.

Ask the question specifically, should you shut the government to deal with this? No. Ask the question specifically, should you not raise the debt ceiling to deal with this? No. They did those things, right? Go right back into the same districts. One week later, after three days of shutdown, the 9-point generic ballot advantage they had going into 2014, gone in one week. And on policy grounds, where they thought they were good, everyone rallied to the flag. The Democrats went back to supporting Democratic policies and the independents said forget you guys. And so they've got both sides of the equation.

We can stay out of the way, and if we do something, we kill ourselves for next year. They'll figure that out. It's going to same some repetition, but they'll figure it out.

MURRAY: So we will get to the "kick the can down the road" solution...

HOLTZ-EAKIN: Yes, we will.

MURRAY: ... much more easily and sensibly.

HOLTZ-EAKIN: Smoother. Smoother. And Boehner built up his internal capital by letting these guys -- I mean, it wasn't just "We want to touch the stove, Dad, can we?" It was like, "We'd like to place our face on the stove, is that OK?" "Yes. Yes, go for it."


"What would you like to do next?"


MURRAY: Questions? Yes, right there, yeah.

QUESTION: Karen Johnson (ph), consultant. I would like to question a bit the tone of the discussion about Federal Reserve policy, because there was the implication -- and I'm an ex-Fed person...


HOLTZ-EAKIN: I was waiting for that context.

QUESTION: ... that the Fed should be the adult in the room, the Fed should be the one with the long-term horizon, and the Fed should be the one to figure out the unintended consequences, the Fed should act as a disciplined force on Congress and somehow change the rules of the game, somehow, and take action that they're not now taking.

This is a democracy. Nobody empowered the Federal Reserve to do that. Vincent I think made a remark in passing -- if you didn't, my apologies -- that, you know, they're quick to point out what they were told to do, which is to do the dual mandate, right? Well, this is a democracy. It's right for them to do what they've been told to do.

I think the problem is more fundamental. I think our voting system and our voters, the redistricting and the demographic changes we're seeing are conspiring to make it very, very difficult for us to solve these kinds of problems, the five issues, and so forth.

And I think you're underestimating that side of the problem. I don't think it's a question of if only the Fed would do X, somehow that would be a big improvement. And I'd just like your reaction.

REINHART: So I do think the Fed is the only adult in the room, because all the other adults left the room. So -- and, therefore, it has a responsibility. I think a deep irony of the last 30 years is we decided to make central banks independent because that would solve the problem of price stability, given that you can't trust politicians to do -- to take short-run pain for long-run benefits.

Having created these independent central banks, it also means they are free to act very quickly to do things that -- if politicians are slow to. And expectations of central banks are permanently -- have been elevated and won't go away for a long time. Fed's got a complicated balance sheet. We will expect it to keep a complicated balance sheet. The Fed could create special facilities. If something goes wrong in the economy, we'll expect the Fed to do something now, and it's not just the Fed, it's the ECB, it's the Bank of Japan.

What is -- and I completely agree -- what's missing from that discussion is the reason they can do those things is they operate in a democratic deficit by structure. That's not appropriate in the long term. And in some sense, the really important political issue is, if we're having our central banks do more things, how does the political representatives govern the central bank? How do we monitor the central bank? And in that sense, the Congress has failed completely in terms of having a discussion that is any way meaningful about what the Federal Reserve's been doing.

MURRAY: Right. Well, when Rand Paul is president and appoints his father chairman of the Fed, it'll be a different -- there's a question right there.


QUESTION: Yeah, Mark Kimmitt (ph). You opened up the question about immigration reform and the impact of immigration reform and economic policy. Can you take us a little bit further down on the path as that -- those discussions are beginning to emerge, how immigration reform can become -- how economic policy can be wrapped into the immigration reform to best benefit the economy?

HOLTZ-EAKIN: So, you know, full disclosure, you know, immigration reform has been an important part of my career. I was on the McCain campaign when he stood on a platform with Ted Kennedy and had a third of his fund-raisers cancel overnight, and we went bankrupt, and I was unemployed. And so it's not personal in any way.


So when this round -- when it looked like, you know, the Congress was going to gear up for this, I actually thought long and hard about, what are the kinds of things that we can do to sort of aid this process? And one of the things that we tried very hard to do, and which I think there's been some success on this, to stress to conservatives the growth opportunity that is immigration reform.

Because you have to find one more thing for them to like. Border security wasn't going to be enough. You were never going to make it over the line. So, you know -- and as a matter of looking around the globe, many other countries do, in fact, allocate their visas on far more economic criteria. We don't. I think that's all to the good. And in addition to the core visa system, we have these sectional needs in ag and in high-tech, and we have a temporary worker problem that we can build a broader system for.

So I think that the case is easy to make. Whether the legislation will meet my hopes -- you know, the Senate didn't. It wasn't aggressive enough. I would like to have seen more. But, you know, it's progress, right, to go from a system founded entirely on these other criteria to one that has economic components in it is a good thing. And we're not done in the House yet. Hopefully we can get more in the way of stronger skill-based immigration and, you know, really benefit more as a nation.

So, you know, I'm an optimist by nature. This is a really tough policy issue, because it does have so many components to it. But I think the fact that we made some progress in the Senate, that the process is still alive, and that this is a core thing for conservatives to hang onto means that we can strengthen it in the House.

MURRAY: Michael Barnes?

QUESTION: Thank you, yes, Mike Barnes, Center for International Policy. There was a reference earlier to the demise of the middle class, and my question would be, how do we address that? What do you brilliant economists have as a formula for us to address income inequality, which is rising substantially in this country and strikes me as one of the major challenges we face?

HOLTZ-EAKIN: That was yours, I guess.

REINHART: I think that was you.

MURRAY: They're both fighting to give their answers to this.

HOLTZ-EAKIN: Very hard. So broadest macro imperative is, grow better. People have talked a lot about the lack of job creation, sustained high unemployment. That's real, and the scarring effects are going to be real on young workers, and that's going to harm the future middle class. But in addition, for those who have jobs, the majority, income growth has been relatively dismal in this recovery, and that's generating lots of pressures that we're starting to see. So, you know, got to get better macro performance.

In addition, there is a place for the U.S. to have 21st century infrastructure. They should not advertise it as stimulus. They should not sort of do gimmicky stuff that's short term. They should fix some very fundamentally broken federal infrastructure programs and fix that, and that would go straight to the sort of -- the jobs that are associated with middle class.

Third thing is, avoid temptations that are going to be real on minimum wage and other things and get the Earned Income Tax Credit beefed up, reward work in the way that we did with that policy, but it doesn't hit, for example, single males who are not custodial parents. They're missing. So we can do better on the supplement to work that comes from the EITC. We're talking about tax reform. It fits into that nicely. It should be part of this conversation.

And then over the longer term, this is all about skills and education. And so we now know that our K-12 system is failing. We've known it for a decade. We've measured it. We can find the schools, teachers and students, but we haven't fixed it. And so that's in the end the long-term solution.

REINHART: It's accumulate more capital and, at the budget level, recognize that there's a difference between a capital budget and a current budget. And there are plenty of positive net present value infrastructure projects we could be doing, but that's part of our inefficiency in delivering fiscal policy generally, and educate more and better.

MURRAY: Question right here.

QUESTION: Prior speaker actually covered one topic I meant to ask.

MURRAY: Can you identify...

QUESTION: Bob Winter (ph). But you mentioned the Earned Income Tax Credit. And I wonder whether that is, in a sense, not counterproductive, because does it not, in effect, allow employers to pay on a salary structure that really is not sufficient to sustain the middle class and shift the burden of what should be employee or -- employer compensation to the general tax system? I wonder what your reaction to that is.

HOLTZ-EAKIN: Yeah, I mean, there's no particular evidence that that's the case. I mean, you know, we've now had a lot of experience with the EITC, and, you know, it has lots of potential incentive effects. The ones that dominate are the movement from not working to working. That's the overwhelming impact.

There's concerns about, as you phase it out, an implicit tax affecting the work effort and the rewards. You can find that sometimes if you stare at the data hard enough and torture it, but it doesn't seem to be large. And so I'm convinced that on the whole, since if you look at the data on poverty, people who work are way ahead of the game. It's the not work population we need to worry about, so let's get people into work.

MURRAY: There's a question right here.

QUESTION: David Lynch with Bloomberg. I'd like to go back to health care. Has the slowdown in the increase in health care costs been significant enough to make any difference for U.S. business global competitiveness? And if not, is it just too early for those effects to show up? Or is it that health care isn't that big of an issue, because as the benefit gains become less, employees just demand more on the wage side and it gets washed out?

HOLTZ-EAKIN: So the -- sort of three pieces of an answer -- perhaps even a non-answer that's elegant -- are that, number one, over the long term, it's pretty clear that if you increase non-wage compensation, the wages go down, and it's the compensation package as a whole that is driven in the labor market.

So if we do see health care costs go down, that'd be good, because you're going to see higher cash wages, and we've needed that for quite some time. I would love that.

Number two, that and the budgetary impacts are all sort of over decadal sort of measures, and over a year or two, it's just not that big.

And, number three, what's been going on at the business level is, first of all, they're in a slow recovery and, you know, it's pretty weak business situation to begin with, so they're trying to control costs in any way they can to begin with, and one of the reasons we think that we've had some success on national health expenditure is we've seen big increases in co-pays, deductibles, the sort of employee exposure to their health care costs.

And so the employers are doing that, and the benefit they're getting in the near term is that. It's the restructuring of who pays the bill for the health care, the bill being smaller is an out-year phenomenon.

MURRAY: Right here. Hang on just...

QUESTION: (OFF-MIKE) what you were saying about immigration, it is that we should redesign it so as to keep the best and brightest that we educate here. And my question is, is that really sensible? Isn't it better for the best and brightest to go back to India and build up India and lessen the burdens on us to prop up the rest of the world?

HOLTZ-EAKIN: So I am a big believer in free choice. And what I want is the opportunity for those people who want to reside in the United States, become legal permanent residents and/or citizens, to come here and that, in making the choices we have to make about who to admit, we reward economic criteria.

I'm not trying to trap every smart person in America. That's not a...


We certainly haven't succeeded, I should just stipulate. You know, so I don't think that's the right way to frame the question. The question is, when you have a system of voluntary immigration, how do you want to shape the criteria for entry? That's really it.

REINHART: And the best anchor for global growth is the United States as being an incubator of ideas and generating a lot of output on our end.

MURRAY: Yes, right here.

QUESTION: Priscilla Beck (ph) with Mitsui (ph), formerly at the Treasury Department's Office of Financial Research. I have a question on financial stability. We were talking about bubbles that went from the equity markets to the housing markets and now possibly government bonds. Do you think that there's enough focus and assessment of risk and a clear kind of understanding of what the possible risks might be in the financial services industry and among corporations about what possible, I guess, at least a focus on that and from the regulatory community on those kind of topics right now?

MURRAY: We fixed that, Vince? It's all fixed, done, OK?

REINHART: That was the great accomplishment of Dodd-Frank. Actually, what was the great accomplishment of Dodd-Frank was giving the Congress deniability by putting one more layer of protection from it from blame, namely the Financial Stability Oversight Council.

These quick answers, no. We have an incredibly complicated financial system, because in part we have incredibly complicated financial regulation and a tax system that encourages institutions to make their balance sheet as intricate and opaque as possible. And to an important extent, lots of financial institutions are big black boxes. And in that regard, it's impossible to detect real...

MURRAY: But let's not -- let's not blame it on the companies. I mean, when you say money is free, people are going to do funny things with money.

REINHART: But the fact is, our financial regulation creates this intricate landscape of opportunities. If you make your balance sheet complicated, to take every one of those tax and regulatory arbitrages, we've made them what they are through our regulation tax system and multi-jurisdiction.

HOLTZ-EAKIN: But I do think we're in better shape than we were, you know, in 2006-2007, for a couple of reasons. I mean, number one, the attention to internal risk management was appallingly low. I mean, I served on that financial crisis commission for the Congress, and I was shocked in the testimony at the examples of poor internal risk management by very large institutions, just unbelievable. And I think that culture has changed significantly. I do.

Second is, we're holding more capital. And, you know, the omnibus reserve against unforeseen risk is equity capital, and we're holding more. And that's good. And I think the regulation community broadly defined globally has gotten away from the conceit that they can count up all the risks -- and they know what they are -- they can figure out what kind of capital you need to hold against them and in what amounts and have this intricate set of capital charges.

Instead, we do sort of stress tests, you know, the world blows up, what do you look like, sort of these global -- and more capital. I think that's all steps in the right direction.

REINHART: Well, those are all in the right direction. And where the United States looks the best is in comparison. Consider Europe...


REINHART: ... in the sense of not having -- having the rigorous stress tests, undercapitalized national champions, an unwillingness to, really, a myth that there were wealth losses associated with the financial crisis. And if you don't admit it, you can't get to the job of allocating.

MURRAY: Right here, and then right behind you, and then we'll come over here.

QUESTION: Anna Soellner, Motion Picture Association. I was curious about the -- where trade fits into your pillars. That has not been a topic that you've addressed yet. There are two major agreements that are percolating. And also, I'm curious, just because both of you come from kind of center-right organizations, there has been a shift on the view of trade within that movement and how you see that evening out or not evening out over the next five years. And by that, I mean, for example, the Tea Party movement and its kind of recalcitrance when it comes to issues related to free trade.

HOLTZ-EAKIN: I think, you know, on the merits, you know, I'm an economist, I'm a big believer in these agreements and their capacity to improve U.S. economic performance. The reality is, on both sides of the spectrum, there's significant opposition to trade in general, giving the president trade promotion authority, which is going to be absolutely necessary to get these deals finished, and it's not one of the places where I'm terribly optimistic. And I left it out of my list for that reason. I think we can do some good, we can do better, but it is a big, tough political slog.

And there -- my reading of sort of, you know, 20th century history is the GATT and then WTO and all that didn't happen because economists said, "This is a really good idea." It happened because we were afraid of the Soviet Union, and we knitted together an alliance that included trade as a defense against the Soviet Union, so something was driving it. Unless you can get a comparable driving force, you're not going to have momentum to get over these political hurdles. That's the issue.

MURRAY: Let me just add to that, that at the Pew Research Center, we recently did a survey of the American public on a host of foreign policy issues, including trade, and then we did a survey of you folks, of the members of the Council on Foreign Relations on the same issue. Won't surprise you to know that members of the Council on Foreign Relations -- you didn't get one?



MURRAY: I'm sorry. We must have your old e-mail address. We sent it to the McCain campaign.


And you won't be surprised to learn that -- and, by the way, we're unveiling this at an event here, I think, in two weeks, so check your inboxes and see if you -- but you won't be surprised to learn that members of the Council on Foreign Relations are very supportive of free trade.

But I was somewhat surprised -- and I can't give you the numbers right now still -- but I was somewhat surprised to see that while on the one hand Americans right now have less interest in engaging with the world than they have had in quite some time, really sort of an -- almost an isolationist sense, when it comes to the economic issues, when it comes to trade, very strong support.

And so those things aren't quite as tightly tied together as they've been in the past. I don't know how you explain that, but it was -- it's an interesting thing. We'll have those numbers out in a couple of weeks.

REINHART: But don't forget the business cycle. A poorly performing economy invites simple solutions and one that is not conducive to trade.

MURRAY: Usually because the public blames somebody overseas.


MURRAY: Seems to be a little bit less of that than there's been in the past, for whatever reason. Yes, I'm sorry, you, and then you, John.

QUESTION: David Slade, Allen Overy. Could you comment on the significance of our reserve currency status to these issues, and the risk, if any, of our losing that?

REINHART: So a part of the reason there's no pressure on politicians is there's no -- we happen to enjoy the benefits of being the reserve currency historically. The first basic principle of economics applied here is, you can't beat something with nothing, and there's no other alternative obvious reserve currency right now. The euro, perhaps?

HOLTZ-EAKIN: Bitcoin? Bitcoin.

REINHART: Bitcoin, yes.


And it's not obvious why the Chinese would want that, since it comes with the associated appreciated currency relative to what it would be otherwise. Historically, to lose the reserve currency status -- you know, we don't have many observations. We have Britain over the interwar period. You have to make a series of repeated mistakes, there has to be a plausible alternative, and there has to be issuance in that plausible alternative, because reserve managers don't hold currency. They hold assets denominated in that currency.

It was Britain's misfortune that New York was there, that there were sovereign issuance with a lot of Latin America in dollars, and Britain made a series of mistakes.


QUESTION: John Hawgie (ph). You haven't discussed yet or touched on the 1 percent, 99 percent, what de Blasio called the tale of two cities. And so I was wondering, in the current budget discussions, do you think that'll have any impact, particularly on the earned or carried interest element?

HOLTZ-EAKIN: There won't be any -- there will not be any tax increases in a budget agreement, if they...

MURRAY: Even carried interest?

HOLTZ-EAKIN: No. They won't do that.

MURRAY: You can wipe your brow and go back to the office.


HOLTZ-EAKIN: You know, that's a risk if you're not getting an agreement. I mean, it has been laid out very clearly, the agreement's going to be very narrow, and it's going to be largely trades of discretionary -- modest discretionary increases against mandatory spending cuts and then some fees...

MURRAY: Maybe some fees, yeah.

HOLTZ-EAKIN: Yeah, that'll be it.

MURRAY: In the way back, in the...

QUESTION: Charles Reynolds, U.S. Department of State. Just had a question about -- over the -- you talked a little bit about China and their foreign exchange issues. As far as them possibly appreciating their currency over the mid- to long term, could you talk about possible scenarios of why they would do that and why that may be able to help us out as far as our exports to China going forward in the future?

REINHART: I'm pretty sure they won't be doing it to help us out.


Locally, at least for the next couple of years, they have an export-led growth strategy. They are trying to manage a difficult transition that is a consequence of having growth so rapid for three decades as you create a middle class and the middle class has middle-class expectations with regard to attitudes toward corruption, a desire to control their own balance sheet. That's going to be a difficult transition for China.

Part of satisfying those desires will be to create markets internally, and to the extent they create markets and have tradable assets, then they can turn and think about the openness to the economy, and there's going to be a tug there. If you told me that the Chinese would stop intervening right now, I understand the currency would appreciate. If you told me that China would right now completely liberalize capital outflows, I'm pretty sure the currency would depreciate.


REINHART: And so I think -- this is one of -- the right answer is, time will tell.

MURRAY: So we can do two more questions. I'll take this one and then this one right there.

QUESTION: Hi, I'm Ben Carliner from the E.U. delegation. I was wondering if you could talk a little bit more about how you would characterize the current state of the economy. Because it seems to me that, really, we're still in a situation where there's a shortfall of aggregate demand and, you know, if you look at corporate profits, they're near all-time highs, and companies have been using that money to reinvest in their own stocks.

What we have is an excess of savings, which is really why interest rates are so low across the board. And in that context, it seems to me that what the Federal Reserve has been doing is the thing that you would expect from the adult in the room. It's to prevent disinflation and prevent deflation. If you look at the Taylor rule or other things like that, there's been a long period where the natural rate should have been negative.

And so why all this emphasis on talking about the Fed playing with inflation dangers and things like this?

MURRAY: The question is, are we Japan?

REINHART: So our economic forecast is we've been stuck in a growth channel centered around 2 percent. It's appropriate to have very accommodative monetary policy. That...

MURRAY: But 2 percent is not Japan.

REINHART: Two percent is not Japan, but that -- given that the financial crisis is receding in our rear-view mirror, that we're past the peak drag from fiscal policy and we've created a lot of wealth over the last year-and-a-half, that we'll start seeing more sales and businesses will come to expect more sales. They've got a lot of cash on their balance sheet and that will lead to investment, which amplifies that swing and we pick up to something like 2.75 percent growth.

Inflation is not the three- to five-year threat. We have resource slack, and 2.75 percent growth will only eat into that slowly. It's the five-year-and-beyond issue, and for now, the Fed's dealing with the problem of disinflation.

MURRAY: You agree with that midterm forecast, 2.5 percent, 2.75 percent?

HOLTZ-EAKIN: I think we're stuck at 2 percent, unless we change something, right?

QUESTION: 2.75 percent used to sound pretty good.

HOLTZ-EAKIN: So if you look at the policy -- yeah, no, it does. But, I mean, it's not. It's the triumph of low expectations. On the policy instrument front, I mean, the Fed -- you know, the Fed's done what it's done, and it's proven it can drive investors to riskier asset classes, and it's proven it can move, you know, all of those markets, but it hasn't proven it can generate sustained increases in real growth.

And so, you know, there's no inflation threat now, but by continuing to do this with no benefit, you start to ask, well, maybe it's not worth it. So -- but it's basically where it is. On fiscal policy, it's going to get better, just because it's on autopilot. I mean, the swing this year was quite negative. It's not near as bad next year. And so that'll ease a little bit.

And then the private sector, this all comes down to business investment. You know, the traditional components of a business cycle recovery include a strong investment boom. And we have firms with the financial wherewithal, but not the interest in doing that, and that's what's missing.

MURRAY: We're going to take one more question. Before we do that, I just want to remind everyone, if I didn't say it at the outset, that this has been an on-the-record session. And that's true, except for the things we didn't mean to say.


Just keep that in mind and be gentle. And go ahead, last question.

QUESTION: Sure. Kevin Sheehan from Multiplier Capital. One of the five challenges that you identified at the beginning, as well as the answer to Mr. Barnes' questions on economic inequality, was education reform. Recognizing that you're economists and not experts here, that's an entirely different subject and it's 128. I wonder if you could say just in a few words what you think that means going forward.

HOLTZ-EAKIN: So here's what's at stake. And this is stolen from a great book by Rick Hanushek out at Stanford. Rick's an old friend of mine. If we could get the U.S. to Canadian levels of accomplishment in the education system, the K-12 system -- so, you know, we're not talking about emulating a foreign country. This is Canada, right? You know...


We can do that. It would increase wages across the board by 20 percent and over the lifetime of workers, this is like five times GDP. I mean, it's an enormous payoff. And so that's what's at stake.

And if you look at the key issue, it is concentrated pockets of failure. There are schools and districts that are failing and others that are not. And so you need to either allow people to exit them more easily -- and that's what's behind charters and vouchers and all those mobility studies -- or you need to go in with big levers and change them, and that typically has to be the federal government, because in those pockets of failure, there's also sort of a local control, corruption, and you can blame it on unions or, you know, bad management, whatever you want to. You need an outside force to come in and impose standards and get some sort of achievement.

The fight in the U.S. is, do you -- who runs this show, federal, state, local? And so the second channel has been blocked out. The money that would have to go with the parents, a lot of people are uncomfortable with that, so the mobility thing gets minimized, and we're stuck.

MURRAY: That's the last one. That's it?

REINHART: That's it.

MURRAY: You have the opportunity. We have 10 seconds left.


MURRAY: Good, gentlemen, thank you very much. Very good discussion.

HOLTZ-EAKIN: Thank you.

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