Thursday, June 27, 2002

Just two years ago, in the 2000 fiscal year, the annual federal budget had a surplus of $236 billion. Now the federal government is facing a budget deficit of more than $150 billion, possibly much more. And whereas during the presidential campaign of 2000, the candidates were debating how to spend trillions in expected future surpluses, the Congressional Budget Office is now projecting a cumulative $1 trillion deficit by 2011. What happened to the surplus, and what is to blame for the return of the deficit? Is it President Bush's tax cut? Or was it the recession of 2001 and the war on terrorism? In light of the deficit, what should we make of the president's budget plans?

Recorded on Thursday, June 27, 2002

Peter Robinson: Today on Uncommon Knowledge: golden oldies from the 1980s--not music, deficits.

Announcer: Funding for this program is provided by the John M. Olin Foundation and the Starr Foundation.


Peter Robinson: Welcome to Uncommon Knowledge, I'm Peter Robinson. Our show today: red, as in red ink. Just a year ago, the Congressional Budget Office was projecting the federal government to run surpluses of some $2.7 trillion over the next decade. Today, just a year later, the CBO is projecting the federal government to run deficits of about a trillion dollars over the next decade. That's from black ink to red ink in just one year. Where did the surplus go and where did the deficit come from? Recession, tax cut, war on terror? And now that the government is back in the red, what should President Bush do about it?

Joining us today, two guests. Stephen Moore is a Senior Fellow in Economics at the Cato Institute. Alan Auerbach is a Professor of Law and Economics at the University of California at Berkeley.

Title: Attention: Deficit Disorder

Peter Robinson: Last year the Congressional Budget Office projected surpluses outside the Social Security and Medicare Trust Funds of some $2.7 trillion over the next ten years. Today, just a year later, the CBO is projecting deficits outside the Social Security and Medicare Trust Funds of some $1 trillion over the next decade. That makes a swing of about $3.7 trillion in just a year. What happened? Alan?

Alan Auerbach: The economy including September 11th, the tax cut…

Peter Robinson: The economy sinks…

Alan Auerbach: Right.

Peter Robinson: …and the president cuts taxes. Steve? What happened?

Stephen Moore: Exactly. The economy shrinking leads to revenue shrinking and that's been the most profound impact on the budget. The other thing that's happened is you've had an explosion of new spending due to the war on terrorism and also on the domestic policy front.

Peter Robinson: Okay. We will now get to all of this. Let's start with the tax cut. Last year President Bush signed into law a major tax cut. The legislation reduces all marginal rates, cutting the top rate from 39.6% to 35%, dropping the lowest rate from 15% to 10%. There are other provisions including the gradual elimination of the estate tax and marriage penalties. The CBO, Congressional Budget Office, once again, estimates that the tax cut will reduce federal revenues by 1.6 trillion over the next ten years and that the tax cut alone accounts for about 45% of the projected deficit. Now the provisions of this tax cut are set to expire in 2010 and President Bush has said no, let's make them permanent. Is he mad?

Alan Auerbach: No, it makes no sense to adopt a tax cut like this where it's done for ten years and then to make the revenue costs look smaller, things are first of all, phased in over a very long period of time and then eliminated at the end of the budget period.

Peter Robinson: So you like the tax cut and wish it had been permanent from the get-go?

Alan Auerbach: I don't like the tax cut. There are certain elements of the tax cut that I think are okay. As a whole, I don't like the tax cut because I think it's too big and I also think it left things out that should have been done if a tax cut were to be enacted. But I certainly don't think that it makes good policy whatever you're doing, whether it's a tax cut or a tax increase, to do it for ten years.

Peter Robinson: Okay. So let me put it to you that the president is to be excused on grounds of practical politics. The only way he could get the thing through congress was by saying okay; it's in some sense experimental. We'll make it look different on the--we won't let anybody say it's going to cost $100 trillion over 20 years. It's going to be such and such over ten years. So he's to be excused. He wanted from the first--he knew the distinction. He wanted from the first to make it permanent.

Alan Auerbach: Well in part…

Peter Robinson: You like that better?

Alan Auerbach: No, and it's--I mean--the senate is complicit in this because they have a rule known as the Byrd Rule which requires provisions that go beyond the ten-year budget in order to get 60 votes instead of 50. And they didn't have 60 votes for the tax cut. So in this circumstance if the president wanted the tax cut he was proposing, he really didn't have any choice.

Peter Robinson: Should the tax cut be made permanent, repealed, what do you want to do with it?

Stephen Moore: Yeah. I agree partially with what Alan was saying. First of all, the big disagreement though is I think the tax cut was too small, not too large. One of the things that I think torpedoed this economy was--well two things. One was the monetary mistakes that Alan Greenspan made that a lot of economists recognize but the other factor was, Peter, a dramatic increase in the tax burden from 1995 through 2001. The federal tax burden went from about 17% to about 20 to 21% of GDP. That's a huge increase in the tax anchor.

Peter Robinson: On account of what? Because…

Stephen Moore: Well, you know what it was was that was a period of prosperity, that period '95 to 2000. It was real income bracket creep that when you have people making higher incomes, their taxes go up faster than their incomes do because you've got a graduated income tax structure.

Alan Auerbach: That was only part of it.

Stephen Moore: Nonetheless, it is true though that the tax burden went up substantially. And my point is that when you're taking 3% more out of GDP and taxes, that creates an anchoring effect. The reason I think the…

Peter Robinson: Anchoring as in tending to sink toward the bottom.

Stephen Moore: It sinks the economy. Anytime you get the tax burden over about 20% of GDP, it's a fire alarm signal that the economy may go into recession. So I think the Bush tax cut is about half as large as it should have been. Now the other big flaw in the tax cut is that it, just what we were talking about, is that it is not permanent and that it's phased in too long. The economy needs help right now. And these tax cuts, a lot of them Peter, don't start taking effect until 2005, 2006 and 2007 and 2008. The other problem related to this, by the way, is when you're--one of the big elements of the tax cut was the estate tax elimination. Now if you've got an estate tax that goes to zero in 2010 and then comes back to 55% in 2011--how in the world do you do any estate tax planning under that kind of environment?

Peter Robinson: Well, you plan to die in 2010.

Stephen Moore: Exactly. We call it the "Throw Momma from the Train" death tax repeal.

Peter Robinson: Let me try to tease out Steve and Alan's philosophical differences over fiscal policy.

Title: Paradigm Lost

Peter Robinson: We have two recent models for the way to handle fiscal matters in this country. First let's go to you, Steve, with the Clinton model. 1993, Bill Clinton enacts a tax increase, relatively modest. It amounts to .7, seven tenths of a percent of GDP. Clinton uses the resulting revenues to take the federal budget from great big deficits down to smaller and smaller deficits and then in the last year, year and a half of his office, his time in office, the federal government goes into surplus. During the period when President Clinton is doing these things, the economy just roars. So why shouldn't George W. Bush follow the Clinton model and pay very close attention to deficits, keep them down, get the government back into surplus? Why shouldn't he do that?

Stephen Moore: Well because you didn't tell the whole story. I mean the economic boom of the '90s…

Peter Robinson: Accusing me of posing a tendentious question?

Stephen Moore: It was an economic boom, one of the most prosperous periods in American history but it didn't begin in 1993. It began in 1982 and it began with a set of Reagan policies that included bringing tax rates down from the 70% high in the 1970s and free trade and getting inflation out of the system and reforming government. And, in fact, Clinton, although I disagree with him on his tax increase, I think it was a misguided policy, the economy continued to roar because Clinton did a lot of good things. We had welfare reform; we had a capital gains tax cut in that period. We had free trade. We had Alan Greenspan at the Federal Reserve Board. And that whole conglomeration of policies led to a very pro-growth environment. And, in fact, I think the lesson of the '90s and I'd be very curious whether Alan agrees with this, is that when you have strong economic growth as we did for a period of about 15 or 16 years, you can do what Jack Kemp and Ronald Reagan said, you can grow your way out of the deficit. And the converse is also true.

Peter Robinson: Okay, here's the…

Stephen Moore: If you don't have growth, you're not going to have…

Peter Robinson: You may answer that question but let me rephrase it in terms of the other model which is the model that Steve has put on the table here of Ronald Reagan. He comes into office. The deficit's running at 2.7% of GDP. He enacts big tax cuts that amount to two and a quarter percent of GDP, big tax cuts by historical standards. And 1982 as the tax cuts begin to go into effect, the economy takes off and Steve makes the point that the boom that we enjoyed under President Clinton actually began in 1982 with a little setback of a couple quarter recession, mild recession in the early '90s. So--and but incidentally the economy grows so quickly that although deficits pile up in nominal terms, by the time Reagan leaves office as a percentage of GDP, they're right back down to 2.7%. Why shouldn't Bush follow the Reagan model, cut taxes dramatically to encourage growth?

Alan Auerbach: You might call it the Reagan-Keyne's model. I mean it wasn't just Reagan's tax cut. It was Reagan's tax cut, very large defense build-up.

Peter Robinson: Well George W. Bush is giving you some of that right now.

Alan Auerbach: Yes he is. But the numbers were pretty big in the Reagan Administration and…

Stephen Moore: $2 trillion.

Alan Auerbach: …it was a combination of very large increase in defense spending, very big tax cut. It's a traditional Keynesian prescription for dealing with recession.

Peter Robinson: You call it Keynes or Reagan or whatever you want to call it, what's the lesson for George W. Bush?

Alan Auerbach: Well frankly I think there isn't really a lesson because you can have prosperity with rising taxes. You can have prosperity with falling taxes in the short run. Over the longer period, a messed up tax system with high marginal tax rates is not going to be good for growth. I certainly agree with that and I imagine we agree on that. In the short run, you can have growth; you can have recession, tax cuts, tax increases. It's complicated. It depends on monetary policy as well.

Peter Robinson: What should Bush do with regard to taxes? We'll move onto spending in a moment but with regard to taxes, what do you want--what do you want…

Alan Auerbach: What do I want Bush to do?

Peter Robinson: Yes.

Alan Auerbach: Well I would like him to cut back on what he's done, address some of the mistakes that he exacerbated…

Peter Robinson: Claw back some of the taxes?

Alan Auerbach: Claw back some of the tax cut and in exchange fix some of the things that he made worse. There are…

Peter Robinson: What did he make worse? Just give us one since…

Alan Auerbach: Well the alternative minimum tax is an enormous mess and complication. And it started out as a minor provision of the tax code to make sure a few people who were doing dodgy things paid tax.

Peter Robinson: And Bush in proposing to make the tax cut permanent, one of the items he wants to do is expose even more people to the alternative minimum tax, far from--oh, okay so you two are in agreement on that?

Stephen Moore: Well no--no we should get rid of the alter--the alternative minimum tax was a lousy policy to begin with.

Alan Auerbach: It's an entirely dishonest policy to…

Stephen Moore: I agree.

Alan Auerbach: …propose tax cuts to tell everybody they're getting a tax cut and then…

Stephen Moore: And a lot of them aren't going to get it. I agree. But I do disagree strongly with one thing that Alan said.

Peter Robinson: What's that?

Stephen Moore: And that is that fiscal policy doesn't really matter and that you can have growth during…

Peter Robinson: Well he said in the short term.

Stephen Moore: Well I think history's pretty clear over the last hundred years. Every time we've raised--virtually every time we've had major tax increases, the economy has performed rather poorly, in the 1970s and the 1930s. And every time we've had supply side rate reductions as in the 1920s and the '60s and the '80s…

Peter Robinson: Kennedy, who was it--Coolidge, Kennedy and Reagan.

Stephen Moore: Right. The economy did well. So, you know, I think that tax policy does matter. If you tax something like work and saving and investment, you're going to get less of it. And if we lower…

Peter Robinson: We've discussed tax cuts. Now onto another reason for the deficit, increased spending.

Title: Spend But Don't Break?

Peter Robinson: Guns and butter. First, guns. President Bush has called for an increase in military spending of some 14% year to year, this year to next year. That's the biggest increase since Ronald Reagan took office and a total increase in military spending of more than 24% by the end of his first term, first and possibly last, we don't know. On top of that, he's proposing an increase in spending on homeland security, which the accountants don't quite know what to do with yet, is it really defense, is it a separate category, of another 30 billion. So it's big. Now may I assume that in the aftermath of September 11th, you're both in favor of this?

Alan Auerbach: Probably. It, you know, any increase in spending in any category may bring with it unnecessary expenditures.

Peter Robinson: Okay. So it's the federal government, there's a lot of…

[Talking at same time]

Alan Auerbach: It's hard to know.

Peter Robinson: …junk, there's some pork but you got to do something after September 11th, right?

Stephen Moore: I guess my view is we spend 300 and some billion dollars a year on national defense and now we have to spend all this additional money on homeland security. And my view is wait, what's the other $300 billion dollars for if it's not for homeland security? So I guess I'd say let's spend the $300 billion dollars more wisely, get troops out of, you know, Europe and Africa and so on and make sure that we're spending our national defense dollars…

Peter Robinson: Okay. So I know you well enough to know that you are extremely critical of every additional dollar that's spent but may…

Stephen Moore: Well not if it's not…

Peter Robinson: …would it be fair to say that you would tend to be a little less critical after September 11th of defense spending?

Stephen Moore: Absolutely. The number one function of the government is to keep us safe from foreign harm.

Peter Robinson: Okay. From guns to butter. As you both know, a lot of domestic spending, the overwhelming majority of it is locked up in entitlements, Medicaid, Medicare, food stamps, da, da, da, da, da, on it goes but let's look at the interesting item discretionary domestic spending, the stuff congress has to vote on every year. It is projected to fall by 6.5% in inflation adjusted terms over the next ten years. And next year…

Stephen Moore: If you believe that, I've got some oceanside property in Las Vegas for you.

Peter Robinson: I said I believe that it is projected to fall. All right…

Stephen Moore: It ain't going to happen.

Peter Robinson: All right. And in the next year alone, the administration proposes to cut spending on community and regional development, low income energy assistance, environmental job training--and other programs, I'll just say and other programs because this list goes on and on and on. So the administration can't get at a lot of domestic spending because it's locked up in entitlements. But the domestic spending they can get at they want to squeeze. He's paying for tax cuts by squeezing programs that disproportionately help poor folks.

Alan Auerbach: Well in that sense, he is taking a page out of Ronald Reagan's book because that's what…

Peter Robinson: Hold on.

Alan Auerbach: …that's what Reagan did. Discretionary spending--discretionary spending now -- a non defense discretionary now is a much smaller share of the budget and of GDP than it was at the beginning of the Reagan Administration. It's come down sharply since the early '80s. The overall spending didn't fall so much because Reagan built up defense while he was cutting domestic spending and that's the prescription that Bush wants to follow as well. There isn't a lot of money there and so in order to get any real money out of the discretionary budget, there have to be very, very deep cuts. And that's what Bush is proposing.

Peter Robinson: And it's reasonable?

Alan Auerbach: No it's not reasonable. It's hard to believe that we had so much excess spending in the economy after two decades of wringing it out through various administrations that we now could continue to have massive cuts. And I think there are various elements of the tax system that--or the tax cut that could be undone or frozen that would leave at least a little bit more money for discretionary spending. Mind you, you said that some of the spending is locked up in entitlement programs. It's worse than that. It's not simply locked up. One of the things the president proposes and that congress is moving on is to expand through prescription drug benefits and Medicare, for example.

Stephen Moore: That's why this conversation does have a little bit of an Alice in Wonderland, you know, and I sort of was laughing when you were reading those statistics because discretionary spending is actually rising now. Now it's true that it did fall…

Peter Robinson: Nobody takes this stuff seriously even now.

Stephen Moore: No. Look this year discretionary spending not just on defense spending but on all the other areas of government is going to grow by 10 to 12%, way…

Peter Robinson: 15%. 15% is what the impartial host found...

Stephen Moore: You know, we just passed this obese farm bill that'll give every farmer who's subsidized a million dollars in the next ten years and it's just on and on and on.

Peter Robinson: Okay, listen to this Stephen.

Stephen Moore: So the government is not falling. It's growing.

Peter Robinson: Steve makes the point that under the current Republican administration domestic spending is growing rapidly. How come?

Title: Spend 'Em If You got 'Em

Peter Robinson: Increase in domestic spending by 15% this year. Last year's increase was 11%. This will mean that George W. Bush will have presided--this is not projected, this is what will happen--will have presided over the biggest two-year increase in domestic spending since the great society. So why aren't you giving him a standing ovation? You should love this guy.

Alan Auerbach: Am I now the defender of expansion in discretionary spending? You know, this is an unusual period. I mean, part of the reason why discretionary spending rose at the end of the Clinton Administration, at the beginning of the second Bush Administration is because of prosperity and because of surpluses.

Stephen Moore: Surpluses. That's right.

Alan Auerbach: There's no doubt that--and I think I agree on this, that some downward pressure on government spending is exerted by deficits and by tax cuts. I wish that weren't true. I wish we could have a more sensible way of setting spending policy. But I'm sure that government does respond to the deficits and…

Peter Robinson: You subscribe to the great tenet propounded by the prophet, Milton Friedman.

Alan Auerbach: To a certain extent.

Peter Robinson: Which is that government will spend every penny it can raise and every penny it can borrow.

Alan Auerbach: I don't agree it'll spend every penny it can raise. During the Clinton Administration we had a reduction in deficits. But I do think there is some erosion. There's no doubt that the very tight budget caps on discretionary spending that Congress lived under in the 1990s have started to disappear. You know, in the late '90s, it disappeared with the appearance of emergency spending on everything.

Stephen Moore: See here's the problem. In the '90s, the period that Alan is talking about, actually the discretionary spending cuts you were talking about were actually in the defense budget. We actually--there was a very large "peace dividend" after the Berlin Wall came down. Now we have the situation where military spending is going to go up again as it did under Reagan and you've got this pent up demand for this domestic spending. And Alan's right, you know, the mother of all new entitlements is this new prescription drug benefit. And so the problem is you're going to get this huge increase in spending and how do you balance the budget under that kind of scenario? And I think there's only one way to do it. And that's through very strong economic growth. That's why I want to see a reduction like capital gains cut or a reduction in the…

[Talking at same time]

Peter Robinson: Ultimately he's right about that right?

Stephen Moore: …to get the economy moving.

Alan Auerbach: Well, growth--I certainly agree that growth is good and we're all in favor of growth but how do we accomplish that? I don't think a capital gains tax cut has any appreciable effect on growth.

Peter Robinson: Onto the politics of the budget situation.

Title: Grasping at Straws

Peter Robinson: First the Democrats. They rail against the President's budget but have only half measures at best of their own to offer. This past winter, Tom Daschle, Senate majority leader, claims President Bush was responsible for, I quote, "the most dramatic fiscal deterioration in our nation's history." Yet Daschle refused to call for the repeal of the Bush tax cut. So you have them saying--you have them almost in Rumpelstiltskin mode. They are raging but impotent to do anything about it. Has Bush got the Democrats pinned down?

Alan Auerbach: Well to a certain extent. He's got them pinned down in terms of rhetoric. Nobody wants to be the next Walter Mondale. You know, who…

Peter Robinson: That is to call for tax hikes?

Alan Auerbach: Well he said in the '84 campaign, he said Reagan's going to raise your taxes and so am I and he won't tell you and I just did. He was wrong…

[Talking at same time]

Alan Auerbach: Well he was wrong--I mean he was wrong that Reagan was going to raise our taxes. But he also didn't win any popularity contests from doing that. Nobody wants to follow in his footsteps.

Peter Robinson: Okay. Steve, the GOP? For decades after the New Deal the Republican Party is the green eyeshade party, the accountants constantly worried about the growing deficit…

Stephen Moore: Actually, I don't agree with that actually. I think if anything that the interesting transformation in the last few years it's been the Democrats have been sort of a green eye…

Peter Robinson: That's--well that's what I'm coming to. You get this kind of switcharoo that the Democrats through the '50s, the '60s and then Reagan turns it into a tax…

[Talking at same time]

Peter Robinson: …growth. My question now is where does the GOP stand now because it would seem to be the case that they stand for spending.

Stephen Moore: Yeah, yeah. It's interesting. I mean, it's a great question and my belief is…

Peter Robinson: Why thank you very much.

Stephen Moore: …that the Republicans are a Reaganite tax-cutting party. They are for tax cuts but they're not for smaller government. You can't name a single program that the Republicans now want to get rid of. So it has been transformed into a sort of supply side, cut taxes party but it is not a anti-big government party as it was under Reagan and even under Gingrich, which was just six or seven years ago.

Peter Robinson: You say--I'm going to quote you, Steve, "Republicans wrongly believe they can bank on a spend and elect model to secure their house majority and then capture the senate this November." It's interesting because Reagan in the old days used to talk about the Democrats as the party of tax and spend. And now you have the Republicans as the party of cut taxes and spend. But you don't think that's a successful policy?

Stephen Moore: No, because the Republicans can never outspend the Democrats. The Democrats will always be the big government party.

Alan Auerbach: Well they're trying.

Stephen Moore: They're trying to but I don't think, you know, if they offer 50 billion for a program, the Democrats will, you know, offer even more. So I think it's a…

Alan Auerbach: Right. They made the farm bill and the prescription drug benefits are both examples of policies where people aren't really thinking about the cost.

Peter Robinson: This is also one comparison between Reagan and Bush because in '86 going into the mid-term election in '86 when it was clear that Republicans in the senate were vulnerable, Reagan signed what was to that point, an outrageously big farm bill…

Stephen Moore: He also did in '81 as well.

Peter Robinson: …and the idea was that Republicans were especially…

[Talking at same time]

Stephen Moore: Really horrible farm bills are always signed by the Republicans.

Peter Robinson: Well okay. So the question is will it work?

Stephen Moore: You mean politically will it work?

Peter Robinson: Yeah, will it work politically? Can the American people be bought off or this interest group or that interest group?

Stephen Moore: I don't think so because I think Bill Clinton had it right. It's economy stupid and if all of these sins that Bush is committing on steel, on timber, on farm bill…

Peter Robinson: Okay so he raises tariff on…

[Talking at same time]

Peter Robinson: I just want to explain, raises tariff on--steel raises tariff on timber so it's more expensive for us to import timber from…

[Talking at same time]

Stephen Moore: If you do that and it does hurt the economy, which I think these things gradually do do and Bush goes into 2004 with a bad economy, that's the one thing that can cause him to lose the election.

Peter Robinson: Last topic: some predictions.

Title: From Boomers to Bust

Peter Robinson: The deficit this year is going to be about 150 billion, around one percent of GDP, which is still very low as a proportion of GDP. It is wonderful that when you're talking about the federal budget, I say 150 billion and you say that's nothing. Okay in 2011 a signal event occurs. The first baby boomers begin to retire and draw on social security. How big will the deficit be as a proportion of GDP in that year?

Alan Auerbach: You're asking for a prediction rather than for me to recite the CBO projection.

Peter Robinson: Yeah I'm asking you--in other words, what I'm asking you to do is kind of get a feel for domestic politics and are we in for a period of bigger spending?

Alan Auerbach: I think we can be certain that the deficit's going to be bigger than the current CBO is indicating because one of the things in 2011 that's in the CBO forecast is the expiration of the Bush tax cut and we know that's not going to happen. And…

Stephen Moore: I hope you're right about that.

Alan Auerbach: Well we know now some of the provisions may be repealed but other provisions will still be there. We also know that this discretionary spending isn't going to fall as you indicated it's projected to fall. So even if there's no change in the underlying economic forecast, there's going to be a much smaller surplus, possibly a deficit in 2011.

Stephen Moore: But all that really matters in these forecasts is the economic growth rate. It really--it's really true. If you just put in half a percentage point higher growth rate, the deficits turn into large surpluses.

Alan Auerbach: Yeah, over a long enough period of time, it's certainly true.

Stephen Moore: Well this is what happened in the late '90s.

Alan Auerbach: Yeah, that's right, productivity…

[Talking at same time]

Stephen Moore: We went from two and a half percent to three and a half percent.

Peter Robinson: Okay then let me ask you this: we've been through two decades of growth, '80s and '90s, all right so the next decade of the--what do we call them, the aught-ones and aught-twos, first decade of the third millennium, is it going to be more like the '80s and '90s or more like the '70s?

Stephen Moore: I'm optimistic. I think this is a new age economy. I think the high technology growth will lead to sustained three to four percent levels of growth.

Peter Robinson: All right. Alan?

Alan Auerbach: I agree with that because I think that ultimately the fiscal policy that we've been talking about here that changes within the range that they occur in the United States, we're not talking about, you know, third world countries, these differences are fairly small and I don't think that any policies that are going to be enacted, whether it's a Democratic or Republican administration, are going to have really important effects.

[Talking at same time]

Peter Robinson: So Ronald Reagan talks about growth and Bill Clinton, a Democrat, in effect, ratifies the importance of growth and we now have an enduring bipartisan consensus within a relatively narrow range that says let's grow the economy.

Stephen Moore: You don't have any Democrats talking about going back to 70% marginal interest--I mean marginal tax rates and that's important.

Peter Robinson: They're now talking about huge new entitlement programs. They're trying to…

Stephen Moore: No, that's the Republicans.

[Talking at same time]

Peter Robinson: They're trying to preserve the Social Security program that's 65 years old.

Alan Auerbach: Yeah, when you get right down to it, strip away the rhetoric, the differences between the two parties on fiscal policy are not that big.

Stephen Moore: Except on taxes. I do think that there's a--because the Democrats understand that if we keep cutting taxes, they're not going to be able to fund a lot of these programs they want.

Alan Auerbach: I think in the end what they actually do as opposed to what they say isn't that different.

Peter Robinson: Alan, Steve, thank you very much.

Peter Robinson: I'm Peter Robinson for Uncommon Knowledge, thanks for joining us.

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