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00:00Let's start with the data. Three percent growth. That's the data number from today we're paying close attention to you put that in concert with the unemployment level at four point four percent. Our president has talked about the need for corporate tax reform in light of those data I just mentioned is making the case for tax reform become a little bit harder. No not at all . In fact if you look at the data going back the last few years one of the things that's most striking to me and I know to you because you follow these things is that capital stock growth has been so low in fact capital deepening in the U.S. went negative in the second half of the Obama administration for the first time since the Second World War. The reason is that firms are locating their new factories and their machines over there in Ireland and in other countries rather than creating jobs here . And so if we want to keep this recovery going then what we need to do is just get capital deepening to increase productivity increase wages and give us the economic growth that we need . And so the 3 percent number now actually if you look at it a lot of it has been driven by business optimism I think because one the president has deregulated the economy and two because they expect a tax cut this year. I just want to surely you must be a little bit worried here about the economy overheating. Are you at all. Well certainly you know at this point the cycle one should always worry about that. If we were proposing a big demand stimulus then it could very well lead to inflation and overheating economy. But this is this supply side stimulus and we're starting from a point recall where the contribution to productivity growth of capital deepening has been negative or zero over the last four years. So getting that back to normal is something that's going to be a supply side shock which will increase productivity and wages without creating inflationary fears. CAC I got your new report right here and in it you argue the business side of the unified framework would increase GDP by between 3 and 5 percent over the baseline long run projection . How long are we talking about here. Well as we mentioned in the report that there are four different ways really that you can estimate the growth effect from the corporate tax and we do it each of the four ways. Get about the same answer. The optimistic models say that we get the three to five in sort of three to five years. The pessimistic models say that it would take about twice that long. The last time we spoke you said you didn't want to respond to ad hominem there's been some attacks of the plan that we have so far in the report that that you've issued. You said you would respond to some economic argument we do have some of that now. So let me ask you about a few of those pieces in particular Lawrence Summers at Harvard saying we don't really have a tax plan at this point. What we did. What we have is not clear enough to permit the kind of careful quantitative analysis of its expected budget costs economic effects and distributional implications that precede such legislation in a serious country. Do you agree with that. Do you disagree with what Professor Summers says. It depends on which side of the tax code we're talking on the corporate side . We know the rate that's been agreed to we know the expensing that's been agreed to and those are the two main factors that go into the user cost of capital which is the fundamental driver of economic growth in our models and that's why at the Council of Economic Advisers we've modeled the corporate side of the reform but not the individual side. As for the individual side we are waiting the complete plan we're awaiting the details when we get those we'll model that as well. On the issue of corporate taxation you drew some comparisons to how this has played out in other countries and critics have said you've looked at smaller countries and not to U.S. economic history. Is that a salient complaint that your critics are making. Why not look more at U.S. history than these other countries. Well we are looking at U.S. history and in fact if you look at in the paper that came out today the vast user cost literature including many papers by myself back when I was a little kid. Look at what happens to U.S. investment when you change corporate tax policy. And if you consider that the user cost of capital is dropping about 15 percent because of the proposal then that gives you about 15 percent higher target capital stock and that gives you the economic growth that we're talking about it's very simple arithmetic on the issue of repatriation I'm struck by a line in a piece by Adam Looney. He was on the Council of Economic Advisers he worked at the Fed. Now he's at the Brookings Institution and he says to clear up a common misconception repatriation is not a geographic concept it refers to a set of rules defining when corporations have to pay taxes on their earnings. He acknowledges there are problems with the system as it exists. But he says nearly all of the two point six trillion dollars is already invested in the US quote multinational firms are allowed to bring those dollars back to the U.S. and to invest them in our financial system he says look at financial systems. They're already doing this. Is there a misapprehension here about repatriation how it works and what it is. Adams a smart guy and he's onto a subtle point which I'd like to go into because what happens is that if you are a U.S. multinational you can move your income to Ireland by locating a plant there. What that does is it increases the demand for workers in Ireland reduces the demand for workers here lowers wages here lifts wages there. And so once you've done that and you've got the money in Ireland then there's a question of what do you do with it. And what a lot of companies do is that they put it in the bank account of their Irish subsidiary and the Irish subsidiary very often has a bank account in New York. And I think that that might be what Adam is talking about. Last question here we have limited time. I want to ask you about maybe it's not ad hominem but some people are wondering about the role that you play in this administration the role of the Council of Economic Advisers. Larry Summers again I'll quote saying that the job of the head the CIA is not supposed to cheerlead for administration policies how do you see your role here within the Trump administration. You know honestly you did it you did a good job of going after substantive things like with Looney and so on and I think that we all bemoan the course sitting of discourse in America. And when you keep giving attention to guys are relaunching ad hominem attacks then you encourage more ad hominem attacks. I'm just not going to respond to Mr. Summers. What have you learned about academic consensus. That's a line that you use in the report out today there's considerable academic consensus you say on some of the conclusions that you come to over these last few weeks since you delivered that speech at the Tax Policy Center before them the Tax Foundation. Have you learned anything here about how we regard the academic consensus in the world of economics. Well I think that someone like you. You know it's why I've respected your work for so long. You look at the facts you look at the evidence look at the report today and count the cites in the back and count how many are peer reviewed and you'll see that there's a massive amount of evidence supporting what we're saying that we're just making it up .

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