Rate if you are a passable entity and giving half your money back it is hard to grow your business, and equipment, grow jobs when you are giving half of it away. My. Is, your thoughts in terms of if we lower the rates and terms of pastors as well as my. Is your thoughts in seek secor what difference would that have in terms of growing the economy and creating jobs. Professor holtzeakin, could you expand on that . It is a bad tax policy that treats the same Business Activity differently. And that would drive you to organize your business on the basis of tax considerations, not business decisions. That is the hallmark of interference with the economy. In the work i have done on Sole Proprietorships partnerships, relatively small they are disproportionately sensitive to tax considerations, heavily reliant upon tax flow. Lowering taxes gives them greater cash flow. They can invest invest and hire more and so you see strong linkages between tax load toward those entities and capacity to grow invest. I am happy to get the research and citations to you. But they look much more in terms of just pure rate sensitivity. My senses you see a lot of people moving from passthroughs, scorp and back to ccorp. As you said it is an option that companies have. They can always go back to the ccorp. The reason that most corporations prefer to be a scorp as another form of passthrough is they avoid the 2nd round of taxation on distribution of corporate profits. I think it is a complicated a complicated issue and there is no simple solution but i think the basic principle ought to be to take taxes out of the choice between whether you are a scorp or ccorp. Thank you. I would add in the late 80s there was a change. Now were going back. I think it would hurt businesses especially Small Businesses and startups if we do not address ccorp as well as the pastors as well. Thank you and i yield back. Thank you. Mr. Pass well. Thank you, mr. Chairman. Good luck. Thank you. Youre welcome. I have noticed that we have lowered the duck troubles but still have an ironclad position here and there. It will take a lot more than talk to get us out of the logjam. Just one example i hear from your side all the time about discussing and debating the business tax expenditures. I hear nothing about personal tax expenditures. I think that it has become quite obvious if we are going to come to any agreements there need to be both in consideration, and i ask ask that you do that and i sincerely wish you the best of luck. You are going to need it. The questions at hand, i think and 1 i would like to ask mr. Johnson on trade he wrote an article in 2013 about what we needed to avoid in trade deals which look lovely from the outside you talked about trade expanding unfairly at times without a level Playing Field that projects are workers, protection of workers who benefit from free trade. Is it the workers in the factories . Is it the shareholders and executives at the top that you are talking about . As you know and as we have been discussing all morning most of the gains in terms of income have been realized at the top of the Income Distribution. Much of much of that is for management and ceos. There is an important. About tpp which is an issue before this committee. On the Auto Industry appointments, japan has had a closed market for cars and auto parts. Are they offering to open that up to us exports . That would seem like an appealing opportunity. To what extent will they be held responsible . This is a link you can chalk draw to jobs. You will not be engaged in that discussion. I think i have Heard Committee members say that they want to think about all of these pieces and how they can be helpful. That engaged with tpp, not teeeight, that tpa, that is where we have the conversation. You wrote a column for the Financial Times with the headline inflation is looming on americas rising. I think maybe you can recall that. And almost six years since you wrote that piece inflation has been consistently below the Federal Reserves 2 percent target while the Unemployment Rate continues to elevate causing real world pain and hardship for a lot of americans. Recently with the economy improving thanks largely to some specific policies that were passed between 2006 and 2010 the Unemployment Rate has been dropping but we are still a a long way away from a healthy economy. We all agree on that. Yet you continue to call for the Federal Reserve to act aggressively your words despite the fact that our recovery is nowhere near complete and there are few signs that inflation will soon exceed the Federal Reserve. Why do you think your prediction in april of 2009 did not materialize . Thank you for that question. I think Federal Reserve policy changed after that. We got the socalled unconventional Monetary Policy where the fed because they are authorized to pay interest excess reserves induced the commercial banks to deposit the extra funds that they got from the quantitative easing policy to deposit that back at the Federal Reserve. So we never saw the increase in the money supply that looked like it was going to happen back in 2009, so i think the fed handled it well. Ultimately, as i said earlier in my comment i think i think it was fed policy that gave us the strong recovery rather than the fiscal policies in 2009 and 2010. Thank you. Ten. Thank you. The time for the gentleman has expired. Mr. Paulson is recognized. Thank you for calling this hearing. Rvco the recent improvements we have seen is certainly welcome news but it is the worst economic recovery since the Great Depression the slowest economic recovery ever. We cannot we cannot even get to an average. Wages are flat people are taking notice. The numbers doubling every 32 years or so. Now it we will double every 90, tab 60 years onto the standard of living for an american family, it is probably no surprise a lot of folks think this is the new normal. The public is accepting it and we can do better. 72 of americans a few weeks ago think the economy is still in recession when we have been out for five and a half five and a half years is pretty alarming. Two thirds of americans if you ask them, will your children be better off than you two thirds say no. The new congress can make a difference in tax policy trade policy 750,000 jobs in my state art tied to trade. Obviously it is key to that. There is no doubt about that, that but i want to talk about regulation. Maybe mr. Abcaeight, is it it possible to measure how much expansion of regulation is costing her workers, the economy and slow growth growth, and if so how much if it can be measured . Thank you for the question. We have an ongoing attempt to measure Regulatory Burden in the United States where we track all regulations and look at a couple of different measures of burden, all burden all which are incomplete but give you some sense. Agencies say how much it we will cost to comply and we can totally costs. There is the paperwork burden. In my written testimony there is some paperwork. You can look at that comprehensively. I would be happy to you the give you the totals, but if you look at 2014 final regulation added just in terms of compliance cost about 20 billion in 2014 alone. Thats 200 billion of tax increase. The growth and packs how we want to think about that that debate does not go on. If you look back it has been an extraordinary time for regulation, and these costs display that. The only comparable time in recent memory was posted september 11, 2001 when there one when there was a lot of Anti Terrorism legislation. We will be looking at that in the coming months. In the 1990s i i understand that we were successful as a country and boosting Labor Force Participation rate increasing takehome pay and reducing poverty, all which has gone the opposite way in these last six years through welfare reform. Could another do the same . As i said, we need to look at the work incentives. The 1990s have lessons and some things that are different. The economy grew. That is the number one priority that makes the welfare reform easier to interact and participants to be successful. I successful. I do not think that you want to replicate the. Com bubble which led to an anonymous and flow. You want want to do it the oldfashioned way. And the kind of spending restraint that was successful in the 90s is no longer available. It got us to a balanced budget. A spending problem problem now is in the mandatory programs. It is a different world. Thank you. Mr. Davis, you are recognized. I thank you for calling this hearing and certainly thank our witnesses for participating. I i want to add my congratulations to you, my friend from the midwest, for your ascendance to the chairmanship of this committee. I was having dinner with two of my grandsons the other day and asked them, when you pass me a glass of water. Once said, do you mean the one that is half empty and the other said do you mean the one that is half full. Of course, their there was only one glass. But they saw it differently. Like all of the members of this committee i am i am indeed pleased that our economy has made tremendous progress in the last several years. More people are working. Unemployment numbers are down. The economy the economy is moving forward, and so there is reason for what i call joy but not jubilation. Not jubilation because their are still too many people left behind too many people unemployed or underemployed people even during this frigid climate throughout many areas of the country who do not have heating their homes and others who do not have homes to eat. Doctor johnson, could you share what you would recommend in terms of policies that could keep our economy moving forward and could reach back and include in it some of those millions of people who are being left behind. Congressman, i congressman, i think that is the right way to think about the issue. I try to lay out a range of ideas. Often there are very specific measures that can be taken up raising the minimum wage is highly relevant. Support for education is available. Post high school education. There is a long list of specifics, and if youre looking at the tax code and considering tax reform is important to do that in a way that is revenue neutral. We have an aging ref rev five aging population, continuing pressures. The Affordable Care act has done a remarkable job in terms of slowing down health care inflation. We must have the revenue base. All of the proposals i have heard so far are cutting taxes and giving away revenue. Thank you. Let me just ask if each one of the witnesses would reply to this comment. The United States has the highest share of income going to the top 1 percent of earners compared to the other g7 countries. Does this policy and the trend does this seemingly help expand our economy . Does it have any impact on it . Is it intended to . What would your response simply be . It is a reflection of Global Trends and the return to skills which is not unique to our economy. We have seen the top rising. I i would. Out that all of the evidence out of a harvard study, mobility says that it is unchanged over the past 50 years. For me that says people still have a chance to get ahead. The rich can be rich but we are not growing fast enough that we are happy. Our focus on anti poverty the ability to have the low levels of income be better that is the focus. The bottom, not the top. Thank you. The time of the gentleman has expired. Rep. Kenny marchant. Thank you, mr. Chairman. I would like to ask the panel about the recent phenomenon that has taken place in texas. It is arguable over the last five years at least the exploration discovery transmission of oil and gas in the United States has been a major factor in the economy picking up and probably the most robust part of the economy. Now now that we have seen a significant price decrease in oil we are seeing t5 hi drive every week to the ranch on the weekend and gauge what prices are by a certain gas station on the highway. 1. 64 for regular gas this weekend does this offset the boom in the oil patch . If we reach some stabilized level of oil price will this have a longterm effect on the economy . I would like each of your opinion. I i think the decline in oil prices we have experienced recently has been a very big plus for the us economy. I think that that is a view shared by the Federal Reserve and others. We will w will see stronger growth because consumer income has gone up. In part we benefit the cost of other countries from which we benefit import oil. Most of it is internal. Oil companies are taking a hit at the same time that consumers are better off but there is no question that the combination leads to higher growth more real income, better job creation in the nearterm. The Energy Explosion the us has had a dramatic impact of the past five or six years, years and i have never seen anyone do a full accounting of the stimulus from the decline in net import. The ability of Chemical Manufacturers and factories in the United States states, the cost in natural gas, very important. Certainly it changed. A more nuanced position. I so still think the bottom line is what doctor feldstein said. If if you look forward some of it is just global weakness. As as economies grow more rapidly we will see oil prices go back up. They appear to be stabilizing. I do not see any longterm problem. At the moment i would not be surprised if we saw a downturn. On balance i think this is good for the United States and has made this a different world. Congressman, on balance i i agree it is a good thing oil prices go up and down. It is a a remarkable amount of technological innovation that we have seen. Secondly,. Secondly, job mobility. One thing the Affordable Care act did is reduced job block, the tendency for people to stick with an employer even if there was a Good Opportunity elsewhere. Whatever you do do not return us to a a situation where we have greater job block. Right now we are pretty good at it. Oil and natural gas are not identical. If you see gas prices go down you will see a bigger drop off. If Oil Producers have to drill a well and count on getting sustained relatively high prices, they are the tougher call. I yield back. The time of the gentleman has expired. Rep. Lynn black, you are recognized. Thank you, mr. Chairman. I i want to go to the issue of capitol. There was an interesting chamber talk given, and i was struck by what he said there. It was so simple. Maybe it is because i am so simple it made so much sense to me. We have talked about sustained Economic Growth, good paying jobs. He he said in his talk, it is about capitol if if you do not have an inflection capitol you we will not create a job or a business which creates a job. By that their are taxes that are paid as well as the income of those workers. So as we look at capitol and how we see the influx of capital is not occurring i want you, mr. Holtzeakin just art us off with what someone who would essentially be putting capitol in the market because they would be seeing a return is it taxes, regulation, the issue the issue of trade or all of those things combined . I think you have impacts from all of those things, quite frankly. If you look at the things that the government can do to affect the incentive to save and invest at the highest level the federal government is very anti growth. When we give people healthcare and subsidies we want them to live better. As a nation it is anti saving. That piece with the private sector. Within the budgetary framework large spending programs are crowding out genuine investment in research and infrastructure. We have a budget that is very anti accumulation of capitol. The tax code can be the same way. One reason i am a big fan of the kind of tax code is it allows for rapid capitol recovery. A powerful incentive and something that we need to get into the tax code as much as possible and treats all capitol the same. You buy a a piece of machinery, you expensive. You put a worker into r d you expensive. We do not say very much. Doctor feldstein has done more on this than anybody. Why would you save for a College Education and the rules say we we will not give scholarships to you if you do. Saving for retirement and the incentives, all of those things are important. It all comes back to whether we we will save and invest. And mr. Holtzeakin you keep talking about incentives. That is one of the things we ought to be thinking about. Is it incentivizing what we want . Unfortunately i think as you have already indicated there are many policies we have that are not incentivizing what we want. That is what i hope we we will continue to do as we talk about policies in this committee. Mr. Feldstein, would you like to weigh in on this issue . The key is saving. If we do not save we do not have capitol. The household saving rate is half, close to a 3rd of of what it was in 1960. Why . Partly because of the incentives to this save your mortgage deductions partly because of other policies which substitute. We should be examining what kind of policies we have that drive savings down. Mr. Johnson, i have 30 seconds left if you would like to weigh in. I would say when we we discuss capitol, please do not forget human capitol. One thing one thing we learned from 200 years of Human Experience is the prosperity of any country depends 1st and foremost on the prosperity and skills and health of its inhabitants. Please, when you are considering with the federal government does and does not do it was introduced to encourage people. It was a great success. Reclaiming my time i know i am out of time. Remembering it is the private sector that makes these possible. I yield back that makes these possible. I yield back. Thank you. I will not rehash the area. There are huge opportu