Inauguration Special Talking Business


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Inauguration Special

In a special edition of Talking Business from Washington, Michelle Fleury asks employers, workers and entrepreneurs what they hope to see from a Trump presidency.


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football club Jared has played again after last month. They were

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presented with the trophy that they were on their way to play in, in

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Colombia. Now, Talking Business. Hello from Washington, DC, I am

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Michelle Fleury, Donald Trump said he wanted to and do stupid trade

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deals, cut tax and establish structure, we examine the economic

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consequences of the Trump presidency.

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Welcome to the programme. Both before and after his election

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victory, Donald Trump has ruffled feathers at the highest levels. And

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yet he won in the places that mattered. His message was music to

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the ears of millions of blue-collar workers, who had felt ignored for

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years. He made promises about jobs and small businesses, trade deals

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and tax rate. So can he get the job done, and how do Americans feel know

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he's in charge? I think it's going to be good because he's a good

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businessman. We know he's got smarts, business-wise. Meijer I

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think that is what will help make America great game, keeping our jobs

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here. Our people need to be working. They need jobs here. And not

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convinced they will help the people that voted for him. I think the

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wealthy people will get wealthier and those who don't have money will

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soon not have a lot of money. I think the gap between rich and poor

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will continue. I think his economic policy may be good, he has a good

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head on his shoulders. If you might think the wealthy will prosper under

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his reforms yet as far as the middle class I don't see that happening and

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as far as the average Joe experiencing any benefit I don't see

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that happening either. Candidates promise all kinds of things on the

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campaign Trail, a lot of it gets done, a lot does not. Can Trump do

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some of the things he's pledged, helping me figure this out is Jared

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Bernstein, a senior fellow in the centre of policy and budget

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priorities, he worked in the Obama administration and was chief

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economist and economic adviser to the former Vice President Joe Biden.

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We are also joined by one member of Donald Trump 's transition team,

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Diana Furchtgott-Roth, senior fellow at the Manhattan Institute. And last

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but not least I am pleased to be joined by Laurie Waller, director of

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public Citizen 's global trade watch, national nonprofit advocacy

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group that looks at government and corporate accountability in

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globalisation and trade. Laurie, if I could start with you, I want to

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talk about the issue of trade. One of the promises Trump made on the

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campaign trail was to repeal Nafta, is their president that this? It is

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possible. A president can't unilaterally withdraw from a trade

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agreement and all that remains is whatever was permitted by Congress

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which in the case of Nafta is a very small part of the problematic

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provisions of Jared. He could do it. It has not been done before but the

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reason why it seems so urgent is that just under one government

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programmes that are over 900,000 American workers certified by the

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government as having lost their jobs to Nafta trade. And in the context

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of getting the model of trade right Nafta is a well known hot target. It

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sounds like you agree with Trump that America has lost jobs to Mexico

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because of Nafta. There is no doubt about it. We went from having a

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combined trade deficit with Mexico and Canada of about $9 billion

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before Nafta went to a fact to the last full year of Nafta trade, it is

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just simply that we went from not having and a visit to an enormous

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one and we have a list of the jobs that were lost. Certified by the

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government. Diana, how will this help American workers because this

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is not part of the problem, that the face of manufacturing is changing?

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-- is it not? That is definitely part of the problem. Also one reason

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that jobs are moving to Mexico is the corporate tax rates in the USA

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are so high compared with other countries. We have a corporate tax

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rate of 39% federal and state compared with an OECD average of

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25%. You are right that the statutory rate is as high as you say

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and it probably should come down, we probably agree on that but

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corporations pay their average effective rate, what they actually

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paid to the eye and are as is 26%, so very much what Diana said as the

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international rate. The problem is to get that they take advantage of

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so many loopholes that all of us would agree are a mess and should be

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fixed. They are not going overseas to games the tax system, they are

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gaming and here. I want to bring up something Donald Trump has talked

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about, tariffs. If you look at the auto industry, he has said that

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American car companies should be producing the cars in the US,

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otherwise they face tariffs. What do you think of that idea of tariffs?

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Is there a danger of a trade war of other countries retaliating? Tariffs

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always have to be kept in the back pocket. The fundamental problem is

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that we have so many regulations that this encourages companies to go

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offshore. Plus there is the mandate to produce small fuel efficient cars

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that no one wants to buy. So to make those in a cheaper fashion companies

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have incentives to go offshore. The problem with the tariff idea, as

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much as you suggested, is retaliation. If you start talking

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about tariffs of 45%, the numbers Donald Trump has thrown about, I

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think you do invite retaliation and at the end of the day that will not

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target the trade deficit the way we need to. It seems that as we're

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thinking about what would be good trade rules, that would be the core

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reason by off shoring, because a bunch of shoring happened to Canada,

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this is much Morpheus standards than ours. The agreements themselves have

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rules that incentivise off shoring by lowering the risk premium of

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leaving the inspector privileges if you relocate investment and jobs to

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another country in the Nafta son. Those rules that are in there

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because Jared was negotiated behind closed doors with literally hundreds

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of official corporate advisers who wrote the rules lots of often

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protectionist privileges and for that. So if you cut out these

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incentives to do the wrong thing, which even in a free trade agreement

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includes expanding monopolies and blocking competition, they would

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bring down consumer prices are medicines, this is packed into

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Nafta, if you cut out the garbage that was frozen forcing its way

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through and put some basic standards of competition, the way we have

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national law, you could have a very different dynamic about when

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investment would happen and who would benefit and it would be much

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more beneficial for people. I want to bring it back to jobs. Donald

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Trump has said he would like to grow the economy faster to create 25

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million jobs in the next decade. Diana, how does he do this? Trade

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one part of it, what else? One part is bringing companies back from

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abroad, bringing earnings back from abroad. There's $2 trillion worth of

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earnings abroad that have been kept there because of high tax rates,

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that would be one step, another step would be reforming regulations, to

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make it easier for employers to hire and promote, getting rid of the

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affordable care act which keeps company sizes low, and has an undue

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burden, so there are many, many ways to encourage companies to increase

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their hiring that we don't have now. Rolling back a lot of the Obama

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politics that Jared helped with! The problem with the Trump

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administration now talking and policy level is that they are just

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getting started. So by definition this is all speculative. But the two

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policies that they have really articulated and leaned into heavily

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art repealing of the Affordable Care Act that you had Diana mention and

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these tax cuts that are massively tilted towards the wealthy. They

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significantly reduce the tax burden on those at the top of the scale and

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increase it on those at the bottom. And I think this goes exactly in the

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wrong direction in terms of job creation. You mentioned the

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Affordable Care Act, opponents of it to say it is a job killer. The

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evidence is the opposite. The Affordable Care Act created

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something that 20 million more people got health care so that will

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involve doctors and hospitals. We cannot find evidence that it has

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hurt employment at all. When employers are required to provide an

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overly generous plan it increases the cost of employment and they hire

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fewer people. At this point we will say goodbye to Lori Waller, thank

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you for joining us. Diana and Jared are staying. Before we return to

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them will American companies parking many overseas be persuaded to return

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that cash to the United States? Let's listen to our comedy

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consultant. Ireland and global companies paying tax. Context tax

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arrangements are a speciality here in Dublin. So if President elect

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Trump has some new plans it seems things could get messy. Now

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obviously I am not qualified in any legal sense or indeed any practical

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sense to offer tax planning advice to large global multinationals.

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However, I am Irish and tax planning is in our DNA. For years before the

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special relationship with global tax. So when I heard that new Donald

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Trump planned to cut American companies return the money to the US

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by offering them a tax holiday I thought, maybe there's an

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opportunity for me to open up a temporary global tax planning office

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here in Dublin. I may need, before I welcome clients, to do a bit of

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refurbishment around the office. That will do. No, no, you are not my

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first client, no, no. I would say that with lottery tickets, they are

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an investment, so you probably could write them off as an expense. One of

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the questions people ask me is if Donald Trump does offer a tax

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holiday or some other tax incentive, will American companies take

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advantage of it? What are the implications for the Irish economy?

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Let me see. Implications. Maybe I should talk to an actual expert.

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Trump created a tax holiday, my best guess of what would happen would be

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the experience we sought when Bush did it in 2005. A lot of investment

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flooded back into the US because they did not pay as much in tax, so

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FTI and Ireland fell which seems like a scary prospect especially for

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a country so dependent on foreign firms but in the same year we saw

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jobs by multinationals increased by 3%. How does that work? They send

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the money home yet we get more jobs. Money is investment. It is very

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mobile. Jobs are a different aspect of it. It's a much more permanent

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decision process. US multinationals who come to Ireland have generally

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made long-term investments and are here to serve the European market

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and get access to European consumers, and the tax rate is

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relevant in terms of why do they pick Ireland, compared to choosing a

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different country in Europe? They are not particularly in Ireland

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because Ireland's tax rate is lower than the US tax rate. If the US took

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a more protectionist angle and started to increase tariffs and

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trade from other countries, to renege on various trade deals, it

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would likely reduce the US demand for exports from those countries.

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None of the countries are putting forward things really directed at

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Europe so it's all a question of whether they would have trickle on

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effects. Physio's big tax story is sure to be Donald Trump 's big tax

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plan. We don't know how exactly it will work. One thing is for sure, it

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will all be horribly complicated which means more work for global tax

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planners like me. Colum Reagan. And you can see more of his short films

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on our website. Back with us Roger Redburn Steyn, Diana Furchtgott-Roth

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and I'm also joined by Eugene sturdily, author of Dead Man Ruling.

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He helped lay the groundwork for US tax reform and served as an

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assistant to the Treasury Secretary during the second term of President

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Ronald Reagan. If I could start with you, there's been a lot of talk

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about what to do with American corporate profits that are parked

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overseas. How to bring them back to the United States. One thing floated

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is the idea of a tax holiday to tap into more than $2 trillion in

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profits parked overseas. How would it work? Repatriation of earnings

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from abroad as part of a bigger puzzle. By itself I don't think it

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does a lot. We have a corporate tax in the United States, worldwide that

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does not work very well. It has been falling apart for decades and a

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gradual rate. We collect mature revenues these days in corporate

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taxes and one reason for this is because corporations keep a lot of

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their earnings abroad. It's sort of a shell game. They keep money

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abroad, technically, it may not prevent them from doing too much

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because they can always borrow the same money but it does create

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certain legal problems in terms of bringing money back. If we give

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repatriation holiday it would bring back 20% of it, the people who don't

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want to keep it abroad because it's just not efficient to give it there,

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it tries to get it to a broader issue. In some ways it makes sense

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to wipe the slate clean. You are seeing positive and negative in some

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of it? I think if we could get a good corporate tax reform a

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repatriation holiday would make sense but by itself it doesn't do a

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lot. You are both keen to talk about taxes, this is the moment, Jared,

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what do you think about what you heard? Repatriation holidays lose

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money and you can't pay for something that loses money. It is a

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lousy idea and much smarter to do tax reform top to bottom. The

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problem is in this time the minute you start to do corporate tax

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reforms you are closing loopholes, this deferral of holding earnings

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abroad is a classic example of a loophole in the corporate tax rate.

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Everyone starts complaining loudly, therein lies the challenge.

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Republicans and Democrats do agree that our corporate tax rate is far

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above the other countries, and both agree it should be lower. We have

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very few opportunities for tax reform, we had the one that Eugene

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was an integral part of constructing and we had tax reform in 2001 under

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President George W Bush and we must hope we get it this time. What about

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the criticism that it will push up the deficit? Something Republicans

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have been concerned about in the past. Donald Trump is committed to

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keeping spending even. He would counter this with spending cuts. Tax

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reform would act as a stimulus and would bring in increased amounts of

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tax revenue, both especially in terms of the corporate rate and the

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individual rate. To the numbers add up? What is unique is that the

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government is so overcommitted, committed to raising spending

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permanently way above the rate that revenues are rising so we have not

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only deficits, but having built into the law future deficits. So what

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this does politically is put Congress and the president in this

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huge bind, so sometimes somewhere they have to start cutting back on

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these promises made to the public. I am being bipartisan about it, taxes

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too low to pay the bills which raises interest costs. So they are

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in this horrible bind where they have to go back on promises. It's a

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monstrous task which faces them. On a budget that is so out of work

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already, that's the dilemma, if you can get good spending cuts and good

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tax cuts together, make leaner government, I say good, it is

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pro-growth but that will be harder to do in this current climate. Just

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to be clear, you have the Trump administration significantly cutting

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taxes to the tunes of trillions of dollars over a 10-year budget

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window. Diana said, if you cut spending you can help account for

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that but Trump has said he will not touch Social Security or Medicare.

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That takes off the table one of the solution is just mentioned. If you

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take that off the table and you cut taxes to the extent they say that

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they will do, the numbers don't add up. Can I give you some numbers to

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back that up? We have done an estimate, two years from now, going

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by modest growth rates, real revenue will increase by $850 billion.

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That's significant. That's just a couple of percent a year. Committed

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already to interest on that alone is $1.3 trillion. So we have

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commitments way beyond the revenue growth meanwhile everything else

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under current law is going into a tailspin. Donald Trump has pledged

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between three and 4% sustainable growth. How much can he control

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that, he inherits an economy with near full employment, how many years

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we have seen of the recovery, how much can he shared the economy? You

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cannot control growth but you can put in place policies that will

:20:18.:20:20.

encourage investment and work and that is what he plans to do with his

:20:21.:20:25.

regulatory reform and tax reform. And when Congress passes the tax

:20:26.:20:29.

reform, we will just have to see what happens. I am certain we will

:20:30.:20:36.

not see growth rates of 3-4%. I could be wrong... You'd better be

:20:37.:20:43.

careful, Jared! I don't care what you do, you won't get to 3-4%

:20:44.:20:48.

sustained growth rates and this is the reason. All the stuff Diana

:20:49.:20:53.

talked about sounds good, I don't really know what we mean by tax

:20:54.:20:58.

reform and deregulation, that the kind of things Diana is talking

:20:59.:21:02.

about is what I call after the decimal point. That is a few tenths

:21:03.:21:07.

of a percent one way or the other. Doubling the growth rate calls for

:21:08.:21:12.

one two things. Faster growth in the Labour force and foster productivity

:21:13.:21:17.

growth. The Labour force has slowed considerably and of Donald Trump has

:21:18.:21:21.

his way with immigrants it will slow even more, and productivity growth

:21:22.:21:24.

which has been slow, we don't know what will happen, if it doubles the

:21:25.:21:39.

troubles in the next few years. Are not going to commit to doubling the

:21:40.:21:42.

growth rate that I will say that in the past eight years we have not had

:21:43.:21:46.

a growth rate of more than 2%, to slow for the number of people who

:21:47.:21:50.

want jobs and the growth we need. We are pretty much out of time. One

:21:51.:21:55.

last question, or a prediction from each of you, which policies will

:21:56.:22:00.

Donald Trump gets done? I believe there will be a tax reform, how big

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is another question. Biggar there will be tax reform and regulatory

:22:05.:22:08.

reform which will stimulator the economy. I'm afraid the Trump

:22:09.:22:12.

administration will be able to repeal the affordable care act and

:22:13.:22:16.

have no viable replacement. That is where we will leave it. All that is

:22:17.:22:22.

left is for me to thank my guests, Jarrod Burneston, Diana

:22:23.:22:26.

Furchtgott-Roth, and Eugene Stilley. Next week my colleague will be in

:22:27.:22:30.

Bangalore to examine how a country with the fastest growing workforce

:22:31.:22:34.

in the world is coping with the slowdown in jobs growth. For now,

:22:35.:22:38.

though, from Washington, DC, goodbye.

:22:39.:22:54.

A weekend of huge variety in the UK with one common denominator, I'll

:22:55.:23:01.

show you what I mean with the help of some weather watcher

:23:02.:23:02.