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We're going to face a social security issue: Bipartisan Policy Center on budget deficit

Bill Hoagland, Bipartisan Policy Center Senior Vice President joins the On the Move panel to discuss the latest on the Stimulus Bill.

Video Transcript

JULIE HYMAN: Another day gone almost and looks like there is no agreement on stimulus in Washington. The president is commenting on it, of course, in a tweet, saying the Democrats are heartless. He said they don't want to give stimulus payments to people who desperately need the money and whose fault it was not that the plague came in from China. Go for the much higher numbers, Republicans. It all comes back to the USA anyway one way or another. So I'm not quite sure what he's saying there, if he thinks that the Republicans should do more for stimulus because it comes back to the US anyway.

But in any case, let's give Bill Hoagland to talk about it. He is the Bipartisan Policy Center senior vice president. And that center, by the way, is a partner of the Funding Our Future Campaign. It's a group we feature each week only on Yahoo Finance that advocates for a secure retirement for all Americans. Bill, thank you so much for joining us.

So what do you think is going to be the outcome of this stimulus talk? I mean, it must be tough being at the Bipartisan Policy Center right now when there is so little of it. Yes, we had a bipartisan proposal recently put forward on stimulus. It didn't go much of anywhere.

BILL HOAGLAND: Yes, it's a very frustrating time for anybody who believes that you create good policy in this country through bipartisanship effort here. What's going to happen? I listened to Greg in your previous segment. I agree with Greg that we'll expect the Chairman Powell this afternoon to say that we need more fiscal stimulus here. I agree that most economists out here believe that we need to have a continuation of some fiscal stimulus, particularly on unemployment insurance benefits.

But I guess I have to come to the unfortunate conclusion that I think the best that we can expect here is no government shutdown in a couple of weeks and that we'll have a continuing resolution that will carry as unit into December, after the election, or sometime into early next year. I do not expect, at this time-- except for maybe additional money that's going to be added in the continuing resolution for something called the Disaster Relief Fund for the hurricanes and for the fires in the West-- I don't expect much more to happen in terms of fiscal stimulus before the election.

And I, unfortunately, believe that this is all politics on both sides, both Democrats in some ways think that this is to their benefit to ask for more than they're going to get. And at the same time, I think Republicans think that they'll benefit from this. So it all comes down to politics. The best we can expect is a continuing resolution, at least no government shutdown in the midst of everything else that's going on.

ADAM SHAPIRO: And how would that affect the 30-- it's about 30 million Americans who don't have a job right now and with an economic future that is precarious for all of us?

BILL HOAGLAND: It does not help at all, Adam, in a major way, except for one thing. Remember that the $300 that the states are adding to their UI benefits-- not the $600 since that expired back at the end of July-- that $300 is coming out of something that the president did with a memorandum, a presidential memorandum, that allowed for the transfer of the Disaster Relief Fund from the FEMA accounts over to states to provide this.

At least, if they are to put that additional money in the Disaster Relief Fund, which should be for the fires and for the hurricanes, at least there'll be money there that can continue to maintain the state's additional $300 on unemployment insurance, at least for another few weeks. That's going to run out, by the way. That $300 is just about exhausted with everything that's going on with our disasters in this country.

MELODY HAHM: Bill, it sounds like you're with me and perhaps many Americans who are going through sort of a-- an introspective time, right? As we're in this coronavirus pandemic, we can't help but sort of be flooded in our own thoughts. And you sort of alluded to the fact that you spend your entire life thinking that deficits are extremely important and something to be worried about and something to be aware of. Tell me about the existential moment right now you may be having where you're second guessing, perhaps, that claim that you've held onto for your entire life?

BILL HOAGLAND: Yeah, I still believe that a government should try to at least balance their expenditures from their revenues. I think businesses have to do it. Families have to do it. Farms have to do it. Universities have to do it. Why can't the federal government do it?

Obviously, there's a difference here, and that is that we can print the money. We can run the deficit. My concern all along-- I grew up on the theory that deficits crowd out private investment and drive up interest rates. To the extent-- as Greg mentioned in your previous segment, to the extent that the Federal Reserve is playing a very big role right now of keeping those interest rates very low, that means that we're not having the same problems that we would normally have with interest rates. I do think it does affect those people who invest in those treasuries for retirement purposes. I don't think that's necessarily good for them.

But overall, for the federal government, so long as those interest rates remain-- those treasury's borrowing rates remain low, deficits are not going to be a big issue. What concerns me-- and who knows when that last drop in the test tube turns that water from clear to blue-- who knows when that-- something jars us into not getting, let's say, the foreign investments that we need to-- that are funding part of our debt today. And all of a sudden, we end up with a real increase-- a spike in interest rates.

When those interest rates go up with a $30 trillion-- and by the way, I'm going to remind your audience that we will have to pass a statutory debt limit increase July next year. This is the usual thing that we go through every once in a while, and that's going to create some real issues out there and uncertainties in the market, when we have to increase our authority to borrow. And we're going to have to do that sometime next year early.

Long story short here, Melody, my position is that I still believe debt and deficits matter. I believe that right now, it's understood-- it should be-- in times of war, in times of recessions, in times of pandemics, the federal government does have a role to play here, and they should be investing. But over the long term, I think we have to find a way to balance those revenues from those expenditures.

And that probably means-- unfortunately, it probably means either we're going to have to take on some really serious discussion about our entitlement spending programs in this country. We're going to be facing a Social Security issue coming up. We're going to be facing a Medicare, HI trust fund exhaustion. These things are on the table. They're coming. There's no way to avoid it. And when we have that discussion about those major entitlement programs, that's a-- as we always say in the third rail of politics, that's going to be difficult politically.

If you're not willing to do it, then let's face the facts. We're going to have to belly up the bar and say, if you want all these benefits that the federal government is providing out there-- and should be providing up, let me say, in many areas of the country-- we need them to have to think about our revenues. That's not another popular approach going forward politically.

JULIE HYMAN: Bill, great to get your thoughts on all of this. Bill Hoagland is Bipartisan Policy Center senior vice president. Appreciate it. Thank you very much.

BILL HOAGLAND: Thank you, Julie.