tv Today in Washington CSPAN December 16, 2009 7:30am-9:00am EST
without access to the internet continue to use checks and value their convenience. what steps will the government take to save the check? and to ensure that people and small businesses can continue to use this form of payment? >> i think the honorable member makes a significant point and this is particularly a point in relation to older people. and the provision in the equality bill which ensures that public authorities must take into account the interests of older people. they must not take steps which discriminate against older people, that is something which they will have to take into account when they're making these changes. we need to look to the future but make sure that older people don't suffer as a result. >> will my right honorable friend join me in the local transport guide given the powers forces locally elected transport authorities to bring in quality contracts with the power to determine local bus routes, frequencies and fares?
will she agree with me that any proposal to revoke these powers will make the right and be completely contrary to the local democratic accountability? >> i think these quality contracts have been an important step forward in transport and it would be folly for the local transport act powers to be revoked which is one of the things that the party opposite is threatening. it shouldn't happen. >> nigel evans. >> we have an administration run by tweedle d and tweedle dumb. if the prime minister really does want to give the people of this country a great new year cheer, that he will announce a general election sooner rather than later? >> i don't think that turkey is going to fly. >> thank you, mr. speaker. i frequently receive
representations from small businesses in my constituency about the costs of government regulation. would my right honorable friend agree with me that in these difficult times it is essential for the government to reduce the burden of regulation. and cano she tell me what the government is doing about it? >> well, we're making sure that we help government business both -- sorry. we're making sure that the government helps business both big and small. and one of the things that we've done is help businesses defer their tax under the time to pay scheme. and i think the most important thing that's been announced for small business over the last weeks was the chancellor's announcement in the prebudget report that the time to pay scheme is going to be continued. we want to do everything we can to help small businesses. and one of the things that we won't be doing is abolishing the regional development agencies which are so important to help small businesses, which the tories would abolish. >> order.
nathan for all of their hours. we are very proud of what we will talk about today and i will turn it over to david >> thank you very much. i was actually at a conference in berlin and joe acconsider machine who was the ceo of deutsche bank said at one point that it's the appropriate time of year to talk about fiscal policy. usually at christmas kids ask santa claus for presents and the adults pay for them. but in this era of deficits, adults the government for gifts and their kids will pay the bill. you know, i'm a reporter so it's always looking for that little fact that illustrates that something is happening. and one fact is that there's a discussion of the deficit in washington in a room in which there are more people than chairs. so that's kind of a leading indicator of things. we see it in our polls at the
"wall street journal" that public concern about the deficit has definitely risen has as opposition to spending cuts or tax increasing. -- increases. so the ultimate dilemma here is quite clear as doug's successor put it, doug elemendorf. the problem that the american people have asked government for benefits, many of them for retirees. they exceed the amount of money that the american people so far are willing to spend -- send to washington to pay the bills. so i admire all these people for once again trying to deal with this issue. some of them have been dealing with it since i was a lot younger. and i think it's important to note that not all of them are on social security. doug is only 51. but as he pointed out to me the way things are going in the senate healthcare debate, he may -- he may be soon eligible at least for paying for medicare. so with that, let me turn it over to the panel.
this is about discipline and so that's not only fiscal, it's in use of time. what we're going to do is -- i'm going to bill to speak for about 10 minutes to outline the problem and the plan the commissioners put together then i'm going to ask each of the other people up here to speak for about 5 minutes and we'll have plenty of time for questions. so bill? >> thank you very much. thank you, ladies and gentlemen. for coming to this meeting. i hope you'll be as interested as we were when we were writing a report. my part of this is of short and simple. it is that while we were writing a larger report dealing with budget process. it became apparent that our debt was running away with us. and that we had to do something about fiscal policy before we could continue our work on budget process.
so this report is step one and it will be followed by a budget process report, which we hope will help the congress and the president come to some of these conclusions that we're laying on them today. the commission as said that we ask the congress and the president to work together to commit immediately to stabilizing the debt as a percent of g.d.p. you understand that the debt as a percent of g.d.p. is up about -- a little more than 10% this year. and is headed north of 80% by the year 2018. so we're saying let's stabilize that debt. then we say as step 2, that you have to develop a specific and
credible program in 2010. that's, of course, a large year for congress. it's a campaign year. but we think it is necessary to do it as soon as possible and make the announcement. step 3, we say you phase in the earliest policy changes in 2012. that allows the recovery to proceed without unnecessary inhibition. but the decisions are still, we hope, to be made in 2010. step 4 is to review the progress of the program each year. and enforce the goals set by the earlier commitment. and this envisions the program in which if you do not meet the goals, triggers are affected
which will inflict certain other kinds of pain, both taxation and spending cuts. in a responsible enforcement program. step 4 -- i'm sorry, step 5 is -- or stabilize the debt in the year 2018. we think that's as long as we can wait for stabilization. we've chosen the 60% debt to g.d.p. european union uses it as an international standard of sorts. it's no miracle number. but you have to have a number. and that's, we think, achievable. and yet it's a pretty good target for 2018. step 6, which may be the most important of all and maybe even more difficult than the first 5, is that in 2018, having stabilized the debt at 60%, we're asking the congress and the president to go forward and
reduce that debt ratio further. and we don't tell them what it should be because we can't foresee the conditions of those times. but we expect it should be considerably below 60% and maybe more like 40%, which is somewhere near the average of these last many years since the war. and with that, i'd defer to alice who really knows something about the program. >> i think i probably should have introduced people. bill is a former republican chairman of the house budget committee. alice's resume is too long to go through but the relevant thing here is that she's a democrat and the founding mother of the congressional budget office. one of the few institutions in washington that seems to function as it was intended. alice, i wonder if you could speak a little bit about what makes this deficit reduction set of proposals different from all the other deficit reduction set
of proposals to which your name has been affixed over the last 25 years? [laughter] >> more than 25. yes, i can. i think it is the urgency of the problem and the shift in focus from the deficit to the debt. obviously, they are related. the debt is the sum total of the deficit. but those of us who have been talking about deficit reduction for a long time have pointed out that in the future we are on an unsustainable course. we have made promises under medicare and medicaid and social security that on any reasonable set of assumptions will exceed the revenue available from current tax laws. so there's an impending problem. but that problem was always very far in the future. now it's upon us.
and the other thing that's happened is that while we talked about the future problems of deficits, the current debt level in relation to g.d.p. has been quite moderate in this country in the range of 30 to 40% until very recently. so we didn't have to worry so much immediately that we couldn't pay the interest on the debt. but now as a result of the major things that have happened in the last two years, the cost of dealing with the financial crisis, the automatic reaction to the recession that followed the financial crisis in terms of revenues falling off and expenses going up and the actions taken to forestall
the -- or to help the economy recover from the recession, as a result of all of that, the debt has ballooned. and now we're in ranges that we haven't seen in a very long time. so it makes everything that much more urgent. >> so a lot of people say, why in god's name would you want to even think about raising taxes or cutting spending at a time of a still uncomfortably high unemployment rate. are you talking about doing this stuff now? >> no. not this year. not even next year. what we're talking about is committing to a goal of debt stabilization by nine years from now. the goal is fairly arbitrary. the important thing is stabilization. that will mean getting the deficit coming down as the economy recovers.
and it will mean putting in place credible actions in the future including reductions in the entitlement spending and tax increases. everybody on this group agreed that it was going to take both. putting those in place but not for the immediate future. because it would derail the recovery if you did. >> doug was most recently famous for advising john mccain, we have been hearing that the sky was going to fall if we didn't do something about our deficit for quite some time. we haven't done much except make it worse for quite some time. the sky hasn't fallen and, in fact, interest rates have fallen. the united states is able to borrow extraordinary sums of money at very low interest rates. so why should we worry about this now? what risks, if any, to the
economy are posed by projections that show as this report does, rising debt as a share of g.d.p. >> so it is true the u.s. federal budget deficit has for a long time been forecast to rise dramatically as the baby boomers retire and the shift in the denothing si. the point alice made i think is the central one which used to be a three-decade problem is become a one-decade provocative. -- problem. we see of a spike in the g.d.p. why would you care about that? we know deficits have costs. higher interest rates, reduce the kind of investments we'll make in productive capital, diminished exports around the globe hurt our ability to compete. and in general we'll perform less well. the deficits matter because they shift who pays the bill. the kids end up with the bill. they end with the financial bill in the form of the debt which they mayo heo to foreigners and
they also end up in an economy that's smaller than would be otherwise and you get limits to policy flexibility. if you've got as an increase in debt, that's money that you don't have for other budgetary objectives. it also limits the flexibility of the federal reserve in combating economic shock so we're setting ourselves up fought for the conventional menu of cost but the dramatic size of the cost in particular, international lenders at some point will look at the united states and no longer say, hey, they've got 30 years to fix this and i trust they'll do it. they say they only have a decade. i'm not putting my money in the u.s. anymore. that's a recipe for a currency crisis, spikes in the interest rates, a serious recession. so you'd like to avoid that. it's true that in coming out of a worldwide recession and a worldwide financial crisis, we do not yet see the conditions in front financial markets that would suggest that's tomorrow. but the fact that it's not
tomorrow doesn't mean that you go on your way. it's time to take action on this. >> if markets are forward-looking and so much better than governments at seeing the future, you look into the future and see this fiscal catastrophe. why aren't we seeing this in yields for long-term bonds now? >> you have to assume two things. number one, we're seeing the aftermath of the financial shock where we did see people with a flight to u.s. treasuries, whether that's rational or not. that's a traditional place to go in a crisis. and number two, financial markets counting on the government to get its act together. and the last thing we'd want to do is disappoint them in that expectation. that's why what alice said commit now to credible policies in the future. it can have dramatically beneficial impacts on our millions >> thank you. jim jones is another former budget committee chairman in the house, a democrat and among other things a former u.s. ambassador it off mexico. doug mentioned that unlike in
the past, the distant past when we had deficits and we owed the money to ourselves, that now we are borrowing more and more from abroad, largely from china but also elsewhere. what do you see as the international dimensions as the u.s. on the verge of becoming what some might come the world's largest subprime borrower? >> well, i guess i would say first of all this fiscal situation reminds me of a friend who was overweight, smoked, drank, had bad eating habits. didn't exercise. and we all told him, you've got to shape up. and he said his grandfather lived until his 90s and drank and smoke and he will too. not long thereafter, he had a heart attack and he's in the process of trying to recover. i think that's what we're facing. we don't know where the problems are going to come from. . it likely will come from
international sources but we are living a life, fiscal life. that is not sustainable. and so to me, again, i would go back to say that last week when moody's threatened the u.k. and the united nations with a down grading, that was a major wakeup call. when the premier and the president of china told a delegation led by kissinger and bob ruben, we don't have any confidence that you're going to be able to deal seriously with your deficits and debt problems, when the imf and the united nations say we ought to look for an alternative reserve currency, i think those are all major wakeup calls that we ought to be heegd. -- heeding. i told the story earlier after i left congress, i was ceo of the american stock exchange in new york. and one of the surprises to me
in getting to know wall street was how irrational financial markets can be. and they go on perceptions. they react on where they think things are going. and i think our fiscal situation is something that's being perceived. right now it's not being focused on because all the markets are focusing on the global recession. as they focus on the subsequent issues of fiscal policy, they do not see any serious attempt by the united states to get our house in order. and so what this commission report does is to give us a blueprint to get our fiscal house in order. the perceptions and the lack of confidence if they don't have the right perceptions -- i saw also when i was ambassador to mexico. on the surface the first year and a quarter i was there, on the surface, mexico had a great fiscal and monetary policy, a great economy, et cetera. but pretty soon, the lack of
transparency, the lack of candor of their monetary as well as fiscal policy began to show through. the markets saw it and they stampeded out of mexico and mexico still hasn't fully recovered and reached the kind of economic level they should have since that 1995 peso devaluation that was caused by a perception, a lack of confidence in the country, in the government. so i think we have to have a way to get the policymakers to deal with the deficit. in my judgment, the current congress and the process in congress is simply broken. it's broken mostly because of a strong sense and a growing degree of partisanship. that disallows working together for common solutions. i think what this does in the bipartisan makeup of this commission is to show a way in
which these issues can be dealt with. they've been dealt with in other countries. for example, sweden -- if you look just to the past two decades, sweden and canada had an unsustainable debt and they took care of it. they got their house in order. they made the political decisions. and they're on the right guide path now. i personally believe what's being talked about in the senate of the commission, a bipartisan commission similar to the base closing commission that comes up with bipartisan solutions and then forces the congress to accept it yes or no is the right answer. so i think we're really messing with a massive heart attack on fiscal issues. if we don't act. and that's why i think we have to do it right now. >> thank you. so jim makes the excellent point that a lot of this has to do with the functioning of our political system. and whether there's the political will to deal with the problems that are outlined in this report.
we're going to hear next from charlie and jim both former congressmen. one a democrat, one a republican. jim, of course, has been also been at omb. and i wonder if each of you could speak about what do you think will force something to happen? if this can't go on forever, it won't. but how do we get from here to there without a collision? >> well, i think elections have a little bit to do with that. and that's why we're hoping that the current congress, houseno c0
our fiscal house in order and on the right path. in the house my blue dog democrats are insisting again on pay as you go he. i have never understood how anybody who claims to be a fiscal conservative can be against paying for that which we are asking to be done. but it's been very convenient to put it on the credit card and let our grandchildren pay for it. now, we'll see over the next few going to be reached and hopefully something positive will come out of this. but the big part of the political now is we're hoping that we can get some true bipartisanship and have a target of 280 votes in the house and 75 votes in the senate to put ourselves on a plan that will satisfy whom. the same people that families are having to satisfy. they're bankers that they have a plan where their income will pay for that which they have now -- they now owe.
and will get us on a sustainable fiscal path. if you relegate the simplistic, something families understand and i think more families are understanding that, i think the politics will follow. >> thank you. mr. nussle? >> well, those who are -- those who are c-span junkies or budget junkies know charlie and i have had a few debates and disagreements over the years. just a few. but we come together on a commission like this and have proven, i think, in a bipartisan way that you can come up with a solution. you can come up with a mechanism. it isn't pretty. it isn't going to be popular. it isn't going to be easy. but like families -- i was at a family gathering over the weekend. and part of the reason we love each other and part of the reason that we fight is because we are sometimes more similar than we wish to admit. and there are many similarities
between the parties when it comes to wanting things and not being willing to pay for them. promising -- promising things and not being willing to deal with the consequences in the short term. and that's caught up with both parties. and i think what you will hopefully see is a political solution to this problem. you don't want a market-based mechanism or a market-based event that will cause the parties to have to come together and deal with this. you want this to happen politically as a family. coming together as americans and saying similar to many families who had to deal with this with their own mortgages before they went to their banker, they had to come up with a plan. we don't want to go to our banker, which is china, without a plan. we don't want to have to be forced into a situation where we have no alternatives, where we have nowhere to goc]x except wh
the market or in this instance where our creditors want us to do. we want to be able to deal with this. so what we've tried to put together is a mechanism. you know, i think if you wear your political hat and those of my current or former colleagues who might be watching will say, well, it won't happen in an election year. well, it's always an election year. it's never not an election year. we're either waiting for a midterm or we're waiting for a presidential election. we have proven in the past in our history where in many different instances that we're brought up today whether it was budget summits or social security commissions or all sorts of different examples where leadership can prevail on both parties to come together and sit down and deal with a problem. what we point out is that the problem is coming sooner than anyone probably realized. as doug said, it used to be a three-decade problem. now it's less than a decade. a three-
forth and the mechanism we put together in this report. >> thank you. it's clear to me that the committee showed great foresight in having four members of the house and no members of the senate. [laughter] >> i understand given everyone kept at a time. i want to ask a couple of questions. one is, the committee says, commission says that basically the city would let us have government debt and about 85 percent of gdp by 2018. and the goal should be to get it to 60. alice, could you talk a bit about how heavy a lift is it to reduce spending or raise revenues to get us to a lower debt to gdp ratio over that period? >> it's a pretty heavy lift. but it's not impossible. depending really on what you think the baseline is, and we have chosen a baseline that does
assume that the most of the tax cuts that were enacted earlier in this decade will be extended. if you didn't assume that, that would be easier, but we think that's realistic and we have made some other assumptions that make it harder. and that means that we're going to have to work hard to get on the glidepath to stability. we're going to have to get budget deficits that are likely to be, even after the economy recovers, going up again at the end of the decade. we've got to get them coming down into a range of two or 3 percent of the gdp. we don't have to get to surplus.
but it's going to be very hard to get to the range that it will be necessary to stabilize the. >> so in dollars, we're talking, what kind of dollars are we talking to change this? hundreds of billions of dollars annually? >> yes. >> no. >> no to be mentioned the president of the united states. what role does the president played in moving from fiscal, what you said earlier, inebriation to fiscal sobriety? anybody? charlie? >> i did mention the president suggesting. our report asked the president and congress to work together to make this logon. traditionally, when there have been, congress and the president working together, presidential leadership has been required. it's been an essential. and the president has as tough a
job as the congress does in applying some of his leadership. he has to be the first actor. he has got to bring them together. he may have to lay out the plan, but his participation is absolutely necessary to make this plan work. and in fact, in the beginning he has to be the major player. >> i think the health reform bill that's going to the congress that is going to be a first test of the president. he has said that it has either got to be deficit neutral or not increase the deficit. i think he has to seriously enforce that as the bill winds its way to his desk. secondly, the president can create an atmosphere of national league like no other member of congress can individually or even as a small group. so i think he has to over the next year as part of the 2010 elections and beyond, really set
the story that we have a serious problem and we have to deal with it in a serious way. >> doug, if i could ask you one final question before we turn to the audience. i know that no one on this panel believes we can throw our way out of the deficit. but what role does economic growth play and how do you balance the need to encourage growth with the need to have a more tighter fiscal policy? >> i think you, number one, do what alice said which is you now announced a plan that puts the budget on a stable path. that sends the message that there will not be -- it will be certainly about interest rates, and all that's helpful. number two, the way we set this up is to look at debt relative to gdp. if you can find a beneficial fiscal policy that helps the economy grow, that helps solve this problem. you get a faster growth and that
will not be the single solution but you should always balance. two choices about how to cut, the one that is -- i think in the end this is about setting pro flow fiscal policies instead of fiscal policies which fundamentally are about borrowing to hand out goodies, they don't go to a bigger economy and they don't lead to greater growth. >> okay. let's turn to the audience. a couple rules. wait for a microphone because it makes it easier for the people who listen on c-span. to, say who you are. and three, a question and with a questioner. [laughter] >> is pete davis here? >> p. davis. does any of the war in iraq and afghanistan over the next two years help very much? >> somebody want to take that? alice? >> any decrease in spending helps. but the long run deficits are not being driven by military
spending, and we assume that the war will eventually be over and that the military spending will come back down. but even if it continued, the real drivers of spending in the future are medicare and medicaid, and to a lesser extent, social security. >> there's a question in the back that are. >> thank you. i am nicole. you just mentioned medicare and medicaid. i would like to ask a related question. what type of contributor to the debt is our private health care costs, and if we are able to reduce our private health care costs, how would that affect the federal debt in the future? >> i think the short answer is that the growth in medicare and medicaid share some common elements with the growth in private health care costs.
and to the extent we get reforms that slow the growth of health care costs in general, there will be some budget benefit to that. >> over here. >> joe packard with me for education funding. one of our concerns and our arguments has been investing in programs like early childhood education, college financial aid, actually over the long-term to help the economy to help people get education, leading to better jobs. so as you are making these proposals, should there be some distinctions between spending and programs that might lead to future economic growth purchase versusother? >> i have never heard the argument made were that wasn't the argument. [laughter] >> for every single program policy, spending item departme department, organization, etc. you make a good point. there is no question. but it is almost always in the
eye of the holder. i think what we have done is we've said different than past commission, different for that matter than past even bipartisan efforts, we said everything should be beyond the table or discussion. all spending, both entitlement and discretionary. both automatic and in those spending items that are determined every year, as well as all taxes. whether it's those who are interested in tax reform, those who want tax increases are those who believe tax reductions spurs growth. everything needs to be on the table and everybody needs to be at the table. so you make a good argument, but unfortunately, i'm sure just about everyone will be couching their arguments in those terms as they make their cases regarding the deficit reduction and budgetary. >> alice? charlie? >> if you do nothing about the growth of the entitlement programs, medicare and medicaid
and social security, it will inevitably drive out other things, including spending, investment in children. but the track we're on is shifting federal spending toward older people. and away from an investment in children. >> you know, one of the processes that i used as a member of congress when i had a constituent come in asking for additional spending, and let's use education, which we all agree. i would say that's a great idea. is a great new need. can you help us find a way to pay for it? is there something we're doing in the education community that is less desirable than some of the other things? and that's the spirit in which the commission is going to be asking all phases of the budget. take a look and come forward to congress and say, every time we're spending on education is being spent efficiently for the purpose of educating children. i doubt you can do that.
i know -- i can speak in almost any aspect of government. that's the spirit in which the commission is recommending a new look and a new process. >> amy. everything about the table, there are no annie oakley. nobody gets a pass. everybody is in a. congress and the president will make the final determination. but everything has to be considered for our program to have effectiveness or validity. >> just one point is that to establish one of the key things the report suggests is establishing a goal. debt-to-gdp ratio. and what that gives you is a way to say no. it has to be not just good, but good enough to make the cut. we have no way to say know right now, and we don't say no. >> can i have you explain in simple terms, what happens if the debt to gdp ratio continues to rise? what happens to the share of our budget that goes to interest payments, and make it real for people to. >> if you look out at 2019, you
can be running a trillion dollar deficit. we are very close to the point where getting new credit card used to pay off the old one. and if you look around the globe, we have seen argentina, we've seen all sorts of countries which are the poster children for letting their debt to gdp ratio get so far out of hand they literally have no room to move on real necessary programs, and they get cut off by international lenders. >> there is a question here in the front. can you wait for the microphone? >> anton with executive intelligence review. if you have about a quadrille you in derivatives, and maybe hundreds of trillions of unpayable debts to financiers, and you're not going to put money into massive infrastructure developments to shift, get out of the collapse
of the whole economy, wouldn't your slogan rightfully be something like, this time around, we're not going to make the transfer on-time? if you're going to try to force more austerity in the know of the collapse of the whole economy? that's the picture you are presenting. >> so again, the important stressor is we're asking for a future, not about but simply arithmetic that adds up instead of what we have done in the past. we're not asking for it in 2009 and 2010. the planning happens now. the implementation happens later. >> good to see so many friends here and congratulations on a great report. i want to ask your thoughts on how to make is politically viable. charlie mentioned we need to hundred 80 votes. i would give asa just a different metric. we need a majority vote.
because it's just one party on the sword and the other demagogues. if you look at the debate on health care, republican screen about the medicare regardless of the other consequences in the house. applauding ourselves for tax cuts. what are some thoughts were you can make this real? those of us who have said no, on a number of measures, again, and there needs to be somewhere where someone running for office or serving in office has a metric by which they can be rewarded or recognized for the achievement. it can't be something so simple as supports a balanced budget amendment or not you are calling for that here that i'm very about on this panel anyway. so what are some thoughts about how we communicate to candidates and the voters that is what does matter so it should be a priority in casting a ballot? >> doug? >> i just want to say something, i don't know anything about politics. >> we have demonstrated that.
[laughter] >> i am your man. here are three ideas. number one, replaced wessel as moderator. [laughter] >> number two, you know, you have to find around something good, or ways to unite around, you may not seem it's fair to raise your taxes, but it is unfair to demand your kids to growth. that's a weird if there were handed out a diminished economy and say now you have to have higher taxes and lower spending. that is very unfair. you can unite around fear of china. as our banker. and i personally find it an embarrassment to this nation that the secretary-treasurer goes to china says your money is safe with us and graduate student lab at it. so it is not a partisan issue to make sure we are not laughed at. >> my assumption in the 280 was a majority of democrats and republicans.
because i don't believe you're going to see unanimity. our congress is so fractured today right and left that getting 435 votes would be impossible. 280 with a majority of both parties is something i think is the goal with this commission. >> and all of these things are correct. for one thing, the public now seems to understand the debt ratio better than it understood deficits. it got ready hardened deficits, swallowed them with regularity. i think we have to play that much harder. we have to play the story of international control, our affairs be managed from abroad, which is difficult. and the important item of intergenerational theft. and i suppose the last item would be to have you read file. >> i think for me at least i'm
not convinced that it's going to happen magically. this is not a situation like ebenezer scrooge when he wakes up the next morning having been visited by the ghost of a budget passed, and they all say, gosh, we really need to get together and talk about this. [laughter] >> there's going to be a triggering event, in my estimation. i believe there's going to be a triggering event. there's going to be one of two things and it may be a combination. it may be a midterm collapse possibly. that may be the first example. it could be a presidential change, or a race where this becomes the issue. or it could be a market, some kind of triggering market event and accommodation occurring at that point. i don't think as we've seen, and it's unfortunate, there's so much invested on both sides right now in the arguments that it may be very difficult to impossible for that to be unwound through magic. requiring i think a very unfortunate turn of events for
that to occur. >> can you pass the microphone over here and they will go down the side. there are two gentlemen here sitting next to each other. >> norman bailey. you mention argentina. my question is, and i fully support this commission and its extreme import. my question is, why do the members of the commission believe that what they are suggesting or something similar is more likely to happen than the way the situations they usually dealt with by countries which is either through inflating away the debt or by defaulting, which is what argentina did and as a result, it went on for several years, very high economic growth. and if it had saved that money instead of wasting it, it would've been able to pay off the debt and it would now be back in functioning normally. >> i think we need cash back we need to modify our metaphors and show some examples of courage. i just want to say a word on behalf of the irish government, which is actually taken fairly
dramatic steps to cut its budget deficit in the last couple of days. does someone want to take the gentleman's question, default or inflation and alternative? >> first, i think the commission has a lead in the political system. it may be broken right now but i think we have a believe that if the american people are fully informed, that the political system will respond to that. but there has been courage in the past. i had mentioned about how important the confidence or lack of confidence to perception is, in the early '90s, we raised taxes and we cut unsustainable spending, welfare reform and things like that. those issues of themselves did not balance the budget. and yet we had a surplus budget by the end of the '90s, because that plan gave confidence to the markets to the private investors to start investing again. i think if we have a plan, we adopt this plan, we have some things that are serious like a pay-as-you-go system, a commission system that requires congress to face the issues, i
think the private sector globally will respond to that. and we will be back on track. >> alice, inflation, i know it's not the desired outcome, but is that an alternative? >> is possible in the long run, but at the moment, i think the kind of triggering event that most of us would fear is -- would be a spike in interest rate and a falling back into serious recession, rather than inflation. but i think the basic answer to the question is we are not a small country. we have the status of the world currency. we'd like to keep it. we had the status of the bonds everybody goes to when they think safety. we'd like to keep it. and that's very -- it's very
important to us to keep the status that we have in the world. >> bill? >> i referenced argentina, i think should not lead people to believe that's the way all countries of the world operate. within this report, there's a special inset that shows you a dozen and a half countries who have come back in very strong fiscal position, from a position about the way ours is. and it can be done. other countries have done it. we hope that they are not that much smarter than we are. >> sir? >> roger erickson, i'm not representing anybody. i am a research biologist. a quick comment on that point that it's my understand there's never been a country that people did that wasn't still on the gold standard or paid to another currency that we are in a completely different situation. now my question really is back to a fundamental point that nobody has asked here, if the
only way a private citizen in the united states ends up with currency is as a result of trickle down from federal level public spending, and they have to return some of that through taxes. how is the taxation revenue to the government? >> someone want to try that? >> i guess the point where i disagree with the characterization is it's not true that all income is the result of trickle down of government spending. it is the economy is composed of married entrepreneurs. it is composed of a private sector that utilizes the skills of its workers and the pat hickey relation -- [inaudible] >> and those capacities are the core of our economy and we choose to measure and exchange them in dollars which is the currency that federal reserve is ultimately trying to guard. and i think one of the point is important here is that there is
an interplay between what the federal reserve can and wants to do and the enormous deficit that federal government is about to run and we should try to minimize that interplay. >> i am eric with the fiscal times. a digital start of focusing on the budget and fiscal issues. i have a specific question for alice rivlin and jim nussle. all the panelists have said that it's essential that all issues be on the table trying to figure out what to do with the deficit and debt. for alice rivlin, on the question of medicare savings, what are areas that you would look at that congress hasn't looked at already to try to finesse health care reform? and for jim nussle, would republicans seriously consider raising taxes as part of an overall solution? it doesn't seem likely. >> do you want to start, alice?
>> i think that the first line of defense on rising medical care costs is making this system more efficient. and medicare is actually an extreme case of art and efficient medical care system, because it is a fee for service system that is not emphasized, managed care. i think we can change the reimbursement rates and medicare so that they reward more efficient kinds of care and get -- and discourage treatment that don't work and extensive treatment. that's going to take time. it's going to take -- it's going to take effort. and the problem for the administration, congress right now is you put mechanisms in place to do that, and the cbo will not score them, for good
reason. because in the past congress has derailed them. so the real question is, is congress serious enough now to allow greater efficiency and medicare and also medicaid. >> all things on the table, mr. nuzzle? >> yes, but it is a wise question. i don't think that's why i said to brian, i don't think this happens through maggie. they're not just going to all of a sudden say i woke up today and everything is on the table, and you know, here's my list of tax increases. if you're a republican. or here are my list of entitlement cuts if you're a democrat. and friendly, i'm not even sure it's fair to characterize the parties in that kind of way that one would be for taxes and one would be for protecting spending. i think there's enough to go around on both sides. that's what i believe it's going to be a triggering event. i don't think it's going to necessarily be their first calculation, first impression.
there first, you know, they're logical place that they would he meet miguel. if it were me, i would look at it in terms of how the government collects its revenue, through tax reform, how it collects it, who it collected from, how we can spur economic growth. through that kind of reform. and finally, for once, use a system like this or a process like this to get comprehensive taxes on the table for the first time in a generation. the way it needs to be. if you're a democrat, you may look at the same way for entitlement reform, a place where i know democrats are concerned about entitlements and their growth. yet because of their constituency, maybe they've had a difficult time putting that on the table. so i think using the process as a way to say, look, we have a fiscal oval now for the first time as maya likes to say, we
have a process setting on goal. we arrive at a result currently in our fiscal process. the result of everything we do at the end of the year, we added up and we said that must be what we are adding. what we are saying now, this is what we want to hit. how are we going to get their? so instead of building from the ground up, the way we do know, let's build from the top down, setting the goal and then moving toward that goal, that everybody has the skin in the game and everybody has put everything on the table. >> the gentleman in the back? >> joe, committee for economic development. mr. nuzzle may well be right that we need a triggering event to deal with this problem. i think you'd probably agree that if we put down a list of potential triggering device events, many of them are too terrible to contemplate. mr. jones answered a question earlier about the role of the president and i believe it was
mr. jones, in addressing this. i wonder if the panel could think about some scenarios of how, with presidential leadership, we might head this mess off. >> house? >> well, i think if the administration perceives and they may, that if they don't take a strong position on the long run deficit and make some concrete proposals in the 2011 budget comp they are going to get killed in the midterm election. if they reasoned that way, i think we could get action in the next year, not to solve the whole problem, but to maybe social security reform, maybe some element of tax reform, may be a serious commission.
maybe all of these things. as a preventive and h -- and a dove to proceed landslide to the other guys in the 2010 elections. >> i would agree with that. i think the numbers all point to the fact that there's going to be some sort of drastic problem. in the next few years. most likely what happened before 2012, maybe before 2010. so i think it is in their political interest to take a lead in this. i think you probably know that. also, the polls show the debt is now in the conscience of the american people. they are concerned about it. i think there is a natural constituency to put young people and retired people together, and to say if we're going to have, going to turn over a country, that's better than it was which is the american thing to do for
200 plus years, then we're going to have to find this goal. so i think there's both an emotional and apolitical and a practical reason for the president to take the lead, and i hope that he will. >> my only point, let me make sure i included i'm not suggesting that both parties and individuals within those parties, including the president, will fail to make proposals that i'm sure the president will make a proposal. what i'm saying though is that republicans, and i will do both, so don't hiss. on the republican side they will say the president is doing it because he finally, you know, saw the light and he is worried about what's going to happen in the midterm elections that the democrats are going to say the reason you're attacking is because you have no alternatives yourself, and they will play the inheritance from george w. bush. and it will go on and it will continue to go on with that argument. with proposals coming at. what i'm talking about is a triggering event is something that causes both of those arguments to melt away and to force them to the table to say,
okay, we've heard those arguments regardless of that, i would've to put some skin in again to actually get this done. that's the triggering event that i don't yet see. but yes, i think it will be proposals. but both sides will dismiss the other's proposals, i think, in the next year until that event occurs. >> the woman in the pink. [inaudible] [laughter] >> qaeda wiki from the british embassy. announced plan that you're taking on the chalice but you are don't qaeda threaten the recovery. i think kind of a proposal that has an announcement now, there's some possibility that the public might be a bit skeptical about the credibility of that. so could you say that more about what is the characteristics that make a plan critical? >> that's not what i said.
i said enacted now to take effect later. when now is is a question, but if we could do this in the next year, it would be it would be good. and let me give you a couple of examples. bec is one in social security. if we were to enact a social security reform that brought, so that future social security debt down to zero, we wouldn't possibly have anything happen if you were raising the retirement age or changing the indexing or whatever you were doing, it's going to take time. and he wouldn't have it take effect for a current retiree there so that's a very good example. of another, people talk about an added tax. it would take several -- we could enact it, but even if we
enacted it tomorrow, it would take several years to get it up and running because it is a commentator tax. >> i'm just grand with the investors business daily. several of you talk about interest rates responding favorably if we take some action now. and negatively if we don't. i'm wondering if it would be helpful if that was built into cbo scoring and why isn't it? >> just to be clear, i'm talking about the interest rate, interest rate and potential for a spike in interest rate. >> so it is built into cbo's analysis of the present budget, which is the only comprehensive budget proposal it sees in a cycle, and the cbo in the context of doing that analysis looks at that and look at applications for interest-rate, and all the feedback that
happens to the economy. the difficult on a piece of legislation on a piece of legislation based as you don't know where all the moving parts are so you can't do that with the deficit impact might be. >> there's a question right here and in one in the back. >> thank you. i'm not with any particular group. >> a citizen. >> i pay taxes and am now on medicare and have worked in health care. i want to address this question to the whole panel. you mention, mr. nussle, a trigger. i don't hear anyone here talking about and i think the trigger is here, the average american. we understand we are not working. so as you talk about entitlement reforms and social security and medicare, and medicating, i don't hear anything about creating jobs so people can get back to work to put some money back into the government. i don't know if there is a political will for anyone in
congress to say no to any constituent group, which i think they should. we don't have the money. there are wants and needs. so why is there no discussion about jobs and those people who -- should the government tax high income individuals who create those jobs? thank you. >> -the answer is pretty simple. number one, everything we said points toward the fact that economic growth is central to creating jobs and having the economy recover is a big part of getting that down relative to the economy. we have to have growth to be successful in that regard. with respect to the specifics, we have tried very hard as the commission to not lay out specific policies. we have emphasized everything has to be on the table. you have to have a go, a plan to a place where you're tried to take the budget. and do it in a way which is beneficial to the overall economy. >> and not tighten fiscal policy now? >> and we don't do it in the middle of a recession.
>> i have bill and i probably shouldn't ask this question. i'm talking about whether there should be a substantial pay raise. i am very concerned that the chief justice of the united states makes only $232,000. the supreme court of canada makes much more as well as singapore. now, what do i do? do i go to say, well, mr. president, whenever you want to get davis, you fly on an airplane that if you took a car, it would be less. where do i go to prevent anybody to get more money? anything i do i irritate? >> which number of congress wants to take this one? >> lapland. >> everything is on the table, except for the chief justice's salary. we will take that off the table. >> done. >> in the back?
>> al milliken, amv. did anyone have further commentary on former presidential candidate john mccain and passion reaction and morning on the senate floor yesterday? did he get worked up enough? >> someone other than doug holder you can? >> you haven't seen anything. [laughter] >> you're talking about senator mccain talking about in the health debate? anybody? >> were you watching the senate in action on a football weekend? [laughter] >> maya, you have a question? are you going to answer it also? >> so i was at a dinner party recently where i saw perhaps the best dinner party trick i've ever seen. somebody took off the cap the
invisible fence call and put it around her throat and walked up to the invisible fist to the what action feels like to get hit by one of those. it was something to watch. >> you go to somewhere dinner parties, maya. [laughter] >> do you know what that will do to washington's image out there on the c-span audience because as a result that is become a favorite analogy to the fiscal crisis that we don't know when a tipping point is going to happen but as a chief warning we know it will really hurt big and that is sort of one of the samaras. you get zapped, there's some price of. the other scenario is sort of a softening where they have an ongoing economy. but what i would like, if a couple of folks are counted boil that down to families. how this affects real people who don't spend a day worrying about budget deficits. so those two senators, what would that feel like a family's? >> anybody want -- alice, you're offering to start? >> well, i think the crisis trigger a would be first, their
interest rates go up a lot, but then as a result of that, the job situation gets a lot worse, i think the questioner in the front row were worrying about getting worse. the softer scenario, that doesn't happen, the economy recovers slowly and what we don't put our house in order is the dollar weakensprogressively, things get a bit more expensive, and economic growth is slow so that we don't get people going back to work very quickly. and this process for a very long time and we are all just less well-off than would have been. >> indy but else want to say or? >> if you were a family that had credit card debt, you understand
what happens when interest rates go up and you have to make the payments. right now, it used to be the estates of our debt to ourselves. that's no longer true. $8 trillion of debt is owed to others. and i suspect they are going to want to be paid. whatever interest rate the market determines, at some trigger point. now i want to make a point on three questions that were asked here from a political sense, and as you listen to the questions, so many of us, we have our idea of what ought to happen and why it ought to happen and why it's important. that's the american system. but our political system demands that we get 218 votes, 51 or 60 votes, and a presidential signature. that's our political system. that's what's going to play out next year. and i'm going to have one recommendation when it comes to policies in the next version of this that i'm going to insist that my commissioners vote on. and that is to support, and all of you are making that recognition now, support a
candidate. john tanner, by his partisan support right now changing the way in which we redistrict every 10 years. to create more competitive districts so more to run for congress have to care what the other party thinks, instead of having a totally safe republican or totally safe democratic district i represent a competitive district for 26 years. and i found that most of my colleagues on both sides of the aisle who represent competitive districts tend to look at answers to these questions a little differently than what the party asks for. so i would hope that people would take -- all organizations that are worried about this would take a look at the john tanner bill. it does have i partisan support. unanimous support on the blue dogs until. but so what? if you can't get 218 votes, it cannot happen. this is a political year. if you really want to do something about policy and having some of these serious questions answered, that's the best way.
and, i think almost the only way that we will ultimately get to the perfect solution. but there may be some other ones in between. but that's my recommendation and i think that's the answer i would give you right here, and you right here. you misunderstood, i think sir, a moment ago that we're not suggesting that we have tax increases and spending cuts this year or next to. we're staying put in play and, in place a plan. from an individual family standpoint, if you have a date, your banker is telling you right now, you need a plan. same is going to be same for the united states of america. >> excuse me. is giving. .com do you want to try, mr. joe? >> let me just add onto what charlie said. i would say that's the canada. i would agree with the paygo. i would agree with the commission concept. i would add to that financing of political campaigns. those four things. >> on maya question, i lived through one of those crisis situations in mexico. and i saw how it affected
families. we take for granted that we sort hit the mountaintop. we can afford a house that we can buy car, etc. etc. they thought, the mexicans thought they had finally reached the mountaintop, and then it all collapsed. so they were turning into keys to their house. they were abandoning their cars. 8 million of them came to united states to get a better life. where are we going to go? so deeply affected families throughout mexico. >> there's a question here. >> joanne with politics daily. and my question is, i really love your report that i hope the next one is going to be action to be mounting deficit. you clearly have expertise there. how many of you see a bat as part of that solution? spirit a guy you added task of national sales tax is that inner cards works out as? >> id that i don't think it is the only way to go. but i believe we will not cut
back on medicare and medicaid and social security enough to close the goal, to reach the goal on the spending side. therefore, we need a tax increase. and a broad-based consumption tax, whether it is a national sales tax or a value added tax is a way to go that i think is a good one. and i would add a wrinkle, namely, that you have to share this consumption tax with the states. otherwise, you are competing with the states and the retail sales tax. >> mr. nussle? >> no, i am not in favor of a pure value added tax, and i think it can be separate from your mention of a sales tax, a different type of assumption tax. but again, i don't think that's necessarily what we will be making as far as recommendations.
a process to make -- is still going to be a political decision, and the people have been elected to represent us are the ones are going to have to be making that decision. so we may have different policy recommendations, but right now the process is what's broken. they can't come to a decision. and that's what we are hopefully trying to give them as a framework to arrive at a goal, fiscal goal for the country and a process by which they can make that decision. the little, you know, decisions along the way are still going to be ones that they are going to have to make an tag in. >> the gentleman here. >> what he meant to say if everything is on the table. [laughter] >> my name is dick moose, and i am a grandfather who is worrying about how my children or grandchildren are going to pay for all this. the panelists are agreed that medicare, medicaid, perhaps to a lesser extent social security,
are the chief villains and the effort to try to bring some sort of stability to our budget and deficit, presumably. the kind of solution that you all would like to say is going to involve dealing with, as yet, unresolved problems in each of those entitlement categories. one would like to thank that the budget committee, the budget resolution process and the congress might be an instrument for dealing with this, but thus far, no disrespect intended, it proved to be a sort of faulty electric and visible fence. do the panelists accept that we have to have reform and
medicare, medicaid and the social security perhaps with health costs, all of that has to be a solution and has to be a part of the solution. and how does a uniform consisted incenses approach be brought to bear in each of those major problems that have been so resistant? >> how democrats and medicare, medicaid, social security net? >> before someone puts too much blame on the budget committee, we don't have a regular annual budget process that deals with the entitlements at all. the budget committees deal with appropriations with annual discretionary spending. so it's not basically at that moment, they're full. i think, and many of us think that we need to bring the entitlement into the budget
process. now that you review them every year, but that you have a regular schedule for reviewing the entitlement, and the congress devotes a budget on the entitlements. and if you deviate from it, then you're in trouble. >> someone else want to try? >> this is the same problems that we face in so many areas, where there are narrow interests that either from jurisdiction in congress or by their desire for programs or particular tax, narrow interest drop, the need to get our fiscal house in order to message or hear from this commission today is that we will no longer have the luxury of letting each bear interest live out its life as it has in the past. >> let me say just a way to proceed. let's take two or three more questions. ask the questions and they will have the panelists response we get as many as we can. there's one over there and one over here, and oki.
will take those two. >> i am very stern, education foundation. what advice would you have for the governors for the mayors will be in january and educators and workforce development people coming in march, are they going to have to permanently or foreseeable future, downsized their levels of government, state and local level or superintendent of school have to figure out better way of getting more results with less resources? what advice would you give to the other levels of government? >> and over here. can we get the microphone over here. is there one more? and one in the back end and we will take those. >> david dixon, "washington times." who out there, given that you all seem to agree that next
year, 2010, is the year that the people in congress and white house come to an agreement that would be of limited in 2012, who out there thinks it's just a swell idea to establish right before they do that another massive health entitlement program that would cost over a trillion dollars, and according to the house version, and corporate a 5.4% surtax, that presumably you would want to keep on the table to help reduce the deficit as record debt to gdp to 60%? >> back there. >> okay. my question is will it play in peoria, i guess it seems to me that congress, you know, just in the process of passing a big omnibus bill with a lot of porkbarrel spending in it. we are given a trillion dollar bill out to the banks. why will people think that it makes sense for their benefits to be cut, when there is so much
been going on that seems to be unreasonable to? >> three good questions. one about what should state and local officials expect, one about the current health care bill and how it influences this debate, and one about dealing with the public at the time when they are resentful their money went somewhere other than it should. anyone want to take those? >> i think state and local, i think it will have to get the message that the federal government has run out. and if they are going to provide the services, they're going to have to find their own sources of revenue. >> to help build? >> well, i think it is clear that the health bill would tie our hands and by taking some pieces of the budget off so what. so. and setting up new and how the program is in my view exactly the wrong day to do at a time when we're trying to get things under control. how do you make a play in
peoria? well, what we are proposing or what maya was worried about the economic consequences for american families. sharp recession, diminished purchasing power. a lot of social unrest as you look at the kinds of things that happen in currency crises. or in the slow version, stagnation as far as the eye can see. this is no better than either of those. >> alice, do you want to try the peoria question? >> i thought you thought i was talking to much, david. >> nono, i pachuca registered it was a competent. >> peoria just takes us back to is there a new level of consciousness, of the debt and the deficit. some of us think there may be, and that it may show itself in the 2010 elections. but that's the question. and we don't know for sure.
>> bill frenzel and charlie stenholm. one from each party spirit i don't want to talk about peoria. and i would subscribe to what what they have said about the public seems to be getting a little better notion of how bad our debt problem is, and what the ramifications are if we don't change our ways. and so there is some hope there. one of the possible effects that may play in peoria is the conservative candidates will do a little bit better in this election and we will have another polarized stand up in two years. i hope that wouldn't happen, but the citizens of peoria will have to make that decision, i believe.
i support jim jones on the other level of government. you can't keep coming back to this well anymore. we are about dry, and they're going to have to find new ways to deliver services. they're going to have to make resources that they have go farther. some governors have done that very successfully, and others who don't will be shortly replaced i suspect. >> i have never really gave a rip about how peoria thought about. it was taxes i was concerned about. [laughter] >> and therefore, you know, what we hope as a commission if these suggestions are going to create a dynamics of some kind of a political will that will demonstrate to the people in a 435 district and 50 states what they should or should not be
for. there will be those that would be opposed to a lot of these suggestions. that's part of the american way. advised to this, i remember when we ended revenue-sharing because we ran out of revenue, and that was, that was a big, big deal back in because so many, they love spending the money that i was having to raise the taxes to pay for and i didn't think it was too good of an idea. if you want to spend it at home, many of the states spent too much and much of the states the ship have to take a hard look at how they run their budget. that goes up and down, schools, etc. and on the health bill, with all due respect, we haven't seen the final bill yet. criticism is coming on the individual components of it and i share some of the concerns about that. let me make this observation. on health care, it you add a new $1 trillion health care bill that does nothing to bending the curve, you are not addressing what we are concerned about today. he will have addressed the one
problem of health care. but you have not dealt with the long-term fiscal deficit. the only people in congress that searcy made an effort of that was the senator wyden and senator bennett in a bipartisan way in the senate. and jim cooper in the house. and i hope that some point the conference or something will go about looking at some of the series recommendations of how you truly been to the curb. and i am still hoping and i'm not going to be critical of our president and till he does something that deserves to be criticized on, on the health care, the final version. that's where we are attempting to focus next year on the process. if they pass a bill that's as bad as you infer, then it will become part of the political dynamics in a big way in november. not to the positive happening from my party. >> on that happy note. [laughter] >> i want to thank our panel. i think they deserve some applause for the work they have done. [applause] >> i think all of you for good questions. i'm told that if you want to read his report and don't want
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>> now richard holbrooke with representative for afghanistan and pakistan. the moderator is michael gordon. chief military correspondent for "the new york times." from the council on foreign relations, this is an hour. >> okay. well, i would like to welcome you to the council and foreign relations meeting this evening, and this is an interesting event because we not only had the audience here, but we have our council formulations