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tv   Capital News Today  CSPAN  June 21, 2012 11:00pm-2:00am EDT

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but as you go away from those six, eight or 10 states wind energy has a different economic equation for the user and solar energy is largely an economic choice and in three to five states. there are smart places and less smart to do both of these and i'm sure we'll get into some of that. >> tell us about -- you quoted saying in 2013 there would be no wind generators, no-win centers built in the united states of the federal government didn't get its act together on the tax incentives. can you expand a bit on that? villa. you have a dynamic where efficient wind energy if it is measured by price today would --
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with the technology will advance as we have seen the last were three years massive one for the last two years, price declines in equipment due to various forces at play in the oval financial and technological markets, combined together with when pricing with the federal subsidy back down to the 3-cent range where it was eight or 10 years ago and it had gotten up to the five or 6% range in the windy spots in the country. and the kos much higher than that with the poor wind regimes and things of that nature but now we are in a dynamic where that subsidy will go away and the 3-cent price point becomes a five or 6% price point after-tax money so for those of you that pay with pre-tax money in your life come you know the difference between paying with pre-tax dollars and the bottom line or after-tax dollars so that is an effective two to 3-cent increase the customer would have to pay. my point that i have made a few times in recent months is what
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customer do you know what suddenly voluntarily agreed that they are buying a lot of it down to pay me or somebody that looks like me a year from now to double the price? i don't think there's that much political correctness in our country nor do i think going forward. >> thank you martin. i was doing some digging on the on -- you and you are the project finance lawyer of the year and look what you did at a range project enhancing for sports stadiums, arenas, sports teams and basically your day job and maybe evenings and weekends you were doing energy. and renewable energy. so i'm interested, are there similarities between what you see as this industry and there the renewable industry sector and what you've done with the other large projects and what are your reflections as you have gotten into this because i can tell by your profile you have been in the an inch lorena for a long time in coming back to my core question which is to kick
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the tires of how serious wind is as an energy option and a viable business option. how do you see it? >> probably 90% of what i spend my time on his energy and in 2011, we were involved in almost $10 billion worth of renewable energy financing. it would be fun to be doing $10 billion worth of sports stadium -- stadium financing but there are that many in the country. purchasing sports is a lot more fun but not as many people are as interested in looking at a bunch of wind turbine sitting out there in the field or a bunch of solar panels. but that is truly where the biggest capital investment is and quite frankly, that is the area where i feel you can make the biggest difference for our country. now, as michael has said they have invested almost $20 billion in industry investing close to $100 billion in when. they wouldn't have done that if it was an wasn't economic, if it wasn't productive.
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utilities wouldn't be buying that power and the same thing is true of solar energy. last year is the result of a federal energy loan guaranty program. they have just gotten little to the publicity they are no government help finance close to $20 billion with the renewables and those are projects in the long run that will help scale up the industry in something like solar the price of solar has gone from $4 a watt to something under 1 dollar a watt. that is just in the last probably two years. part of that is because of the scale up in the industry. the same thing i think mike is mentioned as happened in the wind industry. the cost of wind power has been reduced significantly and ultimately that is the way to help our country become more energy independent. >> here are these cost factors going down but when the obama administration came in three and a half years ago and president obama talking about green jobs and talking about solar.
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at that time china had about 5% of the solar panel production capacity in the world. today taiwan is 70% so it doesn't look like at least eight administration made very much headway. maybe people blame chinese subsidies but it raises the question of whether or not even if you have a president of the united states, a clear need and desire to move into the renewable energy sector whitey think you know this is the wind panel but let's take it as an example. the united states lost its battle on solar and mike may disagree we lost the battle. but it doesn't look good. >> i would say we didn't lose the battle either. i think the largest solar projects in the world are currently being built in the united states. there are two a -- two, 500 billion-dollar projects. mike's company is the owner of one of those projects. those projects will help prove the viability of low cost pv
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solar. some of the largest solar thermal projects in the world are being built in the united states right now also as a result of part of the government program. when you talk about the pv industry in taiwan or china, you're talking about solar modules and manufacturing perjury not necessarily talking about the installation and equipment. there are a lot of jobs involved in the construction and as the price of solar comes down i think the u.s. manufacturing capacity will increase as well. >> getting back to wind, you have been working on this for a while and intrigue intrigued with the projects. you basically tried to deal with one of the big problems of wind which is the variability and i suppose storage and linked a lot of offshore sites are go maybe can tell us a little about that and also reflect on what some of the real weaknesses have been in the ability to get large-scale wind energy production. >> i will take the second one
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first. i think it's a matter of ramp-up rather than weakness of ability. and earlier speaker mentioned 4% of production is now wind, but if you look at the pjm queue which is the power operator in this area, over half of the new generations is when. now what that i'll get health? it depends a lot on tax incentives and other policies and the q is always a more optimistic or cast but wind is moving very quickly under the current policy environment. which as we have noted a change. on the leveling of wind, wind is considered to be weak or unable to become a large part of generation because it fluctuates with the speed off wind hitting the turbines. i think that sounds a bit exaggerated. in denmark in the fall on sabbatical which was does not mean vacation. it mean to her working with different people.
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and they are running 22% of this whole countries production from wind and at times it is 60 and 70%. so it's certainly possible to do a lot more but the key is transmission, and people think storage is the main solution but the project that we did that you referred to is that we looked at the atlantic offshore wind resource and asked, suppose you had wind generation spread out along the atlantic coast rather than in one location. one location the wind fluctuates a lot. so we modeled a long-distance transmission line, high-voltage direct current going from maine to florida. it's not something you would practically build in one shot at least. we are willing to understand how transmission could affect when. we had 11 sites along that
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route -- route. in four years of data, the winds never stopped. it fluctuated but it fluctuated around 30 or 40% capacity, not all over the place. and literally it was not a resource anymore so it is just one direction, but it is way to organize so the way the storms moved was the way the transmission lines move. it transmits you don't need a lot of storage and you combined a lot of transmission with a little bit of storage to get the leveling of wind fluctuation. >> this sounds like a large degree of infrastructure that myself problems and i don't know if the model that i have heard by ted turner is still appropriate or not but when you talk about grids and talk about investment it does make me ponder some of the current policy debate about whether the united states at the national and state-level is investing enough in infrastructure, with the projects look like that
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would partner well with private industry and what those balances should be. what do you thinkhim if he were to see even from your own mercantile perspective, what would be in the public interest as you see it for the government to invest in the infrastructure? >> that is a loaded question. i believe with infrastructure you have to look at the country with all due respect for why he and alaska from a great point if you and not being logically interconnect to bowl. you have 40 different countries and most people who look at the less electric grid fail to see that because you don't deal with it every day that some of the -- like some of us who live in an edit for 30 years. each state wants its own policy and often does. georgia doesn't talk to alabama and florida some talk to georgia and north carolina barely speaks to south carolina on electric issues and we try to have an infrastructure discussion and try to coordinate all of those
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things, and then i played my colleague told me there were over 500 utilities in the united states that on some piece of the transmission grid. we can get out of hundred 37 people that get elected to office in the city to talk to each other. can you imagine how hard it is to get five different companies to apply in this common interest. there is probably very little common denominator on the scale of the whole country. when you want to start doing infrastructure of state-by-state and at best -- wind in general makes a lot of sense and six, eight or 10 states in the center part of the country. robust resource, therefore the least cost-efficient for the all of the above discussion. i think the governor was talking about a little earlier. as you start to to me that other places and you want to desire to put windows where you get into what we call back in our office the orange juice discussion. we have a lot of orange growers and to create orange juice --
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many of you pay x dollars a gallon or half gallon of the supermarket. if any of you are from north dakota or new jersey or maryland up at this area think what orange juice would cost. if you had to grow the orange tree when you buy it. not a lot of people would rush to buy orange juice that had to be grown locally in north dakota or maine are places like that. the same with wind energy. wind energy makes a lot of sense in several states in our country that you have to bring the infrastructure to distribute the commodity the product. then you get into the 40 different countries in the federal government's role permitting, the logistics and the construction for technology is known and understood. to moving electricity around the country is not the same as moving oil and gas, not a pressurized dynamic and the physics and engineering behind it are very different than how
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we move natural gas and oil and other commodities or liquid-based commodities around this country. it's not like interstate highway system where we have kind of a shared infrastructure amongst all the states that pay for it in a political and local way through the gasoline tax revenues. it was built decades ago with central stations in rural areas. now we are building rural solar facilities and the utility scale but marty talked a moment ago and generally new generation anything built over the last 20 or 30 years ago has not been built in the city centers for an hour trying to bring the power back in and everybody used to drive six lane interstate highways out onto the tulane farm roads in rural america. you can start putting all the heavy truck traffic you have on 270 or the beltway here on two-lane roads in rural parts of north dakota. the traffic is not going to handle it so the transmission piece of it, the engine behind it in the civics behind it are
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quite different. you can't control electricity the same weight control natural gas. >> marty do you want to comment? >> the administration supported giving for jurisdiction to help solve the problem which is the fortier state 48th state problem. in fact passed by the house to a half years ago now there were provisions that gave authorization to try to overcome some of the barriers between states in order to build transmission. there is no question transmission is a critical piece in being able to build that renewable energy capacity within the country. some states have done a lot better than others. internally, the state of california has done a pretty good job of being able to recognize the need for transmission and utilities to deal to bail to build that transmission. but if we were looking at federal policy, think going back
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to looking at the provision that was in -- because that would wod open the great. i think offshore will also face the same problem because offshore wind, which is potentially very significant also has to deal with the transmission to get that power back into the markets. >> is there much public awareness of this disparity? he reminds me that a year ago jerry brown and i were in a panel with solar city. there were no when people unfortunately that we were discussing brown's target of generating i think it's 20% locally distributed energy by 2020 or something but it created a huge shift and looking at how you've -- one of the guys that works for elon musk, very similar if you work across counties inside california, each of these counties have while we different attitudes and postures towards solar installation and
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facilities and rooftops or whatever it may be so the permitting creates enormous barriers depending where you are at any reminded me that the world bank publishes a study doing business around the world and compares countries and they go through line by line and they compare countries and it's had an uplifting effect to some degree on countries that are laggards. i'm wondering why, or maybe perhaps it's on the way to do this. there might not be summed benefit of publishing some very disparate environments -- so becomes much more of a public deal. >> we have this thing called shareholders we are concerned about so when we figure those things that we keep it to goodness of our shareholders from a competitive point of view, but we do look at states almost as if there are countries inside of the federal context of hereditary regime we have here at the federal level. but also one of the most confusing things to most folks when we see with a lot of competitors coming from europe and asia when it comes to the
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country compete with us in renewables, they misunderstand the federal and state dynamic about how electricity is regulated in this country. is marty said there is a great ferc tool out there. very few people want to see that tool be used in very few people want to step out and do interstate transmission across regions and be the first one to do this grand plan. that takes a lot of time and a lot of money and a lot of effort and a lot of lyrical permitting and regulatory uncertainty. that's just many years and when you get into those decisions, those business decisions they are complex and from our point of view we look at wind and solar to a certain extent, try to pick places where it makes a little sense. back to my orange juice analogy earlier but also where the customer demand is in customer demand is driven by public policy at the state level. if affairs in the wind builds after this year it will be from rps programs at the state level that drive that. we happen to think that will be
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somewhere but mixture close to zero largely because they will sit on their hands away and see what happens with federal policies and then the two or three or four years later you may see a small amount of wind builds and they country assuming the status quo on other inputs and gas prices stay where they are and electricity prices stay where they are at. public demand may drive some wind but it will be relatively small compared to what we have seen the last five or 10 years in united states. >> you or the optimist but you're in a better position to think about the public's good side and public policy. the public doesn't know this but you're not only working on the engineering of wind and connectivity but also been working with google, university of delaware and the department of energy on electric car grid challenges. do you think there are things the u.s. government needs to do more robustly or that states need to do and what would that he and again coming back to what
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mike talked about is there some benefit. perhaps your center should be the one beginning to create the end of report on state reticence and renewables. >> i agree. i think rps state regulations for renewables are very important and driving independently of price. i think the price issue is not quite as straightforward as the 3 cents or 6 cents because in addition to the rpf, we are looking at prices today. when you talk about three versus six or eight or 10 cents that is based on natural gas prices today and some people think today's natural gas prices will stay the same for a decade or a millennium. i'm not sure how big that number is for the gas optimist but the public utility commission and the utilities want a diverse portfolio. they don't want all one fuel because they have earned way too many times with the cost of the
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fuel going up when they didn't expect it and when the analyst said it wasn't going to go up. there is going to be some wind for that reason as well and of course wind is the perfect hedge against fueling because we know the fuel costs of wind and solar is never going to increase. i guess addressing your question about the automobile, storage, our university and the university of delaware have done a good bit of research on looking at the electric cars as a storage resource for the great and that has been financed by companies for the federal government, so we are getting ready to rollout a commercial program of several industrial partners probably in the fall. but the idea there is to use the batteries and electric vehicles as a great resource, so you can level up fluctuation, whether they are for second fluctuations in what is called the employee services market or a longer
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fluctuation like wind or wind absorbed, the so-called vehicle red technology. >> let me ask you guys about the energy of this and begin i travel around the world and i go to china a lot. i see china investing in everything. developing everything and i have no hope at all that china is actually going to really become -- that it will have highly sophisticated natural gas facilities for putting in place coal plants and we will have the coal plants and we will have wind and obviously solar but i get the sense from the three of you, each of you are very embedded that you are largely optimistic about u.s. investmend this will grow but i don't get the sense from you that this is a hair on fire issue for the united states. what i mean by that is when you go to china you feel the pulsating need for demand for
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action, for civil society for the tectonics of an energy earthquake happening if you will. i don't get that sense at least right now in talking about when. i get the sense that it's stable and sound and it's here to stay. it will be incremental and i'm wondering if i have the right impression. >> went in china, forget the number but one third of 25% -- so you have a public policy and national construction program going on. it's kind of ahead of itself. >> wins in aware. >> it beats the five-year plan. >> is billed and we get an win for. then you have another dynamic. 1500 megawatts a year for new capacity. number has been going on every year for 10 or 15 years if not longer. in our country of 1 million of
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megawatts of capacity. windows 50,000 megawatts so about 4% of the energy next year if you and annualized it after this is big builds it will be 4% of energy. in the country here where we are to have a china for structure built and paid for and at various business and political decisions created over many decades. theirs is getting created to meet demands of some of the dynamic you are describing calling over what our chairman used to use the analogy and a torreo, the growing 15 or 16-year-old teenager that needs a lot of calories to grow and go to class and participate in become an raid fiber and adults versus the 50 or 6-year-old adult and economy are ready to contribute in. do they need the same resources of the family to move forward? i think you have two different dynamics the sky from a public policy point of view and capital flows but if you look a capital flows or countries largely a regulated energy industry, both
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from a profit and/or environmental or rules point of view and i think you get into their dynamic and i would argue it's probably more like that. i'm speculating from what i've learned that it's probably like what was in this country 75 years ago. you meet with a local politician and get your quote permit" and you build your highway infrastructure asset in this country anything that is billions of dollars is not at one lunch meeting anywhere and any of the 50 states so i would argue that they have probably a simpler raider tory regime for construction decisions around large infrastructure assets and you are probably feeling that. >> yeah i was on a panel with a chinese solar developer last year and he was asked how long it took to permit his 50-watt solar project. he stunned the audience because he said one day. to one day degette the land permit, the air permit, construction permit and
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basically the financing as well. and when you think about the two years, three year sometimes up to five years it takes the u.s. to be able to get all of the entities involved to just approve putting the shovel into the ground to start construction, you realize why we are at a significant cost disadvantage. it's that timeframe that it takes in the u.s. the cost money. it's a high-risk development money and its consultants and a lot of people spending a lot of time writing and doing all the kinds of reports and working with all the different governmental entities that are involved in each of those decisions, getting those governmental entities to work together to ultimately come out the same decision to move the project forward. for every project moves forward you have a couple that don't move forward so is the further cost of the money spent on the project that didn't get the approval at the end of the day who basically need to get a return from those prices that are essential.
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as mike said we are in a different stage of maturity as a country and developing but going back to your original question i felt like it was tremendous momentum behind renewables two years ago and i think that a combination of negative press from solyndra, the elimination of the pvcs in the gridlock in congress has resulted in a very different mindset about the future for renewables right now. i don't think the basic economics of renewables has gotten worse in the back i think i've gotten better. i think the opportunities are as greater more significant than they were two years ago. it's just that the overall mindset of the public has changed. >> any comments? >> yeah, so just to give the audience a sense of what you're talking about in terms of upfront investment, just kind of get a couple of representative numbers for an offshore wind farm. you've got development and you
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might spend 20 or $30 million during that development period. if you are successful, you build a 500-megawatt plant you are looking at 1.5 alien so you can afford to throw away, if you are building company can afford to throw away 30 ilya and a couple of times and if your $1.5 billion project is successful. take when for example. through the permitting process, it's it is almost 10 years now. so they are trying to permit a wind farm in nantucket sound. it's all the principles money. it's not the shareholders money. >> jim gordon is a very successful man and sold out his gas plant to a large ip. >> has got almost $50 million in permitting. >> compare that if you want to do an offshore oil platform in the gulf, it's about two years, so that permitting time has a
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definite effect on the viability projects. by to answer question, there are things on fire not from a technology perspective. i mentioned i spend six months in europe last year and i was in denmark interacting with people in germany and the u.k. and so forth. and wind technology, that area is very much on fire. all the universities are doing work. they're looking at completely different kinds of generators and entire wind machines, and part of it is -- you have more liability and the other part is to lower the cost. so we have a little bit of that going on in this century and there are some very innovative designs. but you don't have the same kind of national support for that as we see in northern europe for example. >> you have given me the perfect question to build on and i will ask one last question and then address the audience.
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the new america foundation around the time obama became elected wrote a report that said when they did the study, and when we saw the data, i was then that new america, we have no other way to title it than the clean trade deficit. when you look at essentially lots of different ways to look at green jobs and we ran huge deficits but if you look at r&d dollars as well, i think three-quarters of that dollar would go to scandinavia or china and part two germany. in the last three years have you seen the u.s. r&d base that you mention denmark that reifies the the moment of that study but have you seen the u.s. national science foundation investment base began to intensify more in the united states versus something we are still, is the idea of green jobs being research still something that
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scandinavia. >> you there are a head but their staff might been a big infusion over the last tee years or so. department of energy has been doing the applied project so they have 50 million worth grants which require 50% industry cost share. it's not just some wild idea, but that really seems -- conte and half to two-thirds of those don't come up with anything productive. but it means the other third are getting done which may not have gotten done without that from the federal government. i would like to see the national foundation do more in these practical engineering problems, but the doe as far as i have seen has been the primary funder of pushing the wind industry technology forward. >> mike are you working with university? >> we do in a smaller way. in the u.s. electric business there is very little r&d spent
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by companies. to give you a little context, folks don't swim in our pool that often. is a country we spend between 350 in to billion dollars enron electricity. at $3.50 at the pump we spend about 350 to $400 billion buying gasoline for our cars. that gives you the kind of -- we are talking about. r&d aggregate file this utility holding companies or companies that generate electricity in the mix is very very small number. i shocked if it is even a billion dollars in aggregate. i don't know the number but it's a small number. the government investment is another small number. where the capital is flowing in the last three to five years and renewable energy and high fossil fuel prices and excitement around green energy that he spoke you spoke of earlier is private at what he and private capital. that is something i didn't see 30 years ago in the industry. what you see today is billions
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of dollars every year due to the price signals being sent to the public and the combined signal from public policymakers. whether that's in this country are other countries and we talk about leadership, like to think we are in only the first, second or third inning of this alternative energy or nontraditional energy gain. a lot of runs have been scored by a lot of folks but if you are in the second or third inning there are pub -- plenty of pitchers and whether that storage or wind or other renewable energies or is the governor is speaking out earlier fracking with gas and oil they're all game changers and three to five years ago at a college campus guest lecturing i would get an unbelievable amount of folks that wanted to get into wind and solar. today the topic is how do i get into oil and gas? hard to believe but that is where the mainstream media is and where the money flows and that is for capital flows go. i think you need a combination of all of the above which a lot
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of folks like the governor has said in the past is necessary to win 4% of our electricity. will be higher and will it be 20%? not with the drastic change in infrastructure spending around storage or some economic game-changer. at the same time where those policies go you'll have 48 states and couple hundred utilities making those decisions in the coming decades but there is no silver bullet that's going to solve it that any of us becoming. there's a lot of capital flowing in private equity that is driving what is happening but it's the whole transportation fuels we use in automobiles or what i would call electric generation. >> what mike said about private equity, we do a lot of work with the silicon valley and private equity firms but a huge number have also been investing significantly in clean tech investments. some of those if not then in wind. they have been and solar technologies and looking at
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other kinds of fuel storage. better companies for electric vehicles like a123, tesla and others above and in a fisheries the fisheries of significant amounts of hybrid equity investment and i think that has made and will continue to make a difference. the goal is to have the united states become the leader in clean energy the same way we were and they we are an internet technology. and the future googles and whether it's smart grid or the newest most efficient solar modules or wind turbines the u.s. will be the world leader because it is u.s. market. >> i may come back to you on that. raise your hand and we will move right here, the microphone to you and if you identify yourself please. we have c-span here today so stand. give it your best shot. >> hi, john michaels with green connections radio.
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for first of all i was asked the doe commission i will testify the technologies at the university are sounding. what these people have come up with would just blow your mind and completely turn all all of us upside down and backward so i really applaud them at the university for what they're doing. what is the role of government specifically? if you could have a magic wand, and i know we can do this but if there is one thing that you want government to do that will really boost the energy market for alternative fuel, what would it be? would it be a price on carbon? would be something else? i don't want to say silver bullet that what was the one piece of legislation the? >> what is the one silver bullet? mike? >> i was hoping you went to marty first. my job is to know that you would want that.
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certainty. and you might think it's a copout answer and i will explain a little bit. when you sit in our shoes and you're trying to make decisions and financial commitments that are billions of dollars that are decades long and get a rate of return and you don't know what the rules are going to be a year from now, many of you think, well none of this now, many of us don't and that is the complex reason why some of us get a little more minimum wage than others and have got to make complicated decisions and trade-offs on behalf of your stakeholders and shareholders are government agencies or wherever you are representing. when i come back to it, there is no silver bullet other than something that is free for getting 4-dollar oil again where gasoline is back to 38 cents when i first got my driver's license. that's not going to happen. i look at certainty of rules and regulations and planning and an
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emphasis of where government can set direction so policymakers are making stable decisions that are balanced whether from the left of the right but you can support it and then investment capital and venture capital and private shareholder capital of publicly traded companies like ours will make prudent decisions and then things will happen. maybe not the way you wanted was the law of unintended consequences kicks in. in this kind of form, can make it back to south florida tonight and not have a different problem, i think certainty and that is a broad term and i realized it's not specific. speak to policies. one is take the external cost of energy production, electricity production and project and include them in the price either through consumers are hoped -- wholesalers take or new power plants. what i mean by that? if i'm making bread and trying to compete with somebody else
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was making bread and i've got to steal all the flower i would have the cheapest bread. plant find producing electricity and burning coal in the east coast moderately built-up area, i am posting the cost of maybe 10 cents to 15 cents per kilowatt hour on the health of the people in my area. they pay for that. the producer will pay for it and the inner -- the buyer of the energy doesn't pay for it either. if you are incorporated in in in a price we would have a big shift in what kinds of generation we have. just start with health before you can get the carbon. if you just do it on help you are still going to burn natural gas and you will have some wind and some solar so you're not going to have any new coal. >> what is the second when? >> the second one is r&d which is i would say let's do it at
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two to three times the level. we are in r&d shop so you could say he is just trying to up its own budget, but -- the university of delaware. >> right. our economic competitors are doing that and it doesn't make sense for us to be under funding development of new technologies which we now are know are going to grow over the next couple of decades. we don't know how much they are going to grow in the u.s. in the next five years and so forth that we know these are going to grow a lot over the next decade worldwide. we don't want to be sitting out and not producing that stuff, not coming up with new tech allergies in the united states. >> i would say two things. the first is on the supply-side of think we ought to have a federal renewable portfolio standard. i think we need to create demands in the next five to 10 years for renewables to offset
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all the advantages that fossil fuels ipad and i think is clearly happening on a state-by-state races and it would be much more effective with federal policy. secondly on the supply-side i'm a finance guy and spent my life in finance. i would like to see the cost of finance go down in one of the best ways to lower the cost of finance is to open access to investing in renewables and a way to do that is for congress to change the laws to allow partnerships for investment vehicles that raise capital for oil and gas to be available to individuals to invest in renewable energy projects and secondly for real estate investment trusts which now again are open to individuals and raise billions of dollars for hospitals and long-term care facilities and hotels etc. to also be able to use to raise capital for renewable energy projects. both of those, you would greatly
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enhance the access to capital and would lower the cost of capital and that's another way to make us more competitive with the rest of the world in terms of renewable energy projects. >> we had a tweet appear minute ago. i wonder if we have learned anything new with this thing. i just learned something new. i've no idea -- but other questions? right? right here in the back. >> edward roaders, sunshine press. i wonder, given the presentation earlier that utilities aren't investing much in research and development, but that there is something about the american economic structure that needs to be jaggard to advance the future of energy. we basically our oil imports are
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so financed by the navy, and this mix between the public and private sector and the academic sector and energy, wonder if that needs to be jaggard somehow so that we don't have for example the checkerboard of different utilities working on how to do business. there are some things that it seems are better done in the private sector and some in the public sector. we need to play with the way we have parsed energy production. >> a very interesting question. mike? be if you could re-characterize the question. i didn't understand a. >> i think what he is asking is something and i apologize for torturing your question if i do. think what he is asking, you essentially have large scale
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hidden subsidies. u.s. military costs are essentially a subsidization of the oil industry, and wondering if it's very hard to undo that right now and i think when people talk about energy independence or at least energy diversification, in part that is trying to diminish those costs. but i think he is asking other things that might be done to sort of ulster and upgrade renewables and the sort of social contract and political contract and economic pieces in that ecosystem that surround those pieces. haynesville which is this document if it came out on essentially a natural gas boom in the united states we showed last year it's fascinating because i didn't realize you had a beverly hillbillies -- kind of phenomenon going around the united states essentially people in lots of the lesser developed parts of the united states are all of a sudden getting huge windfalls because of natural gas
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that is lying beneath it and it being extracted and it raises a fundamental question about if it's going to change the share of energy sources and production in the country, might we are adjust some of those -- ed, is that close enough? no. [inaudible] [inaudible] >> there is plenty of capital out there. of anything in the world there is a run -- giant price signal because interest rates are low for a lot of reasons. in the energy sector and i will constrain it to electricity, i'm not an expert on what exxon, shell or bp does hopefully outside of of the american match additional businesses. but in the electric sector if he can bring back to what i said
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before and i'm trying to stick to mike talking point, certainly of rouson collations. the capital will flow there in their subsidies in the united states also electricity. one is the production tax credit with when. a lot of folks think it's time to let it go. oil subsidies must leave. maybe, maybe we have got to that point is a country but of the same time it's a relatively new industry. the wind industry is about 10 years old and in the scheme of things and lectures in this country were talking about an industry that's over 100 years old has made a giant step in the last 30 to 50 years and now we want to transition from a less carbon dependent economy or a less carbon dependent infrastructure inside that sector. you cannot do that on a dime and shift and turn a pivot with the industry and suddenly have an alternative other than natural gas which is just less of an issue than coal when it comes to a fuel of choice. it may be the bridge fool or it may be the fuel that makes sense today.
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the comment made earlier from a cost point, it's a cheap resource today but as you try to plan that diversity and additional comfort they get from solar and wind or other alternative technologies you will have to have some sort of subsidy to get the customers to buy it. right now it is not standing by itself in the near-term. >> i think part of the question was about with the whether the electric utility should invest in r&d, and our experience has been that they do. we have done commitments for 3 million, from electric juicers or distributors for two or three years, and we try to spend that money wisely. systemically, for example when technology research, it's more likely going to be the wind generator, sorry, the wind turbine manufacturers that are going to invest in the r&d rather than the utilities because they are the ones who benefit from advances in technology. that doesn't mean you couldn't
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have you know, a way for electric utilities to invest. a few states have what is called the social benefits charge, where a small fraction of each great payers bill goes into r&d that benefit the ratepayers in upstate. i don't think that is necessarily a good idea for 50 states. i think there are a few states that can do that pretty well, california and new york for example and they provide an alternative reality to washington. they may invest in technologies that washington hasn't figured out are really going to move forward. but, i don't think state governments can make wise r&d decisions. i think we are going to tend to get generally, not always, better decisions like that coming from dod, nsf and those federal agencies. but it is possible to do and some states are doing that.
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>> do we have any other questions? yes, right there. [inaudible] >> abigail barnes with the woodrow wilson center and the china environment forum. this question speaks to professor, mr. kempton, silver bullet if you will. dr. kempton's silver bullet with a buzz phrase external altace and incorporating in those costs. you said address the public health issue and i know, i was curious as to assorted metrics you might be able to propose. is an investment or greater investment in government offered public health reports and establishing those causal links between -- and and and cancer and so forth. i was wondering if you had a way of evaluating the cost?
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>> i was able to -- he is doing a thesis on this topic right now trying to figure out what is the external cost of each type of generation that states have an option or utilities have an option to build or invest in right now. so one metric, we base it on peer-reviewed literature of course. so there is the public health studies where you take the cost of emphysema, the cost of a lost work day, the cost of premature death and the cbc type of metrics that is the center for disease control. you calculate the cost of generation that produces -- a menu back that into a cost per kilowatt hour that is transferred from the generator out to the people in the surrounding area. so that is symmetric for doing it. if that is the question you're asking, how to measure it? >> i think it's a pretty good discussion of how to hit the
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outside elements you see and essentially create what sounds like a taxi me but we won't call it that if you don't want to. it also raises interesting issues about japan. i wrote recently about the energy cliff that japan is facing now. investing in large-scale nuclear reactors. all of these reactors have shut down in part because of the hot summer but also in part because of the iran sanctions and the way in which oil -- and the fact that the saudi's and others talk a lot about it. but japan is sitting in an energy nightmare and i put a piece with the former head of the international energy looking at japan's choices. when i wrote it, i got about 1000 pieces of hate mail directed at him, not me. i was reporting but for not taking into account those of
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their larger costs and externalities but you also saw embedded in these letters what i saw as a naïve belief that when renewables were a quick and ready -- for japan. so i just want to talk that out. it is a boiling issue in the japanese body politics right now. it may not set for the kinds of shocks that japan did after an earthquake or tsunami and -- speak it is the renewables but it doesn't have to be attacks. the state commissions make decisions of what new generators to build than they compare multiple types, and they go on the least cost. so they approve hoping the new plan. arizona has said least cost includes everything. if not just what you you're paying your electric bill but also what you pay on your blue
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cross-blue shield bill. so let's minimize the cost to the citizens of arizona and delaware has a similar one but not a strong. there is no new taxes or anything. it's just which power plants you pick? >> any thoughts on this or any other comic? >> we are really not talking about solar -- solar. it does help sell a lot of infrastructure problems because you don't do with the transmission. you could put a couple hundred thousand solar modules on residences and the district of columbia for example. you can greatly offset the need for future power plants. utility power plants as well as transmission. if you do that across the country you would see how quickly you could eliminate the need for an awful lot of the carbon producing fossil fuel plants that we have. >> michael? >> i think around the wind industry, it is why you invited
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us here to me today. i think from a public policy point of view we need a transition toward the next step is out there and it's not ready for it today. but as we have committed to work with both sides of the aisle, and any support we can get inside the room today would be wonderful to get the word out. the wind is a tax credit even if it is extended tomorrow and puts mixture in jeopardy just because all global manufactures with tens of thousands of jobs domestically and overseas can't stop and start of the specters and they're starting to wind down. even if we got a one-year extension at the end of this year, the 2013 build would be minimal just because it has supplied part of the equation is just not going to be there with the equipment. as we look out the next couple of years a lot of uncertainty for a lot of things going on in the sector but as far as the specific topic we started with today around when, pbc is an
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important public policy that would reinforce the next couple of years. >> and a quick final comment, willie? >> it's very important short-term and long-term let's look to r&d and build up the technology and sell it to other countries. 's belated announcement please thank michael o'sullivan with health care energy resources, willett kempton and martin klepper. thank you very much for a wonderful discussion. [applause] >> at our know how much you hurt of the last discussion. >> a lot so i will probably be redundant. >> ladies and gents when we are joined now by carol browner who is the distinguished senator for the center of american progress. she is former head of the environment protection agency and during yaupon administration served as the director of the white house office of energy and climate change policy. what we are struggling with today and i started the earlier question somewhat facetiously
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and we are positive that from definitely that well-known sarcastic atlantic style which i don't fully mean by to ask this question where we talking about wind at this conference today? is it really because of lyrical correctness or is there a real business, a real need? is there a fundamental logic that is driving that country and in that direction? i thought we had a fantastic on the and bolts of what is happening across the renewables sector and in addition. i want to ask you a similar question because this administration the obama administration when he came and talked a lot about green jobs, clean energy, our climate change responsibility willfully and when asked a question of what has been achieved and was that more rhetoric, and are we not really getting to the reality of some of those leaps leads that the president outlined and that you are working very hard on trying to achieve?
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>> i think the administration is not an awful lot to be proud of. i think that while legislation didn't become possible, the administration didn't sit by and twiddle his thumbs. what were the tools available under existing laws and supreme court decisions to move forward and so for example of of the agreement of the national car program which is the first-ever greenhouse gas initiative. what then triggered the recent proposal for example and nuke coal-fired power plants. i think similarly, the mercury rule and is an interesting rule when you look at these realities in terms of the like the closure of the older power plants in 1950, 1960, or early seventies and what that means in terms of a nasa gas emissions and finally, i would cite the department of energy's work. if you look at all of those when they are fully implemented and
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appliances take time to turn overbroadened when you look at the impact of this the achievement and greenhouse gas will be quite significant depending on the analysis you look at and we'll bring will bring you close to what waxman-markey would achieve in the early iterations and what happened in an effort. there was more and more time given, more and our opportunities for people to use alternatives in terms of achieving production. i think the administration has a lot to be proud of when it comes to climate change and greenhouse gas emissions. i think they also have a lot to be proud of in terms of pushing opportunities for new technology. it's very popular right now in the political rhetoric to suggest that all regulations are bad and nothing good comes from regulations. is a former regulator i can tell you clean air and clean water and a healthy environment for children but it also creates business opportunities. every time we say that something
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good, something shouldn't be used that's an opportunity and whether it's the decision made by congress in 1992 banned the use of perfluorocarbons and the reality that i created, or the car proposal that is currently being finalized by the administration which would take fuel efficiency up to the low fifties and into the mid-fifties. that is certainly going to create business opportunities because you are going to have to look at new technology and there's a market for new technology. [inaudible] >> it sound like we are fading in and out. >> we are fading in and out. are we on? i took a quick stroll through the american -- [inaudible] the guy that is in the white house will be better than the one challenging. at the same time there is a dissatisfaction with what has been achieved and so what would
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be your critique of the administration where it hasn't yet connected the dots and hasn't yet delivered? >> i think the greatest opponent is the fact that we weren't able to get legislation and i can go through all the reasons why i think that didn't happen. health care came first. we had a lengthy debate between some of our top senators about how to structure a health care deal and unfortunately senator kennedy passed away. that was another loss and the clock sort of ran down. the city is doing a good job of using existing authority but you are talking about wind as i came in. it's clear to me in addition to the tax credit which needs to get sorted out and hopefully sooner rather than later something like a renewable portfolio standard, something like clean energy standard would be a huge lift to the renewable industry and i think the president would be the first to say that it's disappointing we have been able to find that common ground.
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..
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>> it is very hard to create a narrative, in my opinion, with the american people. i was thinking back to when i was at the epa many years ago. we had proposed what were very controversial air quality standards for fine particles and four the ozone. it took about eight months. during that time period, there was a narrative that god created with the american people come in "the new york times" come all of the major outlets reported on it. they reported regularly, there were engagement engagements the editorial pages, it is much harder to do today, in my opinion, if any 24/7 news cycle where what is news this morning
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is not news tonight. i don't know how many of you do this, but i go to bed reading "the new york times" and i read it again and ended is a different paper. all i have done is sleep in between. i do think that that really changes the discourse in this country, nothing probably at the end of the day, not for the dead. you know, when did clean energy become a dirty word? what is wrong with clean energy. you can leave what you want about our existing energy policies, but why can you believe that there's an opportunity for clean energy. we all know that air pollution -- we noticed that her children and we know it can exasperate asthma attacks and other respiratory illnesses. why wouldn't we be for investing in the new technology that will be good for children and also good for our competitiveness in the global market. >> i would like to go to the audience. we want to talk about the
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climate change conference in 1992, the united states instead of commitments to know where we stand with these commitments. i think the bigger issue for me, frankly, because i am the one who does believe that the investment in the united states and investment in infrastructure, basically building with clean energy, putting a new backbone in the country and a lot of the arenas that create recurring returns of american society over generations. it is a very smart thing to do. can a nation and as much debt as we are, with the dismal economic performance that we have had, and with so many actors in our society scrambling to hold on what they have, can they be bold enough to make those kind of investments. you have been in the white house and have seen how hard it is. i'm just wondering. when you're thinking about trying to achieve it, whether the school is doable and not. >> we have done this before we
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read what is happening increase in europe and there are difficult concepts. but i think this is our moment of opportunity, and that in the same ways that we have supported the industry throughout the morning, why don't we support clean energy today. we began supporting the oil industry, i think 1917 was some of the earliest tax breaks. we supported the nuclear industry because we wanted it to grow. it why are we supporting the
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nations industries and today, and in doing that, creating jobs. i think this president has tried to create opportunity through the recovery act and other opportunities, it does require the cooperation of congress. it just seems that there is a german this opportunity sitting right there for us to invest in our infrastructure. not just clean energy infrastructure. we have an aging infrastructure in this country and we could be investing in that and in so doing, creating jobs. >> let me open the floor. please put up your hand. i have someone right in front here. >> hello, we are going to get a microphone over to you.
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>> i just noticed on the intercounty connector, how it went through even with a lot of opposition through 200, causing, i think, my question is if we keep building roads, office buildings, shopping centers and etc., what is our future if we keep destroying the environment? we are witnessing the sixth greatest extinction on the planet, which is basically caused by us. where does renewable energy fit into thaton? >> i think we think about it as
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the sustainable manner, and the question is how to grow sustainably. i think there many good examples of how to do that and obviously, turning to my roots in florida, when i was secretary of the environment of the state of florida, we looked at the very last permit for disney world. they wanted to build their final theme park, animal kingdom in a residential community called celebrations. one of the things that was that the wetlands would be impacted. we were able to dramatically minimize the wetlands impact. for those that were impacted, rather than as it had been historically done, -- it took nature thousands of years to create a wetland, even engineers were not likely to do a good job in just a few months, we worked with disney and the nature conservancy to a restore and impact the wetlands. we were able to take this area,
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which is actually the headwaters of the whole south florida ecosystem. and it is goes all the way down to the keys and restoring those headwaters. all of the ecological functions have really been taken out of it, returning it to a functioning part of the ecosystem. there are lots of opportunity for restoration, and when we think about growth, we should think about it in a sustainable manner. up we are not going to stop growing. and i consider myself an environmentalist, and some of them are not for growth -- i don't think that is the answer. i think the answer is how to do it in a sustainable manner. >> right here in the front? >> i was talking with david
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larson, i'm just curious what your reaction would be. i see a lot of what you were saying, when we just help these people, why don't we find these technologies. i am curious what has been talked about, why not just raise the price of fuel is a tax, and then distribute that tax, throughout every registered voter or every registered household. that way, whoever uses energy uses more of it, they are going to wind up with less money in the end and those that are using less of it will wind up with some income. you start seeing a change of behavior working in tandem, with the change in technology come as , as opposed to what i see right now is all this money going to changing technology but no behavioral change. it is like swimming against the
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current. i'm curious what your reaction is to not. >> i think that the congress is very unlikely to embrace an idea like that. i think you have all of the republicans have signed a pledge against ideas of that sort. having said that, this is simple economics. in terms of tax credits and financial ideas that create new technologies come about is one part of the interest. the second artist create the opportunity and the demand for those technologies. i think it would be hugely important in terms of creating those options. there was a second part of the question, but i don't remember what it was good a change in behavior? well, i think it is important to know that many of the renewable portfolio standards and, i
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think, i'm pretty sure the clean energy proposal include efficiency. i still have a long history of utilities in the way to restructure, but i think that is changing. certainly, one of the things we are finding is that they're more access to information that people have two energies, the more likely they are to use less energy. we have companies that are really moving into this phase of whether it is power in virginia that is providing -- i think the apple store is providing this [inaudible name]. it looks totally cool and i want to buy one.
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>> we did her christening of the atlantic -- [talking over each other] >> in terms of numbers. >> in terms of google and facebook, it is really cool. it remembers everything. rather than the children over setting the thermostat when the last person leaves for work or school or whatever, it learns your part unshed pattern, and it knows when goes when you're coming and going, so it will adjust the thermostat depending on your pattern of use. >> how much do you think cheap, massive natural gas in the united states is undermining serious policy around renewable energy development and support? >> this is the thing i hear a lot about.
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part of it is the narrative with about the fact that the united states may now be a superpower again and energy. you think that is inserted in the investment? >> i think the thing that is most challenging is the text production credit and i think secondly, some sort of national program in terms of -- those would be dramatic in terms of supporting renewable energy. >> dan coming of the last question? >> den linden, american university.
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steve mentioned real plus 20. what types of outcomes would you find encouraging? >> you know, you think back to 20 years ago, and i think that there is so much enthusiasm and global commitments to these issues, we can't reasonably expect what felt very bold. if you look back, it doesn't perhaps feel so bold, but at the time it certainly did. it seemed bold. i would hope that there are some measurable concrete steps. they may not be as big as perhaps they once could have been, i think that would be part of the success. >> any final comments before i turn it over to the colleagues?
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>> i think many of you out much longer students of washington than i am, but i think that election systems can produce some interesting outcomes and, you know, i am encouraged that there does appear to be an ongoing dialogue around this, and i don't want to be overly optimistic, but as people moving into their election and the senators and house members, that they recognize it. >> you're watching it used to do they do with politics and public affairs, weekdays reaching live coverage of that senate. weeknights, watch key public policy events and the latest nonfiction authors and books on booktv. you can see our schedule at her website and you can join the conversation on social media
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sites. >> the latest fiscal report on social security. in a little less and a little less than an hour and a half, "washington journal" segments with niki tsongas of massachusetts and former gop presidential candidate, michele bachmann. after that, the house oversight committee debate on a contempt of congress citation against attorney general eric holder. speakers include kathleen sebelius and leon panetta. that is on c-span 3 at eight eastern. you're on c-span 2 at 9:00 a.m. eastern, the national housing conference annual symposium looks at vegans and
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housing a tent housing issues, such as foreclosure prevention, access to mortgage credit and homelessness. later, the atlantic council looks at the future of the eurozone and the european debt crisis after the recent greek elections. you can see that at 11:00 a.m. eastern on c-span. this weekend, john stopper on the civil war and the movement to end slavery. >> is one of the fascinating aspects of abolitionists come up when lincoln gives that's, what transforms abolitionists in two respected -- and two respected critics of the scene? >> lectures in history on saturday night at 8:00 p.m. eastern. also, key political figures who ran for president and lost, but
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changed political history. the contenders and a look at five-time socialist candidate for president. at 7:30 p.m., american history tv on c-span 3. >> the current report says that this goal report shows the program would need to be cut in 2013 if revenues are not increased. this is a little less than an hour and a half. >> this meeting will come to order. good morning to both of you. thank you for being here. according to this years report from social security board of
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trustees, social security will be unable to keep its promises to the hard-working americans who pay into the system. not only is the social security system looking was, but it will decrease in benefits for those if we delay action much longer. as the commissioner said, this year's report contains troubling but not unexpected projections about social security's finances, once again emphasizes that congress needs to act and ensure long-term solvency of this important program. according to the trustees, the old agent survivor program will be able to pay full benefits in 2035. twenty-five years earlier than last year's report. that means workers that are 44 years old today will reach their full retirement age in 2035, at which point everyone else will face benefit cuts of 25% unless
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congress acts. and in less than four years, social security's disability insurance program will be unable to pay full benefits for the average monthly benefit for disabled workers today is only $1111. in 2016, revenues will cover 79% of benefits, so that is a potential cut of about $233. that is real money for those who are getting by on fixed incomes. social security's last major reform was in 1983, and social security faced an imminent disaster. and in then the 82 annual report, the social security report said that without corrective legislation in the near future, the old-age and survivors and insurance trust fund will be unable to make benefit payments on time beginning no later than july july of 1983.
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they were able to develop and pass on a bipartisan basis the social security amendments of 1983. come on in, we just started. despite the near failure of the greenspan commission and the opposition of senior advocacy groups, including aarp. as this year's report makes clear, social security is in trouble. just as in 1983, i believe that our nation has the will to again save social security. we should not follow the path your test taken by waiting for a financial disaster to force changes that ultimately could end up hurting the most vulnerable. today, we will hear from social security's public trustees, but we, in congress, our trustees, too, and the public knows the longer we wait, the more difficult the choices will become and the less time americans will have to prepare. with all the financial exciting
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american space, we should not increase the burden by failing to fill our duty and protecting our nation's most important safety net program. we need to act now before it is too late. do you have an opening statement? >> no, you do. you have arrived. [laughter] >> okay, thank you again for listening and we have a statement and i understand you are on your way. i will recognize mr. russo for any opening statements he has. >> thank you, mr. chairman, and i also want to thank mr. stark for being here. i got my daughter to her program on time, and i'm able to begin. thank you for being here to the two gentlemen. i would just like to say what i
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have been saying for quite some time. social security, even through the worst recession since the great depression, it is a program that people have grown to rely upon and contrast. between 2007 and 2010, a typical middle-class family lost somewhere between 26 to $87,000 in the network. that is about four out of every $10 of their savings. between 2007 and 2010, security added $439 billion to its trust fund surplus. while paying americans are earning benefits on time and in full, so here we saw americans with their private savings and retirement pensions, watching it go down, at the same time, during this great recession, we saw social security continue to increase the monies it had to pay out benefits to its recipients. over 77 years now, through 13
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recessions, social security has added not 1 penny to her deficit, or to her debt. in 2011, social security provided benefits to more than 55 million seniors, windows, disabled workers and children. while saving all the reserves of the benefits. six out of 10 seniors who get social security rely on social security for a majority of their income. there are 1,300,000 children who are listed out of poverty because they received social security. in the long-term, social security faces unmanageable challenges, it is not now and never will be broke. this april, social security trustees warned that without action, social security -- worker contributions in 2030 are projected to cover about 76% of social security's costs. the remaining balance of social security's trust funds will pay
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another 5% of costs. the shortfall is stable come after 2033, social security's income will be enough to be about three fourths of income benefits until about at least 2087, and likely longer after that. social security we beat long-term shortfall is a problem. when we need to address. even when the reserves were building up now run out, social security will not be out of money. it will have a shortfall of about 4.9% of gdp. this slightly more than the cost of extending the bush tax cuts for people who earn more than reporter million dollars a year. social security does is a crisis in the short term. one manufactured by a series of budget cuts force by house republicans. if they continue, the celts could delay benefits and damage social security's well-earned public image. in 2011, the republican-led for your continued rebel the content resolution cut the budget by $600 million, despite rising
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numbers of americans applying for social security. in 2012, the budget was frozen below the 2010 level. i strongly oppose these budget cuts, which are kind of like the cable companies starting to bill you for a service while you're at home waiting for them to show up and connected. social security's trust fund, i'm sorry, social security's trust, funded the entire cost of paying social security benefits. in 2001, workers contributed over $600 billion to social security's trust fund. because of social security's budget cuts in 2011, all social security field offices started closing half an hour early each day. social security permanent closed over 300 contact stations and small field offices, and waiting times for initial positions rose and are likely to be over 130 days by the end of 2012. fsa faces an even bigger cut through the sequestration
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process, these automatic cuts scheduled by the budget control act. although social security benefits are protected, if congress doesn't act soon come on jimmy second, security operating budget will be cut by over a billion dollars. a billion dollars in cuts translates into 40 days in which social security is shut down. offices are closed and locked and no one answers the phone. no one is processed. and no one makes sure that benefit checks are sent to the right place. mr. chairman, social security has been there for maintenance for 77 years. i hope we can continue to work to make it strong for another 77 years. we can start by addressing the preventable crisis of shortsighted cuts. with that, i yield back the balance of my time. >> thank you. we have one witness panel today sitting at the table, to public trustees, charles blahous who is a phd and robert reischauer is a
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phd. robert reischauer, i think, i would like to congratulate you on the ward last night at the national academy of social insurance. we are lucky to have someone with your breadth of experience working as a public trustee. thank you and congratulations. doctor charles blahous, you're recognized. >> thank you chairman and drinking never come all the members of the subcommittee. it is a great honor to appear before you today to discuss the findings of the latest trustees report. in lieu of the time constraints we are under, what i like to do is good go through most of the background information and proceed to primary points about social security financing. the first point is that social security costs are rising, most of that cost increase is going to play out for me. not that started in 2008 to 2035. the primary driver of this cost increases is demographic.
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if you think about social security costs, there are really two main pieces. one is growth and per capita benefit level, and that is driven by the benefit formulas and also does the growth and the in the number of beneficiaries. on the revenue side, the primary driver is the number of workers and wages that ratio -- it is in the process of dropping, we have 3.4 workers for every beneficiary in 2000, now we're down to 2.8, and we will be down to 2.0 by 2035. part of that is longevity increases, but the bigger and more immediate factor is fertility patterns, the baby boom generation going on by 2035. under current projections of combined social security trust funds being depleted in 2033, that is three years earlier than the projected last year's
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report, and each year with the trustees do is estimate the program's actuarial deficit, usually expressed as a percentage of the tax base. and this year, our production content production -- dreaded 12.4% tax rate now, if you immediately added when 67 points to that, you have a program in balance for 75 years, or if you had equals obstruction and benefit obligations. that is an average figure. the shortfalls are smaller in the near term, bigger in the long term. it is also an increase from last year's production. last year we were at 2.22%. a man not so much of a difference, but by social security norms, it is pretty substantial deterioration. we've only had one other report over the previous 30 years that showed as much deterioration in a single year as this year's report says. my colleague, doctor robert
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reischauer will review some of the outlook that it has grown worse. social security has to trust funds come in under a law, they each have to be kept solvent to maintain benefit payments. the social security disability insurance trust fund is in the more severe condition. it is expected to be completed in 2013. best 2023. it will create a strain, which is a result of policy choices that are made along the way, one of them, for example, this year, the payroll tax rate has been cut from 12.4 points. there is a provision of the law which transfers general revenue over to social security so its ability to finance benefits can be projected. basically, that part of the financing responsibly has been moved from social security payroll tax to the general revenue side of the ledger could
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a final point -- there are significant costs to delay in addressing the shortfalls, it is often cited than in 2033, we will have only enough funds to pay 75% of scheduled benefits. it is important to bear in mind that is in 75% of scheduled benefits for those retiring in 2033, that includes everybody am a people already on the role, including many people who would draw benefits today. if you were to say well, we don't want to cut benefits for people already on the rolls and 2033, one of the benefit reductions were confined to new claimants, we would not be able to balance the system without an unprecedentedly large increase, even if we cut off the entirety of benefits to new claimants. by 2033, it is really too late, far too late to protect current, previous beneficiaries from substantial dislocations. we start working through the problem backwards and you say
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how soon we have to act if we want to prevent productions for people in retirement, near retirement, low income beneficiaries and prevent a tax increase of the sites we have encountered before. we've got to do that pretty soon. in closing, mr. chairman, to say that the legislative achievement in creating the social security program remains historically a remarkable one. it has provided vertical interest protections for hundreds of millions of americans, it has done it at exceptionally low costs, it has done with financing methods that have been generally accepted by most of the american public. it's a hard thing to do. social security can continue to fill this role, but such action must be sufficient if the program is going to serve future generations as well as previous ones. thank you. >> thank you. he said pretty soon, what do you mean? >> my own view is that the
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window of opportunity is closing relatively rapidly. there is a shortfall, the kids significantly larger than the one that was prepared in 1983. that is probably the high watermark of what can be accomplished in terms of the short-term resolution. obviously come each year we wait, the problem grows larger and more difficult. >> i understand that, i wonder when they're going to fall off the cliff. doctor robert reischauer, you're recognized. >> thank you, chairman johnson. ranking member, numbers of the committee, i appreciate the opportunity to appear before you to discuss the changes since last trustees report. the judgment is tending to focus on whether the years in which the two trust funds are
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projected or exhausted or exceeded were transferred there has been a significant deterioration in the financial health of the social security program since the 2011 report. exhaustion date, is the chairman has mentioned, for the oasi program, di trust fund exhaustion date has advanced two years from 2018 to 2016 in the exhaustion date for the two trust funds combined has now been moved to 2033, three years sooner than was projected last year. a more comprehensive measure of trust funds them a financial conditions, is the actuarial balance over 75 year valuation period. this measure is essentially the difference between the annual income and costs of the program summarized over the 75 year
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period, and expressed as a percentage of taxable payroll over that. not good in negative actuarial balance, meaning an actuarial deficit can be interpreted as the percentage points that would have to be added to the current law income rate or subtracted from the cost rate in the each of the next 75 years to bring the fund into action dungeon actuarial balance for the actual deficits of both funds have deteriorated since last year's report. the di trust funds actuarial deficit has risen by 71 hundredths of a percent of taxable payroll, that for the osi fund has deteriorated by .38. trust funds that we can 5441 hundredths of a percentage point. this deterioration in the combined trust funds is the largest decline since the measure was first calculated in 1982, saved for the change that
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occurred in 1994. there are lots of reasons while the actuarial balance can go up and down from one year to the next. one of them, of course, is the devaluation. it changes. we added 2086 to the valuation. and subtracted 2011. that accounts for about 9% of the deterioration in the actuarial balance. clearly, there is no legislation that affected this in a significant way over the past year, so that is not a factor. demographic assumptions in research reported are identical to those that were seen in previous reports. but we have updated starting values and the transition from those starting values to the ultimate values, which do affect the actuarial balance. pacific league, more recent data has shown that birth rates for 2009 and 2010 were lowered than
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was assumed in the last report, immigration in 2010 was a bit lower than was assumed in the previous report. and there was a slightly smaller initial population than we assumed before. about half, with less than half of the increase in the actuarial deficit between 2011 and 2012, accounted for changed economic assumptions and more recent information about the economy's performance. two thirds of this is related to updated starting values and less optimistic assumptions about near-term growth of the economy. price inflation, as you all know, was higher than was anticipated between the third quarters of 2010 and 2011. rather than a seven tenths percentage in the summer of 2011, social security gave out a 3.6 percentage point cola.
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that is a huge difference, as you can imagine. interest rates in 2011, and those projected in 2012 are lower than was assumed before. the new investments that the trust funds make it less interest earnings than we thought they would get one to 2011 report was put together. together, these economic factors make the gap between non-interest income and costs over the next few years significantly larger than was projected in lester's report. but when the economy has recovered, about the end of this decade, 2020 or so, the gap between what was expected last year and what was expected this year will be close to disappearing. however, it is important to recognize that we made a new
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assumption in the 2012 report that causes the gap between income and costs to grow over the long run. this have to do with what we expect is the changes of the number of average hours worked per week. in this year's report, we assume it will decline at 51 hundredths of a percentage point per year, and we did this to reflect the aging of the workforce and the belief that as productivity goes up, incomes go up, people want to take more leisure and that will translate into working a few less hours as it has in the past. this reduces payroll tax revenues from what was assumed
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into the slaughter. we also made a change in assumptions about disability and compared to last year's report, the ultimate age-adjusted disability incidence will increase by 2% for males and 5% for women. these are more consistent with what the historical values and trends have been over the last decade. the deterioration and the deficits that i just summarized today } the need for legislative action put social security on a more sustainable path. the sooner we address this challenge, as chuck said, the less disruptive changes will be. if the reforms are enacted soon, those most adversely affected can be given time to prepare and the burden can be spread equally across different generations than a political animosity of public anxiety associated with these unavoidable changes can be moderated.
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the changes in the trust fund's financial well-being that i have discussed, also call attention to the importance of maintaining a strong economy and a vibrant, long-term growth. let me conclude with a common about the staff of the social security administration and hss and labor with whom we work and produce the trustees report. they are an incredibly hard-working talented group of analysts who are dedicated to providing the public and the congress with a subjective and desiccated group of estimates as is possible, and i think we are all indebted for the services they service that they provide to us. thank you. >> thank you. the winner three minutes over. [applause] >> that is a better performance from last year. >> i would like to be graded on a curve.
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[laughter] >> thank you. you know, is customary, i will limit my time to five minutes and time to five minutes and as for my colleagues to do the same. social security was designed so that workers pay into the system entering their benefits, and franklin roosevelt understood the importance of making social security different from a welfare program, he once said that those payroll contributions there, so as to give contributors a legal, moral, and political right to collect pensions and benefits. with those taxes, and no politician can ever scrap my social security program. [laughter] doctor charles blahous and doctor robert reischauer, you point out that the payroll taxes represent only 70% of the total social security income in 2011 due in large part to general
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revenue transfer replacing lost income from payroll tax holidays. if we continue to replace payroll tax revenues with income tax revenues, how long before social security is no longer perceived as an earned benefit, and what is that going to do for public support? >> go ahead, doctor. >> i would say my answer is that no one could know when that point will be reached. that statement is in the report because we wanted to call lawmakers attention to the fact that social security has had a rational for financing, and as you pointed out, it does go back to franklin roosevelt. you go back and read his early statements, he plays a very -- he plays a very big importance on it. that's why we have a separate payroll tax and trust fund and trustees. he was very concerned if you
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want to have a universal participation program, it cost a lot of money to do that. if you have as part of the general budget, they will be competing for fighting with other programs and would be subject to great political risks that the benefits of this program could be cut back. he was very attentive to the idea that her structure this program so has enduring political support, and not only fdr, but subsequent advisory councils have said that one of the bases of the programs and political support is the idea that workers have earned these benefits and they came out against all these advisory councils -- they all came out against funding the program from the general fund. speaking for myself as a trustee, one of the things we wanted to do was draw lawmakers attention to the fact that the program does continue to get transfers from the general fund, it does potentially great situation where we've had a departure from fdr's intention
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on that. >> is not your personal money anymore. >> about 45 cents out of every dollar of public debt held by foreign governments, mostly china, doctor charles blahous, if we continue the program, do we risk is being paid by americans -- [inaudible] >> well, that is certainly the case that the general revenues that were transferred to social security along with the payroll tax cut were financed with debt. they were financed by increasing the deficit. we cut the payroll taxes and added that amount to the deficit, and certainly, there is an ongoing argument over who really finances the redemption of the trust fund, clearly, in this instance.
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as would be a case of the financing for social security being provided by the people who invest in u.s. treasury bonds. >> can you tell me what you think tax increases are no answer for fixing social security? >> because it seems to me that to fix social security for that, we need to make sure that our reform and efforts are aligning tax revenues with benefit outlays on a sustained basis, and that didn't happen during the last major reform. seventy-five year solvency was achieved by building annual surpluses in the near term followed by grilling annual deficits and long-term, even though that was not intended come at the time. is that correct? >> that is correct. i have to say if you were to bring in [inaudible name], he
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would disagree on that point. one of the thing on 10 things that is striking about 1977 is that they did not measure financial sites content successfully we do now. they didn't count the carryover balance of the trust fund. they didn't count interest earnings of the trust fund. he used a different actuarial method that presumed that all benefits of the future would be paid for taxing the way -- the wages. they said in multiple places that it was their intention to keep the program financed on a pay-as-you-go basis. the fact that they wound up with a solution that have big surpluses of some years, and big deficits in other years, it wasn't as intentional as many people now believe. what they were trying to deal with was a short-term emergency, trying to make sure that the benefits checks didn't stop in
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1983, and they were trying to arrive at an average actual balance over the long-term. as you point out, that resulted in an unsustainable solution, because as time went on, surplus was into the past and more deficit years appeared on the horizon. again, they were trying to do a lot of things under emergency conditions in 1983. the intensity to critique what they did, but to point out that as they defined long-term balance, they did not give the same level attention to what was happening on an annual basis that we do in the trustees reports now. >> okay. i presume that you agree? >> actually, i would probably disagree with all three of the answers that chuck gave. [laughter] [laughter] >> come on, that is why you have to trustees. >> you want me to disagree? or shall i keep my lips dealed? [laughter] [laughter] i will let him answer the same questions. >> thank you.
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we will just deal with the fact that there is a disagreement on that. thank you for your testimony, and the work we do as trustees, we appreciate that. both of you mentioned in part of your testimony, the deterioration in the outlook for the program, which is why i think all of us should be trying, as i said doctor charles blahous has said, dealing with the sooner rather than later. i think your pie charts and your testimony is, the information you provided shows a great portion of that deterioration occurred as a result of the recession, which hit pretty hard. it has become pretty clear that you lose jobs in america and workers that are paying their fica contributions, fewer workers contributing and less money paying out in the pockets of beneficiaries.
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job one for congress should be creating jobs and helping the private sector create those jobs. you get more folks to work, it just doesn't help them and their families, it helps social security, because there's more money going into the system -- the social security system and the trust fund. doctor charles blahous, doctor robert reischauer, does the fact like other countries have a consistent flow of immigrants over the last several decades help the social security system and its trust fund when it comes to being able to pay out benefits? >> that is a very complicated question. >> in fact, certainly, the influx of immigrants has increased the labor force and the number of individuals paying payroll taxes, which, over the short run, clearly helps the ability of the program to pay benefits to retired and disabled workers and survivors.
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>> i think the other part of that they don't mention is mention is in the long run from it they become recipients of social security benefits, is one of those things that it's not just an automatic plus because they come at some point, will qualify for the benefits as well. >> it is very confiscated and will depend on what the earning patterns are overtime. and different groups of immigrants have different pluses and minuses in sort of a narrow, this was. >> many leave and don't end up collecting benefits. >> i have some numbers here that show me that between 2007 when the recession was starting and got really deep, through 2010, nearly 6000 companies in this country terminated their pension plans. in 2009 alone, those pension plans were short $9 billion would be needed to pay out benefits to workers who have those pensions under those
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companies. during that time, 2007 to 2010, social security didn't lose any money, didn't? >> doctor charles blahous, go ahead. >> social security continue to make payments in full and the trust funds continued to rise. >> we all know the examples of circuit city that went bankrupt. you remember enron when it went bankrupt, and how those companies let their employees and pensions. the virtue of social security, and the reason i think it is important is you mention how we should be acting now to try to resolve any longer-term issues for social security. we don't want to get to the point where you can prepare social security to enron or social -- circuit
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city. even after that, it would be paying out 75 or 76% of benefits. i don't think anyone today's paying into social security. today, beneficiaries are getting -- i hope what you will all continue to do is give us recommendations you feel help us move toward something sooner rather than later. i think most of us are getting to the point of agreeing that it is pretty simple math, as i think doctor charles blahous mentioned. you can go to the benefit side or the revenue side coming you can figure out a way to get yourself an actuarial in actuarial balance for the next 75 years. so hopefully what we will do sit down at some point soon in congress to try to come up with that i appreciate your testimony here today and your service with the trustees, and i hope you will continue to testify before this committee.
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thank you. >> thank you, mr. brady. >> thank you, mr. chairman. we hear these days that everything is doing fine with social security on capitol hill. and no need to act. but things are not fine with social security. as chairman johnson pointed out, in the last year, america borrowed roughly $140 billion, much of it from china and other foreign investors to pay her social security benefits. this year, we will borrow $150 billion, roughly, from china and other foreign investors is to pare benefits to seniors. that is not fine. if you don't like it, get used to it, because your report said that we face permanent deficits forever and social security programs. the truth is, we are told economies doing better, but this has the largest single
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deterioration in 1994. so it is getting worse and not better. so my question -- i have three questions, and i would hope that we can have a no spin zone and asked the trustees, those responsible for the financial stability of social security, just give us your best advice to congress and the white house. first, should congress and the white house continue to delay reforms on this important program, or should we act now? >> i am an advocate of acting now. >> doctor robert reischauer. >> i think that speedy action is called for. whether the actual changes in policy making need to be implemented next year. that's a totally separate issue.
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this is an area where we generally pays policy in over a long time to get people, you know -- >> you both made the point that if we don't act as soon as possible -- again you're nice to us -- what's what is the timetable? how soon doing it at. >> this year, next year? >> i think that you should act when the climate is right. when changes are being made. >> not from a political statement, i'm asking is as a trustee, looking at the numbers, how much time you say we have back in your belief? >> i would hope that you would act within the next five years. >> doctor charles blahous? >> with the disclaimer, i am probably on the line of experts here, i am probably on the ethnic end of the 10 with respect to how that is going to be for the future.
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definitely within five years i hope to do it even faster. >> can i ask, the payroll tax holiday was important to many families. april untenanted blowhole in social security's revenue. we know that that cannot continue. no politics in this, your advice is trustees, should we consider continue to payroll tax holiday or should be restored to full revenue to social security? doctor charles blahous? >> i'm speaking very much for myself, but i would urge that social security go back to the 12.4% rate. >> your advice would be to restore the full amount of money? >> is a personal view, obviously, for the board of trustees. >> doctor robert reischauer?
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>> minus a personal view as well, but i would phase out. >> thank you, mr. chairman. >> your recognize. >> you are recognized. >> i want to get a little parochial here. you said that we need to act soon. i am just curious, with the younger generation of americans have in store for themselves if we don't act soon. >> i would say a two-part answer. mathematical part of the answer is a net income loss. there is a table in the trustees report that says if you just held off current participants promise, current tax formulas and people coming into the system would lose a net of about 4% of the tax taxable wage
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income. that is after they receive all benefits. those income losses would be higher in the income side, but they would also be present on the lower income side. ..
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and the answer is less income in retirement years. future generations will run more risk with respect to disability as well. they would get disability and survivors. they need to divert more of their income into private pension plans, which are 401(k)s or other retirement vehicles. >> you say they would need to geek out why? >> if they want to maintain adequate incomes in retirement. because security payments would be less for them. >> how much less? >> as chuck explained in the chairman and others have mentioned, social security would be able to pay about three quarters of the benefits now
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promised. >> is that based on what each category? >> will i mean, this would be an across-the-board for all existing beneficiaries and future beneficiaries starting after 2033. >> for the next 100 years? >> well, we don't go out that fire. we go through 2086 amnesty is roughly in in that area. >> assuming the same number of people at the same number of years and at the same number of children. >> no, we do vary over time and are projections according to the best information we have available. >> so what happens to people that aren't as young, perhaps they are 50 and her 15 years from retirement. what happens to their social security if we don't do anything? >> the little no action scenario is that little or no legislation actually be 25% reduction in
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2033. and so, those people, presumably would collect full benefits for sending us the next variances and benefit reduction reduction in 2033. obviously it is unlikely that is how it played out in part if congress had not permit a 25% reduction. there would probably be some alternative benefited between beneficiaries and taxpayers. to 25% reduction. >> use simile would be be responsible? >> i'm not sure if being responsible -- let's say there is no historical precedent for congress whiny sudden benefit cut of that magnitude. >> is their historical precedent for congress on social security to become this group? >> no, it is actually very, very important question. >> we've never had a natural deficit as large as it is now.
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we've become in 1983 a few months for nothing in the the benefit checks. the size of the balance is now larger than it's ever been. read the fancy for the 83 reforms. there was an indexing mistake made in the 1970s when there is temporarily a huge long-term deficit created by the indexing mistake fixing the 77 amendments. the sense that correction, this is the largest x-ray deficit receives prior to the 83 reforms. >> dr. reischauer. do you agree? >> yes. >> at that a republican and democrat to agree? call capitol hill now. >> thank you, mr. chairman. >> ministers start, you're recognized. >> thank you, mr. chairman for holding this hearing and i think her witnesses for their service.
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i have to mention, death or blahous, before you choose to criticize my testimony, we both have the same background. i notice you have a doctorate in physical chemistry. i also have a great deal of experience in physical chemistry. i think it took 10 semesters of it at m.i.t. however it was all second semester chemistry i had to repeat over and over he can before he could pass it. but it's a gray background. the republicans want to kill social security. i think that it's quite obvious, and turn it into a voucher plan. >> if the gentleman would yield on not? >> ministers start, republicans are very strongly supportive of social security.
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our moms in our dad, grandparents -- but for us to get -- >> -- >> social security and medicare turn them into voucher systems. now, dr. reischauer, you are one who is stealing your thunder. you are one of the original founders. your thunder of course is to have medicare part union supporter. now fortunately you also gave the umbrella from not thunderstorm, which is a guaranteed an affair. but, would you support the idea of premium support without a guaranteed benefit? >> as you know, mr. stark, the term premium support came out of
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an article that henry aaron and i wrote in 1995, suggesting that there'd be private or nonprofit options for medicare beneficiaries along with fee for service that the benefit comment via defiant guarantee that if it and that the payment be one that was indexed to the growth of health care costs. over time. our belief was that this may generate more efficient delivery systems and better care for america's seniors along with some cost savings. but the emphasis is on the quality of care and offering a more diverse set of delivery systems.
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>> thank you. >> the affordable care act, which the republicans would like to defeat, according to actuaries, it would shorten -- it would extend solvency theaters longer than if the republicans had their plan to kill health reform. would you suggest that is correct? >> is not a projection that each icon is to be reduced, then the trust fund -- >> i submit for the record the cms press release that the trustees report states that without affordable care act the health insurance trust would expire eight years earlier in
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2016. >> dr. reischauer, can you put a dollar number -- i mean, i keep in social security will go broke in 20 years, something like that. but while the total negative amount be? how many billions would you cast? over the total. >> over the next 75 years? >> will it take 75 years ago broke? >> it will exhaust the process in 2033. i don't have a number. >> basically the projections of a trust fund solvency 2033 and said the shortfall would be 2033 through the end of the 75 year. only the value of about 8.6 trillion. >> 8.6 trying in. >> t. have any idea what the two
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wars we are fighting and not paying for cost? >> i do not. >> i am not hearing anybody on the other side asked that we pay taxes, particularly those of us who may be of high incomes, like members of congress. we are not being asked to contribute anything for that war. lower income people may be our. thank you, mr. chairman. >> thank you without objection, post referred to is entered into the record. mr. marchant, you're recognized. >> thank you, mr. chairman. my question is about the actual mechanics of how when you approach lets say 2016 and the disability shortfall begins to appear in the disability
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program. what is the number that congress would need to appropriate out of general funds and those threshold years, just to maintain -- to maintain the benefit? >> just as a very crude estimate comments about $30 billion a year shortfall that appears from 2016 to the rest of the decade. >> so about $300 billion. we look at things over 10 years usually. >> it was started in 2016. so that dirty billion dollars the year over the last six years at that valuation. >> and it's there already -- is there a trick or put into the lot where the legislate -- the congress immediately is confronted with having to make that legislative decision? or will it be a legislative decision that has to go through the complete congress and be
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signed by the president? >> well, the way the law creates is the disability insurance program can only make payments for my needs and the trust funds. so peace in the congress does nothing, basically you would have -- in the trust fund balance to zero company or delays in outgoing benefit payment until income in tax revenues came to finance my benefit payments and a factor virtue of just plain payments would be to reduce total payments on an annual basis by 21% per year. if you want to maintain full schedule of benefits payments 100%, you would have to find other revenues and put them in the trust funds to let the full schedule of benefits to be paid. >> you basically have an appropriation made into the trust fund and the trust fund would basically then make -- make its payments adequately? based on the current? >> and if we reach that
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threshold in the main social security trust fund and the amount of money, what would be the amount of money needed that congress would have to appropriator and that current year, the first year based on the projections that you are making now to keep the benefit at 100% when we've reached the 75% threshold that all of the skype -- all of us get that warning when we opened our yearly statement and look at it. >> right now i don't have the precise dollar figure, but just to put it into today's terms, it is about 25% of scheduled benefits. today the cost of paying benefits as a little shy of $800 billion. about $790 billion per year. you want to think in today's terms, the amount by which you would be short would be in today's equivalent of little shy of $200 billion a year.
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>> 200 billion. so, that would be the choice congress would have at that point, to keep benefits basically at the level of the project above all congress would have the decision of just simply appropriated the money to go in. >> yes, now this cuts to a point i made earlier about the difficulty of the choices congress had faced -- obviously the path of least resistance at that point it's just a return to the general fund and say here is another 200 billion. it won't be much higher in 2033, but to put into social security obviously word, you know, and the principal social security is financing itself. a few wanted to finance itself the raise payroll taxes or cut them if they payments by up to fill in the gap. >> but by doing that, you would and completely the philosophy of
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a self pain system and you were transferred like many of the states have done, they've gone and invaded their pension plan over the years to read the pension obligations and many of the states now have just occurred in appropriation? they've depleted trust funds, part against her cash payment to wear instead of it being a payment out of the trust fund, based on earnings, they just simply have -- it is just fetishistic fixed liabilities to them. >> that's right. >> and with that largest become a lot by the fact that we have not fixed the system? >> well, you would actually have to take an affirmative legislative action to support the program as general revenues. under current law there is a provision for doing that. they can't burrow, can receive
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that additional legislation from the general fund. you have to change the law in order to have that resolve. >> so i think it's reasonable to expect most of us will still be here in 2016. i certainly hope to be. and so, that threshold you are talking about in the main social security trust fund we are approaching with the disability fund. so whether we are at dinner not act in, we're meeting some very conscious decisions on how we are going to handle the disability trust fund. and i suspect the mentality of the congress at this point the mentality of the congress at this point loses their benefit. but at this point loses their benefit. but when you make a conscious decision and you are making -- are you making a much bigger decision not to point? >> in the past, when faced with the same challenge, the congress
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has reallocated tax revenues from the system, the old-age survivors system to the disability system. and tweet the division of the total payroll tax between the two trust funds and verified, avoided making a difficult decision. >> thank you. >> gentleman's time has expired. mr. smith come you're recognized. >> thank you, mr. chairman. and thank you two witnesses. dr. blahous, we frequently hear the social security as a separate account that does not contribute to the dataset. my colleague, mr. marchant was touching on some of this. that in your testimony, you indicate the operations are currently adding to the unified federal deficit and will add substantially more in the years to come. could you expand on that?
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>> perhaps the best way to answer this is to say the price of my answer my answer that if they caught analysts would agree with anon delegate into the parts for this disagreement. i think that all analysts agree that to the extent to social security supported by a sub payroll tax revenue or private taxation of benefits, to that extent it is not adding to the federal budget deficit. most analysts also agree that to the extent that social security is receiving a subsidy from the general fund like the general fund transfers tax cut, that portion and i said to be devastated. where you get into the murky area for analysts argue with each other assiduity interest payments made to the social security trust fund. right now to a very large extent from outlook to 2033 and certainly into the 2020, social security subsists with large extent this on interest payments are general funds. if you have two different analysts to interpret what's
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going on there, you get two different answers. from a mechanical standpoint, the payments of interest go from the general fund to social security. you could say from a mechanical unified budget standpoint those interest payments don't come into the u.s. treasury and therefore represent money going to social security without reducing the unified budget deficit and then represent extent to social security adding to the overall deficit. you'll also have a school of thought and i don't agree community school of thought process those interest payments represent the extent to which social security has reduced the amount of wiring in the past federal government has had to do and therefore represents a reduction in unified budget interest payments and therefore to the extent social security receives interest payments is not adding to the unified budget deficit. you have competing views on that. i think with this other price of social security, there's less
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ambiguity. to the extent the program is receiving transfers of general revenues come is clear that adding to and it's her that i'm income is clearly not. >> thank you cannot yield that. >> thank you. thank you, mr. chairman. and thank you for the witnesses. dr. reischauer, i appreciate your article and 95 about premium support without go. my question is what happens where the time people call that vouchers would be the set that will wreck medicare. what was your response back then? >> you know, our response was that changes were unavoidable, that this was a promising approach tories providing beneficiaries with more choice,
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possibly higher quality coordinated care and possibly a reduction in government spending from competition. >> thank you. jumping back here, i kind of want to follow up on the plan that chairman merchant had. he now can we talk about one to five years to make decisions and i'm sitting here looking at 2016 and insane that it's not five years. that is four years. if you knock off a cliff you think when the three years of descent team. as you explain the reality of how things may happen and where money would come out of the other fund to subsidize this fund, if you put those two funds, have you looked at with the year that we are not going to cover the benefits?
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we see when it's 2033 and one is 2016. if the old-age started subsidizing the other one, i went point will it bring it down? dr. blahous. >> right now the old-age and survivors fund is scheduled for completion in 2035. disability is 2016. the kind that can combine funds or 2033. >> 2033 six-figure we throw around in the vernacular that refers to social security as a whole. if you split it into the two funds, when it's 2035, the other is 2016. >> the 2033 assumes you reach it. the allocation of the payroll tax between the two trust funds to maximize the link. >> the old-age survivors today in this report is still 2035. >> that it's not still. it's 2038 last year.
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>> the other point and i just want to be clear when you present value of the unfunded liability we talk about 8.6 trillion, which is the over two years of all federal spending. but that includes the 2.7, using that money within the trust fund -- >> you're right. that's basically five of the deficits on top of regaining the trust fund and redeeming the trust fund basically saying that as an asset amend the shortfall from 2033 to the end of the valuation. as for that trillion comes from. >> so if you didn't value the trust fund and not unfunded liability to make it solvent. >> there's a lot of different terms used and sometimes it makes it confusing, but a cashless for a while, but it's not solvent. really from my days, i just really think we have to look at
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these facts and the facts are the facts and it's not solvent long-term and quite frankly if we care about social security, we need to do the same thing to ensure that it is solvent. and so i'm obviously personally very open to any ideas from anywhere and i think the solution is to be bipartisan and that's the only way you can present to the american people and just hopefully get some bipartisan solutions coming forward. thank you, mr. chairman. high-heeled that. >> i take care of it. i'm going to ask when the question. that or reischauer, we need to make sure our reform efforts ultimately allowing tax revenues underfed outlays on a sustained basis and i didn't have been during the last major reform and 83. then a 75 year solvency was achieved by building annual surplus in the near term followed a growing annual deficits in the long-term, even though that wasn't intended that
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the reformers at that time. is that correct and could you talk about that? >> again, my colleague, dr. reischauer might want to even disagree, but my read of the 83 amendments is that they intended to do and what they actually did were somewhat different. i think they aimed at avoiding any immediate insolvency problem. the benefit checks are not going out in a few months and they wanted to prevent that from happening. they also aimed at a long-term actuarial balance. if you actually go back and read documents of the the deliberations and that most of the greenspan commission exchanged how they measured fiscal success, it is very clear they didn't look at the way we do it now. when we make a measure at the condition of trust funds, we count the carryover balance of the trust fund and interest
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payments. we basically treat the trust fund as an asset in social security and therefore within deadlines that you can certainly do something that builds up the trust fund address it down over a period of time. that is not how they went about it. to use a different method for calculating the financial conditions called the average cost method basically ended a sentence in any given year you fund the program for incoming wages for workers sifted count the trust fund and the interest payments at the trust fund. if you read the commentary, numbers and this after various faiths are intent to get the program on a pay-as-you-go basis, not to have balances from one year to the next. jake pickle wrote a number saying the public would never stand for a big trust fund build a because they wouldn't trust the government to control trillions of dollars of investments and save the money.
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we want to keep the program on a pay-as-you-go basis. what happened with the gothic surplus veneers and big deficits other years, but that result wasn't fully apparent until so late in the legislative process that could go back and revisit the novice say what they dealt with was emergency in the deal that it can reach and so they got a result of the program after balanced on paper was a little more apparent than real, which is why it is flipped since. >> this time it's going to be political consequences as well. do you care to comment? >> yeah, i do care to comment. there is a real dilemma here. if you operate a program like this on a strictly pay-as-you-go basis, then you were saying as demography changes and changes may be in the next that could raise or trend economic growth changes, you are going have to
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raise taxes or lower taxes or raise benefits or lower benefits. and for a program designed to provide the american population was some kind of assurance that it's going to be able to plan its retirement or how much insurance it means for potential disability. that's not a satisfactory way to go. the other option is you can build up reserves and deplete reserves over time. and i agree with dr. blahous that the intent was not to build up these fake reserves. the future course of democracy was not fully appreciated by those responsible or anybody at that time.
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was that baby bust a permanent phenomenon. we have huge social changes going on in the last 30, 40 years. small family size, more immigration, more women in the work for his comment better, et cetera they make these things very hard to put in place and then stick with your decision for the next 75 years. so i don't think there's a right answer to this question. >> thank you, mr. chairman. one more question. >> for me and peered to 30 feet off of this i think oftentimes we have conversation because i think we don't explain in terms of most americans who look at it essentially we face back in 1983, social security was nearing a point where would be a little pale benefit, congress working with president reagan were to deal with that and the
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result was a system where americans paid a little bit more of those retired got a little less in benefits than the result was this reserve being built that because americans have been contributing more to the system they needed to pay recipients to beneficiaries. now, i think most americans say if i give you hard cash, what do your bank or any other place where i can store my money and you tell me you're going to pay me and interest on that cash, you expect at some point to collect on that cash. essentially bylaw that is what we did. we told americans when they deposited their contributions from their paycheck to the government, what is not used -- actually all of it when it comes and goes into treasury bonds. it uses what it needs to pay for
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benefit, to cash in treasury bonds because they needed to cash in all of those treasury bonds to pay for current retirees and building up the surplus that has been earning interest rates on because they earned less than the risk investment on wall street. it's been earning interest and that his 1.6 trillion interest that has been earned. dr. blahous questioned whether that's real money because his interest in essentially transaction between whenever the government social security to the other arm of the government, which is the general operating budget of the federal government. those treasury bonds are real and is the chairman pointed earlier, 45% of our public that is owned by foreigners. they all match at and make it to collect on it because they have treasury bonds. so there is those who say it's not the money social security holes.
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we are in pretty good shape because 45% is a real money either. if you don't know social security, we don't owe foreigners if they are. that is way to understand the logic of those who save up for the money because americans pay real money into the system. it was secured by the most secure form of currency there is, which is the treasury bond and you say it's not real money simply because it is done by social security giving the money to the government to hold onto that money, i think as a rio air mistake to say are real and justice to the american people who to continue to pay into the system today. and in fact, that reserve is going to continue to grow for several more years before we have to start using it to pay for benefits. and so, i think the public will want to understand.
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i did the quick map on this. in the 77 years social security been around, you and i and everyone who works and has worked as contributed $14 trillion into social security with our paychecks, fica contributions. in 77 years a calculation we used to $13 trillion in paid-up benefits. hard cash left over come the simple math there's a $13 trillion contributed a cold hard cash to social security never been used. this helped produce. for decades that reserve has been gaining interest because his home in treasury bonds and added another 1.6 trillion. most americans would tell you if you only wanted to give back 1 trillion, if this were a bang, we would have a big run and we would probably bring the bank down. and so i think we want to be careful when we talk about funny
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money for social security because either we tell china and the rest of the world for not going to pay them because they have the same funny money or we should keep our obligations to americans who contributed money. final point i want to make his face. mr. brady mentioned that social security faces a deficit. i think dr. blahous and dr. reischauer would concur with me that under the last social security cannot run deficits. is that correct legs >> that's correct. social security will never face a deficit. but we do face and i think he is the right word. an actuarial deficit because we actually see the difference between what we collect to what we hope to pay out and there was a deficit here d that's what we have to tackle sooner than later. can the social security system ever run deficits by law. the cold hard fact is that we have to -- i think we have to tell americans in 2033, guess
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what? all of a sudden your benefit and from 20% of what you're getting to 75%, which is to be cruel. but neither has social security run a deficit and never can and do we in congress changed the law. with that i would yield that. >> eliminate the final comment on that? >> i certainly don't want to be construed as complying with the bond of the trust fund are not realized this to social security. as my testimony indicates a travesty makes clear those bonds are a full faith and credit as the true asset to program. we get into controversies about the trust fund is it's not really so much about whether the real assets of social security or 62 arguments between analysts as to who pays for the trust fund runs. for example, interest payments we did 200 plus billion in generative new transfers they feared to social security from the general fund without
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collecting any taxes based on the 200 yen. now those bonds are going to earn $400 billion or so of interest after 2033. see this analytical clash income is really paying for that interest? for taxpayer finances general fund of the u.s. government for the person investing in treasury bonds is obviously the interest payment. it's not necessary to case they were paid for by workers on social security in a fierce analytical argument as to whether that person social security financing consumer contributions of some others source but i do want to be construed as saying they are not real money. >> mr. chairman, we can actually have this discussion because this is that the public would love to hear. rather than just doing our five minutes of asking questions and you'll be getting five minutes to respond or give your testimony, and i think actually
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chairman camp has done a great job on texas where he has allowed us to have these informal off the record testimony with tax reform, we could do more in social security. for example, that are blahous, limited the payroll tax code to try to help working families with this recession, you're right. you have to contribute less to fica taxes to social security. but congress intentionally said would not going to damage social security. we'll take money from the general fund and replace the money that otherwise would've gone in. i would respond to your point, a valid point that real money -- at an interest interest through the treasury bond because it came from the general fund absolutely should earn interest because they consciously in congress said we don't want to undermine social security. we want to help the economy give working families to pay fica taxes a bit of a break. these folks require. the decision was consciously made by congress by treasury
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bonds that would generate interest and therefore we knew that would eicon money that the federal operating budget would go to social security when the time came to collect on treasury bonds. your point is well taken and that's the person we have to discuss because otherwise everyone gets confused about is the real money, not the money. so i appreciate the point you make. >> i want to thank both of you for being here today and i think we've had a positive discussion. we do need to fix social security we tend to do it and i want to thank the members for being here today as well. mr. stark, thank you for showing that. but that, to meeting stands adjourned. [inaudible conversations]
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>> how do you approach book interviews differently than news reporting interviews? >> i think the book interviews is gathering history. i think of interviewing when i worked for the news side as gathering contemporary information. >> how difficult is it terming impartial in your reporting and not get caught up in one campaign or another? >> i'm going to try to his best as i can give people a full understanding of what is happening in this campaign. it is not that difficult to put your biases to decide. >> how does social media change a line of work in terms of reporting and giving your news information quiet
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>> twitter in particular is a primary news source for anyone who covers politics and pays attention to politics. twitter didn't exist four years ago for all practical purposes. >> on "washington journal" thursday morning, we're joined by democratic representative, niki tsongas, member of the armed services committee. this is 40 minutes. >> we're pleased to have joined us, representative niki tsongas, member of the armed services committee and the resources committee. representative tsongas, if we conservatively talked with our viewers this morning that is the house oversight vote. committees vote on holding eric holder in contempt. what are your thoughts about
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that? >> guest: you know, the policy itself called the fast and furious policy was ill-advised, whether it was put in place under president bush initiated or his administration and as ill-advised under the administration of president obama. it has led to a tragic consequence with the last of the border patrol's life. i think there is a very per year growth for congressional oversight and i also think there needs to be some accountability, which we have seen with the fiery as some of those held responsible. i think our attorney general has released 7600 pages of document. the fight is over in her band of documents around which he has said and rightly so that there are very privileged information in there that could compromise ongoing investigations. so you know, in terms of the content to thought itself, i haven't seen the resolution. i will look before i make a
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decision. i am cited as come to this. there was a way forward that didn't necessarily have to lead to this point. and when you look at what else we are doing are not doing in congress, we have a transportation bill whose authorization is about to expire. student loan rates about to double for millions of american students or those other things we should be dealing with. >> host: and one other issue of the day he wanted to bring. potentially the supreme court could rule on health care. >> my view is has a strong supporter of health care reform were under governor romney's administration be created a template for the law and that day. the goal was multipronged to create access to health insurance and uninsured insurance had great success with massachusetts. we had to do with the rising
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cost. it's not supportable over time and there's many elements of the accountable care act that would do that. we have many americans but because they are not insured companies left to government and the rest of us to pay for that coverage. and they want some important insurance reform. so my view, does congress have a rational basis for moving ahead in dealing as it did in this way? my hope is that supreme court would defer to the role of congress and to the political process that if the political process should resolve this n-95 supreme court. >> host: if the supreme court as a rule suggest, does the democrat in the house have a plan b? >> guest: i don't know that we have a plan b, but we are all in her own way trying to make the process more. much remains to be seen as to what exactly they do. whether or not they do with the
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individual mandate will look more broadly at the entire piece of legislation. we simply have to wait and see what the outcome is. my hope is that the supreme court refers to the political process and the legitimacy as naturally. >> host: before we got started on the programs here, you mentioned you traveled to afghanistan. how may times have you been there? i know laura bush was active on the role of women in afghanistan. so what if your issues as well? >> guest: i went there four times after being elected to congress and have seen a change over the course of those four visits. my last tour with the focus on visiting our winning and support roles given the nature of these words really necessarily put them in harms way virtually at all times, but also meet with
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afghan women who have benefited from our presence there in education. i'm a strong supporter of the timetable the president has put in place. i would support a more aggressive timetable, but i'm more concerned that we don't walk away from the team for women and children. we visited a school and a small village close to the pakistan border rightsizing of growth cycle through the school in a given day and we were able to visit with older students. some older students we asked these young girls, what would you like to do? i want to be a lawyer, he got here come a journalist, a teacher. doesn't take much to raise the sidelines once you expose young people and young women to education. i remain very committed and supportive to the fire that as they negotiate a way out, but we
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also are very supportive of the gains we made for women and we hope the government beat to the fire as well. >> host: a recent report in the news about congress not allowing another background have been. is that a correct report and you agree with that? >> guest: i am on the armed services committee we did not authorize a process to the president has yet to introduce legislation that would create that process. coming from massachusetts we are not home the basis that we are home from one who has the unique capability because of its proximity to research and development facilities come extraordinary universities to partner with the air force base. as we look at the cybersecurity, but these is uniquely positioned to help respond to that challenge. i'm a strong advocate of the
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base that we are so proud of and massachusetts. for we know that the process is coming as part of the larger effort to do with the debt and deficit and spend dollars wisely, it will inevitably be presented to us. i do feel strongly about the particular base we have in massachusetts, given its unique capabilities and ability to meet the challenges of the future. >> to think the process of the past has been successfully structured? >> i know we have a base has been a model as we move forward has been a model for how to redevelop them use the land left behind. it's not an easy thing at all, but my preference would be terrific at the foreign basis. there's a lot of questions about why we have so many locations around the globe were there no longer necessary. but we do know we have to do with the process going forward on the one at two b. in a
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reasonable way that allows us to reach make the case for the particular strengths of the basis we have been to represent. >> host: finally, representative tsongas, women in combat before we go to calls come in numbers have been up on the screen. we'll put them up again. should women be allowed in combat, officially allowed in combat? >> guest: absolutely. i can tell you is had been to afghanistan and that was female engagement team they are part of the marine corps. these are units that are given to cultural challenges of afghanistan where moral soldiers cannot interact with afghan women. there is a necessity to create the units composed of women so that women could then go into these villages and interact with afghan women and learn more about what the threats were getting better that the land. they are absolutely in harms
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way. they have been trained to engage in combat. there are remarkable women. whether or not they are trained to be in combat have also met with a woman who was in charge of dealing with all the logistical challenges of getting on the supplies or whatever was needed across the southern portion of afghanistan to the different operating basis, always in harms way as she and other women help support that effort. we simply have to notice there's more by 2025, 25% of our military could be women's they are going to be inevitably in combat situations. they need to be trained and protected city of the the adequate protections and understanding of how to deal with it given credit for. post to representative niki tsongas has been in congress since 2007. her late husband, paul tsongas was senator from massachusetts and ran for president in 1982.
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first call comes from robert and mathias west virginia. republican line. brother, good morning. >> caller: good morning. yes, back to the fast and furious. it strikes me that the whole reason why the bush administration and then the obama administration has had to resort as was involved in the purposes of assault but then is the lifting of the ban that we had for a number of years on the sale of assault weapons. although i am in a very much strong amendments state, various absolutely no justification for
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a private individual to be in possession ak-47 or an m-16. i would like to know if there's any news of putting congress further thought then. >> guest: that's a good question and i absolutely agree with you on the limitations that should be in place around assault weapons. but there's been no recent effort to do with that. but back to the fast and serious, there was a very ill-advised strategy under president bush as under president, we've engaged in the necessary oversight it calls for giving them protection of the tragic consequences and outcomes of it. i think the responsible individuals have been held accountable and removed from their positions.
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they have delivered the 7600 or more documents he thought were appropriate and really focusing on a very small band of those documents last. it's unfortunate it's come to this. there's a better way forward to deal with this, but we will see i will be reviewing the contempt citation if it comes to the floor and making necessary decision. as for assault weapons, i do think they do not belong in the hands of individuals who have no necessity for using them. >> host: panetta proposes new sexual assault rules. recent article in the paper. privacy is necessary? why is he proposing this? >> guest: the issue of sexual assault is a grievous one in the military has a newly elected member of congress was assigned to the armed services committee and the military personnel said committee we had a hearing soon after i got there for the
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services came to talk about the various programs to put in place to host those assaulted. as an issue to me and i have been a coach wounded warrior function not soon after it was sold with or nearly men who'd been grievously injured and their service to our country. there were several women in the room and he went to suit their experiences have been. and the course of the conversation i asked one of them, are the statistics from the information i hear about assault real? one of the women with a nurse who had been deployed several times to iraq and afghanistan in her late 40s had never been assaulted, but she said i'm more afraid of male soldiers ina end of. she's traveled about whatever be she happened to be stationed on it, she had the capacity always to defend herself from our own soldiers. the reality is one out of three returning female veterans report having been some sort of military trauma. it's a broad term that
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encompasses a lot of behavior. but that is untenable that women who seek to serve our country should be the demise by our own soldiers. we have worked very hard on this dearth the sexual assault prevention caucus that mike turner from ohio formed through the legislative process flashier can't defend strong to put more tools in the toolbox to assist the defense department to do with this. for example, they do not have a post to a low year in the military justice system is a mysterious one and so we want to ensure that guns as they sat to see justice if they understood with the process with the light so they would be very well prepared for a peer of the event that congressman turner had a constituent whose daughter was
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assaulted requested a transfer out of the unit because she was serving in the same unit with her assailant. the transfer was denied that she was subsequently murdered. it's analogous though there is a provision that would allow some wonderful teacher request a transfer. the transfer is denied there's a process for reviewing it. a very quick process for reviewing it. we've learned that all these people who've been put in place to help victims, if you had to seek help in how the conversation with them, the conversation could be used against a big gun. so why would she go? why would you get the help if you knew somehow would be used to hurt you in a court proceeding? i was taken under the bill president obama created in executive privilege, executive order to create that privilege. secretary defense -- secretary panetta has heard these stories, understands the challenge and
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has armed the ante a bit. he has come to understand cindy's cases are brought to a very young commander doesn't understand the process who is trying to hold his unit together to do many other things, often will try to minimize the significance of these charges. this is the understanding how to do with it is often inherently conflicted because he is responsible off the assailant and the vet them. so it's been moved up the chain of command. the first official to deal with it would be at the kernel or b. if that is a very important step. secretary panetta has created units to investigate crimes. they are unusual crimes that required the particularized understanding and processing again is a very important step.i think there's a window of opportunity here. a lot of tools in the toolbox and understanding across the services that this cannot go on.
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we in congress need to monitor very closely to make sure we see many more successful prosecution in a changed culture that simply does not tolerate it. >> host: next call for niki tsongas comes from lauderdale, florida. >> caller: good morning. i was going to ask about the contempt situation and also about the problem with atf because ever since they went away from being plainclothes people, there's an investigation with respect to trying to be pleasing. they started out can continue to do these types of things. so why think he should be looking with their actual policies and what they're doing because they hired a lot of officers not position. i know the president has been working with them in d.c. my main issue is you start out with a hot topic with the contempt situation with holder
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and then you go on and you ask her to deal with the committee issued that she's dealing with, what she does next lunch out with, but is limited. however, i've been following her and she's there to deal with the topics of the day and she's just going to run over and do the normal talk. you have her doing this all the time. you always do that with the democrats and then he let the republicans just run wild and do about the issues they she's going to end up doing with the power points from the right. posted thank you, melvin for your comment. richard under independent line you please go ahead with your question for representative tsongas. >> caller: yeah, representative tsongas, i understand from the timetable that with the job of the richer richer from asking this and. i'm wondering if you don't hi

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