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tv   Today in Washington  CSPAN  December 14, 2009 10:00am-12:00pm EST

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decrease medicare payments to doctors by 20%. two of my doctors said that medicare is not paying them enough anyway. if you are going to cut them 20%, i don't think doctors will get into that line of work. i'm curious to hear your thoughts on this. guest: fehbp gives you the chance to find a plan -- doctors may sign up with the blue cross or vice versa -- if you want to follow your physician's -- there are already some doctors who do not to dissipate in any plan and that is just the way the world where -- to it. who do not participate in any plan and that is just the way the world works. there is a pretense that there will be this 20% cut in payments to physicians allowed to go into affect it is an annual ritual with the congress puts it off another year and it will never happen. because of the rules of scoring these things, it counts as a saving even though it will not
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happen. host: putting medicare consumers in charge. lessons from fehpb -- thank you for being with us this morning. that will do it for " washington journal." we will take you live for the discussion on budget reform. it is put on by the peterson- pew commission on budget reform. among those speaking include a former congressman, former omb director jim nelson and former director of the congressional budget office, and it should get underway here shortly. we will see you tomorrow morning at 7:00. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009]
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>> ok, good morning, everybody. good morning, congressman. [laughter] thank you so much for coming to join us today. i want to welcome you all to the release of the recommendations by the peterson-pew commission on budget reform. i am the president of the committee for responsible federal budget. i think there is no question that it is a moment for fiscal
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policy in this country. it is unfortunately a very troubling time as we are both dealing with a recovering economy and massive amounts of debt that have been accumulated in part because of that economic downturn and because of policies that we have been running for quite some time. i think the country as a result really needs this report and the kinds of recommendations we are putting forward and other groups are putting forward, to work on focusing attention to the critical question of how to deal with the fiscal policy challenges. the work here -- and i think our cover looks so good -- it reflects really a remarkable partnership between the peter peterson foundation and the pew charitable trusts, an economic policy group there, and the committee for responsible federal budget, whose board
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members made up the commissioners on this report and who are truly some of the greatest thinkers on budget policy in the country, the folks who run big office of management and budget, congressional budget office, federal reserve, and other committees and we are joined by many of them today. a culmination of a tremendous amount of hard work. all of their bios are in the report. it is a bipartisan effort, which i think is critical at this time because solutions and only be done and a bipartisan manner and that means it reflects many compromises. there is probably nothing anybody who is on this commission thinks is perfect, but they knew they had the work together to come up with a solid framework for focusing on the economy. it is sensible, it is balance. i think it is thought fully thought out in terms of a time line, again, dealing with both the economy and the budget problems. it is a very good start on what i think we need to do to move
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forward. it is not easy to do the kinds of things it will to -- take to achieve the goals, nor is this a group of people anybody would describe as politically naive. they know what is involved and it came up with a balanced plan. i will turn this over to the capable and knowledgeable david wessel, who is just off of a plane from europe. i want to thank again the peterson foundation and the pew charitable trusts for supporting their work and the work of fiscal policy. both of these organizations are taking leadership roles in dealing with these issues. and i want to thank the commissioners that really went above and beyond the call in terms of what they went into -- put into, the hours of work and writing and rewriting. and i would like to thank the commission is tremendous staff and group of advisers. i particularly want to thank victoria, damian more, and
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nathan for all of their hours. we are very proud of what we will talk about today and i will turn it over to david wessel. thank you. >> thank you debri much. -- thank you very much. i was at a conference in berlin and the ceo of which a bank said at one point that it is appropriate time of year to talk about fiscal policy -- ceo of deutsche bank. usually kids asked santa for present and adults pay for them. now adults ask the government for president -- now adults ask the government for presence and they have the kids pay later. one fact is there is a discussion of the deficit in washington in a room in which there are more people than shares. that is kind of a leading indicator of things. we see it in our polls @ "the
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wall street journal" that public concern about the deficit has definitely reason, as had -- has opposition to spending cuts and tax increases. the ultimate dilemma here is quite clear, as doug allen north put it, but the problem is the american people have asked the government for benefits, many retirees, that exceed the amount of money the american people so far are willing to spend -- send to washington to pay the bills. so i admire all of these people for once again trying to deal with this issue. some have been dealing with it since i was a lot younger. and i think it is important to note that not all of them are on social security. doug holz egan is only 51 but he points out the way things are going in the senate health care debate he may be soon eligible
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at least for paying for medicare. with that, let me turn it to the panel. this is about discipline, so that is not only fiscal but in use of time. what we are going to do is, i will ask bill frnzl to speak about 10 minutes to outline the problem and plan and each of the other people to speak for about five minutes and then we will have plenty of time for questions. bill? >> thank you very much, dave. thank you, ladies and gentlemen, for coming to this meeting. i hope you will be as interested as we were when we were writing the report appeared my part of this is short and simple -- it is that while we were writing a larger report dealing with budget process, it became apparent that our debt was running away from us and we had to do something about this policy before we could continue
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our work on budget process. so this report is step one and it will be followed by a budget process report, which we hope will help the congress and the president, to some of these conclusions that we are laying on them today. the commission has said we asked the congress and the president to work together to commit immediately to stabilizing the debt as a percentage of gdp. we understand the debt as a percentage of gdp is up a little more than 10% this year. and it is headed north of 80% by the year 2018. we are saying let's stabilize that debt.
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and step two, you have to develop a specific and credible program in 2010 -- that, of course, is a large order for congress. it is a campaign year. but we think it is necessary to do it as soon as possible. step three, we say you phase in the earliest policy changes in 2012. that allows the recovery to proceed without unnecessary inhibition. but the decision we hope will be made in 2010. step four is to review the progress of the program each year. and meeting the goals that and set by the earlier commitment. the program in which, if you do not meet the goals, it triggers
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an effect which will reflect certain other kinds of pain above the taxation and spending cuts -- responsible indorse -- enforcement program. step five is to stabilize the debt in the year 2018. we think that is as long as we can wait for stabilization. we had chosen the 60% debt to gdp, european uses it as an international standard of sorts , it is no miracle no. but you have to have a number and that is what we think is achievable and yet it is it pretty good target for 2018. step six, which may be the most important of all and even may be more difficult than the first five, which is in 2018, having stabilized the debt at 60%, we
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are asking the congress and the president to go forward and reduce that debt ratio further pared -- further. we don't tell them what it should be because we cannot see the conditions -- foresee the conditions but considerably below 60% and may be more like 40%, which is somewhere near the average of these last many years since the war. with that, i defer to alice rivlin who really knows something about this. >> i think should introduce people. bill, former republican chairman of the house budget committee. alice rivlin's resume is too long to go through but the relevant thing is she is democrat and founding mother of the congressional budget office, one of the few institutions in washington that seems to function as it was intended. alice, i am wondering if you could speak on what makes this deficit reduction set up
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proposal different from all the other deficit reduction set of proposals to which your name has been affixed over the last 25 years? >> more than 25. i think it is the urgency of the problem and shift in focus from the deficit to the debt. obviously they are related. the debt is the sum total of the deficits. but those of us who have been talking about deficit reduction for a long time have pointed out that in the future we are on an unsustainable course. we have made promises under medicare and medicaid and social security that on any reasonable set of assumptions will exceed the revenue available from contacts laws. there is an impending problem. but that problem was always
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very far in the future. now it is upon us. and while we talked about the future problem of deficit, the current debt level in relation to gdp has been quite moderate in this country and the range of 30% to 40%, until very recently. so, we didn't have to worry so much immediately that we couldn't pay the interest on the debt. but now, as it result of the major things that have happened in the last two years, the cost of dealing with the financial crisis, and the automatic reaction to the recession -- in terms of revenues falling off and expense of going up -- and
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the actions taken to forestall or to help the economy recover from the recession, as a result of all of that, the debt has ballooned and now we are in a range as we have not seen and a very long time. so it makes everything that much more urgent. >> a lot of people say, why in god's name would you want to even think about raising taxes or cutting spending at a time of still uncomfortably high unemployment? are you talking about doing this stuff now? >> no, not this year. not even next year. what you are talking about is committing to a goal of debt stabilization nine years from now. the goal is fairly arbitrary. the important thing is stabilization. that would mean getting the
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deficit coming down as the economy recovers. and it would mean putting in place credible actions in the future, including reductions in entitlement spending and tax increases. everybody on this group agreed it will take both. putting those in place, but not for the immediate future, because it would derail the recovery. >> doug holz-egan, among other things was director of congressional budget office and most recently a must for advising john mccain. we have been hearing that the sky was going to fall if we did not hear something about the deficit for quite some time. we have not done much except make it worse for quite some time. the sky has not fallen but in fact interest rates have fallen. the united states is able to borrow the extraordinary sums of money at very low interest rates. why should we worry about this
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now? what risk if any to the economy are posed by projections that show, as this report does, rising debt? . >> it is true the u.s. federal government deficit has for a long time forecast to rise dramatically -- baby boomers and shift of democracy. but the point that alice made is essential, what used to be a three-decade problem has now become one-decade problem. spike in debt relative to gdp over the next 10 years. why would you care about that? winnowed deficits have costs and those costs are diminished economic performance, higher interest rates, reduce the kind of investment in productive capital, the minister exports of around the globe heard our ability to compete. in general, would perform less well. deficits matter because it shifts who pays the bill. kids and what the bill, the end up with financial bill both in
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the form of debt, that they may owe to foreigners and flow out of the country, and also ended with an economy smaller than the other. and limits to policy flexibility. if you have what we are on track, interest on the debt, $800,000,000,000.90 years, that is money you don't have all of the budgetary objectives and limits the flexibility of the federal reserve in combating economic shock. we are setting ourselves up for not just conventional -- but germanic size of the cost. international lenders at some point will look at the united states and no longer say, hey, they've got 30 is to fix it and i trust it will do what, but they only have a decade and they don't seem too serious, i will not put money into the u.s. -- recipe for currency crisis, spike in interest rates and serious recession. we would like to avoid that. it is true coming out of a worldwide recession, financial crisis, we do not see the conditions in financial markets that would suggest that is
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tomorrow. but it does not mean you should just go along your way. we should take action. >> if markets are forward looking and somewhat better than governments in seeing the future, you look into the future and you see the fiscal catastrophe, why aren't we seeing this in yields for long- term bonds? >> you have to assume two things. number one, the aftermath of the financial shock where you did see people with flight to u.s. treasurys, whether it is a -- rational or not, traditional place to go. number two, financial market accounting on the government to get its act together. the last thing you want to do is disappoint them and that expectation. like alice said, commit now to credible policies in the future, could have dramatically beneficial impact on our performance. >> thank you. jim jones, another former budget committee chairman and house, a democrat, and among things, former u.s. ambassador to
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mexico. doug mentioned that unlike in the past, the distant past when we had deficits and we owed the money to ourselves, that now we are borrowing more and more from abroad, largely from china. what do you see is the international dimension of the u.s. on the verge of becoming what some might consider world's largest subprime forward? >> i guess i would say this situation reminds me of a friend who was overweight, smoked, drank, had bad eating habits, didn't exercise, and we all told him, and you've got to shape up and he said his grandfather lived into his 90s and drink and smoke and he will, too. not long thereafter he had a massive heart attack and he is in the process of trying to recover. i think that is what we are facing. we don't know where the problem is going to come from.
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it very likely will come from international sources. we are living a life, a fiscal life, that is not sustainable. so, to me -- again, i would go back to saying that last week when moody's threatened the u.k. and the united states with a downgrade, that was a major wake-up call. when the premier and the president of china told a delegation led by kissinger and bob rubin, we don't have any confidence that you will be able to deal seriously with your deficits and debt problems, when the imf and the united nations say we ought to look for an alternative reserve currency, i think those are all major wake- up calls we ought to be heeding. i told the story earlier after i left congress, ceo of american
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stock exchange in new york. one of the surprises in getting to know wall street is how irrational financial markets can be. they go on processions, they react to where they think things are going and this fiscal situation is something that is being perceived -- right now and is not being focused on because all markets are focusing on the global recession. but as a focus on the subsequent issues of fiscal policy, they do not see any serious attempt by the united states to get our house in order. so, what this commission report does is give us a blueprint to get our fiscal house in order. the perceptions and lack of confidence if they don't have the right perceptions, i saw also when i was an bessin to mexico. on the surface, the first year and quarter i was there, on the surface mexico had a great fiscal and monetary policy, a great economy, etcetera.
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the lack of transparency, the lack of candor of the monitor -- monetary as well as fiscal policy began to show through, the market's solid and they stampeded out of mexico and mexico still hasn't fully recovered and reached to the kind of economic level they should have sensed that 1995 peso devaluation that was caused by a percentage it -- perception and lack of confidence. i think we have to have a way to get policy-makers to deal with the deficit. in my judgment, the current congress and the process and congress is simply broken. they are broken mostly because of a strong sense of growing degree of partisanship that disallows working together for common solutions. i think what this does, and a bipartisan makeup of this
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commission, is to show a way in which of these issues can be dealt with. they have been dealt with in other countries. for example, sweden. the past two decades. sweden and canada had an unsustainable debt and they took care of it. they got their house in order and they made political decisions. and they are on the right guide path now. i personally believe that what is being talked about and the senate, the commission, but i've carson commission similar to the base closing commission -- bipartisan commission similar to the base closing commission, is the right answer, an answer. i think we are really messing with a massive heart attack on fiscal issues if we don't act and i think that is why we have to do it right now. >> thank you. jim makes the excellent point that a lot of this has to do with the functioning of our political system and whether
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there is the political will to deal with the problems outlined on the report. we will hear next from charlie -- jim russell, a democrat and republican. what do you think will for something to happen. this cannot go on for ever, it what but how we get from here to there without a collision? charlie? >> i think elections have a little bit to do with that and that is why i am hoping that the house and senate will take a look of the recommendations and put forward a plan that they will run on for next november. one of the answers to that. but i think the significant part of this whole discussion on that answer some of the skeptical questions that keep coming up is, i think the american people now understand the difference between deficits and debt.
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as you build your credit card deficit, ultimately you have to pay for it. i like yogi berra's version -- that which cannot go on forever, usually won't. in hindsight, most people know that home prices could not go up and up for ever. the market took over. you can see this evidence in many of the personal family trials and tribulations going on now as individual american families have to deal with their own debt. yet the look of the current congressional discussion going on kind of more of business as usual. a group of senators are saying they are not going to increase the debt ceiling to $14 trillion on yet the -- unless they get a commission. not a bad idea. those who argue against it said regular order of congress should prevail, not a bad idea.
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we are just suggesting somebody does something that gets our fiscal house on order and in the right path. and how's my blue dog democrats are insisting again on pay as you go. i have never understood how anybody who claims to be a fiscal conservative can be against paying for that which we are asking to be done. that it was very convenient to put on a credit card and let our grandchildren pay for. we will see between now and december 24 what compromises are going to be reached and hopefully it something positive will come out. a bit -- big part of the political now is we are hoping we can get true bipartisanship and have a target of 280 votes in the house and 75 votes in the senate to put ourselves on a plan that will satisfy whom -- the same people that families are having to satisfy. did they have a plan that the
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income will pay for that they now know and will get us on a sustainable fiscal path. if you relegated down to the simplistic, something families understand -- and i think more families are understanding. i think the politics will follow. >> thank you. dr. nussle? >> those who are c-span junkies or budget junkies know that charlie stenholm and i have had a few debates and disagreements over the years, just a few. but we come together on a commission like this and have proven, i think, in a bipartisan way that you can come up with a solution, you can come up with a mechanism. it isn't pretty. isn't going to be popular. it isn't going to be easy. i was at a family gathering over the weekend and part of the reasons we love each other and part of the reasons we fight is because we are sometimes more similar than we wish to admit.
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and there are many similarities between the parties when it comes to wanting things and not being willing to pay for them. promising things and not being willing to deal with the consequences in the short term. that has caught up with both parties. and i think what you will hopefully see is a political solution to your problem. you don't want a market-based mechanism or a market based even that will cause the parties to have to come together to deal with this. you want this to happen politically as a family, coming together as americans, similar to many families who have had to deal with this with our own mortgages before they went to the banker. they had to come up with a plan. we don't want to have to go to our banker, which is china, without a plan. we don't want to be forced into a situation where we have no alternatives, where we have
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nowhere to go accept what the market, or in this instance, what are creditors want us to do. we want to be able to deal with -- deal with it. i think if you wear your political hat -- and those of my former colleagues who might be watching it will say, well, it won't happen in an election year. it is always an election year. it is never not an election year. either waiting for a midterm or waiting for a presidential election. we've proven and are passed in a history, in many instances whether budget summit's or social security commission's or all sorts of different examples where leadership can prevail on both parties to come together and sit down and deal with a problem. the problem is coming sooner than anyone probably realized. as doug said, a gifted a three-
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decade problem and now it is less than a decade. we show a mechanism where as republicans and democrats can have both the political cover and the will to come together with a mechanism to deal with it. and we give them some tools for their toolbox to approach the problem. that is what we can do. there is no question if they don't, we will be less afraid as a result. this is about our freedom. if we don't address the problem, we see what debt does to families, individuals, people who max out credit-card. we do it every single day what happens, you will be less free if we don't deal with this problem as soon as possible. that is what this commission has
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tried to put forth in this report. >> it is clear to me the committee shows great foresight -- everyone is kept to their time. i want to ask questions. the commission's says the steady as she goes policies allows us to have government debt at 85% of gdp by 2018. and the goal should be to get it to 60. alice, can you tell me how heavy lift it is to reduce spending or raise revenues to get us to a lower gdp ratio over that period? >> it is a pretty heavy lift. but it is not impossible. depending really on what you think the baseline is. we have chosen a baseline that
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does assume that most of the tax cuts that were enacted earlier in this decade would be extended if you did not assume that, it would be easier, but we think that is realistic and we made some other assumptions that make it harder. that means we are going to have to work hard to get on the glidepath to stability. we are going to have to get budget deficits that are likely to being even after the economy recovers, going up again at the end of the decade. we've got to get them coming down into a range of 2% to 3% of the gdp.
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we don't have to get to surplus. but it is going to be very hard to get to the range that it will be necessary. >> in dollars, we are talking what kind of dollars of talking? hundreds of billions of dollars? >> yes. >> none of you mentioned the president of the united states. what role does a president play moving from fiscal -- you said earlier it is inebriation to fiscal sobriety. anybody? >> i did mention, ash suggesting -- the report asked the president and the congress to work together to make this all go. traditionally when there has been a summit, congress and the president working together in, presidential leadership has been required. it has been essential.
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and the president has as tough a job as the congress does in applying some of the leadership. he has to be the first actor. he's got to bring them together. he may have to lay out the plan. but his participation is absolutely necessary to make this plan work, and in fact, in the beginning, he has to be the major player. >> i think the health reform bill that is going through the congress now will be the first test of the president. he has said that it has got either to be deficit neutral or not increase the deficit, and i think he has to seriously enforce that as the bill winds its way to his desk. secondly the president's can create -- the president can create an atmosphere nationally like no member of congress can do individually or even as a small group. i think he has to come over the next year as part of the 2010
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election and beyond, really send a story that we have a serious problem and we have to deal with it in a serious way. >> if i could ask you one final question before we turn to the audience. i know no one in this panel believes we can grow our way out of the deficit. but what role does economic growth play and how you balance the need to encourage growth with the need to have a tighter fiscal policy? >> i think you, number one, do what alice says, which is you now announce a plan to put the budget on an sustained path. that is good for economic growth. that sends a message is -- that there will not be future uncertainty about tax policy, about interest rates, -- excuse me. number two, the way we set is up is look at debt relative to gdp. if you can't find a beneficial fiscal policy that helps the economy grow -- if you can find
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it beneficial fiscal policy that helps the economy grow, it will not be a single solution so you should always balance two choices how to cut the deficit with the one that is most pro- growth. indeed and it is about setting pro-growth long-term fiscal policies is that the policies fundamentally about borrowing to hand out goodies, they don't grow bigger economy. >> let us turn to the audience. a couple of rules, one is to wait for a microphone because it makes it easier for those listening on c-span. two, say who you are. 3, a question and what they? . -- a question and with a question mark. [laughter] >> the war in iraq and afghanistan the next couple of years -- the ending the warrant -- iraq and afghanistan help? >> and the decrease in spending helps.
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but the long run deficits are not being driven by military spending. we assume that the war will eventually be over and that the military spending will come back down. but even if it continued, the real drivers of spending in the future are medicare and medicaid, and to a lesser extent, social security. >> and question in the back. -- a question in the back? >> thank you, i am nikole for the center for economic policy research. you just mentioned medicare and medicaid. i would like to ask a related question. what type of contributor to the debt is our private health care cost and if we were able to reduce the private health-care costs like other developed nations, how would that effect in the future? >> i think the short answer is the growth in medicare and medicaid share some common
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elements with the growth and private health-care costs and to the extent we get reforms that slow growth in health-care costs in general there would be bent -- but the benefit to that. -- budget benefit to that. them over there? >> joel, education funding. one of my concerns is investing in programs like the early childhood education, college per financial aid, over the long term helps the economy and helps people get an education and better jobs. so as you are making these proposals, should there be some distinctions between spending on programs that might lead to future economic growth verses other spending? >> somebody wanted take that? jim. >> as omb and budget chairman i have never made the argument made where that wasn't the argument. for every single program policy spending item, department, organization, etc. you make a good point, there is
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no question. but it is almost always in the eye of the beholder. i think what we have done is we have said different from past commissions, different, from that matter, bipartisan effort, we said everything should be on the table for discussion. all spending, both entitlement and discretionary, both automatic and those spending items determined every year, as well as all taxes, whether it is those interested in tax reform, those interested in tax increases, and those who believe tax reduction spurs growth. everything needs to be on the table and everybody needs to be at the table. you make a good argument but unfortunately i am sure just about everyone will be couching their arguments in those terms as they make their case regarding their deficit reduction and budget priorities. >> alice and then charlie? >> if you do nothing about the growth of the entitlement
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programs -- medicare and medicaid and social security -- it will inevitably drive out other things, including spending and investment in children. the track we are on it is shifting federal spending toward older people. and i'm one of them. and away from investment in children. >> one of the processes that i used as a member of congress went and had a constituent s and for additional spending -- let us use education, which we all agree. i would say, it is a great idea. can you help us find a way to pay for? is there something we are doing in the education community that is less desirable than some of the other things? and that is the spirit in which the commission will be put asking all phases of the budget. take a look and come forward to congress and say every dime we are spending on education is being spent efficiently for the purpose of educating children.
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i doubt you can do that. and i can speak in almost every aspect of government. that is the spirit in which the commission is recommending a new look and a new process to go through. >> everything is on the table. no and the vocalise. -- annie oaklies. who but it's a pass. everything had to be considered for our program to have the effectiveness. >> one of the key things the report suggests is establishing a goal, debt to gdp ratio. what it gives you is a way to say, no. it has to be not just good, but good enough to make a cut. we don't say no right now. >> what happens if the debt to gdp ratio continues to rise? what happens to the share of our budget that goes to interest
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payments. make it real. >> if you look out to 2019, you could be running a trillion dollar deficit, interest is $800 billion of that so we are close to the point getting a new credit card debt and in -- credit-card. if you look around the globe you see all these countries a poster children letting debt to gdp ratio so that they have literally no room to move on necessary programs and get cut off by lenders. >> can you wait for the microphone? >> anton with executive intelligence review. if you have about a quadrillion in derivatives and maybe hundreds of trillions of unpayable debts to financiers, and you are not going to put money into massive
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infrastructure development to get out of the collapse of the whole economy, wouldn't your slogan rightfully be something like, this time around we are not going to make the trains run on time if you are going to try to force moral austerity in the middle of the collapse of the whole economy. that is the picture you are presenting, really. >> so again, the important thing to stress is we are asking for a future -- not of austerity but simply arithmetic that adds up instead of what we have done in the past and we are not asking for in 2009 or 2010. the planning has to happen now, the commitment has to happen now and implementation happens later. >> good to see some many friends here and congratulations on a good report. i want to ask your thoughts on how to make this politically viable. charlie mentioned we need to hundred and 80 votes.
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i would suggest a different metric, majority of both parties -- 280 points. if it is just 280, one of the demagoguing. -- 1 causa demagoguing. what are some thoughts where you can make this real? those of us who have said no on a number of major getting flak from all sides, and there needs to be some way it someone running for office or serving in office has a metric by which they can be rewarded or recognized for the achievement. it can't be something so simple as supporting the balanced budget amendment. no one is supporting that, as i am hearing. so what are thought about how we communicate to voters that it does matter of sufficient that it should be a party in casting your valid -- priority in casting your ballot? um i was a something because i don't know anything about politics.
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[laughter] >> you demonstrate that. >> so i'm your man. three ideas. replace wessle as moderator -- [laughter] #two, you have to find ways to unite around something good or ways to unite our something to fear. one thing you can not be -- unite around, you may not think it is fair to raise taxes to cut spending really unfair to make your kids pay for. we are handing them a diminished economy and saying now you have to get higher taxes and lower spending. you can unite around that. uniting around fear of china as our banker. i personally find it an embarrassment to our nation that the secretary of treasury goes to china and says your money is safe with us and graduate students laughed. i think it is not partisan to insure we are not last that in financial circles. >> my assumption in the 280 is
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majority of democrats and republicans. because i don't think you will see unanimity. congress is so fractured today right and left that getting 435 would be impossible but 280 with a majority of both parties acting would be the goal. -- i think would be the goal. >> for one thing, the public now seems to understand the debt ratio better than it understood deficits. it got pretty hardened it to deficits and swallowed them with regularity. i think we have to play them much harder. we have to play the story of international control. our affairs being managed from abroad, which is difficult. and the important item of intergenerational fast. and i suppose the last item would be for you to refile for
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office. [laughter] >> for me, at least, i am not convinced this will happen magically. this is not a situation like ebenezer scrooge where he wakes up having been visited by the ghost of budget passed and they all say, we really need to get together and talk about this, you know? there is going to be a triggering event, in my estimation. i believe there is going to be one. one of two things or combination. a midterm collapse possibly, that may be the soonest example. it may be a presidential change or a race where this becomes the issue. or it could be some kind of triggering market event and a combination occurring at that point. but i don't think, as we have seen, and it is unfortunate, there is so much invested on both sides right now in the argument that it may be very difficult, to impossible, for that to being unwound a through magic.
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it will require, i think, is very unfortunate triggering event. >> we will pass the microphone over here and then go over to the side. two gentleman over here. >> norman bailey. you mentioned argentina. my question is -- and i fully support the goals of this commission and it is extremely important. i question is why do the members of the commission believe what they are suggesting is more likely to happen than the with the situations are usually dealt with by countries, which is either through inflating the way the debt or by defaulting, which is what argentina did, and as a result it went on for several years at very high economic growth and if it had saved that money instead of wasting it would have been able to pay off the debt and might now be functioning normally. >> we need to modify our metaphors and show example of coverage. i want to say a word on behalf of the irish government, which
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has taken dramatic steps on their budget deficit. does someone want to take the question? the fault or inflation and alternative? >> i think the commission has a belief in the political system. we -- it may be broken right now but we have a believe if the american people are fully reform, that the political system will respond. but that has the coverage in the past. i mentioned how important the confidence or lack of confidence perception is. in the early 1990's we raised taxes and cut unsustainable spending -- welfare reform and things like that. those issues of themselves did not balance the budget, and yet we had a surplus budget by the end of the 1990's because that plan gave confidence to the market, to the private investors, to start investing again. i think if we have a plan, adopt the plan and have things serious like pay-as-you-go system,
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commission system, that requires congress to face the issues, i think the private sector globally will respond to that and we will be back on track. >> alice, inflation? i know it is not the desired outcome but it -- is it the alternative to hard choices? >> it is possible in the long run, but at the moment i think the kind of triggering event that most of us would fear would be a spike in interest rates and falling back into serious recession rather than inflation but i think the basic answer to the question is, we are not a small country. we have the status of the world currency. we would like to keep it. we have the status of the bonds everybody goes to when they think safety. we would like to keep it.
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it is a very important to us to keep the status that we have in the world. >> in reference to argentina, and should not believe that is the way all countries in the world operate. in this report there is a special insight -- and said that shows a dozen and a half countries that have come back in very strong fiscal position from a position about the way ours is. and it can be done. other countries have done it. we hope they are not that much smarter than we are. >> roger erickson -- just a research biologist. a quick comment on that point. to my understanding there has never been a country that the fault it was not still on the gold standard -- so we are in a completely situation. but that's a fundamental point
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nobody has asked, if the only way a private citizen of the united states and up with currency is as a result of trickle-down from federal level public spending, and they have to return from that through taxes, how is taxation revenue to the government? >> someone want to try that? >> i guess the point where i disagree with the characterization is it is not true of the income is a result of trickle-down government spending. the economy is composed of a myriad entrepreneurs, a private sector that utilize the skills of its workers -- >> u.s. dollars. >> those capacities are the core of our economy and we choose to measure and exchange them and dollars, which is the currency that the federal reserve is ultimately is trying to guard. adding one of the points that is important here is that there is
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an interplay between what the federal reserve can and wants to do and the enormous deficit the federal government is about to run and we have to measure legitimatize the interplay. >> i am with the fiscal times, new digital start up. budget and fiscal issues. is this a question for alice rivlin and jim nussle, all panelists say it is essential all issues be on the table, trying to figure out what to do with the deficit and the dead. for alice rivlin, on the question of medicare savings, what are areas you would look at that congress hasn't looked at already trying to finance health-care reform. and for jim nussle, would republicans seriously consider raising taxes as part of an overall solution? it doesn't seem likely. >> want to start, alice?
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>> i think the first line of defense on rising medical care and cost is making the system more efficient. medicare is actually an extreme case of our efficient medical care system because it is a fee- for-service system that does not emphasize managed care. i think we could change the reimbursement rates for medicare so that they reward more efficient kinds of care and discourage treatments that don't work and excessive treatment. that is going to take time. it is going to take effort, and the problem for the administration and congress right now is to put mechanisms in place to do that and the cbo
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was outscored them, for good reason, because in the past congress has derailed them. the real question men's -- question is, is congress serious enough now to allow greater efficiency in medicare and also medicaid? >> all things on the table, mr. nussle? >> it is a wise question. that is why i said to brian it does not happen to magic. not, i will up today and everything is on the table and here on my list of tax increases if you are republican -- or my list of entitlement cuts if you are a democrat. frankly i am not even sure it is fair to characterize the parties in that kind of way that one would be for taxes and the other would be protective of spending. i think there is enough to go around on both sides. that is why i believe it is going to be a triggering events. i do not think it will necessarily be there first
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calculation, there first and oppression, their logical place that they would immediately go. if it were me, i would look at it how the government collects revenue, through tax reform, how it collects it, who collects it from, how we can spur economic growth. and finally use a system like this or a process like this to get comprehensive tax reform on the table for the first time in a generation the way it needs to be. if you are a democrat, you may look at the same way for a common reform, a place where i know democrats are concerned about in entitlements. yet, because of their constituency, maybe they had a difficult time putting that on the table. so using the process as a way to say, look, with a fiscal goal now for the first time -- as
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maya likes to say, first time through the process setting a goal. we arrive at a result currently in our fiscal process. the result of very thing we do at the end of the year, we add it up -- what we are saying now is this is where we want to head. how are we going to get there? so instead of building from the ground up the way we do now, let us build from the top down, setting a goal and then moving toward that goal, knowing that everybody has been in the game and everybody has put everything on the table. >> on the back? >> joe, committee for economic development. mr. nussle may very well be right that we need a triggering event to deal with the problem. i think he would probably agree if we put a list of potential triggering event, many of them are too terrible to contemplate. mr. jones answered the question
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earlier about the role of a president, and i believe it was mr. jones, in addressing this. i wonder if the panel could think about some scenarios of how with presidential leadership we might head this mess off. >> alice? >> well, i think it's in the administration perceives -- and they may -- if they don't take a strong position on the long run deficit and make some concrete proposals in the 2011 budget, they are going to get killed in the midterm election -- is the reason that way, i think we could get action in the next year not to solve the whole problem, but maybe social security form, may be some elements of tax reform, maybe a
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serious commission, maybe all of these things as a preventive antidotes to perceive it landslides' for the other guys in the 2010 election. >> i would agree with that. i think the numbers all point to the fact that there is going to be some sort of a drastic problem in the next few years. most likely it would happen before 2012, maybe before 2010. so i think it is in their political interest to take the lead. i think they probably know that. also the polls since show the debt -- polls show the debt is in the conscious of the american people, they are concerned about. there is a natural constituency that puts young people and retired people together and say if we are going to turn over the country, better than it was,
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which is the american thing to do for 200 plus years, then we are going to have to bite this bullet. .
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>> but yes, i think there will be a proposals. but both sides will dismiss the other proposals, i think, in this next year, until that occurs. >> the woman in pink. >> [inaudible] [laughter] >> i am from the british embassy. will you announce a plan now to bring, as they were taking on the challenge, but [unintelligible] with a proposal that has an announcement now and an enactment later, there's some possibility that the public could be skeptical. could you say a bit more about what are the characteristics that would make a plan credible? >> that is not what i said.
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i said inactive now to take effect later. if we could do this in the next year, it would be good. let me give you a couple of examples. the easiest one in social security. if we were to enact a social security reform that product -- that brought future social security deficits down to zero, we would not possibly have anything happen immediately. if you were raising the retirement age or changing the indexing or whatever you are doing, it is one to take time. you would not have it take effect for current retirees. that is a very good example of another people talk about a value-added tax. suppose we started to do that, it would take several years to
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enact it. even if we enact it tomorrow, it would take several years to get it up and running because it is a complicated tax. >> i am jeff gramm of investor's business daily. several of you talked about interest rates responding favorably if we take some action now, and negatively if we do not. i'm wondering if it would be helpful if that was built into cbo's scoring and why isn't it? just to be clear, and talking about the interest-rate -- the interest rates and the potential for a spike in the interest rates. >> it is built into cbo's and ounces of the president's budget, which is the only comprehensive -- analysis of the president's budget, which is the only comprehensive study.
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except the interest rate and they feed back to the economy. the problem on a piece of legislation by piece of legislation base, you do not necessarily know what all of the user impact might be. >> there's a question here. and then there is one in the back on the right. >> thank you, i am not with any particular group. i may citizen who pays taxes and is now on medicare and has worked in health care. i want to address this question to the whole panel. you mentioned, mr. nussle, about a trigger. i do not hear anyone talking about -- and i think the trigger is here for the average american. we understand, we are not working. when you talk about entitlement reform, social security and medicare and medicaid, i do not hear anyone creating jobs to get back to work to put money back into the government. i do not know if there is the political will for anyone in
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congress to say no to any constituent group, which i think they should. there are wants and there are needs. why is there no discussion about jobs? should the government tax-come individuals who create -- pacts high income individuals who create those jobs? >> i think the answer is pretty simple. number one, everything we said points toward the fact everything -- that economic growth is essential. we have to have growth to be successful. with respect to the specifics, we have tried hard with a group -- as a commission not to lay out specific policies. everything has to be on the table. you have to have a real goal, a plan, some place you are trying to take the budget, and do it in a way that is beneficial to the overall economy. >> and not tighten fiscal policy right now. >> we do not do it in the middle
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of a recession. >> i am very concerned that the chief justice of the united states makes only $232,000. the supreme court of canada makes much more, as well as singapore. now, what do i do? do rego to say, well, mr. president, when you go out to camp david, you do not have to fly an airplane? if you took a car it would cost you less. where could i go to get anyone to prevent more money? everywhere i go, i irritate people. >> which member of congress wants to take this one on? [laughter] >> everything is on the table except for the chief justice's salary. we will take that off the table. [laughter] >> in the back.
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>> did anyone have further commentary on former presidential candidate john mccain opposed to the reaction in morning on the senate floor yesterday? did he get worked up enough? >> you have not seen anything. [laughter] >> you are talking about senator mccain talking about the health debate? >> were you watching the senate in action on a football weekend? [laughter] >> maya, you have a question? we going to answer it, too? >> i was at a dinner party recently where i saw the best hat trick i've ever seen.
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somebody took off the cat at the invisible fence, and put it on their own throats and walked up to the invisible fence to see what it was like to get hit by one of those. it was something to watch. >> you go to some weird dinner parties. [laughter] >> as a result, that has become my favorite analogy to the fiscal crisis. we do not know when the taping it point is going to happen, but we know that it is going to hurt. that is one of these scenarios, you know, you get zapped and there's a crisis. the other scenario is an ongoing softening of the economy. one thing we do not do is talk about how this affects real people who spend their day worrying about budget deficits. >> alice, are you offering to start? >> i think the crisis triggere
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would be that, first, their interest rates go up a lot, but then as a result of that, the job situation gets a lot worse and the things that the questioner in the front row were worrying about get worse. the softer scenario, that does not happen, the economy recovers slowly, but we do not put our house in order -- the dollar weakens progressively, things get a bit more expensive and economic growth is slow so that we do not get people going back to work very quickly and this persists for a very long time and we are all just less well- off than we would have been. >> anybody else? >> if you were a family that had credit card debt, you understand
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what happens when interest rates go up and you have to make the payments. right now, it used to be that the united states owed our debt to ourselves. that is no longer true. $8 trillion of debt is owed to others and i suspect they will want to be paid, whatever interest rate the market determines, at some trouble point. i want to make a point on three questions. as you listen to the questions, so many of us, we have our idea of what ought to happen and why it ought to happen and why it is important. that is the american system. but our political system demands that we get 218 votes or 60 votes and a presidential signature. that is what is going to play out next year. i will have one recommendation when it comes to policies in the next version of this that i will insist my commissioners' vote on, and that is, to support -- and all of you are making that recommendation now -- support
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the tenor bill. john tanner, bipartisan support in changing the way we redistrict every 10 years to create more competitive districts, so more who run for congress how to care what the other party thinks instead of having a totally safe republican or totally safe democrat district. i represented a competitive district for 26 years. i found that most of my colleagues on both sides of the aisle who represent competitive districts tend to get answers to these questions of bit differently than what the party asked for. i would hope that people would take all organizations -- i would hope that all organizations are worried about this would take a look at the john tanner bill. it does have bipartisan support. if you cannot get 218 votes, it cannot happen. this is a political year. if you really want to do something about policy and having some of these serious questions answered, that is the best way. in fact, i think almost the only
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way that we will openly get at the perfect solution. but there may be some other ones in between. that is my recommendation and i think that is the answer i would give you right here and you right here, you misunderstood, i think, sir. we are not suggesting that we have tax increases and spending cuts this year or next year. we are staying put in place a plan. from an individual's family standpoint, if you have that to my door banker is telling you that you need -- if you have debt, your banker is telling you that you need a plan. >> let me just add on to what charlie said. i would agree with that, the tenor bill, i would agree with the paygo. i would agree with the commission concept. and i would add that the financing of political campaigns. but on maya's question, i lived through one of those crisis situations in mexico and i saw
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how it affected families. we take for granted that we have hit the mountain top. we can afford a house, buy a car, etc. the mexicans thought they had finally reached the mountain top and then it all collapsed. they were turning the keys to their houses. they were abandoning their cars. 8 million of them came to the u.s. to get a better life. where we going to go? it deeply affected families throughout mexico. >> the question here and then one in the back. >> i am with "politics daily." i really love your reports and i hope the next one is going to be actions to stem the mounting deficit. news clearly have the expertise there. -- you clearly have the expertise there. how many of you see that as part of the solution? >> a value-added tax, it kind of national sales tax? is that in the cards? alice? >> i do, and i do not think is the only way to go. i believe we will not cut back
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on medicare and medicaid and social security enough to close the -- to reach the goal on the spending side. therefore, we need a tax increase. and a broadbased consumption tax, whether it is a national sales tax or a value-added tax. that is a way to go that i think is a good one. i would add a wrinkle. namely, that you have to share this consumption tax with the states. otherwise, you are competing with the states in the retail sales mr. wilson? but no, i am not in favor of a pier value-added tax -- >> no, i am not in favor of it. value added tax. it can be separate from your mention of a sales tax or a different type of consumption tax. but again, i do not think that is necessarily what we will be making as far as
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recommendations. it is still going to be a political decision and the people who have been elected to represent us are the ones who're going to have to be making that decision. we may have different policy recommendations, but right now, the process is what is broken. they cannot come to a decision that is what we will hopefully be trying to give them as a firm were to arrive at a fiscal goal for the country and a process by which they can make that decision, a little decisions along the way are still going to be ones that they have to make and calculate. >> what you meant to say is "everything is on the table." [laughter] >> my name is dick musaoose andi am a grandfather who is worrying about how my children and grandchildren are going to pay for all this. the panelists all agree that medicare, medicaid perhaps to a lesser extent, social security
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are the chief villains in the effort to try to bring some sort of stability to our budgets and deficit. presumably, the kind of solution that you all would like to see is going to involve dealing with as yet unresolved problems in each of those entitlement categories. one would like to think that the budget committee, the budget resolution process in the congress might be an interest -- an instrument in dealing with this, but thus far, no disrespect intended, it has proved to be a faulty electric invisible fence. do the panelists to accept that we have to have reform and medicare, medicaid, and the
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social security, perhaps with health costs -- all of that has to be a solution and has to be part of the solution. how does a uniform, consistent, consensus approach be brought to bear in each of those major problems that have been so resistant? >> how do we crack the medicare/medicaid/social security not? alice? -- social security nut? alice? >> we do not have an annual budget process that deals with the entitlements at all. the budget committees deal with appropriations with annual discretionary spending. it is not their fault, basically. i think that many of us think that we need to bring the
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entitlements into the budget process, not that you review them every year, but that you have a regular schedule for reviewing the entitlements and the congress votes on a budget on the entitlements and if you deviate from it, then you are in trouble. >> somebody else? >> at its essence, this is the same problem that we face in so many areas. there are narrow interests that either from jurisdiction in congress or by their desire for programs or a disk -- a particular task, if you want, it narrows the ability to get our fiscal house in order. the message you are hearing today is that we have -- we no longer have the luxury of letting narrow interests dictate where we have in the past. >> let me suggest a way to proceed. let's take two or three more questions, after question and then we will have the panelists responded. there is one of their, and one
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over here. ok, take those two. to bring the microphone to this gentleman in the blue shirt. after that. >> i'm with the education foundation. to expand on jewel packer pose a question earlier, what advice you have for the governors that will be here in february and the mayors who will be here in january, and the educators and work-force development people coming in march? are they going to have to for the foreseeable future downside levels of norman at the state and local level? are superintendents of schools going to have to figure rodham ways to get -- figure out ways to get but they need with fewer resources? -- to get what they need with fewer resources? >> and this tournament over here. and then when the back. >> david dixon, "dixontimes." you all seen -- "washington
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times." who appeared sees -- thinks it is a swell idea truth of reform in 2012 that they establish another massive and fatima program that would cost over a trillion dollars and according to the house abortion, incorporate a 5.4% surtax that presumably you'd want to keep on the table to help reduce -- and according to the house version, incorporate a 5.4% surtax that presumably would want to keep on the table to help reduce future debt? >> and over there. >> my question is, will it play in peoria? it seems to me that congress is in the process of passing a big omnibus bill with a lot of pork barrel spending in it. we have given a trillion dollar bailout to the banks. why will people think that it makes sense for their benefits
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to be cut when there is a much spending going on that seemed to be unreasonable? >> three good questions. what about what should state and local officials expect. the one about the courage -- the current health care debate and out -- the current health care bill and how it influences this debate. and about benefits going to someone other than local people. >> state and local will have to get the message that the federal government has run out and if they're going to have to provide the services, they will have to find their own sources of revenue. >> the health bill? but i think it's clear that the health bill? >> i think it's clear that the health bill will tie our hands by taking some of the pieces of the budget off the table for a while. it will set a new entitlement programs and i think that is the wrong thing to do at a time when we are trying to get things under control.
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how you make a plan for peoria? it is what we're proposing or what my was worried about. -- maya was worried about. sharp recession, diminished purchasing power, a lot of social unrest if you look at the kinds of things that happen in currency crises. in the slow version, is just stagnation as far as the eye can see. >> alice, did you want to try the peoria question? >> i thought you said i was talking too much. [laughter] >> that is not true. i said you were being courageous. >> peoria just takes us back to, is there a new level of consciousness of the debt and the deficit? some of us think there may be and it may show itself in the 2010 elections. but that is the question. we do not know for sure.
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the cruof what to talk about pei would suggest -- subscribe -- >> to talk about peoria, i would subscribe to what alice and doug have said. the public seems to be getting a better notion of how bad our debt problem is and what the ramifications are if we do not change our ways. there is some hope there. one of the possible effects of how it will play in peoria is that the conservative candidates will do a bit better in this election and we will have another polarized standoff for two years. i hope that will not happen. but the citizens of peoria will have to make that decision, i believe.
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i support jim jones on the other level of government. you cannot keep coming back to this well anymore. we are about dry. they're going to have to find new ways to deliver services. they will have to make resources that they have go further. some governors have done that very successfully and others who do not, they will be shortly replaced, i suspect. >> and never really gave a written how peoria thought about it. it was texas i was concerned about. [laughter] therefore, what we hope as a commission is that these suggestions will create the dynamics of some kind of a political will that will demonstrate to the people in 435 districts in 50 states what they should or should not be for.
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there will be those who will be opposed to a lot of these suggestions. that is part of the american way. advice to states -- i remember well and we ended revenue sharing -- when week ended revenue sharing because we were out of revenue and that was a big deal back then because many local and state, they loved spending the money that i was having to raise the taxes to pay for and i did not think there was a good idea. many of the state spent too much, folks. much of the state leadership needed to take a hard look at how they run their budgets. that goes up and down, schools, etcetera, which is my answer to the education question of ago. with the health bill, we have not seen the final version yet. let me make this observation. on health care, if you add a new $1 trillion health care bill that does nothing to bending the curve, you are not addressing what we are concerned about today. you will address the one problem
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of health care, but you have not dealt with the long-term fiscal deficits. the only people in congress that seriously made an effort at that were senator biden and senator bennett in a bipartisan way in the senate and jim cooper in the house. i hope at some point, the coffers -- the conference or somebody will go back and look seriously at the recommendations about how you try to conserve. i will not be critical of our president until he does something to be criticized on, the final version of the health care bill. if they pass a bill that is as bad as you infer, then it will become part of the political dynamics in a big way in november. >> on that happy note -- [laughter] i want to thank our panel and i want -- and i think it deserves applause for the work they put in. [applause] i thank all of you for good questions. i'm told that if you want to
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read this report and not want to take down any trees in the process, you can go to www. thank you very much. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009]
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>> has this panel comes to a close here of the national press club, we want to let you know that we have a link at our website to the peterson-pugh commission's report on the federal debt which includes recommendations on how to change the federal debt process. that and more at >> keep up with the latest on the senate health care bill. watch live gavel-to-gavel coverage on our companion network, c-span2, the only network with unedited debate and commercial free. and now, for iphone users, follow the debate with the c- span radio iphone application,.
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and with it, you can listen to c-span, c-span2 and seized down radio. >> a foggy day here in the nation's capital -- and c-span radio. >> a foggy day cure the nation's capital. low clouds around the dome. we do not expect that to interfere with the congressional work day. but the house and the seven at -- and the senate gaveling in today. the house at 12:30 p.m. eastern. you can see the house live right here on c-span. in the meantime, the senate is in at 2:00 p.m. eastern for the 12th day of health care debate. we spoke with a capitol hill reporter who covers the issue for further details. david covering the healthcare debate for roll call this-- the pressure is on a little. this is david drucker writing in
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"roll call." guest: that is correct. part of what is going on is that there is no scoring yet for this potential compromise to the public option. most democrats do not know what that compromises supposed to look like. so when they're asked questions about what they can support, they naturally will sort of default to the easiest and safest dancer which is, i will not support anything i do not like or which cost too much -- the safest answer. host: what is the reality of when the congressional budget office will come back with a cross-analysis? guest: today, tomorrow, next week -- we really do not know.
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the other thing i just heard, politically the polling, public polling on the health care reform bill is not good. it just as everyone a little skittish. there is also a hurry, people tried to get this done by christmas. whenever you have a fast schedule a think it adds pressure. it makes it more difficult for senators to jump on board and do something big. they are always worried it will come back to bite them. host: let me ask you about the comments of senator lieberman and senator nelson. what does that do to the debate? caller: it obviously makes it more difficult for harry reid to come up with 60 votes. politically republicans do not
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like it and see no reason to support it. as a lawmaker you do things because it is politically beneficial, or else because you believe in it. in this case the republicans have neither. that includes olympia snowe. this is who ben nelson has always been, but when democrats were in the minority it was less of an issue. joe lieberman is a little bit of a surprise only because on social issues, things like this he is usually more democratic. he has been clear all the way through. he would not vote to get out of the bill if it included a public option. the reason he does not like the public option is because he does not like expansion of government.
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of all the members of the democratic conference who are threatening not to support, i believe him the most because he has been consistent. if he does not like something he tends not to go along with this. host: tell us a little about the mechanics of the debate. he said that at press time they were still working out an agreement on amendments. we read that there will go back to the dorgan and in them. guest: the schedule is up in the year. now that the appropriations omnibus bill has been taken care of over the weekend it is really about health care. there is the question of what amendments will give votes and which are not. i think that if harry reid got a positive score for the compromise to the public option that they might sort of try to move immediately go us fast as
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they can to close out debate and begin the budget process. >> join us later today for a discussion on jobs and the economy. karen mills is the administrator of the u.s. small business administration and she is speaking at the national press club at 1:00 p.m. eastern to live on c-span. elsewhere, virginia democratic congressman bobby scott is hosting a forum on education disparities in the u.s. that we live also at 1:00 p.m. eastern on our companion network c-span3. president obama is meeting with the heads of several large banks today. among them, have american express, jpmorgan tase, capital one, wells fargo and others. also, rahm emanuel, larry summers and timothy geithner expected to be there.
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here's a preview of that meeting. journal" continues. host: we're joined by eamon javers. facing what else pressured to increase lending. in a meeting financiers will tell obama they're ready to step up to promote recovery in additional steps. what is the president going to tell them? guest: that they need to be lending to lend to credit- worthy businesses. these are the job creation engines of the u.s. economy. they can i give credit to expand and grow because the banks are so frightened by the global economic meltdown last year that they are unwilling to loosen standards. the banker is going into the meeting arcana caught in between. on the one hand, the white house is telling them to lend more, and on the other their bar regulators tell them to lend
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less. be careful you are not lending to those who cannot afford to pay back loans. that is what got us into all this trouble in the subprime mortgage meltdown. host: you said that white house political people like david axelrod are telling us to win more, but regulators say the opposite. they to ramp up capital ratios and cut back on lending if you see default risk on the rise. this might be the second or third time the president has met with this group of prominent bankers? guest: it is the second time he has met with the mall. the last time was back on march 27. at that meeting he famously told the folks, look, and the only thing between you and the pitchforks out there. he meant the anger over the a.i.g. bonuses. the president was positioning himself between a populist anger
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and the bankers themselves. host: he did not sound any family air last night on "60 minutes." let me play this short clip and asking how it might impact the discussion today. >> i did not run for office to be helping out a bunch of fat cat bankers on wall street. the only ones who will be penalties fat bonuses are the ones who have not paid back that tarp money. >> do you think that is what it did about as quickly? >> in many cases a things of note that tells me the people on wall street still do not get it. they are still puzzled over why people are mad at the banks. let's see. you guys are drawing down $10 million bonuses or more after america went through the worst economic year it has gone through in decades? and you guys caused the problem? and we have 10% unemployment?
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why'd you think people might be a little frustrated? host: he used the term that cracked bankers. guest: it is a flash of anger from him. he is stepping up the rhetoric. it mirrors what we see in the public. the public is extremely angry ha. for barack obama to the route terms like fat cat bankers must make them once a little as they head and for a meeting with him this morning. host: presumably some of his public stigma will be written ahead of time. do you have an inkling? guest: we do not. presumably he will talk a little about what he just told some of the bankers and the meeting today. they have been prepping all weekend. these are equal parts diplomacy and business negotiation. there is a lot of symbolic
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pieces to this. host: we want to give viewers in on the conversation. -- to get yours and on the conversation. -- to get viewers in on the composition. citicorp is announcing that they will repay $20 billion from the tarp money, the so-called bailout money. is this coincidental? or is it time for this meeting? [laughter] guest: citigroup has been working on this for a while and bank of america repaid there's last week. the banks have been extraordinarily eager to get out of the tarp program. there brands of them as the weak ones in the herd. halken feinberg is announcing a
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tight pair restrictions for midlevel executives at these companies. last weekend with the new announcement for the rest of the top 100 most highly-paid employes who are not generally be able to earn more the governor thousand dollars per year which is relatively low on wall street. that is extremely painful for those folks. they one to make more money than that in the banks want out of the government restrictions as fast as they can because the government cannot tell private banks what . to host: -- what to do. host: here is how our first caller. ñrcaller: there is a shared responsibility on this problem we're having. president ali keeps blaming doctors and health-care
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insurers. he keeps blaming everyone except the people who helped calls this which was congress. -- president obama keeps blaming doctors. i'm really tired of him calling people out whether or not they are the fat cats. they contributed heavily to the democratic party. of like to see some account will be for chris dodd and barney frank. president obama is traveling very fancy on the tax paradigm. if he were really concerned -- on the tax payer done. if you were truly concerned when he cut back on his entertaining, eight nights, traveling to pick up awards? and stop all the taxation? to redistribute wealth not only
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in the u.s., but worldwide? host: thank you, marie. there is certainly blamed for politicians going around. guest: barack obama does not want to be seen on the side of bankers at all. all the spending is necessary to finance the bailout we saw last year -- it is causing a lot of anger. you hear that a lot. the president is caught. he does not want to be on the side of those who cause the problem. you hear from republicans the anger at congress and over fannie and freddie. it might plan to some of the troubles for chris dodd from connecticut, chairman of the senate banking committee who has been viewed as extremely close to wall street in the financial industry. he has been making strides to
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distance himself over the past year. he will face a tough reelection next year. host: next up, baltimore, peggy on the democrats' line. caller: good morning. i called to say that i do not understand when we worked we put taxes in. we never got a raise, but we stepped up to the plate when we did not have enough taxes. when it comes to the banks either we don't have enough money to even ask for a raise or loan. i don't understand why this is president obama's fault. we as americans have supplied the necessary taxes. we have never used anything, but
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then you find out that your bills at the white house before the president got there were not even pay. what does that say about the past president? @@@@@@@ @ @ @ @ @ @ @ @ @ @ @ å guest: that is a point that the democrats make fairly often, the president has been a bit more overt in his recent speeches to talk about some of the deficits that or run up by his predecessor, george w. bush. the white house is eager to say, wait a second of all those republicans on capitol that are complaining about deficit spending now, most of them voted for eight years of deficit spending under the previous president and they're extremely frustrated by the fact that people who voted for deficit spending under a republican president are now screaming about it under a democratic president. host: will talk about mortgage
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refinancing later in the program, but i want you to go back to the issue you talked about earlier, about the balance between opening of for more lending and banks preserving their capital position and their financial stability. capital. guest: a lot of the investment bank's cut extremely over leveraged. that is where the crisis took off. what regulators and experts have been saying is that you have to ñ in some perspective. you have to raise your capital ratios, the amount a bank has on hand in cash to tap into. so, the banks have been trying to do that, and yet they come here to washington and are told no, we want you to lend more. they're frustrated because there
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trying to do the right thing to put themselves on stable footing. host: is there a concern by the treasury that the banks to do pay off their tarp money, concern that there is still in stability there? guest: always. the people at the treasury have said they would like to keep some of the tar money in reserve there. the idea of just allowing the tarp line of credit to return to congress to be spent on a jobs bill or something is not entirely popular at the treasury building. they feel they need a little wiggle room in case the economy takes a double-dip. it is seen as a possibility. they believe the worst is over, but they have been scarred. they look like a little reserve on hand. host: "usa today" headline.
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they have a list of the financial meeting line up to do. michigan, on the republican line. caller: i used to be a futures trader. to seexd some of these situatios that the banks and these people got bailed out for is unbelievable to me. when i was trading i was responsible for my own debt and if i lost money came from my own pocket. it is disheartening to many americans to see these guys get bailed out, whether it be a bank or insurance company. they made these derivative trades and get billed out for having made a bad trade. it is unfair. it has many americans upset. anyone with half a brain can see through to see special interests are still running the show in washington. guest: that is what president
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obama is talking about. these people brought you the financial global not done. it makes americans angry to see them getting a $20 billion bonuses. he is tapping into that anger. it is true. it is inescapable that those who made the bad debts, disastrous decisions have largely been rescued. most have not really suffered any major financial consequences. some of them who worked at lehman brothers or otherwise are out of work, but many are doing just fine. there is a boom market on wall street and in the stock market right now. the dow jones is up substantially. for those on wall street still in the business times are pretty good. for the rest of americans unemployment is 10%. you cannot get a mortgage loan. your house is under water. that disparity between wall street and the real country is just extremely dangerous.
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host: the u.k. announced last week there would give a one-time tax, 50% for bonuses over 25,000 pounds, about $40,000. france followed suit. possibly other european nations will as well. our american bankers concerned about that sort of legislation going through congress? guest: for now, yes, they're very concerned. they view washington as very unpredictable. it is not viewed as likely to happen here in the u.s. although the french and british said they hoped it would. they hoped by announcing their measures in the same week they might urge other countries, at read the united states, would do it as well. when you look at the political anger between both democrats and republicans there is an enormous amount of their of revenge-
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minded pieces of legislation. the idea could catch hold very quickly. host: there has also been talk of a financial transaction tax to pay for funding afghanistan operations. guest: wall street will say it is horrendous. capital is very fluid in this global economy. they would say transactions will just take place offshore. who knows whether that is actually practical. it is a threat. host: next up is chandler, ariz. on the independent line. caller: what i want to see a
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obama do today is just kick some ass. i am an old white guy and-a cried when obama got elected. we're finally getting away from the old guy network. now i just see him bail and a banks and we're sitting out here as taxpayers. i had to claim bankruptcy to stave off foreclosure. my bank would not work with me whatsoever. i want to see obama do something for the taxpayers who have built up the banks now and say what you try to work with the people were going through foreclosures? guest: yeah. yeah, and that is what obama will say to these bankers today. he will say we need you to work with average consumers, help them solve their financial difficulties. one the frustrations we hear over and over again that is totally valid is the idea that
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the wall street banks got help when they were in tight financial difficulty, in a screaming financial pain. they got a check from the government. my house is under water, my small business went bankrupt. i have a problem right now. i'm not getting billed out by the government. you hear it again and again and again, and people know it is true. the obama folks know it is a huge problem. they also argue that the bill is absolutely necessary. he called the tarp program the most unpopular program ever, but completely necessary. they feel that the u.s. economy would be a smoking ruin right now as the club's continued unabated. they certainly understand the political frustrations out there right now. host: this reporter writes that the president's leverage is limited. nine out of the 12 banks have
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repaid money from the tour. the virginia-based banking consultant says that the meeting is nothing more than political thedaater. there is also a picture here of larry summers who yesterday was on the "state of the union." he had some tough words for bankers. >> it was irresponsible risk- taking that brought the economy to the brink of collapse. it was their irresponsible risk taking in many cases that brought the economy to collapse, and frankly, after the asian financial crisis and after the savings and loan debacle and after that 1987 stock-market crash and other things, it was not the first time. and they do not get in some
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cases that they would not be where they are today, and certainly would not be paying the bonuses they are today if their government had not taken extraordinary actions. extraordinary actions not friendly with the motive of helping them, but with the motivation of helping the economy. but of which they nonetheless were the beneficiary. for them to be complaining about serious regulation directed at making sure this never happens again is wrong. host: he used the term " "irresponsible risk" and it would seem that the banks are doing all they can to avoid doing that again? guest: that is clearly true. you can say with some certainty that that interview with larry summers yesterday and the barack obama interview on the "60
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minutes" were a coordinated attempt to increase pressure on banks. the white house does not want to be the best friend of j.p. morgan or goldman sachs. the reason you saw so much anger a couple of weeks ago when goldman sachs executives were quoted in the "vanity fair" magazine saying they thought they would have been fine without the ability and would not have gone under without government assistance -- the first-rate people in washington to no end. the entire financial system of the u.s. would have collapsed, and goldman sachs right along with it. ñito hear them saying banks, but no things and we did not need the help -- in washington that is the height of arrogance. you have wall street's problems looking at washington with no understanding. you have this culture clash with all at stake. lloyd blankfein will be there at
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the white house. goldman sachs announced last week that they are changing composition of their top executives, the 30 most powerful will now get special stock instead of cash bonuses at the end of year. it is designed to keep their interest in line for the next five years or so with goldman sachs, so they don't get paid unless the firm does well. that is designed to appease reformers. reformers say you give a executives incentive to loot the company in the short term without incentive. many think that is what happened with the 2008 meltdown. host: goldman sachs field the aig gambles. the firm says the problems were hidden in some of these financial products that aig had a cause a downfall. guest: goldman sachs is one of the biggest beneficiaries of the a.i.g. bailout.
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a.i.g. turned the bailout cash to their counter-parties -- goldman was one of the top beneficiaries of that bailout money. for months after word officials involved refused to say who the counter-parties were. it was suspicious and weird. we were trying to get the information for a long time after the a judge a bailout. several months later they finally put out a list of the counter-parties. xdgoldman sachs were on the list and so were several foreign banks. host: next up, fla., on the line for democrats. caller: good morning, all that i can say is from what i hear america it is nothing but a big, the tangled web of confusion. my feeling is that we were in such dire straits that the only
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way obama was elected, him being african-american, is that america is looking for a scapegoat. we're talking about too big to fail, the banks. the market is basically too white to fail or too white to be wrong. therefore, everything happening, the government that existed was run by white america. from the comments made over the last 11 months with obama in the white house, the familiar with bankruptcy of the economy, all the bad things are being blamed on obama. there again we pretend --


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