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4 2010 Fiscal Summit
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8 America's Challenge and a Way Forward
9 Sponsored by the Peter G. Peterson Foundation
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13 Ronald Regan Building
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17 Washington, D.C.
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19 Wednesday, April 28, 2010
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1 M-O-R-N-I-N-G S-E-S-S-I-O-N
2 PETER PETERSON: Good morning and welcome to
3 the 2010 Fiscal Summit. I look at the great minds
4 around this room and am truly humbled, although I know
5 there are many who doubt such a thing is possible.
6 [Laughter.]
7 PETER PETERSON: It is our hope that we can
8 come together in this summit and make progress on
9 reaching consensus in three main areas. First the
10 nature and magnitude of our fiscal challenge. Second,
11 the future -- the nature and general direction of
12 solutions. And third, how do we educate and activate
13 American citizens to do something about it?
14 We've got all kinds of ideas and ideologies
15 represented here today. While we may not agree on a
16 whole lot else, but most of us agree on one thing, our
17 present fiscal course is unsustainable. At a time of
18 multiple bailouts, one uncomfortable thought lingers in
19 the back of our minds, who's going to bail out America
20 if our policies continue to stumble down this
21 unsustainable path?
22 Now some of you know that this is an issue
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1 that's close to my heart. I've written four books on
2 it. I've been boring people with it for decades. In
3 fact, Ted Sorenson said of one of my books, once you
4 put it down, you will not be able to pick it up.
5 [Laughter.]
6 But I believe the issue we address today has
7 become more urgent with time. The real purpose of
8 today's summit is to listen to you, but before that I
9 simply would want to summarize some views of our
10 foundation.
11 First, it is important to clarify how we
12 define the problem. We make a very important
13 distinction between current budget deficits and our
14 longer term structural deficits. Contrary to some
15 perceptions, the short term deficits are not my primary
16 concern.
17 We understand the urgency of people's
18 economic hardships, the painful effects of high
19 unemployment and an urgent need to create jobs. It's
20 the longer term structural and unsustainable deficits
21 that are pushing those of us in our foundation up the
22 fiscal Richter scale.
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1 In the Nixon White House we had the
2 economist, Herb Stein, who was also a humorist, though
3 I know some of you may find the term Nixon humorist an
4 oxymoron.
5 He used to say, if something is
6 unsustainable, it tends to stop. He also said, if you
7 horse dies, I suggest you dismount.
8 [Laughter.]
9 We keep acting as if we can ride this horse
10 indefinitely. We at the foundation think it's time to
11 dismount and address this challenge before a crisis
12 occurs.
13 Another concern we have are ballooning
14 interest costs. In only 12 years interest costs and
15 entitlements alone would consume 100 percent of the
16 projected revenue. These huge interest costs would buy
17 us nothing and would crowd out critically needed
18 investments in a much more competitive world. I'm
19 speaking of more of R&D, education, and desperately
20 needed infrastructure. In effect, what we would be
21 doing is spending our children's future rather than
22 investing in it.
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1 It is also important to recognize that by
2 addressing these issues soon, we can make decisions on
3 reforms fairly, thoughtfully, and with compassion. In
4 a crisis, the government could be forced to make
5 changes urgently endangering the important social
6 programs on which so many Americans depend.
7 As the very lucky son of Greek -- of
8 American, of immigrant parents -- I decided not to
9 focus on the fact that they were Greek given the
10 current financial situation there.
11 [Laughter.]
12 I am deeply concerned about preserving the
13 social safety net for those in need. And make no
14 mistake about it, no so-called safety net can be
15 considered safe in times of genuine fiscal austerity.
16 Call it generational theft, or even fiscal
17 child abuse. But beyond the numbers, what would these
18 burdens mean to our kids and grand kids? We need to
19 ask ourselves, not just is that sustainable, but is it
20 moral?
21 What does it mean to burden our kids to an
22 unconscionable doubling of their taxes? And we're not
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1 just talking here just about money. Debts this large
2 could bring about a radical change in this nation. A
3 change in the very idea of America and what it's all
4 about.
5 For the first time in our history,
6 generations of Americans could be facing a future less
7 bright than the past. For our kids, there would be
8 fewer jobs, greater burdens, more insecurity, and
9 diminished dreams.
10 And what of the American ideal? Since the
11 first explorers set foot on this country, Americans
12 have believed that this country of ours is an
13 exceptional place with exceptional possibilities in
14 store. We have lived on the basis of ever expanding
15 horizons. Without that, what would America be?
16 Politics in this democracy of ours has always
17 been a tough business. We bemoan the loss of civility
18 in our day, but imagine how much more brutal our
19 politics will become when they are a fight among
20 factions simply to hold on to their piece of the a
21 shrinking economic pie.
22 And what of America's leadership in the
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1 world? For a century now the world has looked to
2 America to light the way and keep it safe. But how can
3 we lead effectively when we are more and more in hock
4 up to our eyeballs and higher to nations that may have
5 very different interests at heart? There's an old
6 saying that running into debt isn't so bad, it's
7 running into creditors that hurts.
8 For those of us that genuinely believe that
9 the world still needs America's leadership, for those
10 of us who truly care about leaving a better country to
11 our kids, we have no alternative but to get our
12 economic house in order. If America can no longer be
13 America, who can be?
14 So how do we undig this hole we find
15 ourselves in? First, we at the foundation believe that
16 everything should be on the table. Of course
17 expenditure cuts must play a major role but some have a
18 tax aversion syndrome. They've never met an increase
19 they didn't hate, and do everything in their power to
20 stop it.
21 To me, that is simply an untenable position
22 both fiscally and politically. Given the sheer
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1 magnitude of he imbalances that we face, addressing
2 these without any revenue increases simply doesn't add
3 up. Doing so would devastate important social
4 insurance, and other important governmental programs.
5 Though there needs to be adjustments to it,
6 the social contract is part of the fabric of our
7 society and any set of solutions should recognize that
8 the core of these programs must remain intact
9 particularly for those who need them.
10 Meanwhile, some seem to have an entitlement
11 fixation, they have never met a universal entitlement
12 program they didn't fall in love with. But with a
13 rapidly exploding population of elderly who are living
14 much longer than ever before in human history we have
15 to ask, if all of us are on the wagon, who is going to
16 pull it?
17 We keep being told that Social Security is
18 "solvent" for another 30 years or so because of the
19 $2.4 trillion of assets in the trust fund. You didn't
20 hear it, but I was putting quotation marks around the
21 word, assets. That's because these so-called asset
22 have already been spent for purposes and even in
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1 Washington, you can't spend the same money twice.
2 I believe that there are approaches to
3 reforming Social Security that are compassionate, fair
4 and reasonable. And if we act before a crisis occurs,
5 effective reforms can be implemented that are sensible
6 and which will preserve this indispensable social
7 safety net for those who depend on it.
8 For example, we would suggest for
9 consideration some combination of gradually increasing
10 the retirement age, indexing it to longevity, and
11 reducing benefits for the well off through what I call
12 an affluence test or progressive wage indexing. Then
13 one could also lift the payroll tax cap.
14 If we could address Social Security reform,
15 it would provide a much needed confidence builder with
16 our valued foreign lenders so they don't lose faith
17 that we can manage our own fiscal affairs.
18 However, addressing Social Security only
19 solves a small part or about 10 percent of the overall
20 fiscal problem. Health care costs in the U.S., on a
21 per capita basis are double those of the rest of the
22 developed world with no appreciable differences in
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1 outcomes. Health care costs are the big elephant that
2 could bankrupt our economy. They serve the highest
3 priority on the fiscal agenda.
4 Now in order to really have a major impact on
5 the newest cliche, bending the cost curve, we believe
6 we must address many basic health care cost drivers
7 that have hardly been reformed at all. Take the fee
8 for service payment system. If you hired a roomful of
9 economists and told them to come up with a highly
10 effective incentive to inflate costs, I don't think
11 they could come up with something this perverse.
12 There are other largely ignored health care
13 cost drivers. End of life, where a disproportionate
14 amount of spending occurs, our counterproductive
15 malpractice system and how to expand the use of
16 integrated clinics which have both improved outcomes
17 and reduced costs.
18 The recent health care legislation put in
19 place two mechanisms that have the potential to both
20 foster much needed implementation of those reforms
21 which have been tested and provide much needed research
22 and experimentation for those that haven't, the
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1 Independent Payment Advisory Board and the Innovation
2 Center.
3 But the real question is, will we have the
4 political will to tap this potential? Can the culture
5 of health care in America be transformed to one focused
6 on value?
7 There are a few other reforms that should be
8 on the table for consideration. A progressive
9 consumption tax that not only increases revenue but
10 also increases savings. Increasing our savings is a
11 nation imperative.
12 And energy or carbon tax to reduce our
13 dependence on foreign oil and foreign lending and
14 respond to the environmental challenge. So-called tax
15 preferences which aggregate to about $1 trillion a year
16 I can also understand why the American people
17 believe that there are significant savings to be found
18 in a defense budget hat is larger than Europe's,
19 China's, Russia's, Japan's, and much of the rest of the
20 world combined. Finally, budget controls like the pay-
21 go rules and spending caps of the 90's work.
22 Once this recession is behind us and more
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1 Americans are back to work, we need to immediately
2 begin to implement these kinds of reforms. In sum, we
3 believe in timely action.
4 It is because we don't want to see our
5 futures diminished. Because we don't want financial
6 necessity to force radical disruptions in our way of
7 life. Because we don't want to see the safety net
8 frayed that we believe we must act now with moderate,
9 fiscally conservative and socially compassionate
10 reforms.
11 But how do we get there from here? This
12 after all is a nation whose enthusiasm for shared
13 sacrifice is rather restrained. I've heard it said
14 that we spend like Socialists but tax like
15 Libertarians. Our special interest politics seem to
16 operate on one imperative, give us more. It's part of
17 the culture, I want it all and I want it now, and I
18 don't want to pay for it.
19 But we believe there are other interests and
20 other constituencies that can transcend the more now
21 syndrome. They are the growing ranks of those who do
22 not identify with either party and for whom spending is
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1 now the number one issue when they go to the ballot
2 box.
3 Maybe the most important general interest
4 group, however, is the young. After all, they have the
5 greatest stake in the future. The status quo is a raw
6 deal for them. Yet right now, too many are like the
7 student in the philosophy class when asked which is
8 worse, ignorance or apathy he mumbles, I don't know and
9 I don't care.
10 [Laughter.]
11 Our CEO, Dave Walker, will speak more about
12 engaging other constituencies. While some people may
13 see me as a Dr. Doom of the deficit, I'm actually still
14 hopeful. America has faced worse challenges before.
15 In the aftermath of World War II, our exhausted nation
16 confronted a public debt of over 110 percent of GDP,
17 twice what it is now, and a world economy in shambles.
18 Nevertheless, that generation managed to
19 reduce the public debt to less than 30 percent of GDP
20 while simultaneously launching and paying for the GI
21 Bill, the Marshall Plan, the UN, and building the
22 interstate highway system and other major
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1 infrastructure.
2 They did it with courage and commitment, and
3 a positive vision of a prosperous nation at peace and
4 so can we. We also need a positive, optimistic vision
5 of what an economically healthy and growing America
6 would look like and what it will mean to our kids and
7 grand kids.
8 The adventure of America has only just begun.
9 We can open a whole new chapter of innovation and
10 growth. If we unencumber ourselves of our massive
11 debts and promises, our future can be ever larger.
12 And maybe most importantly, we will be able
13 to look our kids straight in the eye, feel proud of the
14 work we've done, and have confidence and hope in the
15 world we are handing off to their care.
16 We are the most resilient of countries. We
17 are the most entrepreneurial of countries. We are the
18 most innovative of countries, which is just what this
19 competitive new world requires.
20 If, and that if is much of what our
21 discussion will entail. If we provide the resources to
22 invest in this country's indispensable assets and in
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1 our future. I say, yes we can. Let me change that,
2 yes, we must. Thank you all very much.
3 [Applause.]
4 [Musical interlude.]
5 MICHAEL PETERSON: Good morning. I'm Michael
6 Peterson, Vice-Chairman of the Peterson Foundation.
7 I'll be taking you through our program today, but
8 before we being a brief note about our foundation and
9 why we're all here.
10 What we confront and how we address it
11 impacts my generation and future generations of
12 Americans. That's what this foundation is all about.
13 We're dedicated to preserving economic opportunities
14 for tomorrow by making wise fiscal decisions today.
15 From our perspective, the problem we face is
16 inherently nonpartisan. It's about math. It's about
17 the realities of debt and credit. It's about investing
18 in the future versus consuming today.
19 When it comes to solutions and reforms on the
20 other hand, there will be many views and opinions from
21 across the political spectrum. But this foundation is
22 not about pushing a particular program of reforms.
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1 Rather, we see our job as increasing
2 awareness and accelerating action. What the Peterson
3 Foundation is really about is doing exactly what we're
4 doing here today, bringing people together to start
5 building a consensus on a way forward. We hope to help
6 build a respectful and informed national dialogue.
7 To begin that dialogue today I will now
8 introduce our first panel. I can just imagine both of
9 our next speakers a few months ago enjoying a pleasant,
10 relaxed, and civil life outside of Washington, D.C.
11 That is, until they get a phone call from the President
12 asking them to serve as co- chairs of the National
13 Commission on Fiscal Responsibility and Reform.
14 I'm not sure there's a more perilous
15 assignment then this one. This past weekend they even
16 described their role as jumping out of a plane without
17 a parachute. But I am sure their job is critically
18 important.
19 And we'd have trouble finding a better team
20 to lead such a Commission then two men with a history
21 of reaching across the aisle to get things done. Alan
22 Simpson and Erskine Bowles are principled leaders who
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1 have consistently put their country before now partisan
2 interests.
3 Mr. Simpson represented Wyoming in the U.S.
4 Senate for nearly 20 years, rose to the post of
5 Republican Whip and took the lead on contentious issues
6 such as Social Security reform. As White House Chief
7 of Staff under President Clinton, Mr. Bowles helped
8 broker a budget deal that paved the way for the
9 nation's first balanced budget in 30 years.
10 We applaud President Obama for establishing
11 the Commission, and we especially credit him for
12 choosing these two great Americans as co-chairs. They
13 have already demonstrated that they are a team and are
14 leading the way on the bipartisanship that we so
15 desperately need. And who better to direct this
16 discussion then Lesley Stahl of CBS News.
17 Please welcome Alan Simpson, Erskine Bowles,
18 and Lesley Stahl.
19 [Applause.]
20 [Musical interlude.]
21 LESLEY STAHL: Hi everyone, thanks for
22 coming. First I want to ask Alan, how's your knee?
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1 ALAN SIMPSON: Well it's new.
2 [Laughter.]
3 ALAN SIMPSON: And it's seven weeks old and
4 it feels like I did at seven weeks old, crying every
5 night.
6 [Laughter.]
7 ALAN SIMPSON: No, it's healing and I did
8 kind of cut -- as I haven't had a drink. Came right up
9 there.
10 LESLEY STAHL: Yeah, but we ought to get that
11 out on the table.
12 ALAN SIMPSON: Erskine hadn't been
13 sympathetic at all.
14 ERSKINE BOWLES: I drug him all over
15 Washington, it's been great.
16 LESLEY STAHL: Okay, now we've dispensed with
17 the funnies because our topic is kind of heavy. So
18 Senator Simpson, let me just start off and ask you
19 whether the word doable is going to be factored in to
20 your deliberations?
21 In other words, if it becomes pretty clear
22 that there is a solution that's obvious, will you just
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1 toss it out there or will the idea of whether this can
2 fly politically be woven in to everything you do?
3 ALAN SIMPSON: Well first let me just thank
4 Pete Peterson. That wonderful man has been working
5 with me and we worked on Social Security. He's more
6 than all the things you see. There's a deepness to
7 him, it's called patriotism, that's where he springs
8 from. And he's -- he's just very special and does so
9 much.
10 But doable? I don't know. When we got the
11 call, Biden called, he said Al I got a real deal for
12 you. I said sure Joe, I've heard that for 30 years
13 from you. And so he said your co-chair will Erskine
14 Bowles.
15 I said I have the deepest respect and
16 admiration and regard for him. And I called Erskine
17 and we said we got to talk to the President and see
18 where he is and we did. And all I can tell you is that
19 both of us agreed that we may be only able to move the
20 football a yard.
21 And I have no idea, but I can tell you that I
22 have no illusions. We're gong to get savaged from the
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1 right and the left. We will be beat up. Every time we
2 go somewhere somebody says, are you going to have a VAT
3 tax or are you going to -- what are you going to do
4 with the children, you know the veteran's?
5 I say everything is on the table including
6 the new President's and Congress' Health Bill, that's
7 on the table too. There isn't anything off the table.
8 Now that may be the only thing that will save us. And
9 yesterday the Commission in a letter since we -- there
10 wasn't a single member of the 18 that didn't know that
11 this was one of the deepest problems of this country.
12 LESLEY STAHL: Well let me get back to my
13 question about doable --
14 ERSKINE BOWLES: That happens to us a lot.
15 LESLEY STAHL: -- which may be at the heart
16 of this. You know I was thinking about this and it
17 reminds me of the Israeli Palestinian --
18 ALAN SIMPSON: Ewh.
19 LESLEY STAHL: -- endless, endless problem
20 where there's a road map, and there has been a road map
21 since President Clinton was in office. And everybody
22 knows the answer. And to some extent this is what
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1 you're confronting.
2 Everybody knows you're going to have to raise
3 taxes and cut things, and big things like put
4 restrictions on Social Security, everybody knows that.
5 So what is your Commission about? Is it going to be a
6 negotiation more than looking for the answer because
7 the answer's pretty clear, isn't it?
8 ERSKINE BOWLES: Yeah it's going to be some
9 of those things, no question about that. And let me
10 thank Pete too. I don't know anybody who I think is
11 less partisan or has been kinder to me than Pete
12 Peterson. And I think we're all blessed that he would
13 give us this opportunity to educate the American
14 people. So thank you.
15 [Applause.]
16 ERSKINE BOWLES: Lesley, it's going to be
17 about trust and confidence. If both sides, and
18 hopefully we'll end up with no sides, that we'll just
19 be American citizens. But if both sides don't believe
20 that the other side is serious, that we are not in this
21 for political gain but we're here to solve these really
22 big issues.
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1 And if the Right doesn't believe, as Al said,
2 that Medicare and Social Security have to be on the
3 table, that we have to reduce the costs if we're
4 serious about balancing the budget and if the others
5 don't accept the fact that we're going to have to have
6 some new revenues.
7 It is just like Michael Peterson said, this
8 is arithmetic, I'm good at math. And we can't solve
9 this problem by talking about foreign aide or waste,
10 fraud, and abuse, we've got to seriously attack these
11 big problems and we've got to do it now because if we
12 don't, they're not going to be solvable without that
13 word, bankruptcy.
14 LESLEY STAHL: So in other words, this whole
15 exercise is much less about getting the answer, because
16 the answer is pretty clear, then it is about getting
17 those 18 people not to exercise a veto?
18 ERSKINE BOWLES: Well the arithmetic's clear
19 --
20 LESLEY STAHL: And it's really going to be --
21 ERSKINE BOWLES: The arithmetic's clear, the
22 solutions are relatively easy to see. But the
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1 political will to step forward and make the tough
2 decisions is where we've got to do our job.
3 LESLEY STAHL: Now everybody's talking about
4 Pete, I'm going to throw my two cents in. Pete, as
5 everybody knows, has been working on this since at
6 least the 70's if not -- I don't know before because
7 we've been having deficit problems all these many
8 years. And my claim, since --
9 MR. PETERSON: World War I.
10 LESLEY STAHL: Since World War I. And my
11 claim to fame is that I actually convinced Don Hewitt
12 to do a deficit piece with Pete Peterson on 60 Minutes
13 somewhere in the early 90's.
14 And in that story we had ordinary citizens
15 sitting at tables, and we had a huge deficit issue back
16 then, and we gave -- they got the budget books and all
17 these citizens solved it. They just did it, it was
18 clear.
19 I mean raise Social Security eligibility, the
20 age. I don't know how high it has to go, some actuary.
21 Put on some taxes, gas taxes, everybody thinks that
22 would be a good idea -- well not everybody, soda tax,
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1 whatever. And so that part of your problem is over.
2 Will you agree with that?
3 ALAN SIMPSON: Well people use flash words in
4 Washington, the immigration flash word is amnesty,
5 another one is national i.d.
6 Now these are good words to get people worked
7 up. Taxes is ours, the minute we were appointed, they
8 said there they are, they're stalking horses for taxes.
9 And we said, we're stalking horses for our
10 grandchildren.
11 And so in every situation here there is
12 emotion, fear, guilt, or racism. Those are the four
13 things that I've found in my time here. Either pass or
14 kill a bill with a death blend of emotion, fear, guilt,
15 or racism whatever the issue.
16 Social Security, hell there isn't a thing in
17 it that affects -- anything that I've heard in the last
18 10 years doesn't affect anybody over 57. What do I get
19 the guff? These 70, 80 year old cats. That's where I
20 get the guff, you're not going to take it away from me
21 are you? I put in it from the beginning, and in fact
22 if I could have invested it myself, I'd be a
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1 trillionaire now.
2 And I say, well if you were the government
3 wouldn't be taking care of you so either way you could
4 make it. Anyway that's very predictable but speaking
5 of predictable, tell them the word yesterday.
6 ERSKINE BOWLES: Yeah I thought it was really
7 interesting yesterday we had our first public
8 commission hearing. And everybody talked about the
9 fact that the path we're on today is not sustainable.
10 Everybody, from the President to the Chairman of the
11 Fed, to the two former leaders of the Congressional
12 Budget Office, to Peter Orszag, and then everybody on
13 our Commission agreed.
14 But Paul Ryan, who is a Congressman from
15 Wisconsin, said it best. He said, this is the most
16 predictable economic crisis in history and it is. This
17 nation is on autopilot and if we don't change and make
18 big changes we are going to face disaster. He was
19 terrific.
20 And let me tell you how broad the consensus
21 is. Andy Stern, who is the recently retired President
22 of SEIU, the Union, agreed with him 100 percent. So
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1 all of us here realize the problem.
2 But where I disagree with you is we've got a
3 real education issue in America. We've got to make
4 sure that the American people understand how big a
5 problem that is. That's why what you're doing here
6 Pete and Michael is such a big service. This will
7 educate a lot of people.
8 And secondly, what we've got to do is we've
9 got to get a real set of numbers out there. Numbers
10 that everybody agrees to. And what Al and I have said
11 is we're going to use the actuaries numbers from Social
12 Security and Medicare, that's pretty hard to argue
13 against. And then we're going to use CBO, the
14 Congressional Budget Office for everything else.
15 We're not going to use the Administration's
16 numbers. We're going to try to use those sets of
17 numbers that have the greatest credibility. And then
18 once we have an agreement on numbers, then we can lay
19 out the options and then we can make the tough
20 decisions.
21 LESLEY STAHL: If I asked you, each of you,
22 to right now tell the American people how dire the
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1 situation is in your opinion, what would you say?
2 ALAN SIMPSON: Well oddly enough, in my
3 travels the American people know that something is
4 terribly, terribly wrong. You can call on anybody from
5 Cody, Wyoming to Chapel Hill to Dubuque, and they'll
6 say hey, what's wrong with our country? And that's why
7 these organizations spring up, the tea party, these
8 other things, the hostility --
9 LESLEY STAHL: Yeah, but they're no new taxes
10 organizations. They're don't touch my Social Security
11 organizations.
12 ALAN SIMPSON: I know, but they know that
13 something is desperately wrong in America. That's the
14 key, and as long as they do they -- that's what we're
15 trying to tell people, something is terribly, terribly
16 wrong with this country.
17 A dysfunctional Congress in that sense, the -
18 - we were taught and trained by our handlers to bring
19 home the bacon and now the pig is dead and the candy
20 store is closed.
21 ERSKINE BOWLES: This is what I get to be
22 with.
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1 ALAN SIMPSON: He does the math I do the
2 color.
3 [Laughter.]
4 ALAN SIMPSON: Hell, I don't know the math.
5 ERSKINE BOWLES: And if we can build the
6 trust in this whole Commission that the two of us have,
7 we're going to the promised land. How do I -- here's
8 what I tell our students at Chapel Hill, and they
9 immediately get it. This is a fact, this is not a
10 forecast, this is where we are today.
11 If you take the revenue of a country today,
12 this year and butt it up against the mandatory
13 expenditures, which are principally the entitlements,
14 Medicare, Medicaid and Social Security, they equal each
15 other.
16 Now what does that mean? That means that
17 every dollar we spend on education, infrastructure,
18 transportation, the military, homeland defense, every
19 single dollar is borrowed and half of it is borrowed
20 from foreign countries.
21 Now just stop and think about that. You know
22 all of my friends who say all we ought to be talking
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1 about is jobs, jobs, jobs. Well I can tell you one
2 thing I know having been a small business guy, small
3 businesses can't grow and can't create jobs without
4 what?
5 ALAN SIMPSON: Money.
6 ERSKINE BOWLES: Capital. And there's not
7 going to be any capital, it's going to be crowded out.
8 You talk to the people who think, hey we live in a
9 knowledge based global economy, we better invest in
10 education, we better invest in training, we better
11 invest in infrastructure and innovation if we're going
12 to be competitive. There won't be any money for it.
13 We've got to take these big, these big steps.
14 And the biggest thing of all, half that money is
15 borrowed from foreign countries. Somebody said well
16 what if the Chinese just quit buying our debt?
17 Hell, what if they just -- what if they start
18 to sell it? My God, the crisis we're going to face is
19 tremendous. Greece just went through it, Portugal went
20 through it.
21 ALAN SIMPSON: Spain's coming up.
22 ERSKINE BOWLES: Yeah.
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1 LESLEY STAHL: What about the Baby Boom wave
2 coming into Social Security and Medicare? I mean that
3 has to be tsunami that's going to hit all of us.
4 ERSKINE BOWLES: That's basic arithmetic and
5 you can't solve that problem through increased taxes
6 because no matter what else you look at today, you have
7 the cost of health care is growing faster than the GDP
8 and you've got old guys like me who are aging right
9 into the problem who have you know, all these issues
10 that have to be dealt with.
11 LESLEY STAHL: Senator Simpson, you were on a
12 commission in the 1990's that was an entitlements
13 commission and apparently everybody on the commission
14 absolutely understood even then how dire the
15 entitlements situation was and yet nothing came of it,
16 it collapsed.
17 ALAN SIMPSON: Well that was --
18 LESLEY STAHL: So my question is, what did
19 you learn from that experience where it was a failure
20 that informed you for this one?
21 ALAN SIMPSON: We learned that when the
22 economy is like roses, wine and roses and everybody is
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1 consuming everything they can and buying everything
2 they can, that they ignore everything, but these are
3 different days.
4 And that was a great group. That was Jack
5 Danforth and Bob Kerrey and we did a lot of work. In
6 fact we had a game where it was called like whack a
7 mole. They'd say well we can just cut spending, well
8 what would you cut? And then you'd give them this
9 little game. And nobody could, wanted to you know, do
10 any of their pet stuff. But it was, there was good
11 record of it.
12 I've been on commissions before, they haven't
13 all failed. The immigration, the Select Commission on
14 Immigration, we did two bills. The reason it failed is
15 we couldn't get a more secure identifier because the
16 right and the left said this is a National I.D.
17 I was on the Iraq study group. We had to
18 agree on every word. They've adopted about 57 of those
19 out of the 79 by now. So the cynicists -- there's more
20 than skepticism in this city, which was here when I was
21 here, now it's cynicism.
22 LESLEY STAHL: Right.
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1 ALAN SIMPSON: And you guys will fail, you
2 guys will fail, or what a laugher this is. Well you
3 know, the drinks are on me, hell I'll go home.
4 [Laughter.]
5 LESLEY STAHL: Well what happens Erskine, if
6 you go through the exercise, it's all public, we all
7 watch it and you end up deadlocked because both sides
8 have a veto out of the 18. I mean what then happens?
9 ERSKINE BOWLES: You know in my opinion, that
10 won't be victory but we will have made real progress,
11 just like Pete and Michael are making here. If we can
12 educate the American people as to what this problem is
13 and we can get some push from them on the elected
14 officials to actually face up to these big problems.
15 And I can tell you, every grocery store I go
16 in to, especially when I'm with this guy, you know
17 because everybody knows him, it is -- it is amazing,
18 people come up to you everywhere and say please take
19 this on. Please do something about it. Please do it
20 for your grand kids. I've got seven, Al's got six.
21 We've got to do this.
22 And Lesley if you think back, you mentioned
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1 it earlier, in 1997 when President Clinton asked me to
2 lead the negotiations to balance the budget, there was
3 not a person in the press who didn't think it was a
4 joke.
5 There was little support in the Congress and
6 I must have spent months locked up in conference rooms
7 with Speaker Gingrich and Leader Lott, and y'all owe me
8 a lot for that I'm telling you.
9 [Laughter.]
10 ERSKINE BOWLES: But seriously, it was great.
11 [Laughter.]
12 ERSKINE BOWLES: And you know I didn't leave
13 those meetings, and nor did they, and talk about the
14 politics of any of the discussions we had. We stayed
15 at it, we built up some trust in each other and we got
16 to a solution that did balance the budget. That's what
17 we've got to do again.
18 LESLEY STAHL: And I know you -- well I don't
19 want to put words in your mouth. I assume you're both
20 pretty optimistic about this. But on day one, which
21 was yesterday, your first meeting, a Republican group
22 held a big news conference and said that you were a
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1 Trojan Horse for a value added tax commission. And the
2 liberals had another news conference and said, we want
3 you to -- we need to raise spending on infrastructure
4 and education, something you alluded to.
5 So it sounds like both sides have shot off
6 their cannons and then you're going to go inside and
7 have to already deal with something that they've put on
8 the table.
9 ALAN SIMPSON: We've been there before. You
10 learn in politics when they rip your skin off it grows
11 back double strength. I've been called everything.
12 I'm pro-choice so I've been called a baby killer, not a
13 very pleasant thing. I work hard with the gay, lesbian
14 community so I get called a lot of stuff. And you
15 know, that's the way it is.
16 MS. STAHL: A Trojan Horse is not a --
17 MR. SIMPSON: But never let them destroy who
18 you are. Never, ever let them destroy who you are, and
19 that's not who we are. VAT tax, what the hell.
20 If you do a VAT tax you got to do some
21 adjustments with the income tax. You think you were
22 coming in and slapping that on top of the income tax.
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1 Children, veterans, all those people won't have
2 anything when it's all sucked up.
3 I mean if people can't understand that well
4 we -- we'll do the best we can to let them know that
5 everything you love will not be there. How's that for
6 an answer? Everything you deeply love, when you button
7 your shirt your heart fell out, everything there in
8 government, the children and the poor, is not going to
9 be there. There won't be any bucks for them because of
10 automatic pilot.
11 LESLEY STAHL: Let me ask you both one final
12 question. How do you get the public to really accept
13 the idea that everybody's going to have to have a --
14 make a sacrifice? How do you get the American people
15 into that frame of mind? Because boy, they're not
16 there now.
17 ERSKINE BOWLES: We have to convince them, in
18 my opinion, that this problem is real. We have to do -
19 - convince them that Paul Ryan was 100 percent right
20 and Andy Stern was 100 percent right, that this is the
21 most predictable economic crisis in our nation's
22 history. And if we don't do something about it, we're
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1 going to be a second rate power before you know it.
2 LESLEY STAHL: That's pretty tough. Alan
3 what do you say?
4 ALAN SIMPSON: Well I agree. Someone said,
5 well we'll just do something with the money supply,
6 we'll print more, we'll do this, we may default. But
7 then instead of America the beautiful and the powerful
8 we become second rate. That's what -- we're not going
9 to expire, we'll just become second rate.
10 LESLEY STAHL: On that lovely note, I think
11 we all wish you the best of luck and we're all kind of
12 counting on you.
13 ALAN SIMPSON: Yeah, sure I can hear that.
14 [Laughter.]
15 MR. BOWLES: Thank you.
16 MR. SIMPSON: Thank you.
17 [Applause.]
18 [Musical interlude.]
19 MICHAEL PETERSON: As we said earlier, this
20 summit is about convening views from across the
21 spectrum. And in that regard, our next panel
22 discussion is right on mission.
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1 I won't predict that our panelists will agree
2 on all the steps we should take, but I am hopeful that
3 our experienced moderator can find some common ground
4 on these issues that affect all of us.
5 With us today are two members of the National
6 Commission on Fiscal Responsibility and Reform, Alice
7 Rivlin, who is a Senior Fellow at the Brookings
8 Institution and was the first Director of the
9 Congressional Budget Office. This past January she
10 agreed to co-chair the Debt Reduction Task Force
11 sponsored by the Bipartisan Policy Center. Her fellow
12 co-chair is former Senator Pete Domenici, who I am
13 pleased to say is also here with us today.
14 The second is Paul Ryan, Republican
15 Congressman from Wisconsin. He has spoken out
16 regularly about the importance in addressing these
17 difficult fiscal challenges. In addition, we have
18 Larry Mishel who is President if the Economic Policy
19 Institute here in Washington which has a special focus
20 on the interests of American workers.
21 Bob Greenstein, he'll be joining us a little
22 late, but he is the founder and Executive Director of
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1 the Center on Budget and Policy Priorities, a think
2 tank that focuses on Federal and state fiscal policy.
3 Lastly, Neera Tanden, who is Chief Operating
4 Officer of the Center for American Progress and has
5 been involved in health care reform for more than a
6 decade. The panel moderator is Gwen Ifill, managing
7 editor and moderator for PBS' Washington Week.
8 Please welcome our next panel.
9 [Musical interlude.]
10 GWEN IFILL: You'll notice we're missing
11 exactly one member of our panel, Bob Greenstein who's
12 somewhere in a cab fleeing his way here so he'll be
13 here shortly. But we're going to get started without
14 him because as you could tell from that last panel,
15 there's a lot to start with.
16 Paul Ryan just walked in the door so he
17 didn't hear himself get quoted, but I'm going to start
18 with him, ha-ha, because you're fast on your feet.
19 We just heard Erskine Bowles and Alan Simpson
20 quote you as saying that this is the most predictable
21 economic crisis ever. I'm going to start by asking you
22 to explain a little bit more about what you meant by
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1 that and then ask everybody else on the panel to weigh
2 in on their thoughts.
3 CONGRESSMAN RYAN: Sure. I said this in the
4 context of TARP. I remember vividly October 2008, you
5 watch the credit spreads all over the place go wild.
6 We had the Chairman of the Federal Reserve, we had the
7 Treasury Secretary come up to the Hill in a panic,
8 talking about a crash, a crisis, a deflationary spiral.
9 And then we engaged in crisis management in
10 Congress. And we came together in Congress and put
11 together a very deeply flawed plan to get out of that
12 crisis. That came up and got us by surprise. Now we
13 can go back now with hind sight and untangle the mess,
14 but that was a surprise crisis.
15 This one's not. This, I say, is the most
16 predictable crisis we've ever had hitting our economy.
17 It's a forthcoming debt crisis, we know it, we see the
18 problem on the horizons in Europe, Greece, Italy,
19 Spain, Portugal, we know a debt crisis is coming.
20 We know that interest compounds viciously
21 once interest rates go up. And so this is something
22 that is obvious, easy to predict, and therefore,
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1 something we should tackle. And what's crazy about
2 this is we have yet to muster the political will to
3 actually prevent this crisis from occurring.
4 GWEN IFILL: Alice Rivlin.
5 ALICE RIVLIN: I agree with that. We've
6 actually known about this crisis for a long time. The
7 fact that our entitlement programs, especially Medicare
8 and Medicaid, but also Social Security, are on track to
9 grow faster than the economy's growing and our taxes
10 won't grow that fast.
11 We've known that for a long time. But
12 something else has changed to make this much more
13 urgent. We used to have a sort of manageable debt. It
14 was about 40 percent, 37 percent of our GDP.
15 But we've come through this terrible
16 recession and that has given us a much bigger deficit,
17 the recession itself and the things we had to do to
18 combat it and to rescue the financial system.
19 That deficit will go down, but we've built up
20 our debt. We used to think it would -- 20 years from
21 now maybe we'd have debt equal to 60 percent of the
22 GDP. We're there now and it's rising fast.
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1 So we're not Greece, but Greece is sort of a
2 useful lesson. If you have massive debts, eventually
3 your creditors lose confidence. And I think we're on
4 the verge of having that happen to us. But, there are
5 things we can do about it. It may be a predictable
6 crisis, it's not a necessary crisis.
7 GWEN IFILL: Lawrence Mishel.
8 LAWRENCE MISHEL: Well Gwen what's
9 interesting to me is this talk about predicting a
10 crisis when in fact we're actually in a crisis and I
11 don't hear any discussion about it whatsoever.
12 We're going to have 10 percent unemployment
13 this year. I think one out of three workers are going
14 to be unemployed or underemployed at some point this
15 year, around 40 to 45 percent in minority communities.
16 I believe that two years from now we're going
17 to have an unemployment rate of more than eight percent
18 and that's higher then it ever got in the last two
19 recessions. So how about that for a predictable
20 crisis? We're actually in one.
21 And the fact is that this discussion of
22 deficits, overlooks the fact that right now we have a
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1 large deficit because we have a very large recession.
2 We have an out of control economy, not an out of
3 control government budget.
4 And in fact, David Walker and I wrote an OpEd
5 two or three months ago that said the first step
6 towards deficit reduction is actually generating jobs.
7 And that may require more deficits now and I hope we
8 can all agree on that, that our first thing to do is
9 actually generate jobs, get more tax payers and that's
10 the -- that's a complimentary path to deficit
11 reduction.
12 GWEN IFILL: Even if drives the deficit even
13 higher?
14 LAWRENCE MISHEL: Absolutely, I think you
15 know, George W. Bush six years ago said, in a time of
16 war and recession you have to have a large deficit.
17 President Obama would agree. This is not something
18 that -- I mean there are some people that disagree, but
19 this is something that I think hopefully we can all
20 agree on that we should not let this focus on the long
21 term structural deficits kill the opportunity to
22 generate millions more jobs that people need.
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1 We talk about the worry about our
2 grandchildren, well that's true but people are being
3 scarred right now that's going to leave a permanent
4 scar on our productive capacity as innovation and
5 productivity is hurt, as children are hurt. We're
6 going to have children 50 percent higher you know next
7 year then it was before the recession.
8 GWEN IFILL: Okay, they'll plenty of chance
9 for everybody to make their speeches but I want to get
10 everybody to respond too because this is the
11 conversation we want to have here. Neera Tanden and
12 then Congressman Ryan weigh in on that.
13 NEERA TANDEN: Well I think we -- I would say
14 I definitely agree, that we all have to have economic
15 growth now. And that even those who are most concerned
16 about the deficit recognize economic growth is the way,
17 is the chief way actually to ensure that we're
18 addressing deficits over long term.
19 But I think as progressives we understand
20 that long term deficits are a problem. We sill facer
21 challenges down the road that will starve investments
22 if we don't actually -- investments that we all care
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1 about if we don't actually make some of the though
2 choices over the next year or two.
3 That doesn't mean we should take drastic
4 action now to reduce economic growth, that is the wrong
5 choice. But we do have to make decisions now to ensure
6 that we don't have to make tougher and worse decisions
7 down the road.
8 GWEN IFILL: Congressman and then Alice
9 Rivlin.
10 CONGRESSMAN RYAN: I'm not sure that John
11 Maynard Keynes would even be a Keynesian today based on
12 where we are. What I mean when I say that is, deficits
13 are here, it's obvious there's nothing you can do about
14 it in the very short term.
15 What is driving those deficits is an
16 excessive spending with more borrowing that doesn't
17 really do a lot to grow the economy, lower
18 unemployment, that's not good deficits. Are we
19 lowering tax rates to produce incentives for
20 entrepreneurs, for risk takers to get out there and
21 create jobs, that's good.
22 Here's the economic climate in the future.
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1 2010, we're growing. Not nearly as fast as we should
2 coming out of the kind of recession we had. But what's
3 coming in 2011? Tax rates on capital, tax rates on
4 labor, tax rates on income.
5 It is a bad climate for a risk taker, for an
6 entrepreneur, for a small business person. The federal
7 reserves are clearly going to be hitting the brakes,
8 they're going to be sopping up the money supply.
9 So we're going to go from easy money to tight
10 money, from lower tax rates to higher tax rates. That
11 is not a good recipe for economic growth. And that's
12 right, economic growth, job creation, going from
13 collecting unemployment to paying taxes is one of the
14 important things we need to do.
15 But what's behind this recession and these
16 deficits is this huge massive structural problem in
17 entitlement crisis. An entitlement crisis that is
18 going to sink us that is a predictable forthcoming debt
19 crisis.
20 And that is why we don't have a lot of margin
21 for error like we used to coming out of recessions
22 because our debt to GDP ratio is so much higher then it
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1 ever used to be and it's on an unsustainable
2 trajectory. It goes to levels that the models can't
3 even predict what would happen to our economy.
4 GWEN IFILL: Alice Rivlin.
5 ALICE RIVLIN: I think the American people
6 are smart enough to think about two things at the same
7 time. I'm not sure that --
8 LAWRENCE MISHEL: If we talk about them.
9 ALICE RIVLIN: I'm not sure that Larry thinks
10 that. I agree, we are in a crisis, a very deep
11 recession now. We need to grow the economy. The
12 increase in the deficit that we have had I believe was
13 absolutely necessary, part of it was automatic because
14 of the recession.
15 Some of it reflected the things we needed to
16 do to help grow the economy. But while we're doing
17 that we have to think about the future. And there are
18 things we could do now that would reduce the deficits
19 in the future that wouldn't hurt the recovery at all.
20 CONGRESSMAN RYAN: It would actually help it.
21 ALICE RIVLIN: Yes.
22 GWEN IFILL: For instance?
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1 ALICE RIVLIN: For instance. Well actually I
2 think there's been too much talk already in this
3 meeting about Social Security. But I'll come back to
4 it because it's an easy example.
5 We know that the Social Security system is
6 out of balance. The things that we need to do to get
7 back in balance might include raising the retirement
8 age in the long run future, changing the way benefits
9 are calculated so that upper income people don't get as
10 many of them.
11 But you would never do that for people who
12 are already retired or people who are about to retire.
13 So doing those things doesn't hurt the recovery effort.
14 It doesn't damage the recovery at all or the
15 current benefits of people who are already retired.
16 But it would give confidence to our creditors that we
17 have our house in order. That we're actually thinking
18 ahead.
19 That we aren't just thinking about the next
20 six months or the next two years. We realize that we
21 got something looming at us and we're grown up enough
22 to do something about it.
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1 GWEN IFILL: Ask Greece about giving
2 confidence to creditors in a debt crisis. Let me ask
3 Neera Tanden, because really we could spend the entire
4 time talking about Social Security, you're right.
5 But I am curious about something that came
6 out yesterday in the meeting of the Debt Commission.
7 Which is someone asked, so what is the big fish in they
8 sea of options here, of ways to reduce the deficit.
9 And the reply, I think from Bob Reischauer, was there's
10 one big shark and it's health care and all the rest are
11 sardines.
12 So is health care on the table? Should it be
13 on the table, this brand new bill we passed for cost
14 reduction, deficit reduction?
15 NEERA TANDEN: Well I think what's critical
16 is that bill was a framework. And I think it's very
17 incumbent on the Administration to ensure that we have
18 aggressive action to ensure that we have the kinds of
19 savings --
20 GWEN IFILL: Framework, really?
21 NEERA TANDEN: I know, having gone through
22 that --
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1 GWEN IFILL: All that for a framework?
2 NEERA TANDEN: Having gone through that very
3 long period of discussion on health care and having a
4 lot of battle scars around it. But around the issues
5 the payment reform.
6 There was aggressive deficit reduction in the
7 bill. This was $100 billion dollars over the first
8 year, over $100 billion dollars over the first 10 years
9 and a trillion dollars over the second 10 years. So I
10 think health care has done -- is actually helping us
11 with our long term deficit picture, health care reform.
12 But there are a variety initiatives in the
13 legislation, payment reforms that actually change the
14 way, are attempting to change the way we pay for health
15 care. And those are a little bit of a framework,
16 they're demonstrations, they're grants, they're
17 programs that will ensure that we have models for
18 changing the system.
19 Most important is for the Administration to
20 really lead on that and ensure that we have aggressive
21 action and that we're driving the system. That that's
22 going -- that those initiatives are transforming the
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1 way we pay for health care away from a fee for service
2 model, more for paying for quality. Giving less and
3 fewer incentives for overuse.
4 And I think it's really important for the
5 Administration to ensure that we capture those savings
6 by taking aggressive action to do so. I think those
7 are actually better ways to change the system then some
8 of the issues around vouchers and other ideas that
9 others have had.
10 GWEN IFILL: Congressman Ryan.
11 CONGRESSMAN RYAN: Well first on Social
12 Security, to save time, I agree with everything that
13 Alice Rivlin said. So ditto on your point.
14 ALICE RIVLIN: Thank you, I appreciate that.
15 LAWRENCE MISHEL: Let me dissent.
16 NEERA TANDEN: Yeah, we'll go the other way.
17 CONGRESSMAN RYAN: So on health care we see
18 things a little differently
19 NEERA TANDEN: Yeah.
20 CONGRESSMAN RYAN: Just to say the least I
21 think suffice it to say.
22 NEERA TANDEN: Yeah I think.
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1 CONGRESSMAN RYAN: We got an interesting
2 report from the Chief Actuary, Rick Foster at Medicare,
3 on Friday. Our national health expenditures increased
4 $311 billion dollars. The federal commitment to health
5 care increases $251 billion dollars.
6 As soon as this dock fix is fully passed the
7 claim of deficit reduction evaporates right away. The
8 only way under this kind of an architecture of a health
9 care system, to achieve these kinds of savings, these
10 fiscal savings is to deeply and systematically ration
11 care.
12 I know ration's a word that people don't like
13 to use and it happens and it occurs in many ways, but I
14 don't think it ought to occur primarily from
15 Washington. And so I think this bill, the health care
16 framework's a fiscal train wreck.
17 We used to say the big three entitlements,
18 Medicare, Medicaid, Social Security. Well we got four
19 now. And this fourth one basically says to people once
20 it's up an running, if you make less than $100,000 a
21 year, which is most people in America, and your health
22 care expenses exceed anywhere from 2 to 9 percent of
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1 your income don't worry about it, the Federal
2 Government's got you covered, we're going pick up the
3 rest of the tab.
4 That is the creation of the largest
5 entitlement we've had. It's the biggest piece of
6 social legislation to have passed since 1965. And I
7 have no doubt in my mind that it's going to exacerbate
8 our fiscal problems.
9 GWEN IFILL:. I'm going to let Neera Tanden
10 respond and then I'm going to keep this going.
11 NEERA TANDEN:. Yeah, just briefly. What the
12 Chief Actuary found is that when you cover 30 million
13 people is costs money to do so. So that's what the
14 Chief Actuary found.
15 CONGRESSMAN RYAN:. But spending's going up.
16 NEERA TANDEN:. Yeah, spending goes up but he
17 amount of money we're paying for each person who had
18 health insurance goes down. So we have a trajectory in
19 which we're actually lowering costs per person who has
20 insurance. And I think that all of recognize that
21 that's going to cost money. But what the Chief Actuary
22 overall found is that we actually are saving money over
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1 the long term.
2 And so I think the issue -- I think that what
3 we should recognize from this is that we have greater
4 efficiencies when we actually -- what the Chief Actuary
5 found is when you actually insure people, there's less
6 cost shifting over the long haul and we have
7 efficiencies that way.
8 In terms of other issues around this, CBO,
9 you know someone we generally all agree with, says
10 we'll have a trillion dollars of savings in the second
11 decade and we recognize, we do -- we are insuring 30
12 million people.
13 We do create a system where people have a
14 right to health care and that that's an important
15 thing. We don't -- no one should say that we're not
16 changing the system to ensure everyone has health care.
17 GWEN IFILL:. We have very efficiently
18 stumbled right into two hot buttons right away. I'm
19 very proud of you.
20 CONGRESSMAN RYAN:. I could go into that but.
21 NEERA TANDEN:. Yeah, we'll go back and forth
22 I'm sure.
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1 GWEN IFILL:. And we'll keep coming back to
2 them but it makes the point which I guess is the
3 problem with this whole conversation we're having all
4 day long. Which is, what do we have the stomach for in
5 this country?
6 LAWRENCE MISHEL:. Gwen you know that's the
7 way some people are framing it. I absolutely disagree
8 that its about what kind of spinach we want to eat.
9 This debate is not what Michael Peterson said, it's a
10 simple matter of math.
11 It's about what kind of nation we want. What
12 are our priorities? What do we want to spend on? What
13 do we want to tax for? What we want to be -- let me
14 give the Social Security as an example. And I won't be
15 long.
16 GWEN IFILL:. That's okay.
17 LAWRENCE MISHEL:. We have a Social Security
18 shortfall. That is something that we can address. It
19 happens to be that we can actually pay every benefit
20 promised for the next 30 years or so. Absolutely, you
21 know it's the least of our problems.
22 But cavalierly, like frankly Lesley Stahl did
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1 earlier, said well let's raise the retirement age. But
2 the fact is that she didn't know that retirement --
3 life expectancy grew a lot over the last three decades.
4 However, it only really grew for the people
5 in the upper half of the income distribution. People
6 in the bottom half of the income distribution are not
7 living longer. So we have a fundamental problem of
8 inequality that we have to deal with.
9 We also have a problem of retirement
10 insecurity. We just saw a massive loss of wealth.
11 401k's are now derisively and appropriately called
12 201k's. If we actually reduce Social Security benefits
13 by raising the retirement age or some other way, we're
14 actually exacerbating a problem.
15 So the problem we have is, I'm not talking
16 about a Social Security shortfall, but what are we
17 going to do about retirement in this country?
18 GWEN IFILL:. Alice Rivlin.
19 ALICE RIVLIN:. I agree with Larry, not about
20 the fate of Social Security but about his basic premise
21 which is, it's about what kind of a future do we want
22 for the U.S. economy.
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1 But I think aside from all the gloom and doom
2 that this crisis should be seen as a big opportunity.
3 For example, we know that we have a tax system which is
4 inefficient and doesn't raise as much revenue as it
5 could from a fairer, simpler tax system that would be
6 better for the economy.
7 We know we have a very inefficient health
8 system. And we've talked about --
9 GWEN IFILL:. You want to hold your
10 microphone up.
11 ALICE RIVLIN:. We've talked about fee for
12 service and we need thorough reform.
13 CONGRESSMAN RYAN:. You're mic is going out.
14 GWEN IFILL:. Let's fiddle for a minute.
15 ALICE RIVLIN:. Sorry.
16 GWEN IFILL:. Okay, you got it.
17 ALICE RIVLIN:. Better?
18 NEERA TANDEN:. Right.
19 CONGRESSMAN RYAN:. Don't move.
20 [Laughter.]
21 ALICE RIVLIN:. Okay, we know that we have a
22 very inefficient health system and that we need to make
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1 it more efficient. In a way, that's kind of an
2 advantage, the fact that we spend more than other
3 countries. We've got a lot of inefficiency and
4 ineffective care that we can get out of the system
5 before we have to do any rationing.
6 GWEN IFILL:. Congressman?
7 CONGRESSMAN RYAN:. I agree in many ways with
8 what you said. First of all, we've got to come up with
9 better ways to help assist retirement. You know, it's
10 the three legged stool. The tax system penalizes lots
11 of saving and investing for the future.
12 We need to incentivize those things. So we
13 got to give people better tools to better prepare for
14 retirement. This is not a spinach eating exercise.
15 This is an exercise where if we do this right, we will
16 have a more prosperous future.
17 Look, the Congressional Budget Office, and
18 let's use the CBO, the Congressional Budget Office is
19 telling us, we are giving the next generation a lower
20 standard of living. We have never done that before.
21 If we turn this thing around, if we actually, per
22 capita GDP is going down in the future, a lower
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1 standard of living.
2 LAWRENCE MISHEL:. They say --
3 CONGRESSMAN RYAN:. I'll send you the chart.
4 LAWRENCE MISHEL:. It's going to grow two and
5 a half percent a year, our productivity. How can it be
6 a lower standard --
7 GWEN IFILL:. We're going to pretend this is
8 a news hour segment and let everybody finish their
9 sentences.
10 [Laughter.]
11 CONGRESSMAN RYAN:. Look at the alternative
12 fiscal scenario and look at the CBO's projections
13 forward. The point we're saying is, because of the
14 debt and deficit that we're bequeathing the next
15 generation, we are giving the next generation a lower
16 standard of living.
17 If we get off that path and fix this, we will
18 have a more prosperous future. We will have higher
19 living standards, better jobs, more prosperity. This
20 is not pain in root canal. This is doing what we need
21 to do to make sure that we can grow and prosper and
22 have opportunity.
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1 Look, the big difference in philosophies that
2 we have is what size of government are we going to
3 have. And from my perspective, that determines how
4 much individual opportunity and achievement are you
5 going to be able to have.
6 Are you going to be able to reach your
7 destiny and tap into your potential? That's a
8 philosophy thing, I don't want to get into that. The
9 point is --
10 GWEN IFILL:. That's a perfect point for Bob
11 to jump in I think actually. You're late, but we're
12 going to put you into the deep end of the pool here as
13 punishment.
14 BOB GREENSTEIN:. I really apologize.
15 GWEN IFILL:. That's okay.
16 BOB GREENSTEIN:. 50 minutes for me to get a
17 cab this morning.
18 GWEN IFILL:. We understand lord knows in
19 this room. But tell us about this, the differences in
20 philosophy is what we're talking about here. Whether
21 it's about how -- what the problem is, who's
22 responsibility solving the problem is?
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1 Whether Americans have stomach for the
2 problem, that should be what's driving the solution.
3 All of these things we've been talking about on the
4 table. We touched on health care, Social Security,
5 we've been having a fabulous time. How would you
6 define the problem?
7 BOB GREENSTEIN:. The problem is not the
8 immediate deficits, which are necessary to deal with
9 the most severe economic downturn since the depression.
10 And I think we go in the wrong direction when
11 we start saying things like we can't afford to extend
12 unemployment benefits which we need even for jobs so
13 that those workers will have money in their pockets to
14 buy products and businesses don't lay off more jobs.
15 The problem is the long term structural
16 imbalance between the level of revenues that we bring
17 in and the amount that we expend. And I don't think
18 there's any mystery. That is the core of the problem.
19 And we have to deal with that long term structural
20 imbalance.
21 GWEN IFILL:. Well let me turn the corner
22 then to something which I'll direct to you first and
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1 then to the other members of the panel which is, taxes.
2 Pete Peterson, among others, believes that that is
3 something that we ridiculously take off the table all
4 the time.
5 When in fact, that's part of the solution to
6 the problem. Not the entire solution, but part of it.
7 How much of the solution do you think it ought to be?
8 BOB GREENSTEIN:. Well the first point is the
9 key one. Nothing can be off the table and certainly
10 not revenues. Revenues has to be a substantial part of
11 the problem, especially in the short term. Let me
12 explain why.
13 Health care costs are the single greatest
14 contributor to the problem. Health care costs system
15 wide. As Bob Reischauer said yesterday to the
16 Commission, I know you're a member of the Commission
17 Congressman Ryan, you cannot year after year have
18 Medicare and Medicaid costs significantly slower than
19 health care costs system wide, it can't be done.
20 Or at least it can't be down without a widely
21 two-tiered system in which we throw lots of our
22 citizens out to dry and don't let them have the
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1 benefits of modern medicine. So we have to find ways
2 to slow the rates of growth of health care costs system
3 wide.
4 But we don't know all the ways to do that.
5 It's going to take us time. It's going to be a number
6 of years before we get major savings there. We know we
7 have to close the long term Social Security shortfall.
8 But there's bipartisan agreement that we're
9 not going to slash benefits for people who are already
10 retired today. Any changes in Social Security will be
11 made gradually and phased in over a long period of time
12 as the Greenspan Commission did in 1983.
13 That means not only that in the short run the
14 single major place that you get most deficit reduction
15 from is going to have to be revenues. And over the
16 long run it's going to have to be a balance.
17 In the long run, the single largest
18 contributor I think has to be from slowing the rate of
19 growth of health care costs but no one thinks we can
20 slow health care costs so much that you could do the
21 whole job there. Because there will be medical
22 breakthroughs and they will save lives and they will
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1 improve health, but they will add to costs.
2 GWEN IFILL:. Let me ask Neera Tanden to
3 weigh in on that, that's her expertise. Is that true,
4 is that an accurate take -- your accurate take on what
5 happens to health care?
6 NEERA TANDEN:. Well I agree totally with Bob
7 that there's -- that it will take time for us to
8 realize the savings, the potential of savings that are
9 in the legislation itself. But that I believe you
10 know, that CBO was very conservative and that we could
11 realize greater savings when we ramp up those -- when
12 we ramp those up.
13 But I don't think that we should -- we should
14 live in a world where we expect that health care
15 inflation will dramatically decrease or get to place
16 where we -- it's in line with everything else. And so
17 that has to be part of our understanding of what the
18 long term picture is. And part of how we make tough
19 decisions about the budget overall.
20 GWEN IFILL:. Alice Rivlin.
21 ALICE RIVLIN:. Oh, I agree with that. But I
22 think we have to start now to strengthen the health
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1 care framework as Neera said that's already in the
2 Bill, to give it more teeth, and to think hard about
3 how we get these health care savings down the line.
4 Because they aren't going to happen tomorrow
5 and we're never going to fix that problem. We're going
6 to have breakthroughs in health care that people want
7 and that they need to have. And health care's going to
8 be pressing on us forever.
9 NEERA TANDEN:. And the --
10 GWEN IFILL:. What about revenues?
11 ALICE RIVLIN:. Revenues have to be part of
12 the solution. I believe we can shift our tax system to
13 a much more fair and productive one. That can mean
14 taking our income tax, making the base much broader,
15 getting rid of a lot of the special provisions.
16 Now it's easy to say that in the abstract.
17 Some of them are things that people really care about
18 like the mortgage interest deduction. But if there
19 ever was a moment when we have proved that high end --
20 we over billed high end housing, guess what we did it
21 and the mortgage interest deduction contributes to
22 that. And we don't need to abolish it, we need to
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1 phase it down.
2 GWEN IFILL:. Congressman, you live in the
3 world of the reality as opposed to the abstract. How
4 much of this --
5 CONGRESSMAN RYAN:. I like to think so.
6 GWEN IFILL:. Well some days.
7 [Laughter.]
8 NEERA TANDEN:. When did we start calling
9 Washington that?
10 GWEN IFILL:. I know, what is --
11 CONGRESSMAN RYAN:. I live in Janesville,
12 Wisconsin.
13 GWEN IFILL:. I'm sorry, I had a moment
14 there.
15 [Laughter.]
16 GWEN IFILL:. Assuming for a moment that you
17 live in the world of reality and not in the abstract,
18 how's that?
19 CONGRESSMAN RYAN:. That's on the weekends
20 when I go home to Janesville.
21 GWEN IFILL:. Exactly. Let's talk about
22 taxes and whether that is part of the solution or
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1 should be or even can be?
2 CONGRESSMAN RYAN:. Well I try not to get
3 into table talk as a Commission member, meaning what's
4 on and off. This is my 12th year in Congress. I have
5 served in Democratic and Republican majorities.
6 Here's the problem on taxes, when you take
7 pressure off of the need to reduce spending, you never
8 end up reducing spending. It doesn't matter who's
9 running Washington. That's the problem.
10 So if we simply go to the quick fix which is
11 raise the revenue line to come closer to the spending
12 line, you never end up getting that spending line down.
13 We need to keep the focus on the problem, and this is
14 my opinion, the problem is spending, it's not revenues.
15 And of course we should clean up our tax
16 system. It's a terrible tax system. It penalizes
17 growth, it's making us internationally not competitive.
18 I've obviously produced reforms myself in my bill. But
19 I think we need to focus on that spending line. And
20 like Bob and Alice said, what really matters is the
21 trajectory.
22 Heritage and Brooking did this paper a year
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1 or two ago of a bunch of budget experts that Alice I
2 think, and Stuart Butler headed which I thought was
3 very significant. And it said, let's score keep these
4 things long term. Meaning, let's show the trajectory
5 of American fiscal balance sheet.
6 And if we actually lowered our trajectory
7 because these saving in the health care take awhile to
8 accumulate, but we actually put these reforms in place
9 and show the out year differences, it will buy us
10 breathing space in the credit markets. It will revive
11 some confidence in the America economy going forward
12 and that will help us in the near term with growth as
13 well I think.
14 GWEN IFILL:. Bob and then Larry.
15 BOB GREENSTEIN:. Yeah, well let me disagree
16 with Congressman Ryan here. I do not think it is
17 accurate to say this is simply a spending problem. It
18 is an imbalance between revenues and spending.
19 Let's remember that eight years ago, nine
20 years ago in 2001 the Congressional Budget Office
21 forecasted surpluses as far as the eye could see.
22 Chairman Greenspan worried that the surpluses were too
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1 large at that point. A number of factors intervened
2 but one of the key ones was massive tax cuts that were
3 not paid for.
4 I know this isn't going to happen
5 politically, but it's interesting to note that if the
6 policy makers adopted a policy that any of the Bush tax
7 cuts that they wanted to extend, they would pay for in
8 non-deficit finance the 40 percent of the fiscal gap
9 through 2050 would go away.
10 A second key point is this distinction
11 between spending and taxes is very artificial. We have
12 over $1 trillion dollars a year in what the experts
13 call tax expenditures. This is spending that uses the
14 tax code as the vehicle for the spending.
15 That $1 trillion dollars a year is nearly as
16 much as the current cost of Social Security and
17 Medicare combined and it is double everything we spend
18 on every domestic non-entitlement program, veteran's
19 health, education, environmental protection, protecting
20 the borders, everything combined is half of what these
21 tax expenditures add up to.
22 I remember serving on the last deficit
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1 commission, the Kerrey-Danforth Commission in '94, and
2 when Mr. Greenspan testified before us at one point he
3 called these tax entitlements, they are. They're
4 entitlements delivered through the tax code.
5 So if we want to keep the pressure on
6 spending Congressman, the pressure should be on all the
7 spending that's in the tax code as well as the spending
8 that's on the other side of the budget.
9 GWEN IFILL:. Larry?
10 LAWRENCE MISHEL:. Ditto.
11 GWEN IFILL:. What he said.
12 LAWRENCE MISHEL:. Let me raise another issue
13 which obviously --
14 NEERA TANDEN:. Your mic -- you might want to
15 use the --
16 CONGRESSMAN RYAN:. Use the other one over
17 there.
18 LAWRENCE MISHEL:. One of my concerns about
19 the deficit discussion is the excitable nature of the
20 fear mongering. The idea that somehow, to respectfully
21 disagree that our standard of living is going to be
22 lower 30 years from now when productivity growth is
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1 going to two percent a year, per capita income is going
2 to be far higher 30 years from now.
3 CONGRESSMAN RYAN:. If our debt is 300 or 400
4 percent of GDP?
5 LAWRENCE MISHEL:. Yeah, exactly. And
6 secondly, you know you get the fear mongering also
7 from, unfortunately Senator Simpson, who's a collegial
8 funny guy as we all saw.
9 On the talk shows he said we can't grow our
10 way out of this even if we had 10 percent a year
11 growth. Well in fact, the Commission has a goal of in
12 2015, and growth between now and then is supposed to be
13 three or four percent.
14 If only it were five percent a year between
15 now and then it would hit it's goal without breaking a
16 sweat, without far from getting the 10 percent. Now
17 where he gets you can have 10 percent a year growth and
18 we'd still have a problem, seems untethered from
19 economic analysis.
20 So I just want to call attention to we need
21 to be really careful about how we approach things.
22 Because the public needs to know that there is a
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1 challenge we have, but if it is fear mongering, false
2 crisis mongering we won't get the decisions I think
3 that are wise.
4 CONGRESSMAN RYAN:. So citing CBO numbers is
5 false crisis fear mongering?
6 LAWRENCE MISHEL:. We can huddle afterwards
7 but I don't think the CBO --
8 CONGRESSMAN RYAN:. Okay.
9 LAWRENCE MISHEL:. -- shows that per capita
10 income is going to be lower 30 years from now even
11 after taxes then it is now.
12 GWEN IFILL:. Alice.
13 ALICE RIVLIN:. I think we've got fear
14 mongering on one side and denial on the other and I
15 rather think Larry's in the denial camp.
16 [Applause.]
17 ALICE RIVLIN:. But let me come back to what
18 Bob was saying and I was glad to hear him reference the
19 surplus that we actually had at the end of the 90's.
20 We got that surplus partly because the
21 economy was growing quite rapidly. And it was growing
22 quite rapidly at then tax rates which have since been
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1 cut. So there isn't much evidence that going back to
2 those tax rates, eventually, not now Larry, would be
3 very deleterious to growth.
4 And the other way we got it was by very
5 strict budget rules that meant that spending went up
6 very slowly throughout the 90's until the end of the
7 decade. And that was real restraint, bipartisan
8 restraint on the part of the Congress, which was
9 controlled for much of that period by the Republicans
10 and a Democratic administration. It's harder now, but
11 the spending restraint is not impossible.
12 GWEN IFILL:. Bob.
13 BOB GREENSTEIN:. There's an important point
14 here in what Alice just said. And I think it is that
15 restraints, when they're tough but realistic can work.
16 When you try to impose restraints, targets,
17 whatever they may be, that look good for those policy
18 makers who are putting them in place and don't take
19 effect for a number of years, and go so far that
20 they're wildly, politically unrealistic, that doesn't
21 help at all. It can even be a negative because that's
22 when the system blows them away.
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