>> [inaudible] i am thrilled to be here today to talk about an important topic, and in the interest and

in the spirit of the conversation that the peterson foundation has been having so far, i want to talk come start by talking to you in a bipartisan manner terry. tim pawlenty announced he's running for president and said last week he feels americans are not looking this in the eye, that the need to slash budgets without regard to sacred cows. is that even possible? >> i think it is, but i think it needs to make sense. let's not forget the terrible bind america is in right now is that in a classic economic terms this is the worst time to cut deficits. that's the relentless stream but paul krugman writes in the new york times every day. there is a chance that if there is zero demand for private

capital it's not that low interest rates eventually zero and less activity in the private-sector if you cut public investment at the same time that actually you will lose more revenue in the declining economic activity and tax revenue than you get from the spending cuts and it's going to be interesting to see what happens in the united kingdom on that because the early results are not particularly encouraging. the fury of the budget is the same one, the same theory the european central bank seems to be driving that even though interest rates are zero the benefit you normally get from reducing the debt is to ease interest rates and you get a big increase in investment they think there's some sort of confidence premium in doing it right now when things are fairly flat. i thought the genius of the simpson report was the

recommended big structural long-term changes and ask that we not start until next year when the recovery was clearly plainly under way, and the work that pete peterson and michael and the whole group in the peterson foundation had done is based on dealing with this over the long run, so my view is if you deal with it over the long run and tell the american people the truth i think that we can work through this. now i know some people will say the election in new york yesterday for congress proves that's not true but i completely disagree with sat. the republicans ran to the left of the democrats on medicare in the last election. the excoriated us for all the savings that is now embedded in congressman rye in's budget carroll and the plane to the claim we cut medicare when what they did is to cut the reimbursement rate for medicare

advantage and put the money into lengthening the life of the medicare trust fund and closing the doughnut hole, which according to kathleen sebelius of the paper is saving money because we are also requiring a discount on the drugs bought in volume which we should do i think. >> but do you think that the recent new york was a referendum on this issue or was it about something else? it's sometimes easy to over interpret. >> it was about medicare that the only point i'm trying to make -- [laughter] the only point i'm trying to make was an inevitable consequence of the fact the republicans ran to the less of the democrats. the attack the democrats for cutting medicare it wasn't a true charge and the democrats decided to keep what they had done a secret so the attack would certainly work, go figure. so it happened. but all i am saying is you

shouldn't draw the conclusion that the new york race means nobody can do anything to slow the rate of medicare cost. i just don't agree with that. i think what you said to draw the conclusion that the people made a judgment that the republican budget is not the right one. i agree with that, but i am afraid that the democrats will draw the conclusion that because congressman ryan's proposal i think is not the best one that we shouldn't do anything and i completely disagree with that. there's lots of things you can do to bring down medicare costs. when i was president, we passed the medicare reform bill bipartisan, and it saved 50% more than it was estimated to save in the first two years so much so the congress went back and actually increased the reimbursement rates and over a ten year period to keep in mind this is more than a decade ago

it saved 23% more than congressional budget office more than $700 billion over a decade. so you can do this. >> how different are things more than a decade ago when he faced 300 billion deficits when you came in office and there were surpluses as far as the eye could see? >> the deficit problem is worse because let's go back to the bidding. this started, we had never run permanent structural deficits of any size before 1981 when the american people what the argument and the a.d. election that the government was a source of all evil and there was no such thing as a good tax or a bad tax cut. that was the beginning of america's involvement with structural deficits. the deficits -- the debt of the country was quadrupled between 1981 to 1993. then we had for surplus budgets

about $600 billion down on the debt, and my last budget obviously was mostly president bush's first year. we were in a recession. he proposed tax cuts, but continued to propose them so we doubled that again in the next eight years and then we had the financial meltdown which devastated the revenue stream of the government. so, this is a more severe problem, and it's more severe because i became president at hill land of the traditional cycle recession, and when we had a clearly high interest rates because of the debt this recession was caused by a financial meltdown and the recovery has been slow even with the interest rates it's more like what japan went through after their collapse. these financial real-estate collapse is normally take longer to get out of the in traditional business cycle recessions, so

it's tougher now. >> democrats can oversells the idea that in the years when you were president everything was rosy and now that the republicans have been in charge for eight years and the democrats are just taking over the should be able to fix it. they are overselling that? >> i think that they are fundamentally right that the approach the took was better, but the americans if you look at the last 30 years we only get higher when things are messed up so people want to feel fixed. in 1994 we lost the congress because people didn't feel fixed yet and we were vulnerable to claims that we were socialist and all this stuff and then in 2010 people didn't feel fixed yet but in fact a lot of good things were going on underneath the surface, including the return of america to prominence in manufacturing and the race for clean energy technology. and i hope those two things will

not be reversed in whenever bipartisan resolutions workout. i still believe that essentially the same dynamics will take hold and we will have a bipartisan resolution vote because the work vice president biden and the gang of six, now fight is doing, and because they want to get reelected and people will want to see some progress on this. >> the debt ceiling there's a new poll today in "the washington post" that he research center did that shows more people are concerned about the potential of raising the debt ceiling the and of the government default. the argument that this administration is making that there will be disaster of the debt ceiling is not raised its going to send the wrong message to the world it's not taking hold with the american people. why is that? >> because they never lived through it. nobody knows what will happen. i don't think in a lot of these areas pulling can be useful, but

they can't be paralyzed because in the end people hire the president and the converse to win for them coming and to win for america, and a lot of the most important things i did as president or on popular. 80% of the people were against the mexican bailout, 74% were against bringing troops home, majority were against what we did in bosnia and kosovo when we did it. lots of other things in helping brazil and the things we did in america on the economy were not wildly popular. but i think you have to make these decisions based on where you think the end will bring you out. of course if the end doesn't bring you out for a decade then your toast. but we have elections every two years it's impossible to guarantee the results for all of these structural changes within

that amount of time, and i think that's what happened in '94 and in 2010. >> isn't leadership about bringing people along even for the tough decisions? >> absolutely. but i think what you have to do there is as far as i know there's been no national address and the consequences of america defaulting on its debt. >> should there be? >> yes but not yet. i'm not sure it's going to happen. whatever the polls say. if we default on the debt once for a few days, it might not be calamitous, but if people felt we were not going to pay our bills anymore than they would stop buying our debt. one of the really troubling things to me about the decision to maintain all these big tax

cuts and not address some of the other structural problems of the debt is that we borrow increasing amounts of it from countries that enjoy with us and as a result of that, what we should have been doing in the last decade which is going to a future debt was less totally dependent on finance housing and consumer spending and have more manufacturing and green technology that required us both to have more trade agreements and more vigorously enforce the ones we've got. and since the people who were learning us money were the same people that had big trade surpluses with us are treated for slight drop to 80% in the last decade, 80% for good reasons. get up tomorrow and have an extra cup of coffee and knock the living daylights out of your personal kitfield ander could you get a loan that they? so this is going to take some

time to work out, but the main point i want to make that we started with is i don't think that the democrats or the republicans should conclude that we can't allow ourselves to be so paralyzed by the president and by people's preference for present certainty in the benefits that we stop reading the future. america has always been about the future can and if we stop being a future country we are going to be in real trouble. estimates we have this immediate logjam whether it is the gang of five for the meetings that happening that vice president joe biden is trying to negotiate. the basic disagreement seems to be whether there will be revenue increase is whether you call

them fees or taxes you're in the room and want to bust through some sort of agreement. how do you do that? >> i think you have to first of all say that our revenues when i was president were very low as a percentage of our gdp but that's because our growth rate was so high, and there is a revenue premium to high growth rates of high growth rates are not achieved by low taxes alone at the expense of fiscal responsibility. that is the lesson of my age years that is applicable to this eight years. a arithmetics still matter. as one of my greatest one-liners when people say it would agree to why did you bring to washington when he became president i always said a arithmetics. so the idea that the lower the tax rates are the better everything will be is then

debunked now for 40 years that's both in positive terms when i was president and an - terms by quadrupling the debt once and then again. so i mean how many times we have to see this moving forward before we know what in this? on the other hand, could you have taxes that are too high or too stupid? absolutely. so what i think we have to do is to say that would it be good if the federal revenues were somewhere between 20 to 22% no more of robust growth rates and maybe someday they would be lower again like they were when i was president? yeah. they probably can't get as low as they work until after the baby boomers. some of this is demographic. and keep in mind, the grand children of the baby boomers are more numerous than their parents, so we will have a demographic relief from social security after 18 years and medicare after about 20, and that will be a good thing.

but i think you just have to make the point -- i also think that we may have some room for tax reform here that one of the really impressive accomplishments i think of the simpsons commission was pointing out how much money there is in the so-called tax expenditures, and i would favor returning individual rates to where they were when i was president, and maybe even across the board but certainly for the upper income people. the i think you ought to do something with that tax expenditures. on corporate taxes i have a little different take. i raise corporate tax rates and my father was important because the percentage of the federal pie covered by corporate taxation went the way down in the 12 years before i was president. but it is very important to be internationally competitive. so our rates are fairly high compared to all our competitors.

but our the polls are also fairly high. so if you get rid of a lot of the tax expenditures on the corporate side you could lower rates and still raise the same amount of money and that would make us i think look more competitive and be more competitive but then everybody would have to pay something. you wouldn't have some corporations paying 35% under and then others paying ten. >> you talked about arithmetics and i talked earlier about sacred cow. one of the pieces of arithmetic the peterson foundation and the six groups put on the table was reducing or eliminating the home mortgage interest deduction, however there was one. is that a reasonable and arithmetic target? >> i certainly think it can be reduced. there's no question at a million dollars it continues to inflation, and there is no question since it only goes to one home and so many people with a heck of a lot of money and the

absence is a determined to get enough so that something that should be reduced, and we need that -- here's what i think about how far down you should go. you need to look very carefully at these income levels and see how much in the quality has increased. and we need to try to structure the tax system that doesn't aggravate it. one of the reasons that america is not more productive in the rate is not higher is that from world war ii to roughly 1980 the bottom 90% of americans had 65% of the income in the top 10% at 35% and the top 1% at 9%. it was enough inequality to reward people for working hard, having good ideas come starting businesses, putting people to work and not so much inequality to deconstructed the capacity to

build a great middle class and a growing economy. the last 30 years those numbers have changed. the 90%, 60% drop to 52. the 10% has gone to 48. the 1% and 9% has gone to 21. so, that's too much inequality. it is not sustainable. and it's the kind of thing you get if you have all your economic growth and finance consumer spending and housing which is what happened before the meltdown, not enough attention has been given to what happened to america's economy before the financial meltdown in the last decade. we only had 2.5 million new jobs come and solve it will hire and 9/11 attacking that but most was we didn't have a source of new jobs in the decade that would support devolving diversified economies so that's what i think about that. i think, as you know, people like me should pay higher taxes

and i think we should be careful on home mortgage deduction and everything else not to do anything to would aggravate inequality at the middle class and lower levels. we've got the only time in the last 30 years when the bottom 20% income increased in the percentage terms as much as a top 20% was in the second four years i served because we have so many jobs and that it tightened the labour market because health care costs increased only as much as inflation for the first time and because we had a lot of support for the working families and for single mothers in the work force. in spite of that we didn't do anything to stop the increasing inequality benefiting the top 1%. so i just ask you all to think about that. i think that in the back of our mind we should realize that as we come out of this and create more jobs we ought to create more consumers and their requires the income distribution support a middle class income

and allow poor people to work their way into it. >> mr. president we solicited questions from the public direct to you and had de facebook audience vote on which one they wanted to be asked and the winner was a fellow named kent letcher of albany oregon and the question is why is there so much focus on reducing the indolent programs as opposed to the military or other forms of spending? >> welcome for the same reason the sat and weigel banks. that's where the money is. >> i think you do have a point. let's talk about it. non-defense discretionary spending is only about 13% of the budget. and that's -- there are savings to be had. the gao did a study i am sure a lot of you have seen which determines for example all the

different programs i think like 19 different adult literacy programs. that is just a small example but there is a few billion dollars. it's not -- it's not a significant amount and in terms of reinvestment in the future personally if it were me i personally would favor looking at that study, implementing all the things we did in the government plan which saves $136 billion over a ten year period and i would like to see that money reinvested in the non-defense discretionary spending that its future oriented and green technology bringing back manufacturing and biotechnology in a reauthorization and expansion of the new market initiative which rewards investments and relatively poor areas in america that's what i think should be done. there is money there and it's not dramatic. then on defense i agree defense

is 4% of our gross domestic product. medical spending is 17.2% and almost half of that is government insurance of some kind or another. so there's a lot more money in health care. also on social security was meant to be self sustaining and with the retirement of the baby boomers it won't be any more. but i think there are progressive and fair and decent ways to reform social security, and i think medicare and medicaid cannot produce savings in good conscience unless they are part of a comprehensive plan to bring down the rate of inflation in medical cost. you simply can't have medical costs, but three times the rate of inflation every year in and you can't justify america spending 17.2% for canada being the next highest country at 10.5, germany and france rate first and second for overall out

comes at 10%, and america ranking somewhere in the high 20s to 30s in the overall effectiveness of the health system. everybody just assumes we can't do everything about this but if you break down where we are out of whack with the rest of the world, you see that the biggest category is rooted in paying for a procedure instead of for health care. and having no comparative studies of cost and outcomes. pennsylvania i think is still the only state in the country requires all the hospitals to file the charge for various procedures and attempt to determine the competitive results. and what they find every year is there is literally no connection between what is charged and what results were given. so that's the biggest. the second biggest by far are the administrative costs and profit margins related to the

way we finance health care which is one of the things that is also a source of problems between the republicans and democrats because the republicans want to put more people than the insurance system and claim that individual consumers will have bargaining power. it's just not true. in 2009 and the death of the recession and before the passage of the health care bill so it wasn't available to blame insurance companies raise rates and in 2010 and this year claiming i'm sorry, i know we don't have cost raises but we have to have these huge reserves when of this terrible obamacare comes into reading to thousand 90 didn't have it to blame yet profits went up 26%, 5.5 million people lost their insurance, 3 million went on medicaid and a balloon that the deficits of the federal and state government. you can't have an unregulated defect a monopoly in most states one or two companies have 80% of the market.

and you don't if 30% of minister of cost in the system which is what it is to come the insurance companies, hospitals, the other providers, the employers and the individual the insured all the paperwork cost nobody else is over 19 this tune of $15 billion a year in the trillion dollar difference we can't have that. now there are other things. we have to need readmissions and medical errors, if we of the quote save a fortune and the government entity the va hospital network was the first in the country apparently to uniformly applied the procedures to reduce debt at missions and costs about 15% of the problem. lifestyle choices particularly related to obesity and exploding

diabetes are a result of that. $150 billion of this. and then we, according to the mckinsey study, we pay about $66 billion more for medicine and we would if we lived in any other country including the pharmaceutical producers and other countries. >> yet mr. president even supporters of the new health care law which you know the american public as previously split over, even they say that the health care law may not have done enough to address the things you're talking about to bring health care costs down. >> i agree but when my position, you know, when i was out there making appearances in the last campaign i said look this law is not perfect but this is a huge complex issue. what we should do is continue to improve, not repeal it. the argument for repeal i can give you in a second. i know this is a complicated issue and we haven't talked about malpractice reform or the end of life care which is a big

part of this, but the real reason there was a big push to repeal instead of to reform is one line in the health care law that says if you are in short in a big plan 85% of your premium has to go to health care and promotion if you're in a small plan 80%. and my goodness the insurance companies act like it's the end of the world but in minnesota where more and more plans pay for health care and pay for procedure they are already at 91% statewide. and if you take blue cross blue shield of north carolina for example there's already an 87%. it's not an unreasonable requirement and i believe it's going to hold. these things will bring down health care costs compared to the competitors over the next decade but we've got to do much more of them and basically there ought to be a national system like pennsylvania that has real reports on a regular basis about the cost and result. and will create, that will give

consumers power. and would have a huge impact if we do it. >> can i get back to the question for a minute because you said it is not the power that health care -- too i think there are savings. we have to include the defense. this gentleman's ? is there so much focus? most believe we need a strong defense and we do but increasingly are national security is affected by climate change from a resource depletion, the so-called power conflict of religious and other political conflicts, so the national security is going to have a broader meaning protecting the borders and all that. i think that some of these weapons systems have to be eliminated. now that congress eliminated and

believably we had the joint strike fighter which i spent a lot of money trying to develop and i believe that is why should a free service have to have its own fighter plane? it was a good idea. so when they save money on that the turnaround and say an engine might fall off let's give a whole nother company a contract to produce another in jim it was not a good thing. they got rid of it finally, but the marine corps also has to eliminate a fighting vehicles it is being produced as a 5 billion-dollar article to congress used to do that. we have 11 of groups the chinese navy has been dramatically modernizing. they have great diesel power submarines that go deep, fast and quiet but they only have one carrier. do we need 11? keep in mind every time you do that someone in america loses a job, but in the and, if the money is properly reinvested to get more jobs. that's what happened when we had

the base closing in my first term we just used those resources to build a different kind of economy. i think that there is no question the defense will have to be a bigger part of this than it has been so far. >> you touched on an important point which is there are economic trade-offs in the time the economy is struggling to rebound. while you were attempting to do these things how does this administration deal with its economic trade-off for instance if you decide to increase corporate taxes there's a strong argument to be made that you're also slowing down the, you doing that and if you cancel a weapons program, if you cancel a homeowner's aid assistance a matter how you interpret the actual effect is. the message you are sending as you are taking jobs away, taking support away at a time we are now back on our feet yet. >> i would come by and first to think the timing is important, i

think most of this should bite next year, not this year. >> because? >> because the economy is weak. >> not because the election? >> no. that he elections next week some will start before the election. it's driven by economics. second, i think that there should be an effort to take the gao study and other things that we now to cut as much prefer spending in the discretionary budgeting and reinvest in things that will create jobs. mostly manufacturing green technology and other areas. third let me say this again, i think our corporate tax rates can be lower in a way that will be an incentive to invest in america and will raise as much or more money if we won't lower the rates before we get as much

or more money out of the tax expenditure elam nations. it's not just individuals who get tax expenditures, corporations to come to wrecks of the corporate rate looks high of the bizarre thing is some people pay because of their operations are in america and they don't have the access to the deductions and others pay next to nothing so i think we can bring the rate down but we have to bring the tax expenditures down. then i see from the individual side again relating to creating jobs, we may want to move away altogether from the system that taxes labor at middle and lower levels and in come and tax things more. you can get rid of the payroll tax altogether which is a big deterrent to creating jobs. and if you impose a progressive

tax or have a tax on pollution comes so-called externality, and then create just as much money and invest more of it my problem is with the current dilemma we are in now is we need to get rid of this debt but we need to do it in a way that brings back investment. what happened when i passed the deficit reduction as we got a big drop in interest rates come spike in the bond prices, a decrease in private investment, 92% of herger hommes were private sector jobs. right now we don't have a strategy to get there or an easy path even though the banks have over $2 trillion in cash and only 160 according to the last in the bad mortgages. so whatever we do, what ever complex things we do, should be designed to trigger more bank

lending and more investment from corporate surpluses off in the united states so we get enough economic activity double boost revenue if you make these other changes. >> paul rifle approach dead on arrival is it the wrong argument to be having? >> i think that he's wrong to say no matter what happens yet no matter what the circumstances are, we won't touch taxes. i've already said by wouldn't be against lowering the corporate rate as long as you don't lose money but making sure everybody paid something. but my position is one of your tax rate exists now are perfect as compared with anybody paying 1 dollar more. the only way to make the tax system more perfect is to have it produced less revenue. and i think that's wrong. but i don't think that the democrats can say the same thing

about medicare, social security or anything else. the other thing is the medicare proposal is on the merits wrong. that is there is no reason to believe that if you cut a check to of the people on medicare all of a sudden they will have market power and drive down medicare costs and they will be better off. in all probability what will happen if the dismantle some of the other cost controls as medical costs will continue to go up and people will use less get sick and die quicker or they will be poor because they have to spend so much of their money on health care. in other words, the problem is rising medical costs. medicare is a part of a whole health care system that has a toxic rate of inflation and a spending base today that's not sustainable. it's also one of the major reasons people don't get pay raises. employers try to provide health care in a down economy that

takes the better increased revenue they allocate to labor to pay for the health care premium and to have nothing left to give pay raises. so i don't -- i did what congressman ryan for making this suggestion but on the merit it doesn't work and that's what i hope the lesson that we will draw from the new york election not that we can't talk about medicare and have to tiptoe around because we've got to have a system that brings health care costs in line with our competitors and we do have to go back to your popular opinion question we have to have a much deeper commitment than we've had to making sure americans understand the american health care system foss compare with others. americans are so historic we diverse to caring about or absorbing what our competitors are doing in some areas. we have to know what our competitors are doing in every area and has to matter to us. >> use a moment ago and i know you didn't mean a heck with the election next year but we are in

washington to follow politics and is there a stomach for grappling with these issues with an election they are living not only for the president obviously but also for congress. >> if i could reach a bipartisan agreement, -- >> de ifill. >> even if people disagree with the particulars, you have many examples of that at the end of the year when president and congress made an agreement on the taxing and i didn't agree with all of it, but i thought we should take it because it's the best deal he could get and i thought the republicans should take it from their point of view of the best they could get. the american people supported overwhelmingly even though there were things almost every american didn't like about it. there is a real hunger for us to do things. so a lot of these polls will shift if they reach the agreement, and i wouldn't put it past the president and the congress to be able to reach an

agreement next year because it is an election year and the republicans now have a majority in congress and they want to hold it. >> how do you know there is a hunter to do something big? >> you travel the country and the world. where do you get that from? >> i'm not sure there's a hunger to do something big there's a hunger to make an agreement >> but we haven't done enough, any of us to educate the american people. the main benefit of all this is to register in people's psyche that this is a huge problem. because none of us have a vote in congress i think mr. ryan is coming up the unless you're in congress unless you work in the white house, or the treasury department, you might not have an impact, but i think -- i think that the american people want us to work together to make the big problems of the country.

the only problem is we are not among the country anymore. we are the oldest democracy in history now, and every society that achieves an enormous success sometimes reaches a point where they have to reform or suffer the consequences of decline because the institutions no longer serve the purpose for which they were established as much as they preserved possessions of the leaders and the constituents of the institution. people get more interest in holding on to the president and creating the future. there's some of that in america now. and we have to create an appetite for the future again by showing people both the negative consequences of not doing it and also the positive consequences of doing it. the purpose of this is showing the negative consequences of not

being able to. we also need a pretty picture of the consequences of creating the future which requires us to deal with the debt. >> my next question is where you see the political consensus but i want to put it in the words of jim dickey was one of the members of the public to read from boulder colorado. what is the likelihood that the incumbents in the house and senate will vote for any kind of debt compromise or budget bill been holding the party want to get reelected? >> for i think the likelihood is greater than the democrats will do it and the republicans and moderate districts will do it. if there's any changes in revenues which can be tagged as revenue increases than in those districts where the tea party can control primary if you have a situation which costs senator bennett in utah because he dared to have a conversation with ron

wyden about health care reform in other words the situation is the problem, and so i think it's different from district to district and from state to state but there may be enough votes for a bipartisan consensus. i think it's going to be ironically easier to get the democrats to vote for the word is in consensus than republicans if they come from districts where the antitax theology school can to clear them heretics and banish them to the electoral hell. and if you think democrats are at a better position? why would you think that? i can't imagine. you think they are in a better position to agree to a consensus -- >> because we proved that we will do things that are controversial and a lot of us -- the only thing i think that is working on the democrats fitful in taking on controversy decision is how many got the

last election for doing things right on health care and the stimulus. but that is partly our fault because what i said, we didn't have a national campaign. for the first time since 1998 we ran a midterm election without a national message by the time we needed it for the and any time since 1994 and because we didn't have it we got the same result as we got a 94 but i still think democrats will work for a combination of spending cuts and revenue increases either from eliminating tax expenditures or changing rate structures. they are just more willing to do it, and i think the -- i think the democrats would vote for some changes in medicare, but they would want to believe that they would actually work to stabilize health care costs and not just make the elderly poor and more at risk. >> what should the national message be? should it be this, something larger, smaller?

.. it presents mutually beneficial trade relations, and you have to negotiate those and fight them through and work through the details. and assess things like the relative currency values if you want to have a balanced economy with the manufacturing sector and not be totally dependent on finance and consumer spending and housing. and so, you know, my view is

that we should say that is a part of it but it is not the only part of it. as i said, we will be able to sell this debt reduction thing a lot better and bring in the deficit back to a balance if we also have a positive picture of the america we are trying to create, the kinds of jobs we are trying to create, the opportunities we are trying to create. we have a lot of other issues here. college graduates are having trouble finding jobs now. bui dropped from first to 12th in the world for the first time since world war ii and the percentage of college graduates. we are still first sending young people to college but we dropped to 12 in degrees. we have a lot of things we can do that ordinary people will understand more than the details of cbo scoring or the seven things you have to do if you want to get health care costs under control. and so i think that their political strategy here is to not be to run away from this, but to marry this to a positive

program to put america back to work and a picture of what it will look like if we go through the changes. if the public won't buy it then we are stuck with what we are but i don't think we should give them a chance before we give up. they haven't had a fair chance to evaluate a real balanced plan to create a different future yet. >> since you left off is, people are so much more scattered, not only what issues are number one but also where at war and more and more places and intervene in places where it is not exactly warranted. the headlines that there are people cell phones to drive the day are not just about this issue, no matter how compelling it may be and it seems it would make it more dill of the call to come up with a consistent but he said message for democrats or republicans in election year like this. >> well i agree with that to a point. that is, there are more sources than information and there are

more things being done that are hard to put into a clear pattern. it is what happens if you live in an interdependent world with instantaneous transmission of information reporters look are like nets that walls. when you get right down to it, that is at the heart of this little step we have seen in america about what should be the final steps between the israelis and the palestinians. i mean there is sort of a microcosm of the larger global interdependence that you can actually see their. i agree with all that. but, the fundamental problems that i think we have in america america -- let me just contrast america with brazil for just a minute. a guy named bill bishop who happen to be a liberal democrat wrote a book two years ago called the big sort. he is from austin texas. and he started off with a story of the one republican family that lived in his very

democratic voting precinct in austin, texas were john kerry beat president bush 3-1. and this guy loves his republican neighbor and their kids play together and they talked and they disagreed and they learn together but everybody else was mean to him so he moved to another neighborhood in austin where president bush beat john kerry 4-1. and the argument that bishop makes in the book is that both neighborhoods were -- and he said america is overcome. we are not as racist or sexist or as we used to be. we don't have as much a religious presence in more. we just want to be run anybody who disagrees with us. and i think -- you are all laughing because you know there something to it, right? the action to describe the development and how a developer made a fortune in the inland empire outside of l.a. or near thereby doing a profile and finding out the people who were upper income people were almost

evenly divided between republicans and democrats so he devised one side, it was a one street lung development, one side for the republicans and another site for the democrats. i could make this it. the republican development had the sidewalks and basketball courts in the back. the democratic developments had rooms for yoga mats. [laughter] i swear to god. he sold all the houses in a nanosecond. so by contrast i was in brazil at the edge of the rain forest. the other day for sustainability conference, and they got serious problems in brazil. 95% of their electricity is from renewable source -- resources. they wanted to be more even as they grow so they want to build three hydroplans. the problem is the dams had to be on rivers that flow fast and all the ones that are left are in the rain forest. so they have got competing sustainability arguments. serious problem. but what was the difference?

here i was at this conference in this nice conference center. you had every oil company come every utility company, the head of the green party, the head of the people representing the indigenous tribes one of which will be totally destroyed if one of these big stands this bill than all these people whose interests are affected and they are sitting down having an honest, civil conversation in a two-day seminar where they'll listen to each other and try to work through this. now i don't want to be pollyanna here, but this is a hell of a deal. until this last year when brazil had slippage, they reduced under lula annual destruction by 75%. a little known fact. they got all the lockers out but they are still pushing the cattle farmers in the soybean people in. >> do just that they are fantasizing about having that kind of conversation here? >> well i think we should. we should try and maybe we will have to go through another election but in the end, we have to listen to people who disagree with us. it cannot be possible that

either the democrats are the or the republicans are always wrong. it cannot be possible that 100% of us are proceeding in bad faith. you know i basically think that the country has been badly hurt in the last 30 years by the adoption of two ideas, one predominately in business and won a government. the business idea was that corporations are not really creatures of the state. they are independent entities just like citizens and they ought to be able to whatever they want in elections in their only responsibility is to their shareholders. since people hold shares for 15 seconds now before they sell them, what it means is that corporations have become uprooted. my generation was taught, those who went to business school and studied economics, corporations were creatures of the society and they had responsibilities to all their stakeholders. yes they are shareholders that they are employees and they are customers and the communities of which they are a part.

we are going to have to go back for that. the primary government idea was the one that tried for the 1980 election. the government will screw up the two-party part. the secular st. of america the founding fathers they were all perfect. just about everything that's happened in the last 80 years is horrible. government always screws up. there's no such thing as a bad tax cut or a bad regulation or a bad this or a bad that as opposed to government. it hasn't worked. look at the job numbers, look at the growth numbers, look at the productivity numbers, look at the numbers. so if we can break out of theology and get back to evidence and experience and aspirations of ordinary people, think we can have bipartisan cooperation and they think the democrats are going to have to be willing to give up may be some short-term political gains by whipping up fears on some of these things. if it is reasonable social security proposal, reasonable

and care proposal. you cannot have health care devours the economy. >> i have one more question for you but before that i would not be -- i didn't follow up on an illusion you made to the israeli-palestinian peace process. did all this sounds terribly familiar to you about the 1967 borders and you feel like it is moved anywhere? >> i think for one thing i think to some extent it is the tempest or the teapot and i think first, i think what the president said was too shorthand and raise a lot of questions but also -- prime minister benjamin netanyahu said a man of the things that are in the headlines that if he made a peace agreement with palestinians he was well aware he would have to give up so much of the west bank the top of a settlement could be included. that has been totally overlooked

that he deserves credit for saying that especially when you look at how hard it was on sharon to get out of gaza which everyone wanted except the settlers that were living there. when benjamin netanyahu was prime minister before and i was president, all the people worked with for eight years saying that the borders were a reference point was nothing more than saying that is what we work -- looked at the map on. when prime minister barack said he was prepared to give up 96% of the west bank with land swaps in return for certain strict requirements on the palestinians including waiving the right of return, is 94% to 96% of what? the 67 borders were the reference point. i think that is what the president meant. i also believe before they get

back to the table, israel is entitled to know that there will be recognition of the state of israel. my recollection is president of boss --abbas has said he would accept the deal that yasser arafat offered that i didn't. , that he would give up the universal right of return. they gave that up when they signed an agreement on a white house lawn in 1993 whether they acknowledge it or not. the israelis always said some families have been in northwestern israel forever to their descendants are lebanese camps and let some of them and but if there's going to be a peace deal and has to be a jewish state and a palestinian state, they have the majority. everybody knows that. i even offered as part of this deal to raise $10 billion with

israel money back then, to resettle in the new state of palestine or in the u. s, canada or wherever else they want to go. i don't think we should get too carried away. if you look at the map, and the operating map these negotiators have used, is clear what the boundaries were before and after 67. it is also clear that because the piece was not made in 2000 or the intervening years that the land differences will be great. when i was president you could get 90% of israeli settlers on free% of the land. now you have to take 6% of the land just to get 80% of the settlers. i don't want to minimize the difficulty but i wouldn't just -- i don't want to get off of the tracks because what the president said and what benjamin

netanyahu said was juxtaposed. you can overstate the divide. as long as they both keep talking about this they should. two other things were not mentioned that it is a mistake to forget. one of israel's legitimate complaints with arafat was they could never be sure they have a partner for peace all low in 1998 when we had lots of things going the only year in the history of israel where no one was killed by a terrorist attack, second argument was even if we make this peace our neighbors will never accept it. no question king abdallah of saudi arabia's peace initiative includes all the arab countries but syria and other muslim countries around the world promising political economic

security normalization. if i were prime minister i know he feels this way i would want to get it at the same time but if he got a simultaneous peace signing with all these countries that normalize relations, either side needed vote president and prime minister talked about that but those things should not be ignored given the recent developments in the arab world. >> there's an opening for an envoy if you're interested. >> i have great confidence in the secretary of state. [applause] >> i will let you get away with that. i end with this final question. you said in an interview you were talking about climate change. you said we are a race against time and circumstance. is this true as well about debt and spending and do you think the current president

appreciates that? >> yes and yes. this is a lot like climate change. you know if you don't change the trends something really bad is going to happen. you just don't know when. or precisely what form it is going to take. i think we are in a race against time. secondly, this debt problem is already constraining our options as a country. constrain our ability to develop a more diversified economic strategy by undermining our ability to get investment capital as opposed to consumption capital and undermining our ability to enforce our trade law. which discourage perhaps of from new trade agreements. it is terrible we haven't already done this colombian trade agreement and the one with panama has been agreed where we

end up making improvements with korea which is one of the fastest-growing economies in the world. we are paying a price for this now but when we get to the point where -- and then interest rates will start to rise again with more balanced global growth not matter what ben bernanke does. the criticisms of him have been wrong. i don't think he should have started raising interest rates on the value of the dollar yet. it will only slow down our recovery. no matter what he does when the economy comes back interest rates are going up. the percentage of the budget has constituted interest payments on the debt will go up. that means you won't be getting anything for spending relatively less on medicare or non intense discretionary budgets. all you get is sending more money out the door. that is another argument we

should make to the american people. we are fixing to have changes in these other spending programs to pay our interest rates to other people if we don't deal with this. yes, i believe the president will do things which will be politically risky arguably to him and if he wasn't prepared he wouldn't have asked vice president biden to chair this budget group. you can't do that. if you get out for being not serious and context like that a president can pay a terrible price. i think he will do the right thing. >> president bill clinton, thank you so much. >> thank you. [applause]

>> the fiscal summit included a summit with mitch daniels. he was interviewed by washington post columnist george will for 20 minutes. >> governor daniels, unfortunately seems determined to go on being known, a good example of midwestern political culture in the midwest. they have gone to a kind of

low-key but effective leadership of which he is an exemplar. you said to an audience here in town united states is menaced by survival level fret. people are more implacable meant americans before returning to red ink. in indiana you took a deficit of $900 million in 2003. it became but $1.3 billion surplus in 2009. could you do the same thing in washington? >> guest: we have to start with the only operating principle that makes sense in life and that his optimism. if you are asking would some of those things -- tools or steps we took apply then i think some would and some wouldn't.

there isn't anything magic about it. it summons the will and makes the case. we found in our state people might not like individual steps but they like the general idea of solvency and the likely outcome when they saw it. >> the american people are ideologically conservative and operational liberal and subscribes of principles when it comes to limiting government. did you find that cognitive dissonance in indiana? >> guest: we found some of that. i remember mumbling under my breath more than once people say they want -- some tough decisions and to you make some. spending cuts and to you cut some. it is important not to sell the american people short. the single most important thing we can bear in mind.

a roomful of people who understand the problem and the dimension of it. i would suggest to you in miniature at least we have the example in my state that people will grumble. demagogues' do what demagogues' do but if you act decisively, make it clear in every step that it is average people and people on the lower -- the lowest rungs of society's ladder that is your first concern. that is why we do what we do and if you deliver results you can not only survive but thrive. >> host: at the state level, you have the advantage of not being able to do three things that the federal level. you can't print money, you can't

borrow promiscuously and you do have a constitutional requirement that you have in the budget. washington has been able to print money and have no constitutional limit. how much does that complicate the task of doing at the federal level what you did at the state low? >> enormously. it is only fair to note a lot of our sister states have an expert at keeping work wriggling away around these otherwise wholesome and effective limits. that was true in our case too. we have a balanced budget requirement. they did keep our predecessors from spending more than they took in 7 consecutive years running for state reserves. and using a variety -- you don't make deposits into pension funds

online. used if various people you owe like schools and universities and locality. make them to the darling. they wait for the check you should otherwise send them. these are structural limits on government. they're very important but not always the size of. >> host: based on your experience as a governor and watching 49 governors deal with some kind of constitutional limit. and having seen this at the federal level. you can find the occasion of

constant lawlessness. >> guest: i favor some constitutional restraint. i advocate a supermajority to go beyond some reasonable limits. if you have one tomorrow morning. i worry a little bit that if you become a diversion. the safety net problems and so forth, my own preference would be to see if we can summon our fellow citizens to do what is necessary to square in the means over the long term and on the back side have a good healthy debate about whether or we make

it harder legislatively to laps and to access. >> host: we tried one of those mechanisms in one of your earlier tours in the federal government named after three no longer senators -- >> guest: george bush -- until somebody called that. >> it put in place a trigger require sequester asian of more budget cuts. the trigger would be disabled or ignored and slowly faded away. what does that tell us about the possibility of institutional political restraints. >> guest: it is a limit of utility. my recollection, my recollection is it was a blunt instrument but has some value for a while. the system find ways around

these limits. >> host: speaking to a conservative audience in a february you say our obese federal government needs not just behavior mccabe -- modification but bariatric surgery. that sounds like institutional change. bariatric surgery reduces the calories in the system. what is the equivalent? >> guest: i should have said liposuction. it just seemed less elegant piece of rhetoric at the time but i take your point. imac meant major reductions in current spending not to exclude the idea of something structural. may be supermajority to overspent. or go into imbalance. the arithmetic is as plain as it

usually is and we will have to in my opinion not only transformed the safety net and entitlement programs. the don't like the word so i keep avoiding it. also restore the federal government to something. some sort of affordable shaped to go after that. >> host: christopher riley is watching these proceedings from a far. he asked should entitle its be limited to a sustainable percentage of gdp, how does that work in an aging society given the welfare state is a transfer of payments mechanism transferring wealth to the elderly and growing portion of the population

>> guest: chris is an active citizen. i am going with of the previous theory. for one i am in favor of anything that changes long-term trajectory we are on. i have never been particularly e enamored of arithmetic formula to additional constitution or statute and you point out a good reason to be careful. we are going to be a much older society that we have ever been. we are committed and should be to protecting people in their elderly years, either financial or driven by a health event. i am not sure anyone knows what a magic percentage of any thing

to do that. it will be higher for a while and once again a younger society. doesn't have to be that high. having said this, i could listen to almost any approach. i would start by identify a percentage, start -- smart enough to know what that is. >> host: the growth of government with a safety net is built into the cake? >> guest: some of it is but no reason you or i should be subsidized for openers and i would hope we would all agree

that since our desire to look after each other is against finite resources we ought to concentrate them on those who without which will suffer. >> host: when indiana business leaders say what can we do for the great state of indiana you say go and make money, economic growth. you recommend two things, tax reform that would give us in your were the tax code that looks as though someone designed it on purpose. and --. >> guest: we structure our administration around disposable income believing that is not only a good idea, and absence of

the american promise. we have reduced the cost of hiring people, by lowering the corporate income tax and a host of those cost government imposes directly. we have lowered those costs government imposes indirectly. we measure everything in our administration such as how long it takes -- time is money. it is not a figure of speech, we all know and this is what we work on. every single person in leadership in our administration knows that we will be looking at their performance based on how they did or did not contribute

to that goal. >> host: the tax code was simplified in 1986. classic reform lowered the rates, fewer exemptions and loopholes. it has been complicated 50,000 times. since 1986. is there a metabolic urge of some sort in our american political system that makes it impossible to have a tax code that looks as though you decide it on purpose? >> guest: of course. one could say you only weed the garden every 25 years it will be a mess. that is not quite captured in washington because it is not just the natural growth of these preferences but the fact that you have a lot of people planting weeds. just to switch metaphors, the

bigger the trough, more -- the more animals you will attract. i am amused by people ranting and raving about lobbyists in washington. only one way we will have less of this pernicious influence and that is if there's less to be gained. we all know the tax code is the source of a lot of that. a couple things. i want to sell optimism here and i have plenty of reasons but i imagine it has threaded its way through this conversation already. this thing you talked about, tax preferences and expenditures. a huge opportunity to do a couple useful things, collect

revenue without hurting growth. dr. feldstein and others point out this is just spending by another name. this certainly qualifies as that. it could enable. what we really need as much as any other single part of this puzzle is a pro-growth tax code, which you were talking about. economists from left to right agreed that this is the right general direction to head. it is obvious to everyone in this room if you let george and me this afternoon have a large hand to restructure the entitlement program and perform surgery and the federal government it would not suffice. we have to have a long boom in this country. it is getting this thing done. we have to do all those things simultaneously but this might be a good place to start because

there's a chance of getting some ground. >> host: you won't use the $7,500 tax credit to buy a chevy volt? >> as a matter of principle no. for two reasons. the tax credit i'd prefer to purchase from private enterprise. >> host: the role of public employee unions at the federal level will become a big topic of argument over in their role in causing and helping to solve fiscal problems at the state level. what is your experience in indiana? >> guest: lot of reflection of the second day. will discontinue collective bargaining. it has never been a statutory authorized in our state but put in many places by executive order. what is important to say about

this, it was more important in our case for indirect benefits on spending and our fiscal situation than anything direct. just as in the federal government, public employee unions have never been able to bargain for wages or benefits in indiana and it wasn't particularly the source of the bankruptcy wheat were wrestling with. employees were not extravagantly paid and benefits were not too far out of line but the indirect costs, the rigidity of the system, we have done a thousand basic things over the past six years. that was really paralyzing. the ability to restructure departments and break them up and consolidate services to outsource things in the private sector, less-expensive, none of

these would have been possible. finally, are always want to stress that it was a major, indispensable element in moving from a position of bankruptcy to a position of strong solvency and delivering services well and we can demonstrate because we measure everything that services in indiana are delivered better than ever and that is important it seems to me. it is going to be essential for the reforms that come, take a positive outlook for the things government should do. i remind our folks skepticism about big government is very healthy and american but contempt for all government is a

mistake. we have really worked hard to stay within the limited sphere that we believe government ought to occupy, we have a very solemn duty to perform with excellence if we can and being free of collective bargaining rolls is sensible. >> host: democracy act on difficult problems when they have no other choice. hitler was warned by churchill, they get to the channel courts. and reform social security because checks are two weeks from not being able to go out. what catalyzing event will cause the political system to act? >> guest: we see the catastrophe

that could happen if credit is not good anymore. we would rather not get there. sometimes those crises lead to a 11th-hour action but sometimes something else. it is an authoritarian answer that democracy did not seem able to solve. the task of people like this tremendous assembly to reach our fellow citizens. please don't blame the american people for their apparent reluctance to deal with these things. most have never been told the facts. no one has explained to them the current system needs to plundering of the next generation. i honestly believe we can as a

republic deal with these issues before the worst happens. >> host: the sign tells as we are of time. a lot of people in this room feel as i do that reuters law has been triggered by a recent decision. david broder said anyone will do what you have to do to become president shouldn't be allowed to be president. we respect as much as we regret your recent decision. thank you for coming here today. [applause] >> house budget committee chairman paul ryan and economic council director gene sperling on the republican and white house budget plans. they were interviewed by cnbc enter mary bartiromo.

this is tested by the pettersson foundation. due to technical problems we can only show portion of representative ryan's interview. >> host: as we heard this morning from michael peterson and the courts that addressing america's long-term debt is one of the most difficult and important issues facing policy today. in this section right now we speak with two of the leading washington authorities on economic policy, paul ryan of the house budget committee and gene sperling, head of the national economic council. before i bring chairman ryan out, last month he introduced a proposal to reduce long-term deficits without raising taxes. the plan proposed significant changes to the medicare program, medicaid and other costs in federal spending. some people have hailed the

program as positive. others have criticized it. let me bring on mr. ryan as he soldiers on about that plan. [applause] >> thank you. i got caught up with president clinton. >> great to have you today. we will talk about your plan and comments on the white house plan. so your plan to cut deficits includes cutting spending by $5.8 trillion. you do not accept any tax increases on the revenue side. reducing budget deficits by $1.6 trillion. >> guest: 1.4 over ten years. >> host: that includes not

increasing any extra revenue. from increases from gene sperling's plan. proposers restructuring medicaid and medicare. let's start right there. can you walk us through what medicare and medicaid changes look like over this ten year period? >> guest: of ten years no changes in medicare. medicaid, we are taking a page out of successful welfare reform policies of the 1990s that president clinton line did a lot and replicating those strategies to other -- with medicaid we are proposing to block the program in state and grow the program at a more sustainable rate. medicare -- medicaid is broken. we have proven it doesn't work. we grow it as population growth and inflation but more importantly talking to dozens of governor is. giving them freedom and flexibility to customize

medicaid to meet the needs of their populations. in wisconsin we have a better way of doing it than new york or nevada so we want to empower states with the ability because they manage the program. let them customize particular populations. medicare, we propose -- this is lost in tv ads. we propose not changing benefits for people above 55. more to the point unlike the president's health care law which takes half a trillion dollars for medicare but to spend on the president's health care law there also have our pads designed to impact price control. we repeal that and it affects currency. we heard some totalling announcements from the actuary that would end up -- to get rid of that we make sure any money

from medicare goes to making it solvent. people 54 and below, medicare is going solvent in nine years. trustees moved up by five years. it is collapsing. in order to keep the promised currency people in or near retirement, you have to reform for the next generation. those going up 54, we say go toward a premium support system. the same system president clinton's bipartisan commission is looking at. it is an idea that has had our partisan support. medicare will negotiate with insurers and have guaranteed coverage options from which then seniors will choose from. medicare will subsidize their premiums and do it like this. the middle income person spends more than a wealthy person. the wealthy person and more for those who have less money.

doing it that way. original harnessing choice and competition, at subsidizing those left with more and subsidizing those with more or less make medicare solvent and gives us the ability to keep the program as currently designed for those in retirement and ten years from retirement. >> host: we want to talk about health care and other areas that require building into defense spending and tax reform and other federal spending cuts you have proposed but let's stay on health care because i have a follow-up on seniors. the cbo says your health plan would increase spending for typical 65-year-olds, medicare beneficiaries by 30% to 40%. private plans that replace medicare under your plan would have higher administrative costs and less negotiating efforts than the current medicare program does. why do you think shifting

medicare and beneficiaries to private payers would reduce total cost? >> guest: experience shows us is working. i disagree with the premise of that question. measuring any medicare reform plan against the status quo is to measure against a fiscal -- we have tens of trillion of dollars of unfunded liability with medicare growing at an unsustainable rate which is the biggest driver of our debt. even president obama acknowledge that with his cap on growth rate of medicare using the i tab. we do a different way. we have experience. medicare was written in 1965. it pays for brain surgery, basically is a price controlling system that dictates prices for brain surgery. the point we say is used choice in competition and have these plans compete against each other. where do we have experience with this? this is how the federal employee

plan works. it is how the medicare drug plan works. we are saying move to a system that works like a drug benefit plan. what is the evidence? what does time and reality show? this is a plan that came in 40% below cost projection. medicare drug benefit we are proposing cost 41% less than we originally thought it would because of choice and competition. it is very popular and the senior gets to choose. if she doesn't like the plan she has she goes to another plan next year. they compete on quality and price and using those market-based principles of choice and competition. the power comes to a senior, not a government bureaucracy to improve the system and lower costs. monopolies don't work. whether it is insurance monopoly or government monopoly we want to put the power in the hands of the person, not some 15

unelected bureaucrats to determine how this complicated sector of the economy works. >> host: how do you know doctors and hospitals will treat medicare patients on your plan if reimbursements are lower? >> guest: they gave us a new reports a 40% of medicare will start taking medicare patients under the status quo. under the president's plan they think more providers will stop taking patients because of price controlling. medicaid is the problem in the same vein where providers are taking less medicaid patients because of reimbursement. under the program we are talking about we are not saying price control. we are saying choice and competition. providers are incentivized and rewarded for excelling and creating a better cost. we want to have the dr./patient

relationship be the nucleus of the health care system. not government price controls system. i would argue providers are under more stress and strain under a price control system than a market-based system where the power goes to the person selecting competing providers for benefits. >> host: one more on the medicare plan. the cbo says your medicare plan will double seniors out of profit loss. is it realistic to assume most seniors would be able to afford the cost increases? >> that fails to take into consideration the extra $7,800 we are adding to low-income seniors benefits. what we are saying is protect those who are low-income by supplementing benefits. as people get sicker increase payments to stabilize premiums and people get wealthier don't subsidize them as much. it is inaccurate to suggest that

will happen. the others thing i would say is comparing medicare to a fiscal fantasy which is the current system is unsustainable and growing at rates that will crash the system. what are the reforms we are putting in place for the root cause of health inflation to make health care dollars stretch further and inject competition into the system to stretch our dollar farther and subsidize people more who need it more and not those who need it yes. it is an incomplete comparisons to suggest -- wealthier people will pay more in the future but more importantly there's only so much money to go around. we believe we should save medicare for the next generation to count on an subsidize people who need it the most and not punish people who need it least. >> host: we have questions from the audience and twitter on this part of the plan. let me ask about tax reform. we heard president clinton talk

about the fact that it is difficult to see how this plan would work without new revenue. you are against raising taxes. some say that is an ideology. you are against any tax increase. how would this work? >> guest: i would not paula ideology. i would call it economics. the missing ingredient in this conversation, if we allow this conversation to be one of mathematics and green eyeshade the missing ingredient is economic growth, job creation. two basic things we are trying to accomplish our spending cuts and reforms and economic growth. the top tax rates on individuals goes to 44.8%. we don't agree with that. we don't think we should be raising tax breaks or taxing employers and job creators so we

are talking about cutting tax revenue. we are talking tax reform. just like the fiscal commission recommended. so we have a more fair international eye on economic growth. do we want more revenue coming in. the best way to go after that is economic growth and job creation. ranking up tax rates won't accomplish that. in this era of global competition will make the economy less competitive. most jobs are from successful small businesses to file as individuals. when you are bringing tax rates and state taxes above 50% that puts a chilling effect on job creation. on the corporate side we have the highest tax rates in the industrialized world. is 25%.

ours is 35%. clear out the clutter and lower tax rates on everybody. the person and the business take the same amount of income and tax rate. we need to clean it up with an eye toward economic growth. >> host: what is the low hanging fruit of the tax expenditure and ultimately lead to expanding debates? >> guest: this is what the ways and means committee is planning done to put plans out there. we are taking a page out of the playbook of the fiscal commission. we have more room to maneuver and tax expenditures because our revenue targets are lower than

the fiscal commission. which of these will be going away, those who choose tea is class warfare describing these things, people and companies that use tax shelters, for every dollar, it is at zero. the tax shelter exchange for lower rates for everybody you are taxing that money. there was a broader based, simpler system and more people were paying taxes on money they were not paying taxes on before. it is a smarter way to go putting us in better -- the international competition. when we tax ourselves a lot more we are going to cost ourselves competitively. you can't fix the fiscal problem if you can't grow the economy. >> host: this plan does not talk

about social security. you talk about it before but it is not part of this plan. and social security, perhaps you would not have other spending cuts you're talking about on education. food stamps, cutting services on people who desperately need those services. >> guest: if we had that social security plan, is reflecting longevity in progressive benefit structure it would have accumulated savings in the ten year window because we would have exempted people 55 and above from any changes. we put a trigger in st. house and senate, the white house commits plans. we thought we would have a better chance of getting the social security agreement on the other side of the aisle. it would be too tempting for harry reid and nancy pelosi on

medicare. we have a social security agreement we wanted to do and make it such that we have a higher likelihood of reforming social security and i fundamentally believe if we can reform one of our unsustainable programs that would help ocelot with the economy but we don't seem to have interest on the other side of the aisle. we're sending specing -- spending more sustainable. social welfare increased at a more sustainable rate. the way in which we choose to reform the safety net is take a page out of the playbook of successful welfare reform signed into law we want to use those ideas and apply to the other welfare programs. there are still dozens left. the idea behind safety net

reforms is we want to have a safety net there. to help people who can truly help themselves. people back on their feet, this is why we proposed to consolidate the career scholarships to go to workers in displaced industries. so we can get back into a career and on their feet. we are not talking about just green eye shade but transforming the safety net to get people back to work and fulfilling the mission of how retirement security, saving these programs and paying off the debt with economic growth and job creation. those are we are achieving with our budget. >> host: where our opportunities to cut defense? >> guest: secretary gates has done a good job identifying

$178 billion in cuts he believes could occur in defense. we agree with that annex of those cuts. he recommended taking $100 billion to the troops to modernize their weapons and equipment that are needed and $70 billion thaw for deficit reduction. republicans are great mixed bag on this issue. we believe you have to take spending cuts to this agency. you can put $700 billion into a government agency and not expect waste to occur. we want to make sure we did not dodge taking spending out of dod for deficit reduction. we do that but having said all that i would love nothing more at the budget year to budget for a peace dividend. here's the problem. we are not at peace. we are at war. there's only so far you can go before you compromise the mission and the men and women who are out there serving our

country. we don't have the ability to budget for a peace dividend when the world in a more dangerous place. having said that we do cut defense and take $78 billion out for debt reduction in addition to the hundred billion dollars from other parts of dod to give to the troops. if we wait, we allow these scare factor is to continue, demagogue and political paralysis in our system we are going to have a debt crisis and then what happens is austerity, cuts to current seniors the personal tax increases, people get hurt the first and worst are people who need government the most. the elderly and the board. that is what we're trying to prevent. our spending is more targeted towards those populations. that is why we always a fix welfare for people who need it and end live for people who don't. that is corporate welfare and spending on corporations and for the tax code. i really believe we have to make

a decision about our values. who should be helped most by government and who should? should we help those -- the sooner you do that the more we doing on our terms, the more gradual and sensible reforms are. the more we procrastinate the deeper the hole we did, more painful the solutions must become. >> host: tell us how you envision governors taking over their own part of the medicare issue. medicare data shows where the health market works effectively. the medicare program highlights the best market. >> guest: medicare advantage, you show the medicare benefit program where you have a better market protection. not all states of the same. i talked to several governors who asked us to block grant medicaid because they believe they can make a program work better at a better price and better cost if they can have more control over flexibility and reforming in their state.

talk to scott walker and several governors who said give us the freedom and flexibility because we will make the work better. right now we are having problems with this program. on medicare it comes down to this. it is the biggest driver of our debt in the future. it has tens of trillion of dollars of unfunded liability. the status quo is the enemy of medicare. that means collapse. does the money go to the government and come down through price controls and rationing care? we have a board of 15 people making these decisions. or the money goes through the individual. more for the 4, more for the wealthy and give them power to the marketplace to have competition. do you want to centrally planned system or do you want a system where the providers, doctors and hospitals and insurance

companies compete against each other for our business. to make that work you make sure the person is powerful. they have money and they have rights to clean up our insurance laws and medicare reform proposal, medicare does negotiating with insurance companies. medicare sets of guaranteed coverage options from which seniors shoes and medicare subsidizes those based on -- that is a better way to go. it is just like the system i have. it is just like the way medicare drug benefit works which came 41% below costs. medicare is not experienced doing it this way. it is a better way to go because it gives it the ability to guarantee the benefit system as now designed is there for people who rely on it. that is a better way to go. education centers where the patient has the power versus a government standard planned system where you necessarily have to ration and control prices. price controls don't work.

they produce lot of inefficiencies for route system and scarcity and i don't think we want to go down the road. >> host: one quarter of patients at 89% of the program's total costs. many patients are receiving end of life care. how will your health plan reduce the cost of treating these good people? >> guest: it is a budget. the budget resolution is brought architecture. those are the details we worked out. in the concept level, you are right about those statistics. you want to have a decision not made by some board. not made indiscriminately by government. it is a decision that should be made by the beneficiary, their family and their physician. you want that to be made with all the information. when peterson is facing that

moment, pete peterson should pay more for his benefit because he is a man of means. those who are least among us should have more coverage and support. those who have more should pay more and in those situations there will be price exposure and we will be discussing these things. this is an inherently personal thing and the dignity of the human person is such an important principle that we employ to these solutions and a last thing we should do is have an arbitrary board determined these things. this is something that should be left to the individual, for family and the physician and they should make the decision based on surrounding factors. you're going into an area of the government should go to. and put some one size fits all levels on end of life issues. >> host: any other items you want to ensure that people

understand our critical to getting the deficit down eventually to surplus situation? >> guest: will make a political statement than policy statement. , a policy perspective the sooner we deal with this the better off we are at the country. gao told us our liabilities meaning promises government making to american citizens doesn't have money to pay $62.9 trillion. a year ago they said it was $64 trillion. this year the unfunded liabilities are $99.4 trillion. every year we stop trying to fix this problem it gets that much worse than the inevitable solution is that much more painful. politics. i am very worried and it is pretty clear these days that in both parties doing to each other that whenever you put out a reform plan to fix this problem the other party uses as a political weapon against you. what they do in this particular case with medicare is

shamelessly demagogueing and distorting this. try to scare seniors. the irony is our plan preserves the benefits to current seniors but trying to scare seniors and turning this into a political weapon what that ends up doing is inflicting political paralysis. nothing gets done. that means we go farther down the path of debt. politics of this means we need leadership. what do leaders do? leaders are for and compose solutions. we have not had that from our partners on the other side of the aisle. we have had presley'ss and tv campaign that speeches. we have yet to see actual solutions meaning real numbers that add up to fixed problems. in the divided government and ultimately this will happen, you can't have negotiations just to ourselves. you need to have responsible leaders put ideas on the table. the president created a fiscal commission which i was happy to

serve on. you have dozens of recommendations in the budget. then he gave us a speech which didn't fix the problem and now we have another commission, the biden commission. we can commission ourselves to death but we need to fix the problem. leaders should put solutions out that fix the problem and on how best to fix the problem and compromise, you can't get to that point if you have political demagoguery. my fear is political campaign strategies for 2012 have seeped into 2011 and we are going back to our respective corners. with the debt limit, my hope is we get a serious down payment on this issue and on spending and debt to buy us more time chasing the credit market. if there are things we can't agree upon i would like to think we could add a civil conversation based on those

problems. the country deserves this debate. people are hungry for solutions. representing a district that voted for bill clinton, gore and obama, i believe people are ahead of the political class. they're sick of the demagoguery and smear campaigns. they want solutions. they want answers and they are way ahead of us. >> host: we will talk to gene sperling momentarily. anything you want to say before that about the president's plan? >> guest: that is a softball loaded questions. >> host: what is wrong with the president's plan? >> guest: it doesn't fix the problem. the problem is the debt crisis. it doesn't do anything to address the entitlement programs. where they do something, i personally believe put the board in charge of these is the wrong way to go. even with all the tax increases

and the president's plan which will show economic growth it still faces higher spending and does not come close to fix improbable. my personal opinion if you're going to put up a budget it better be a budget that's all our problems and get the debt under control. we have done that. nobody else has. >> host: thank you very much. >> guest: appreciate it. [applause] >> host: thank you so much. our next conversation is the national economic council director gene sperling. he is at the center of the discussion on budgets and fiscal policy. no one has more detailed knowledge of the administration's plan than gene sperling. [applause]..

>> guest: it is absolutely the case that chairman ryan's plan does to, does get to $4 trillion quicker, over 10 years as opposed to 12. but we think that that is appropriate because we want, number one, we don't want to face things in at 9% unemployment in a way that in any way impedes our recovery. number two, we think it's important that as you are trying to control entitlement costs, trying to control the deficit, that you don't stop investing in the future in terms of

education, research, science and things that are critical for our competitiveness. third, we do believe it is more important to protect the fundamental social compact that we see in programs like medicaid and medicare. and we think that the president put out a very serious plan. it had medicare and medicaid savings of 470 billion over 12 years. it had over a trillion in discretionary spending over 12 years. it did have a trillion dollars of revenue. so it has a plan, including interest savings, for every dollar of revenue increases. but i want to get to the shared sacrifice put. i've been involved in several efforts and here's the news. nobody likes deficit reduction. the way deficit reduction happens in our country is when everybody dislikes it in a kind of equally, the way they think is fair. so it's very important. if you're going to go into

programs like medicaid and ask for savings, if you're going to squeeze on discretionary spending in ways that do with research and science, if you're going to do these things and ask for sacrifice, people need to know we're all in this together. so when we talk about things like why it's important not to criminally extend the high income tax cut, it's not just the numbers. it's not the extra trillion dollars, though that's important, it is a trillion dollars over 10 years to both extend the increase in the estate tax exemption, and the upper income tax cuts that are in dispute. 1 trillion. the reason that's important beyond that trillion is, look what is happening on the medicaid side. you're going to cut $770 billion, 770 billion. you can't say to anybody who would be affected by that that we have to do that. we have no choice. we have the greatest recession since the '30s.

we inherited a huge deficit and debt and we have to do with this. the fact is that all of those savings would be unnecessary if you were not funding the high income tax-cut. so it's important for having the kind of moral power to ask everybody to sacrifice, that you include revenues in the package. particularly raven on the most fortune. it's not about the class warfare. it's about shared sacrifice and it's about having the moral authority to ask everybody in the country to be part of an effort that is going to squeeze us a little in the short term in the medium term, but for the benefit of restoring confidence in our long-term economic future. >> host: i want to ask you about the ipad mechanism. let's stay on track for me. you just her chairman right talk about what he sees our negative implications of raising taxes on anyone. he said it was not economic growth. so, talk to us about that.

you said it's a shared responsibility but we do have so many expenditures and many people agree on both sides of the aisle that real tax reform is required rather than necessary taking the highest earners up and taxing the way you're talking about. >> guest: three points. number one, i don't think anybody engaged in a series discussion about our fiscal and economic future. should make claim that what happens to the marginal tax rate at the top is going to be the sole explanation of whether we grow or not. i don't think that's a good idea, but i particularly think chairman ryan and others shouldn't try to make it from their perspective because if you're going to look at that in that kind of more simplistic causal way, the evidence doesn't look too good over the last 20 years. everything he said, i heard 9 million tons in 1993, then the

next eight years were eight of the strongest years our country has had in the 20th century. then we cut taxes together going and had an administration that did not have one net private-sector job growth. now, i am not claiming that that is that simple. that's not my claim. i'm guessing i don't think it's wise for people on that site to make it because it's a simplistic argument, and history doesn't help them. and the truth is that you are doing this as part of an over all fiscal discipline package. and if you do that, you will create confidence in your country, conference for people to make long-term investments because they believe we have the political will to compromise and do things that are significant to get our fiscal house in order and live within our means. so i think that's very important. i really want to point out how isolated the house republicans are in their line that it's just a spending problem, not a

revenue problem. i mean, that is good message discipline. it is not good fiscal discipline. if you look at any serious effort, 1982 after ronald reagan tax cut was seen as hurting the deficit too much, ronald reagan was part of the tax raising effort and 82. and 83 on social security, on 86 they raise taxes and cut others as part of tax reform. in 1990, president bush and speaker poly. in 1997, the republicans agree to keep and maintain the tax increases in 90 and 97. people talk about cameron in the u.k. cameron has about the exact same proportion of revenue increases in his budget as we do in ours. so, it is serious people doing serious discussion do not take an absolute decision that you cannot have a penny of revenue. it is never none of the -- none

of the bipartisan plans, peterson-pew plan, none of them take that position. 10 former chair is included people like marty feldstein and greg, all came out and said you need a mix of revenues. and so i think this is holding back our chance to do something major. because you can't get the sense of shared sacrifice if revenues are completed off the table, number one. number two, it's hard to ask other people to do things perhaps on entitlements that they don't want to do or have wanted to do if there's no willing to compromise on the revenue side. and third, you know, there is a disconnect between what chairman ryan says about which i'm sure are his sincere intentions and what the impact, his plans on medicaid and food stamps would have for millions of not so fortunate americans. and i think the reason that happened is he has put himself in a box by having not be willing to do any revenue, even as part of tax reform, and

forces them to be very severe cuts, that i think if people export they would not be proud of. that goes to your last issue, which is we are very open to having a tax reform plan where you cut tax expenditures. and you use some of those savings for lower rates in some of those to lower the deficit. that is what the bowles-simpson plan has been for. that is what bipartisan plans to a thread read that commission, then we would have a valid commitment that revenues going to be part of the equation, and i think that would go a long way. but right now we still have this absolutist decision, even tho every analysis of why we have a deficit problem right now certainly includes the long expected aging of the population, but almost any analysis shows we have 500 billion a year, 500 billion a year of higher deficit because of the tax cuts in the bush era that were never paid for. we support some of those, but we just need to be honest.

there has been a revenue problem, and if we had paid for the tax cuts in 2000, we might not be having this conference right now. >> host: isn't their evidence, was their work on the fact that when you allow people to keep more of their income, they will spin it in the economy? >> guest: well, there's no question that when you're trying to, you know, put more spending into the me in the short term, when you're trying to censor have a keynesian impact, that you want to give, you want to put money out, we spent the quick us, have the highest multiplier impact. but actually that argues, when you argue that type of tax relief to help the economy in the short run to give money to those who have at least, say, the highest propensity to spend. in other words, when you're making 38,000 a year and you get

an extra $500, you're probably going to spend close to $500 of that. it's going to get out and economy until. when you get somebody making 3.8 million an extra $500, they may not remember where they left that check. so that actually again argues more that when you're trying to do tax relief you want to center it more on people who are living paycheck by paycheck. that's what we've done by having the payroll tax cut for this year, which is very important for economic growth, particularly with higher gas prices. that's the type of tax relief we have pushed for people in the middle class who are more likely to need the money paycheck to paycheck, and put it out in the economy and help us get higher growth trend with let's talk about spending cuts and your thoughts on chairman ryan's ideas on medicare and medicaid. the affordable care act maps medicare spending through the independent payment advisory board, ipad mechanism. why do you think that a small group of people serving on ipad

could possibly make wise decisions about cost reimbursement in light of the enormous size and complexity of the health care market of the united states? why does command-and-control the right approach for this problem? >> guest: it might not shocking that it would have defined the question the exact same way you did. [laughter] >> guest: a couple of things. number one. it's good we're talking about this ipad issue, independent board, because in the president's plan which was not just a speech or press release, but a plan. we put out levels of detail that included saying that in 2018 and beyond we actually would tighten our focus on medicare growth, by saying where it was above gdp plus .05 per person in medicare, that the ipad would look for additional savings. so, first of all we are having this discussion now about our

plan because we have put out significant details. here's the justification for it. a lot of people for years, democrats and republicans, said medicare and unlike social security is a little harder just to figure out what, you know, combination of different adjustments are revenue adjustments you need because health care is a dynamic. but, unfortunately, we don't ask as much because it has also -- often been caught up in the system. the idea was to try to create a more independent nonpolitical way of dealing with that. there's been a lot of accusations of demagoguery, but if somebody doesn't like that idea, let's have another suggestion. but the basic idea of bringing more expertise into our system, more independent expertise to help adjust medicare as we learn more about quality and delivery system efficiencies, in a way that doesn't have to go through two houses of congress all the time, doesn't have to be subject to all the politics, very

well-intentioned and smart idea. and if it's not the best idea, then let's hear something. i think one of the most unfortunate things going on right now has been the complete politicization of the affordable care act. you know, president obama does not sit around and say, boy, we're going to defend every little thing that we've done to the g. he would welcome constructive criticism or comments about how we can do things better. but we have a health care spending problem in our country and we put together a very thoughtful effort to try to take all of the type of reforms, whether affordable, you, comprehensive care, different payment systems, the ipad come and these things might not have just become political fodder. part of the real or not having, so i agree with chairman ryan on one thing. we should be able to have more serious discussion about the specifics of our plan. and i think it would make it easier for us to figure out what

we agree and disagree on, and how we can make progress. >> host: walk us through it. let's have that discussion. what does medicare and medicaid look like over the next 10 to 15 years? >> guest: let me just say something, you know, and you can watch me. i will use no phrases, nothing, i'm just going to describe what i as a policy person have concerns with chairman ryan's plan, based on the congressional budget office analysis. most of what you hear in the discussion is the fact that, as you mentioned, a beneficiary in 2022 would have to pay $6400 more than they would in the current system, 6400 more. and that amount grows with time. that's where most of the discussion has been. let me go to another part of that calculation. what that same congressional budget office analysis shows is that over all under his plan as

analyzed by congressional budget office we will spin $5700 more per medicare recipient. so let me just make sure everybody is clear on that. the goal of most health reform is, not just to shift from one side of the ledger to the other, but to see if we can do reforms that lower the amount, we as a society spend on health care. his plan by cbo would mean in 2022, instead of all of us together spinning about $14,000 per medicare recipient, it would be about 20,000. we would be spending $5700 more per medicare recipient. now ask how much is the government saving. the government saves $615 per recipient. so i hate you so many numbers, but here's the basic deal. it does not show that we are spending less. it shows that by having the private sector involved in this

that you end up paying extra for the administrative cost, advertising cost, profit cost. and you're basically saying that we will pay this much more, mostly the recipient will pay 6400. and for what cause? so the government can save $615 per recipient? now, that's not my analysis. that is the congressional budget office. chairman ryan says maybe it will be more efficient, okay. i will give it to. let's say it is 10% more efficient. it still makes very little sense. and so i think you have to look and ask if that's the type of reform we want, and we feel comfortable changing the entire structure of medicare from something where there's a bit of a basic package that people can count on to something completely very new, when the congressional budget office at the chairman's request analyze their plan so it could come out on the same day

he announced it, and found that it was going to mean that we as a society where going to spend $5700 more per medicare recipient in 2022. >> host: what is your plan? >> guest: our plan, we do a few things. first of all, we are involved in serious discussions that are going on right now as part of the biden grew. and we're willing to look line by line through many of the traditional savings that have been put forward by congressional budget office, by many of the bipartisan groups. we for one would use more leverage in terms of, on the purchase of drugs. we think there are still savings that we can get any deficiencies in our payment system. and we have committed publicly that we are willing to do 470 billion of medicare and medicaid savings over the next 12 years. the ipad does do something which we think is important. it means that we may not have it

all right, but we're going to set up an independent body of authorities, six of them would be chosen by republicans, six by democrats in the congress. and that this group of experts would look on a year by year basis. and if medicare spending was growing too much, it would never be on automatic pilot again. a group of experts would be forced to present options to the congress that they either had to act on or be implemented. again, maybe that could be done better, but it does not deserve the kind of disparagement it has. it's a very strict proposal, and maybe there's a better way to do it. and we are all ears and try to have that type of bipartisan discussion. >> host: if the current health care law is effective, why daschle are the 1000 ways? >> guest: i thought about medicaid? >> host: know, the health care law. thank you when i think you are doing, i think when you are

doing any kind of things come with had to settle system when we try to create, we try to create a system for our country. would had options for flexibility and as part of the laboratory of democracy that we have in our country. so and medicaid, for example, people can apply for 1115 waivers and i can give them the ability experiment, have more authority. but we make sure when that's happening that it's not going to mean less coverage for very poor people or things that are destructive. and so, again, i think the fact that we have waivers, that kind of flexibility, is a positive not a negative it shows that we are not trying to do one size fits all. and so for example, on the exchange is we have said that if a state can do more with a different system, that they think is better and covers the same number of people, they can do so. which again shows that this really is about whether someone

else actually has a better idea, or whether they simply are deciding that it's okay to not cover 34 million americans going forward, and continue have those costs shifted to hospital, shifted to premiums as hidden taxes. i mean, our status quo on health care is not acceptable, and that is why the affordable care act is the right thing to do. and i think again, our goal as an administration is not just about every single thing exactly as we decided it the moment it passed. what we would like is not a constructive conversation with people recognize that we have put into this virtually every good idea people have had for more coordinated care, more efficient care, for online payment with the right incentives, not rewarding or leading hospitals get away with readmissions that are completely unnecessary. these are all the good policies. if we didn't get it exactly

right let's have a discussion about it, as opposed to deciding you're going to name something the repeal, the job killing health care act, and make that simply a political sound bite, a political message, when we are supposed to be talking about this important issue. and if you think this is separate from medicare, it is not. let's be very clear about one thing. the main reason that medicare costs are going up in our country for spending is that we have had the long-awaited aging of our population. in 2020, in 2000 when i left as a director under president clinton there were 45 million people on medicare. today, in 2020, there will be 70 million. 25 million more. that is going to increase costs. that's what we did all the fiscal discipline in the '90s so that we are ready for the. the growth for each and role he is about to .92%. that is lower than the growth of health care in the private

sector. so if you're not doing the type of things that is bringing down costs and the overall system, you are likely to be back to the game of shifting costs from one party to the other instead of us as an economy trying to figure out how we can spend less over all. >> host: it's just worth noting, they have gone to the extent have actually received waivers, a significant number. but let me move on to social security. why didn't you attack social security? >> guest: why didn't we -- >> host: ipaq accpac social security in terms of trying to cut social security, services over the 10-12 year period. >> guest: i would say it's pretty clear the obama administration is the person in middle on social security. there's no question that we have some people in either groups that we support and work with who would like us to take social security completely off the table. we have, unfortunately, most of the republicans, virtually all,

so far sang that they will only be social security reform if you do the entire reform by cutting benefits. that's not how to tip o'neill and ronald reagan did it 1983, and that's not how we will ever get done. so i think the president made clear in the state of the union, he made clear when he laid out his $4 billion debt reduction plan, that while we do not think social security should be used as a device that is designed to lower the 10 year deficit, that we do think we as a country would be better off dealing with protecting its core purpose is, it's rock solid benefit, and its solvency earlier as opposed to lead. what we are really looking for is folks from the other side to be willing to come to the table without this ideological, not a penny of revenues come and talk about how we can do this in a

balanced way, doesn't slash current benefits, still protects those with disability, still keeps it as a rocksolid benefit. so we have not taken it off the table, but this is an area where we need, we need those who could help pass this to be willing to have a balanced conversation about. >> host: and to be fair, chairman ryan also is not attack social security as i referred to it earlier. defending cuts. >> guest: it is true that prior to the president's recent plan, that our defense budget actually increase the deficit by about 180, $190 billion over a ten-year window. we have now put out budget target that actually reduces the deficit -- reduces spending so reduces the deficit by 290 billion. so that's over $450 billion swing. so we've made pretty serious and

move on defense spending and i think we're doing so because we recognize that you just can't have this kind of comprehensive deficit reduction effort, since a shared sacrifice. if you take any major area of the budget and just say it is completely off the table, this is difficult to the president is the commander-in-chief. is not at a think tank. he has to work as two anniversaries way with his joints chief of staff, secretary of defense. but we made it pretty significant commitment recently which is one of the reason we're able to get to $4 trillion over 12 years in the budget tram with such a serious commitment that, in fact, chairman ryan's team says bob gates has said that you're spending cut proposals are not viable. >> guest: well, yeah, -- >> host: have you heard bob gateway in on this? >> guest: the president and chief of staff, vice president have many conversations with secretary of defense, and i am party to some of those but i'm

not going to discuss them here. i think we're all on the same team and i think he understands that defense has to be part of the overall effort to get our budget under control. >> host: let me get some questions from the audience. this is from michael pierce of wyoming. as a father of a child with special needs my family has benefited from government social programs. nevertheless, when does our debt reached the level where good intentions today become crushing burdens on the next generation tomorrow? >> guest: i think that's a great question and i think the spirit in that question is really touching in a sense, this is a person was a child with special needs and yet they are suggesting they're willing to be part of the shared sacrifice. but i have to say there are right ways and wrong ways to do things and is going to say from a policy perspective, and i say this to everybody in this room, there is enormous discussion about the revenue side and the medicare site. but from a policy perspective,

from a values perspective, we should be very deeply troubled by the medicaid cuts in the house republican plan. i want to make clear what they are. this is not my numbers. this is theirs. after they completely repeal the affordable care act, which would take away coverage for 34 million americans, according to the congressional budget office come after they completely repeal to that, they do a block grant that would cut medicaid by 770 billion. in 2021, that would cut the program by 35%. under their own numbers, by 2030, it would cut projected spending in medicaid by half, by 49%. so, of course, i don't think in polite any negative intentions or lack of compassion.

but there is a tyranny of the numbers that we have to face. and here's the tyranny of the numbers. 64% of medicaid spending goes to older people in nursing homes, or families have someone with serious disabilities. another 22% goes to 35 million very poor children. now, i ask you, how could you possibly can't 35% of that budget and not hurt hundreds of thousands, if not millions of families who are dealing with a parent or grandparent in a nursing home, or a child with a serious disability? how is the math possible? if you try to protect them, mathematically, you have to a limited coverage for all 34 million children. now, i know some people didn't like when the president mentioned this is going to be very negative for families, for

those amazingly brave parents come and he may be one of them in our country, who has a child with autism or downs, and hoosiers are enormously committed and dedicated to doing everything they can to give their child the same chance every other child has. but here's the reality. medicaid does help so many families in those situations. over the years we have a lot more middle-class families who have a child with autism to get help in medicaid. there's a medical need a program that says we need to spend it down -- we will count income after you spend down medical costs. there's a program that was passed by president reagan that says if you have a child that is in need of institutional care, you can get help from medicaid. this is a life-support for many of these problems. but these are the optional programs in medicaid. these are the ones that go to more middle-class families. if you're going to cut 49% of projected medicaid spending by

2030, do you really think these programs will not be seriously hurt? so when we say that the tyranny of the math is that this medicaid program, this medicaid cuts will lead to millions of poor children, children with serious disability of children with autism, elderly americans in nursing homes losing their coverage, or having it significantly cut. we are not criticizing their plan. we are just simply explaining their plan. >> host: one more question from viewers, from andover. toward putting america back to work help reduce the deficit? >> guest: you know, absolutely. and i think when people talk about the efforts that were done, let's understand what happened. we inherited, we inherited a very, very the deficit.

and there's no question that we took effort through the recovery act to add money to grow to the deficit to help get our economy back. but we don't think those increase the debt or the deficit. we think they help prevent us from going into a prolonged deep recession or even a depression. so of course growth is important. and we are at a point right now we have 9% unemployment equipped private sector job growth striking but not good enough. we have to do this the right way. we have to do it with ballots that we need to be able to say that we are giving confidence to investors and people to create jobs around the world that the states still a good place to invest. because we get our fiscal house in order, we are willing to estimate significant cuts and select revenue increases to do so. but we do so in a way that is phased in and doesn't hurt our economy because that would be counterproductive. and secondly, i just want to

make just an overall point because i think it's very important. for so many people like pete peterson and others, who have devoted themselves to a cd with the baby boomer retirement, the long-term entitlement, part of the theory behind this is we did want to be a society that spent so much just on older americans, that we lost our ability to invest in our children an education, and the science and research and innovation that is important for future productivity. it was very much of that type of thinking that led so many people to want to deal early on with the aging of our population. but what is happening right now is theirs become a very i think unfortunate desire to simply cut domestic discretionary spending across the board, the unprecedented low levels. even though this is the area where the national institute of

health is in, the national science foundation, pell grants. you know, head start. we need to do fiscal discipline going forward, but as the president said, you don't unload a plane that is loaded up to high needs to have some weight taken off but you don't take the engine out. so we need to lead a balanced plan that does not take our levels of domestic spending to such low levels that it might sound good for press releases and might sound good but we are defined a fundamental, one of the fundamental goals of the with our long-term entitlement situation by actually failing to invest in our children, failing to invest in research, medical research, innovation. and i think that's a very, very important as we go forward. >> host: which aspects of chairman ryan's plan with the administration be willing to incorporate to get the republican by in? >> guest: look, i think

there's places that are very difficult for us to go to. i think the hardest really, when you look at medicaid block grants, those are things that i think would be very, very difficult for us to ever support. number one, we think it takes away the basic social context -- compact in those programs that would lead to the type of very unfortunate cuts we just discussed. secondly, i don't think they are wise economic policy. the federal reserve estimates the fact that we have what they called automatic stabilizers, things like food stamps and unemployment insurance, and medicaid, that where we increased spending as we go through recessions are more people go into poverty, helps smooth out our business cycle, our recession. doing them and block grants not only will be bad for some of our most hard-pressed americans come it will also be i think i'm wise macroeconomic policy because it

will reduce the automatic stabilizers in our economy. so i think that those kind of block grants are difficult. we are open to talking about many ideas on medicare, but for the reasons i've discussed, i think the current house republican medicare plan is just very, very poorly designed. i mean, it just -- to make beneficiaries paid 6000 more so the government can get $615 more in savings, you know, that's what people say about my basketball skills. he is slow but he can't jump. it puts a lot of beneficiaries, puts a lot of costs on beneficiaries but it doesn't save much for the government. so i think when you're doing, if you want to go into the areas of reform, you have to do so carefully and you have to be not upset, basic guarantees that are important to our safety net. but look, we have basically agree to a level of domestic discretionary savings that are consistent with the

bowles-simpson plan. we have put in a level of medicare and medicaid plan, savings consistent with the bowles-simpson plan. the only two places where we don't go as far as they do are on defense, and they do more revenues than we do. so we are the ones that are very close to the bipartisan fiscal plans. we have a balanced plan that we're taking nothing off the table. do you know what i hope is, i think chairman ryan is, he's somebody i like very much personally, and i think he has a lot of sincerity. but i think what's happened is that in their desire to live by what is an ideological view that you can't have a penny of revenues, it forces you to do things like the medicaid savings, that when you look at the details out, i don't think many of the people who for them would really support, that they understood the full implications of. >> host: final question. one of the administration's fiscal goals top priorities this

year and how would you achieve them, briefly? >> guest: i think that at the moment, you know, i think most important fiscal goal, and this is one place where i think i agree very much with chairman ryan. we have to get a down payment now. a lot of what people judge around the world is not that they say, you know, i don't know that people when they look at what gives confidence in our economy says oh, it's at 2.2, we have confidence and 2.8 we don't. i think they look and ask. i think they start with the view of the enormous confidence of the united states. we are fortunate. people have a positive bias towards the united states. we are, even in an ugly economy, we are often the previous kid in the room. we are often the safest haven even when people are most -- we have something very special. we need to protect it.

that's why i can't play games with things like the default. you just can't play games. it's a treasured asset that we inherited from alexander hamilton, that u.s. credit standing, our credit worthiness, our full faith and credit is something that is the gold standard. you don't even want to get near doing anything that would in any way lessen that began on the fiscal discipline side, i think what people would like to see is that even with the types of position we have, we as a country are capable of coming together and doing something serious. if we've got a series a down payment on deficit reduction in the summer of 2011, i think that would have been way above the expectations that people would have had in november when they so we're going to be any period of abided government. and my guess is that a serious down payment is going to get you all the way there, but the

packet -- the path to deficit reduction doesn't always happen at one time. and to be bipartisan, you know, president bush, the older president bush, started in 1990. he didn't go far enough. president clinton bravely put forward a plan with no republicans supported it in 97 d. with medicare, to incredible adversaries, newt gingrich and bill clinton came together. so i think what people need to see is we are on the right path. so getting serious deficit reduction package, which means looking for the areas we agree on, and trying to press each side to move a little bit from wrong health decisions so you hold hands and jumped together and do something that is politically difficult for each to do a little, but together it is politically viable and economically important to the country. that would be the most important thing. i think that would be enormously

confidence building. and i will say that i am unfortunate to be one of the people at the table for the biden discussions, and if you're in that room, you would really be struck by the seriousness of purpose, the degree people are going line by line. and i think there's trust building. i did not era canterbury will before this, and probably agreed virtually nothing with them. but you sit in a room and have discussion, and everyone including congressman cantor comes very well prepared, ready to talk specifics as opposed to giving speeches. and i can't tell you that this biden negotiate group is not commission. it's a negotiating group with people selected by the leadership to negotiate. i can't say it will get all the way to the finish line but there's a real seriousness of purpose in that room that gives me some optimism. >> host: gene sperling, thank you very much. >> guest: thank you. >> some of yesterday senate

debate on extending certain expiring provisions of the patriot act.

>> debate continued yesterday over extending certain expiring provisions of the patriot act. a procedural vote on the issue is scheduled this morning. republican senate rand paul of kentucky has objected to the amendment process. >> i thank the senator from new mexico for his comments.think wt i think what this shows is thata it is a bipartisan effort that says we should protect our constitution. l those on the left and those on o the right should believe in the constitution think it should beb protected. it bring some of us together who may not necessarily agree on al, other issues, but when it comesn to the constitution, when it comes to the basic bill ofts, te rights, if we are concernedhe

those on the right and left onn the democrat and republicans thf side, the problem is that those of us who are concerned are inoh the minority on both sides. quid so we are being quieted down. we arein being told to sit quiey in the back of the room and don't make waves. we want to have a debate over an the patriot act because we are concerned about our liberties.eu we are all concerned about terrorism but we don't think you have to give up your liberties in order to combat terrorism.xtd on february 15, we extended thet patriot act for 90 days. during that period of time, andn on the senate floor on of february 15, we were promised ae week of debate and we werement promised an open amendment process. we are now in the midst of a process where we will have no ad debate and nome amendments.erros do we fear terrorism so much that we will not have debate? fr

that we throw out our d constitution and aebre unwilling and afraid to debate our sad constitution? i think that is a sad day, that- we can't come down, our senators the day? afraid to debate the constitution? afraid to have an open forum anr debate whether or not the think t patriot act is constitutional? i they talk about thisd' being tho world's most deliberative body.. we are unwilling to have questions and have questions patriot act is unconstitutionals we have been in session 99 days0 since then, we've had 99 days since we've extended it.t, a 43 days in session, and we've had 56 vt otes. what does that mean in the a context of things? we are setting a record for the least amount of votes effort to occur in the senate. estion there are some important debati, questions we should be debating,

but in lessons a foregone and conclusion, and less than the counted the vote and decide them outcome, we are precluded from debating. abolitionist wrote "efernal vigilance is the price of liberty." the patriot act is a perfect example of how a lack of vigilance needs to loss of liberty. in the aftermath of 9/11, we amended the constitution with the patriot act. and you say, whoa! we didn't have an amendment to the constitution, did we? well, we didn't do it the way we're professed to. but we did in reality amend the constitution with the patriot act. how did this happen? we were fearful, 9/11 had happened, and we wanted to stop terrorism. all of us want that. but do we hav ut do we hav but do we have to give up our constitutional liberties to do

that? how does the patriot act change -- how does the patriot act change the constitution? how did it change the fourth amendment? we have in the fourth amendment the right of the people to be secure in their persons, houses, papers and effects against unreasonable searches and seniors sean not be violated and no warrants shall issue but upon probable cause supported by affirmation and particularly describing place and persons to be seized. the patriot act changed this. the patriot act changed the standard from probable cause which is a longstanding tradition within the court which limits the police from coming into your house unless there's probable cause that you committed a crime or in the act of committing a crime. we change this way standard we called relevance.

that is changing the constitution. how do you change the constitution by majority vote? it is supposed to be a supermajority ratified by 3-fourths of the state. it is supposed to be difficult to change the constitution. difficult to amend the constitution because so we thought some of these rights are so important that we should not allow a majority to change them. those of us who believe in gun ownership, think the second amendment is protected from a simple majority. the first amendment, those who pride the ability of the press and to respond, those who wish to have a country in which religion is not being hampered by the government. we don't believe the majority will take away these rights but a majority did take away the

fourth amendment. and from probable cause to relevance. if they want to look at your records, they have to say it is relevant. they don't have to say you are a terrorist or a foreigner or conspiring with anyone. they just have to say they have some interest in your library records. how often is this going on? there is nothing called suspicious activity reports. some of that is separate from the patriot act. much of it was emboldened by the patriot act. the suspicious activity reports are where your banks eyes on you. you don't know this is happening or even know if it is on you and they probably won't tell you. if you made a transaction that incurs $5,000, you could have been spotted on by your bank and reported to the government. some say i am not doing anything wrong and i don't care if they

look at my records but here's the thing. if you look at my visa bill you tell what doctors i go to. if i see a psychiatrist and don't want everybody to know what that might be -- what magazine i read is on my visa bill or books from amazon or other booksellers. whether or drink alcohol. whether i gamble. there's a lot about your life that is involved in your financial records and they do deserve protection. we deserve a standard where we don't just say it might be relevant or we might want to troll through these records to see if anybody might be committing a crime. this is worse than other aspect because suspicious activity reports did not begin with the government asking any questions. they tell your bank to what you. your bank is to watch you and watch all your transactions and to report to the government so they have four. you say they are only reporting

terrorists. since 2001, since 9/11, eight million suspicious activity reports have been filed. over a million are filed by the year. the thing is you could well ask for freedom of information act, freedom of information inquiry and ask if you have been investigated for your transactions. my point is this is an invasion of your privacy. it doesn't have any judicial restraint on it and the other thing is it may not be good for finding terrorists. it maybe they are getting so much information they can't even read or listen to it. it is like what they're doing at the airports. because they insist everybody be searched, we are patting down 6-year-olds. a little girl in my town whose dad is a physician and practiced with me is padded down where they're putting their hands

inside her pants. this is absurd. 6-year-old girl. they're wasting time on people who will not attack us and missing people who might attack us. same with your banking records. if they're looking at your banking records they're not having time to spend looking at records of people who would possibly be attacking us. eight million records have been looked at. no judge's order. no judicial review. this isn't even reviewed by anybody in government. they are giving carte blanche this power to banks and telling them if you do not find your customer you will be fine. $7 billion a year is spent by banks complying with this order to start on your customer's. the thing is we are having trouble in our economy. banks struggling. the economy is struggling and yet we are going to add

$7 billion of costs to the banks to spy on their customers. might there be an occasion that a bank transfer or bank activity could be a terrorist activity? yes. if we investigate those let's ask for a warrant. that is too slow, we will never get it. warrants are almost never denied. there's a special court set up for the investigation of intelligence that has been around since the 1970s. before the patriot act the pfizer court never turned down a warrant. those people are awful. just get them on the street. i just wanted done. that has been the attitude of the majority of the people up here and the majority of americans after 9/11. people were so frightened they said do anything. i don't care. the problem with that attitude is even if you want to argue it hasn't been abused yet what happens when people elected to your government who decide they don't like your religion or you believe in a certain kind of

marriage and they want to investigate you. now there is no step to stop that. no step to say your church believes in this unorthodox believe that we don't cross politically correct or is no longer acceptable. we want to investigate the banking records of the church and see if we can take away their irs number or tax exemption. if you don't have any restraint to these activities someday we will get a government who has no restraint and goes forward to say we want that church shutdown because it is saying something we disagree with or these people are reading these books we don't like. this goes across the party are. look at the library association which is concerned about this that people's books are being looked at. think about the you want the government to know what the books you read? do you want to be on a watch list because of the books you read? they say we make provision that

that won't happen. the only way you have a real provision or protection if you have procedural steps that say someone must review this before it happens. if we have someone we really think it's terrible and they need to be off the streets or they are accused of rape or murder, accused of robbery, accused of the most heinous crimes we can think of and it is 2:00 in the morning we call the judge and we get a warrant. it is almost never turned down but it is one step removed from the police breaking down every door case suspect and not having any kind of discussion with someone who has a level head who is not part of the investigation. many of here will say we are in grave danger. if the patriot act expires, all things that happen and terrorism could break loose. what they are arguing is they are arguing there is a scenario

where we would get warrants against terrorism. that never existed before the patriot act. we were not turning down these warrants. some have argued that massoui was captured a month in advance of 9/11 and many said a fully have the patriot act we would have gotten them. that is not true. there's a provision called the lone wolf provision it not even ask for a warrant. they turned down a request for a warrant without asking by the court for it. we have the nineteenth highjacker a month in advance. we had his computer. when we do look at his computer on 9/12 we linked quickly within a matter of hours to all the hijackers. is easy to say we could have stopped 9/11 but to tell you the

truth we have to look at the rules and say could we possibly have gotten that information? the answer is yes. the fbi agent in minnesota wrote 70 letters to his superiors. the fbi was told moussaoui was an agent of terrorism. that is all we needed. had they done that they would have gotten the court. they acknowledged as much when they got the report. in all likelihood the warrant would not have been turned down and there's a possibility we might have stopped it. the suspicious activity reports are particularly galling because their businesses forced to spy on their citizens. there is another form of spying that goes on as well and these are national security matters. these are like warrants. they go after your banking records, like the suspicious activity report but they are more targeted in the sense that the government asks for an end as al but it is not a judge that

asks for it. the person who asks for the nsl is a law enforcement agents. the danger here is we removed the step where the police officer or the fbi agent would then ask permission from a judge. that is my problem with the national security letters. some would say we are not doing that many of them. initially we weren't. now we have done 200,000 national-security matters. one of my reforms if it were to take place would be to ask judges to review these. i see no reason they should review them. some have said you have no expectation of privacy. the courts have ruled you have no expectation of privacy in your papers or electronic records. this is a way it has been interpreted but it has been misinterpreted. it has been interpreted your banking records do not deserve

privacy when not in your house and that is an incorrect interpretation of the fourth amendment. the fourth amendment says that in your papers you are to be protected. doesn't specify if those papers are in your possession or someone else's. at this time i would like to yield the floor to my good friend from south carolina. >> thank you. i came to thank you for bringing up a number of issues of concern and being willing to stand down here and tell america what those concerns are. i also respect your demanding the opportunity for debate and amendments of such an important bill. it is extraordinary particularly after the majority leader promised in february that the patriot act renewal would get a week of debate with the chance to offer amendments to and after a couple weeks of doing