am sorry to say i am being given a signal to wind things up. this was done in a total fair fashion. we will be around later what the last question after the collapse of wamu people losing money, sales at jpmorgan, where does $20 million come from to pay bonus? >> that is a great question. apparently there was just enough money left. >> where do i get a job like

that? the book is the lost bank. thank you for being with us. [applause] >> every weekend booktv offers 48 hours of programming focused on nonfiction authors and books. watch it here on c-span2. >> david wessel of the wall street journal reports on where trillions of dollars that make up the u.s. federal budget comes from and where the money goes. this is about an hour. [applause] >> i was thinking maybe i would let you keep talking and i would listen and that would be the interesting part. it is good to be here at one of america's best independent bookstores and i assured brad that not all these people are my friends or fellow members, there are apparently people who want

to think about the budget in august. it is heartening. i want to talk at the beginning about how this book came to be. my agent who is here to talk to me about doing a book about the budget and the editors at crown unit of random house published a book i did on the fed said to me the fed was boring and you made an interesting. the budget is boring. can you make that interesting? making the fed exciting in 2008 when we were about to tumble into a great depression wasn't all that hard. there's nothing going on with the budget. of book links treatment of the failure of the supercommittee is not something i want to write. what if you did a year in a life of the budget? you could start with the budget being crafted behind-the-scenes of the white house when the president presents the budget and congress actually acts on the budget and the money goes

out the door and i said that is not really the way it works and they said really? and i began to think maybe i did actually know something that could be useful and what brought me to this conversation some of the charts pete peterson's foundation has done. pete peterson devoted a billion dollars to a foundation to deal with the federal budget and not sure he made much progress on the policy front but he has made lots of good charts and employ lots of graphic artists making them and they are excellent. as i went through the charts i began to realize and my editors realize that the same time that there was a market for a book that just explained where the money comes from and where it goes and as i thought about that i thought this is a good idea. this is the book i could do quickly. i was cocky about how quickly. and i thought i am going to write a book about the federal

budget for people who have never managed to get to the end of many wall street journal story on the subject. i had this naive hope that maybe i could play small role in separating fact from opinion because i think what has happened in a lot of budget discussion is people have mixed up what the facts are with what the reality is and what choices we have to make. the choices are fundamentally in the best sense of the word political. they have to do with our values and how big government we want to have and the nature of success in our economy and so forth but what happened is people start with a set of positions and build a set of facts that support them and they never let the other side interfere in their argument. if you watch one cable channel fill in the blanks you get one set of facts. watch another cable channel get another set of facts that you would never know they were talking about the same thing. i know is kind of unfashionable to be trying to write a book

that says i do not have a solution to the budget crisis. in chapter 5, it is not david wessel's version of the bowls simpson but the role of a journalist is to say this isn't so complicated. let's break it down. it is hard to understand because it is so big the instructions the white house sends out to the agencies to tell them how to submit requests for the president's budget run to 972 pages. the budget itself four printed volumes. you can read them free online. 2,038 pages last year and behind each one of those is another set of explanations. my favorite is the department of homeland security which submitted to congress 3,134 pages to justify their budget, one for every $12.6 million they wanted to spend. the budget is big.

$3.6 trillion a year. $400 million a day. $17 million an hour and dave barry who is the humor columnist to use to write for the miami herald and is really good at this stuff once said the reason people don't understand the federal budget is millions, billions and trillions sound too much alike and if we just calm golf balls, watermelons and hot air balloons it would be easy to understand the magnitude and there is something to that. in this book i try to break the budget into big pieces into digestible morsels. i want to talk about a couple of them here today before i turn to questions. one is when congress shows up every year they have already committed about two thirds of the money. 63% of the money that was spent by the federal government last year was committed to various benefit programs, medicare, social security, medicaid, interest on the debt -- they

spend this the rest of the year arguing about everything else. what this means is they are never forced to confront how much do we want to spend on retirement programs? how much do we want to spend on health care benefits? what is the right amount of farm subsidies in a modern economy? it is automatically baked in the cake and only if there's some reason to reopen the bill which there sometimes is do they make any changes. an economist named jean southerly --stehrle pointed out in 2009 for the first time every single dollar of tax revenue had been committed before congress arrived. all the money the tax code writing went to cover benefits and interest on the debt and all the money we spend on everything el else, defense and domestic and discretionary stuff was borrowed. that is one thing and a big change from the past.

the second thing is related. the one thing that is rising faster than everything else in the federal budget is health-care. that is because the government covers more people every year and because the cost of health care is going up faster than everything else. in 1960, before medicare and medicaid program to insure the elderly, this table and the 4, 9.5 of the federal budget went to health care. last year it was 25% and we are on course even with the affordable care act according to the congressional budget office to hit 33% by 2020 one. this is an inexorable fact. you can argue about how we should change it and it certainly is a fact that we don't have the world's healthiest population even though we spend more on health care than any other country but you can't escape this fact and i am struck in a town where

democrats and republicans can't agree on what time it is there is some consensus in the health care that there's a big problem. another big chunk of the federal budget is the fence. we spent $700 billion on defense last year. $700 billion. that is more than the combined defense budgets of china, britain, japan, saudi arabia, germany, italy, australia, canada, turkey, spain and israel. our defense budget is bigger than the defense budget of the next 17 countries combined. i don't think that is sustainable. there are some big choices to be made as to what extent we want to be the cops of the world and to what extent is it important to keep the sea lanes open for oil shipments for everybody who depends on oil from the middle east. to what extent we want to send the blood drop of a hat to libya

or somalia or syria or wherever. there are some items there. the trouble with the defense budget is like covering the federal reserve. a set of facts and concepts that outsiders can understand. in the book i try to take just one thing the defense department inside. how many aircraft carriers are enough? congress in its infinite wisdom told the pentagon they have to have 11 aircraft carriers. they have special permission to have 10 for a while. and each aircraft carrier over one aircraft carrier every five years for the rest of my life. these aircraft carriers which are enormous, 4 acres of mobile sovereign territory cost

$11 billion. eleven billion dollars is the same amount medicare will spend on the knee and shoulder surgery on 700,000 medicare beneficiaries. when you do your scale one aircraft carrier, 7,000 joint replacements. and it costs $2 billion. each one has two nuclear reactors. we have decisions to make on how big a defense budget we want to have. brad mentioned the couple misconceptions people have, and it goes to spend bureaucrats. most don't do a good job.

4.4 million people. most in the defense department and military or civilian are various homeland security apparatus. if they fired every single one of them from president obama's secretary to the person collecting tolls at yellowstone to the guy who is sitting in some norad air defense facility, if we got rid of all of them, wages and benefits, $435 billion last year. that didn't reduce the deficit by even 40%. almost a record deficit of there were no government employees whatsoever. the federal government in a sense takes a lot of money and sends it out again. a military with retirement fund.

$2.2 trillion of money from the federal government last year went out in the form of benefits to individuals of some kind and much of the rest went in state and local grants and state and local governments. it is not going to be possible to reduce the federal deficit by nickel-and-dimeding federal employees. we will not succeed in reducing the deficit that way. another misconception people have is we are paying more and more taxes and we are paying more taxes than people in other countries. a lot of people particularly in this room appreciate americans have a smaller government than those in most developed countries and we pay less of our income in taxes and get less of our services from the government than they do in northern europe. what is less understood is for a variety of reasons the share of income people of the middle of the middle-class have paid in taxes has been coming down

steadily for 30 years. in 1979 people in the middle stratum of, middle 20% of income distribution paid 19% of their income in taxes of all kinds to the federal government according to the congressional budget office. in 1999, 20 years later it was down to 17%. in 2007 before the recession hit it was 14%. last year partly because of a recession people's incomes were depressed and there were special tax breaks it was down to 12%. the typical american family has been paying less in taxes every year as a share of their income even though the government has been spending more money every year as a share of their income so where's the money coming from? we are borrowing at. last year we borrow $0.36 of every dollar we spend. most of it from abroad. half of it from the chinese. at the bottom a series of

policies many of them pursued by republicans as well as democrats have gradually lightens the tax load on people at the bottom. last year 46% of american households did not pay any income taxes. 46%. that was swollen by the recession but in ordinary times it has been 40%. a lot of them pay payroll taxes and social security and medicare tax which for most mucking americans is a bigger tax than the income-tax but even with that about a fifth of all americans didn't a payroll or income taxes. didn't make enough money. they were elderly people taking the advantage of one of the myriad set of tax breaks who were low-wage workers or big families or other deductions. some of them were probably well off and some ripped off the system but most did not. if you want to think about the federal budget you have to think about those three things.

what do we do about health care? what we going to do about defense and revenues? almost everything else is a detail. if you get those three things you will put the pieces together. the deficit today is enormous. bigger than we had at any time in our history since the first world war but the deficit today is not a problem. the u.s. government is bar with almost unlimited amounts of money at extraordinarily low interest rates. the government is borrowing ten year money at 1.5%. that is a record low and it has never been that low since the government has been borrowing as far as the records we have go. the problem we have now, the acute problem we have now is unemployment. 8.3% unemployment. more than three million people who have been out of work for a full year and those of just the

ones who say they're still looking. the deficit is not today's problem but it will be tomorrow's problem. even at today's low interest-rate the federal government spend $230 billion on interest. that is bigger than the combined budget of the departments of commerce, education, homeland security, state, and federal courts. how is that we were able to borrow so much money and pay so little interest on? why aren't we like spain or italy or campbell wharton -- or grease? not that we manage our finances or have a political system that seemso be a marvel of the efficiency and compromise. it is because the rest of the world looks even worse. the united states is the world's tallest midget when it comes to borrow when money. if this could go on forever it

would be fantastic. it is not going to go on forever. i have no clue where it will end but it won't go on forever. as interest rates return to normal legal share of the federal budget the best interest is going to rise and that will crowd out spending on other things. pay taxes and borrow money and some of the money we borrow will pay interest on the money we borrow last year and some of the taxes will pay interest to our creditors and those creditors are overseas and 19% said the federal debt was held by foreigners. 19%. last year it was 46% so that means we will be working harder and if the economy grows we will have more tax revenue and a share of each of our paychecks will pay interest on the desk mainly to the chinese which is weird when you think of it. here's a country where the standard of living is far below

ours yet somehow they manage to save incredible amounts of money because the government makes them do it and they use it to lend it to us and in fact they allow us to have housing bubble and borrow this money so we could run up our houses and we find ourselves in the situation we are today. this can't go on forever. it just can't. when is it going to stop? when is the bond market's going to rebel? when will the chinese stop lending us money? it is a great question with no answer but if you know something won't go on forever it does seem prudent not to plan on it going on forever but right now we are on course to become world's largest sub prime borrower and we do not have a business plan to avoid that. there are not too many heroes in my book. i had heroes in the last book.

there are a couple. one of them is doug elman north --elmendo --elmendorf. the congressional budget office is a remarkable institution. one of the few institutions in washington that works the way it is supposed to work and is functioning. it was created largely in rebellion of the congress trying to take control from richard nixon to give them independent advice and honest figures on the federal budget, federal spending and has done just that. elmendo elmendorfso is trying to talk sense into his boss's. fortunately he is not paid for performance. he said a couple things i think are relevant. one is we cannot go back to the spending policies of the past because the number of people 65 and over will increase by one third off between 2012, and

2022. the number of people over age 65 will increase by 1-third over the next ten years. that is the aging of the baby boom. the idea that we fix the budget deficit, do something about medicare before the baby boomers start collecting it is over. the oldest baby boomers are turning 65. we have to have a bigger government that we have in the past despite what you hear from some candidates, and what we had before. is arithmetically possible, it is extraordinarily difficult. and we decided we want a smaller government. the second point that is one of elmendorf's best observations, this country faces a fundamental disconnect between the services

people expect the government to provide and primarily in the form of benefits and tax revenues people are willing to send to the government and that dilemma, that contradiction is at the root of the budget crisis. i have been criticized as i mentioned earlier for not ending with a plan to say how we get out of it. and unable to face the facts, we have the luxury of not having to face them right now because we were able to borrow so readily and we have even by american standards and extraordinarily polarized political system. what changed this? i can only come of with two possibilities for what change this. one is a crisis.

one is the financial crisis -- your project together, and fewer dollars, and a fiscal cliff at the end of the year when spending is across the board. and taxes are supposed to go up. and the president reached a compromise. abettor deficit reduction. maybe that will do it. the alternative is a sudden outbreak of leadership. leadership and come from strange places. i am glad ross perot was not elected president but he played a constructive role in the race forcing candidates to stop trading 1-liners and deal with some legitimate issues and it would be nice if something happened to get like that again. it won't happen and the petition going on.

one of the debates, dedicated to the deficit and we agree on what the number is and what the targets for reducing over the next decade. tell us how you would reduce it. and the barack obama plan. another semi hero in the book is leon panetta who is an extraordinary man. he is 74 years old and came to washington during the nixon years. he was working for a republican in congress who lost. wasn't conservative enough for calif.. he then went to work in the nixon administration and you can decide whether it was fortune or misfortune to be put in charge of the department of health and education and welfare's school desegregation task force. at a time when nixon promised strom thurmond and others they

would not enforce school desegregation rules. so he got fired and wrote a book about that which had no idea and, started researching this, the budget committee in the years when there was an agreement between democrats and president bush to reduce the deficit. he was in the clinton white house in those years when we ran a surplus which seems like a long time ago and it was a long time ago. you was director of the cia and secretary of defense busy defending the defense department against people who want to do what he would have done in the budget committee. he has a lot of perspective. i talked to him in his office at the pentagon which is pretty cool. has a little shrine to the capture of osama bin laden. he told me in the 12 years he was out of office when he was teaching at an institute he set up in california he said i used to tell students that we are

eager governed by the leadership or by crisis. i always thought that if leadership wasn't there that ultimately you rely on crisis to drive decisions. in the last few years, he likes to laugh at his own jokes, he said my biggest concern was crisis doesn't seem to drive decisions either. there goes my theory. on their i would like to end. i am happy to take your questions. i would like to recognize my wife naomi carthy. anyone who has written a book knows that the worst thing is for the spouse who has to put up with someone who can't think about anything else and can't sleep at night and is perennially crabby. this was a quick book so she got an intense those of author spouseitis. my agent is married to a psychiatrist and it shows because he is a great counselor. when you say how can this work. there is a question here and i have been asked if people have

questions to come to the mike so they can be recorded. high. >> in terms of this edition among other things. the numbers that you mentioned at the beginning. the 40% -- was it 40% of people who were on medicare and/or social security who thought they were not receiving government benefits? the republican plan -- the republican plan cut medicare and people would get fewer services. that is the republican idea that we get too many services and people shuttling get what they can afford. if the obama campaign work to explain that do you think it would change anything? do you think it would shift votes from republicans to democrats if people realize what was going to happen for medicare even if it didn't happen to them but only to their children?

>> it is a good question. i don't know the answer. let me make two observations. one is these are campaigns that have the good job explaining medicare and medicaid and plans for health care in a way that makes sense to everybody. both camps are a little too much on the free lunch school for me that we are going to make health care more eat fish and so everybody can have all the health care they want and all the health care they need and no one will ever say no to them. that is not very realistic. the obama camp has taken a pass on medicare and all the cuts they propose would hit providers. they don't propose to do much to beneficiaries and the republicans want to turn -- not the way put it but more of a voucher thing. and hope that by that process

you can wind down. convincing voters that your opponent will cut medicare will win votes. i am not sure ever done in either campaign is doing us any favors if they tell us we can have a pain-free solution to health care because i don't think we can. >> that is for another time. >> starting with the idea that medicare is catastrophically underfunded, $50 trillion underfund according to the accounting system they require employers to use and going to squeeze spending on everything else probably including defense and not the means tested program. a the same co-pay and the same

deductibles. more like medicaid. two questions. why would democrats basically demagogue cuts in medicare which i think -- i should be paying ten times the deductibles and co-payments to somebody else. why would they demigod backed and let medicare debt every program they care about is going to be cut because of their support for medicare and why would republicans propose any cuts in medicare? they can let it go ahead and leave the rest of the budget and they can live with a government that has medicare, defense and interest on the national debt which would be fine with them. >> the answer to any question that begins why would political party a demagogue is because they think it will get some votes. i am willing to substitute my judgment for a lot of people.

when it comes to my judgment for politicians about what gets votes i stand back. that is the first cancer. i don't think the republicans want a government that is all medicare, defense and interest on the debt. they want a smaller government. both sides if you press them recognize we have to do something about health care costs in general. is not just medicare and it is not just medicaid and not just the other half of the health care bill paid by private employers and insurers and consumers but health care costs are going up faster than everything else and we have struggled to figure out a good way to control that. if there were a magic bullet solution to health care costs that would be in the obama work from the plan but there isn't. there are two things we have to do. we have to be really efficient in the rest of government because health care is inevitably going to be a larger slice of what the government spends and secondly we have to

find a way to restrain the growth of health care and bear is the portable care act, some ideas on a republican side and at some point we have to implement those and may be ration health care in order to do that. there are three people in the audience who are more health experts and i am. if i keep getting questions i'm going to call on you guys. >> i am trying to understand why after 30 years of starting the beast why governments under both republicans and democratic administrations continues to get bigger and bigger. i have come to the following answer and i would like you -- i haven't read your book. eyewall street journal continually reminds us when you want to pet the consumption of some commodity raise its price.

conversely if you lower the price you increase consumption. i submit to you by cutting taxes you make government cheaper. more government for the same price. you have this paradox of trying by cutting taxes you cut the cost of government leaders will make it cheaper so this is not surprising that people want more of government. >> the reason we have more government is so easy to borrow money and we didn't have to pay for it. that is the difference between us and spain and italy. we pay 1.5%. 2% inflation rate is a pretty good deal. in the book i resurrect one of

the original -- a pamphlet work for the editorial page of the wall street journal for which i did not work. he popularized something he called the two santa claus theory. the party of income distribution are best suited for the role of spending santa claus. the republicans, traditionally of income growth should be the santa claus of tax reduction. it has been the failure of the gop to stick to the traditional role that has caused the nation's economic misery. not the they don't enjoy cutting taxes. they love it. this is 1976. something in the republican causing them to be hypnotized by the prospect of a balanced budget. they play into the hands of the democrat, successful politics, never shoot santa claus.

one has been definitively disproven is star of the beast pherae. that was part of the reagan administration's plan. cut taxes. reagan, cutting the government's allowance and that would allow cuts and spending the doesn't happen. i am not sure for the reasons you say if you tell people they can get something for less than one more. it happens because there's this relentless pressure to spend more. very few members of congress wants to spend less. even some of the tea party people want to spend less in principle but in practice they are not so sure. when you can borrow the difference there's not much pressure to reduce the size of government. it is that simple. >> i want a shorter answer. a lot of people -- >> rather symbolic washington nationals have a mascot called screech. i had to say something about the

affordable health care act. it subsidize health insurance. no one can be denied health care if they fail to pay their deductibless or co-payments. a lot of offices essentially have voicemail that says this is an emergency, go to the emergency room. that is a huge fallacy. the reason it is less costly in other countries is cheap labor. tight restrictions on the cost of medications. that is a huge problem and other countries make people wait for care where rations come in. i wonder if you could comment about the incomes of persons in government who have to report their income especially on either side of the aisle and what their taxes would be if their taxes were increased proportionally after $250,000?

>> the big fuehrer has been mitt romney doesn't pay enough in taxes although warren buffett doesn't because he doesn't take a salary. everything is given to him. >> i thought you were going somewhere else. we do have a pretty transparent society. you confined out what any government employee makes and there are not a lot of them to make on their own some of them are married and have spouses enough to be hit by the $2,000 threshold. >> i have a different plan. my plan is every member of congress should have to fill out his own tax return and may be without turbo tax. it gets me a little nuts that people decry the complexity of the tax code and you look at tax returns and some members of congress to disclose their tax returns and a number of them are taking advantage of every single possible loopholes eduction

credit and exclusion by this time they labor. the issue with governor romney's taxes and warren buffett's taxes is if you are really rich the tax code provide a fertile field for finding ways to avoid paying taxes and if your income is more in capital gains and dividends and less in wages you are taxed at a lower rate. that is the bottom line. i don't think mitt romney is campaigning on a tax plan because it would benefit him particularly. he either believes in the tax proposals he put forward or thinks they will win him elections. i think sometimes people are too hard on rich people who run for office and think when they get to what is they're doing things to benefit their personal pocketbooks. i don't think that is the case. >> will you comment briefly on what you consider the true loophole versus a justified

exclusion? >> every loophole -- that is a great point. my loophole is justified exclusion. my favorite is -- two come to mind. one is i don't understand the social purpose in having a special depreciation tax break for people who own nascar racetracks. that was one that was set to expire but the senate finance committee decided to extend it again and another is the one i go into depth in the book called light kind exchanges. a piece of property and you sell it at a profit and turn the money into another piece of property, you don't have to spend problem -- in the 20s, in the infancy, over a series of time it has been stretched, if you want to put something in something else i have an example

in the book about one of these brokers talks about a case where a number of people had very valuable antique cars and they wanted to salomon not a capital gains on the proceeds so they found another set of antique cars so they didn't have to pay capital gains and explain how they did the right thing on the estate tax to pass those on to their kids and never paid taxes at all. and what is a like kind exchange? there is a way if you do it right if you have a dental practice you can sell the dental practice and you can buy vacation property and that is a light kind exchange. but the irs says livestock of different sexes are not lifetime -- [laughter] >> which makes eminent sense. i would like to be the one whose

shifts from spending to the revenue question and ask a simple question i have not been able to determine an answer. since 1980, had tax rates been what they used to be, in the mid 70s for the 60s for that matter have they remained that way? capital gains been taxed as regular income, what would our situation be? >> a great question for which i don't have an answer. obviously if we had more tax revenue and the same spending than we have a smaller deficit. the magnitudes are hard to judge because it is always a problem. what would the economy have been like if we had the same tax rates today that we had before ronald reagan became president? don't have the answer to that. if you are asking me -- i am

going to answer a question. is there a set of tax rates that is higher than the ones we have today that would allow us to still have a prosperous economy? the answer is yes and you can see that from the experience of the 1990s. >> i would like to ask a simple question. as simple question. [talking over each other] >> the question is brief in the sense that what is the real tax like? you are trying to elucidate the facts of a complicated tax system. for example on page 113 you show the tax fight but this is income-tax those. on page 106 -- that is not

right. and page 113 the congressional budget office average tax rate and that is federal taxes of all kinds. payroll tax, income-tax, excise taxes and they distribute corporate income tax. >> maybe i misunderstood. i picked up this evening and haven't really studied it that well. i was bringing to mind the tax system is so complicated that a few of us really appreciate it and there is not only the taxes that we pay on our invoice we receive from the employer but there are the hidden benefits and the payroll taxes are just a part. what the federal government receives is the employer's contribution and the employee's contribution and if you are self-employed you appreciate more of what you are contributing. so you are saying now that cable

113 that i misunderstood includes all taxes. but i was also going to refer to page 106 on the tax makes showing the payroll taxes and where i presume that includes the medicare perhaps. >> let me just explain what you are looking at. there is a chart which goes back to 1940 and shows the share of federal revenue and income taxes, corporate income tax and payroll tax and other things. what you notice is the payroll tax is an ever greater share and the corporate income tax is a smaller share and that is because we raise taxes on social security but also we invented medicare in the 60s and that is financed in part, not in hole by the payroll taxes. >> on page 113, sufficient

exemptions, pay income tax -- 15% of the payroll and the federal government is receiving 15%. >> not necessarily. >> contribution and employer's contribution of medicare and social security. >> it is a mistake to think only about in contact sins. most working americans pay more in payroll taxes if you include the employer share because that is wages they didn't get and they pay income taxes. about a fifth of households don't pay income or payroll taxes because either they didn't work or because we have -- i talk about this in the book a little bit, decided we don't want to give people money and call it spending because spending is not kosher.

tax cuts are very kosher. if you have a choice they would rather give people a tax credit rather than put it through the spending thing. in some cases the federal government has programs that for working people reduce payroll tax sometimes to zero and give people money back and that counts as a spending -- tax cuts and that move the conversation so you can never figure out what they are doing. >> that would explain why the lowest percentile is less than 5%. >> let's have the next question. >> good evening. >> you have a simple question? >> very simple question. more a clarification. i am confused about the federal government, state government and county government and i have observed, state and federal employees are on the decrease,

the amount of contractors are on the increase. i am seeing government increasing not directly but in directly -- [talking over each other] >> i don't think that the state and local level they are increasing much of anything. they're letting contractors go and letting employees go because they have been under such pressure. we want to do something and, a tax cut rather than spending increase. to keep the number of federal employees down, the government has tended to rely on contractors. some are people who use to the employees and are now contractors. there are people who try to do that. shows how people at the things together. >> i am clear now. >> glad to have clarified at

least one person. should stop now while i am ahead. >> i won't challenge you. i want to thank you. you had tremendous insight. a couple of observations. you mention areas lack of leadership. i agree and i think many people would agree with you and in a lack of leadership anything filled a gap including the media of which i include you but that happens to be -- i thank you for that. >> it surprised me. >> i hardly believe in a free press especially in this wonderful book. i am a tourist who wanted in. as an observation my father is 72 and i look around and see many people who are older and 0 worried about the same thing. will i receive what i paid in? do i receive some fairness. i think we would all agree and hoped we would agree that we

will all sacrifice something if we just knew we were being treated fairly and that leads to my conclusion that i don't trust anybody in washington. i am going to south dakota. >> i want to disagree. one thing you said is my experience, a lot of people on social security and medicare and some people in this room, they want to be treated fairly. everybody does. they're worried about their kids and grandkids and what is troubling about our current course is the cost of continuing on this path is going to be felt not by today's retirees but those who have not yet retired. you make a fundamentally important point. this stuff is hard because we are going to have to tell people someone is going to get less and someone is going to pay more in taxes. that is the only way to bring the deficit down. would be great if the economy grows faster and i hope it will and that will make it easier but

growth alone is not going to fix this problem. that requires citizens to have some trust in government and as you know that has been eroded. i like to say the only institution in washington that people have less confidence in than the press is congress. the government has to wear in back the trust of the people before we can solve this which is why so many things that seem petty like a bridge to nowhere stuff are important because if people think that money is being wasted on bridges to know where or ridiculous projects for someone's congressional district for which they got extra campaign contributions they will be reluctant to pay more in taxes and higher medicare premiums and whatever. >> the reason i don't feel government is responsive is they're beholden first to their political party and then to the rest of the people and i don't think anybody is willing to say i am not going to be beholden to

my party because i won't get elected. what can be done to stop that? you live in washington. you see these people. what can we do? >> there are some members of congress--drawing a blank on which republicans senator was who said he would not abide -- abide by grover norquist pledge not to raise taxes because the pledge to support the constitution took over that. i don't -- i don't know how to change washington. i am glad to lot of people want to change it. the role of journalists is to try to put a few facts on the conversation so we make choices on evidence. that is all i am trying to do. two more and we have to stop. >> i like your observation on why everybody is buying our bonds.

i am suggesting i wonder what you think of this and another reason. we have an implicit bargain with the rest of those 17 countries you mentioned to spend less on defense that in exchange for a speaking of the defense burden being the police of the world and spending 6% gdp, in return for that surplus countries keep buying our bonds which comes to the question of suppose we cut defense like i would like to do to something like 3% gdp, require the other 17 to contribute more and have a joint police effort if we did something like that, would there be unintended consequences that the surplus countries would feel less inclined to buy bonds. >> it could be. one of the big surplus countries now is the chinese and they may look at us more as an adversary

than an ally except for keeping sea legs open for oil from the middle east. there is definitely some synergy. i use this tallest midget line on the radio the other day and my niece rebecca said to her mother why is david being so nasty to midgets? i have nothing against midgets. let the guy behind you ask. >> thank you for wonderful talk and i look forward to reading this. you have spoken quite a bit about congress and their role but it strikes me the presidential budget proposal which gets dissected is so mythical, why did it become such a big document and is there any hope when you see president obama trying to propose more accurate budget. is there any hope of making that budget proposal meaningful? >> the president's budget has

become a political document. has the advantage of president has to put numbers on his promises which people running against him don't have to do. something has gone wrong in our system where the president looks at the budget as the opening salvo in a long two or three year negotiation. if you wanted me to be hopeful i think there is a shot after the election if president obama is reelected and presuming he faces a congress with a lot of republicans that may be the moment he has to put down an honest proposal that fleshes out some of the things he says he supports but actually haven't found a way into his budget. thank you very much. [applause] >> for more information visit the author's website david wessel.net.

this weekend on booktv beginning sunday at 4:00 eastern from his 2010 afterwards interview with juan williams mitt romney from his book no apology. >> they thought the president was not going to be a strong defender of american values and american principles, human rights and democracy and free enterprise, those words of apology and those statements have emboldened those who find us as a weakened enemy. >> later in the book the real romney, water and boston globe investigative reporter michael crash explore is mitt romney and the early years in bluefield michigan through the winter olympics and his tenure at bain capital. part of our booktv weekend on c-span2. >> what are you reading this summer? booktv wants to know. >> the inventor of information

theory and also recent books about claude shannon by james black called the information by george dyson on caring and shannon and claude shannon is a great figure from mit and bell labs who are have been falling for decades in my guys as a technology do. i studied telephone and internet and this required me to master information theory and i discovered that information theory is perfectly aligned to capitalist economics and gives a better way of explaining

capitalism than the existing models -- capitalism is not a material system. it is an information system. just as the key measure of information under claude shannon's theory is news for unexpected bits or surprise. in capitalism the key factor is profit which is the surprising up side of entrepreneurial activity. these books by james black and george dyson are good preparations for my book, knowledge and power. >> for more information on this and other summer reading lists visit booktv.org.

>> crown publishing is a division of random house publishing and joining us is director of publicity campbell wharton. what do you have coming out. >> very exciting book this fall. rod stewart's memoir is highly anticipated celebrity book this fall. and the policy think-tank of the presidential library and memoirs, series of hilarious and controversial rance. and a really big one from one of the nation's foremost authorities on education. look after that at the end of august. >> you are publishing the bush institute and jonathan -- >> we do both sides of the aisle. we published barack obama and george w. bush. we do a bit of everything for

everyone. >> what is the policy book coming up in the bush institute? >> the 4% solution. a series of essays from well-known economist, nobel prize winners about how we can achieve 4% growth little blue print for the economy. president bush has written a forward to this book. he is excited and eager for the book to get out. this is the first book from the bush institute and a lot of noise this summer. >> coming out before the election. >> yes. the 4% solution can be thrust into the dialogue this fall. >> one thing crown was doing peterson uncrowned is doing more politically oriented in stan e-books? >> we will feed the instant appetite from political junkies. an instant the book is a way to feed the apatite instantly. we haveea