encourage religious bias and violence. panelists will examine how the media is being used to promote religious discrimination and what can be done to help foster respect for all religions. live coverage begins at 10 a.m. eastern on c-span. >> now, a debate on defense policy between the national security campaign advisers to president obama and republican presidential candidate mitt romney. speaking for the president is michele flournoy who served as his defense undersecretary for policy. and romney adviser dov zakheim who was defense undersecretary and chief financial officer under president george w. bush. they recently spoke at a conference of the military reporters and editors' association. this is about an hour. >> okay. good evening, everyone, and welcome to the military

reporters and editors' annual conference. my name's ellen, i'm with the madill school of journalism which is cosponsoring tonight's event. we're delighted to have the opportunity to partner with mre because our goals are very similar. the medill national security journalism initiative aims to educate young journalists and professional working veteran journalists to better improve coverage of national security issues. much the same goals as the military reporters and editors' conference. and, um, we've got a great program tonight, so i think we should get to it. i will turn the stage over to brian bender who is the president of mre. brian? >> thanks, ellen, and thank you guys for coming. we are very pleased tonight to have two former undersecretaries of defense, both advising the

president as well as governor romney on defense and foreign policy. first, to my right here is dov zakheim who is a senior adviser to governor romney, served as undersecretary of defense in the last bush administration and has a long history of defense policy experience dating back to the reagan administration in both the public and the private sector. and to his right is michele flournoy who was very recently the undersecretary of defense for policy in the obama administration, is a senior adviser to the president's re-election campaign and is also co-founder of the center for a new american security. and maybe i'll start it off with a question for both of you, and then we'll go to the audience. secretary zakheim, it seems to me that one of the biggest differences between governor romney and president obama at least in their public statements

is in terms of the style of american leadership in the world. and governor romney, obviously, has made it clear that he believes the president's style of leadership is not the right approach and is, perhaps, undercut american security. so can you talk about specifically how a romney administration would approach america's role in the world, how it would deal differently and then perhaps secretary flournoy after could defend the obama administration's approach and why you think governor romney's criticism is not founded. >> well, i agree that there's a clear difference in style. but there's also a difference in the substance. so let me start with the style part, and if i have enough time, i'll deal with the substance part, otherwise you folks will be able to ask me questions that will presumably allow me to be able to deal with that anyway. fundamentally, the governor begins with a premise that it

appears the president doesn't share, which is that of american exceptionalism. now, that whole idea has been, i think, critically misunderstood in the sense that it doesn't mean we're superior. what it does mean and, frankly, the one who used the phrase as well as any other was madeleine albright in the clinton administration, secretary albright who said we're the indispensable power. that means that we are a necessary condition for making things happen and making them happen the right way. and we're the only necessary condition like that. so by definition that makes us exceptional. beyond that although we're not the only nation of immigrants -- can canada to the north, the australians are, europe now has lots of immigrants -- we have done more with our immigrants as a nation of immigrants than anybody else by the longest possible shot. people are lining up to get into

this country. they have been since day one. that makes us exceptional too. and finally, more than any other country we represent and i don't think michelle or really anybody in our national security community would disagree, we represent the series of values in a way that nobody else just has been able to. so that makes us exceptional. now, when you begin with that, the next question is how do you underpin it. and the governor has made it clear that he underpins it with this notion of peace through strength, that is to say if you want to have peace, if you want to have stability, you need to be strong because being strong enables you to, essentially, dissuade people from doing things they otherwise might do. and to have that kind of strength, you need not to cut defense budgets, for example, but to increase them. now, let me give you a specific

on that. there is no way that we can pivot to asia the way the obama administration wants and maintain what's clearly a required presence in the middle east for some time to come. and do more on the seas in the mediterranean, for instance, we now have four missile defense ships coming to spain and operating in the eastern med. you cannot do it all with cuts in defense spending. you just can't. i'm not even talking about the sequester. you just cannot get from here to there. if you, indeed, want to beef up your presence in asia and you have to maintain what you're doing in the middle east, you can't spend less. it just doesn't work. so to be credible, to be credibly strong, to be credible to your allies, to be credible

to those who might challenge you, you need that strength, you need that spending. that's more than style, that's substance. significant substance. i don't believe and i think the vast majority of my party doesn't believe and i know the governor doesn't believe that you can lead from behind. it doesn't work. it didn't really work in libya. we've seen the proof of that a few weeks ago. libya is not a safe place. the challenge of libya is not over. one lesson of libya, by the way, is that maybe our intelligence isn't what we thought it was. and if it is not, how do you reassure the israelis, for example, that we will know when the iranians are close to having a bomb? so it goes to not just to capability, but to credibility.

again, how do you make yourself credible in the world? it's more than just a matter of style, it's a matter of substance. it's a matter of systems, it's a matter of deployments, a matter of money, it's a matter of capability, and it's a matter of how you lead. why don't i turn over to michele. who, by the way, is a good friend, and one other thing -- give me a second, michele, it's very important. [laughter] >> he's flattering and more time. >> no, no, you'll see, it's not to make that kind of a pitch. i think it's very important, because i don't know who watches this, but there is a consensus in our national security community about certain things. we all agree on the importance of allies, we all agree about the importance of forward deployments. may disagree about how you get a strong defense, but we agree about a strong defense. there are some very, very real disagreements, but i think it's very important for people around the world the to understand that

at very bottom we're all americans, and we're all on the same page. you can take it from there. >> thank you. well, let me start by clarifying, um, president obama's position on this notion of american exceptionalism. you can read it in his own strategy documents, you've heard the words come out of his mouth. this president believes that the united states has a unique leadership role to play in the world. um, and that no other power can play that. he accepts and embraces the notion of american exceptionalism, it's actually in some of his strategy documents. but the real difference between the president's approach and governor romney's proposals is in how to play that role, how to lead in this very complex and dynamic security environment. too often when governor romney talks about american leadership -- and, by the way, you know, peace through strength is a great slogan, but it's not

a foreign policy. you know, it sounds like he's talking about the being out front first and, you know, the risk being alone. i think this administration came in and found a number of our alliances and partnerships frayed in the post-iraq period because of, you know, the previous years. and the previous administration. and i think this president has sought to adopt an approach to american leadership that really inspires and enables others to step up and contribute a alongside us. on the theory that that collective action on the part of the international commitment is much more effect -- community is much more effective in dealing with the kind of threats and challenges that we face today. you can see it in the 49-nation coalition that's been built in afghanistan, you can see it with regard to how we've gone after al-qaeda globally with

partners, um, on the ground. we can see it in the most crippling sanctions regime ever put in place with regard to iran where countries like china and russia along with our traditional allies and a thurm of other states -- and a number of other states across the world have stepped up to impose these sanctions together. ask you saw it in the intervention in libya where not only our traditional european allies, but our arab friends also stepped in to intervene. that is not leading from behind. that is leading in a way that enables others to step up, share the burdens, be part of the solution. um, i think that, you know, this president has adopted a very strong and smart approach to american leadership using all of the instruments of our national power. the military when we must, but also much stronger on diplomacy,

economic instruments and so forth. when it comes to defense and defense spending, um, i think this is a big difference between the two campaigns. this president has put forward a very, you know, a defense budget that is strategic in the sense that it's driven by strategy, but it's also driven by the legal constraints, the law that's been put in place, the budget control act that was passed by a bipartisan majority of congress that set the budget levels for the coming years. and he worked very closely, hand in hand, with the service chiefs, with the combatant commanders, with the chairman of the joint chiefs to come up with a strategy that met several criteria. one was at the end of the day we'd still have the best military in the world, second is we'd keep faith with the men and women who served and with their

families given the sacrifice we've seen, and that ultimately, this would underwrite our sustained leadership in, in the world. now, um, this does support the rebalance to asia and so forth. on the specific questions of naval forces, part of the strategy is forward positioning those forces so you don't have to have as many to support a rotation base. in fact, we're put, we're forward stationing the ballistic missile defense ships in the med iranian so you -- ped train yang so you don't have to rotate them from the united states. there's going to be more ships forward stationed in the pacific, and what's most important is not just the number of platforms, but the capability on their ships, and if you look at the defense budget, it's protecting all of the capabilities that are needed to in an anti-access air denial kind of environment. um, so the question i would have on defense spending for dov is and for governor romney is, you

know, a 4% -- taking defense spending back up to 4% of gdp. first of all, what's the strategy behind it? there is no strategy behind that. there are no military requirements behind it. the military hasn't asked for it. and most of all, how in the world are you going pay for it? especially if you're not willing to increase taxes for the wealthiest americans? the arithmetic just doesn't work to add $2 trillion of spending over the next 10 years for defense when it's not strategically required and when we have a big deficit and debt problem to solve. but other than that, we agree on everything. [laughter] >> before we get to questions, and i'm sure people have them, maybe i can ask you, secretary zakheim, to answer that question about the $2 trillion figure which governor romney has talked about -- >> actually, it's a democratic number, not a republican number,

number one. number two, actually, right now we're at 4.2% of gross domestic product because she didn't count the overseas contingencies operations account. number three, if you look at the fiscal year '11 budget which was mr. gates' budget, when he was not mr. bush's secretary of defense, but mr. obama's secretary of defense, and you extrapolate that one, you come out higher than $2 trillion. so $2 trillion was generated on the basis of certain assumptions about the pace of defense spend anything a romney administration, and the pace of that spending will very much depend in part at least on the state of the economy. in other words, the sharpness of the increase will depend on that. but in any event, it's kind of -- if i could use the word a flip-flop -- by the obama administration that actually had a higher number for that

ten-year period the be you simply extrapolate the way they would extrapolate the romney budget. .. got kicked out actually, if you

want to think in those terms, then yes, it's only will welcome you in and welcome your big ships and, then maybe you might be able just to pull it off and still have something in the indian ocean and the eastern mediterranean. and by the way, this isn't just missile-defense ships. you would have to send other ships. so the numbers don't add up that way. in terms of michele's direct question, how do we deal with this, after all this is a much larger problem, don't forget, the national debt right now is $10 trillion, give or take, if the sequestered it, that's 54.6, correct me, tony, you're the one who knows it, it's 54.6 billion for each of nine years. 54.6 billion off of 10 trillion? think about that.

how big a dent are you making in the national debt? so why am i looking at the death? because the budget is a fraction of the problem. the problem is entitlements. it is not defense. defense is practically a rounding error. if you want to go ahead and trade defense as a hostage to the issues that have to be dealt with, go right ahead. the only people you'll be helping are the iranians, north koreans, the venezuelans and others, and others like that. >> i feel like, michele, i should give you a two-minute rebuttal and then we will go to questions. >> i think everyone agrees that we have to get into both tax reform and entitlements reform. no one is taking that off the table. but when you look at defense spending, to the extent the federal budget does play a role, defense spending, 20 for bert -- 20% of the overall budget, 50% of the discretionary budget, the

consensus on a military side is that our economic health is the foundation of our national security. defense has to be part of the solution. you know, i think that, you know, we can further explore the issues in asia, ships in asia and so forth, but i think there's been a number of plans laid out, not only about forward stationed but rotating our forces through, putting a larger percentage, 60% of the naval forces rotating to that and so forth. again is not the number of ships it is what is the capability. it's marines, air force, naval ships and their associated capability. so again, i think it's overstating it to say that we can't resource the strategy. i think if that were true, you

wouldn't have the pacific commander, the navy, the head of the navy, the head of the air force, all the associated military leadership standing up and sing we endorse this strategy and its budget. >> okay, without, questions from the audience. and if you can, please state your name and affiliation. [inaudible] >> you talk about credibility, credit substance. you have to get some kind of figure, which your can't dismiss. realistically what is it and what are the applying -- plausible findings? you're a former controller spirit as a former controller i can tell you that whatever number you would throw out before you have a good sense of economic policy, it's not going to be viable. that's not what applies when i was comptroller, it applied in 1981 when reagan came in.

and the reason is very simple. you have to look at the rate of growth you can tolerate. you have to look at the rate you're going to bring down the overseas contingencies operations account, and offset some of those reductions with what you're going to put into defense budget. you have to look at as well how are you going to deal with the sequestered, as the first issue, but as a second issue how frequently to the $480 billion cut that was done in the budget control act? and to throw out a number and say well, it's 1.52, 2.5, in a way it's meaningless. what counts as the contents of program tricks was not a matter of ducking anything. it's a matter rather of cingular the objectives we've got. for example, 15 ships are you. that's we want to get you. that's pretty specific friendly. he's talked about a couple hundred thousand troops. that's pretty specific. he's talked about a long range

bomber. that's specific of those at it. been look at okay, for example, cannot find inefficiencies? everybody talks about deficiencies over and over again. what he said, which has not been said in recent years is i'm cutting civil service. that's an efficiency that's tough and that requires president intervention because we're not just on the dod. we're talking a opm. [inaudible] >> there is a program, not a number, that's different. there's a program that has a certain set of objectives that we're trying to reach. and again as i said, if you simply look at the gates of the program, that already would've been higher than $2 trillion. you're not going to get rid of all your base operating costs. the president since the sequestered shown how important it is to him not to mess with military personnel costs, so you're not about to start cutting that. we have to look at, for

instance, how we deal with we time it benefits. any adjustment in retirement benefits of any significance immediately say to 10 billion bucks a year, thanks to the accrual accounting that the actuaries take account of. you've got to look at all of that, and so it's a nice figure for a newspaper headline, frankly, tony, but it is not a meaningful figure. what is meaningful is what you're asking for and why you're asking for it. and i'm happy to discuss at greater length. [inaudible] >> you would ramp up gradually our 2014, the budget you inherit if you when it would be substantial fallout to keep -- >> i think it will very much depend on the state of the economy, neville and. number two is very much depends on the kind of offset you will be able to find within the defense budget. and i think that at the end of the day, every effort will be made to ramp up as soon as

possible. to say whether the fiscal 14 our fiscal '13, all i can say is there's going to be an effort to ramp up. that's going to be a pretty serious effort. >> just to be clear that we're often with the same fact base, even under, even with the plans that comply with the budget control act that this administration has put in place, the defense budget is still going to grow. it's just not going at quite as fast a pace as what you originally planned. so in fy '13 the budget will be 525.4 billion, in fy 17 it will be 567 points 3 billion. the defense budget will continue to grow. contrast set and adjusted real dollars, at the end of the bush administration it was 479 billion, just by comparison. said this is the base budget. this is not counting oh go. let's put this in perspective.

number two, on ships, how did we get to a place where you'll think the navy is getting to small. at the end of the clinton administration in 2001 with 316 ships in the u.s. navy. by the end of the bush administration you have to hundred 78. of the biggest drop in this navy was actually under bush. obama has added 42 back in, with an option for an additional 15, and he has restructured several programs including security programs and others to try to ensure that we get more value our taxpayer dollars and hold open the possibility with the greater efficiency of actually adding ships to the program in future. so i think it's a important kind of get the fact-based correct. the last thing i would ask is about the plans to add 100,000 additional troops, assuming you mean army our ground forces. remember why we drew the forces to what they are today.

they grew to support the rotation requirements of the two large simultaneous counterinsurgency campaign in iraq and afghanistan. we have come out of iraq. we are on transition path in afghanistan. the current plan in patients taking the army and the marine corps down to size that's slightly larger than before, right before the iraq war. again, we drew the force to sustain the rotation base. what is the strategic rationale for adding 100, or i heard you say hundreds of thousands of additional ground forces postwar? and again, in an era would have to make some tough trade-offs, what's the strategic rationale versus, say, putting that investment in really important areas like soft and isr and precision strike and all the other things that were really

defined warfare for the future? >> i'm with "the boston globe." i want to get some clarity on what you said about some of the numbers in response to the obama representative, document how do you get to 4% gdp. you said if you added an account, 4.2% of gdp, so by your logic are using romney within reduced defense spending to 4%, give an apple to apple comparison. >> here's the point. the overseas contingency operations account is essentially driven by afghanistan and iraq. iraq is going. and afghanistan is being drawn down. and mr. romney has said that as long as the commanders on the ground are comfortable at the the 2014 deadline, we can discuss the differences there, not just the minor nuance, then he's prepared to follow their advice.

in which case that account, because it's driven by operations comes down. the point though is that you'll be still taking some of that money. there are billions of dollars in that account that really have a long-term implication and they are not purely driven by the afghanistan operation. so you would move that into the baseline. and yes, you would in theory come down from 4.2% to 4%. there's no question about it. by the way, let me point out a couple of things. it's absolutely correct that the number of ships have gone up in a number of your to do know why? because i funded them. it takes a bunch of years to build chips. and every year that i was comfortable with, we bought more ships than the previous year. that's why the numbers have gone a. look at the trend, the future trend of these ships. options on ships, to you believe that the bridge of brooklyn i can sell you is tooth fairy so i

communities you too, options don't mean a thing. but in practice that's why the number of ships has gone a. and as isr, which is intelligence, surveillance and reconnaissance, for those who don't speak like the two of us do, those are relatively low costs, logo to -- relative to the larger number program. we're not talking 20% of the defense budget or anything like that. soffit is still a relatively small percentage of the budget. so you want to be clear about stuff, i'm all for being clear about stuff. >> you also mentioned you talked about defense budget, i was described as being 50% of discretion spending, a rounding error. so explain exactly -- [inaudible] >> that's exactly right. that's the problem. our problem is not the deficit problem. it is an over all national debt

problem. that's what we have a fiscal crisis. because we have a $10 trillion debt problem and they'll have to raise the debt ceiling, or at least they will debate it, in about four weeks or so. if you want to get that debt down, if you want to get down from $10 trillion, which is roughly i think right now about 64% of gdp, correct me if i'm off by couple of percent. if you want to bring that down, getting their $55 billion a year is not going to do it. because just the interest at the qe2, quantitative easing, is going to eat up that 5550. so when i look at the problem, i look at the actual national problem. sure, if you define your problem in the narrowest possible terms community that medicare, you leave a a source is good, leave of entitlement to me say right,

my problem is a budget problem, venture, close to 50%. i don't deny that. >> question for dov zakheim. and the vice presidential debate there was a question about i think vice president biden was saying that governor romney is advocating a $2 trillion increase your ride in response i sang that's not what we are asking for. we are seeking to roll back a trillion dollars. what is in the $1 trillion of cuts? >> to the best of my knowledge, if you have $487 billion of the budget control act cuts to the $492 billion that right now we're facing on a fiscal cliff, sequestration, which nobody wants by the president has always said he will veto if it isn't exactly -- if there's an effort, think about this, if there's an effort to do it exempt defense, the president is

willing to veto and let us go over the fiscal cliff which frankly is not my idea of how to do with the problem, but that's the president idea. to say that happens. let's say congress has, we really cannot jeopardize our national defense. the president says fine, i veto. he didn't veto the budget control act buddies ready to veto this, 492 billion plus 487 billion is awfully close to a trillion dollars. >> if i could just clarify the veto threat. go ahead. >> he didn't seem, he did not defend the full defense on gdp figure in the. he was saying we are not looking at adding more money. we're only looking at all factors. >> well, i mean, if you roll back cuts, then you're adding money by definition. and 4% of gdp, as you heard from michele, is not the administration's position. so by definition we are adding money. it's true they're adding money.

i don't know what it is in terms of dollars. and some years it's actually no real, no real growth. what you take out the inflation and look at what's going on. and particularly by the way, inflation in defense accounts, particularly procurement, is much higher than say the consumer price index. but let's leave that technicality aside. they are growing, we are saying, we're going to grow more sharply, okay? >> if this trillion dollars, rolling back cuts, if it doesn't add up to a full percent of gdp, is that all they're talking about? >> again, i think 4% of gdp is exactly that. when he said he's going to go by, that's restore. that doesn't mean that's where you finish. >> let's move on. >> if i could come you know, as i understand it the presidents veto threat is actually, look, if congress sends him a budget

deal, that does not include revenue, even dominant, some additional tax burden for the top one to 2% of the wealthiest individuals in this country, that if they do not appeal, does not include that he will veto. and the administration has objected to excluding defense as a whole category from, you know, the deliberations on the budget and where things should go. and again, rightly so, given that the extent the budget is part of the solution, it's a huge part of the budget. >> more questions out there. >> i have heard a lot about numbers -- san antonio express. i've heard a lot about numbers, but throughout this campaign i haven't heard almost anything about soldier family stress,

suicides, the high number of wounded. there are 1500 families and soldiers in rehab. and i've been interviewing these guys for years and years. the stress they are under enormous because the two wars we've been fighting, using the same small groups. why aren't we hearing more, both candidates, about the stress that these were so put on our troops and their families? and why aren't we hearing more about options for relieving the stress? >> if i could start, first of all, i think this set of issues is at the forefront of the presidents mine, secretary panetta's mind, on a daily basis but if you look at their actions. the accounts that were perhaps most protected in the latest budget were investments in wounded warrior care, investments in ptsd, and

secretary of defense the net result announce a new suicide prevention initiative to really try to get to the bottom of this because what's happening is, is incredibly disturbing, and tragic. it can't go on, and he's really going after can figure out how to deal with that. and if you look on the va side, the ds has got the largest budgetary increase under this administration in history. it's protected. the president has been clear that veterans and active duty service members will not be, -- they will not be touched if sequestration is into effect. so i think there's both, you know, statements but also importantly action by this administration to ensure that we are trying to do our best to take care of our servicemembers and their families and veterans. so the concern is there any action is there spend you ask

why it hasn't. i think the reason is because we both, both sides agree about this. there's nothing to argue about. anybody who has visited walter reed or bethesda can argue about this. i remember going into walter reed, and i'm sure you have done this, and i met this young, must've been about 22, young african-american woman, to get back on, grandma was looking after them. and she lost both her legs up to the top of her thighs. that's enough to make you cry. so if you know, and by the way, 99% of the folks in hospital want to get back out in the field with your buddies. it's amazing how the morale. so i think the reason there isn't a debate because there's a consensus. they are -- [inaudible] spent i guess the question i'm going to is can we hearing a lot about how we need new bombers. where's the talk about needing a psychiatrist or more than?

because god knows the army does. >> well, again, i can't speak for michele but it seems to me that if this issue number one priority, and if you are indeed are attacking the military personnel account, then the money is going to go into these things. programs are being started. there are somethings the obama administration started, wounded warriors started under mr. bush. if you look at these programs, the handoff from us in the bush administration to these folks, the obama administration was smooth. and if mr. romney wins, i guarantee you the handoff will be smooth the other way. nobody wants to do anything to make life more difficult for those who are already suffering so badly spent i do think there's a difference, one difference here, and it certainly not on the level of the compassion we all feel and the concern we all feel. but on health care system of the va. one of the proposals that's been put on the table, similar to how

the governor, governor romney would approach medicare is the talk of using, changing the va system to go to a system of vouchers. i think that the va system, if you actually look at it, is probably the most respected system nationwide. they get very high marks for quality of patient care, and so forth. i mean, i think the idea of messing with that system and going to an unproven voucher system is very worrisome for a lot of veterans that i talk too. and i do think that's a policy difference on investment in the va that is different between the two campaigns. >> secretary lehman, former navy secretary lehman, in an

interview recently -- [inaudible] very ambitious program. basically quite doubling the navy's current shipbuilding plan, which is 13, $14 billion in a year, which is what it's been under the bush administration, the obama administration. where are you going -- were i you going to get to the point? [inaudible] and where are you going to get -- you talk about increasing the marines and army, downsizing. and navy has been downsizing for quite a while. where are you going to get the sailors to man all those additional chips? >> my understanding is when john lehman laid out a very, very specific plan, there were two

elements that the governor has already spoken about. another element is being considered. the two that was spoken about were, first of all, the 15 ships a year. and second of all, the three submarines a year. we will move to three submarines. so the rest of it is, what we would consider. i mean, is our objectives. that's not one. number two is, the question is how do you move the money around. and when you move the money and where you take the additional money that we predict we would allocate to the defense department. it is not at all surprising, given the decline of naval ships, and by the way, i don't care how good a ship, you know this very, very will. i don't care how good a shape is, you can only have one ship in one place at one time. and so if you want to have two carriers in, say, the arabian gulf, and, which we do, and you

want to have to in the western pacific, which right now we do but which we can't sustain. you know that. and you want have a carrier moving around in other places, you've got a problem. now, if you want have escorts for those carriers, and the right number for battle group you've got a bigger problem. if you want have submarines, you have still a bigger problem. so clearly you've got to build a lot more ships ready much to stay where you are in the 300 range. and if you don't have about 300 ships, you cannot simply be in all the places no matter how capable. ships don't fly. >> you talk about studying -- [inaudible] but i don't think he said what he going to substitute that. >> i can't speak for john. and as i say, we are looking at a whole bunch of options. needless to say, if you are

talking about an open ocean frigate, that's not what they can do for. lcs, what does it stand for? a little combat ship it when it came to me with the idea in 2000, i guess 2002, he comes to me and he says we really want to fund this thing. we have a concept but we need what's called ground water navy ship. really agree modern a. not even ground water navy. green water. that is to say something that will not be on the open ocean but isn't just going up the river like they did in vietnam. and it made a lot of sense to fund a ship like that. what's happened is that that ship has come to dominate the entire shipbuilding program. which doesn't make sense. spent there was a question about how to pay for this. so the question is, is it another come something else in the defense department budget, it's something else in the

federal budget. is in the entitlements? if so, which entitlements would you change? how do you pay for this speaks again, if you're talking about increases, number one, and you are talking of moving money out of the overseas, ocoa, and talk about a stronger economy which allows you buoyancy to get you to 4% and you also account for efficiencies like cutting civil service, which by the way defense budget -- defense board recommended. so this isn't an original idea. they are nonpartisan. we do that, i guarantee you will find the 14 million a year. >> just a quick follow-up. >> your description of numerous carrier battle groups constantly scheming around the world, made me think of the question, a very simple one, which is what specifically is that force trying to prevent? it sounds like world war ii.

>> not at all. not only when you have 11 of them. we were putting out more than those every year in world war ii. what carriers do, and i think everyone understands, the biggest supporter of aircraft carries is not the defense department. it's the state department it always has been, historically. the reason is carrier presence has an unbelievably effective deterrent effect on people. i give you a concrete example. 1976, okay, you have this knot, e. i mean, the israelis deliberately sausages but operating out of kenya. what does ee i mean to? he threatens to invade kenya. e. i mean besides it's not such a good idea. carrier presence is very effective. 1996, not my administration, the clinton administration, we have a crisis with china over taiwan. what do we do? we send aircraft carries.

chinese back off. 1976, 1996, it will happen again in 2016. >> this question is for both of you. i just going to go and ask both of the reactions to this. we talked a lot about the ships. dov zakheim brought up -- [inaudible]. i think the biggest question behind that is whispering so much of his conversation talk about our interest in the asia-pacific. i want both of your opinions. how are the strategic interest of the united states of america protected, the next administration comes into office and labels the people of the republic of china manipulator's

-- currency manipulators speak why don't you start with that and then i can pile on? >> i love that ladies first, but it ain't working. >> but president obama has not proposed calling china a currency manipulator. so i believe that to you. i will also follow up. >> okay, that's fine, that's fine. [inaudible] spent starry? >> [inaudible] >> look, i don't have an issue with it. i think that, what governor romney is essentially toddler, this is just to clarify and i going to debate the question, he's saying if china wants to trade on an equal level playing field, there isn't a level playing field. it ultimately is bad for everybody. because at some point americans will stop investing in china. and he says he's going to lay on tariffs. so he's saying if you guys want to play this game, we can hurt

you just as much if you think you can hurt us. now, what will it do to the strategic balance after, which which is your question. my guess is that the chinese will push as far as they can as long as there's no pushback. and my best example of that is chinese behavior in the last few years in the south china sea. where they kept pushing and pulling, and some extent they still are. but when the administration and i give hillary clinton a heck of a lot of credit for this, when she basically got up at the conference and made it clear that this is going a little bit too far, they backed off. again, in 1996 when carriers were sent to the taiwan strait, they backed off. the chinese will push if they think they can push. they're not the only country in the world that operates that way. but if we, you know, we take

that kind of strong action, i honestly would be shocked, and they don't mean it in the casablanca sense of shocked, shocked. i mean literally shocked come if the chinese were stupid enough to try to make a military issue out of it. >> so if i could just add. i think, you know, this administration, has pursued trade actions against china, you know, twice as many as its predecessor. and there's no question that this president has been tough when he's needed to be tough with china on pushing them on unfair practices. we've also been in constant conversation with them over the last four years about undervaluing their currency. and that valuation have started to change and it's gone up pretty significantly. needs to go farther but that

conversation has had impact. so i think we need to step back and look at this more strategically. china is a rising power. and we have an interest in how that rice is managed. we have an interest in trying to see them integrated into a rules-based order. how do we do that? i obviously we pursue cooperation work and were in its both of our interest. we're very clear, as secretary clinton was an example than one mentioned, when they step over a line. we will not accept sourced disputes being installed through intimidation, coercion or use of force. we will not accept restrictions on freedom of the dedication or freedom of commerce. we will not accept gross violations of human rights, et cetera. so there are certain rules that we stand up for. i think china understands that the u.s. has played the role of

regional stabilizer, a sort of, we have undergirded the stability of the region that has allowed this region to become the economic contingent of the economic economy. that role isn't going to change, i think we have to frame this in a relationship that's trying to get china to be a more cooperative turkoman two-seat in their interest to do so. >> by my watch, i think we have about 12 or 13 minutes before we wrap up. so questions in the audience and then had a couple i wanted to maybe ask you, a few brief questions. [inaudible] >> winslow wheeler. i'm still confused of the 4%, and i'd like -- [inaudible] i

like dov to take another crack at it. anybody here with a computer can go to the mitt romney website, click on the foreign policy submenu, and on that you will find at the bottom of the submenu a defense budget raids the second or third paragraph and you see very clearly that senator romney embraces 4% in the base budget for gdp, and and he says there's reasons to do that. and none of those reasons lack of urgency. i'm confused by what you said about 4%. it's fuzzy at best. it may be being disavowed. does candidate romney embraced 4% of gdp for defense, number one?

number two, given his sense of urgency, what specific numbers are you willing to talk about for the first year supplement as you will recall when governor reagan was elected, he had a massive supplement towards defense budget. there's all kind of issues about that, but he knew what he wanted to do. >> as moderator on when ask you to get to the question. >> the second question is do you know what you want to do in the first few years? >> yeah, 4%. i thought i was pretty clear that 4% is indeed governor romney's policy, full stop. unequivocal. how do you express it? first of all, as a point that we are actually 4.2% so you can move money out of the overseas

-- >> not in the base budget. >> but the money is there. money is money is money, and it's money for defense. >> so the larger number will come down under the romney administration speaks everyone believes want to pull out of afghanistan the number will pull down. that's not an issue. [inaudible] >> no. defense spending in the base budget will not decline. what you're doing is you're taking money out -- by the way, the supplemental don't show up against the budget. they show up against the deficit. so you're moving money back into the baseline budget. now, one issue, which i think has to be determined is, for instance, will there be a budget? we don't have a fiscal '13 budget, so if there's a budget, then you're talking about a supplemental. if there's a budget, you're talking about an addition to the budget.

the budget add-on, an amendment. we can't possibly know that right now because that's up to the congress. another issue is how quickly is the economy growing. what are you revenues like. if your economy is growing your revenue is going to grow. under any circumstance it will grow, and so that additionally will provide a buffer or a fill-in to this penny. but 4% is 4% is 4%. if it looks like it, quacks like a, looks like a, it is it. your second thing was what? >> that's three months from now. shirley you have a number spent again, i don't know how you come up with that number into you know what the baseline budget is. [inaudible] >> how long have you been working on it? this is going to happen very soon. >> it takes a few years to work out a defense budget. the administration still doesn't know to do if there is a

sequester. >> very briefly. >> i cannot answer the 4% never because it's not our number, but i can say logically, on the question of how deeply for it, you have only a limited number of choices. either you increased tax revenues from the wealthiest americans, or from the middle class, or on businesses. you increased tax revenue. or you reduce entitlement benefits. you make cuts to social security, medicare. not in the future, that you change a contract on people now. if you're trying to get money for next year, you make immediate changes to entitlement or you make very draconian and deep cuts to the other parts of the domestic spending, to the other parts of the budget. so you go after education or health care or other aspects of the federal budget. there are only so many choices you have to pay for this.

and it's very hard to evaluate this, not knowing the answer to exactly what governor romney would you to support this increase in defense spending, or this sustained level of defense spending, even after the two wars ended speak and would you allow me to give the fourth alternative? the economy grows, revenues grow. that was left out. >> i want to move on because we're running out of time. there's only things i would love to ask about afghanistan to iran to libya will come up in the presidential debate next week, but at the outset you talked about leadership, american leadership in the world. i wanted to ask in the context about syria. 30,000 people are dead. by some essence but by most estimates in the civil war there. and one of the drivers, although not a major one of one that is

critical has been weapons coming into syria, including from russia. even this week the turks forced a plane to land that was crossing their airspace. allegedly carrying weapons for the assad government. how is the president we sat with russia increased american influence in moscow, so that one would think the president could convince the russians to act differently and then i would ask the cheese respond how, or to explain how governor romney in his approach to america's leadership in the world play different so that america might have more influence in stopping the killings in syria? >> so, there we sat with russia by simply taking a very clear eyed approach and recognizing that you are going to have to

interest that you can cooperate on an interest where you see things very differently. in areas like arms control, reducing nuclear danger, nuclear proliferation, of course want to cooperate with russia. in areas where they agreed to help supplies come to russian territory to support our troops in afghanistan, of course want to cooperate with russia. iran sanctions, they're willing to help squeeze iran, of course we welcome the cooperation. syria is an area where we have fundamentally different interests and views. syria is the last russian toehold in the middle is and they are ivory thank very shortsightedly trying to hold onto the assad regime instead of trying to be the solution for what is an inevitable fall of this regime. this administration from the beginning has started with humanitarian assistance to the people. it has put enormous pressure on assad as the president very

clearly calls for assad to step down, impose sanctions, other efforts to isolate him. we been added command-and-control assistance, nonlethal assistance to the opposition on the ground, and that is helped greatly to enable their cohesion on the battlefield. now we are flowing assistance to the parts of three that are free, trying to help them build capacity, provide government services, meet the needs of the people there. and behind the scenes we're focusing, or the administration is focusing its efforts on trying to get this very fractured coalition, opposition to go here. because as the opposition coheres and they actually have a transition plan and can guarantee the rights of minorities like the alawites, that's when the situation will flip and that's when assad will fall. i'd love to hear from dov, you know, you know, what more would

you do? are you talking about militarily intervening in syria? if it's just providing additional arms youngblood the substantial amounts that are already flowing into the country, how do deal with the risks that shoulder-fired missiles, for example, that could shoot down aircraft, how do we make sure those don't show up shooting down american aircraft, israeli aircraft and so forth? so exactly what else would governor romney do? because i think this may be an important issue spent as they say, i'm glad you asked the question. let me start out by saying, the recent with russia has not worked terribly well. russia has very reluctant gone along with sanctions on event. they were the last holdout, and we water down the sanctions in order to satisfy the russians to get a deal. the european union has tougher sanctions than we do. and they just passed more this past week. we lag behind them.

and impact the administration took its time approving sanctions that were initiated by the congress. but they were so determined to work through the united nations come made them so they did so yeah, we worked with the russians, now on syria combined with the other thing the russians are doing is people are not noticing is the of selling arms to iraq. you pull out of iraq superb, you don't negotiate an agreement, the president should been on the phone every day to that guy, maliki, and he didn't. night that nearly a shia dictatorship. you have the vice president of the country being hunted by the president of the country. at night have the russians selling to them, which is were we work in the 1970s when we used to worry about a soviet attack on iran who within our friends, the iraqi with a russian friends. very interesting. syria, i am fascinated by the administration's argument that while they know who the good guys and the bad guys are when

they give them intelligence, when they give them logistic support, when they give them communications, all of sudden they don't who they are when it times -- when it's time to give them ours. the governor has said that. whatever it takes to give them ours, and if we don't know who the good guys and bad guys are, why are we providing command-and-control support? why are we providing logistics support? how do we know? maybe we're helping the bad guys. maybe we are hoping to identify with each medication, the command-and-control support we give, they get shoulder-fired missiles from others and they will use our "cq" to fire at aircraft. it doesn't add up. the fact of the matter is, our policy on syria is nothing short of a disaster. it's very nice for the nicest detail mr. assad tule. i be so he hasn't listened. >> i am afraid we're out of time. i want to thank you both -- >> i will bite my tongue for the

comeback, but we are out of time. spent but i want to thank you both. hopefully you can stick around for a few minutes, perhaps for a few follow-up questions. thank you to the audience, and thanks to medill news service for hosting us, and thank you for coming. >> thank you a plot that. >> -- thank you. [applause] >> tonight president obama and republican presidential candidate mitt romney meet at lynn university in boca raton, florida, for their final debate. watch and engage with c-span's road to the white house coverage. just ahead, congressional staffers give insight on the next gaps in health care debate. after that, live coverage from the heritage foundation. a discussion on china's incoming government and its importance to the nation's increasing

international role. >> also today, a look at the influence of catholic voters in this year's election. a panel will analyze and assess the latest polling data come including a recent study of the motivations of catholic swing voters. a live forum by catholic university gets underway at 12:30 p.m. eastern over on c-span. >> now, congressional staffers who specialize in health care policy offer their thoughts on what to expect in 2013. you will hear from those who work for senator tom coburn and representative michael burgess, both republicans and medical doctors. topics include the health care law, potential changes to medicare and medicaid, and a long-term solution to so called doc fix, which efforts are scheduled payment cuts to

physicians who treat medicare patients. this hour-long event was hosted by politico at the museum in washington, d.c. >> i'm jason millman, with political. happy to have tony clapsis here with the senate finance committee. to get started, care about your background, sort of how you work out where you are, how you got into health care. >> sure. prior to coming to the finance committee i spent about six years on wall street working at lehman brothers, barclays capital. that's where picked up health care ride went in a was getting service. spend about six years there, and i think the benefit was getting to learn sort of provider issues is where my focus is now. from every sort of granular kind of finance perspective. this helps for hospitals and all sorts of an acute care to really understand the impact on a lot of policy has on folks. so then when health reform is getting started up, i wanted to

come to do for a long time, and i felt the field i had there could be helpful and actually working on provider policy. so i was chief of the finance team and they brought me at spend what are you working on now? >> the state is mostly medicare part a and provider issues. a lot of it is following implementation. the affordable care act, deliver reform, at this point a lot of that is -- i think beyond that we have a lot of year in issues coming up, doc fix and so on, i think is always work on politics. >> sure, sure. on the delivery system reforms, using hospitals have a couple of new programs that went into effect, trying to type them into quality. is that the kind of stuff you are tracking? >> yeah, absolutely. i think it's a broad landscape that you can look at. value-based purchasing was probably had the longest track record. where congress went through sort

oof the few cycles of pushing fr the coordination and sporting a skit at the new programs. i think in the affordable care act you took the next i was getting what was ready, readmissions i think was really very topical one to get started a few weeks ago. beyond that there's lots of other new programs. dcl being the biggest. you've gone up to if you may medicare beneficiaries will do the quickly. if you think about pace of adoption i think is encouraging to see. and, of course, the innovation center. and that i think it's an incredible opportunity to test of innovations and medicare but most important to scale on. i think for too long it's taken congress a long time to pass, and you're getting them eight to 10 years and i think innovation center will cut that time down. >> have you seen anything from innovation center that has been particularly interesting with what your interest in? >> i think within aco, pioneering program, you -- there's not one model here, we're really going to work to be

as likable as we can. to give providers a lot of different options. i think we're looking forward to seeing it and now it will be hopefully soon. so they will test a number of models. it's not jus just a cute diffict on the focused in on some of these reforms is hospital stock only. but it's also acute and post-acute. i think that's when you will see. those are probably the two biggest and most encouraging of models but they're also testing a lot of interesting interventions. the other day with nursing him we've missions, a big focus of ours. there's a lot of proposals to do with it. innovations in its testing. so we been encouraged at how quickly they have gotten stood up and family programs are out the door spectrum to the election a little bit, we keep hearing about the 716 billion medicare cuts. big political point. can you tell me, how it's taking 716 billion from the program going to say the program and --

>> clearly a lot of focus. i will stay away from the politics of most of it. i think with a lot of it the changes, we look to ways we can improve the program to expand benefits at a think as a number of examples. we tried to say where could we get more efficient and i think that's an important question wheels have to ask yourselves and medicare. every year medpac has this recommendation. they look at hospitals. listed on the out the a look at them and they said okay, what should medicare be paying? now what is the default. but given margins, given axis, given quality, what should medicare actually be paying? i think we take recommendations graciously. throughout all this the medicare changes we made we try to be very careful and judicious and saint okay where is it you can make the program more efficient? at the end of the day these are taxpayer dollars and i think we have this, as an obligation to i think we try to do that as carefully as we could. >> one thing about the cuts we've heard about recently and

the supreme court obviously made the medicaid part optional, which means that would allow me states going to take the medicaid expansion and these cuts that were assumed for hospitals because all these people on medicaid. sadly that's a question and we've heard pretty worried about where things are going to be going from here. what happens at the hospital cuts? dish payments been cut, will they get renegotiated? he tried to scale back some of these? what you think is going to have to? >> i think that's a great question. i don't work on medicaid. mycology does. clearly we have to wait to see how that works out. if they want to be flexible and work with states to get as many as possible in the door. i think will be sometime into a place. it will be hard to answer any of the question so first ecma states i think really get in the door. or providers though it's a tough deficit reduction environment. unfortunately there's a broader

push for further reduction. i think that's what you hear broadly and all the deficit reduction proposals that are out of. they have a couple portions that are active. >> sequester is coming up. how do you think that plays a short-term deal, long-term deal and what is your best guess because my crystal ball is nearly not powerful enough to answer that would. i think in some ways health care is not really going to drive the discussion. it really is sort of a crystal -- fiscal macro level question for folks. it's -- the design was to not ever happen. now we're getting sort of the key point where members are going to have to face a lot of tough decisions. not just ask him not just tax cuts, there's a lot of tax cuts there. remember it's a very big picture kind of question. clearly could be a part of it. it's that big picture question that members have to answer first spent with the outlook for 2013 after we get past the election? about the fiscal cliff, is it

going to be a policy year or keeping doing more fighting, partisanship? >> i'm hopeful. and optimistic. i think we look ahead to the next year the biggest thing for us is real implementation. when you look at exchange is in particular, you're right, this time next year there'll be an open and will appear in your of millions of americans have access to coverage where they didn't have that before. we know that is probably the biggest policy development in years and we're looking at that from about a year from now. on the delivery system side of the equation we will be another you into having acos people have a series of bundles out there and part of the commitment is rapid cycle evaluation. so again we're not expecting we have to wait five years to start to see some results. i think we're expecting to see them sooner. regardless of what happens on the hill there's so much going on both on the coverage side and on that delivery systems that i think you can almost 10 to go be a lot of policy being talked about. on the hill it will be hard to answer.

i think it is a what happens at your in. if it's a framework for something we discuss all of next year, then again will have a very active year that looks a lot like last year rather than this year. >> we've heard a lot of concern from republican colleagues that there are no rules yet on a lot of key issues, on central benefits. you know, is that something you guys are concerned about? a lot of key details are still missing. >> you always want stakeholders, you want implement, you at them to do so. we've always kept in touch with both at the state level and provider levels, the plan levels to understand how well implementation is going. generally we are really pleased. you know, i think the states want to implement exchanges, and if you talk to the states a really active in trying to do so, they feel they have enough -- more than enough information to go out and implement them. using developments. so i think you are starting to see kind of all that. i think you'll see that

accelerate very quickly as soon as we get past this election spent assuming if there is a status quo election, obama states in the white is, democrats keep the senate, there is an assumption that will have to go back into the aca and fix things that we couldn't do before. if that happens, you know, what d.c. could be possible fixes? what gets reopen? >> i think you will have a political discussion about what fixing really means. and fixing the democrats and fixing the republicans, probably is a very different, probably a different understanding. so i think that probably is a threshold question you sort of deal with first year. ..

>> a narrow bucket of how do you pay for it and less on what does the permanent doc fix need to look like. so we had a series of round tables where we had providers and stakeholders examine that question. and, you know, that's, i think, been a big part of the focus this year as we work toward something permanent, what does it look like. the doc fix, i think, has to be responsive, i think, to that kind of shift as well. in the meantime, though, we know we're going to need to do a doc fix. there's bipartisan consensus that that'sing something we need to do. we think about it all year long, and i fully expect we'll be able to deal with that at the end of the year. >> and just broadly, you know, the election coming up, how is that sort of shaping the work that you're doing day-to-day, and how do you expect it'll shape it after the election

actually happens? >> it's a great question. you know, i think in the short term it's made it a little quieter. there's focus on the election and really getting past that. as a result, there's a little bit less, you know, activity. that's actually been occurring. on the flip side, in that quiet period you have a lot of folks who sort of come out and say, hey, we want to meet with you on x or y issue, so i've been encouraged to see provider groups and plans and others say, okay, i know you guys are going to have a lot of activity at the end of the year and into next year, here's some new ideas that we're thinking about. you know, i think beyond that i think we really need the election to sort of finally play itself out. i think we'll have depending, obviously, on the outcome, there's some big political questions we'll have to deal with, but the immediate focus for everybody is sort of fiscal cliff and reaching a bipartisan deal. >> we have a debate coming up tonight, probably the last best chance to hear about the candidates' health care plans. what kinds of things are you

looking to hear from the candidates? >> it's going to be a good debate, huh? [laughter] i don't think i'll throw anything at my tv this time, so i think we'll be in good shape. you know, i think it'll, obviously, both strong debaters, and i think it'll be a good discussion. you know, clearly, um, you know, you saw a lot of focus on the affordable care act last time. we expect that probably to continue. and beyond that sort of i think deficit reduction and how health care fits in. and i think broadly those are kind of the themes that are permeating what congress is having to think about as well. >> um, are we taking audience questions? any questions from the audience? >> hi. [inaudible] you mentioned that -- come up with a couple of suggestions to make providers more efficient. thank you. and one of the suggestions was to equalize payments for physician, physician offices and

hospital outpatient departments for office visits. and i was wondering in terms of likelihood, because it seems like a very straightforward opposite for a doc fix. what would you say the likelihood is of that actually showing up? >> sure. you know, i think you saw that, obviously, show up last year in legislation coming out of the house. so given the fact that it's already been included in legislation and given the fact that medpac has been included, clearly there's concerns that some folks have. so i think it'll be in that discussion, you know, but at this point it's probably premature to sort of say how likely it really is. >> do we have another question? >> shea mccarthy. so the affordable care act passed with zero republican votes, and republican nominee --

and the republican nominee for president has vowed to repeal it on day one. at the same time, you have liberals who would argue that an individual mandate is actually a conservative principle, and at the same time the republican plan for replace premium support has been oftentimes or has -- was actually a democratic idea when it was founded in the brookings institute. what are your thoughts on bipartisanship or your concerns on the role that it'll play on health care reform and implementation going forward? >> sure. it's a great question. it's hard to speak to it more broadly. i can give you our experience in the finance committee. we held countless meetings and negotiations with republicans, really that entire year that we worked on health care reform. so for chairman baucus, i think bipartisanship has always been his goal, and i don't think anyone worked harder to insure that that effort was put in, you know, in the context of the affordable care act. so for the finance committee and

in terms of what our role will be moving forward, you know, i think reaching across the aisle is something the chairman has always felt really strongly about. you know, as far as premium support and other ideas, you know, i think in some senses they're still relatively new and haven't been fleshed out. so to give you one idea, you know, rural hospitals, right? we have 42 critical aspect hospitals in montana, i was out there and literally the road kind of ends when you get there. for these critical access hospitals, there is no program in premium support that really helps them. so what happens to these 1200 critical access hospitals across the state if you transition away from fee-for-service health care to a premium support option. that's just one idea. teaching hospitals -- i mean, there's so many different issues that i don't think have been close to being discussed yet. that's a really new idea but one that i expect will be coming up and that i think we'll be having a lot of discussions about.

>> tony, i want to thank you very much for being here. we have coming up nextgener if haberkorn, and we'll be back. ms. . >> good morning, everyone. i'm here with y.p. paluskiewicz from chairman burgess' office. you're the one person who knows exactly what's going to happen at the election, fiscal cliff -- >> makes me the most valuable person in the room, i can safely exit. [laughter] >> so let's start off with your background. you've been on the hill, working in health care, i should say, for about a decade? >> that's correct. i started on the hill early 2000, i think i started like most people, you know, interning. but started with a small boutique firm lobbying clients, and then this 2003, early 2003 i want to say, started working for the late charlie norwood from

georgia. and i worked with dr. norwood for about four and a half years, and i was with him until he passed away in 2007. he was vice chairman of the health subcommittee, a position dr. burgess now holds on energy and commerce. i spent some time off the hill working for the american dental association working on medicaid insurance policy, and then in january 2009 dr. burgess asked me to come back to the hill to handle his health care policy, and i've been with him ever since. >> and here you are. >> with yes. >> so as you look out at the end of the year, how are you preparing for the intense health care discussions and budget discussions that we're going to have? >> getting a lot of sleep. [laughter] you know, resting up. i think that we're not going to know until we know. i think that's one of the ideas that's out there that we all have, these plug and play plans ready to go. and i think a lot of us are doing some strategic planning of discussions we may want to have and discussions we may not want to have but have to be prepared

to have. and kind of getting ourselves lined up on those areas. but we're not going to know what we're going to be asked to do until the day after the election. what is the makeup of the senate, you know, what is the -- you know, where is the white house? and everyone is very much, and rightfully so, focused on what may be on the table once we get in the room. >> uh-huh. >> because that's where individuals can either be harmed or helped. i'm much more focused on what gets us in the room in the first place. i think you've heard about all these pending problems. there's not a desire necessarily to have a long, drawn-out lame duck. that, you know, culminates in a grand bargain. i think that if there was that desire, we would have seen it last year, and it would have succeeded, and it didn't. so i think what we're going to have to be faced with is what is so pressing that we must deal with it at the end of the year that congress must put aside any

differences from the election and handle those issues. once you know what the driving force is, then you can start kind of looking at the package, seeing the size and scope of what we may be asked to do. but until you know that and you're not going to know that til after the election, i think that really sets up the discussion better. >> but what are some of those strategic discussions you said that are taking place? um, obviously, we know, we know what's going to have to be dealt with. it's a matter of, is it going to be dealt with. um, so what are some of those strategic discussions? can you take us into the room at all? >> well, i think once again it's a matter of what are we dealing with. are we looking to avert sequestration, are we looking at the tax code and the expiring tax provisions, are we looking at, you know, the debt ceiling that's hit again, and, you know, day after election we are notified that we've hit the statutory limit on the debt no matter what the outcome of the election is. and that's one thing that's very interesting, is you can have

different political outcomes leading to, you know, not necessarily having, wanting the same policy outcomes, but then being forced to have the same policy discussion, and that is, you know, let's say republicans take the senate and the white house. we are going to want to have a conversation on tax reform with a romney administration, talk about fundamental tax reform. however, if at the end of the year president obama says we've hit the statutory limit on the debt, we may be forced to prematurely have some of those discussions to deal with that issue, not wanting to know on election day, you know, we've hit that limit. so, or vice versa. i mean, you could postpone that discussion for that very same reason. and we're not going to, you know, once again we're not going to know that. what are the discussions taking place? i think that once again it's a matter of what the package is, what is the size and scope of what we're asked to do. if we're just asked to, you know, handle the doc fix and then get out of town, well, we know what our window is.

so we're looking, you know, and whether or not you include or extend medicare extenders in that, you're talking in the range of $20 billion. if we're talking about something much grander, then you're going to have to talk about different sources of potential revenue or savings. and once again it becomes very nebulous at that point, but you've got to start wrapping your head around what may get on the table at that point knowing what we may be asked to do. >> and let's talk a little bit about those sources of revenue. um, i'm sure there's a lot of people in washington, maybe some in this room, who have interests that they don't want to see on the table. um, what within health care do you think might be pulled as a source of revenue? do you think we'll see medicaid cuts, perhaps, to pay for sequestration? some of the medicare extenders? could those be chopped? >> well, first and foremost i think that what do we have to do, i really think under every scenario that has been run the doc fix is the most important thing to do.

and that's because, you know, we're going into a new congress, it's going to be a new congress, you know, new administration after, you know, the inauguration. we're not going to want cms, you know, having to worry about the doc fix kicking in, you know, the cut kicking in. so i think that is the thing we must do. once again, once we know the narrow window there, it's a lot easier to kind of come up with some things that may be on the table. now, unfortunately, you know, when we get to this point at the end of the year, providers tend to take hits to pay for these short-term sgr fixes. that's why my boss, you know, had pushed for months to say, look, of everything we may be asked to do, the doc fix is the most bipartisan. it is something that we agree on both sides of the aisle needs to be addressed, and while we may have differences on pay for, we should be able to come together on this issue if we really wanted to. and that we need to provide that certainty to providers and to patients, you know, to medicare

patients especially, that they're not going to see an interruption in service. so we should handle the issue of the doc fix before even the august recess. and we dropped a bill just to do that and tried to draw attention to maybe we should get this off the plate. because it is the thing that we both agree on. now, what could, you know, go potentially past that? once again, it's a matter of how big are you talking about. if we're looking to avert sequestration, um, you know, all of a sudden you've got some people who are looking to avert the 2% cut in medicare who might find, well, 2% doesn't sound so bad now that we know what might be on the table in cuts elsewhere. and certain providers have taken a lot of hits over the years cumulatively from different laws because of this last minute kind of nature. do i necessarily see in the lame duck a discussion on fundamental reform of our major health care spending programs? i don't. because you're going to either

have a status quo election, or i think that people will only want to deal with what they have to deal with and regroup and have some of those kind of come, you know, heart felt cushions on where do -- discussions do we want to go in the next congress or the new administration. and on the other side, i think if there is a shift to one party or the other, they're going to want to much rather fox on, again, what can -- focus on, again, what can we do in the future with different numbers or control for the white house or senate. >> next year on capitol hill, let's talk about it if president obama is reelected or if governor romney wins. if president obama wins re-election, um, the 2014 deadlines are going to come up really quickly in the health care reform law. um, do you think republicans at that point are going to say, you know, we ran out of chances to repeal this law and move on, or do you think this fight for repeal is going to continue in. >> well, first and foremost i

think we absolutely need to be focused on our singular message which is the aca is a bad deal for americans. it's going to cover less people than expected, it's going to cost more than projected, it is, essentially, you know, the american people asked us to deal with cost, to deal with a small segment of the population that may have had the difficult medical diagnosis. we could have done that, and we didn't. we had a massive rewrite of the system. so we must be focused on selling the american people we hear you, that this is giving you taxes you didn't ask for, it's not giving you the results, it's not lowering your health care costs, and we didn't need a complete turn upside down of the entire system to implement some of the reforms you did ask for. and it's not patient-driven. so we need to be focused on that. because that's where my boss believes we need to be focused. now, in the hypothetical and, of

course, we have, things are looking very good for governor romney, and my boss is a health care adviser to governor romney, that the white house, you know, stays with president obama. i think then what we have to do is have, go back to basics and say, yes, there is a giant clock on the wall, and it's been clicking, you know, down to 2014. it's been there. are we prepared for it? and it's not just, you know, everybody focuses on are republicans prepared to accept the fact that 2014 is coming. i think much more fundamentally, is the system ready for 201? do we have the guidance we need? are the states prepared? do we know that we have the, you know, regulations and direction out of cms and hhs that we're going the need to make this work? and if the answer is anything but yes, and i think it is anything but yes right now, then we need to seriously evaluate whether or not we want to take the risk of flipping that switch and risking what may happen to

the system and what may happen to patients in the interim at that time. and so at that point we may have to have a discussion of what do we want to go forward doing. now, the terminology's going to be very important when some people say, you know, we need to address some of the flaws of aca, and there are many, that we just need to go in and make tweaks. some people are saying it is a complete repeal and replace. obviously, in a hypothetical obama administration the latter is not going to happen. so what are the discussions we can have that will say we need to be prepared for the future, what about this can work, what parts could have been bipartisan? i mean, it's not just the popular provisions people know about. there were work force sections that would have been bipartisan, community health center, i mean, there were several issues that we may say, you know what? that's not even part of the discussion, we're okay with that. but then fundamentally look and say what is going to be very a

harmful to the economy and to patients and say we're going to have to take those things and either repeal them, but for these other issues we may work on a different way going forward. >> do you think republicans might perceive trying to delay the big 2014 deadline, you're kind of hinting at exchanges and the tax season, the mandate, the big pieces, do you think there'll be an effort to try to delay those? >> i think fundamentally it all has to be on the table. once again, we can't just have a hope and a prayer that because the insurance companies have been denied the guidance that they need, that a lot of the answers out of hhs is we just assume in this will work. what if it doesn't? and that could mean disruptions in coverage, disruptions in provider care, and that should concern us a lot. so whether it's a delay or more flexibility, something that governor romney talks a lot about, i think that we have to have those conversations. now, once again, going into a

new congress, are those conversations part of a larger fiscal discussion of where we're going in this country? and i think that, you know, you may see us go to aca to answer some of those questions as well, whether it be through reduced subsidies or a delay or increased flexibility. and i think anyone who thinks that that isn't going to be the case will look how much we've already gone in even with democratic control of the senate and the white house and altered aca just in the last couple of years. and so it will definitely be on the table. to what degree i think, once again, it's a question of -- what is the problem we're trying to solve at the time. >> well, and let's flip that for a second. if governor romney wins, he's obviously talked about repeal. um, that might not be possible if republicans don't take the senate or at least have 60 votes which is all but impossible. how much of an effort are republicans going to put on repeal? is it going to be a constant

drum beat to try to get everything they can out of the law? >> certainly, i'm not going to try to second guess a future romney administration. i think, though, stepping back and saying where do we take our message that the aca is harmful to america's patients, the next step is, you know, in that scenario is to say, well, there might be tools at our disposal, and people have talked about reconciliation. having been here as long as i have been, i know it's a much harder trigger to pull than some people sell it as. but it also gives us the discussion, and this could play into future fiscal discussion based on where the numbers lie and where the mandates are interpreted of what we may want to do with fundamental reform of the major drivers of our budget. and that's going to include talking about taxes. and you can't talk taxes and tax code without talking about subsidies and aca. to have a conversation about medicare, to have a conversation about medicaid. and not presuppose the outcome. and that's one thing that i

think, you know, we always do because we always want to say, well, this is the general direction we're going. and i think that we should be focused on, you know, republicans want to make these systems more patient-friendly, provide more flexibility. but at the same time, i'm not willing to second guess where we end up. but you can have a -- that could set up a fundamental discussion where it's not just about finding savings, but how do we reform these programs and the tax code, be more fair and for future generations? >> okay. well, thank you so much for your thoughts. i'm sorry we weren't able to get to everything within health care, but i'm going to turn other to my colleague jason millman and elizabeth falcone. thanks so much. [applause] >> well, i'm back. we have here now elizabeth falcone from senator mark warner's office from virginia. thank you for being here with us. >> yes. thank you for having me. >> start us, you know, tell us about your background and how

you got invited, got involved in the hill. >> i don't know why i was invited. [laughter] but, no, i've been on the hill for a little over six years. i kind of got my start in health care as an intern at the national vaccine program office which is, um, at hhs. i, by fluke, i needed an internship during my semester abroad which was really here in d.c. and got this phenomenal internship and ended up staying from january all the way through august and kind of fell in love with health care and thinking about systemic reform. so, um, when i graduated, i came back to d.c. i got an initial job on the hill, but then in october i started with congressman cooper and was his health care staffer. i guess the is history. we did health reform, it's a little bit of right place, right time. >> yeah. and we were talking in the green room a little bit, and you said

one of your sort of pet projects is health i.t., something you're very focused on. so can you tell us a little bit about what you're looking at there? >> yeah. i mean, i think my boss is really concerned about kind of changing the delivery system of health care and how do we make health care more efficient, more or accessible, um, and better for both patients and for providers. and i think as a guy who built his background in technology, he sees that there's a real benefit to using technology to help get us there. and i think the kind of term health i.t. really is kind of thinking about that in a broader sense. we made some really big leaps and bounds, um, in the aura by creating meaningful use and the dollars and incentives. but i think what we're really focused on is what comes after meaningful use. health i.t. and electronic medical records are not an end goal, they're a means to get us to where we're trying to go. and so we're really having a lot

of internal conversations and external conversations with groups like the bipartisan policy center and others about thinking about what, how we encourage the system to move forward and use technology in a way that's helpful. you know, i have a very good friend who's an icu nurse here in d.c., and they just switched to electronic medical records, and i had been talking them up, and i said, oh, they're going to be so great, and she looked at me and said, well, i had to take my day off to do a whole day of training, so i hated that, and and now it takes me an hour where it used to take me 20 minutes. and i think that is really concerning, but i said, isn't it better, can't you find more information, and she said, yes. so the question is how do we help people get over that kind of initial, you know, longer taking and how do we, um, help it help her do her job better. so -- >> you do hear stories like that, you know, it's taking longer. >> yep. >> you hear about how these systems aren't actually even talking to each other that well right now. >> yes. >> and a couple weeks ago you

had four gop house chairmen say, all right, this isn't working, let's stop sending out these billions of dollars in meaningful use payments because we don't know they're doing any help, it sounds like it isn't. you know, what's your take on that? >> yeah. i don't think it's not doing any help. i think you've seen an enormous exponential growth and take-up of electronic health records. i think the dollars have been helpful. it is expensive. i think interoperability is a really big issue, and i think it has, um, more to do with encouraging competition and encouraging innovation in companies and encouraging systems that talk to one another. and i think you can do that through both meaningful use dollars, i think onc has done, you know, a good job of, with stage ii starting to put in requirements for interoperability and starting to say this is something that we're going to. i think what we're really focused on is how do we push that more, how do we push the vendors to do more and push

innovation? i mean, we're not going to have the answer, but i, but i think there's really smart people all across the country who do. you know, i don't -- i think most doctors and providers and hospitals will tell you that they need the help. i think the meaningful use dollars have been helpful. i was in rocky mountain, virginia, friday touring with the director of hospitals at franklin memorial, and he was showing me in this small town, and they all have their c.o.w., their computer on wheels, and he was showing me the nurses. and we were in the middle of this conversation, and he just stopped and turned to me and said we could not have done this without the meaningful use dollars, thank you so much. and i just think that's true. so i don't think there are ways, and i don't think we should stop because then we're going to stop that type of innovation. >> let's turn to something that your boss is deeply involved in right now. we had gang of six last summer, they've added two friends, they're now gang of eight. >> yes. >> you know, what can you tell us about what they're talking

about, what they're working on? >> yeah, you know, um, i can't talk a lot about it, i guess is the first, but what i will say is my boss, um, like many people in the senate and in the house, um, are very interested in working in a bipartisan way to get, um, our country back on a better fiscal path. and i think, um, you saw the bowles-simpson commission, i guess it was now two years ago, and my boss and senator chambliss, you know, kind of wanted to make sure that that ball wasn't dropped. and he, we got some friends, and we are looking for new names. so if anyone can think of something better than gang -- [laughter] only in washington is a gang a good thing, right? you know, i think there are groups of people who are continuing to talk about how we can do this in the most, um, in a bipartisan and a fair way. um, you know, there's a lot of things on the table. i think my boss will say, and he says publicly and privately that

kind of everything is on the table. there's a framework that you have to have. you have to, you know, go big as we call it. it needs to include revenues. um, and it needs to include entitlement reform. and there are kind of different ways to get there, um, you know, there are a series of buckets, and, um, we're certainly willing to have conversations with anyone about what the best path forward is. >> so ultimately, if the plan does come out of this, what's the expectation, what role is it going to play, you know? >> yeah. you know, we really want to be constructive and helpful. my boss really thinks that, you know, he wants to be helpful to the leadership, to the president, um, and he thinks that, you know, what they can offer we can continue to talk and what the group can offer is this kind of trust, mutual trust, mutual conversation and, quite frankly, bipartisanship which is really important. >> so you're looking at entitlement reforms. can you tell us a little bit about those sort of things at

all? >> um, it involves everything. >> everything. >> you know, i -- there's a lot on the table. the bowles-simpson report had a series of policies and a number, there's the domenici-rivlin report which had different pieces. you know, i think in health care we think a lot about it as buck do some more provider cuts or provider productivity assessments is what we like to call them. you know, you can change the structure of the medicare benefit, and there's kind of a spectrum of that, right? you can look at things like a unified deductible and putting catastrophic cap on spending. which seniors don't have now. you can look at changing cautionary and all the way maybe at the other end of the spectrum is changing the entire structure of the system. ..

to be able to provide for them what many of them worked years and years to have this benefit, so if you might have to balance that and balance with the outcome will be. we are excited about the conversations we've had you will hear from josh leader and we've worked very well with senator coburn and others. i think there's something to be done. i think there is unable to be thread but it's hard.

>> it's a very big topic in the election once you get past the election do you think you do see them for democrats talk about it? >> it's hard to have a conversation about everything, but i think it's disingenuous to the process to draw a very bold lines in the sand, but i think there is concerns about how you would design a program or where the procedures wouldn't be as protected. i think the kaiser study that came out yesterday, and i haven't been able to read 60 pages of it with the findings say that seniors will be paying more and a lot will be paying over $100 more for the benefits that they are already getting and i think $100 is a lot to many seniors particularly low-income seniors, so you've got to watch out. you've got to be, you know,

nervous about are we really giving them the benefit that they thought they were getting? >> we have the fiscal cliff coming up. first of all, how do you think it is going to play on the hill? >> you know, i don't know. i think we are really hoping that we can have a fossil discussion. i think that there's -- i don't think anyone thinks that we are going to solve all our problems or even all the country's physical closed problems a month and a half that we have in the so-called lame-duck session but i think what we can do is have a good conversation about a free market and pathway, how do we build the path we can start walking on that gets us there and i think we would really think that that would be important in creating a

framework and not hunting totally and seeming like we can't handle it, but giving us enough room to make a decision, but enough pressure that we actually get it done. >> if romney is elected one of the things he's promised to do is repeal health reform. what is that going to set up on the hill democrats and republicans achievement, what does that mean for tackling other health care issues? >> i'm not going to presume. i know what happens on november 6. my office always said she was a proud supporter of the bill but he's always said it wasn't a perfect bill and we need to have a conversation about ways to tweak and reform it and we look forward to having that as a bipartisan conversation. what he was voting for is changing the status quo, the

status quo isn't acceptable. the costs are too high. too many people were struggling to pay for medical bills and we got every morning terrified that, you know, they are one of illness away from being put out on the street, and i think that going backwards is never a good idea in washington were in life and i think we really feel like we want to move forward and we look forward to having that conversation, but i just -- i just think that it would be a shame to look so far back. >> if there is a status quote election there's an assumption that you have to go into the aca even if there are not a perfect bill there are things that -- >> it wasn't drafted that quickly. i think you need to go back. there are other bills that were certainly drafted -- >> they didn't get a chance to

fix it like they would have. >> absolutely. any time you have a piece of legislation in our history, and you've seen people come back and do changes. there's always technical changes and broad changes as we have learned more, and as people have had conversations. you know, i think we welcome those conversations. my boss looks forward to having that real looking at the bill and making tweaks that does make sense. >> is their anything in particular that your office is looking at right now? >> you know, i think my boss continues to be very focused on making sure that we can continue to lower the cost of care. and i think a lot of folks have told us that has to do with the structure and the interaction in the delivery system, so looking at more accelerated delivery reforms, making sure that, you

know, the system, the market is working appropriately probably which is appropriately but i'm not saying anything. >> i think we might have time for one more audience question to this gimmick we appreciate your bringing of the issue of health i.t. bet is large to the provider organizations concerned about. how do you see health i.t. going forward to address some of the concerns being able to meet kunin full use? when a lot of a physicians especially surgeons primary centric? >> when you get into the conversation that probability life never personally never thought that the answer was kind of these big answers to vendors

that i think you do need to be able to kind of plug and play and so i think encouraging a marketplace where you can make sure that you are integrating systems that to focus on specialty and the society will play a big role in saying this is what i need. can you help build it? that's what a market place does if there is a need you can face it and so we need to build regulations and work with vendors to allow that type of innovation to move forward. >> thank you very leche. appreciate it. [applause] coming up we've jennifer mac with johnson to the code joshed >> okay. we're back. josh trent and tom colburn thanks for being with us. >> thanks for having me. >> let's start with your

background. you've been doing health care and what got u.s. trusted and it? >> i got interested in health care when i was in president bush's white house helping recruit the senior at netz station officials for other agencies and we interviewed hundreds of physicians and talented people in the health care industry and got the sense of issues in the industry and developed a passion for it. is an interesting personal reward and i think it really matters for millions of americans. my brother is a physician so i appreciate a lot of the challenges from the perspective and at the program for a three years. >> okay. and now here we are [inaudible] looking at the next few months you have several gains in congress in the last two years. we haven't had a really successful one in quite some time. the was confidence to come together and put out something

with their their product is successful and leads to something that successful on the hill. >> we talked about some of those discussions but it's always good when the members come together and talk about some of the policy solutions that we have. so i think that's a good process but can't really handicap the outcome. >> what about handicap in the fiscal cliff discussions at the end of the year? there is a lot within health care that could be on the table. you were joking earlier with that table looks like. what in hell cared you think might be susceptible? >> i think it kind of depends on what solution the congress adopts. someone needs to develop that said a few slides in the scenarios, all of the possible combinations, whenever the number is.

i think medicare centers have been reviewed by the house ways and means. i think that you've seen some others, mitt -- medpac need to be with scrutiny. it has to be dealt with. i will say for the provider community it has been dealt with every year the past ten years, so it will be dealt with. a challenge we face at the end of the year. i don't think it's a good time for us to kind of health policy staff and for members and others to just think about when we face this kind of fiscal cliff which is a really big deal with regard to the economic impact it can have on our country but we need to be thinking about what's really been the most predictable fiscal crisis our country faces. we know we have to in the next several years bring in entitlement spending and not the government accountability offices we have an 88 trillion-dollar fiscal gap over the next 75 years of commitments as a federal government and what we can afford to pay. dirty 7 trillion of that is

roughly medicare and the largest structural driver of the deficit, so i think in some sense it is natural for us inside washington right now to think about what's going to happen in the short term term and the next few weeks. i don't want to minimize that. but i think there is a sense in which we need to have honest conversations and we need to have more foresight to think about what comes not just in the next six weeks or six months but in the next 16 years. you all know the numbers as well as i do. medicare faces as soon as five years it could be 20, 24, it could be 2017. and, you know, they have said to justify the 75 year gap to rectify that a broader it's either 47% tax increase or 26% neither attainable for the official race and address the challenges that we know are coming sooner rather than later. >> is their anything in your

vision that may see that bipartisanship is even a possibility on health care? particularly in the senate is there a bipartisan health care bill besides perhaps stopping the cuts? >> there's a lot of bipartisanship on health care. i think that we are in a unique political moment where it is partisan right now. i think the reality is a lot of members want to solve the problems and they want to do the right thing. i think the election will help and converse and winston churchill if we look at something that's a real issue for lots of the provider communities and there's been great by partisanship. senator coburn and co-sponsors of the house, there's a bipartisan peter process the finance committee has undertaken and with regards to the

integrity setting that there's a lot of other issues. even medicare in the bipartisan consensus on what some of the options are. maybe there's not a consensus on immediately adopting those but the maximum amount of pocket that actually helps the lowest income beneficiary is the most and improves the medicare benefit. so i think there is a goal and awareness to do something. we need to keep talking to each other and see the solutions inevitably adopted in the years to come. >> at that point i was thinking about the so-called flaw in the aca that doesn't allow people in the tax subsidies. i know the administration that isn't going to be an issue. what is the concern that could be assembling back as the exchange's get set up? is that something say it does become and conagra's has to deal with that in some way.

next year if that were to come up to you see republicans saying sorry this is your problem you have to figure out where will it be that by partisanship that you're talking about that perhaps that would be something that they would come together on? >> i think a lot depends on the elections. they are given the kind of empirical map of the health reform law and some of the critiques that were made you will see the republicans walk away from this. i think some of those were reported but some of the largest empirical a driven based on some of the kind of claims the supporters made over the cost or extending coverage and that sort of thing. so i think we will have to look at some of this, but ask me again in six months. >> that's an easy answer.

i think the reality is we all want to know but we won't know until we are closer. i think if you look back at the last two or three years in the health care industry there's a lot of fatigue and an amount of uncertainty that there are decisions that have played out differently than we predicted at the time and remember there were folks that were laughing at that idea. maybe the supreme court would be this or that so there have been moments where you kind of know what possible outcomes are but it's hard to read those with any kind of certainty. >> i don't think anybody -- if someone in the room and predicted that, raise your hand. >> it would be useful. >> that's a scenario if president obama is really liked it but if governor romney is elected as he talked about using that reconciliation, you know,

the senate would be very difficult. how difficult is reconciliation and how much discussion is there now about what could squeeze through? >> i think i'm not going to publicize strategy and considerations, but i think it's to prepare for trying to look at all possible outcomes and all possible tools we can use to bring in spending and change policy. so, i would say state-owned on that, too. what will be interesting is even before that after the election will be interesting to see what the options are. i think that is a thing that faces us even before, and there's a huge health care provisions for that, too. not just for medicare or for discreet policies but for the economic impact and without have

four other parts of the industry. i think that would be the big thing the would be the immediate focus and when there is a little bit more certainty than things will naturally turn to what are the opportunities in the senate. >> that sounds like a yes on reconciliation. >> i think it is a legitimate approach. i think it has been coming you know it's not been historically used for that but there has been president coming and when you look at during the spending reductions and deficit reductions, that is a legitimate use for the reconciliation. succumbing you know, i think that there is consideration taken. >> okay. if we look at the 2014 deadline it has been signed on to a lot of letters asking for reconciliation, funding and the prevention fund. what is that looking at now in the aca that you might be

talking about in the next few months? >> that's a good question. someone you know that his passion for oversight and wants to make sure the programs are working and that's for the aca and for the rest of government. today he just put out the annual waste book which has things like three injured $25,000 being spawned debate was spent on the robotic school to see if it's for kind of tempting rattlesnakes and i'm not sure how that is a federal priority and how we should be spending money on that. so you can continue to do oversight, some kind of illustrative showing how the congress is not doing that oversight and how the agencies are not spending taxpayers' dollars effectively as they should and the oversight like the social security disability. a very thoughtful policy heavy review of the program and how it is working. so we look at the oversight whether it is medicare, medicaid and cut the affordable care act or anything else. >> as we wrap up what are you doing now to prepare for the

fiscal cliff. what are you researching and preparing for? >> that is a good question. i think everyone is trying to figure out what are the conventions, what are the options will be on the table, what are the different scenarios and what we need to have the legislative scores for, what is the data that the members can make the decisions, what are the opportunities for bipartisanship and what are the opportunities for kind of deficit reduction, what are the things we can reduce uncertainty? there is so much the congress has to do and clearly the taxes will be large political line drawn and it has been bipartisan -- >> just a couple moments left in this program. you can see it in its entirety, good to deceased and video library, c-span.org. live now to the heritage foundation this morning hosting a discussion on china's incoming government which takes power in place for the next ten years. panelists discussing with the transition means for the chinese politics, security and the economy. this discussion just getting underway.

>> hosting our initial panel will be walter wollman. walter serves as the director of asian studies center. prior to joining us here he was at the u.s. business council as well as serving on the senate finance staff and as an aide to senator john mccain. please join me in welcoming walt lohman. walter? [applause] thank our guests the first half which we will turn to very shortly. just a couple of us are compromising our usual institutional alliances to be here and to be together talking about this and what to expect from beijing when its leadership transition is complete. it's really no matter more important to peace, stability and prosperity in east asia in my opinion and i really proud that we could come together to assess the developments there today. i hope i am not taking too much

liberty to also say that i think it is an illustration of how the differences in washington and assessments in particular of the chinese politics and behavior has collapsed in the last several years. it's much more consensus i think here. there's at least a lot more agreement on the concerns and apprehensions about where the chinese may be headed. but, you know, i don't want to put words in anyone's mouth. my colleagues will correct me if i'm wrong about that but it is at least an indication that we can be in the same room and our differences are small enough that we can be in the same room to talk about what we think is going on in beijing. as john mentioned we will have two panels and we are going to cover policy and then turned over to terry miller, my colleague at the center for national trade and economics center and he will pick up on the economic side of the conversation. the panel first we will have cheng li director of research and senior fellow at the john l.

thornton china's center in foreign policy program at the brookings institution. he's also a director of the national committee on u.s.-china relations. dr. li has an m.a. from the university of california berkeley and a ph.d. in political science from princeton university. dr. li has authored many books on the topic of chinese politics including the national they plan to be discovered in china, the amex and the dilemma of reform from 1997. he's currently working on another to books, to at the same time, that takes a lot of talent and the time. one is about chinese politics in the ear of collective leadership and the other middle class pioneering china's global integration. not an exaggeration to say that dr. li is the foremost expert on china politics. we are very pleased to have him here. we are also very pleased to have dr. christopher yung. dr. yung is a senior research fellow at the institute for national strategic studies at the national defense university among the many other things.

dr. yung is the author of the book entitled "chinese librations case studies contradictories obstacles and solutions," that was published in 2010. chris's ph.d. is international relations from the school at sais come school of advanced international studies. yields a master's degree in east asian studies from the same institution. we will then turn to dean cheng. dean has been our senior fellow for china political security issues here at the heritage foundation and specifically in our asian studies center for a little more than three years. i am reminded everyday how great it is to have him around, because he is right down the hall from me and i can poke my head and at any time and tap into his enormously from the enormously full brain. dean brings extraordinary expertise and talent having worked 13 years as an analyst.

first is science application international corporation, sc icy and in the china studies division at the center for naval analysis. dean ready bachelor's degree in politics from princeton university in 1986 s studies for his doctorate at mit. with that, i am going to turn it over to dr. li. he will get us started and then we will go through maybe ten, 15 minutes each and hopefully get to question and answer pretty quickly. thank you. >> i have a powerpoint. can you see the screen? okay. that's great. thank you for the kind introduction, and i am honored to speak to you today. i recall that i was here twice over the past ten years. once was on the eve of the 16th, the other five years ago on the eve of the 17th.

each time i learn a great deal on the chinese leadership and rebalanced, you know, the exchange of ideas and colleagues at the heritage foundation. now, in my ten to 15 minute presentation that does not work -- okay. for some reason it's very, very slow. yeah, i will address three basic questions. first, who are the main candidates or competitors for the new standing committee and

what is the likely composition and to the balance of power? certainly who are the main competitors for the new commission military leadership? what are the major issues regarding this change in military leadership? and finally, i will talk about how the upcoming generation of the top ministry officers affect the relationships and interactions with the civilian counterparts. now the first one, who are the main candidates? we certainly have several versions, 0.0, 3.0, the latest is probably five plano. but i believe it is probably a little bit too early. there will be a leak like what happened in the past congress, but usually that week or ten days before rather than three weeks before i fink that is

involved with serious negotiation and dealmaking. this is quite long and there are so many issues not only for the personal issues but also related with the other issues like whether hu jintao will stay armed as the chairman, and what would deal with the program. now you have the leaders and how to avoid this kind of interfering in chinese policy behind the scene. there's something more, regulation needs to be adopted with the person that would change. and also, some of the religions, the media said there isn't credible. why? because it is really balance in tensions between jung's people and hu jintao's people. it's five, maybe even five and a

half among the seven standing committee that really belong. hu jintao's people will only have one and a half. this isn't right in my view. there is a tremendous incentive for the party leadership for balance of power if some people, nine people should be. some other considerations. sometimes there's also a lot of changes because they relate to the discussion. this reminds me of a candidate when once he was asked how could it be possible his brothers running mate and then vice president of the u.s. and he said no we just get involved in a very lengthy discussion. we're so tired in the so exhausted. there is a lot in this discussion. and also, there is something quite new to this time.

it's a possibility of the so-called party election in the high level. since 1987 they have the election for the central committee. these are the delegates elect the 350 central committee members. but never happened in the intraparty election. if they have the members the of eight people on the balance three of them would be eliminated. now this also is complicated. one of them -- two of them could be candidates, so if the adopted policy you really do not know for sure who are the other standing committees. there's also the consideration may be 58% possibility that the standing committee itself will be also members for that 47 members they put eight people on that ballot. so is a certain degree of uncertainty. now having said that, this is

the candidates, we do know the candidates, we do know the candidates chance to be on the standing committee differ from each other. certain people have a better chance than others. now, this is the 12 people i work out at the beginning of this month i presented a conference. now it happens to be also the past states according to the week to one reuters. before on the left, and the right side there's seven people to consider the standing committee. but again i think not sure but i think there will be a lot of changes, but certainly these people will for various consideration age, identity come capacity etc. now, again, there will be some other changes for consideration,

but this very likely is the case. now, the balance of power would be maintained. these are the japanese camp. majority of them are precincts. their father's father were previous ministers. on the right, and the four of them have a career from the hu jintao's power base. this is so clear-cut that i think they are maintaining the spending for power would be very important. now, let me move to the second question who are the main competitors of the commission and what are the major issues regarding this change in the military leadership? early on whether hu jintao will step down as the chairman or

whether he will follow jiang zemin retirement and stay on for two more years. if wen jiabao steps down to the to -- hu jintao steps down immediately, it would become a civilian vice chairman is also going to hong kong and elsewhere this is the consideration. i do not know if it is true or not, but there is a difference of signals. i'm not sure. i think that the 55% chance hu jintao will stay on. this is based on the ministry evidence. one is if xi jinping would become chairman he probably should appear in the launch of the carrier to or three weeks ago. now he is ever since that event to indicate the hu jintao in particular would stay on. second, according to the

interview in hong kong he told the media that hu jintao would stay on. and based on my reading of chinese officials this is the case, but again, 5% coming and we do not know for sure. secondly, there's also a consideration that the top leadership to many offices in the military operation contract larger than political affairs because to distinguish the career path for these military officers usually hard we switch to each other. some just move along the political affairs in the present appointment and the ideology. the other move with chief of staff, commanders at different levels, chief of staff etc.. so these are distinct careers. but now we see the top candidates -- the majority of them in the military operation. i will highlight that in a few minutes. now also, there is a balance of the soviet, previously by the

army leaders but now you see the rise of the air force and the navy and even this kind of an forces both but you do need to maintain the degree of balance and finally it is that issue one difference between the military and civilian leadership in that it is between the officials but because the organization is very weak in the military so therefore now we have the same identity, the same kind of entitlement and that top leadership and then usually they come together some of them liked each other but generally they

have the same identity, value and with some inspection. but others would come together because they are more tested and move along their career. they are very critical. now, this is the current member of the military members of the commission. as we know, several of them will. only these three people because they will go on after 1945. according to the previous converse anyone this time born before 1944 should retire. now these three people are still able to stay for one more term. now, or their successors? it is really unclear, and now here are the candidates. i divide them into three things. again, this isn't a clear

defining line for factions. some of them are closer to hu jintao and also very close to xi jinping. this is an important way to look at the military. now, these are the candidates and this is including xi jinping that will be the vice chair of the military commission and currently a member and he will stay on and how likely will become the commander of the air force and several others. not because of the problem previously with his ties i think his chances become very slim he

could be a candidate but i include him as a possibility because he may become the chairman. and the leaders are also rising stars although the current commander of air force very close. now this is for the dawa cmc and hu jintao as the chairman and the only civilian vice chairman promoted from the members of the vice chairman. now the other eight people represent different services will and with the two people

both are competing for the director of the party and this position may switch around but very much these are the top candidates in the commission. now let me move to the final question, the composition of the top military leaders, affect the relationship in the counterparts. here i want to address three issues that i think are very, very important. one is that this time it's really very high. it's expected past the leadership to know in the military. we know the past leadership and civilian leadership is a 70% change in the committee of the state council the they are also 70% and i would also show you that the level also there were very high speeds.

the second is the growing power of military leaders with the guideline and all i will show you the table. finally, you see the phenomenon of the one hand you see the decline of the technocrats declined that some of the members of the bureau and the committee and also hu jintao's team five years ago. now you see that decline, the past eight candidates in the highest degree. but in contrast the military officers become increasingly technocratic. this is on the role with china's decision making process where the mother three offices have the authority of civilian leadership.

now, let me show you the three tables. one, the military leaders on the committee you can see the total number of the militant members in the 357 central committee members, military counted 65 seats, but the party congress says among that 43 are new. some two-thirds of them are new members to reduce the military always has a faster rate in the military top leadership. and i believe that this time would be similar or even higher. and i look at the delegates from the military. now this is in the commission in 1992 you see the percentage increase over these years.

13% in 1992 to 14% dhaka 97, 25% in 2002, and this would be 18% in five years ago. but this time i believe there will be around 42%. previously still running it could be over 50%. this is really something very, very unusual. quite disturbing. the military officers are very unhappy and the would be a lot of criticism. the other is an issue about the decline of the technocrat and civilian leadership. this is a study that i conducted over the past two decades about the rise and fall of the technocrats in focusing the minister, secretary government in these three categories. 1982 only to present minister.

-- 2% minister. 30 or 40% in five years later. reach a peak in 1997, 15 years ago about over 17% of the technocrats in these three very important. but that decline in 2008 roughly between 26% to 41%. based on my study i think the decline would become about 25% in the civilian region or in contrast in the military leaders should you would see the rise of the technocrats particularly in the major general level or the colonel was full of people do not have the background to join the pla or receive ph.d. seville in universities.

major universities morgan science technology company v and air force and so with that it's a very important dynamic. these other major issues would take. thank you very much. [applause] >> thank you, walter and dean for the invitation to talk to this group. i also want to thank thank cheni for taking on a difficult topic. who is who in the cmc and a very intricate and detailed and complicated problem. so i'm glad that cheng li took that on and i didn't have to address that particular issue. i was asked specifically to talk about china as structure, defense policy strategy following the 18th party congress. ..

>> scholars consistently make that reference to an area of opportunity they need to take advantage of. when we read between the lines, there's going to be free riders on an international system that united states essentially created and that they'll continue to develop their economy and military capabilities along those lines. now, they specifically identify certain threats they need to address, and i'll talk about those subsequently. by and large, they see it stable and need to take advantage of that. secondly, another way of skinning this cat is looking at the party's guidance to the military. what is the party saying to the military of terms of preparing? they make statements about the strategic guidance made to the party, and if you look simply what the party has been directing to the military, that, to me, does not suggest significant change. for example, the party argues

that the military that has to professionalize itself, improve capabilities to meet threats the party's facing. the military needs to face certain threats to protect the national interest say in the gulf of aiden or the gulf of china. these are tasking that naturally militaries like to take on versus during the culture revolution or other parties when they pushed the military to revolutionize, to -- to engage in party struggle, ect. so the kinds of tasks that the party's been giving the military are certainly the tasks the military can sign up to. a third argument for why we're going to most likely see a continuation is that the fact of the matter is over the last decade to 15 years, the modernization worked out pretty

well. if you look at the chinese military modernization, i think we can all agree it's been pretty much a success story. for example, the most recent example, of course, is china's aircraft carrier. you can talk about how effective it is and what else needs to be done, but it's a a symbol china's come a long way in the development of its forces, but we can look at other examples. the sheer number of short range ballistic missiles or medium range ballistic missiles that can inflict pressure own punishment upon taiwan is a testimony to how effective china's military modernization has been. the modernization of china's knave sigh and air force. look at the number of ships they procure and number of submarines they developed. you can't say it's been a disaster. you can point to problems with the military modernization. we can talk about that, but by

and large, the military modernization over the last ten years has been relatively successful. i think a good argument can be made that approach the modernizing the military continues gradually. what pace? we can debate about that. by and large, the approach chinese have taken with regard to professionalizing and modernizing its military has been successful. if we look ahead, you have to make an argument about what generally has been guiding china's actions, the defense policies, forestructure over the decade. there's two general frame works to do that. the first is, by and large, the party's guiding theory to the military. two things come from all the things the party is saying to the military. first is the new historic missions out eight years ago. hu jintao made a speech in 2004 saying here's the missions we

expect the military to take on. there's evidence to suggest these are some of the wars put out in 2007 and laid out in the end of the 1990s, and hu jintao and military then took on and laid out in very clear fashion the missions that the military needs to take on. in addition, the other guiding strategic frame work we could use is essentially hu jintao's scientific concept. i'll talk about that in a minute. first, the new historic missions. essentially, you can boil them down into four basic mission. first is to provide a security guarantee for continued party rule. essentially, the pla is held to continue to protect and make sure the party continues to

function and rule. secondly, provide a security guarantee to safeguard national development. you can read a lot into that and analysts say what does that specifically mean? a lot of missions can be pulled out of that. can mean internal security missions, counterterrorism, or ensuring taiwan don't split off from mainland china, a taiwan mission, protecting china's maritime interests in the south china sea or sovereignty interests in the east china sea with japan. interestingly enough, you can apply that to new domains -- cyberspace, space missions. if you look at how the pla take on some historic missions, you can see them in the things the pla's done over the last few years. the third -- the third historic mission has to do with providing powerful strategic support for national development. what that might mean is protecting the national

interests far and abroad from china itself, being able to protect chinese citizens in countries like africa, protecting the impocket -- import of raw materials coming from mountain gulf. 2008 could be a reflection of that mission. the last mission is play an important role in safeguarding world peace. sounds like fluff, but the reality is the decade or longer. u.n. peace keeping operations, involved in a lot of military diplomacy, sending out a hospital ship to do medical diplomacy so although i'm reluctant to take at face value things that the chinese party puts out, right now, there's documents that's a blueprint for the missions that the military's held to, and we see evidence that the chinese military's taking on that task and conducting missions to do --

support the historic missions. now, the sign tisk development -- scientific development doesn't play as much in the west, but in china, it's a guiding principle, and, in fact, many argue that's hu's basic and primary contribution to theory and to social development in china. basically, the concept comes down to the idea of comprehensive, coordinated, and sustainable development. from a larger point of view, this has implications for income development, ensuring income inequality is not out of control. the perspective what it means for military development, army building, there's certain implications and direct implications because the chinese write about it. in journals where they talk about the implications of the

scientific development concept towards army building, towards naval force structure, there's specific discussions about hu's concept on scientific development having implications for development of the military so what kinds of things do we see it affecting the way the pla thinks about development of its force? well, for example, the party's insistence that the pla professional its force, recruit highly professional personnel, reform the training, provide rational and effective training programs for the militaries, the reforms in the military academies -- all of those initiatives have been argued so link back to the sign tifng -- scientific development i was at a conference for the pla, and what was brought up, by

the way, involved some of the best minds in the country on the pla all gathered to talk about the people's liberation army and its direction. one of the concepts was the idea of, perhaps, china's revolution military affairs, fixation on that idea, related to science and technology and a system of systems, very similar to our con cement -- concept of future warfare is related to the scientific development concept. there's a number of initiatives related to this -- this concept that hu has put out. now, in terms of force structure implications, the -- the forces that would be necessary to support the new historic missions, i think you can automatically draw them out. if you have a taiwan

contingency, you have to address that and it's straightforward to see what military capabilities do you need to support a cyber mission, a space mission, a taiwan contingency, addressing the sovereign dispute, but in the q&a, i'll address what the force structures are. by and large, for me, there's a good argument to be made about the continuity about the policies pursued by the chinese military over the next decade, and we'll know for sure when the 18-party congress comes out and makes announcement about the party work report, about the state of play, and we'll know for sure if that's the case. by and large, i put money down that by and large, there's continue newty of -- continuity of policy, and with that, i'll stop. thank you. [applause] >> thank you.

>> seem to be having just a little of difficulty today with the technology. i wonder if it's made in china. [laughter] it's always extraordinarily daunting to share the podium with experts of this caliber, especially when you go last, the question then becomes "what the devil are you going to say that hasn't already been said and said better?" i make no promises regarding that, but i'd like to make the following observations. the party that emerges at the 18th party congress, the party leadership, including the military leadership, will be in office is past president is anything to go by for ten years. if you think about how far

china's come since 2002, when china was not the number two economy in the world, nobody talked about the g2 at that point, or when you consider between 1992 and 2002, gung -- power, be careful in what we hope for and also in limiting expectations. i think one of the things we really expect, what we really do hope for is a return to pragmatism, especially over the last couple years when china's relations with its neighbors seems to have deteriorated whether it's south korea, recently with the shooting incident involving a chinese fisherman, a japanese over the south china sea, india -- we see

china antagonizing, almost all its neighbors simultaneously, and there is, perhaps, the hope, well, maybe it's politics. it's a power transition, nobody wants to look weak. when it comes out the other side, maybe everything calms down and they revert back to bide your time, don't take the lead, seize opportunities because success will eventually come. certainly, that's something most people hope for that the region will revert back to its normal foil rather than a higher pitched foil. the problem is that it's quite possible it won't. part of the reason for this is in a sense what we see in china is the reintroduction of politics. that would seem odd for a civilization that's a thousand years old and always had politics, but in over the last

30 years, it was there are dunk dunk, and when he was alive, you could say, dad, will you make a decision in mom, will you make a decision? and deng could make a decision, and even after he passed on was hand picked by deng to succeed xi jinping. deng picked his professors and that his policies would not be reversed. in a sense rps there was that appeal. why am i doing this? because it's what deng would have wanted. with this party congress and new leadership, no one can make the

claim that they are what deng wanted. we see the reemergence now with no final arbiter, but it's politics, making arguments, ser sueding people, ect., and that is part of a process that's going to be very different. when you have differences, whether it's about factions or by age or by other -- by region, who will make that ultimate decision? within the central military commission? this will be further exacerbated by not only the things that cheng lee identified, but consider the central military commission serves as about the leadership of the pla as a whole and also of the ground forces and in particular, the supplies of the four general departments, and so if you were to promote a navy or an air force officer to the general department positions, in a sense, you are

having an air force navy second artillery officers making policy for the ground services. back in the day when the services, themselves, were not on the cmc, that was okay. ground forces had seniority in protocol and precedent. you had many navy officers really army officers promoted to admiral, but reversing that, that's a whole different proposition and one of the things to look for is the possible promotion of a knave -- navy or air force officer at a minimum at the military region level because no region in china has been commanded by a non-ground force officer, and so this is going to create an interesting opportunity on the one hand for jointness, but at

the same time, for bureaucratic politics in addition to princeling and technocrats and the rest. the problem of the technocrats versus viewer technocrats, by the way, is also going to be a real problem for security policies, and chris laid out a lot of the key issues here, but i augment that with an observation. the pla is the only source of military information for the top leadership. the top leadership in china, there's no rand corporation, no heritage foundation, no brookings, no civilian entity out there that can produce a separate analysis on military affairs. now, china has a lot of think tanks, but it's important to remember there's no private think tanks in china. every think tank is affiliated

and somewhat controlled by a government bureaucracy, and so while certainly it's possible they produce objective analysis, it is at least theoretically possible they will be influenced by the bureaucratic patron so in the event of a crisis, who will the left leaders turn to but military officers who are more technocratic, who know how tanks and cyber warfare works, and you don't. trust me when i say we need to do "x," and that should be a source of concern how the chinese make decisions about the ever-more complex security environment they are finding themselves in, and so, let me

conclude my portion of the remarks simply by saying we should be limiting our expectations. the new leadership that is coming in will be influenced more by politics, intraparty politics, interpersonal politics, every leadership has a transition, and, as americans, our time line is often far shorter if only to resolve these disputes and things so perhaps we shouldn't think about china's first 100 days or even the first thousand days, especially if you think they will have ten years in office. thank you very much. [applause] >> thanks, dean. i want to open it up to questions on what y'all think. i wanted to follow-up on what

dean asked. the issue of continuity, you know, i don't find that terribly reassuring, actually, given the last few years and especially the last year. like dean said, what we heard is just politics, south china sea, a matter of politics, and as soon as we're past the political situation, things will change. what do you think about that? do you think that on the things that we hope to see change on, that is some responsible approach to south china sea, some sort of patching up things with the japanese, will we see some change by virtue of the political season having passed in the next couple years? do you want to start? >> well, i think it's an excellent impression to give me the opportunity to, you know, say something maybe a little bit different from the two distinguished panelists.

i do see a change and also do see the challenges to overwhelming the leadership and act quickly if they do not act very quickly, they are in big trouble. now, the -- look at each generation of time, its leaders, each has different emphasis from hu jintao too the development, really an adjustments and events emphasize development, development at all costs to promote a harmonious society, pay more attention to inland regions to issues of environment and consumption and vulnerable social groups of migrant

workers, ect., but i think the most important thing is the crisis china's status faces now, the huge corruption, a reveal use of power by elites and others. i think the communist party is in jeopardy. for new leadership, they have to do something big quickly and decisive. also, in a moment, chinese economy also slowed down. this is unusual. you can't wait for another five years and the hopny moon leader for every country and period is short. in taiwan's country, second term, no hopny -- honeymoon immediately received criticism, i think he will have one for a few months, has to rely on things on the economic

front and political reform agenda to curtail, the corruption is serious to deal with, the rule of law will be respected, and he should form a new team. also, there's something in society that are new. if you look in today's china, a similar crisis, but the society act a little bit differently. chinese economy largely not disrupted. why? because there's new forces. middle class is new. entrepreneurial class is new. legal profession is new. commercial new, and since many others, reaching out for public support. i think we probably will face some very, very dramatic changes in the months and years to come. some chinese intellectuals

compensate culture change takes 60 years. economic change takes six years. political change takes six days or in a weekend. [laughter] >> i generally think that the election cycle or this election environment did have a hardening effect on the chinese leadership, but i don't think that what we can expect following this is a period of peaceful, nonconfrontational policies. i think that erupts for the following reasons. one, as i indicated, the chinese have listed maritime sovereignty disputes as a historic mission. by and large, they said it's an interest we will protect. now, what threatens those interests? by and large, i think the chinese are generally interested in keeping maritime sovereignty disputes down because by and large they want a peaceful

strategic environment in order to development. what causes the chinese to act aggressively and hostile? if you ask the chinese, they say a couple things true to that. first, certain activities by our rival claimants in the south china sea normally force us to take action. the passage of some national territorial law and rival clay manets allowing fishermen to fish in waters the chinese claim is their own. they say it's a triggering event causing us to have to react, acute in the election cycle before the selection of a party congress, but that kind of behavior and activity can continue past the party congress, and so our leadership cannot afford to look weak begin the fact their legitimacy, nationalism, ect. going on in china requires that the china looks firm on a lot of these issues, and so i do see a

continuation of hard lined policies when at certain actions or activities take place in the south china sea or east china sea, maybe the chinese will be more willing to negotiate and resolve issues peacefully when there's not a party congress coming up, but i see them willing to make use of force and use certain options, kinetic options like the use of law enforcement, vessels to control a situation and try to hurt their sovereignty claims. that's my basic view on that. i do think party politics, party congressing do have an effect, but i would not predict a very peaceful, tranquil time over the next decade by any means. >> that's terrific. everyone's here to hear you guys so i won't say many, but i think that's why the quick analysis

and selection of both sides, mostly chinese and interested party in the u.s. trying to make themselves feel better, you know, to get through this. i think we're in for a rougher time over the next several years. right in the back. >> yeah. [inaudible] >> there's a microphone right there. >> oh, hi, richard finny for radio free asia. to follow-up and continue the question of the political reform, is the new approach to politics you observe in china, persuasion, argument, is this going to create more of a space now for reform in domestic politics? >> well, i think that one can always hope for domestic reform in chinese politics, but as my colleagues will tell you, i'm probably the most pessimistic

person in the office, and i would say the following: the chinese current leadership has often talked about the need for political reform, and we see very, very little evidence of political reform on the ground, and here we have only one degree of separation from deng xiaping because he picked the cabinet. inserting political reform with a new leadership that's more divided is difficult to imagine, but as important, political reform to what end? deng xiaping supported economic reform because china needed to get its economy back on track. politics, today, with the princelings, with the appointment of so many children

to corporate positions and private sector means there's potentially economic consequences, and here, to borrow a line from an old movie, "never mess with a man's livelihood. the senior party leaders, or their children or peoples is the sort of thing that would be more of a brake than accerlant political reform. >> did you have a point? >> societal pressures, i think it's getting momentum, and we discuss earlier that i agree with my colleagues that we are going to see a collective leadership. this will be continuation that the leadership because of internal faction, you know, tensions, sometimes very

difficult to implement, you know, quickly about policy so deadlock becomes quite often. people say this is a bad system. some people ask for a strong leader. now, the strong leader, i like strong leader who gets things done, do you want that option? no. the important thing is there's something else. it's a system more democratic reach out of public, but also make the political system for transparent, more accountable, more representative. that's a scenario, and the more and more intellectuals in the discourse argue for that. now, early on, there's one thing i did not mention is social media play such an important thing. it's new. my friends in microsoft told me that within 18 months, china's

a-twitter from 0 to 18 million, and that still continues. this event we air on c-span, but very quickly, so many, thousands and thousands of people in the twitters also talk about our meeting. now, brookings host the event, and it's about the public health crisis. now, this is a very important issue. this is also become very, very sensitive about the public health security so people, with middle class, commercialized media, interpolitics, if the leaders are smart, they understand they need to change. i'm optimistic and believe the new leadership, and it's not about the democrats, but they smart and understand if they want to survive, they need to

change. >> okay. other questions? >> can i come back on the leadership and fighting -- do personalities matter at all? say in the current race in the u.s., we're looking at who would be secretary of state if obama wins, if romney wins, who would be secretary of defense? it's not -- there's factional stuff going on, but not a lot. it really matters who the people are. personnel or policy basically, is it completely off the radar screen? does it matter at all in chinese politics? >> i can talk a little bit about that. one of the things we're definitely seeing, at least the party's at least stating they are trying to make themselves more institutionalized, more bureaucratic, and that their

responsibilities shifting from a personality based system to one that's bureaucratic and more professional. at least in terms of what's being said, the argument is personality should matter less. whether or not some of you know it's nice to say those things, but whether or not that's the reality, i don't know. with respect to party guidance to the military and cay dreys, the idea that the purpose of the party is to help move into a third and national development level, and the way we're going to do this is by trying to professionalize everything and make everything institutional, that's what you get in terms -- that's what you are told. now, again, i defer to my colleagues in terms whether or not that's a reality or not. >> well, excellent question. this is why we pay so much attention to the committee standing members. they are experienced, ties, and,

of course, china is no democracy. these people do not campaign like we do, but, still, we know some of their views. well nope, loose behavior known before the crisis, and we also know some liberals are more liberal like wen jiabao and others who pay attention, and there's one-party, two factions. this is also important because you do need to have some conservatives to balance the liberal approach so society moves forward. this is our political system, and also the number of standing committee also important, not important necessarily that the faction, but currently, they talk about the propaganda czar and the other is the police czar, now, if that's the case, you really reflect the reform

agenda, and they have more power to make anywheretives -- initiatives otherwise it would be when xiaoping's power, what's the power, your limitations? that's what we have to discussion. i think every individual are important, and they tell you which faction, what he advocate, what his family wants. largely -- it's not completely in the dark. >> interesting. do you want to comment on that, dean, and before you do, just as a wrang -- wrinkle in the question, what about the ministry of the foreign affairs? do you see a change of power or who he is for just a bureaucratic thing? >> i was simply going to say that one of the interesting things about the social media aspect and the personalities is

if you think about it, chinese leaders come in when they are fairly older, late 50s or early 60s, so for this generation of leaders, in a sense, you're looking at people who grew up in the age of the telex, shows how old i am because i remember those, in a technology age. that's a different sets of speeds in terms of how you grew up and got information and how quickly and how quickly you translate that today. a chinese leader who understanding social media, operates at the speed of twitter, partial personality and partial technology, will have advantages. li could have been one of those who had that. his individual personality plays into this. with regard to the ministry of foreign affairs and the like, it's important to recall there's not been a foreign minister on

the bureau since back at the end of the 2000 -- the beginning of the 2000s so the foreign ministry has been bureaucratically neutered. whether that's true in the new party congress, in terms of the new leadership, if, for example, you actually had the person who had the foreign policy portfolio on the politburo committee, that would have tremendous impact whatever the personality. it helps if he's personable, smiles a lot, and has a good fashion sense, but whether or not that's true, that alters china's face to the world than if there is no foreign minister even on the politburo. >> well, i'll leave it there for us, thank you very much. i appreciate you guys being here and leading such a great discussion.

[applause] i'm going to invite terry miller up here to take my place, and the next panel gets started in one minute. >> thank you, all, gentlemen, that was really great. >> thank you, yeah. [inaudible conversations] [inaudible conversations]

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>> all right, let's get started with the second discussion that's going to focus on the economic issues. now, i'm going to start this off just with four general observations that i think you all quite well know, but perhaps sometimes people tend to forget. the first is that china is very large. this means that what happens in china matters for the rest of the world, and it also means that what happens in china matters for a lot of people because a lot of people live in china, and their well being is an important thing not only for the chinese government, but all of us who care about progress

and humanity. the second thing is that china has been growing very fast. the chinese economy's growing, averaging double digit growth rates for a very long period of time, and this means they must be doing something right, but this is also mean it's creating an illusion of doing something right. in fact, it could be hiding some very negative kinds of economic policies being pursued so that's, i think, a question open for debate. the third thing is that china is still relatively poor compared to western developmented seats. -- societies. china's income on a per capita basis a quite low comparted to - compared to the standards we have in the west.

that's a gap that drives chinese leadership and there's a recognition they need to do something to close that gap with the west. finally, of course, china is still very much a command and control economy, and there's been little reform over the past 30 years, and i think a key question with new leadership coming in is can we see an actual resumption of reform to liberalize the commie -- the economy and fully integrate it into the global economy. it's partially integrated now and partially integrated with large flows in some cases, but certainly not fully integrated. we assembled what i think is an extremely distinguished and diverse panel here today to discuss this issue. a senior fellow, jointly at the

peter institute for national economics and also at the center for global development. his book "eclipse: living in the shadow of china's economic dominance" published in september of 2011, and he's co-author this year of "who needs to open the capital account". he's a on the expert group with the g20 #, previously assistant director in the research department at the international monetary fund. he served with the gat, taught at u.s. harvard kennedy's school, and johns hopkins school for advanced international studies and doctorat from oxford

she's walked on qualcom asia-pacific's development team, consultant for the aspen institute, worked on foreign policy issues for the croft group. let's see, and, also, for the university of california institute on global conflict and cooperation, and she's also worked as a chinese-english translater. meanie has a ph.d. in political science from the university of california-san diego. finally, an adjunct professor at george washington university teaching a course on the chinese economy. before joining heritage in 2008, derek was at intelligence research, a global consulting firm. he has a master's degree from the university of chicago and

doctorat from stanford university. i think we'll start off with melanie. >> i want to start by thanking you for inviting me. our groups don't always agree, but this summer, we had a conversation on china, and we actually agreed on some things with china. that was fun. we have remaining disagreements as well, but further dialogue is great, and i hope politicians will do more of the same. i'm hear to talk about the economic side of chinese challenge, and the previous panel talked about the pla, and the message from that is things are going well with military modernization and the new leadership needs to keep things going. on the economy, that's not quite the case. on the economy, i characterize the feeling at beijing as present as rather severe anxiety

because china's hit by two very difficult economic forces at once. once is a short time for us, and one is a long term force. the short term force is the declining gdp throughout 2011 and 2012 as a result of some of the policies designed to cool down china's big stimulus. china responded to the global financial crisis in 2008 and dwien with -- twine with a big government package, you know, channeling money through state banks, enterprises to roll out big investment projects to keep the economy growing resulting in a stimulus hangover. they had big inflation increasing food prices and other consumer prices for citizens. the chinese government, therefore, had to tighten up monetary policy to bring it out of control and avoid a big bubble. they over corrected a bit and triggered what we see this year in the slowing gdp growth and

slowing inflation. the problem is what they are seeing now, if you look at the graph on the screen of china's gdp quarterly growth over the past few years, what they are seeing now looks like it's -- not quite a sharp trajectory of decline we saw related to the global financial crisis, but the problem is right now, they cannot use the same tools they used to pull the economy up in 2008 and 2009. that's because in addition to these short term pressures, they are facing much, much bigger problem in that bigger problem is that their economic growth model is running out of steam. china, in the last two decades, has been in a stage of growth, and many countries included that growth stage like jay -- japan and taiwan. the way it works is when there's a population unemployed and they

move those people in industrializinged modern portions of the economy, it increases rapidly, and you have the growth rates experienced for two the three decades and that other countries experienced as well. what happens is you reach a point in the development where you have a critical mass of your citizens that are no longer in that low wage, unskilled, agricultural growth cool. this is great for the chinese citizens, and the chinese citizens, respective, they are reaching the point in development where they have a growing middle class, more families send children to college and wanting to have more higher wage post college types of jobs, not cheap production jobs in factories located far from where their families are. china has a shrinking pool of labor willing to do up skilled low -- unskilled low wage jobs to export products at low rates. that means they are running out of workers at low rates, prices go up, china is a less

competitive exporter, and the only way to move forward is to change the economic model to rely more on industry that are innovative and produce higher value added products. not making the ipod cheaper than we can here in the united states, but make the next ipod, ipod's challenger, they get a bigger chunk of the rights in china, paying bigger salaries, and the middle class has good jobs. the problem is that is very, very difficult to do. that will require basically a restructuring of their entire economic system. first of all, you cannot create a level playing field for innovation unless you reduce the present state own enterprises in the chinese economy that's primarily dominated by soe. soe output was twice that in 2004. in 2011, it was 11 times.

the soe sector rather than shrinking in the age of economic reform has actually increased. that's a problem because the managers and top leaders of state owned enterprises are basically government appointees appointed by the government like a party secretary or governor, and although we have a lot of problems with the way we select ceos and the way we pay ceos in the united states, china's party system for selecting leaders is worse than ours, and i was lucky enough to attend a talk with the founder of lenovo in china, and he says the leaders just care about implementing regulations and policies from the higher level leaders. they are not focusing on disruptive types of innovations to challenge other companies in the system. they are plodding forward. they can do the innovation.

state owned enterprises can make products like the ipod cheaper looking for efficiency gains, but they are not good at breakthrough 0s china will need to keep the economy going and create higher paying jobs for a middle class. the second absolute change they haved to do is level the field for financing. currently, it's almost impossible for private sector enterprises to get financing from state banks. basically, the financing goes to the well connected state owned enterprises and the few with government connections. for those companies, they have soft budget con trapted and can get -- constrains and can get big loans, sometimes at 0% interest, because they are sometimes reimburressed, but i hear the big banks won't meet with them and the smaller banks laugh or asked for a bribe to get a loan approved. a lot of private enterprises go

into the black market for lending, and as we found out with the big crisis over the past year, lending rates are in the triple digits. they may pay 100% interest to get started. that's why we had the crisis, ceos just leaving and committing suicide. we absolutely cannot under estimate the problems facing the growth of the private enterprise sector in china, and the fact is despite those unbelievable problems, 80% of china's best innovations are from the private sector, not the soes even though they have the support. 90% of china's growth is from the private sector, not the soes even though it's so difficult on the private side. that shows how much growth they could genre rate if they level the -- generate if they level the playing field and give them opportunities. it will be difficult.

the third thing to get right is rule of law enforcement on ipr. for the past few decades, we've had this situation where the ipr conversation in china was usually a foreign enterprise versus government enterprise where they say they're copying by technology, it's a problem, and chie chinese said in public, we understand the problem, it will be fixed, but in private, they say avoid the means necessary becauses the u.s. has the lead over us. we need to catch up. when i was at qualcom documents stated to chinese companies avoid paying royalties and processes fees on foreign technology by any means possible, and behind closed doors and in documents they didn't think foreigners would read, it was a trick designedded to keep us down, and we should get around this.

this is very different today. i'm fascinatedded on visits to china to hear how strongly the chinese companies are actually pushing for stronger ipr enforcement. i heard from a chinese venture capitalist a few weeks ago in a meeting, a financier, and one of the tech companies was bragging about stealing this, you know, engineering design and using it to manufacture a product. it was the other company's design, and they didn't realize this, and the other company was, of course, not amused. this is very new situation. we have new interest groups in china pushing for ipr enforcement because as they climb up the development ladder, they stand to benefit from it. there's spending money and effort in billing up the technology champions, and now the companies have their own ipr and so governments are interested in protecting ipr. it's a very interesting and new situation. it will be very difficult to do

because reforming the chinese court system and having independent courts across the board means the courts can challenge the communism party and saying restrictions on protest on the media is unconstitutional. that's problematic for the leaders in beijing concerned about stability. what i hear about some companies is some companies encourage middle of the road solutions like, perhaps, special courts for iprs that are on a different court system. that has some companies strong to say if the government is going to be spending money on 0, they should understand that every single money spent is a complete waste because we don't own the outputs from all the inputs the chinese society is making. that was not a message i heard in china, say, eight years ago, working on technology policy in the telecom sector. from my experience, this is new,

and i find this to be a positive trend to see chinese companies pushing for the types of things that many in the west for a long time thought would be the best path forward for the chinese economy. the party leadership seems to have gotten the message. particularly, over the past summer, what i've been hears is that from hu jintao on down, there is a new understanding that the first phase of ininnovation, the understanding in beijing, the first plan focused on too much of the hardware side of innovation, throwing money at engineers trying to turn the money and expertise they have into new innovation outputs. there's an increasing realization at high levels they miss the software side of innovation, courts like