>> it's based on something referred to as a fixed market basket, sort of like look at all the stuff people are buying at a point in time and how much to those prices go up. would avoid two things you bought come you bought equal amounts, one of than doubled in price and the other one stayed the same, if one doubled and the other state the same, you would say, you at 50% increase in prices. so that's kind of what the fixed

market basket approach would say. it tells you much the prices go up on the stuff that you have bought and that you've considered buying. nothing is added in the cpi by the way for new things that come on the market. some of us are old enough to remember vcrs coming around. everyone here probably remembers when dvd players came around. lots of other things like that. when they come into the cpi, they don't boost the level of cpi. it's just a rate of change and the prices of things that are already out there. an interesting thing about the nature of new things that come in, new things, those who remember vcrs and dvd players, when they first came on the market they tend to be really expensive, and then they drop in price really fast. the cpi doesn't -- it does pick up the rapid drop in prices of stuff that comes up to be very expensive initially. new stuff is coming out all the time. and, of course, if your price

index does not reflect anything about the real increase in incomes that generally happens for workers. okay, the second one which is number three, a modified version of price. back around the mid '90s, there was a change in the cpi w. that had been available for years and years. and is used for social security automatic cost-of-living adjustment, to reflect some other things to reflect some behavioral responses, behavioral practices that people have. there are 211 different categories of goods and services that build up all the cpi's. within each one of those like for instance, one of them includes steak and hamburger, within each one of those they made an effort to try to reflect the fact that a stake goes up in price a whole lot and hamburger doesn't, people probably shift to hamburger. so in that case, imagine this world where we have to think,

one doubled in price, the other states the same, they did something called jill means. what they did is if you have two things, instead of going up i 50% price index it would go by 41%. so they assume you'll shift away from the stuff that goes up faster in price. that may or may not be true. if it turns out and goes up in price and stay dozen people mentioned all that much to state. but nonetheless this is the adjustment that was put in for each of these little 211 an admitted difference we estimate about two-tenths slower rate of growth in the cpi as a result of making those adjustments back in the mid 1990s. those affected all of the cpi's and the affect the way we are active in cost-of-living adjustment. another one, i hope we're doing okay on time here, another one which is further modifications

for behavior that could be considered, and this is across those 211 broad strata, we could start taking into account possible you people could shift between -- not hamburger and state. this is like cars and flatscreen tvs. if cars double in price all of a sudden and flatscreen tvs do, some may say we're going to buy more flatscreen tvs and maybe not by a car that you. people have different abilities to shift across the broad categories which are not so much substitute, they're just different stuff. for people to adjust what they find some people adjust more than others. this again really reflects the ability of people to shift across these broad categories to make adjustments, and i would suggest not so much substitution just were in reaction. we estimate, this by the way, this is the chained cpi that we refer to.

it's done only for the cpi view at this point, not for the w. anything is possible. we estimate this would slow the growth further in the way the growth and measure prices by an three-tenths of 1% going forward. we have a fourth option year which is price increases for the old account and there is a so-called expand on cpie that is out there. it puts greater weight on health expenditures, greater weight on housing expenditures which is where the elderly spend more money than apportionment other folks. we estimate that this would historically resulted in a faster rate of growth in the cpi if one were to look at this and use this for increases in federal benefits. one of the argument against using cpi and calling it experimental is that the elderly age 60 and over have been a relatively small sample portion of the overall sample that the

bls uses. back in 2006 it is true the cpi w. represent about 37% of the overall sample of all urban. it was kind of like -- but how about the 2020 we estimate the weights will be about the same. so the suggestion that is really not, it's not really appropriate to use the cpi-e because of low example weight we think is probably not have serious consideration anymore. such as kind of reviewing these, really this is a matter of option to which five and 35 people in this building consider all the time. we could've standard of living increases, both across generations and even potential to after people start receiving benefit, which are key beneficiaries of all types up with a standard of living of people enjoyed in our economy. we tend not to do that.

the modified price increases we have now which is too tense of a percentage point slower on average per year, that's where we are now, then a third one to have are the modifications to reflect the ways people can shift what they bought over time, another three-tenths slower. finally, the price index for the elderly we have about two-tenths faster than the current modified and it puts us back about the same the growth in prices we would estimate as the cpi that we had back on automatic adjustments first went into place. let me to show you a little graph. this is in nominal dollars of what, over time from age 62, considering your retiring, what the benefits would look like under these different flavors of approach. the blue one at the highest is what we would have if we went to a real standard of living adjustment, and standard of living, cost-of-living, take a pic on which word you want to use. you would end up by age 82, 20

years from starting benefit, about 24% higher benefit level than our current cpi cola shows the improved to go to the cpi for the elderly or go back to the old. price index you would end up with about 4% higher levels but if we go to chained cpi, you end up with about 6% lower than our current cpi would be. showing and percentage changes from what is being offered under the current, you can just see how the 24% higher versus 6% lower and all the other possibilities. i guess i would just conclude by saying that really this is a choice that has to be made about what kind of measure it is that we want to affix benefit changes to overtime, should it be the standard of living that people are operating on so the people as they get older and older once they start receiving benefits would be able to buy the same kind of stuff that workers are able to buy overtime? should be a pure price index which is reflects the changes in prices that folks are presented

with, or should be an adjusted or a double the adjusted version of a price index which takes into account the fact that people can change their behavior and move towards lower price or lower in fleeting riced items as time goes by? it's a choice, and i will step down now, i think we're going to have lots of thoughts about people's beliefs about where we should be going. thanks again, gary. [applause] >> so, i'm going to focus in particular on the implications of the chained cpi for social security retirement benefits, that's a topic i've done a little bit of research on come on myself so that's going to be the focus of my presentation.

so i'm going to start by saying i think we're all aware that social security is an unsustainable path. so in the near future we're going to need to make adjustments, it is level of promised benefits or to the level of payroll taxes. the idea behind switching to the chained cpi is it will reduce promised benefits, and it's really does help us get to that goal. the question is is this a good way to a college that goal? when we think about slowing the growth of benefits, i think it's important for us to focus not just on the level of benefits but on their structure. so the key russian here is given a level of lifetime benefits, what's the best way to pay that out over a person's retirement. now, what are the key features of social security, it provides a real annuity, and inflation indexed life annuity. that is, and if it's okay for life and they are adjusted for inflation. that's pretty rare in a private market. so it's a valuable thing for most people.

it protection not just against outliving your savings but also against inflation. if we think that social security should be paid as a real annuity, one question we have to think about is how do we index benefits for inflation. that is, what is the appropriate cost-of-living measure. there are a couple of different options. there is the cpi-w which is currently, which is currently used to index social security benefits. to chained cpi, chained cpi you is an alternative. a third alternative would be experimental cpi-e. so the cpi-w reflects the purchasing habits of a broad group of workers. so i think it's about one-third of the u.s. population. and as we heard it does have some shortcomings. it does not adequately account for substitution between goods that consumers might willing to make, so the price of one good goes up, that might be mitigated by the fact that you can switch

to a different good as the price of cars go up, you can switch to flat screen tvs and that might help offset the impact of the increase in car prices. that's a legitimate criticism of the cpi-w. and the chained cpi does tend overcome that but another criticism of the cpi-w is specifically with respect to indexing social security benefits, is that it doesn't reflect his spending habits of older people. in particular, older people spend a larger fraction of their income on health care. but if we look at experiment of cpi, the cpi-e, that is based on the spending pattern of older americans. it's not chain weighted so does not adequately pick -- take substitution into account. it's based on sort of a smaller sample. it does rise faster than the cpi-w, mostly because health care rises, health care costs rise faster than other prices.

and older people tend to spend more on health care. so the key question here i think is, if we want social security benefits to rise with cost-of-living, in other words, if you want social security to be paid as a real annuity, what is the best measure of inflation? i want to emphasize that this is a separate question from the initial level of benefits, or the total value of benefits over a person's lifetime. now, i have done a little bit of work on this question, together with my co-authors, john and -- at stanford university. so together we done work on the appropriate cost-of-living measure for social security. we hav have a paper that was published in the june 2011 national tax journal that looks at the cpi-w and the cpi-e out alternative measures of cost-of-living for social security retirement benefits. what we do in this paper is we begin by estimating the pattern

of out of pocket health care spending for older men and women. in order to do this we used data from the health and retirement study which is an ongoing survey of a representative sample of older americans. what we find is as you might expect, out of pocket spending rises with age. and at any given age, out of pocket health care spending rises over time. so for a few difficult horse we perform the following calculation that we compute the pattern over the retirement of their social security benefit net of health care spending. in other words, take their social security benefit at every age in the retirement and subtract out of pocket health care spending, and we say that's what they have less to spend on, everything else besides healthy. so when doing this calculation we are assuming these individuals have no other source of retirement income other than social security. so really the calculation that we've done in the paper applied

to the one-third or so of beneficiaries rely on social security 490% or more other retirement income. arguably this is the group we do want to be most concerned about. so we took what's left of the social security benefit after health care spending, we look at the pattern over the retirement, and we compare that to the nonhealth component of the cpi-e. so that comparison, what that tells us is how well has the purchasing power of their nonhealth spending held up over their retirement. the bottom line is it has not held up very well. so one example, we find that for people born in 1980, the purchasing power of nonhealth spending grows at a slower rate than the nonhealth component of the cpi-e. by age 89, purchasing power falls short of that measure by about 20% for men at about 27%

for women. it's larger forum because women tend to have out of pocket health cost the rise faster particularly at older ages. we get similar results for other cohorts and for different racial and ethnic groups. we find that for the indexing to the cpi-e, even that doesn't fully protect nonhealth to purchasing power. and that's because as a person ages, health care spending grows in addition to the general rise in health care costs over time that a 75 year old is likely to spend more, larger fraction of the income on health care compared to a 65 year old. to see this visually, the solid black line on this graph shows you the actual average social security benefit. that's phenomenal terms, for men born in 1918, and it shows you for ages 65-89. the solid gray line on this graph, the lowest line, is

social security benefit minus out of pocket health care spending. the dashed gray line, the line right above that, is what the cohorts of what the cohorts not health care spending would need to look like in order to maintain nonhealth your purchasing power. as you can the actual that the filter spending falls short of that amount. that grows over the retirement. the dashed black line for comparison is what social security benefits would look like for this cohort over their retirement if they're indexed to the cpi-e instead of the cpi-w. the next graph shows the same comparison for women born in 1918, so these women are aged 89 in december 2007 which is when we did the calculation. so again, actual net of health

care spending falls short of what it would need to be in order to maintain nonhealth care purchasing power, and that difference as mentioned earlier is greater for women at the older ages compared to men. now, a couple of important caveats to this analysis. as we discussed, neither the cpi-w know the cpi-e is chain weighted to both of them do overstay cost-of-living increases for their respective populations. they don't adequately account for substitution. also, need other adequate account for quality improvement which can be a big deal in health care. support of what's driving increasing health care costs is improvement in technology. now, in my view the ideal cost-of-living measure for older americans would be some version of a change of cpi-e. that doesn't exist. in order to tightly that it would be possible to catch a community to go back look at the

kinds of substitutions that older americans make coming need to go to the data for the. a change of cpi-e with grow slower than the cpi-e but it would definitely grow faster than the chained cpi-u because it's going to give a higher rate to the health care. it's not clear to me, it's about is what it would go faster than the cpi-w norton know that we would need to calculate it. so the bottom line here is that switching to chained cpi-e in my view does not necessarily improve the accuracy of cost-of-living adjustments in social security. if we want to keep purchasing power relatively constant over a person's lifetime, in other words, if you want social security to be a true real annuity, then it's probably not a great idea to make that switch. my colleague at aei has even made the point that we made want to purchasing our associates to

to benefits to grow over a person's retirement because that might encourage longer careers. the early in the retirement you my work part-time to supplement your social security benefit and then when you're not able, when you know longer able to do that at older ages, you get sort of higher increasing levels of benefits in real terms. now, we do need to make some adjustments to benefits. we know that the program is unsustainable, but in my mind that a separate question from how benefits should grow over a retiree's lifetime. more generally i think in reforming social security and other entitlements we need to pay attention to the structure of benefits, ask ourselves what is the purpose of these programs, what do we want them to accomplish, and make sure we are doing that rather than just focusing on the level, leve thel of benefits. thanks. [applause]

>> thank you for coming but i appreciate the chance, a chance to talk on this and it looks like a very important and timely issue sense when read the papers are here the news were constantly hearing that the administration and congress is supposed to come for -- of this uncertainty on this. so we are on topic. i want to hit for main point. first off, current seniors are not affluent on how often i see the papers, affluent seniors, i'll make a point, at least are not a lot of them and pete peterson is doing well, but not a lot of pete peterson's. secondly, the situation for near retirees, this idea that people coming down the road, baby boomers like they're going to be real wealthy. the data doesn't support that. third, the evidence on the cpi, and we forward your to good account on this but want to say more about the evidence on the cpi and cost-of-living of

seniors is very mixed. the idea that somehow we're overstating the thing i do think about that very carefully. we've heard to good presentations on the. i want to get in a few more things. the last thing is that this is a big hit. one of the things i found frustrating in washington is the idea that okay, no big deal, we'll do this and no one will notice. the reality is we are talking a real money. first off in terms of the affluence of current retirees, again you heard allusions to the to close to 40% of seniors rely on social security 490% or more of their income. this is an average muslim benefit just over 1200 a month. so we know -- this is not an affluent group on the whole. 70% or bit shy of 70% rely on for more than half of their income. social security is very, very large chunk of the income of most retirees. third point is if we look at the group as a whole, stepping back, meeting in person income for people over 65 is 20,000, a lot

of single people, widows, people living alone, and when you get older i get, points to be made early, people tend to get poor as they get older so the meeting for people over 75 was 17,600. this is a very, very important point in the context of the chained cpi because again the impact of that, you could argue that price indices, what the true price index should be. what we can argue is the impact increases over time to quit giving the biggest hit to people or '70s, '80s, '90s. it becomes very, very hard. a lot of people are looking to save a lot of money are exactly those people. i think we'll get into this but again you run into this story that isn't going to immigrate with a different group of people you'll end up not saving very much money and ends up with some very, very complicated stories. what do we think is the to price

index and if we're shuffling this around? we will come back to the. the next point, our people about to be better off, what i show you is come i just like to show the impact of the housing crash. that's what i still 2004. this is income for near retirees. wealth of near retirees, people 55-64. some of them are already retired but in any case likely to be retired soon. the median for this group is about 170,000. important point, this includes housing. i got a lot of people go, these people paid off their home, that's fine. that's all they have. this is including the equity in their home at in their home. the median house price is currently about 180,000. what we could say is that the median person in this age group, 55-64, to take everything they own, the equity in home, sell the car, take whatever they have in 401(k)s or savings

accounts, take that all, use that to pay off the mortgage and then they have zero. they have a homepage also don't have to pay their mortgage but everything until the phone is there social security. so this is near retirees. 55-64, doesn't look terribly promising. the younger group, 45-54, not a lot better. the median income -- or medium well for this group is at 70, 75,000. they could basically pay off about 40% of their home. these people are so working for the most part. do have an opportunity to achieve additional assets. it's hard to tell the story that particularly know what the economy economy looks like now and knowing, see what rapid wage growth. so we are looking at a situation where the people we can see retiring for the near future look like they're not going to have a lot of money. i do want to remind, i don't

talk about defined benefit pension. we know it is disappearing rapidly. that many people in these age groups are going to see defined benefit pension plans. so this does include the find benefit pension but that's not like this is a factor for these people. now a little bit about the cpi and again some of this has been touched on. the elderly index as window shows a high rate of inflation due to health care in housing, it's important to keep in mind that the health care component is measuring the increased in the same set of health care services. so if people are getting more services through time and one reason they get more services through times of older people need more services in general. that's going to be an additional cost. that's not picked up even in the elderly cpi. that's an important point. so for that reason alone we're not picking up on my think of as their cost-of-living. second thing is that talk about substitution, it's not clear, look at the higher level

substitution, teeple document clean strata the twin a flat screen and the car. it's not clear that that applies for the elderly. so we are two issues. one is how good is the current index, we go to the chained cpi and it might become even less good because we can't assume the same sort of substitution. bureau of labor statistics did an analysis some years back, they weren't looking specifically at seniors, they're looking people on tanf, ssi, other programs and defend the substitution effect for this group was basically zero. there was an old study, about 15 years old now, things may have changed. we can't assume seniors are just like these groups but the point is we can't assume they are not. it's a very big assumption to just say senior substitute the same as everyone else. the other point i wanted to make in a realized i have a typo, i'm going to keep our g. rating. that's lower level substitution. we already have lower level substitution in the index.

we cannot assume that that's necessary going to be the same for everyone, particular the same for seniors but let me give you a couple of examples. reasons unrelated to this, i don't particularly to this on we can but habitability of some of the strata over the weekend. some of the strata you find sugar and artificial sweeteners. one of the other strata is margarine and butter. think about that for a second. suppose that the price of margarine goes a. do we think a lot of seniors with heart problems will switch to butter? if the price of artificial sweeteners go up are the going to switch to sugar if they have diabetes? i don't know how big a problem that is anything the point i would make about this is i don't think anyone knows how big a problem that is. the current analysis assumed they make the switch's. if we really want to be accurate we could have bureau of labor statistics monitor the consumption pattern of seniors. people shop at wal-mart, they shop at a big star, shop at a

big star, price of one good goes up, you go to the next goodie. fair enough. what if you don't typically shop at a big star? you have less opportunities. is that two of seniors? it could be, i don't know, i haven't studied this. this sort of thing if we wanted to bureau of labor statistics to do a full index they we do and would have better information on that because we might be already assuming a greater level of substitution that is actually there. a third point, steve raised this issue of new goods. very, very important point to new goods at very rapid in price. model here always use the cell phone. they didn't include the cell phone in the cpi, but it 1997. bureau of labor statistics has done a very good job, it was a rare mistake. but it was a mistake, a big mistake. but the cell phone had plummeted in price of people saying cpi overstates inflation. hey, you missed the. you missed this big price in --

this big drop in price. flat screen tvs, and they plummet in price. to seniors by these things at the same rate as everyone else? and we could get the answer to that. so if we want to say, if want to pretend we are very knowledgeable and say we know it overstates the rate of inflation, you better know the answer to that. i don't know and i don't know anyone who does know. my guess is that they don't buy those goods. they don't buy new goods that just came out with their very expensive, which means it understates the rate of inflation because we have included these big price declines that they don't actually see. so my point here is if we want, if our concern is accuracy, if we're saying we want to index that follows the cost-of-living of seniors, we could do that by constructing a full elderly index. it could be a chaine change in y index but we don't have information we need to say that now. we no chained cpi is a cut, that's indisputable. it will give lower benefit --

shouldn't use the word term. it will give lower, whether it's more accurate or not we don't have the information to answer that question. .. >> and i realize i'm not powerful enough to pick that adjective, but what i can say is that something that is, something that is bigger than something that's big has to also be big. that i feel comfortable saying. [laughter] now, we had a really, really big fight over raising taxes on the

wealthy which you could say president obama won, lost, whatever you want to say, but everyone thought that was a big deal. so if you say how much did we raise the taxes for i picked someone earning over, someone earning 500,000, a couple earning over 500,000, that would be a hit of about six-tenths of their income. we were told that was a big deal. that was supposed to be a really big deal. okay. this is about three times as much, because for a typical senior, we're going to be cutting their postretirement income by about 2%. so if we think the tax deal was a big deal, we have no choice, but we also have to think switching to a chain cbi is a big deal. it's three times as large for the person affected. okay, so just to sum up, again, the affluent seniors, i always want to say who are you talking about, definition of 450,000 for a couple is affluent, not a lot

of seniors up there. again, if we want accuracy, if our issue is we're really troubled we don't have an accurate index, we could have bureau of labor statistics conduct a cpi. and, again, what i call big or small, there's more at stake for seniors than was at stake for the wealthy with the tax increases put into effect two months ago. thank you. [applause] >> which one do i hit? that one? so thank you so much to aarp for having us here today, and more importantly thank you to aaarp for having water bottles for out. they took them at the door, and i was really concerned we weren't going to be able to make marco rubio jokes. i'm an attorney at community

legal services, and i'm also a policy advocate on disability issues here in washington. and i wanted to speak today, um, about something a little bit different than what a lot of my other fellow panelists are speaking about. we're hearing a lot about seniors, and i think that one of the pieces of this conversation that often gets lost is people with disabilities. and the reason that that's significant, um, as my slides will discuss in detail, is because there are other social security programs besides social security retirement benefits, and that's what i think is sort of getting not discussed if a lot of the media attention and a lot of wonderful forums about this potential policy change. um, so briefly i'm just going to discuss what are social security disability went fits -- benefits, what are ssi benefits, who gets them and kind of explain why that's a significant part of the conversation or should be. um, so here's just a brief

snapshot of ssdi, social security disability insurance. ssdi is a program also under social security, but that provides a modest monthly benefit to people with disabilities, specifically people with severe disabilities and health conditions who have worked enough quarters to be covered by the disability program. i'm not going to get into details about what that means. but who is it? it's almost nine million workers with disabilities and severe conditions. the average age of people who get the been fit is about 53 -- benefit is about 53, and the vast majority are over 50. the amount they get in went -- benefits is paced how much they worked -- based on how much they worked. why it makes it relevant in a discussion about the chain cpi. now, the average benefit that social security disability insurance beneficiaries get is about $1100 a month, and i'm going to put that into

perspective a few slides later. and it also comes with medicare can after a two-year wait period which is significant for these people. so my next slide is just a snapshot of ssi which is supplemental security income. that that's a separate program also for people with disabilities, and the main distinction is it's for people who are not covered by ssdi, and it's for people who haven't worked enough in order to get a been fit through ssdi. we're talking about people with severe disabilities. ssi is also a program for people who are 65 and up but who don't have enough quarters in order to get social security retirement benefits, so there is some overlap here as folks are talking about seniors who are low income. now, there are about 8.3 million beneficiaries in the u.s., about 4.8 million of them are adults ages 18-64 which is, i think, an important point because we're

not just talking about the elderly here, we're talking about people with disabilities who are nonelderly as well. it is 2.1 million seniors as defined by 65 and up. it's also 1.3 million children who have severe disability, and i think that gets neglected as well. i'm going to come back to concurrent beneficiaries because that's around important point to make. now, ssi benefit, the amount you get is based on the federal rate. the maximum benefit you can get is $710 per month for 2013. if you're part of an ssi couple, the benefit is reduced, it's a couple rate at 1066 per month. but most beneficiaries actually get less than that, so the average benefit per month is just $520. and we'll kind of put into perspective exactly how little that is to get by on each month. in order to get ssi, you also have to be not only disabled, but you have to be really, really poor.

you have to have very, very limited income. not just you, but your household. and you also have to have very little in assets, and the asset limit is just $2,000 for a single person and notably, that hasn't been adjusted for inflation or raised since 1989. the federal benefit rate that i mentioned is adjusted using the social security cola, same as social security disability insurance, so that's what makes ssi relevant in a conversation about the chain cpi. and ssi recipients are typically in most states eligible for medicaid. so without going into a long discussion of why we have these programs, it's similar to the purpose of social security retirement benefits. it's about, it's about security for people who aren't able to work and to support themselves. so the purposes are really about reduction of poverty for seniors and also for people with disabilities. prevention of homelessness, also to prevent and reduce institutionalization. these are critical programs for enb abling people to live in the community and to stay in their

homes as opposed to having to be in institutions to receive their care. it's about helping people maintain their health and, very important, helping people access essential, basic needs of life; housing, shelter, food, etc. and the last bullet also describes, i think, um, kind of the role of the family in caring for people with disabilities which is often what the benefit is really critical for. it's for the whole family caring for that person so that they can stay at home. so or who are the people who get these benefits? well, i said that they have severe impairments and medical conditions, but what does that really mean? i won't read this slide to you, but this is kind of a long list of very severe conditions, and these are just a few of the ones people who receive benefits often have. an important point is many of them actually die within the first few years of receiving benefits, and that is something of a stark illustration of how significant the disability standard is.

most people who apply for benefits are denied. and many report worsening health, so they're not only sick, but they are actually getting worse over time. now, as dean noted for seniors, the same is true and actually even more true for people with, who receive disability benefits, that their benefit actually comprises all or most of their income. and this is significant, i think, especially given that we're talking about cuts that might sound minor, but when it's your only money that you have to buy everything you possibly need in the world, it makes any reduction in your income actually more impactful on your life. so ssdi is over 90% of income for nearly half of noninstitutionalized beneficiaries. it's the majority of income for over 70% of noninstitutionalized ssdi beneficiaries and 13% of ssdi beneficiaries also get ssi because their benefit and their

assets are so low. this is the note on concurrent beneficiaries that i wanted to make sure not to miss. there are about 2.1 million americans who receive both a very modest ssdi benefit and a very small ssi benefit, and the reason that they get both is because their ssdi or social security retirement benefit is so low that it's actually below the ssi federal benefit rate, so they receive a little bit of ssi to bring them up. but it sort of reflects how many folks are actually incredibly low income. and the majority of ssi went fisheries -- beneficiaries have no source of financial at all. so this next slide, i think, should come as no surprise given that i've just stated how many beneficiaries receive benefits as majority or, actually, entirety of their income. and when the benefit levels are actually so modest, um, as $520 per month on average for ssi beneficiaries, $1100 for ssdi

beneficiaries, if that's all you've got, compare that to the federal poverty level, and it should be no surprise how many ssi resip cents -- virtually all of them -- are actually below the federal poverty level. and the majority of di recipients are twice below the level which is the preventional standard for being low income. so these folks are actually really struggling as it is. um, and another, i think, useful comparison point is the minimum wage, um, which is higher hand the annualized benefit for both of these programs. i don't have any points about how market rent compares, but there's research that shows average market rent virtually everywhere in this country exceeds the federal government rate, so it puts into perspective how little money we're actually talking about. a lot of people call the chain cpi a technical change, and i would argue that for people or

few whom this is their sole or majority source of income, it is significantly more than a technical change. it is a huge cut in your household income. i'm not going to read this slide, but it shows you the annualized benefit cut that folks will incur, ssdi men fishes will incur based on how much they're getting. the lower portion shows an ssdi beneficiaries, but it's significant cuts after time. and it's, i think it's an important note that many people who receive ssi and ssdi start getting benefits at younger ages than the retirement age, so they have longer to receive the benefit during which period they're going to see those benefit cuts really build up. here's the equivalent slide for ssi beneficiaries. but i think an important note on ssi beneficiaries is that they really face a two-part benefit cut. it isn't just the slower colas while they're actually receiving went fits, it's also --

benefits, it's also that before they even start to get benefits, the federal benefit rate is going to grow more slowly, and what that means is the benefit they get by the time they actually qualify based on age or disability is already going to have been reduced in terms of purchasing power. so it's really a two-part benefit cut for s, i been fisheries which i'm sure we can get into more during questions. so in every real -- [inaudible] the switch for ssi beneficiaries would actually be eroding the value of what is already a subpoverty level sub since for people, even those who receive the full benefit. so is the chain cpi more accurate? i think dean raised a lot of really good questions. i think we don't know. we don't have a lot of good information here. but what i would like to put forth is just a little bit of common sense. what is it like to be living on $520 a month? and is there really any room for

substitution there? i think that the best example of why the chain cpi makes sense to a lot of economists i've heard is, well, if the price of a mercedes goes up, people will just buy an audi. that doesn't work for my clients or people who are receiving ssi and ssdi in most cases. they're not driving mercedes, they're not also driving audis, i can tell you that much. the orr comparison i've heard is if price of beef goes up, you can't say the people will buy chicken, you have to say in the same strata, so it would be hamburger. but suffice to say, if you can't afford to have meat in your diet, that's not a substitution you can make either. so the substitution effect that you're really going to seen when it comes to someone who has $520 a month or even the full ssi at $710 a month is scrimping on one basic living expense to cover the other. a tragically common thing that i see with my clients all the time

is that they become incredibly proficient in how to manage a household budget so that you don't end up with any utility shutoffs. you skip your gas bill this month so you can pay your electric. hen you pay your gas bill this month, but you don't pay your electric. you won't get either shut off because you have to have not paid for 60 full days, and that's the kind of substitution you're seeing. it's skipping a meal or taking half a pill instead of a whole pill that's been prescribed. that's the kind of substitution going on when 520 is what you have to live on. so i think that needs to not be neglected. i think the other ting that's important is what that breaks down to on a daily and weekly basis. i did a little bit of math. it's actually the first time i did this. this isn't comparing to looking at strata on weekends, but i did some light math, and i found

that $520 per month breaks down to $130 a month and $17.33 a day. now, if you took a cab here to this event and you spent ten bucks, that's almost all of an ssi beneficiary's daily budget. if you bought a $5 grande latte from starbucks, that was a third of the ssi budget. it's literally pocket change to a lot of us, and that's what these folks are living on. so just two stories that i think, um, put a face on this, and then i'll be done with my limited time which i may well have exceeded. but 450ers, here's ruth. she's 83. she worked full-time until she came down with lung cancer, had that diagnose noticed and stopped working. she went through her savings before she applied for social security disability, and she's now flipped into receiving social security, um, retime benefits. she gets $878 a month which makes her pretty well off when

it comes to a lot of these folks. but you can see pretty quickly even with food stamps, every dollar of her income gets eaten up very, very quickly, and i don't even have a column in there for miscellaneous items like toothpaste and deodorant. every dollar counts to ruth. another example, um, is dana, and she's 40, so she's one of these younger folks who has a disability but who receives ssi benefits. and she also gets food stamps as well like ruth. um, she's only at three-fourths of the federal poverty level even getting the full ssi benefit. pennsylvania being especiallygenerous gives you an extra $22. note my sarcasm. she has less than $2,000 in savings because you have to if you want to be el i didn't believe for ssi benefits, so she's not nothing to fall back on in case of a crisis. we're pushing her to today that, and we're pushing her even farther into poverty, and i

think that's pretty clear just looking at these numbers. so that's all i've go. -- i've got. [applause] >> well, good morning. n i'm tom tarantino, i am the chief policy officer for iraq and afghanistan veterans of america. you know, i wanted to start out by thanking my fellow panelists for explaining this issue and for kind of breaking it down for all of us because, frankly, this is really complicated stuff. and you'll or forgive my lack of powerpoint. i'm actually a soldier and not a lawyer or an analyst or anything. i'm used to doing my presentations with chalk on the side of a tank. i apparently have neither despite my questions. [laughter] so you'll just have to bear with me. you know, this is, this is really complicated stuff, and

it's very confusing stuff. cpie, cpiw, it makes my teeth hurt just thinking about it, right? [laughter] and i do this for a living, and it's taken me a couple of months as i've looked into this issue. and the point is, is that it's complicatedded, and that's the reason they're looking to cut it. because dean said it, he said no one will notice the difference. no one will notice. why? because it's impossible to explain simply. the average american isn't going to pay attention this much because this stuff is really complicated. you know, i tell my staff when they're explaining complicated policy issues, pretend you're at a bar, and you're trying to chat someone up. explain what you do in 30 seconds. it's nearly impossible. so i'm just going to simplify this entire thing for you. you're talking about cutting benefits, and you're talking about cutting benefits for the people who have sacrificed the most for this country. if you are promoting a chain

cpi, you are telling veterans that their service is not valuable. that's what you're telling them. so let's strip away all the stuff that doesn't matter and understand what we are telling to the men and women who are sacrificed blood, if many cases their limbs and in many cases their health for this country. um, it is an unconscionable thing to try to think. but you know what? we come up with a lot of creative ways to cut veterans' benefit, and because this is so complicated, they think no one will notice until it's too late. that outrages me. i find it unacceptable. my friends find it unacceptable. and you should too. because over the last 12 years less than 1% of this country has fought in iraq and afghanistan. less than 1% of the families in this country have sacrificed the most over the last 12 years, and now we're telling them, well,

guess what? you're going to take another hit. and this isn't theoretical stuff, okay? this is real. so let's talk about, let's talk about how this works. there are 3.4 million veterans receiving va disability in this country right now. a chain cpi would cut those benefits. 100% disabled vet that end listed now will get $33 -- i'm sorry, never mind about that. you see, this is what i'm saying. i'm reading all these stats that i'm getting. my colleagues have given me all this stuff, and it is confusing. but the bottom line is that you're talking about cutting benefits to 3.4 million veterans, and these are veterans who today already wait nearly 300 days just to get the benefits. so you're telling them lean -- we're going to stick you in an unmanageable system to get benefits, and then when you get 'em, we're going to cut 'em. that's what we're telling people. and it's not just disabled vets, because guess what?

this is a double hit. there are nine million veterans right now receiving social security, and 93% of those are older than 62. so you're saying we're going to cut your benefits. thank you for your service, we're going to cut your benefits. and, oh, by the way, recruiting a tired and all you have are your veterans benefits, maybe your veterans pension and social security, we're going to cut all three of those at once. that's what we're talking about here. that is why we're so outraged. that's why every single veterans' group in this country is outraged that this is even on the table. there's no political thing. it's not a partisan thing. the fact that this is even a topic of discussion is breaking the promise that we made to these men and women who served their country. you know, it's difficult looking at the way our country cares for its veterans and trying to stomach this. most people don't understand that the fight for care and services in this country is

ongoing. it's been going since after world war i, and it hasn't stopped. frankly, it's gotten a hitting bit better, but it's still no where near what we need it to be. the unemployment rate for iraq and afghanistan veterans is typically two points higher. most people don't know that. the suicide rate is astronomically high. we lost more people last year in the military to suicide than we did to combat. most people don't know that. in the time we've sat here talking about this, one veteran has committed suicide. every 65 minutes in this country. most of them are actually elderly veterans who are getting these benefits that we're talking about cutting. the va has a backlog for these benefits that is unbelievable. i don't know if anybody saw it today, but in the daily beast aaron glance from the center of investigative reporting put out a whole, an investigative report on the state of the va backlog. it's actually much worse than we

thought it was. we say that veterans of iraq and afghanistan on average are waiting 300 days for benefits, in most urban areas it's actually closer to 600. so we are nowhere near where we need to be to care for the men and women who have been sacrificing over the last 12 years. and so i can't believe that this is even on the talk about. i cannot believe that we are even talking about this. because what we're seeing, what veterans are seeing is that the goth is failing them every single day -- the government is failing them every single day. every single day the care and services for our veterans, we're failing. and so to say, you know what? times are tough so we all have to sacrifice a little bit, so now we're going to cut your benefits, it's a punch in the face, and it's not acceptable. and you know what? tell me about it, times are tough. tell that to the guy who's done three tours in afghanistan, who can't get a mental health appointment at the va within 50

days. tell that to the families who have lost members, veterans to suicide. times are tough. you can't keep going back to the same well. you can't keep pulling water out of that same well. ors you're just going to have people stop serving in the military. you're going to have a national outrage, and i think this is something that we cannot accept. pause this is what we're really -- because this is what we're really talking about. you cut through the math, what we're talking about is betraying the faith that we keep with our men and women who defend our country. and that's really all that needs to be said about it. so thank you for your time and attention. i thank aarp for bringing us here today. i hope that you go back to your bosses and you talk about this in as simple terms as possible and that this is just something that we cannot accept as a country. thank you. [applause] >> as you can hear, there's a

lot of passion about this issue. um, i want to congratulate the panel because i kept on a very tight schedule, and i had us wrapping up at 11:10. as you can see, we're a few minutes before 11:10, so great job. and that leaves plenty of time for questions. i do -- we have some mics in the back, so i ask that you raise your hand. if yo i do -- if you do ask a question, i ask that you give us your name and organization. so if you have questions, just raise your hand, but i'll go ahead and kick things off. one thing i mentioned earlier and i think rebecca might have mentioned as well is that this not only affects the cost of living adjustments for federal benefits, but it would also apply to the poverty threshold, the poverty guidelines. and it strikes me as, um, we already know that the current, um, official poverty measure is woefully outdated and has a lot of issues with it. i'd like to just get the panel's reaction to applying this also

to the threshold. dean or rebecca? >> well, i'll just start quickly. you know, if you apply this to social security, presumably, you would apply it across the board. i know some people, bob greenspan in particular, he was saying under some circumstances it might be a reasonable thing to do, but he wanted to carve out ssi and other things. that becomes a very, very hard story to tell because most importantly we have all these programs tied to the poverty index, so the question is do we say, no, this isn't the right measure for poverty, and if we don't do that, well, then that index is going to rise less rapidly. the point is, people who today we would think of as poverty we will not be thinking of as in poverty 10, 20 years out because it won't be rising as rapidly. >> this is a point that's really important to make. i, in limited time, didn't have whole slides i could go into, but what you should have noticed from the two slides of ruth andday ma that i put up is that

they both also receive food stamps, and dana receives in-home, community-based services to help her with her activities of daily living, and that's through a medicaid waiver, part of which is based on where she falls under the federal poverty level or in terms of it. so it's an important point to make. but i think also the other point that is sort of buried in dean's comment is there's been a lot of discussion of, well, maybe we can protect certain categories of people and then the chain cpi will work. it's more accurate for some people than for others maybe, and we want to protect ssi beneficiaries, or we want to protect poor people. part of what i really was hoping to do with my presentation this morning was to show that it's not just ssi beneficiaries, it's also di beneficiaries, and it's low income social security beneficiaries. and be you start to carve out all of those groups that really would be adversely impacted in a big way by this switch, you've sort of eaten up the whole policy, and i'm not really sure what's left. that's sort of an important

point to take in. >> i see a couple of hands. >> hi, i'm lori montgomery with "the washington post." i'm wondering if any of you all know exactly what the proposal that the president has put on the table, because my understanding is veterans and ssi and poor people wouldn't be affected, and there'd be an adjustment at age 85. i mean, could you talk about what the actual proposals on the table are and why they would, you know, why they are not, you know, don't provide sufficient protections for the people you're talking about? >> i don't think anybody's talking about applying it to veterans' benefits, for example. >> i mean, i would just say, i mean, i haven't gotten a call from the white house to even can ask about it, and i think this has been -- >> [inaudible] >> yeah. well, i don't know if i am or not. and this is another big problem is that, you know, there's a lack of outreach, and this is just a general -- there's a general lack of outreach to the community about this. i mean, the va has been talking

about fixing the backlog. it's been talking about modernizing. it's been talking about doing all this stuff to benefits, but it's, you know, they largely don't talk to anybody about it. and so i don't know if there's a plan to save veterans' benefits. but if, you know, when you're talking about the majority of veterans being, you know, in retirement age, um, you know, one carveout isn't really going to fix the problem. you have to be incredibly come e e -- comprehensive. so why pull out a graphing calculator when all you need is a simple one? why make this more complicated than it news to be when really what you're talking about is how much savings are you talking about? and if you're just making a political statement, then don't do it on the backs of veterans and seniors. it's, i mean, i just can't even believe that this is, we're even still talking about this. >> there's a couple points. obviously, they've gone back and forth different proposals. we've heard bowles and simpson

had proposed a bump up at age 80, i've also heard 85. obviously, those who don't make it to 80 or 85, they're not helped and, obviously, there's a very long list of people who live to 90, 95. they're losing 9%, but they're losing 4%. if they live long enough, obviously, more than that. the other point is i don't, i can't imagine maybe they're going to say this, but i don't think they're going to say that they're not going to apply the chain cpi to the poverty level itself. i moon, that'll be -- i mean, that'll be kind of strange. i don't know what they would think they were doing. if the chain cpi is applied to the poverty level, all the programs that are indexed to poverty for eligibility, those would be affected. so, you know, again, obviously, congress can decide anything, but that would be rather strange that we say this is the correct cpi, but we're going to have a different one for poverty.

you could do that, but i'd be surprised. >> i think the other thing that gets discussed is protecting ssi beneficiaries which i would applaud, but i would also go back to my earlier comment, something that you don't hear discussed is, okay, protecting low income di beneficiaries before they hit age 80 or 85 at which point they may have been receiving benefits for decades if they began receiving benefits before age 65 as many of them do. and the other point that i would make i think ties back in with what dean just said. you start to carve out ssi, you carve out maybe di, maybe you carve out vets, maybe you carve out the federal poverty threshold, and you think that you've covered all your bases of vulnerable people, but what's left? it's not a policy that makes any sense switching to. if it's supposedly more accurate but you have to carve out virtually everyone it would be applied against to make it accurate and fair, it makes you wonder, is it more accurate? >> i would just, i would also

add to that that with all these programs that we've heard about today, and i'm not an expert on all of them, but it just seems to me if you try to carve out protections for one group, there are implications for other groups. i mow there's sewer actions -- interactions between social security and ssi, that doesn't necessarily help ssi population because of the $20 disregard. and so there's other hippings that you need to do. -- other things that you need to do. it seems to me to really fully account and protect the most vulnerable, it strikes me as maybe an impossible task to do. >> hi. i'm virginia reno with the national academy of social insurance, and i just have a -- i'd like to comment and then ask your reactions on the observation that this is so complex that people really won't understand it. and maybe, and it seems small, but yet it won't become -- if

it's enacted, it wouldn't be complex when it's actually in place. the cpi are calculated, and come election time -- which is about when they announce the social security cola -- they say, well, if the incumbents hadn't done this, your social security would be $4 a month bigger for the rest of your life. next year it'll be $8 less than you otherwise would have had. and the year after that it'll be $12 for the rest of your life. that's not hard. and so i'm, you know, trying to think about putting it, putting this in hindsight. it's not hard to see. it's very difficult to explain going forward. and just trying to think through the politics of this if it were actually done. it seems like it would be very hard on incumbents, whoever, you know, on both sides of the aisle who support it. comments? >> i mean, that's the point. you're exactly right. after it's all said and done once you start feeling it in

your check, like then it's really easy. congress just cut my benefits. but the problem is, is getting there is all the obfuscation it takes to get there. you know, and trying to explain, oh, cutting benefits, linking benefit toss a chain cpi. that's a crazy thing to say because no one knows what that means unless you know, you're one of these guys who do the research and you actually know what a chain cpi is or what a cpi is. unless you actually have this bank of knowledge, you're just going to sit and go, yeah, that's an interesting idea, and you have no context for what that means. but when it starts affecting your life, then you have real context. and this is a problem, i think, with politics in this country is that question don't tend to get engaged in stuff until it actually starts affecting our lives, and then it's like, oh, my god, what did we just do. we have to apply that tape of feeling now -- that type of feeling now so we can put the brakes on this thing and prevent it from actually doing things

like cutting these benefits. >> i'll just say quickly, it's hard to know how the politics will play out, but you don't hear a lot of people saying they don't want to cut benefits, they want a more accurate index. i suspect people saying that have no clue. obviously, they're interested because we cut benefits, but they don't want to say that. >> yeah. the other language, the technical fix. and i think what i've heard from dean and from others on this panel that it may not be the correct technical fix. >> [inaudible] it's a little bit difficult to talk about all the technical math stuff on this with the stories that tom and rebecca mentioned about real world effects on this. but this does come down the way it's been or portrayed probably by and large as a technical fix more correct. i would just suggest there's no question that the chain cpi and the change that it would make would be a more correct way of calculating something. it's a more correct way of calculating what it calculates.

but, again, i would just come back to what exactly is it that we're trying to target benefit increases to rise with or to change with over time? is it the standard of living including all the things that come into play that people might buy over time? is it just the prices of things that they're confronted with or is it the prices of things taking into account behavioral responses to some things growing faster and how people might want to shift away from stuff that's been growing faster or slower. which of those is really the target that we're trying to affix these benefit increases to? one example i would give is gary's computer over here. quality adjustment is built into the cpi indices that we have now, a little bit of a technical thing. actually, the cpi grows slower as the quality of things increase. one really good example is computers. computers, my gosh, the capacity of computers has just exploded over the last 30 years.

and as a result, the component in the cpi for the price of computers has really dropped like crazy. you know, the problem is gary, bless his soul, cannot go to costco or walmart and buy an 8086 computer. does anybody remember those? so the fact that computers have dropped in price, if he wants to why a computer -- buy a computer, they haven't really drop inside price for what's available. that's true of lots of things where quality adjustment comes into play. >> hi, i'm ann mcpherson, and just a -- i'm nobody special, but anyway, what confuses me is why is this taking place or being alined with the federal deficit? and that it's not, as i see it and what my investigate or what my research and reading has suggested, there's no doubt that the social security needs to be, cola needs to be investigated and maybe -- or changed somehow. we need to look at it

differently. but i'm not sure it needs to be on the table with the federal deficit, and that's what's in my mind making it need -- people are seeing it's a decision that has to be made today. can't we take it off the table with regard to the federal deficit? because it doesn't have anything to do with the federal deficit. we paid into it. so not that it doesn't need to be looked at and discussed and debated with all the different choices we might have in changing the cpi, but is there, is anybody listening to what you're having to say? i mean, that's what worries me. and can't we take it off the table now? can anybody answer that? [laughter] >> the only thing that i would say is aarp agrees with you. [laughter] we think social security should have its own conversation, and it should be more broadly talking about retirement security. >> [inaudible] >> yeah. i can't see we can get them to

see it that way. historically, obviously, social security has been considered as a distinct program, and it has its own distinct funding. at least in principle it is supposed to be off budget, so historically, it has been considered as a distinct program. so this would mark a major change in which it's being treated, you know, just looking to have savings on the deficit. i can give you a long diatribe given that we got this because the economy collapsed, but whatever. that's beside the point. of. >> i think it's notable that there does appear to be a real disconnect between what's getting discussed in washington and what people really want. um, i think a wonderful illustration of that disconnect is embodied by a recent survey that the national academy on social insurance conducted, and it was, i would direct you to their web site to find the survey results. but in a nutshell, it found that a majority of americans who identified east as republicans -- can either as republicans or democrats and

across income strata all supported strengthening social security benefits and paying for it through payroll taxes. and that's not something that you hear when people are talking about what do we need to be doing about social security. all we hear is about cuts and raising the retirement age. um, even though that's not what a majority of americans of either party want, it's all we seem to hear in the echo chamber, and i think that that disconnect is unfortunate and, hopefully, won't remain the case forever. >> i'd just say really -- >> and virginia reno from the national academy on social insurance would like to say that there is a briefing on that survey and the results tomorrow x. the flier is outside if you'd like to get information about it. >> i'd just say really quickly, you know, stop -- don't think about the policy for a minute and just think about the politics because that answers the question pretty quickly, you know? this isn't -- well, yeah, we've got to fix -- is it broken? has anyone ever answered that question if it's broken?

i don't think they have. i mean, judging by what we just heard, no one really knows. so stop looking at the policy and look at the politics. you know, according to the agenda of things we have to do, we have to reform entitlements, we have to raise revenue. well, this checks the reform spite elements block. it's irrespective of the fact that this checks that reforming entitlements box. everyone on both sides of the aisle gets to give themselves a nice high-five and get a win. but the problem is that their doing it -- they're doing it with the people's lives that are most vulnerable. >> while gary and dean are correct that technically and legally social security is off budget, we've all heard that terminologying the fact that when you look at the discourse in d.c. by the cbo, generally what you'll see is people talking about the publicly-held debt or the unified budget.

when you talk about the publicly-held debt and the unified budget, social security's right there. so social security spends more or spends less, that affects both publicly-held debt and the unified budget. so it's completely in the game even though it's technically and legally off budget. >> [inaudible] with congresswoman schakowsky. let me just stand up with some of the offices. we worked the letter on the house side and got a majority of the democratic members of the house to send a letter opposing the chain cpi and cuts to medicare and medicaid. i know there are a lot of senators that are going the same thing. so you do have some supporters, and we're trying to build our ranks here. this is really important, and i think the real life component of this is critical. i was particularly happy that we were talking about the connection between health care costs and net social security

benefits. one of the big concerns that we have is using the change cpi -- the chain cpi, obviously, hunters the eligibility -- hurts the eligibility of medicaid and medicare benefits. but there are also changes that are being discussed that combined to all of this would be devastating; increasing veterans cost sharing for medical care, increased cost sharing for people's disabilities and seniors on medicare, changes to medicaid. um, are you all looking at the combined effects of these? one of the big concerns we have is silo chain cpi over there, and then you look at medicare over will and medicaid over there. and as much as the most vulnerable are people on ssi and ssdi, i can tell you somebody who's living on $25,000 in chicago, our district, they're not eligible for anything.

and they are having a very, very tough time, and they're going to be hit too. so what we're really looking at is, um, some of the combination effects of this and just curious as to whether anyone's looking at it. >> i'm not aware of any papers on it, but, obviously, putting together a panel like this we're trying to bring the connection together that it affects a variety of programs and some people get benefits from multiple programs and would be impacted. >> i guess part of it is we don't know what else is coming down the pike. obviously, there is a lot of talk about having some cuts to medicare and, clearly, there'll be overlap with the social security and medicare population and the di and medicare population. but, you know, at this point i don't know what cuts to medicare are likely to look at. if they're paying less for prescription drugs, i mean, to my mind, fine. that's not going to affect what people have to pay out of pocket. but they may well take a

different form. so hard to say. >> let me just come back to steve's point. i don't want to get to this big semantic thing, but i wanted to highlight there is a logic to treating social security as a separate program, and that's just a simple reason. it does have to maintain its own balance. we get to the 2032, is that now the exhaustion date? some. >> '33. >> '33, okay. we get to 2033, there is no commitment. we'll find out be we get to that date and it actually happens. but at this point there is no equipment that we're going the pay out of -- no commitment that we're going to pay out of general revenue. it is under the law and under past practice it had to be self-financing from its own budget. you know, that could change, but that's not the case now. >> i'm glad you mentioned that there are, um, a number of folks on both sides, both chambers of congress that have really taken clear positions opposing the chain cpi, and i think that's

not gone unnoticed by either advocates or people who would be impacted. another notable individual who's championed this issue is senator sanders. so there are a number of folks who have really made a point of making clear this is not something they support for their constituents. i think you also make another great point which is whenever we're making proposals or having discussions about policy changes that impact people, um, we can't be looking at them in silos because they, the programs interact, and we have to be looking at the combined effects x. it's hard to do, as dean said, when we have a lot of theoretical ideas out there, and we don't really know what's coming or what's going to actually take hold, but it's absolutely a critical principle that is very much illustrated by social security, ssi, medicare, medicaid and many, many other programs that people who are seniors and who have disabilities, um, rely on for critical assistance. >> at the risk of adding complexity on top of complexity, and i apologize, but the question about interaction

amongst proposals, amongst plans, one item is that imagine that we, well, if the social security cost of living adjustment is less, if it yous by less than had otherwise been taxed, one impact of that is on the part b medicare premium. as many realize in this room, i'm sure, the amount by which your part b medicare premium can coup for you personally is by the amount of the cola. so if the cola goes up by less, then many people will be contributingless towards the part b premium which means the basic part b premium will have to go up even more because part b has to capture a certain amount of money in order to pay the bills. >> so we're about out of time, but i just want to see how many more questions we have. two or three. okay. >> maria frees with barbara kanellly associates representing the pension rights center. i'm glad we're talking about interactions, and i know this is

not supposed to be a tax panel, but i can't believe that people seem to be neglecting. there are a lot of staff people, i think, in this room whose members are interested in this because in in addition to beinga stealth way of cutting benefits, it's also a stealth way of raising taxes. and i don't think they realize that for the vast majority of middle income americans, they are the ones that are going to be the most dramatically impacted by the tax side of the cpi change. joint tax committee did a distributional analysis last year at the request of congressman levin, and they have determined that the bulk of the tax increases because of the cpi change will be on middle income workers. so what you're telling middle income workers, if you do this is your taxes are going to go up higher while you're working, and then when you finally get to the point where you can retire, we're going to cut your benefits faster.

and it's interesting to me that that particular linkage doesn't come up very often because you're hitting the same people while they're working that you're going to end up hitting when retired. >> [inaudible] go to the next question. >> hi. i was just wondering whether one of the solutions on the table would be, um, taking the cap, the $108 or $110,000 cap where payroll taxes stop going into effect. if you took that cap away, what would that do to getting the program to be more sustainable and maybe not cutting benefits for people? >> well, there's a few issues there. i mean, first off, if you just did the arithmetic on it, if you did away with the cap completely, that pretty much covers the shortfall. i think you're still a hair

short. if you're to go that route, presumably you'd have to ask -- currently payback structure's very progressive, but you do get more paid back given the more you pay in. so that'd be a big change if you didn't do that. as a practical matter i have to say if you literally limited the cap when you get to very high-end earners, you probably wouldn't see a lot of that because it's easy for high-end earners to get their money as capital gains, other forms. they wouldn't get it as wages. but i think an important point about this is we have much, much more money going over the top. so when the greenspan commission set the cap, they covered 90% of wage income. 10% went over the top. today it's close to 18%. and i did some calculations, if we had structured it is so that 90% of wage income was always covered, in other words, we didn't get the redistribution over the last three decades, that would eliminate somewhere around 34, 45% of the projected shortfall.

so when people talk about this being, you know, a demographic issue, yes. obviously, we're living longer, the baby boomers are retiring. there's also a very big inequality aspect to it that people should recognize. >> i also appreciate the question. i think just given that, um, often the conversation that we have when we talk about how to solve fiscal problems is played almost entirely on just the part of the field that involves cuts and doesn't discuss how are we funding the program and are we generating revenue for it. and so i think that it's -- we could have a whole other panel about possible solutions for social security's financial futurement -- future. and, in fact, there is one tomorrow as we were reminded. but i think it's a conversation that needs to be had on both sides, and it needs to not just be how can we cut and whom shall we cut which is really where we, sadly, end up it seems like almost all of the time. >> so we had one more question. >> jeffrey lend from --

[inaudible] office. i was wondering particularly while we've heard that the social security administration has shortfalls in certain areas, so i was bond orerring if, i mean, bringing it up to speed on, say, processing claims and such as well as the -- [inaudible] would be able to, say, address costs by identifying -- [inaudible] if there are any. >> well, ssa works very hard, as you all know, in trying to process claims as quickly as possible. at ssa, and i'm sure the va also, things are never done as quickly as we would like. that's all a result of appropriations. by and large, doing things faster would make a big difference in people's lives, it does not have a substantial effect on the cost to the programs because when people are finally allowed their benefits, they do get a back benefit by and large.

>> [inaudible] >> yes. the sequester definitely does affect the amount of money coming to ssa by about 8% for the balance of the year. >> but apart from any conversation about potential savings, i think that's a conversation that needs to be had as well. i apologize for suggesting so many future conversations we need to have, but that's an important one as well. administratively funding ssa so that it can process new claims so that it can manage its existing workload, that's a critical need. and the same is true for the va as well, i'm sure. administrative funding for these agencies is critical and is something that's desperately needed for beneficiaries in order to be able to get the right amount at the right time to the right place for the right person. it sets a critical need, and it's one that comes down to appropriations. >> if i could put one tiny plug since the idea of other options for saving money or for generating revenue has come up,

a little plug for my office has up on our web site, sa.gov/oact, if you go to that and click on provisions, you'll see a vast array of provisions that have been put forth by mainly the 535 folks that work right around here that would affect social security in many, many different ways, and we've developed estimates for all of them. >> okay, great. thank you very much. one thing i wanted to mention is i'm coming back to virginia's question about the politics of this, and one thing we've all been referring to this as a chain cpi, but if you notice the administration and others often refer to this as a superlative price index. it's the same thing. just to make that clear. but i wanted to thank you all for attending, i want to thank the panel u.s.es for a great panel -- panelists for a great panel, and have a good day. [applause] >> the simple fact is that we're all getting older together, and

we're not the same, our fertility rates have dropped dramatically, and we're beginning to have an inverted pyramid. that does not -- it makes our challenges as it relates to into it almosts and social security even -- site elements and social security even greater. japan and europe particularly and russia and now china is starting to feel the impact of its one-child policy. we're percent off than the rest of the developed world, but our fertility rate has dropped to below break even to 1.8, the lowest drop in the last three years in recorded history. and unlike most of the world, we have a tried and true way to deal with this demographic time bomb. demography does not have to be it'sny if you change course -- destiny if you change course. and the path that we could take is to allow for a strategic reform of our immigration laws so that we can bring young, aspirational people that will rebuild the demographic pyramid to make our entitlement system

secure and jump-start our economy in a way that will create an uplifting of our hopes and dreams, but also directly impact, immediately impact economic growth. >> u.s. economic growth and immigration policy. former florida governor jeb bush on immigration wars, saturday at 8:15 eastern, part of booktv this weekend on c-span2. >> tsa administrator john pistole yesterday defended his agency's decision to allow passengers to bring certain lives onto commercial airline flights. he was before a house homeland security subcommittee for a little more than an hour. we'll show you as much of this hearing as we can until our live coverage at 9:30. knox. >> the committee on homeland security, subcommittee on transportation security will

come to order. the subcommittee is meeting today to hear testimony on tsa's risk-based security programs from the administrator of the transportation security administration, the honorable john pistole. i would like to welcome everybody to the subcommittee's first hearing of the 113th congress and thank our distinguished witness for taking the time to be here today. you have a tough job, administrator pistol. i was impressed by your operation and the team you've assembled. we appreciate your service and look forward to hearing from you today. the topic of today's hearing is risk-based security which is, naturally, the next step in advancing security procedures. after all, why should the federal government devote taxpayer dollars to low-risk people, places or things? one move administrator pistole has done is remove certain items from the prohibited items list for passengers to carrien on planes. it's critical we work with you as we move forward with the

implementation of any policy changes. as i said, you have a difficult job, and we want to support you, but we must have open and clear communications, and it should be a priority for us to put a strategy together so that you're not faced with congress pushing back against simple, common sense things you're trying to do because they felt like they didn't have enough information. moving forward, we must help each other in advance of major policy changes to educate the rest of our colleagues in the house and appropriate stakeholders on the reasoning behind such decisions. the open and proactive approach will reduce pushback like the kind we've seen in the last few days and allow all of us to work together on rolling out the risk-based security policies that directly benefit passenger safety, ease of travel and ultimately make tsa a leaner, more efficient agency and effective agency. understandably, immediately after 9/11 risk-based security was easier said than done. federal agencies including tsa first had to figure out a way to analyze risk in a reliable way and then share and

oceanallize -- operationalize that operation. the tsa has finally begun to implement a risk-based security at airport checkpoints. it's been a long time coming, but it's very welcome. those of us familiar with the progress tsa has made towards risk-based security over the last two years are grateful for it. programs like precheck are an encouraging step in the right direction. just last month i had the opportunity to visit the charlotte airport and see the very impressive operation there, very professional individuals working for tsa at that airport. but the fact that tsa still has a long way to go to improve its effectiveness and efficiency, my constituents back home in north carolina recognize that the tourist threat requires us to remain individual land, patient when it comes to security measures and understanding of the enormous resources required to keep us safe. washington must continue to tighten its belt and learn to do more with less, seeking out efficiencies is imperative when

the federal government is carrying over $16 trillion in public debt. and every day we borrow over $4 billion just to pay down interest on that debt. we must find ways to come together over common sense savings that are bipartisan and practical at all levels of imft, and tsa is no exception. in my view, risk-based security in a responsible way. it could be a win/win for our security and for our economy. first, it takes the focus off lower risk individuals like elderly and disabled children. second, it gives tsa the opportunity to evolve its procedures and reduce its long-term operational costs. with the privilege of everybodying in the congress as chair of the subcommittee, cutting unnecessary and wasteful government spending is one of my top priorities. to that end, i have four primary objectives for this subcommittee during this congress. the first is advancing risk-based security programs and policies which is, of course, the topic of today's hearing. second, addressing technology procurement and looking at laws, looking at ways we can improve

the procurement process. number three is streamlining tsa's regulatory process, and number four is strengthening collaboration with the private sector. i would love to see tsa succeed on all these fronts and think that under administrative pistole they have taken meaningful steps in the right direction. i will assist in this process and part of that means asking tough questions and occasionally offering criticism. while he may not, we may not agree all the time, i view opportunities like today as a chance to work together, administrator pistole, to do what is right for the american people. as we interact in the coming years, i look forward to continuing a productive conversation with administrator pistole, with stakeholders inside and outside of government, with ranking member richmond and the bipartisan members of this subcommittee on the difficult issues that we face. at this time since the rank member was not able to join us yet, we will -- seeing as the chairman is not here, we'll move

directly into testimony from our witness. we're pleased to have administrator pistole before us today on this important topic. mr. pistole has been the administrator of the transportation security administration at the department of homeland security since 2010. as tsa administrator, he oversees the management of approximately 60,000 employees, the security operations of more than 450 federalized airports throughout the united states, federal air marshals' service and the security for highways, railroads, ports, mass transit and pipelines. the chair recognizes administrator pistole to testify. >> well, thank you, and good afternoon chairman hudson and former chairman rogers, other distinguished members of the subcommittee and those who will be joining us. thank you for the opportunity to testify on risk-based security changes tsa is making to better protect our nation's transportation systems and the traveling public from acts of terrorism while facilitating the best possible movement of people and goods. i also want to thank the members of the subcommittee for your

support for our risk-based approach we're using to carry out our responsibilities. virtually all the rbf, as we call it, changes thus far have been positively received and help us move away from that one size fits all approach stood up after 9/11. given my recent decision to remove certain items from the prohibited item list, the subject of this hearing is quite timely, and i'd like to address that up front. over the last two years, based on questions raised by the senate in my confirmation process i requested a team of tsa security experts to assess items on this prohibited item list. and to make recommendations on whether we should modify the list in any way. my decision to change the items that i announced on march 5th followed a careful analysis of a number of different factors, and i'll run through those briefly. first, we evaluated the latest terrorist intelligence, and that is how are terrorists trying to

attack us now and how that has t changed since 9/11. second, we considered the potential increased risk to passengers, flight crew, fellow air marshals and the tsa work force. third, we assessed how a change would impact our security operations at the checkpoint and the traveling public. fourth, we evaluated whether the change would increase the risk of a successful terrorist attack to bring down an air craft. fifth, how our current policy aligned with national security standards. sixth, begin current budget restraints that you mentioned, we assessed how this change aligns with our goal to provide the most effective security. seventh, issues raised by flying public and concerns raised by many in congress including this subcommittee to apply more common sense to air vegas security including specifically reviewing the prohibited item list. finally, we discussed the pros and cons of continuing to restrict the traveling public from carrying a particular item aboard a commercial aircraft which is in part responding to

the, quote, hassle factor the tsa has come to represent for so many americans. the deliberative approach we took and my final decision is consistent also with the recommendations of the 9/11 commission for tsa to, quote: not risk, or to set risk-based priorities to protect transportation assets, end quote, and to, quote: give priority attention to improving the ability of screening checkpoints to detect explosives on passengers. again, this is from the 9/11 report. now, while i can't go into specific detail, we do know that terrorists such as al-qaeda and their affiliates and inspired groups remain focused on attacking ben aviation in particular. we also know the threat is from nonmetallic, improvised explosive devices such as the liquids plot we saw from the u.k. in 2006, the bomb by the so-called underwear bomber, the cartridge toner bombs from yemen placed on air cargo flights

december destined -- destined for chicago, and most recently the improved next generation underwear device also from yemen intended for a passenger jet on its way to the u.s. but, fortunately, in a stunning intelligence coup intercepted by a foreign intelligence service in april of 2012. now, while the ultimate goal of the terrorists might be the successful attack welcome back the u.s. against a -- within the u.s., changes to aviation security that we've made since 2001 have resulted in every attack attempt since 9/11 emanating from overseas aboard aircraft flying to the u.s. so over the past several years, tsa has placed a great deal of emphasis on not only the layers of security we have here in the u.s., but working with our international partners to strengthen international security standards and achieving harmony among the international community. so in that regard in all of 2010 -- in august of 2010 the international federal aviation organization changed standards to permit knives with a blade

length of six centimeters or less to be carried in the cabin of the aircraft. excluding u.s.-originated passengers, there have been over five billion commercial airline passengers worldwide allowed to carry these knives. we are unaware of a single incident involving these small knives on commercial aircraft. with hardened cockpit doors, better identification of individual passengers against terrorist watch lists and thousands of armed pilots here in the u.s. and the demonstrated willingness of passengers to intervene in a determined way, it is the judgment of many security experts worldwide -- which i agree with -- that a small pocket knife is simply not going to result in the catastrophic failure of an aircraft. and an improvised explosive device will. and we know from internal covert testing searching for these items which will not blow up an aircraft can distract our security officers from focusing on the components of an ied. since my announcement there have

been a number of reports regarding the specific types of knives and sporting equipment that would be allowed. in general, we're talking about small pocket knives and other common items such as a corkscrew with a folding blade six centimeters or less in overall length. other types are excluded, and i have examples of those under chart if at the right time we care to see those to help inform the subcommittee. similarly, box cutters and other razor knives remain prohibited. of note, the type of knife we will permit is more restricted to international security standards given by ikeo or even what is currently permitted to be brought into federal buildings across the country. so these are more restricted standards. i clearly understand the concerns expressed by many including flight attendants, federal air marshals and others with respect to the potential increased risk to passengers and flight attendances. -- attendants. in fact, my decision was based

on extensive discussion with my leadership team and concerns raised by the federal air marshals. similar concerns were expressed in 2005 when a previous tsa administrator changed the prohibited item list to allow small scissorsless than four in. ofs in length -- inches in length and knitting needles on the list. contrary to claims we would see a rash of assaults on passengers and flight atten adapts, that simply has not been the case. gao published a after that change, did a follow-up assessment and said there'd been no, zero security incidents where these items had been used aboard an aircraft. the fact remains accurate through today and underscores the point that it is not the object per se that is dangerous, but the individual who intends to use that object to inflict harm that presents the danger. there are many other changes tsa's made to strengthen our capabilities. many of these changes reflect risk-based security initiatives we began implementing over two

years ago in an effort to shift away from that one size fits all approach. similar to my decision, these issues reflect analysis of the best available intelligence and sound risk management and principles. so in conclusion, i'd like to play a brief fbi video reenacting a nonmetallic ied used by the underwear bomber on christmas day which demonstrates the destructive power of these well designed and concealed devices the terrorists keep trying to use to kill us. which is what i believe the tsa should be focused on, and when we get the video, we can see it. so -- and ranking member rich monday, good afternoon to you also, sir. >> the staff queuing the video? okay.

[background sounds] maybe we'll come back to the video. administerrer pistole, we appreciate you being here. i know your time's valuable. chair now recognizes the ranking majority member of the subcommittee, mr. rich monday, for any statement he may have. >> thank you, chairman hudson. administrator pistole, i apologize for being late, but i was with your boss, and i would assume you know how that goes. let me thank you for being here with us today and providing the subcommittee with information about how tsa intends to improve its risk-based approach to security screening. i also look forward to hearing more about tsa's efforts to secure our surface and mass transportation systems and particularly its effort toss address rail security.. as terrorist threats to our nation's transportation systems continue to evolve, it is vital that our approach to

transportation security adapts to the threats and addresses the vulnerabilities. since tsa's establishment its aviation security policies have sparked dissatisfied comments from the flying public. airport screening has been described as lengthy, invasive and at times humiliating. i'm sure you have heard these same concerns and understand that you've initiated risk-based screening procedures to address those very concerns. among the programs developed in accordance with risk-based approach is the expansion of the precheck program which allows for certain frequent fliers to voluntarily submit additional information prior to arrival at the airport to receive expedited screening. i'm supportive of the ultimate goal of this policy, and i look forward to working with tsa to sustain and expand these programs. i also look forward to working with you to improve how all of these programs will improve the screening experience for all passengers, not those just in the expedited programs. as my fellow colleagues can

attest to, we must develop a comprehensive approach when expediting security screening, one that will have greater applicability for the general flying public. you recently announced a change in the prohibited items list that has been widely criticized, and while i as a member of congress profess to know what i know and know what i don't know, i generally yield to those with the experience and the expertise in making those decisions. so in that sentiment, i would not question your judgment, but i will question the process. and we have a number of stakeholders from flight attendants to tsa agents to passengers to airline pilots that should always be at least in the conversation, not dictate policy, but should be involved in the process.

so i do not believe that important decisions such as that can properly be made in a vacuum. without advance comment and continued conversation with the stakeholders that i mentioned. i look forward to working with you to accomplish our goals and your goals and on a separate note, we must also address the importance of protecting our transportation systems and insuring their resiliency throughout any manmade or natural disaster. new orleans, my hometown, is home to the louis armstrong international airport which serves as a primary transportation hub for the region. last year new orleans welcomed over a record 8.5 million visitors with neary half of those -- nearly half of those people arriving by airplane. in addition to the airport, my district is home to three critical deepwater ports; the port of new orleans, the port of south louisiana and the port of baton rouge. one of the lankst in the world connecting 32 states to

worldwide markets. .. priority. again, i thank you for being here today and i look forward to the questions and i yield back. >> thanks the gentleman. i'm told the staff has the video ready. >> the chairs understanding is the size of the ied in the

latest attempt that was thwarted through intelligence? >> that's right. this is the type of device i want us to -- just for comparison purposes, it's not much different than the size of the cup of water. >> i appreciate the. i will now recognize myself or five minutes for purposes of asking questions. mr. pistole, there's been a lot of discussion the last few days about the tsa's decision to allow pen knives on aircraft. i would argue there's been more coverage surrounding the difference in blade lengths in the report of the alleged ieds slipping through security undetected. how can we trust your team is facing real threats like the one we saw in the video, which is the reports of a serious lapse in safety for the traveling public? >> and to chairman. that's what risk-based secret is all about, trying to identify what are the most significant risks to in this instance aviation security in making sure

that our officers and our entire u.s. government national security team is trying to be as precise and focused on the threat that can cause the greatest damage. and so if you'd like i could show for the subcommittee what these items are that have already been on the list, allowed in 2005. if we could show -- so, on the left here, it's kind of hard to see from there, but we have items such as scissors and knitting needles and screwdrivers. those of all been allowed since 2005. we have billions of passengers, a price by six or 20 million a year, travel in the u.s. with these items permissible, and there's not been a single incident involving those in terms of attack on passengers, flight crew, federal air marshals, anybody. what is on the right of that white divider our the pocket

lives, pen knives that now last week would be permitted for those eight reasons identified in my opening statement. just in terms of contrast, we also have over here those items that would still be prohibited because of their nature. we went to describe those in some detail, even though some of them may be shorter than the six centimeters coming because of their construction or the use, some of them described as scheming eyes for hunters, other things are simply tactical weapons, those would still be -- as well as box cutters. these are things we will continue to exclude, these are the things that given the overall intelligence from community, these are not things that they are intending to use. it is the novice ieds second local aircraft that is the greatest threat. that's what it's all about. >> i appreciate that.

will screeners undergo additional training that will focus on how to better detect explosives and other major threats instead of these items speak was yes. that's an ongoing process. so what we've had really since christmas day 29 is how do we best detect going through our security officers that our technology. so for example, last year with his second next-generation plot that came out of yemen, what we learn is the explosive was a new type of explosive that our explosive detection equipment not only here in the u.s. but worldwide was not calibrated to detect. so we went back and recalibrate all the technicians we had. additionally, our canines who are such valuable parts of our layered security, they had not been trained to detect the type of explosive because it was new and never seen before in the world. so we went back and trained them with that type of sense so they could be able to detect it. so that type of ongoing

risk-based intelligence, so we take intelligence and what trainers to get officers to these types of devices. if i could comment on any situation. situation. this is important into a red team testing that we do. we are always try to push her officers to make sure they find the most dangerous item. and in that instant come it was a small device. i won't go into detail but not much larger than a deck of cards, but the depth of it, in that instance it was our, our security officers were doing covert testing, and although a patdown was done it was not found. so what we did was give immediately back and say okay, you did a patdown but you didn't find it. why? that's what we use as a training tool for our security officers around the country. >> thank you, sir. i appreciate it. are you looking at any additional item you may want to

take off the prohibited items list? once that process like for the future? >> this goes back to my senate confirmation where i had a specific request from a particular senator who asked particularly about, about small. as part of my confirmation i had to agree to review the. so this a bit ongoing process for over two and a half years. we look for related intelligence but it really comes down to how can we best utilize our resources, how limited they may be, with sequestration and future budgets. i mean, all those issues that you are very well aware of, how do we make sure we are most focused on those items. >> thank you, sir. the chernow refuse -- the chernow recognizes mr. richmond for any questions you may have. >> administrative pistol,

starting with where you left off with her senate confirmation and you are going to look at small knives, and i know that you the prohibited items working group. did you use that group? did you bring and stakeholders to talk about the shift in policy concerning small lies? >> the initial working group was formed internally. i want to get tsa opinion before i went outside to see a pic of what this tsa say about this? that involve a number of people across the organization, including input from the workforce around the country through a couple of different mechanisms. one is the idea factor. it's kind of like electronic suggestion box for people and send in suggestions. we received over the last two and a half years, i've seen hundreds upon hundreds of suggestions to do just that, to remove small items, small minds and other things.

this working group convened and met for two reasons in 2011 and then following up last year to assess the entire list for summer respect. what the intelligence tells, what are the threats, how are these impacted and those items i went to in my opening statement. beethen looking up what does tht mean in terms of our resources at checkpoint. so just for example, congressman, every day still today we, of course, find on average for guns at checkpoints. but we also find about 2000 of these small pocket knives every day. everyday across the country about 2000 of these small pocket knives. on average that takes two to three minutes for the pocketknife to be identified, carry on bag through the x-ray. for the bag to be pulled, for the back to be opened and then for the knife to be found and

then the bag closed up and then run back through the x-ray. anywhere from two to three minutes times 2000 incidents every day spent again, i started by saying that i don't question your judgment because you do what you do, and we have to trust that you are making the right decisions. my question is whether the number of professional associations and airlines, airline pilots, the law enforcement officers, association of flight deck officers, so she's a federal government employees and the flight attendants association, that the of real and meaningful input. i'm not asking you -- a lot of times it helps if they're at the table when you make decisions. so they're privy to information that you have. >> understood. and i recognize that based on a classified briefing that i provided for 12 representatives, flight attendants association just today, i could've been a better job of bringing them in earlier, giving them a

classified intelligence briefing until then about what the actual threats are, the ongoing threats, whether coming from, i could've done a better job of that. not only with the flight attendants, i did notify a senior representative association on november 30 of my intention to change the list as it involves small knives. also did a similar notification to senior representative of pilot association. after that, and then also briefed the homeland security advisory council for the department of homeland security in september of last year on this idea, and got feedback in closed setting within. so yes, there were several opportunities. and then, of course, with the international community with icao, with the european union, with canada officer that we purchased it in, but just to add to your question. >> i'll switch, i'm sure other

members may cover it. in your testimony before appropriations subcommittee on homeland security, you mentioned that the delay in funding for tsa's threat assessment and credentialing infrastructure monetization program may delay the development and deployment of the changes to the twic program. kenya to know more about that? what programs and where we -- >> as you know, we are very much interested in moving forward with the universal enrollment plan which would allow for individuals, whether it's twic, hazmat endorsement, other types of security threat assessments vetting to be consolidated, to get away from the steps that frankly exist now. so the sequestration is potentially the line the implementation of testing for the one visit under twic that we're so much interested in. so yes, there is potential that. if we don't get through this

then we will be adversely affected on the timing of that spent i time i has expired, for mrsomr. chairman, i will yield k i would ask unanimous consent that the gentleman from new jersey, mr. payne, be authorized to sit and question the witness. >> no objection. you are welcome. at this time of the chair recognizes the ranking minority member of the full committee, gentlemen from mississippi, mr. thompson for any questions you may have. >> thank you very much, mr. chairman. i'd like unanimous consent to enter my opening statement into the record. >> no objection whatsoever. >> welcome, mr. pistole. sorry we didn't meet yesterday but such is life. it would have helped me going forward. in this group that you put together to come up with this policy, did it include air marshal? >> yes. it did, and, in fact, in my

opening i noted that because of their strong presentation, the articulation of the risks and everything else involved, i actually changed what i was leaning toward in terms of simply harmonization with standards to make it more restrictive. so yes, a strong input from air marshals spent what about flight attendant? >> no. i did not have a similar input from them. >> you had? >> did not, did not. >> okay. i had a young lady who worked on committee, kind of the some of the items that, with his policy would be able to take on the plane. and i found out that a decision was made that we could take to -- [inaudible] -- on a plane. how did we come to decide on two rather than three or four or one? >> so the