i started my career at the congressional budget office and was in charge of making estimates for the federal food stamp program and i developed this wonderful model and was projecting it and had the estimates going forward. i was called over to one of the chairman's office to explain to me my estimate. i want to be pressing and i said i have the standard estimate and this is my point estimate and here is what it looks like. he said young man, we don't appropriate in ranges. and that always led me to the conclusion that as much as i like to talk about ranges at the end of the day it is a number that is most important for the congress. >> you have talked about uncertainty i'm sure. >> the one thing i wanted to raise because allen's paper and

that discussion for david's i think we really have to all think very seriously about it not just in our normal thinking about long-term fiscal policy that we have had for the last 25, 30 years but in terms of what has happened in fiscal and monetary policy in the last seven or eight years. so on one hand i think much of the premise of what we did in the '90s was precautionary savings. you can see that we have to project not only that you might have a down turn but that you might need a stimulus effort and what that does. the other side of that, though, is that to look at the other extreme, germany, where a bias towards this has been one of the most harmful things in the world. and where -- i just think that -- in fact, i believe that

we have some great central bankers here, that we are seeing heroic efforts by bernanke, kohn and others, draghi. they are efforts that are exceptional things that monetary policy has to do because fiscal policy has completely failed in europe, is trying not to fail in japan. while we are the least ugly kid on the block we still under perform. so i do think that we have to really take a fresh look at this and how it relates to our responding. and then the second issue i make on that is that i do think that one has to take a little more seriously the do no unnecessary harm mandate. at one place you see that is the discretionary sequester has been a terrible thing that was implemented after that paper. there is always a part of this sequester that hits the entitlement side where they do

protect the low income programs. and the reason i say this is that if you are looking in the early '90s et cetera as much as you might have disagreed with newt gingrich you perhaps feared that perhaps one might have to do more reductions across the board that could hurt people you wouldn't want to, that it was possible you could get to that point. yet, it was quite a lesson to see four or five years later what a terrible thing, even more terrible thing it would have been in the first half of the '90s to have so cut food stamps, medicaid and found out only a few years later that you did not -- that there was not even a case that you needed to do that to have surpluses. think of the harm that would have been inflicted on so many low income people that was not only maybe the wrong distributional choice but from a fiscal policy was completely unnecessary. i do think you have to caution against the cautionary savings side, the idea that you do not

want to put shared sacrifice on people who are not particularly well off unless you absolutely, absolutely, absolutely have to. i think that has to be built in very much to these discussions. >> let me turn to david's paper. jim cooper, when do these legislative mechanisms, triggers, expiration dates, alarm bells work best and when are they just useless? >> i appreciate david's efforts to help us design legislation, saving congress from itself but that is a big job. i would suggest that david's excellent paper is just the first part of a trilogy because congress is marvelously responsive and prompt to the private sector. it's only public goods like counter cyclical policy, social security and medicare where we are somewhat slow. you can divide those because many private firms benefit from

those magnificent public programs. it turns out we are even responsible to medicare providers and others that benefit handsomely from legislation. so it is really only the public good that is short changed. i have been on this team for a few years now. the taxpayer is the only person in america who is not allowed to pay congress for performance. special interests up and down washington pay us for performance every day through pact contributions, speaking opportunities and other things. why is the taxpayer handicapped? partially it is constitutional. the latest amendment prevents from cutting our pay. we are stuck with the idea that everybody makes the same even house members make what senators make which is kind of nice. but it's really i think a handicap because you get what you pay for.

we are very able at figuring out what private interests want. i wish, also, that he had put in his paper more behavioral economics. to me it's that type i lizard brain that determines so much of our activities. it's not this type ii cerebral statistical analysis. i'm not implying that my colleagues are reptiles but we do have to speak to our audience. people want a certain number appropriated. people want a quick fix. we can always be outpoliticked by those and say one more drink and we'll feel better. to me we have to go with the allen bias towards precautionary savings just to overcome the political trend towards demagoguery. >> what about using index thing to tie hands? >> my greatest worry is we have

already given up governance. "rule by nobody" almost three quarters of what we do in congress is predetermined. we don't have to show up for work. the trend is such that the most popular way to run for congress is to promise you never visit washington that way you won't be tainted by what goes on here. it is not just entitlement auto pilots. tax expenditures. the cerebral world we should do some of these triggers. we have some already. that is fine tuning a terribly broken institution when it comes to public goods. i am more interested in getting us as responsive as we are to private sector as we are a well-oiled machine even in the latest when it comes to meeting the needs of the lobbyists. why don't we get our game on there and let the taxpayer, social security beneficiary benefit as well.

>> what is your sense of where david's got the recipe right and where he has it wrong? what are the conditions on when triggers are in the public interest and when they are a sequester, shot in the foot and maybe other body parts. >> let me raise a little question about the whole uncertainty framework and then i want to throw one more thing on the table that wasn't discussed which i think goes to what may be more current topic. first of all, i think that, as david said, we have binders of triggers that never saw the light of day. but the question is really, is it fundamentally about actually economic uncertainty or is this more intelligent people understanding that we love democracy but the limits of our democratic system to act quickly

and with speed to serve economic situations generally and building in ways that we can respond without having to force ourselves to vote so repeatedly through the political system that we have trouble responding with the speed necessary? that is slightly different than just the uncertainty. it's a little bit more intelligent people, a students in congress, recognizing like a boss might recognize that they travel a lot and if they make their whole team wait to get their permission that might be a bottleneck that would keep the company from doing well. here that bottleneck is just the political difficulties of people coming together doing something. in that context i think the strongest case in david's is on the cyclical issues. and i think that -- the reason i say that, what david said he

just gave the unemployment. you can do the gdp side. we were looking at 3% negative growth. we know it was 8.2%. and over 5% in the first quarter. so about 5%. i don't know when exactly that was adjusted. so the question is, was that the reason people didn't do more? that is not my memory. my memory is you couldn't get a dollar more and get 60 votes in the united states senate. it was much more the political constraint than the economic team was like we prefer 800 but that is a magic number. i think people would have taken more if they thought they could get it. then what you saw after that was enormous fatigue. i think that there are areas that we already have a different share of medicare and medicaid that goes based on poverty. having that medicaid share go automatically increasing in difficult times -- >> in the federal share.

>> federal share being increased is an automatic adjustment that can be made. having the extensions for prolonged unemployment these are things they have to do. most people know they need to be done. if they are done automatically that was triggers i think would be absolutely good policy. i think they would be more acceptable across the political board for two reasons. they both go on and off. so if you are on the conservative side it is also a way of turning off without having to pass something if it goes off. secondly, there is not a moral hazard issue here. in other words, you are getting more based on the economy being weak, not that you are having fiscal problems at the state level. i think that is where the triggers are the most promising, most solid. where i disagree is i guess on the entitlement side, i think they play an important role but much more in the prompting

action and overcoming constraints probably than the uncertainty. i don't agree. i'm with marty. i think on the social security to design a social security trigger with the percentages of revenue cuts, distribution seems to me as difficult as actually passing social security reform. and if what you are trying to do is overcome the constraints then i don't know that that really adds much to it. on medicare i think that the delegation issues are often more about expertise than uncertainty. it is just a little crazy sometimes for any of us to have to get to the level of detail on the different market baskets, et cetera. there would be a responsible delegation of expertise there regardless of the uncertainty. so the last thing -- but i still think these play an important role. i think the one lesson we may have learned and this is interesting is that what we used to say is we call the sequester

mad, mutually assured destruction. you would try to prompt action by doing something so offensive to both sides they wouldn't let that happen or nobody would be stupid enough to let that happen and we under estimated ourselves. but it's interesting that we were actually trying for most of the time to have a different type of trigger which now problem has a greater case made. that is what i call the crude but acceptable trigger. you are going to raise this much revenue. you are going to do this many cuts. they are not going to be done in a particularly pretty way but are livable. in other words, i think after what happened in the sequester people may be more prone to say if this doesn't force everybody back to the table will it be more livable? and my last point which i think is perhaps most interesting and most topical right now i think in fiscal discussions is we have

failed to be as expansionary as possible during the global recession in coming back from a global crisis. those of us who argue that the sweet spot on fiscal policy is to have a single piece of legislation that expands demand in the short run but gives confidence on long-term fiscal policy. and the response you get from intelligent legislators, policymakers is we don't trust that the second half will ever happen. so i think part of us having a stronger round of fiscal policy and economic policy is having a sense of the triggers or mechanism that gives people confidence that they can perhaps put their foot on the accelerator or not make difficult cuts at the moment but that they will happen eventually. the place where this is most relevant is health care right now. i think as a policy maker when

you see how whether you read jason or doug's charts slow down in health care is dramatic. now, that is going to make life pretty tough, even tougher for members of congress because now you are doing difficult policies on health care entitlements that you are not 100% sure how much you need to do. so now you could say don't do anything but then that goes completely against allen's paper. or you could say let's take the bet. let's see if health care costs get down. let's encourage people to get health care costs down to work on more payment reform because you know in 2025 if you don't something is going to happen. that to me is i think the most promising area right now for helping us deal with policy and encouraging the behave wrr and

yet giving people certainty that tough choices could be made. >> the four things he had delegation, auto trigger, i hate to sound like a scrooge here but the only one that i have come around to -- we have a lot of them today. they are out there. i find that whether it is triggers that they call it such -- there was a reason for having them. there was a thought that maybe they would force congress to act. they did act and maybe not the way you wanted them to act. they did act on it.

they left the triggers into effect there. i just want to say that in terms of -- number one, i think the best approach, one of the better approaches here for social security is what has been mentioned and that is indexing for longevity. i would also note you never said in your paper that triggers that you were talking about were going to be solved. you first said solve insolvency. let's first solve insolvency before we move forward on that. he also mentioned i think the area james referring to is counter cyclical that that was the real issue that you are focusing on the stimulus bill. if i read your paper correctly what you would like to see the question was whether or not you have discretionary spending triggered in. i just have to raise a red flag

here that i think one of the worst possible outcomes for the long term is to have some sort of automatic increase in discretionary spending. i'm not there. so some of the issues that you raised -- >> if so -- because once they are put into effect, once the discretionary spending goes up you say we turn them off. i heard that before. and second of all, i look at your charts you said that when unemployment started up i saw a lot of peaks in unemployment that didn't lead to a recession in the chart that you put up here. >> so much uncertainty out there that i would rather focus on two other kinds of triggers that congressman cooper's position on behavioral. i wish we had a trigger that said no budget no pay. i would say also if you don't

pass appropriations you have an automatic continuing resolution at last year's level. wouldn't be in the mess that we have been in the last week. those are the kinds of triggers i think have an impact upon congressional decision. >> i want to mention the ones i mentioned were on the mandatory side. they do go on and off. those are areas where as i said they would go up automatically, go down automatically. you wouldn't put congress through having to get it exactly right. required congress to vote. >> the two places that we haven't placed we already do it to a degree, expanding it further, making it automatic i think would make a lot of sense. i think it is quite -- i think

you could make the case because it turns off and it doesn't have a moral hazard. i can see that being a more plausible that could actually happen? >> let me respond. >> on a few issues, first, when it comes to the question of triggers and stimulus and for trying to stabilize demand, so actually i think one risk identifies you trigger things on. first i note that we actually in terms of jumps in unemployment we could predict when you are entering a recession and large jump in unemployment highly associated with recession. if you draw a line and increase in unemployment rate that has occurred and occurred in two

points. you can actually whether using that index or another index there are ways of targeting periods of recession. second, looking historically while i agree that there have been some provisions that have stuck in law when you put them in place when it comes to stimulus policy at least on the spending side seems like we tend to have the opposite problem certainly in the last recession. so we had the turn off of state fiscal relief while expended once not further extended. when it came to infrastructure spending which had a slow spend out and did not have dramatic cliff but was not further extended. it is actually not clear to me that if we had types of triggers which did increase infrastructure spending automatically during periods of economic recession that that would necessarily be overwritten. i think there is a chance they could better improve economic

performance without congress not allowing them to go back down. so on a few other points when it comes to the entitlements i completely agree with gene that when it comes to trying to build these kinds of triggers into social security it looks a lot like negotiating a final social security deal. in fact i completely agree. i think this would be built into an actual social security deal where there is an agreement on the parameters of the deal and say we want to stick to that deal so we build in a trigger to stick to the deal. if it can happen in '83 it can happen if we reach that again. the only other point i want to make is when it comes to delegation and the entitlement programs part of it is expertise and part of it is knowledge. when it comes to delegating in medicare some of the experimentations they have going on at the centers for medicare and medicaid services we didn't know what worked so we empower

them to potentially ramp up that experience and implement them broadly. that is an example where we have uncertainty as to what works and congress will not have to revisit the issue and delegate the ability to fully ramp up reforms if it actually does work. >> we can take two or three questions and then we will answer them and then we have to break. in the middle there and then in the back. >> spent about half my career in federal and government and fiscal institutions and working with states. one correction to gene spurling. medicaid match rate has 4 1/2 year leg between date matched and year used in. it is pro-cyclical. that is not something i recommend. i would like to get you to measure the difference between big bang theory of stimulus.

>> i was trying to build in having a share based on what is happening in the economy at that moment and not on the poverty data. so we were actual in vigorous agreement. >> the difference between the big bang ask the trigger response. gave most of the state assistance through medicaid that states may not change their eligibility in which they didn't which meant states cut back on everything else including education which now has become the baseline for education for the future. this is what happens to productivity. is this a good thing? >> one in the back? a couple of rows back. and then one on the left side. >> really a comment. that is there really is -- when you talk about the entitlement program very little uncertainty about the cause of the problem. in fact, there hasn't been

uncertainty since the 1970s when the birth rate dropped. we have known about it for a while. it is sort of a decade-long certainty and actually goes forward. in fact, '83 reforms probably would have benefitted from a longer horizon because we know what was going to happen and there is very little uncertainty about that. that applies to a certain extent about medicare and the other demographic dependent programs. i'm not quite sure i understand why the triggers and automatic items really are relevant for those programs. >> there is one over here. >> thanks. i just wanted to make a cautionary point about fiscal policy. this last down turn was very different from previous recessions.

previous recessions from peak to trough lasted ten months. on average. because of that i think fiscal policy rightly got discredited as a short term stabilization mechanism. in previous recessions monetary policy was more effective because you didn't have the collapse of the financial sector. so this time was different and it paid to do fiscal policy. it was clearer. it was going to be deeper and longer and monetary policy wouldn't work. the idea of using fiscal policy in general when the unemployment rate spikes or the gdp number is negative runs the risk that the lags are such that by the time you have actually hit the stimulus the economy no longer needs it. >> we have to get back on

schedule so very brief responses and we will take a short break. >> so starting off. when it comes to social security and uncertainty you are right that part of the challenge facing social security system in our fiscal situation more generally is well known and now we have baby boomers working their way through the system. with that said there is considerable uncertainty as to exactly what the picture is going to look like going forward. even as i mentioned the optimistic scenario that the trustees put out shows the system remaining solvent on a continuing basis. that is one possible scenario. there are other scenarios, as well. the point is while we do know some points of the challenge remain considerable uncertainty about productivity growth and rate of immigration, et cetera, factors that go into effecting social security balance. this system adjusting to some of the factors.

when it comes to stimulus. the main fact when it comes to fiscal policy that more things be automatic and not have a significant lag. one could say and you may end up with federal policy and in the situations where you need a significant discretionary stimulus you may want to then -- and those things build in additional types of triggers. >> we have a time constraint. we will take literally a five-minute break. i will start in six minutes. if you want to hear the good stuff you have to be back here in six minutes.

so this five minute break here at the brookings institution where they are hosting a discussion on federal budget projections and whether the projections are accurate and whether long term budget outlooks. up next cbo director there on the screen on the left will be talking about policymakers and how they deal with fiscal uncertainty. we expect this to get underway in just a couple of moments. it is a five-minute break here. while we wait the senate is in session today after improving the house's budget plan over the weekend. of course, avoiding that government shutdown. today senators are determined to debate a number of executive and

judicial nominations. we are expecting legislation to retroactively extend more than 50 tax breaks and to renew the terrorism risk insurance program without that we could see the super bowl cancelled. the senate is not expected to take up those bills until after all of those nomination votes are taken. see the senate live on our companion network c-span 2.

one of the things we plan to do and intend to do in the future is to use the opportunity to get views from other countries to see what we could learn from what they do and to be sure so we can continue to tell them how they ought to run their place much more like we run ours even though we seem to have lost a little moral authority on that lately. and the other thing is that we

have tried to bridge the academic and the practical here. this is not the national bureau of economic research. we are not afraid to say what ought to happen. but we also think that it is important that policymakers hear the best ideas of academics but also that academics learn something about what it is really like to practice policy here in washington. so for the final part of our event today we have invited two people who are really more qualified than almost anybody else to talk about the question of uncertainty and how policymakers react on it. we start with the director of british office of budget responsibility in october of 2010. he was previously with the institute for fiscal studies in the international monetary fund but he spent a decade as a journalist with the london independent before finding more

productive ways to use his time. after he speaks he will be joined by doug elmandorf and among his previous activities was serving as senior fellow here. they will join me on the stage and we will invite both previous panelists and the audience to ask questions or make contributions. >> thank you very much. good morning. it is a great pleasure to be here and see further reminders that there is productive life after journalism. what i'm going to do today is give you a little background to how the relatively newly created obr is trying to address some of these issues in recognizing

uncertainty in the goals we have been given and how it is reflected into policy. let me start with a brief institutional introduction for you. we are an independent institution created in 2010. we are accountable simultaneously to the executive and to parliament in the uk. we have been given four main tasks to fulfill, the first of which is to produce five year ahead forecasts twice a year for the economy and the public finances. and secondly, to use those forecasts to judge progress towards the explicit fiscal rules that the government has set itself. that is one rule in terms of a particular measure of structural budget deficit and another rule for the trajectory of debt to gdp. that discussion of uncertainty should be couched in terms of what that is telling you about the government's progress. the third thing is scrutinize

scoring of tax and in particular welfare and social security spending measures and then we also assess the long-term outlook for the public finance as much as cbo does looking over a 50-year horizon and what we can learn from the balance sheet. putting that into u.s. context and if you think about key differences from this structure i guess one point to note is that all of our analysis covers the entire public sector and not just the equivalent of federal government level. we are confined only to producing projections on the basis of the current policy of the current government. we are forbidden from looking at policy options. and the third thing is that the executive, the administration in the uk does not publish its own projections. we are the provider of the official projections and for the government to comment on what we say and not comment on the

figures they produce. in that context thinking about how uncertainty coming into our work i think in a background it is important to bear in mind that in budget setting in the uk the executive is very powerful relative to parliament compared to the relationship between the administration and congress here and the treasury department in the uk is powerful relative to cabinet departments. the rationale for creating this was very much to try to remove politically motivated wishful thinking from official forecasts rather than particular options. when we set out on this task the key objectives increased transparency and to emphasize uncertainty. given our need to produce a highly disaggregated fiscal forecast transparency necessarily means a lot of detail and a lot of point estimates. why emphasize uncertainty?

first policy should reflect uncertainty. we can offer richer assessment of progress towards the target. the first person to run the organization permanently and i didn't want to tie the success of the institution to the accuracy of our forecast. we address uncertainty in the way that we do our work and our outputs both in narrative qualitative sense and quantitatively. in the narrative it means being as explicit as we can in the forecast presentations and publications we do and therefore the implicit risks. the idea that monetary policy

will evauchbl in line with. we also take care to identify what we see as being specific economic risks that may effect the fiscal forecast in any particular presentation we do so what happens if instability reasserts itself. what happens in the new taper tantrums in terms of the global outlook for unloosening of monetary policy and big uncertainties of what is the path for productivity and real wage growth. in the uk more than here one of the key puzzles is why productivity growth has been so weak and whether that will reverse itself and how. we then in addition try to identify specific fiscal risks conditioned on the economic forecast. a key one recently is to look at what is driving effective tax

rates. so the actual tax rate or the amount of revenue you are raising per pound in our case of the particular tax base you are talking about. one of the reasons for our recent forecasting errors is not that we overestimated the aggregate size of wages and salaries of labor income but also the average tax rate on that has been less than expected partly because of the distribution of pre-tax wages. other things that we look at will central and local governments stick within the budgets for discretionary spending. this is a set itself. and then finally to cbos work what uncertainty we see around the scoring of particular policies. and we provide, we don't provide what chuck would like a confidence, explicit confidence interval around the estimates from particular scorings. what we do is provide ranking from each policy that we sign

off based on the quality of the data that under pins it, the nature of the modeling you have to do to get to the estimate and the nature and uncertainty surrounding the behavioral response. this is a subjective exodus but listing the sources of uncertainty under lines how difficult it would be to put a confidence interval around a particular estimate. in addition we try to illustrate uncertainty quantitatively. we quantify the uncertainty around our central forecast and with particular reference to the chances of hitting the targets that the government has set itself. i guess one thing the combination of having an independent forecast and explicit fiscal rules set up by the government is in a sense we smoke out policymakers receive preference of how much margin for error they want to put in in achieving targets against the forecast one way of saying how much you want to overachieve.

we use three main techniques to illustrate uncertainty implied by past forecast errors, sensitivity to key economic determinants and scenario analysis. the key thing is not just to say the projections are uncertainty and what ways does it have to be wrong for the targets to be imperil. just to put a few pictures this shows you a fan chart of probabilities for a particular measure of the budget deficit. we do mechanical sensitivity analysis. you take your central forecast for the targeted fiscal variables and say what difference does it make if there is more capacity in the economy, faster or slower gdp growth and what if government borrowing costs are higher or lower. i think in that context if you were looking for one major

source of uncertainty both around the achievement of the targets and around our fiscal projections more generally it's the uncertainty as to what is the level of potential gdp. what is the path of real gdp to which you expect the economy to tend if the central bank is doing its job. if you can see here almost everybody assumes the potential outpreside output is lower than the path of the crisis but a lot of uncertainty around how far low. scenario analysis to highlight particular key debates or critiques of our forecast that may be put forward at any given time and illustrate some areas that the public may misinterpret. what difference would it make if productivity growth was higher or lower or monetary policy tightens more rapidly than you

anticipate, the fiscal consequences depend on because the economy is doing better than expected or whether it is driven by risk or something like that. we can add additional information from measures of a balance sheet. the uk has whole of government account prepared on commercial accounting basis including list of contingent liabilities, liabilities that are assumed not in the central forecast to crystallize but whether nonnegligible chance, things like public health care system, challenges to decisions on tax collection. there is also a list of unfortunately unquantifiable reliabilities which we note there is not a lot to do with that. my favorite is apparently the government has a requirement to return the land for the channel tunnel to a suitable condition if it ceases to operate.

quite what you are supposed to do, fill it in, plant flowers around the entrance or quite what i don't know but it is in there anyway. in terms of the long term projections most of it so far on the medium term i think the story here is very similar to the projections that cbo produces. it allows you to take on board demographic change, calculate debt trajectories and have sensitivity analysis based on different population paths, different relationship between interest rates and growth and look at specific interests on the tax revenue side for example whether there are long term trepds in the average tax rate. let me note we see as the flip side of emphasizing uncertainty is that creates responsibility on us to learn from our forecasting errors after the event. we have specific publication we produce each year separately from the forecast in which we

look and see how much is because policy changed after the forecast, classification changes, how much because economic terminants were different or because specific fiscal forecasting areas are different? it is not reassuring in the sense that you end up being wrong but this year we were wrong three years ago from completely different reasons we were wrong last year. let me leave it there. happy to take questions. thank you. [ applause ] >> there we are. okay. great. thank you. thank you all. thank you. i will start. one quick correction for david.

i have been director for six years, not eight. it may feel like eight but only six. my colleagues and i are acutely aware of the uncertainty of the budgetary and economic estimates we provide to the congress. we view our estimates as representing the middle of the distribution of possible outcomes. we frequently explain estimates that way to members of congress and their staffs and we discuss risks to our estimates. i take chuck's concerns seriously. in my experience the members of congress are quite aware of the uncertainty of our estimates. in fact, it is not too uncommon to think we got the sign of the estimated effect wrong in addition to the specific magnitude. i think the issue at hand is not whether we should communicate the existence of uncertainty but whether or attempts to discuss and to quantify that uncertainty provides particular additional help to the congress in the choices that it makes. we have worked hard in the past

few years to quantify the uncertainty of more of our analysis. there are important limitations currently on our ability to do that quantification and to help legislators make effective use of such quantification. let me begin by discussing the things that we do and talking about the limitations we see undoing more. we quantify the uncertainty of our estimates in a number of contexts. first, when we estimate the macroeconomical effects we regularly provide a central estimate and a range. the ranges allow for uncertainty about the responsive labor supply, effects of changes in budget deficits on national savings and other factors. and these ranges are intended to cover roughly two thirds of distribution of possible outcomes. one example is estimates of short term and long term economic effects of alternative paths for federal debt.

second example is in our long term budget outlook. we regularly include projections for alternative skairs. in july we showed what would happen to the the rate of decline in mortality, the rate of productivity, interest rates and the rate of health care costs differed from the values that are used in most of the report. the chapter also discusses other sources of uncertainty we did not quantify. similarly, we published additional information on our long-term projections for social security that regularly includes a range of possible outcomes for the social security trust funds based on the historical year-to-year variation in key demographic and economic factors. this sort of analysis suffers from some of the weaknesses peter identified for similar projections from the social security actuarieactuaries. a third in some analysis of the federal policies. for example, here are is our estimates of the effects on

unemployment, raising the minimum wage. we also provided similar ranges for estimates of effects of federal budgets of adopting a more competitive system for medicare. a fourth and slightly different way in which we quantify uncertainty is to analyze how actual outcomes differed from our efforts. we do a recurring evaluation of our economic forecasting errors, which i've shown here. we have an evaluation of our revenue forecastings coming out shortly. we published as obr does rule of thumb for how much budget outcomes vary forgiven various. vast majority of cbo estimates. i think there are three principle reasons for that. first, the congressional budget process requires point estimates of the budgetary effects of proposed legislation. bill hogan put this in a more pit

pithy wayen i will. they provide allocations to funds. the house and senate budget committees track budgetaried. the statutory pace you enacted in 2010 and various parliamentary rules of the house and senate are enforced using point values. a range that encompassed some values and others that did not would not be useful in following those procedures or enforcing those rules so we need to provide point estimates. one might argue that the congress should change its approach to explicitly reflect uncertainty but developing comprehensible figures seems quantity daunting. a second reason cbo usually does not provide rage rannges. one obstacle is that most of the models and estimating techniques we use don't readily yield

uncertainty. not probability models. another object that cal is underlying research on which we draw generally provides only limited information about uncertainty. for example, our analysis of the effects of raising the minimum wage drew on dozens of studies so we could form an educated sense of uncertainty related to the time, the place, the modeling approach used as well as to sampling uncertainty. our analysis in other areas, for example, the effects of prescription drug use and other medical spending was based on just i handful of studies done in that area. forming a sense of uncertainty would have been quite difficult. further related challenge is the lack of time. we're often rushing to finish analyses and especially the cost estimate before congressional action on an issue is expected to occur. doing the additional modeling or gathering the additional information needed to quantify uncertainty can take considerable time that would delay the release of particular estimates and would also delay our turning to other analyses or

estimates of other proposals. and the third main reason we usually don't provide estimates is we're still developing ways to help legislators make effective use of our quantification of uncertainty. is part of the challenge is providing ranges for estimates sometimes muddies rather than enhances general understanding of our analysis. for example, when we report ranges people who like numbers to be big tend to pick the top end of the range. people who like that number to be small tend to pick the bottom end of the range. that can make the public discussion of our analysis quite confusing and we have a limited ability to clear up that confusion. another part of the challenge is it is often unclear how legislators might respond to the quantification of uncertainty. and we in the analytic community more generally have developed only limited guidance in this area. surely it is useful for legislators to be aware of the uncertainty of budgetary and

economic estimates. but as i said, we think they are. the harder question is what else might they do we particular quantification of uncertainty we could provide. some legislators might want to adopt policies only very likely to increase or decrease a variable of interest or hit a particular target. this is the example robert gave in the uk. if you're trying to hit a particular target for the budget deficit, you might want to pick policies that have a certain probability of actually hitting that target. we did an analysis, for example of changes had resulted in savings for the department of defense. we concluded it probably had. similar analysis could be helpful but particularly in those specific cases where the congress was trying to hit a particular particular. as an example, lawmakers might

want to adopt policies with a smaller variance of budgetary effects to reduce risks to the federal budget. for example, understanding the extent of uncertainty about future federal spending that arises from uncertainty about life spans might affect whether policy makers would want to index eligibility ages for certain programs to life spans. another situation legislators might want to adopt policies with a larger variance of future budgetary outcomes as a means of experimenting to identify the best policies. i think analysts can help sort out those sort of situations but it's a complicated problem. as a final example, legislators might want to respond to greater uncertainty about long-term. as allen argued. on the other hand, ledge tors might want to respond to greater uncertainty by focusing less on projected long-term outcomes at some horizon. more research, like allen's paper and other papers being

presented here and being written elsewhere can help guide policy makers in that issue as well policymakers driblgt use is limited at this point. that n turn, leads us to devote only a limited portion of our time to reducing such estimates. there are also important limitationings on our current ability to do that and help legislators make effective use of that limitation. thank you. >> thank you very much, clear and interesting presentations. i'm only going to have a few questions and we can make encourage people who were on earlier panels to join in the conversation. robert, tell me if i got this right.

do you have to express an opinion about whether the government has a greater than 50% probability of meeting its fiscal targets? >> yes, we do. that, therefore, requires us to produce a point estimate median forecast in order to say whether they fall on the right side of that. yes, we do. it's interesting the formal fiscal targets are not the only thing politicians are interested in aiming at. we have two formal fiscal targets at the moment and one isn't binding. so, actually, the government is focused on other things like the particular date on which it expects to balance the overall budget, what the path of the deficit is on a year by year basis. you're absolutely right. that's the formal role. it's not necessarily the thing policy makers are most worried about most of the time. >> i see. there's been -- deb talked some about what this is like from the policy maker side. do you find -- chuck suggested

maybe the british are just different, that they're actually interested in this uncertainty or is this just make you more popular with the manski crowd? >> i think they are. it is this combination of the fact that you have a clearly defined target and independent forecasting because essentially you are requiring the policy makers, even if only by reveal preference to say by how much do they want to overachieve the central targets which is essentially asking them to say how much built do you to want take in the future. i think in terms of the impact on policy changes, we have adopted an index of the state pension age to life expectancy, the government sent out a general principle of people expecting to spend a third of adult life in retirement but there will be a committee every five years to translate this into a precise set of ages which allows you to take into account the fact that may not be what you want to be aiming at that

point in time. i think there is a general willingness to embrace this sort of thing. obviously, the bank of england has been doing this for quite a long time that it presented for monetary policy. you know, the issue about -- it's important the issue on uncertainty doesn't give you an excuse to dodge the responsibility to come up with your best judgment. the bank of england used to be -- measure vin king used to be so resistant to providing estimates. the consequence was members of our former professor rushed home, photocopied the inflation report, blew it up as big as they could and tried to back out the point estimates from the middle of the probability distribution. i think there is a general acceptance, but, you know, real politics has not been suspended in the face of it. >> it seems to me that a couple things, one is -- one reason to talk about uncertainty you can say to the members of congress,

i told you so, even if you weren't looking and you can cite the day in which you testified before the budget committee. but by giving long-run forecasts are you conveying something to policymakers that we don't really know that might n a different state of the world than we have now, lead hem to do something that's harmful? >> we've restled how much weight to give to different forecast horizons. although our long-term projections go out 75 years, the report we talk about talks about the next 25 years. the 50 years beyond that we have greatly reduced the emphasis on recognizing that we have less and less knowledge about what will happen to that horizon.

takes the projection over the next 25 years because the challenges that the country faces are not just short-term challenges and the policy responses that are being weighed are not just short-term responses. they are gradual responses, in general. some cases responses that wouldn't have much or even most of -- much if at all until when moved beyond the ten-year window we focus on. >> it's very important for us to look out over that -- over a longer period than the standard ten-year budget window, but we are very transparent in the greater uncertainty as we go out. and in this last long-term budget outlook this year, this range, has a debt to gdp ratios in 25 years that vary by factor of 2 to 1. it turns out essentially all that range that we show has debt which is as large or larger

which is unusually high level by standards of entire history of the country and i think there's important information in that. >> finally, do you ever find yourself thinking, i wish members of congress wouldn't pay so much attention to the scores in deciding whether something is a good policy or not? >> yes, i think this is a standard view among my colleagues that too much weight is given in some cases to hitting a particular number that we recognize as uncertain. the legislators recognize is uncertain. i think that's a by-product of ongoing legitimate concern about the trajectory for the federal debt. we often think in particular circumstances or estimates are given too much weight relative to particular considerations. >> let me ask if any of the authors or respond epts or earlier panelists want to weigh

in. >> i'm so quiet. you can't hear me. >> we want to make sure we can get every word down and we can hold it against you in your next confirmation hearing. >> it won't be you holding it against me. no, i just want to follow up on doug's question there, which is -- and maybe it's for both, which is there probably are a lot of policies that you do think are good policies but part of the problem may be that when the congressional budget office says no savings, it's not reflected as we're not certain enough about it to do savings but that it would produce no savings. and so it undercuts. and i think my question is more on kind of health care reform, where my guess is there may be areas where you could say, here are a number of things that probably move in the right direction, might do good. we don't have the certainty.

one question is, is there a way of expressing without a score, an opinion or certainty these things could have a positive effect because you may have things that are -- become almost delegitimized by lack of their score, although i don't think that would necessarily be the intention. >> you raise an important point, gene, and i'm not sure what we can do about it. when we analyze, for example, the independent payment we wrote a long discussion about how this is a group that would have certain avenues open to it and it might look for things it could do and it wasn't clear what the group would look to, wasn't as successful as they would be. our estimate of its budgetary effects is explicit problemistic estimate. other proposals for specific changes. we analyze, for example, a few years ago the effects of raising the cigarette tax on the federal budget has direct revenue

consequences. also would make the population healthier. and many people expect that would improve budget outcomes. we did an elaborate analysis that show it might not improve budget outcomes, factors going both directions. i think you came through very clearly in our work that some things that seem good, at first blush, might turn out to be good or not good. i think that comes through what we're doing. i don't know how -- what else we can do. i think particularly in cases where it's hard to understand what the right point estimate of effects of legislation would be, to quantify the uncertainty would be much harder. what robert talked about, which i found interesting, were qualitative characterization of the uncertainty of proposals. that's not something that we do and i personally at least haven't thought about it, although maybe other people have. i see bob, others in the audience, who may have thought about this. i'm not sure if that would help

or not. i'm not sure what our capability would be. we publish 500 written cost estimates this year. we probably did ten times as many informal estimates. i don't want to sound like i'm just focused on running the trains but i am focused on running the trains. we need to find mechanisms that are feasible and very short -- very short timetables for a wide range of legislation. >> that was the one you showed and you had marked in yellow. is that something you were asked to do or is that your invention in order to avoid the problem that doug finds himself accused of? >> i stole this from the australian parliamentary -- >> we'll have that next year. >> we developed it beyond that. i think what we previously had done, we have a slightly odd system in the uk that the government -- we publish the forecast. the government publishes its own scoring which we have

scrutinized before they announce them. they know whether we'll say we agree with this or not and now having introduced this thing about what they'll say about the uncertainty around it. previously all we had done was to say, here is the list of 80 measures announced in this particular package. we think the following three are particularly uncertain. you put a little language around that. i think we felt it would be much more useful to have a more systematic and transparent way of doing this. people are, of course, quite interested if a particular package consists of a lot of well-identified giveaways to the general public, highly certain, paid for by highly uncertain -- >> we never do that here. peter diamond. >> any scoring rule is open to some kind of gaming. and and with presentation of all the details, the gaming is

evidence so people who dig in know about it and yet the scoring rule plays a big role. a lot of our concerns has been, as it were over too much. i wish you had included somebody today who did the reverse. what was life like before the cbo? what was it like without scoring when everybody was making up their own numbers? i certain remember back -- the issue, social security, before we got indexing for inflation, so the issue was how much should we raise benefits this year and what are the political pressures and what kind of limits can we set on it so scoring set the limit but it was all made up scoring because the system had no automatics and the scoring was made up -- here's a formula. here's a number. so congress could hide behind the number when beneficiaries

wanted bigger things i think scoring really matters, even as imperfect as it is. >> pass the mike back to representative cooper. >> i love the british way of whole of government accounting and also on a commercial basis, which i take to mean a cruel accounting. here austerity was caused by state and local employees as federal government was trying to do the right thing. so few of our colleagues have any idea of what a fiscal gap is, much less how large it is. >> the other panelists? steve goss? please. >> thank you. first of all the point of scoring before cbo, at least on social security, there was. peter, we'll have to have a longer discussion about what happened prior to the automaticing because there was serious consideration of that. my question is for robert. robert, you took my breath away

with one of your drafts where it looked as from your 2008 projection, i hesitate to say forecast, to your 2014 projections, you had a lowering of your estimates of potential gdp for 2020 of approximately 15% with no apparent trajectory in the more recent projection to be closing that gap back. so, it looks like you've taken a 15% bite off potential gdp, at least through 2020. is that your presumption going forward and doesn't that sound like an awful lot of uncertainty? the question is, do you think your 2008 was that bad that now you really had a need for that much correction? >>. >> the first one to make 2008 projection was before we existed so that was the published projection when the forecast was still in political hands. although that said -- that said,

i would not say that if it wasn't in political hands, you would have been very much closer to where we are now. but i think this has been true since the crisis hit in the uk. and i think it's more so here than it was to start with. the whole notion of how big is the hole your fiscal consolidation program has to fill in is entirely wrapped up in this potential gdp has moved down from the projected path. basically for the uk, you multiply that loss by 0.7 and that tells you what your increase in the structural debit is. i hope the chart showed, there's a lot of uncertainty amongst other people looking at this as to how big this decline is. and for large bodies, very difficult to explain quite why it should have been that large. but basically in response to the fact that, you know, we've had a weak economic recovery, the business indicators are saying there's not very much spare capacity, you've got a very weak

productivity performance, all of that suggests there's been a big supply hit. on the other hand, that view is challenged by the fact we really still don't have any wage growth to speak of. so, can that really be that narrow? but i think it's something that's important for us to be up front about, you know, we're in the middle of a ten-year fiscal consolidation program based on filling a gap between one number you can't estimate or, indeed, observe directly, and another one. >> how about potential here? >> so, we revised down our estimate of potential for 2017 by 8% or so relative to our projections in 2007. we think that some of that is due to recessions and weak recovery specifically. we think some is due to developments up through 2007 that just weren't apparent to people at cbo in 2007. of course, as the period since the last cyclical peak goes on, as the recovery occupy more and more of the time we're looking

at, it's harder and harder to disentangle what part of the revision is due to developments in this business cycle or just a mistake in assessment by us before the business cycle. the down revision is substantial. and i think that does provide appropriate caution about taking a particular -- a particular point estimate at face value. >> i'm a journalist, so i don't know how productive this will be, but -- >> don't start before you ever ask. >> this is for mr. allendorf. i'm more familiar with jct's estimating methodology but the big debate has been over whether or not to account for macro dmik factors or tend to project them. right now they're mostly just basing it off your agency's baseline. and i was wondering what your thoughts were on whether doing the -- accounting for these factors would reduce uncertainty

or increase it? >> let me quick up some confusion about dynamic scoring our scope for incorporating macro economic effects is limited by the fact that estimates of changes in tax provisions are the responsibility of the staff, the joint committee on taxation, not a cbo. a second thing to emphasis is that our estimates and jtc's estimates incorporate lots of kinds of behavioral responses. they're not static. but they don't generally incorporate macro economic effects. another thing to emphasize, though, is when legislation is being discussed or proposals are being weighed, that would plausibly have large macro economic effects. then and if time allows, then we, jct, do estimates of those macro economic effects. we do this every year in analysis of the president's budget. we did it this year for our

analysis have chairman ryan's budget plans. we do it now every year in our long-term budget outlook. jct did it this year for their analysis of chairman camp's tax reform proposal. so this sort of work is not knew to us. we spent a lot of times in our last few years on improving the models of the effects of fiscal policy on the economy and in writing reports that spell out how we do that sort of modeling. so, doing those kind of analyses for legislation that would plausibly have noticeable macro economic effects and when there is time in the congressional process for us to do it, that's fine. we're doing that now. i think the question for members of congress is how they want to use that information. that's really up to them to decide what role they want to give these macro economic effects and their feedback to the luj when they consider

legislation. but that's appropriately up to the members of congress to decide. >> another question? yes, henry aaron. >> this is a question for you, doug, with respect to the alternative fiscal scenario projection which in many quartz is regarded as, perhaps, more realistic than the extended baseline. actually, one of my questions refers to both projections. during the first session when commenting on the projections of social security and medicare hospital insurance, peter diamond observed that the probability that scheduled benefits would be paid in both programs and current revenues would be collected in both programs was the probability of those joint events was about

zero. yet both extend the baseline and alternative fiscal scenario assume that that zero probability event will occur and is fed into the projections. my question is, what do you think about that? and are you bound by instructions or statute to estimate in that way or was this a decision of cbo. the other question relates to the alternative fiscal scenario only, which is the assumption that revenues will continue beyond the ten-year budget window at 18% of gdp. which is based on historical analysis but historical analysis of a time radically different in character from the one you're

projecting. one in which in the future were we to remain at 18% of gdp, congress would have to continually cut tax rates in the face of projected widening deficits, which even given congressman cooper's evaluation of the colleague strikes me as verging on calamny, something they would not do. so, i appreciate if you would comment on both of those limits of the projections. >> so, it is common, as you say, hank, for people to refer to alternative fiscal scenario as the most realistic scenario. i don't refer to it that way. we at cbo don't refer to it that way because many of the cases we've done this, alternative scenario has shown debt just skyrocketing ultimately. that's not a realistic projection. for our purposes, the baseline and then the extend the baseline scenario are meant to correspond

roughly to current law. we think about an -- the alternative fiscal scenario as corresponding more closely to current policies, one might say, and the difference was particularly stark when the 2001-2003 tax cuts were scheduled to expire because members of our baseline and extended baseline followed current law and incorporating those expirations but many, many members of congress were in their own minds starting from a benchmark in which the existing tax rates were continued. and they wanted to understand the effects of policies relative to that sort of benchmark. we put that continuation of the current -- then-current tax rates into the alternative scenario. so, i don't think it's meant to be realistic. so, peter's concerns about this don't worry me because i think the alternative scenario is to give somebody what would happen if we continue with social security benefits and other benefits as they're currently being paid out and we continued

with current tax policy. now, we are required by law to follow certain rules and-n constructing our ten-year baseline projections. much of this was written into law in 1985 in the legislation with some modification since then. so, there are rules we follow. when there are ambiguities we consult with the budget committee how to handle those. the extended -- but that applies to the ten-year projection. the baseline projectionses we tried to follow that spirit of current law as you go further out. it's not literally current law for a variety of technical reasons. for example, the country -- federal government currently has a debt ceiling we don't assume the debt ceiling is not raised. the baseline rules, even about current laws, make certain sorts of accommodations. for social security, where benefits are legally paid, i understand, only if there is money in the trust fund, the baseline rules say we will

project the benefits as if they were being paid, as if there's enough money to pay them. so, that's the baseline. as i say, we follow that same principle for the extended baseline. the alternative scenario is really up to our judgment about what alternative benchmark, what representation of current policies we think would be most useful to the congress in its deliberations. the goem is not realism. it's to capture what many members of congress think of as the current sorts of things that are going on in the budget. as you know, we lay out the stumgss we make. >> in the baseline you're required to assume that social security benefits are paid even if there's not money in the trust? >> and on the tax question, why 18% of gdp? >> on the tax question, what

we're trying to capture as what people might think of as current tax policies in a broad sense. what's happening -- what's happened over time is the federal government collected revenue, 18% of gdp up or down with a few percentage points but no evidence trend. we think we're trying to show the congress what would happen if they continued with the benefit policies that are in place and the sorts of tax policies we've had in the past and have had now, what will happen in the future. the fact those lines of spending and revenues diverge, that is the fiscal challenge. that's exactly the point. with the sorts of tax policies we've had before, federal government will not collect enough money to support the sorts of benefits we have now given the aging of the population and rising cost for health care. in fact, those lines diverge is our effort to demonstrate to the congress why important changes in fiscal policy will probably be needed and so we're -- it's

not our job to line those up. it's the job of congress to decide what policy changes over time might line those lines up better. >> please join me in thanking these two guys for joining us. i also to want remind everybody that all of this and more is on our websites. these events don't happen automatically. i want to think kerry, brenda, emily and my colleague for making this such a success. and i'm no more certain about the answers. finally, people who are the -- for the rest of you, thank you very much.

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>> donald trump speaking at the economic club of washington, d.c. tonight. he's expected to talk about his aspirations. the trumps are rehabbing d.c.'s old pennsylvania post office and turning it into a high end hotel and shopping office. can you see his comments tonight live at 7 p.m. eastern on c-span. coming up at 8 p.m. eastern here on c-span3, house veterans affa affair subcommittee looks into cemetery operations by improving assistance to families. it's a great question because i think for all of us, you know, as somebody who uses a computer every day, we have

certain expectations when we fire up our computers about who sees what we're doing, who we're sharing information with and at any moment, if the expectations i have -- if the expectations i have are shifted because i realize that there might be another party who sees what i'm doing, say, for example f an -- you know, if a message pops up and asks if i would like some help making a purchase, there are certain lines that we don't know we've crossed them until it's too late. that's true for researchers, that's true for companies. there isn't a clear sense of what's creepy because that's so culturally specific. one person talking loudly on a cell phone in a park has no problem with somebody standing next to them on a bench and listening to that conversation. and at the same time, you can have someone who's trying to have a private conversation and they will go to great lengths to be somewhere that's completely secluded. so, we're not just dealing with

the cultural context. we're dealing with individuals' different frernss and needs around privacy. >> tonight at 8 p.m. eastern on the communicators on c-span $2. rand senior ver says since 9/11 approximately 120 americans and about 2,000 europeans have joined or tried to join jihadists who are fighting in syria. a panel of mid east experts looks at the history of middle east crisis, isis threat to u.s. and why westerners are joining isis. this is about an hour. >> okay, good afternoon, everyone. hope you're having a good day. i direct rand center for middle east public policy, as we call it here cemep. we focus on the middle east from across the rand coercion. we try to focus on the most pressing political and socioeconomic challenges facing the region.

today the region is at a critical juncture. the panel -- that's an underestimated. the panel you're about to hear from will be discussing the complex challenges that we're facing in the region but i want to know our center here at rand, we also try to focus on longer-term solutions to some of the underlying issues that are generating so much of the violence today. that's why we focus on issues like education for syrian refugee children, which is one of the greatest displacement crisis in the globe today. we also focus on the critical question of youth unemployment in regions like the middle east. in our view, if we don't have the long-term challenges, we're going to just continue to see the cycle of violence that generates threats rather than opportunities from this region. i hope also finding some opportunities as well. we'll see. i can attest to all of their

expertise and contributions to rand on a regular basis. so, moderating the discussion first is karen elliott house, former publisher of "the wall street journal." former vice president at dow jones and company. a recipient of the 1948 pulitzer prize in international reporting for her coverage on the middle east. and also the author of a well-noted book on saudi arabia "its people, past, religion, fault lines and future" which i believe is outside the doors here. she currently serves as chair of rand board of trustees. next to karen is brian michael jenkins, senior adviser to the president of rand and who is considered to be the father of terrorism studies. all of these panelists have a long record of publication. so, they will promote their books outside as well. ambassador james dobbins is a senior fellow and distinguished chair of diplomacy and security

at rand corporation. he most recently served as director of the rand international security and defense policy center. next, last but not least, seth jones who now directs the international security and defense policy center at the rand corporation. he served as representative to the commander, u.s. special operations command, to the assistant secretary of defense for special operations. so, please, let's all welcome them. >> thank you, dalia. excuse me. i feel like i'm turning my back on all of you there. we are in a time, in my 30 years, 30 plus years of going to the middle east where i think there are more divisions, chaos and depression than i can ever remember. we'll try as dalia said, to

focus on some opportunities. i hope my colleagues will have some. it's really an honor for me to get to moderate this panel because i'm, yes, a trustee here, but i would say this even if i weren't because i'm a consumer of their product. these really are three of the best experts in america on this topic. all of these divisions that are so aptly listed in the little blurk on this arab persian, sunni shia, arab israeli, autocratic dictator versus demands for liberalism or fundamentali fundamentalism, one or both, are not new. i mean, arab persian is older than islam. sunni shia is as old as the

early days of islam. even the jewish arab dispute is hardly new. so, i would like to start by asking each of you to briefly say of this, why is this set of what i would regard at some level as old issues such a toxic brew now? what's made it so divisive and toxic? because all the elements have been there. >> first of all, recent events -- there is a fundamental change in what we're seeing now in that some of the structures that were established a century ago in -- during and in the wake of world war i are coming apart. and as these artificial borders dissolve, as some of these

governments -- autocratic governments have been removed, what we're seeing particularly in iraq and syria, is we are seeing, in a sense, the thin veneer of control that existed having been ripped off. and so all of these have come up to the surface again. and so we're seeing all these conflicts. i think the second thing that makes them so different for the united states is that at one time these conflicts were seen as -- from this country in the shadow of 9/11 they're somehow seen as having the ability to directly impact us. in fact, concerns about fears that they might impact us directly here in the united states has been certainly used as a justification for a more active policy. so, things are coming apart, but it's not just there.

it affects us in a very, very direct way because there's no difference now between a front line and a home front. >> jim? well, i think, first of all, it's kind of important to put what's going on in in the middle east in a little perspective. we've had upheavals of this sort continuously since the end of the world war. it was the east asia in turmoil. had you half a dozen wars going on. you had more than 100,000 american soldiers killed in two of those wars. you had much larger number of civilian casualties and refugees than anything we're seeing in the middle east today. in the 1980s it was mostly latin america. again, you had more than 20 wars going on. you had more casualties and refugees than anything we're seeing today. you also had more terrorism. american planes were getting

hijacked every few weeks for a while, flown to cuba. americans were held hostage and flown to the middle east. american soldiers were being killed in several countries. american ambassadors were being killed in several countries. in the 1990s it became the balkans. we had four international military interventions going on in the balkans in that ten-year period. the civil war in bosnia was just as intense as the civil war in syria today what's different is it's not just the middle east. it's not the middle east. that's one difference. a second difference is the middle east is an unusually home genius place. single dominant language. they almost all speak arabic. you have a single dominant

religion, all mohammedian and part of a single country less than 100 years ago. so, there's -- instead of having half a dozen somewhat auto ton mouse conflicts going on with a certain amount of contagion among them you have what appears to be an entire upheaval in a civilization. and the conflict is much more cross-border, much more intense. it has several conflicting strands, the ones you mentioned. and so that's one thing that makes it different. the second thing is the immediacy and intensity in volume of the media content. americans were being killed in as brutal a fashion as the journalists who were beheaded in the 1980s. one poor man in a wheelchair was pushed overboard. when a whole entire ship was

hi hi hijacked. we didn't have videos. those pictures never would have gotten out. no one would have ever seen them. you read a news story one got killed, doesn't have quite the same immediacy of seeing, you know, mr. foley actually being beheaded in almost real time. so, i think that also gives it a bit of immediacy. of course, 9/11 as a background, also as brian has indicated, makes this much more real and personal more threatening for americans, although i would argue terror levels are not as bad as they were in the 1980s and the dangers aren't necessarily greater than those we saw -- >> i would like to have a discussion on the threat level as soon as seth gets through with what's -- >> he'll undoubtedly correct me on that. >> i would probably say two issues are of interest and may be new in one sense.

brian alluded to it earlier. we're seeing unprecedented levels of midwesterns travel to the middle east, particularly from europe, to go fight in both syria and to a greater degree over the last several months in iraq. so, there is a connection. when you add jim's dimension of social media, twitter, myspace, youtube, facebook, a connection that we can make to -- that has encouraged people from denver, from florida, to go fight in this area. the case of abusalah is an interesting one. kid north of miami radicalizes here in the united states, florida. goes over to fight with the al qaeda affiliate in syria, al news ra. comes back to the united states for six months. no one in u.s. law enforcement

system realized that he had gone to fight with an al qaeda affiliate. makes a decision to blow himself up. thankfully he does that there rather than here because he stays for six months, returns and then blows himself up. but that connection with the unprecedented numbers makes this, i think, different. the second issue really with the islamic statement of iraq and al sharam, isil, isis, whatever acronym you use, we have an interesting situation where a nonstate actor has made a pretty serious bid to take over pretty important parts of one of the larger states in the middle east, iraq. we've seen elements with hezbollah and lebanon but this has been a blitzkrieg strategy in a major middle east state. that's something we haven't seen much of in the last couple of decades. you put those two together and you've got a very volatile situation with westerners coming to fight.

>> can you try to explain to all of us what makes the islamic state -- al qaeda, what makes that fundamentalist jihadi philosophy appealing to young americans or young arabs. what is it that makes you want to be a jihadi? >> well, i'll start. i'm sure jim and brian -- and brian, i think it's out there, i'll make a pitch on your recent publication. brian has a publication on american and other european fighters that have gone over, particularly to syria, that's just out. which hits on some of these -- >> when the jihadis -- >> when the jihadis come marching home. >> i think you need sheet music to that.

i'm sitting on a panel for the new fbi director with, among others, former head of the washington office, bruce hoffman. one of the things we've looked at in going around a field offices is what has inspired people to go over. there's a couple of things -- this really begs for more analytical rand style project. in the absence of that, there are a couple of things that appear to be motivating. one is taking territory appears to have inspired some individuals. the isis, the videos of what looks like success on the battlefield has drawn some individuals, particularly since june, to go fight with a group that appears to be winning. and a group that is -- i was on cnn a couple of nights ago to comment on this video that came out two or three days ago. what's interesting is it was

clips of people on fox, on cnn, on msnbc, americans, former generals, former intelligence officers, state department diplomats commenting isis is gaining ground. they actually took those clips, used them in a propaganda video and pushed it out. so, they've been using our own words to make that case to our own population. it's an interesting use of social media. so, that argument, that domino argument, appears to be one reason. some of these people that have gone over to fight also have been clearly looking for something. they tend to be -- come from -- some of them come from broken households. some have dropped out. i wouldn't call most of these individuals that have gone on particularly well educated. we can see the leadership structure, but there are things they're being drawn to that make them want to be part of a group that appears too be important as well.

so, i wouldn't point, at least from the data i've looked at, to any one factor, but several of them happening over there and in their own lives that appear to be drawing them to go over. >> it's interesting that it is so attractive. i was just in saudi arabia and i went to see an imam i've talked to over half a dozen years and his 18-year-old son is begging to go to syria. and he told him, no, you shouldn't go. not that you can't go. he said, i don't want to be like an arab government dictating. so, he encouraged him not to go because he said, you don't know enough about islam to do the proper thing in the circumstances are going to be in and to do the wrong thing is bad for your -- for your salvation,

shall we say. and he says a lot of young men in his mosque are asking him -- seeking his approval and encouragement to go. and the religious lady i lived with, her son has already gone. and she's happy about it. i mean, what's your sense, why it's attractive? >> first of all -- >> and are there reasons, the same for arabs as americans? >> no, don't think so. when you look at motives why people have either gone to previous vee haddist fronts in afghanistan, in yemen, somalia, or elsewhere, you get very diverse motives. i mean, certainly if you talk to them or look at what they -- listen to what they say, expressions of are there. certainly they absorb the ideology of al qaeda, that it's an individual duty to take up

arms struggled against the infy dells of the west, that islam is under assault. that's an important ingredient. there are also unspoken but these other motives that seth touched on. their desire for adventure to do something meanful, to participate in an epic struggle. personal crisis is a big part of those, particularly from the united states. it's a very individual decision. the young man from florida that seth spoke about in one of his comments. he basically said his life in florida sucked. i mean, that's a quote. >> that makes it harder to try to diffuse if there's not multiple -- >> it's difficult for us. first of all, there's good news for the united states. there is no exodus of volunteers

going off. the numbers are very, very small. publicly identified since 9/11, we've had approximately 120 americans that have tried to go overseas to join jihadist fronts abroad. we know that there are somewhere around, beyond that, somewhere around 100 or more that have gone to syria. but this is out of an american muslim population of approximately 3 million. so, we're talking about very tiny turnout. despite the efforts of al qaeda and isil through very slick internet campaigns and social media to attract these people, they are -- they are simply -- hang on.

they're not selling a lot of cars. they just aren't. this is -- the decisions are very individual, not community supported. that's good news. bad news is of those who will go, some will acquire competence as a result of their experience. they'll be even more radicalized. some clearly will be disillusioned and come back and may be determined to continue their campaign. >> can you, jim, talk about the issue you started to talk about. what is the threat of i.s. to the u.s.? is it really a big threat? is it a longer term threat? an immediate threat? a threat to the homeland? or just a threat to our, quote, friends in the middle east? >> no, i think it's a threat to the united states ultimately. although it's a threat to all other things as well.

and what distinguishes isis from the other terrorist groupings, including al qaeda, is that it claims to be and to some degree is already a state.state. that is to say it takes and holds territory, something al qaeda has never tried to do. now, if you talk about the ability of terrorist groups to organize themselves to strike at great distance, they can organize themselves and operate in highly unfriendly environments with very effective governments like germany or canada or even the united states, but they have a great deal of difficulty doing so, and they have limited capability as a result. they have a slightly easier time in states that may be unfriendly to them but are also very incompetent. so yemen would be an example or pakistan where they may be under pressure, but it's not much because the state is very incompetent, and so they can pose a greater threat to long

distance targets. they have an even greater ability to operate in areas that have no government at all like somalia for much of the last ten years, but the biggest threat is when they operate in a state that's friendly to them where they actually have the active assistance of a local government. now, that's only occurred once in modern history, and that was in afghanistan before 2001, and that's where the threat, the planning, and the operational control of 9/11 occurred. to see another state emerge in the middle east, which becomes a launch platform for terrorists with larger aspirations clearly tends to replicate what we have spent a decade preventing in afghanistan and thus creates the possibility of threats of that dimension again. so i think denying isis and

similar groupings the capacity to take and hold territory is important. >> but what is their goal right now? is it us or is it taking and holding more territory and knocking off the saudi regime? yesterday they called on the saudis to overthrow the royal family and we're coming to mecca. in their priority list, where do we rank? >> well, i mean, i would say in answer to that question that the group's name indicates its priorities are areas in the levant. they would tend to be areas from about iraq into syria, potentially parts of lebanon and jordan. >> and israel and palestine. >> and israel and palestine, though how well they'd be received by even sunni groups there is an open question. but it's at least a regional

issue. i think their name actually highlights the areas that they're most interested in. at the same time what's been interesting though with isis, i'm just back from both the middle east and south asia, is they've adopted a strategy recently that is more similar to the way al qaeda has operated over the past ten years in even outside of the areas that they're primarily operating in. they've reached out to jihadist groups in other places. some of them -- and through encouragement have pledged loyalty. we saw in the last week on a jihadist group in the sinai that's been fighting against the egyptians and the israelis, pledged loyalty. we've seen isis members in libya going around, got one group now that's pledged loyalty, south asia -- it's actually interesting in pakistan we've seen some support from groups like the pakistan taliban to

isis. support really means pledges of support rather than, you know, willingness to bring in fighters. so there is also a willingness to expand their networks in a broader area than just the one that they're fighting. now, just briefly where does the u.s. sit? i think in general you look at the levels of violence that are going on. they are primarily focusing on local regimes. the assad regime in syria and the iraqi regime. that's where most of their energy is directed. there is -- there does appear to be an interest in inspiring others outside of those areas to conduct attacks, including in europe and potentially the u.s., but i would say the focus of the effort right now without doubt is their own region. >> but let me just clarify, the taliban never had any intention of striking the united states. the taliban had no extra afghan ambitions whatsoever, but they were willing to host groups that

did and facilitate their operations, and it's hard to believe isis wouldn't do the same thing whatever its own intentions are if they were allowed to take and hold territory and set up a state. >> can i follow through on that? look, the idea of the islamic state, not just how many square miles they hold on the ground, but the idea of the islamic state has excited islamists around the world. it has galvanized people around the world, and we are now in the process of an air campaign against it, and that's going to have consequences, and to the extent that we ultimately -- i have to take remedial ear here, to the extent that we become an impediment to the achievement of their goals or even the survival of that enterprise is going to

have affect on their strategic calculations both as an organization as well as individual jihadists who are there who may be scattered and motivated by ideas of vengeance as well as other groups that are not there. so we're going to be dealing with the effluent of this for a long time. when these jihadis come back here, they most likely will be arrested if we can identify them, but there's a bigger problem in europe, and this is a fascinating problem. europe has somewhere in the neighborhood of about 2,000 people that have gone primarily from chance, the united kingdom, germany, belgium that have gone off to fight in syria and iraq. some of them are going back and forth. the polling data indicates in some of these countries an

extraordinary level of support for the islamic state. >> in the european countries? >> in the european countries. >> among the muslims? >> among the muslims. i'm talking about extraordinary levels of support. because in many cases they're coming there from marginalized communities and this is seen quite differently. when these jihadis come back to these communities in europe that are already emboldened by the creation of the islamic state to create in a sense mini islamic states, neighborhoods where they're going to enforce sharia, then that becomes the catalyst for a confrontation -- >> with the government. >> not only with the government, but we have the other phenomenon going on in europe at the same time and that is the rise of ultra right wing nativist political groupings, and europe

has not just a terrorist problem, not just a police problem -- >> so what is not a domestic problem now can become a domestic -- >> can become a societal problem. that's the point. >> i think it's very important to underscore what brian just said about the excitement a lot of certainly saudis but arabs in general i think feel about the islamic state. i mean, the idea that the democracy movement didn't work and many of them are still unhappy with their governments, and this is kind of a new way to get at we can have justice and freedom that we can get the kind of idyllic society we had in the prophet's time if we just can get the islamic state. i don't think it will be such an idyllic society, but it clearly does seem to excite people in a way that i think a lot of

americans don't understand. so what should we be doing about this? leave aside what's going -- we're bombing now. but what should we do to protect ourselves? is it good enough to just contain i.s., which is probably the maximum if the bombing can do that or do you have to do more? >> well, this is at the heart of the -- >> than just contain it. if you contain it, will it ultimately wither because it's not succeeding? >> this is the heart of the current debate. i mean, the air campaign is succeeding -- beginning to succeed in degrading some of the capabilities of the forces of the islamic state. whether or not an air campaign by itself can destroy, the word is degrade and ultimately defeat and destroy, whether it can defeat the islamic state is

another question. some people say that we have to do more, and this gets into the arguments about boots on the ground or we have to accelerate or we have to persuade the sunni tribes in iraq to again switch sides as they did once before and turn against al qaeda. i'm not sure how much of a stomach there is on the part of the sunnis in iraq. there is some resistance movements now against isis, but, you know, i'm just not sure that how much of a strength of feeling there is on the part of the sunni tribes in iraq right now to take on the islamic state, especially on behalf of a government that although the government has changed, it's still not an inclusive government. it's still that shia thing in baghdad. >> we seem to be being sucked toward the view that the