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>> why would this be any different? >> this would be different because of the way it's set up. it is set up to be fully bipartisan and it is set up to get the assurance of a vote on the recommendations of the commission. so it's a statutory commission. and the law that governs this commission would provide that the recommendations of the commission would not be amendable and would come to the floor of the house and the senate for an automatic vote.ñr >> john mckin none. >> senator, would the commission have a set tar get for deficit reduction or would there simply be the ability to set whatever target they want to target? and why should we expect members

of congress to an ambitious target for themselves when they haven't been ambitious about this effort in the past? >> john, those are excellent questions. let me just say we don't set a specific target. we think part of the work of the commission should be to determine how much deficit reduction to achieve. and the reason that we are hopeful that they would take this on aggressively is because everyone knows now that it's required. that is if you look ahead, we're clearly on awn sustainable track. the deficit is approaching 100% or the debt is approaching 100% of the gross domestic product of the country. it will exceed 100% in the next few years. but longer term we're heading according to the congressional budget office under current policy towards a debt that will be 400% of our gross domestic product. so what we face really is a longer-term challenge that requires an action or a set of actions. and i think colleagues know that

if they had this opportunity they really need to take this on in a meaningful way. >> but why not go ahead and set a target to begin with rather than leaving it up to the commission to do it? >> well, it's a matter of negotiation between senator gregg and myself. we went through several years of discussion, negotiation between ourselves with other colleagues. and we concluded that the best thing was not to set a fixed target, to leave that in the hand of the commission. other people might have arrived at a different judgment, but that's the judgment that we came to. >> andy sullivan of reuters. >> senator you picked up a fair amount of support for this proposal so far. the latest count 35 sponsors and cosponsors. how do you convince the rest to give up some of their authority if you're in a pro creator or tax writer you'd be handing over a fair chunk of what you to do to this commission. >> good question. what we say to them is that going through the regular order,

the normal committee process has not and will not address a challenge of this dimension. and i think we know in history that when we have come to something of this significance, we have had to look to a special procedure. in the 80's we did that with social security. that was a commission. of course, we also adopted a special procedure with the summit that was at andrews air force base that came back with a bipartisan plan to put the country back on track when we were then facing record deficits. the situation now is far more acute than in either of those circumstances because the baby boom generation is poised to retire and that fundamentally change everything. we no longer have time to get well. we no longer have time for this to play out over a lengthy period of time. we have now got to take action to get the country back on some more secure footing, and we have to begin the actions sooner rather than later. >> you brought up the past

commissions. but isn't this really your responsibility, congress' responsibility? >> absolutely it is. but what has been demonstrated repeatedly is congress in the regular order, in the normal committee process, is not going to take on a challenge of this magnitude effectively. and the reason for that is very simple. the regular order is geared for partisan divide and partisan gridlock and all that that entails. that's why senator gregg and i have concluded you really need some special process. that's what's been required in history. i think it's clearly required now. you've got to have something where both sides, republicans and democrats, participate p. that's the only way you will cut through the clutter. that's the only way you will avoid the stumbling blocks that have been put in the way to effective action. and it's the only way that you'll have something that's sustainable. because party control shifts back and forth, we've got to have a plan going forward that

both sides have bought into. >> now senator, obviously it's the leaders of each chamber that would appoint the members that would sit on this commission. but i imagine you probably have ideas of your own, you're somebody that knows the budget process very well. do you think you should be on this committee? >> of course i do. >> ok. who else in terms of names or position? should it be appropriators? >> it would seem to me that people who need to be involved in this are the people who are involved with these issues most intimatery, know them the best. those are for example the chairman and ranking member of the finance committees and ways and means, -- budget commit year, representatives of leadership. it seems to me those would be logical people to put such a commission. >> senator you also want to have a couple of members of the administration on this commission. and i'd like to hear your

thoughts about the reception that this idea has been getting from the administration. how enthusiastic are they about it, and what would their role actually be on the commission? >> well as we see it in our proposal, the secretary of the treasury would be there representing the administration. and the administration would name one other person. i've always assumed that would bed head of the office of management and budget. that would be a logical person to include. there would be bipartisan cochairs in the proposal that senator gregg and i have made on the democratic side, the cochair would be the secretary of the treasury. and that would be obviously a critically important role. >> but your proposal is basically for everyone to link arms and jump off the cliff together essentially. do you really think the administration is enthusiastic about that idea, particularly when the commission would be taking action just at the

beginning of the next presidential election cycle? >> you know, i can't speak for the administration. i've been in many hours of negotiations with them and they can speak very well for their own position. i do think that they're warming to the idea that there needs to be a process like this one, not necessarily this one, that we've proposed, but something like it in order to effectively take on this debt threat. you know, the circumstance we faces a a nation is really very, very clear. we have had the debt double under the previous administration. we have now had a steep economic downturn that required more deficit financing for the liquidity to prevent an outright collapse, so that adds more to the debt. the current trend line the debt will more than double again over the next eight years, as i say going to more than 100% of our gross domestic product. we've only seen a debt like that once before in our history and

that was after world war ii. and the longer-term trend is even more dramatic and more serious. and we've got experts of every stripe coming forward. head of the congressional budget office, general accounting office, office of management and budget, federal reserve, all saying we're on an unsus takable track and the sooner we deal with it the better.çó >> senator president obama said on wednesday he thinks it's a little too early to start putting on tax hikes or spending cuts because that would hurt the economy. do you agree with that? when he unveils his budget in february what would you be looking for that would assure you he's taking the problem seriously? >> i agree with his assessment that it is too soon to begin raising taxes or cutting spending. by the way, i don't think even though more reknew is needed that first place we ought to look is for a tax increase. i believe we ought to look to

more effectively and efficiently collect what's currently owed and due that's not being paid. by my calculation we're only collecting about 76% of the taxes that are owed under the current system. if we actually collected everything that's owed, we'd be in relatively good shape. the problem is the current system is increasingly inefficient, sin creasingly being game by offshore tax havens, by abusive tax shelters, by the so-called tax gap, the difference between what's owed and what's paid. and we've got to get america back on track. a more efficient, fair taxñi system, one that helps us be more competitive in the world economy. and on the spending side of the equation we got to face up to the entitlements, which are going to be very adversely affected by 50 million people coming in who are the baby boom generation. i'm part of the baby boom generation. we've got to deal with that reality. >> so senator, who's not doing

their job? does theist lack the resources to collect that -- does the i.r.s. lack the resources? >> a lot of us are responsible for a revenue system that is badly out of sync with the world that we are in today. you know, when this tax system was devised we didn't have to worry about the competitive position of the united states. because the united states was so dominant. now we do. when this tax system was instituted you didn't have all these accountants and lawyers sitting around figuring out how to avoid and evade the system going offshore. you didn't have these offshore opportunities that exist today. and by the way, if you want to see the magnitude of what's occurring in these offshore tax havens, just go google offshore tax havens and see what you find. it's really illuminating. >> senator, i think a lot of people are wondering what they'd

be buying into if they accepted the idea of a commission like this. north, what are the recommendations that are actually going to come out? and i think along the lines of taxation, a lot of people think that something fundamentally different like a value-added tax or some national sales tax might be something that a commission would be tempt today look to to raise revenue. what would be your response to that idea? >> you know, i don't think any of us can prejudge what the commission would conclude. >> ok. >> they would be given the assignment to face up to the debt threat hanging over this country. you saw in "newsweek" just have a cover story talking about how great powers decline. and it starts with an explosion of debt. well, we've had that happen in our country over the last eight years, an explosion of debt. and we see the trend continuingr my own belief is the american people know that we're on a

track that cannot be sustained, want something to be done about it, understand that it's very hard for our current institutions to do what needs to be done here. and we need to give a group an opportunity to come up with a plan. and if a supermajority of that group can agree to a plan that it comes to congress for a vote -- and again under our proposal it would take a super majority to pass and the president could veto it. so there's lots of opportunities for our colleagues to be fully involved. they'll all have a vote. in fact it would require a supermajority to pass. >> so senator, as you know on the house side the blue dog democrats, fiscal conservatives are advocating a pay growth approach which if congress doesn't pay for new spending there would be mandatory across the board cuts. you're not a big fan of that because you think there are too many loop holes. but if it came down to it and the only way to get your commission set up would be to have their version of pay go

would you go along with? >> i don't think it would be smart with me to negotiate in public. >> oh, come on. >> let me say what i've said privately and publicly. look, i am actually a supporter of statutory pay go. but i'm not a supporter of statutory pay go that has $3 trillion of exemption. there are exemption that seem reasonable to me and that would be acceptable. for example, the middle-class tax cuts. i think it would be entirely reasonable to make those permanent. i think it's entirely reasonable to have the dock fix covered for two years and the alternative minimum tax and estate tax and then turn over those marts to this commission for a final determination, a final plan that would come to congress for a vote. but as i say, i don't favor statutory pay go with $3 trillion of exemptions. i can't possibly justify. i do think there is a place here where we could have a principled

compromise with the creation of a commission with the responsibility to come up with a strategic plan for this country's fiscal future, and at the same time statutory pay go without $3 trillion of exemptions. but nonetheless, certainly exempt the middle-class tax cuts permanently. we know we're going to do that. and we may as well just face it. >> ok. now you mentioned yesterday that you've been talking with the white house and they're considering setting up a debt tax force of their own. but that wouldn't congress as your -- what steps can the white house take to make sure that if your proposal doesn't become law and they set up theirs that congress pays attention? >> it seems to me the principles that are critical to the functioning of any commission or tax force, number one it's got to be fully bipartisan. number two, it's got to deal in

across the board fashion with the debt threat. that is you got to look at revenues, got to look at expenditures, got to look at the entitlement programs as well as discretionary spending like defense. and the absolutely essentially important component is that the recommendations of the commission have to to a vote in the congress. >> so how would that work with the white house proposal. >> well, if you had an executive order commission rather than a statutory commission, an executive order commission as you though does not have the force and effect of law. an executive order commission is what was done with the social security crisis in the 80's. that was created by presidential order. it was fully bipartisan. it did come to a vote in congress. and it did deal effectively with the problems before us at that time. so that i think serves as a possible model if we get to an

executive order commission if a statutory commission can't pass. >> senator, this past week the speaker of the house nancy pelosi saying the idea of this commission really in her words cedes too much authority to a commission and takes it away from congress. will she go along with it? and if not what does that do to your idea? >> well, i can't speak for the speaker. i have absolute respect for the job that she does and all the challenges that she faces with a variety of views from her caucuses and her committee chairmen. but i believe this is an idea whose time has come. i believe that if we just review what's happened that we will see the chances of dealing with this through the regular process of congress is remote at best. and increasingly i think there is an understanding that we are running a great risk with the

economic future of the country. and the risk that we're running is that those who are financing this debt wake up some morning and decide, you know, there's just too much debt over there. we've got moody saying that they're going to put the united states debt in a special category now, a different category, a riskier category than the a.a.a. rating that we have enjoyed for a very long time. we've got the chinese who have become the biggest financiers of american debt warning us repeatedly they're increasingly concerned about our about our about to pay this debt back. we have other international leaders saying aren't you going to face up to this? aren't you going to show the rest of the world that united states can assure us that they're going to pay their debt? you know, last year 68% of our debt was financed by foreign entities. 68%. if some of all of those decided

they weren't going to show up at the next bond auction, that would put the united states in an extremely, extremely vulnerable situation. we would then either have to have massive increases in taxes, massive cuts in spending, some combination of the two, and have to dramatically raise interest rates in order to attract capital to finance this debt. if that day ever arrives, we will rue the day we did not face up to this challenge earlier so that the solutions could be less draconian. >> senator, i'd like to go back to politics for a second. doesn't the idea of this commission in a way undermine what congress is working on right now, which is healthcare? lots of your democratic colleagues that they're pass something going to achieve great savings in the future in healthcare spending for the government. and yet i think we all know that

if your commission comes into being it's going to have to engage on healthcare issues and try to squeeze a lot more savings out of the healthcare system. so in a sense wouldn't you be effectively rewriting the healthcare legislation? and undermining the credibility of some of your colleagues? >> i don't think we'd be rewriting what's just been done. it is clear to me that there are going to be to have to be more savings in the healthcare accounts than this legislation provides. you know, i had my staff draw a chart the other day that shows the deficit debt trajectory we're on and shows the difference that this legislation will make. and while it is important the deficit reduction in this legislation, $130 billion the first 10 years, $650 billion the second 10 years, if you stack that up against how big the debt is becoming it's a relatively

modest contribution to reducing that long-term debt overhang. so frankly, it makes my point. we entered this process with the notion that healthcare reform would fundamentally deal with the 800-pound gorilla in our long-term debt calculus. that is the healthcare accounts. and while it's helped and it's made a contribution, it is reducing deficits. it does reduce debt. it doesn't do it in a way that fundamentally changes our long-term outlook. >> senator, there was a commission, the pew peterson commission put out a report has monday made up of a lot of former congressional budget experts. one of the things they said was washington has to get serious next year, that even if they don't take steps to actually start reducing the debt next year because of the fragile state of the economy they've got to show investors that they're serious. and i believe former fed

chairman alan greenspan said that on thursday. do you think next year is important as well? does it have to happen in 2010 this. >> i absolutely do. by that i don't mean that you start taking the steps when the economy is still weak. that would be a mistake. as i've said to my colleagues, i'm not a hooverrite. i don't believe in cutting spending or raising taxes in the midst of a downturn. and we are still in the midst of a downturn. but at the same time i recognize that very soon we have to pivot and focus like a laser on long-term debt reduction. this is not a one or two-year process. this is something that requires multiple years in duration, that fundamentally changes the trajectory we're on. and if we do it we'll all be the better for it. because otherwise you wait and the longer you wait the more draconian the solutions are going to have to be. >> but senator, this congress has been raising taxes and

raising spending. >> no. in an overall basis, this congress has been cutting taxes. if you look at what has happened under this administration and this congress on a net basis, taxes have been substantially reduced not increased. the spending increases have largely come as a result of the need to provide liquidity to the economy in the midst of a journ turn. those are the so-called automatic stabilizers that are part of the system to avert a collapse. that's exactly what we should have been doing. you know, we've got to help people understand the difference between what makes sense in the short-term, what makes sense in the longer term. when you're midst of an economic downturn, a sharp economic downturn, to avert a collapse you need to provide liquidity. that means increasing deficits and debt. but longer term, longer term you got to do just the opposite. you've got to reduce debt,

reduce the deficit overhang. so we've got to be able to walk and chew gum at the same time. and i think the american people are smart enough to figure that out. in the short-term, adding deficits and debt was exactly the right thing to do to avert a collapse. and we did avert a collapse. but longer term just the reverse is what's required. >> senator, i'd like to ask you about an alternative idea for reducing deficits that some people have floated particularly in the house. there's talk about imposing a tax on financial transactions, wall street transactions that raises a very large amount of money as you probably know and could do a lot to reduce deficits over the long run. what are your thoughts about that idea? >> i believe that idea only has merit if it's done in coordination with other major financial centers. i think if that was done just here, that would run the risk of pushes markets out of the united states in terms of their

headquarters and pushing them overseas which would be counterproductive. so while such a transaction tax might have merit, it only does in my judgment if you are doing it in conjunction with other financial centers. >> now senator, you said that you would like to get this debt commission attached to legislation that would boost the nation's credit line debt ceiling by a substantial amount. as you're well aware, the house opt today go for a smaller amount to give you guys time to negotiate. the senate's going to act on this and your partner, the republican judd gregg, is going to try to attach this to the smaller increases. will you vote for that as well for attaching it to the smaller increase? >> absolutely. i think it would be hugely beneficial if we would pass our commission idea on any debt limit increase. but what i have said and our group has said is we're not going to -- we're not going to

let the debt of the united states be defaulted on because we don't get our way. we have indicated we're not going to support any long-term extension of the debt without our approach being adopted or something like our approach. >> ok. but if your commission gets attached to the smaller increase, then the house is going to have to come back and either agree on it or reject it before the new year. because as you know, time is run out. isn't that sort of a bit too much of a game of brinksmanship there or do you want to attach it anyhow? >> i don't think so. look, we're talking about something that fundamentally threatens the economic security of our country. that is my belief. and to offer our commission on a debt limit extension, even short-term, if it were to pass you're quite right, what would be required then is for the house to come back at some point before the end of the year. i don't think that's too much to

ask given the extraordinary seriousness of what we confront as a nation. >> final question, john. >> but realistically do you think that your better opportunity comes next year when you face a long-term extension of the debt creeling? >> yes, absolutely. because you think about it, on a short-term extension there'll be some members who are supportive of the commission who won't vote for it because they won't want to force the house to come back. so we'll lose votes in that context. i think our better chance certainly comes next year. and that's what we've said. look, we've been very clear. we're not going to allow the united states to default on its debt. that would be a disaster for this country. that would be a disaster for the united states. but at the same time, we're not going to support any long-term extension without some means of facing up to our long-term debt. >> joining us from capitol hill has been the chairman of the senate budget committee, senator kent conrad thank you for

joining us on "news makers." >> thanks for having me. >> we continue the conversation with andy sullivan of reuters and john mckin none of the walt street journal. andy, let me begin with you. is this commission going to happen this. >> i am not the whip of the senate so i can't give you an actual vote count. but it seems like this is becoming more and more an issue of concern for the public that is exerting the grassroots pressure on lawmakers. so i think it stand a chance, sure. >> john mckin none? >> i tend to agree. i think speaker pelosi has recently started to talk more favorably, even though these still has reservations about the details i think she's starting to talk more favorable about it. that certainly bodes well for the idea. and the administration is also showing signs of increased interest in a commission. there was a document that was leaked a few days ago that suggested that they're actively considering it and that they have concerns about how politically achievable all of the goals really are.

but they're certainly coming around it seems. >> but is it a commission that either of you think will have real political muscle and the ability to reign in spending? >> well, if the members of the commission are the people that senator conrad described, the key money folks in congress, the people who oversee writing taxes and then spending that money, i think then that does stand a chance because those are people with a lot of power who note issue. >> this of course coming in the midst of the healthcare debate, but as congress comes back next year, jot jobs, the economy and spending, will those be the dominant issues for the next session? >> yes, absolutely. and this comes under the category -- well, a couple of categories. it comes under the category of the economy and of spending. there's great concern about our long-term spending path and there's concern about what that will mean for the economy. so this is a way or addressing both of those. it won't reassure a lot of people who are most focused on jobs.