there are all kinds of efforts there. foreign relations is basically an area that is more forcefully bipartisan. typically the partisanship stops at ourç shore, and that is a gd thing. on energy, there are opportunities there to do things. the whole notion of dealing with climate change this year is going to be put to the side, which means maybe we will have opportunity to do things on energy security together. but yes. this is the one that is before us. it is a substance issue. hopefully, it is one that is reasonable -- sensibility will prevail and we will work together to get something done. as long as the financial institutions in this country do not know what the guidelines are, what the ground rules are, i think it restricts credit.

i know it restricts credit. people do not know what the lay of the land will be in future. from the standpoint of causing our economy to be able to come back, let's get this settled in a good way, not in a punitive way. a lot a populist people are saying let's get a pound of flesh. let's step back and do something that works. hopefully, it will be the beginning of other things happening in a bipartisan way. host: harold ford may run for the senate in new york. what do you think? guest: i'm fortunate. i have financial regulation and other issues to deal with. i will let the great citizens of the state of new york decide what they think. it will be interesting to watch, if it happens. i get that question every day while i am really tired today, especially with all that has happened, i will not take the bait. i will let the citizens of new

york prevailed. host: senator bob corker, republican of tennessee. thank you for joining us here on c-span. guest: thank you. >> next, the president and a number of congressional leaders discussed a jobs bill. after that, a senate hearing on the impact of the federal deficit. followed by remarks by u.s. central commander general david petraeus. his film, "hillary the movie" was the focus of the recent supreme court decision on campaign finance. davis bossie tonight on "q &a."

"american presidnetents -- lie fe portraits" -- see the entire collection on line. >> the president met with congressional leaders on tuesday. they discussed the jobs bill. the presence spoke to reporters before the meeting got under way. -- the president spoke to reporters. >> hello, everybody. i want to thank both democratic and senate leaders -- democratic house leaders as well as republican leaders from the house and senate for joining us. as i said in my state of the union, part of what we would like to see is the ability of congress to move forward in a more bipartisan fashion on some of the key challenges that the country is facing right now.

it is fair to say that the american people are frustrated with the lack of progress on key issues. although, the parties will not agree on every single item, there should be areas where we can agree. we can get some things done that, even as we have vigorous debates on some of those issues we do not agree on. a good place to start, and what i hope to spend a lot of time on in these discussions today, is how we can move forward on a jobs package that encourages small businesses to hire, that is helping to create the kind of environment where that -- not all -- now that we have economic growth, people are adding to the payroll. i think there are ideas on both the republican and democrat side that allow us to potentially, for example, lower rates for small businesses on their taxes to help spur growth.

my hope is that we will see some packages moving over the next several weeks that can jump- start a hiring and lowering the unemployment rate. another area where i hope we can find agreement is on the issue of getting our deficits and debt under control. both parties have stated their concerns about it. i think both parties recognize that it is going to take a lot of work. i have put forward the idea of a fiscal commission. i am going to be discussing, both with my democratic and republican colleagues, how we can get that moving as quickly as possible so we can take concrete action. i think the american people want to see that. i am also going to be talking about more monday matters -- mundane matters, things like having it government personnel in critical positions in place

that involve our basic government function, and seeing if we can accelerate that and try to find agreement in those areas. then i'm going to spend some time listening, because there may be party is that both republican and democratic leaders have -- there may be priorities they have. this is not going to be a rare situation. we will have these meetings on a regular basis. i'm thankful everybody took the time to come. i hope we move forward in this spirit, keeping in mind what is best for the american people. we should be able to accomplish a lot. thank you very much, everybody. >> following the meeting, senator minority leader mitch mcconnell and john boehner spoke briefly with reporters about the meeting.

>> good morning, everyone. we had a good meeting with the president. what i would like to emphasize is there are some areas of potential agreement. he mentioned in the state of the union his support for a nuclear power -- for offshore drilling, for clean coal technology and for trade agreements, presumably with colombia, panama, and korea, the ones that have been languishing for a year and a half. these are areas where there could be broad bipartisan support to go for it on a collaborative basis. obviously, there will be areas of disagreement. emphasizing the things we might be able to work on together, i would mention that those four areas, all of which would be job-generator -- nuclear power, offshore drilling, clean coal technology -- and pass those

languishing trade agreements that create jobs. >> we also have a long conversation about spending. the american people know that washington has been on a spending binge for over a year. i urge the president, if you are serious about cutting spending, why don't we do it now? why don't we start with a rescission package? he is the ability to send it rescissions up to the hill. i urge him to put one recission in each bill. send it up to the hilt, led members of vote up or down -- send it up to the hill. we do not need a spending commission. we can cut spending now. we did not talk about health care. that will be discussed in several weeks. we are trying to understand the white house -- what we as we are, -- what it is we are trying to accomplish with the health care meeting. eric and i sent a letter down

here yesterday. we are hopeful we will get some answers as we consider what to do about the february 25 meeting. >> [inaudible] start over with health care reform? >> we are interested in a bipartisan conversation with regard to health care. but a bipartisan conversation ought to be bipartisan from the beginning. we have been asking to be involved going back to a letter that we sent to the president last may. we got no response to it. we outlined our concerns about this conversation that the president wants to have. we certainly want to have a bipartisan conversation, but we need to know where we will start from. >> will you attend the meeting? >> we would like to. we are interested in having these bipartisan conversations. >> will you appoint members to a fiscal commission? >> we are considering it.

>> did you make progress on the jobs legislation, did you exchange ideas? >> there were a lot of conversations about various parts of it. the house has already passed a stimulus bill. i yield to the senator. >> we discussed the senate package that has been percolating. it is a work in progress with some members of the finance committee. frankly, it is not ready yet. most of my members have not seen it yet, but we are open to it. there is a chance we could move this forward on a bipartisan basis. we hope it is not just another stimulus bill. we hope it is truly a job generator. i think there is a chance the senate could get there with a small package. >> concerns about health care costs? [inaudible] >> a good way to start would be

to listen to the american people. they are overwhelmingly opposed to the 2700-page bill that the house and senate have looked at. what we need to do is start over, go step-by-step on a truly bipartisan basis and try to reach an agreement. my members are open to doing that. >> start over at 0, at nothing? >> focus on costs. costs of the problem. the rising cost of health care in america. we need to targets junk lawsuits against doctors and hospitals. equalizing the tax code to make it more possible for purchase of insurance on the individual market. have detainment -- the same type of tax that corporate insurers do. >> if the white house will not start over, how are you going to

reach an agreement? >> we need to start over. you need to listen to the american people. the surveys are overwhelming. the last npr poll last week indicated that by 58 to 38, the american people were opposed to this bill. why would they want to keep pushing something that the public is overwhelmingly against? obviously, the answer to that is put that measure on the shelf and start over, go step by step, and get it right. >> democrats are saying that -- things you have proposed such as allowing people to purchase insurance across state lines is in the bill that has come together in the discussions between the senate and the house. have you heard that on the hill, and do you have a response? >> we are going to have a health care meeting on the 25th. what i am telling you is we need to put that bill on the shelf,

the 2700-page bill, start over with more modest goals and go step by step and do with the problems the american people would like us to deal with. >> the president wants to have bipartisan conversations. it is going to be difficult to have a bipartisan conversation with regard to what 2700-page health care bill that the democrat majority in the house and the democrat majority in the senate cannot pass. why are we going to talk about a bill that cannot pass? it is time to scrap the bill and start over. let's talk about common sense things that we can do to make health care more affordable for the american people and expand access. >> is he sincerely listening to your concerns? >> we will see. >> on the jobs package, once -- what specific areas -- ? >> it is hard to predict.

it is a work in progress. we want to make sure is not just another stimulus bill that will not create many jobs. it is too early to tell what that package will look like. the weather is interfering this week with our ability to do business as well. >> thank you. >> on that same day, the president made a surprise visit to the daily white house briefing to take reporters' questions. this portion is 35 minutes. >> hello, everybody. i am glad to see that all of you braved the weather to be here. i had a meeting with the

democratic and republican congressional leaders. it went very well. in fact, i understand that mitch mcconnell and reid are doing snow angels in the south lawn together. can you picture that, chuck? not really. the meeting did go well. i appreciated than making the trek. we had a frank conversation. it is one that hope we continue on a regular basis. we understand there are legitimate into genuine differences between the parties. despite the political posturing that paralyzes this town, there are many issues upon which we can and should agree. that is what the american people are demanding a bus. i think they are tired of everyday been election day in washington -- that is what the american people are demanding it from us. they expect the seriousness of purpose that transcends party politics. that is why i am going to

continue seeking the best ideas as we work to tackle the pressing challenges ahead. i am confident that when one of 10 of our fellow citizens cannot work, which should be able to come together and help business create more jobs. we ought to agree on providing small businesses with additional tax credits and lines of credit. we ought to agree on investments in crumbling roads and bridges. we should agree on tax breaks for making homes more energy efficient, all of which will put more americans to work. many of the job proposals i have laid out have passed the house and will be debated in the senate. we spent a lot of time in this meeting discussing a jobs package andç how we could move forward on that. if there are additional ideas, i will consider them as well. what i will not consider is doing nothing in the face of a lot of hardship across the country. we also talked about restoring fiscal responsibility.

there are a few matters on which there is as much of the curious, bipartisan agreement, at least in public. unfortunately, there is also a lot of partisan wrangling behind closed doors. this is what we know for sure. for us to solve this extraordinary problem that is so many years in the making, it will take the cooperation of both parties. i am pleased that congress supported my request to restore the pay-as-you-go role, which was instrumental in turning deficits into surpluses during the 1990's. i have called for bipartisan fiscal commission. unfortunately, this measure which are originally had received the report -- the support of a majority in the senate and was co-sponsored by senators conrad and gregg, democrats and republicans, was blocked. i'm going to be creating this commission by executive order. i asked the leadership of both parties to join in this effort

to address our long-term deficits, because when politics is put aside, the reality of our fiscal challenge is not subject to interest -- interpretation. there ought to be a debate about how to close our deficits. we cannot accept -- what we cannot accept is business as usual. we cannot afford grandstanding at the expense of getting something done. during our meeting, we touched briefly on how we could move forward on health reform. i have already announced that in two weeks i will be holding at a meeting with people from both parties. as i told the leadership, i am looking for to constructive debate, with plants that need to be measured against this test -- does it bring down costs for all americans as well as for the federal government, which spends a huge amount of health care? does it provide adequate protection against abuses by the insurance industry? does it make coverage affordable and available to those who do

not have that right now? and does that help us get on the path of the fiscal to do what -- fiscal sustainability? this week there was a report that anthem-blue cross in california is planning on raising premiums for many individual policyholders by as much as 39% if we do not act, this is a preview of coming attractions. premiums will continue to rise for folks with insurance appella million. millions more -- millions more will lose it. we have an obligation, both parties, to tackle this issue in a serious way. bipartisanship depends on a willingness among democrats and republicans to put aside matters of party for the good of the country. i will not hesitate to embrace a good idea up from my friends in the minority party, but i also will not hesitate to condemn what i consider to be obstinacy

that is rooted not in substantive disagreements but and political expediency. we talked about this as well, particularly when it comes to the confirmation process. i respect the senate's role to advise and consent, but qualified, noncontroversial nominee s positions, related to our national security, have been held up despite having overwhelming support. my nominee for one important job, the head of the general services administration which helps runs the government, was to that which a denied the vote for nine months. when she finally got the vote, she was confirmed 96-0. that is not advise and consent. that is the late and obstruct. one senator, as you are aware, put a hold on every single nominee we put forward, do a dispute over a couple of earmarked in his state. in our meeting, i asked the

congressional leadership to put a stop on these calls. -- on these holds. surely we can set aside part -- partisanship and confirm these nominations. if the senate does not act, i will consider making several recess appointments during the upcoming recess, because he cannot afford to allow politics to stand in a way of a well- functioning government. my hope is that this will be the first in a series of meetings i have with the leadership of both parties in congress. we have got to get past the tire debates that have plagued our politics and left behind nothing but soaring debt and mounting challenges, greater hardships among the american people and extraordinary frustrations among the american people. those frustrations are what led me to run for president. as long as i am here in washington, i intend to make

this government work on their behalf. i will take a couple of questions, guys. >> after meeting with you, john boehner came out and told us, the house cannot pass a health care bill it was passed. the senate cannot pass the health care bill. why would we have a conversation about legislation that cannot pass? as a part of that, he said, you and your white house should start over entirely from skirt -- from scratch on health care reform. how do you respond? >> here is our responded to john in the meeting. there are some core goals that have to be met. we have got to control costs, both for families and businesses, but also for our government. everybody talks about deficits has to acknowledge that the single-biggest driver of our deficit is health care spending we cannot deal with our deficits and debt long term unless we get

a handle on that. that has to be part of the package. numberç two, we have to deal wh insurance abuses that affect millions of americans who have health insurance. number three, we have to make health insurance more available to folks in the individual market. -- in california, who are seen their premiums going up 39%. that applies to the majority of small businesses as well as sole proprietors. they are struggling. i have got these gold. we have a package, as we work through the differences between the house and senate, and we will put it up on a website for all to see, that meets those criteria. but when i was in baltimore talking to house republicans, they indicated we can accomplish some ofç these goals at no cos. and i said, great. let me see it. i have no interest in doing something that is more

expensive and harder to accomplish if somebody else has an easier way to do it. i will be starting from scratch in the sense thatç i willç ben to any ideas that help promote these goals. what i will not do, what i do not think it makes sense and the american people do not want to see, would be another year of partisan wrangling or around these issues, another six months or eight months or nine months worth of hearings in every single committee in the house and senate in which there is a lot of posturing. let's get the relevant parties together. let's put the best ideas together. my hope is we can find enough overlap that we can say, this is the right way to move forward, even if i do not get everything i want. here is the point i made to john boehner and ms. mcconnell -- bipartisanship cannot be that i

agree to all the things that they believe in or want, and they agreed to none of the things i believe it or want. that is the price of bipartisanship. that is sometimes the wait it's presented. mitch mcconnell said something very nice about how he supports our goals on nuclear energy and clean coal technology and more drilling to increase oil production. of course he likes that. that is part of the republican agenda for energy, which i except. -- i accept. i am willing to move off some of the preferences of my party in order to meet them halfway. but there has got to be some give from their side as well. that is true on health care, energy, on financial reform. that is what i am hoping gets accomplished. >> -- the bill cannot pass anymore?

>> what i agree with is that the public has soured on the process they saw over the last year. i think that actually contaminates how they view the substance of the bills. i think it is important for all of these issues to be aired so that people have confidence, if we are moving forward on such a significantç part of the econoy as health care, that there is complete transparency and all of these issues have been adequately imbedded and debated. this gives an opportunity, not just for democrats to say here is what we think we should do, but it gives republicans a showcase to say, here is our plan. here is why we think it will work. one of the things that john boehner and mitch mcconnell both said as they do not think the status quo is acceptable. that is promising. that indicates that, if all sides agree that we cannot just agree with business as usual, then maybe we can get something done. >> mr. president? >> one of the reasons blue cross

said it is raising its premiums is because so many people are dropping out of individual coverage because the economy is so bad. the people in the pool who need medical care are driving up costs. one of the reasons businesses are not expanding, in addition to the credit issue you talked about, according to business leaders, is they say there is an uncertainty of what they need to plan for because of the energy bill, because of health care -- that is what they say. what do you say when you hear that? >> i think the biggest uncertainty has then we just went through the biggest recession since the great depression. people were not sure whether of the financial system would melt down or whether we would tip into an endless procession. let's be clear about the sources of uncertainty in terms of business investment. t(a huge contraction, trillions of dollars of losses in people's ç401k's.

people have a lot of debt coming out of the previous decade they have not worked out -- the housing market losing a bunch of value. the good news is that where we were contracting by six%, the economy is growing by 6%. sag they are making investments. i anticipate they're going to start hiring and a more rapid clip. what have also heard is them saying, we would like to feel like washington is working and able to get some things done. there are two ways of interpreting the issue of uncertainty. one way would be to say, you know what? we will go back to what we were doing before on the financial markets. we will not have the regulations we need. we will not make any changes in terms of too big to fail. that will provide certainty until the next financial crisis. that is not the kind of certainty i think the financial markets need.

the kind of certainty they need is for us to go ahead and agree on a bipartisan effort to put some rules of the road in place so that consumers are protected in a financial market, so that we do not have banks that are too big to fail, that we have ways of winding them down and protecting the overall system without taxpayer bailout. that requires legislation. the sooner we can get that done, the better. the same is true with health care. a lot to say, we would like to get health care settled one way or the other, but they will acknowledge that when they open up their latest invoice for their premiums and they find out those premiums have gone up 20% or 25%, that is the kind of uncertainty that also camps down business investment. -- tamps down business investment. the sooner the business community has a sense that we have our act together here in washington and can move forward

on big, serious issues in a substantive way, without posturing and partisan wrangling, the better off the entire country is going to be. i agree on that. what i think is important is not to buy into this notion that is perpetrated by some of the business interests that got a stake in this, who are fighting financial reform, to say, we would be doing fine if we did not try to regulate the banks. that i think would be a mistake. >> just to play devil'si]ç adve -- a small business. you have proposed a, you would knowledge a bold agenda. a small business might wonder, i do not know how the energy bill will affect me, all helped reform will affect me. i a better hold off on hiring spurred g.

>> i have been talking to a lot of small businesses. çtheir biggest problem is they cannot take credit of the banks. . . is your party going to go for that? >> i think that on energy, there should be bipartisan agreement that we have to take both hands,

rather than either/or. what do i mean by that? i am very firm in my conviction that the country that leads the way by and clean energy -- solar, wind, geothermal, that country is going to win the race. we have to move in that direction. what is also true is that given our energy needs in order to continue economic growth, producing jobs, making sure that our businesses are competitive around the world, we are going to need some of the more traditional energy sources as we are developing new ones, wrapping them up. we cannot overnight convert to an all solar or all wind economy. we will have needs in these traditional sources. the question then is are we going to be able to put

together a package that includes safe, secure, nuclear power? that includes new technologies, coal which we have in abundance that is very cheap? but is then adding to greenhouse gases. can you find sequestration technologies to clean it up? can we identify opportunities to increase oil and natural gas production in a way that is naturally sustainable? that should be a part of the package of the development of clean energy. my hope is that my republican friends, but also democrats will say to themselves let's be practical, let's do both. not just for the other. -- not just one or the other. overtime fossil fuels will

become less prominent in the overall energy package, but we have got to do both. >> what kind of consensus to you need? >> i am an eternal optimist. it is the right thing to do. all that i can do is keep on making the argument about what is right for the country and assume that over time people, regardless of party, regardless of their particular political position, are going to gravitate toward the truth. i will take two more. [laughter] i wanted to make sure i was getting a balanced. -- balance. [laughter]

why is everyone moaning about todd? >> we got the news that they're doing more of this uranium enhancement in iran. secretary gates today basically said that the dialogue seems to be over. where are we in sanctions? how close is this? i know that you had an end of the year deadline. it is now february, how quickly as is moving along? >> fairly quickly. we have bent over backwards to say to the islamic republic of iran that we are willing to have a constructive conversation about how they can align themselves with international

norms and rules, re-entering as full members of the international community. the most obvious attempt was when we said we would provide the conversion of some of the low enriched uranium that they already had into the isotopes that they need for their medical research and hospitals, serving up to 1 million iranian citizens. they rejected it. one of the difficulties in dealing with them over the last several months, it is not always clear who is speaking on behalf of the government. we get a lot of mixed signals. it is clear that they have not said yes to an agreement where

russia, china, germany, france, great britain, and the united states, all said was the what -- right thing to do and that iran should except. that indicates to us that, despite their posturing, their nuclear power being only for civilian use, they in fact continue to pursue a course that will lead to weapon is asian. that is not acceptable to the international community, not just the united states. we said from the start that we are moving on dual tracks. if you want to except these kinds of agreements with the international community that lead to down a path of being a member of good standing, we welcome it. >> if not?

>> and if not, the next step is sanctions. they have made their choice so far. what we are going to be working on over the next several weeks is developing a significant regime of sanctions that will indicate to them how isolated they are from the international community. meaning that we are going to be looking at a variety of ways in which countries indicate to iran that their approach is unacceptable and the u.n. will be one aspect of a broader effort. we are confident right now that the international community is unified around the iranian this behavior in this area.

how china operates at the security council as we pursue sanctions is something we will have to see. i am pleased to help forward leading the russians had been on this issue. clearly they have seen that iran has not been serious about solving what is a soldable -- solveable dispute. >> on health care, republicans are asking for a february 25 session that would include economists and people supporting their side. i asked the blue cross of the had the authority. >> i do not have the authority, as i understand. i cannot simply issue an

executive order lowering everyone's rates or would have done that already, saving myself some greek on capitol hill. that is why the status quo is unacceptable. there is no shortcut in dealing with this issue. i know that the american people get frustrated. frustrated in debating something like health care. you get a whole bunch of different claims being made by different groups and interests. it is a bit complicated, it is a tough issue. it also proves that without some action on the part of congress, it is very unlikely that we will see any improvement over the current trajectory. the current trajectories that premiums keep on going up, 10%,

20%, 30%. i do not know the people know this, during the health-care debate, people are saying that the president -- the government is trying to take over health care. for the first time this year we saw more people getting health care from the government than you did from the private sector. not because of anything that we did, but because more and more people are losing their health care from their employers. it is becoming unaffordable. that is what we are trying to prevent. we want people to be able to get health care from their employers but we understand you have to fix the system so that people are able to get affordable rates in small businesses can give their employees insurance at affordable rates. that is not happening ran out. to your question about the 25th, my hope is that this does not end up being the political theater that some of you have

framed it. i want a substantive discussion. we have refined exactly how the agenda is going to go that day. i want to talk with both democratic and republican leaders at the white house with what they think will be most useful. i want to make sure that there are people like the congressional budget office, for example, who are non-partisan, who can answer questions. in this entire health care debate and i am reminded of this story that was told about senator moynihan, who was in an argument with one of his colleagues. his colleague was losing the argument, he got flustered and said the senator he did not want to be there. well, he said you are entitled to your own opinion, but i think that is the key to a successful

dialogue on the 25th on health care. let's establish some common fax. let's establish with the issues are, what the problems are, and spread it out before the american people. what ideas are working? what ideas are not working? if we can establish that factual accuracy about how different approaches would work, we can make some progress. it may be that some of the facts to come up are ones that make my party and comfortable. so, if it is established by working seriously on medical malpractice and tort reform that we can reduce those costs, from the beginning of the debate i have said that i would be willing to work on that.

on the other hand, i am told that if that is only a fraction of the problem and not the biggest driver of health care costs, i will insist that we need to look at that as an aspect of it. but what else should we be doing? this gets back to the point i made earlier. bipartisanship is not simply mean that democrats give up everything they believe in, defining the handful of things that republicans have been advocating for and we can do those things, and then we have bipartisanship. that is not how woodworks in any other realms of life. that is not how it works in my marriage, although i usually do give in. there has got to be some give- and-take. that is what i am hoping to be accomplished.

i am confident that that is what the american people are looking for. all right? i will make this the last jobs question. >> republicans are saying that the jobs package, they're worried about the cost and that is why they're moving consequently forward on jobs. >> might understanding is that the jobs package has good elements in it. my understanding is that there is bipartisan fought taking place as we speak on the senate side about some elements of the package. there are things that many people agree on. just to give you an example, gains for small businesses. something that we can all agree on. my hope would be that we could agree on a mechanism for banks that are lending to small

businesses getting more capital. , something i keep on hearing is one of the biggest problems it -- problems that small businesses have out there. it is realistic for us to get a package moving quickly that may not include all the things that need to be done. it may be that first package the democrats and republicans on capitol hill to work together run. it may take a series of incremental steps, but the one thing that i am not so clear about is we have an economy that a strong right now, a boost in productivity, which is the good news. the bad news is that companies have not taken that final step to financially put people on to the payroll full time. we are seeing an increase in temporary workers, but they have

not taken on that full time work. so, providing some additional assistance to them as the economy is moving in a positive direction, that could yield some good results. >> when will we see you again? >> across the street? [laughter] >> this set of budget -- this past thursday, harry reid announced that he was introducing a modified jobs bill that was scaled back from the initial. this is about 10 minutes.

>> 45 years, is that true, david? everyone, dave mcconnell will have worked for wto p for 45 years this morning. we are going to move this afternoon to a smaller package that had been talked about in the press. we are going to do a bill that

has four things in it. the build america bond, which has been so dramatically successful. we are going to do the highway bill extension for one year. we are going to do section 1794 small businesses, the tax program that allows people to lay out their expenses very quickly. we are going to do that schumer job-creating measure in one package. when we finish that, we will move on to the tax extenders, because we feel that the american people need a message. the message is needed is we are doing something about jobs. we do not yet have a jobs bill, we have a jobs agenda.

the message is so watered down, we have to finish that. technically there could be a roll call vote, but we a people that cannot get here. roads are treacherous. many offices in the senate are still closed and it is difficult for the staff to get here. some people that live on some of the main arteries, that's fine. but there are places where the subway is not running and in many places the bosses are not running. yet massive amounts of staff that give you a public transportation and they could i get here. >> [inaudible]

>> the question -- and i changing the bill because of the caucus? i want to make sure they are supportive. >> [inaudible] >> republicans are going to have to make a choice. we have a bipartisan bill that will create jobs according to the cbo immediately. not when the design is done, not in the planning is done, but immediately. the three provisions to create jobs -- the provision dealing with high waves saves 1 million jobs. the republicans, i do not know, logically call what they could say to oppose this. but what we have seen since obama was elected, they have opposed everything. it speaks volumes that on

nominations alone, in the first four months of the administration, there were many times that they blocked boats. flex any chances of passing a regulatory reform bill this year? >> i have had several conversations with senator dodd, i feel comfortable that we will be able to put forward a truly good financial regulation bill. >> [inaudible] >> one week afterwards. we will pay for our own stuff. >> people are concerned about jobs, rightly or wrongly. [inaudible] as people go through their

various problems? >> the question, should the senate and house be out next week? people have schedules. when people leave washington that are members of congress, they do not go to the beach and drink tea and smoke cigars, people have work to do. my schedule is extremely busy. it is a difficult call for me as to when we should be in or out. >> i hope that we will not be able to have a very good fight. [inaudible]

>> with chris dodd talking about regulatory reform and the package, is this a new day for republicans? i hope so. i have a long list of disappointments where we start out by holding hands and we wind up pointing fingers at each other. the proof is in the pudding. we have a jobs bill, no one can dispute that. we are not going to confuse this with tax extenders. one of my favorite stories, it was in "the new york times, one of you wrote about democrats that were nervous over the jobs bill, but mostly it was lobbyists downtown. nobody has written about what we will bring up downtown. the bill that is merged into one that is creating jobs immediately. one last question.

>> [inaudible] >> i love thomas harkin. i am completely familiar with his idea for 67 votes, which answers the question. thank you, everybody. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> the u.s. senate is in recess for the week. later in the day we will have a procedural vote on the jobs

bill. live coverage of the u.s. senate is on c-span 2. sunday, on "newsmakers" bob corker talks about republicans and democrats and agreements they might find on regulating wall street. >> there is the issue of consumer protection and having a freestanding agency being a non starter, that is how it is with me. i do not have to be more clear. chris dodd knows that. i do not want to speak for him, but he knows that a bill will not pass the senate that has freestanding consumer protection. i sensed a willingness on both sides of the aisle to seek a balance so that consumer protection is certainly increased, as there were lapses there, but it does not in any way overwhelm the endowment side of bank regulations and

financial institution regulations. we cannot let it trump safety and the sound nature. there is a desire to see that back. what we need to do, i think, is negotiations, working through the issues on the front end that we know that we can reach easy consensus on. jack reed and judd gregg are going to get consensus on derivatives. mark warner and i will get to consensus on systemic risk, making sure that the notion of too big to fail leaves the american vocabulary and the american people know that if it fails, the economy fails. >> you can see the entire interview sunday, 10:00 a.m. and 6:00 p.m. eastern on c-span. today, on "newsmakers," bob corker talks about the agreement between republicans and democrats on regulating wall street.

i do not want to speak for senator chris dodd, but leno's a bill will not pass the senate that has freestanding consumer protection. i sense a willingness on both sides of the aisle to seek a balance of consumer protection. certainly it has increased, as there were lapses. but it does not in any way overwhelm the endowment side of bank regulations in financial institutions. we cannot let it trump state endowments. i sense a desire to seek a balance. what we need to do in these negotiations is build a little bit of trust, if we can work through these issues on the front end, we know that we can

reach consensus. jack reed and judd gregg are going to get a consensus. mark warner and i will get to consensus on systemic risk and resolutions making sure that the entire notion of too big to fail leaves the american vocabulary and people know that if a company fails, it will fail. >> you can see the entire interview on newsmakers, today at 6:00 p.m., 3:00 pacific. >> updated and released in time for presidents day, c-span's "who is buried in grant's tomb"? the unique and comprehensive guide to the resting places of this nation's presidents. norton smith is a contributor. >> a wonderful way to consumer eyes and personalize the past, taking events and movements that

otherwise might seem impossibly remote. there is something universal about the fact that we are all one day going to be on our deathbed, we will all have to face growing old. we all have to face in mortality and mortality. those are some of the themes that run through all of this. frankly, it is also entertaining book. there are a lot of stories and anecdotes designed to humanize these people. >> available at your favorite bookseller, or order it directly from the publisher of public affairs. >> nell, a set -- senate hearing on the federal budget and deficit with shortfalls projected into the future, they hear about the shortfalls of how big deficit can get, becoming

dangerous to the country. this is about two hours. >> i wanted to thank the witnesses, for making this special effort in light of the weather in the metropolitan area, it is difficult to move around. i was of this morning early, shoveling. i know that many of you were as well. getting a bit of a late start as the trains are not running either. i was in the weekly caucus in a surprising number of senators were there from the commission.

it made having the hearing challenging. we meant to do it yesterday, but we kept putting it off as transportation was not functioning, witnesses and members could not get here, but other colleagues will be joining us. there are still caucuses going on in there are members in the caucuses discussing important jobs legislation. they will be joining us as we proceed. those of us from north dakota feel right at home in these conditions, but in fairness this city has done a remarkably good job given the amount of snow that has fallen. i certainly found that once you are able to get your car out, you can move around. hats off to the washington, d.c. government for doing a remarkably good job in extremely difficult conditions. this would be hard even back home. our hearing is about setting

inappropriate target for fiscal sustainability. we are joined by a very distinguished panel of witnesses. i really cannot think of a better group of witnesses for a panel like this one. dr. whitner is from the brookings institution, and she is the co-chair of of the newly established bipartisan policy center debt reduction task force. they are doing very important works and could not come to a better time. the former vice chairman of the federal reserve, the first director of the congressional budget office. what a remarkable series of contributions. dr. riblen brings an incredible amount of experience to the table.

mayam mcginnis appeared before this committee last november, providing very valuable testimony at the time. dr. pennner is the co-chairman of the fiscal responsibility unit of united states and former director of of the congressional budget office and someone who has very high credibility in this committee. so, we are very pleased to have him with us as well. again, special thanks for your being here. i expected this is a critically important during as they are about to work on a budget resolution for the next five to 10 years. in addition, we most certainly

have a commission that will be willing to work to try to love with a plan to be voted for by congress before the end of this year to get us back on track. so, this hearing is very much in line with our larger challenge this year. today we are focusing on what the appropriate target is for long-term fiscal sustainability. in an ideal world, our budget would be balanced most of the time, but we need -- now we need to determine the level of deficit and debt that is sustainable over the long term, adapting policies over time that will keep it below the target levels as much as possible.

if we fail to confront these numbers, we put the nation's economy at risk with consequences that could be much worse than anything we have seen in recent times. each of our witnesses have been involved in efforts to identify such targets. so, we have an ideal panel for considering this subject. briefly i would like to begin by outlining the problems that we face in the fiscal sustainability targets the been proposed. at its core the problem stems from an imbalance between spending and revenue. spending for 2010 is projected to be over 25% of the gross domestic product of the united states, higher than at any point in 60 years. meanwhile, revenues are

projected to be 15.6%, the lowest they have been in 60 years. whatever solution had in a long- term must involve spending and revenue. they both think should be to the problem and they both have to be part of the solution. the next chart shows deficits over the next 10 years under the president's budget. we can see that according to the office of management and budget, the deficit is projected to drop from 10.6% to 3.6% in 2018, then beginning to creep up again after that. 3% was a goal that was set last year. as they examine the president's budget, the deficit levels will

likely go higher. is a 3% gdp goal appropriate in the first place? the next chart shows that many outside budget groups, like the committee and the fiscal future of the united states, which dr. pennner of shares, have identified a 60% debt to gdp level as an appropriate target for fiscal sustainability. to be clear, that is debt held by the public, not the gross federal debt. this year, if we are to be measured against the gross federal debt, it will be 90% of gdp. we have not been that high since

after world war two -- will war ii. the next charge of the gap between projected that -- debt adjusted for wrought -- alternative policies at the 60% gdp level. clearly, the gap is growing exponentially. sustain any plans -- sustainability plants have been proposed, such as stabilizing the level at 60% by 2018, reducing it further over the longer term. there is a proposed goal of 60% by 2020 to as well. with a deficit of 1.9% in that

year. the center for american progress proposes overall budget balanced by 2020 with estimates that it would be stabilized as a share by 65%. the annual deficits of the larger than 3% of gdp are estimated to stabilize debt to gdp at 70%. that is a lot of numbers, a lot of things to try to get your mind around. i provided the background to show the different goals regarding for real levels to be shooting for. i am not here to endorse any of those four together plans, but in terms of achieving fiscal

sustainability, it can provide specific timeline for action. there are recommendation that the committee immediately commits to stabilization at 60% by 2018, developing a sustainable package by 2010, phasing in policy changes in 2012, reviewing annual progress and implementing regimes to stay on track, stabilizing the debt by 2018, continuing to reduce debt as a share of the economy over the longer term. none of this will be easy. it is interesting how similar the goals are, many of them focusing on debt to gdp a 60%. stabilizing debt at that level will require difficult

decisions. as said in the last hearing, i have gone through an exercise that i will be sharing with my colleagues, trying to get 3% of gdp by the first year of this budget, balancing before the end of the tenure time period. i can tell you, it is daunting and striking how tough decisions will have to be. it is really striking out of things are going to happen to be. >> mr. chairman, may i ask you a question on that? >> yes. >> as i recall, the projected budget over the next five years, if not 10 to 15 years, does not even bring down the deficit to 3% of gdp, correct?

>> correct. the president's budget has got some tough things in it, but that does not get it down to even 3%. then it starts to go up in the second five years. as i said, if one seriously goes to the exercise, which i ask all of our colleagues to do, i ask them to do their own exercises, see what decisions have to be made to achieve any of the goals that have been outlined. i tell you, it will release over people have really tough these decisions are going have to be. it is clear that the longer we

wait, the harder these choices become. the chart that i want to show that shows one example of the magnitude of difference between what is required if we start gradually phasing in 2012 as opposed to waiting three years. for this example, waiting three more years can result in additional $580 billion in deficit reduction. the final chart is summarizing the point at the bottom line, which is that we are on an unsustainable course. our foremost budget and economic experts have come before congress to tell us that this is the case. here's what they had to say. timothy geithner said that the deficits are not sustainable. our cbo director said the the federal budget is on an unsustainable pathway. peter orszag said that the past that we are on is not

sustainable. the federal reserve chairman, ben bernanke, said that we cannot allow ourselves to be in a situation where the debts continue to rise and are unsustainable. the former treasury secretary said that it is clearly unsustainable in. the former head of the gao said it we are on an imprudent and unsustainable long-term fiscal path. as the former chairman of the federal reserve, alan greenspan said the the budget is on an unsustainable path. notice any similarities? unsustainable, unsustainable, unsustainable. look, i know that there is a sense of denial amongst our colleagues. about the seriousness of the threat.

i see it every day. i just came from a meeting where i saw it. this is tough, but it has got to be dealt with. if we let this get away from us, we will rue the day, rue the day. regretting forever the consequences for the country. whether it is through a proposal from the president or some other method, we have got to deal with the consequences of a failure to act. so, we have to back. the sooner, the better. we will go out to our witnesses. doctor, thank you so much for being here. it would be hard to have a

better background and the one that you have in terms of allowing us to see what needs to be done. >> i greatly admire your committee's persistent efforts to focus the congress and the nation on the importance of moving the budget on to a sustainable trajectory. i hope that the president's commission can receive strong, congressional bipartisan support. those of us the cared deeply about this issue cannot give up. i believe appreciate the opportunity to be here today. as you have pointed out, and have so many others, on any reasonable set of economic assumptions, the u.s. budget is

on an unsustainable track. there is not really any disagreements about that or the reasons for it. rising health-care costs on social security, medicare, and medicaid, are going to rise faster than the economy can grow. revenues of any tax rates will cause a widening debt. these projections are not new, they predate the financial crisis. two or three years ago, deficits thought appropriate more manageable slide to within 3% of gdp, the debt was not all of the charts, around 40% of gdp.

the warnings of this committee and the rest of us have found it looming in the future as just not gaining any traction. but the financial crisis of 2007 and 2008, and the recession that it precipitated, have changed the budget outlook dramatically. the deficit, as you pointed out, peaked at 10 percent of the gdp. -- 10% of gdp. the big deficits will receive as the economy recovers and temporary spending measures expire, but it will not receive far enough, as you pointed out. moreover, the double impact of aging and medical spending, which we once thought of as a long run problem, is already driving deficits and debt higher and will accelerate by

the end of the decade. solutions must be found, and soon. the risk grows for foreign creditors. they will lose confidence in our ability to get ourselves in order. we have to take action very soon to eliminate that build up. stabilizing the debt increase seems to be a sensible goal. 60%, while not a magic number, as grain credibility. two groups that you mentioned, including republicans and democratic budget experts, have recommended stabilizing the dead at 60% by a certain date. but by when?

one could take another number, but 60% is good enough. the commission that was a member of suggests that getting to 50% by 2018 is very aggressive. the national academy commission suggested a slightly more gradual trajectory to get there by 2022. even as more gradual trajectory would require substantial changes in current budget policy. i believe that a credible and viable plan to stabilize must have two characteristics. first, as you pointed out, it must include projections spending and revenue increases. and it must have the support of the leadership of both political parties.

the widening gap between projected spending and projected revenues is too large to be cold by either spending cuts or revenue alone. given the rapid aging of the population in the near term, the high demand for medical care and other necessary and widely supported functions of government, it is not realistic to bring spending into line with the growth of gdp in the next decade. in addition, the tax system is extremely inefficient and complex, with gaps that should be closed by reforming the system so that it produces more revenue with economic growth. no one needs to tell a member of the senate that partisanship has been extreme in the last few years.

neither party wants to take the lead in proposing unpopular policies, such as cutting entitlement or increasing revenues. each is eager to blame the other. putting the budget on a sustainable track requires unpopular action. the only way to accomplish them is for both parties to work together. personally, i have never been a big fan of commission. it would be much better of the congress to stabilize the debt by using its regular budget process. but a bipartisan commission with fast-track authority is, it seems to me, would lead to serious debt reductions right now. i hope that there will be an opportunity for the congress to reconsider its rejection of the types like from conrad or in treating the senator's proposal in similar manners and a court of law.

meanwhile, as you mentioned, former senator and chairman of this committee and i have launched a bipartisan debt reduction task force that we hope will demonstrate that republicans and democrats to work together to produce a sensible, viable debt reduction plan. under the auspices of the bipartisan policy center, which was founded by senate leaders like daschle and baker as well as mitchell. , we have an effort that we hope will profoundly show that crafting bipartisan deficit reduction plans is not an impossible task. we have recruited an impressive group of citizens, former elected officials, and budget experts. we will report by the end of the year. we hope to support the efforts of an official commission, statutory or created by

executive order, or what ever, in any case to make our recommendations available to the public and congress for further discussion and debate. we will be happy to assist this committee in any way we can. thank you, mr. chairman. >> thank you for the effort. the clock is ticking. this is the time. one of the things i would like to emphasize, senator gregg and i joined together after two years, working together on a proposal, delighted to get 53 votes in the senate. that was the majority. but it does take a supermajority to pass. we would ask that everyone who had been an original cosponsor stuck with us, but a number of them did not. a number of others were committed to supporting hasan

did not. -- supporting us but did not. going back to offer the statutory commission again in hopes that some mothers will be persuaded to join us, the president could go forward with his executive order, which has now been buttressed by a very specific pledges by the speaker of the house, the majority leader, and the recommendations that will be brought to a vote in the senate and house. which is a very important difference from the way that other commissions operate. ms. mcginnis, welcome, it is wonderful to have you here. please proceed with your testimony. >> thank you so much, senator conrad. it is a privilege to be here again and this is an important topic, moving towards helping people understand the specifics of what it will take to put the budget back on a sustainable path. what i want to talk about today

is how to think about the right goals and how to develop policies to achieve the goals and policies that will be needed and what will need to be asked. first, the need for fiscal goals. clearly the federal budget is on an unsustainable path and while no one can predict at what point will be led to a fiscal crisis, we would all agree that we would rather not find out and we need to get ahead of this first. there are compelling reasons to have specific goals. reassuring credit markets is the first. while history and international experience has shown us that when coming out of the session early we can destabilize, we often seen that announcing committing to a credible plan can have a positive economic impact and buy you some time. the second reason to come forward with a fiscal is that allows policy makers to sell, even when there are -- to say

no, even when there are good points the one line -- one in the budget. i believe that by picking a fiscal goal it elevates the notion of coming up with a plan even before other profits are paid for, elevating it to a top level of priority. agreement on a goal can allow for comparisons of trade-offs in different approaches. health care reform can only slow the growth. other parts will have to come in other parts of the budget, if in thailand and discretionary are not reached. the plan protect all beneficiaries of racer and age. people that are younger will have to sacrifice more. right now it is too easy for anyone to be a demagogue. you considered your plan will cut social security by a certain amount, and it is not fair for that to be the option, which is on an unsustainable course. this is a way to level the

playing field. i would like to take this opportunity to thank you and senator gregg for the important work that you did with the grant commission, and i am sorry that some of your colleagues change their mind and did not support it and i hope that we will be able to turn that into a productive mechanism moving forward. in terms of picking the right goal, there is no single correct gold. the pearson commission has recommended stabilizing 60% of gdp by 2018 and, over the long term, we think is critical that we continue to bring the debt down closer to historical levels because of the fiscal flexibility that we need have by not having excessively high debt levels. one of the things that has helped us to respond. we based the target on international, economic, and political factors. global markets are more likely to embrace a goal that has international credibility, like

60% as. we believe it is the most ambitious and successful target that can be achieved in the timeframe given the significant risk of higher u.s. debt. we also worry that the time frame is too long, the course to be changed in the middle. the goal requires two pieces. bringing the debt down to a reasonable level and stabilizing said that it does not come back up in the long term. . @ @ @ @ @ @ @ @ @ @ @ @ @ @ @ @@

>> the starting point really matters. if we assume the fiscal goal of stabilizing the debt at 60% in 2018, it would require roughly $1.50 trillion over nine years.

and it would take $5 trillion under current policy. that shows huge huge additional debt that is layered on by extending policy without extending -- attempting to offset those costs. we included a blueprint. it shows all the policies -- we lay out the policies under both scenarios it would take to get to that 60% target. it is included in my written remarks. i wanted to put forth a couple principles that i thought were helpful. the first is that changes should be conducive to economic growth, or at least minimize the degree to which it hinders the growth whenever possible. the second is that spending growth is the crux of all long- term budgetary problem, but that spending and revenues have to be part of any budgetary solution. reform should focus on the drivers of programmatic growth, particularly for the long term

stabilization portion of the goal. the sluggish economy should not be used as an excuse to delay coming up with a plan, even though we need to be sensitive about implementing a plan to quickly. so the committee for responsible federal budget does not endorse specific policy changes. i will speak of my own behalf. and i do think it is important to talk about specifics, because the kinds of things that are in the political discussion right now are much smaller than the types of policies it will require. i think policymakers and the public have to beat -- come to an understanding of exactly what it has to take. some of the most promising policies are first, raising the retirement age. as life expectancy increases, we cannot afford to support people in retirement for as long as we have. increasing the retirement age has positive labor market effects.

secondly, restructuring are anti what programs so we slow the growth of benefits for those who need them the least. a time of programs will have to change. you can reduce benefits across the board or reduce the more for people who need them less. i think we should do that in terms of social security. we should look at ways of slowing the growth of benefits at the upper end. in terms of medicare, it helps as well. we're going to have to do more on health care. no matter what happens with the bills being considered, they have not done enough to control costs to really take pressure off the rest of the budget. it is important look at the pieces of the medicare reforms that would be most likely to slow the growth of health care costs, including the medicare commission, including tax treatment of employer-provided health care. we need to have a rational discussion in this country about who should pay how much for health care. we are shifting it around so you

pay for your health care, you pay for your health care. people cannot think the costs come down to them. we need to bring people closer to the costs so we can help control the longer-term. reintroducing discretionary spending caps makes a lot of sense. in the past decade, discretionary spending grew faster than the economy. -- even excluding defense spending. to insure politicians make tough decisions in the budget, we can have strong, enforceable spending caps. they have been their traditional counterparts to pay as you go. both of them should be in place as we go forward. they do not replace an actual budget deal, but they cannot stay on track. broadening the tax base. right now it is replete with credits, exclusions -- tax expenditures lead to $1 trillion less and revenues collected by

the federal government than would otherwise take place. that accounts for the great complexity of the tax code. we can simplify, make it more efficience, and make it more progressive. it is very likely there will still be a budget gap. we have to talk about what kind of broad tax reforms should be on the table. that discussion should look at a number of different revenue options, from increasing rates to a transaction tax, which we started to hear rumbling about and more of that discussion is going on in europe right now, to an energy tax. my preference would be to look at energy tax or cap and trade which is does not -- which does not return all the revenues back to families or businesses. if he cannot get there on spending, you have to fill in with revenues. what is the most efficient way to do that? the higher taxes are, the more

they hurt the economy. we want to be thoughtful about that. two process recommendations. a budget deal should be enforced with a debt trader. -- a debt trigger that applies equally to revenue and spending. so many parts of the budget are exempt from a trigger. we want to have a trigger that was uncomfortable and up that nobody wanted to public, but possible if it had to be pulled, it could be put in place. secondly, we have the expiration of the 2001, 2003 tax cuts. that could serve as a very useful lever, where both parties want to extend to the bulk of the tax cuts. i think it delaying doing that until we have a budget deal in place makes a good deal of sense. if we continue to give away the sweeteners in the budget, it makes it harder to take the tough medicine.

finally, the risks of inaction is becoming more apparent every day. we see what is going on or around the world. we hear what moody's and other credit agencies are warning. we know excessive debt can harm the economy in terms of interest rates, jobs, standard of living. the most prudent course of action would be to commit to a credible plan as quickly as possible, and to phase in gradually as the economy recovers to accommodate it. if we do not get our fiscal house in order, ultimately we will face a fiscal crisis -- a steady deterioration of our standard of living or an abrupt crisis brought on by an external action. nobody wants to see that happen. i think the committee for holding this hearing. ." >> welcome.

we appreciate all the effort you have extended a helping us understand the alternatives to going forward. >> i think the committee for the opportunity to testify. it was organized by the national research council and the national academy of public administration, and i co-chaired the report with john palmer at syracuse university. i share admiration for the work of this committee and it is -- it is a privilege to be here. like a number of other reports, this one makes the argument that today's budget policies are unsustainable. you have heard that argument many times before. so i will not go into it here. the arguments are in my prepared testimony. as recommended, in the report, red ink rising, our committee believes that congress should set a target for the debt-to gdp ratio and not exceeded.

a prudent target would be to hold the debt to 60% of gdp. if the nation experiences good fortune, holding the debt to this level, it would be wise to lower the target further. as maya has said, the choice of 60 percent is a matter of judgment. the committee had to balance the risks of using a higher target against the political difficulty in getting to something lower. a higher debt-gdp ratio means running higher deficits. to make the arithmetic easy -- if the gdp rose at 5% per year, arithmetically a 60% target implies holding the deficit to 3% of the gdp. if we went to 80%, the deficit consistent with that would be 4% of the gdp. as the target for the deficit and debt-gdp ratio is raised,

government would draw on the higher proportion of the available supply of domestic and foreign savings in interest rates would rise. to the extent of the deficit was financed out of domestic savings, there would be less available to finance private investment and that would mean lower productivity than otherwise and lower wage growth and lower standards of living. to the extent that foreign saving is using to finance deficits, americans would have to devote a growing proportion of their incomes to pay interest and dividends to foreigners. american living standards would suffer. and a higher debt to gdp ratio also raises the risk of a total meltdown in the market for our bonds. problems were all rise if recession, wars or some other emergency pushed the ratio above the target and potential buyers began to doubt our ability to put fiscal policy is back on a sustainable path. if people want to see what could happen next, they should look

to ireland and greece, in the face of a debt crisis. ireland has been forced to raise taxes and slash spending. civil service pay has been cut more than 7% and social programs have been decimated. tax increases and spending cuts amount to over 5% of gdp, a huge negative millis. greece may yet ---a stimulus. greece may yet be bailed out by the eu, but i suspect any lender will impose harsh conditions on their fiscal policies. it raises the question -- who would bail us out d? the imf? what with the american think about having our policies dictated by a lender? it is much better to choose the target for a debt-gdp ratio lower than 60%. however, as you suggested, when you look at the policies

necessary to get to that level, they are extremely difficult politically. i believe the most important contribution of our committee was to outline a rich menu of policy options that would get us from here to there. we grouped the options into four packages. at one extreme to, the committee asked, what spending cuts would be necessary to stabilize the ratio as 60%, if the total tax burden were maintained at its historic level between 18% or 19% of gdp? that package is called a low spending option. at the other extreme, the committee estimated what tex krises would be necessary to finance currently promises -- what tax increases would be necessary to finance medicare benefits while other programs -- as determined by current law. there did eventually have to be slow down and health costs, because they cannot be allowed to consume the whole of gdp, but

such a slowdown could be put off for a long time. to your role middle paths were delineated. they differ in that group -- two middle pads were delineated. in the path that was generated -- generous to the elderly, spending for research had to be constrained while the other middle path -- non-elderly spending, could be treated more generously. these packages are put together for a luster to packages only. the policy options contained therein could be put together in an infinite variety of combinations. -- these packages were put together to be elected. the rate of growth as social security should be held to the level that could be financed with the current payroll tax structure that required accelerating by five years the speed with which the full retirement age -- 67 and

indexing it to longevity after then. it involved the indexing of additional benefits for the 70% of earners and switching to an experimental price index which has been about -- developed, in which most people expect to grow more slowly in the long run than the current index. in assessing a package, it is important to differentiate the reduction in the purchasing power of benefits compared to today's level from a reduction in the rate of growth in benefits. although the package seems -- it would more than maintain the purchasing power of today's levels. it would reduce replacement rates below the levels promised by current law the rate of growth in health spending had to be held only by the aging of the population. all other causes of excess

health costs would have to be wiped out. we divide held options in the two categories. they can be readily scored by the cbo. those that can be so uncertain that cbo does not provide estimates. um, it would probably involve using every option mentioned in the chapter to some degree to achieve the health target for the low-spending path. to the degree that options with uncertain the fact work, the score will options could be implemented less painfully. a more radical approach to achieving the health cost target would be to put medicare and medicaid of fixed budgets. they are used in a universal coverage systems of canada and the united kingdom. in canada, every hospital must work on a budget and physicians are limited as to their gross

income. the rationing methods that go with a fixed budgets are anything but transparent. a different approach to a fixed budget would be to use of vouchers system to provide medicare. the voucher would be used by the elderly and disabled to buy insurance, and it -- its value would vary inversely with income. medicaid -- medicaid could be put on a fixed budget. the low-spending option also implies severely constraining all other spending as well. a defense pact would allow the pentagon to maintain the current personnel policies, but would allow very little investment in new weapons systems. although, it would allow small foreign interventions, nothing as large as that current efforts in iraq or afghanistan would be possible. all other non-defense spending would have to be lowered considerably, below today's share of gdp in the package

that attempts to maintain current law benefits, that is the high-spending option, two different financing mechanisms are proposed. in one, we proportionally raise all tax rates. -- until you hit 50% for the top rate. that happens by 2020. we do not want to go above that because of the inefficiencies and inequities that would cause. so we introduce a value-added tax at that point. at first, at less than one percentage point, but ultimately reaching 7.7% by 2014. in the other approach, which i think is preferable, the income tax is radically reformed. almost all tax expenditures would be eliminated. the employer-provided health exclusion would be capped. there would only be two rates -- 10% and 25%.

the top inch -- the top could start at $44,950. they would rise temporarily, but the elimination of all tax expenditures, especially those related to health, generate so much revenue in the long run that the rates could be lowered over time. besides large increases in income tax revenue, the high- spending scenario would require a doubling of the medicare-h.i. tax, increase the social security payroll tax cover the payroll tax cap would be gradually raised until it covers 90% of earnings, the payroll tax rate would have to go from 12.4% ultimately to 14.7% by 2080. and there would have to be a second-tier surtax that did not renew any benefits, which would start at 2%. -- and rise to 5.5%.

this high-spending option would raise the overall federal tax burden by 50% compared to the 17.7% of 20083 and would continue to rise after that. if you add a reasonable estimate of state and local taxes, the u.s. tax burden which is considerably below the oacd, would go above the average by mid-century. speaking for myself and not the committee, i think when you see the extraordinary spending cuts that would be required to keep the tax burden constant and the extraordinary tax increases that would be required to keep all of our promises to the elderly and others, i cannot help but agree with you, mr. chairman, that some mixture of those two things would be required. but i certainly am not speaking

for the committee on that point. we did, therefore, i have these two middle options, which differ in their degree of generosity to the elderly. i can discuss those in detail later if you would like. that testimony concludes by looking at a lot of process changes that our committee considered. we do not think process changes can cure the problem by themselves, but we think they might be helpful in helping the congress to deal with this extraordinarily difficult task. thank you, mr. chairman. >> thank you for your excellent testimony, and even more for the outstanding work to lay out specific options. i tell you, i think if our colleagues go to the exercise you have gone through and i have gone to with my staff, they will

be so summer -- it will be so sobering to them. -- that i think it will help advance the need not act soon. to begin the process. we know that in the midst of an economic downturn, in terms of good economic policy, you do not cut spending or raise taxes. those both have a tendency to further jeopardize recovery. but very soon here, as recovery takes hold, we have to pick and focus like a laser on this debt threat. all of you have made that abundantly clear. senator sessions has joined us. i know he was in another committee. i am delighted he is here. i would like to recognize senator sessions for any opening statement he would like to make.

>> thank you. >> then we will open to questions. >> i will be brief. thank you for the series of hearings you have been holding, mr. chairman, because we are hearing from some of the best people in the world, in america, on perhaps the biggest threat we have to our country at this time. i look forward to working with you, and believe we are going to have to take some steps. on the question, you know we should not cut spending or raise taxes in a time of economic downturn. i think the real question we have is how much can we increase spending? $800 a billion that that was passed -- over my objection -- every penny of that will add to our debt. i truly believe we did not get

the kind of job creation and economic stimulus that was projected. i think many people predicted that. nobel-prize winner mr. becker wrote that he saw that you should hope to get over $1 a stimulus for $1 invested. he thought it would be well below that. that is why he opposed it. reality indicates that is so. i would say to you wise thinkers sitting there, and i do not speak for other members of my party. i do not know -- this is such a big in personal issue. -- and personal issue. i am not for a permanent increase in the size of the united states government. i believe we have a culture, a heritage of limited government. and we have accelerated our debt situation through a number of

bad decisions, in my view. now the answer is, well, we have to have a tax increase. and this will raise up somewhat the percentage of gdp the government extracts every year. and i do not like that. so, you may say, well, sessions, we will cut a little bit but you have to raise taxes a little bit. well, i am not too sure about that. i mean, that is not what my people are saying. they think government wastes too much money, spends too much money and needs to take a shave and not grow. so, i guess i am being honest with you, mr. chairman. we have a big problem here, because this is not an easy thing for me to say i'm going to vote for tax increases. this is deep.

that is not going -- i think a lot of people feel the same. what we will do, i do not know. we will have to deal with the reality you are laid out for us. i will do my best to think about it. ms. mcginnis, thank you for the support. -- of the bipartisan bill we offered it to contain spending at the 2% level that the budget calls for. i think we got 17 democrats to vote for that, close to the 60- vote majority. maybe we can somehow get that across the hump. finally, the containing spending is always next year. we have just got one more year to keep this thing going.

we cannot -- that is concerning to me. i think we have got to look at this year's budget and make sure that not a dime is spent that is not critically important that it be spent. thank you provides thank you, senator sessions. let me say to my friend. quote we have is a circumstance in which -- what we have is a circumstance in which those on a more liberal side of the spectrum do not want to change the trajectory of social security and medicare by a nickel, and we have that those of the more conservative side who did not want to raise taxes by a nickel. and we are in a circumstance, i believe, that is going to require both. i personally believe we are going to have to do more on the spending side long-term then on the revenue side, because if you look at the trajectory, the

reality is i think more is going to have to be done on the spending side than on the revenue side. but i believe, if we really set the kind of goal that we need for the country in terms of level of debt, that if we just did it on the spending side of the equation, as dr. pinner said, that cuts would have to be so deep, so draconian, that it would not be sustainable. on the other hand, i know there are passionate feelings about revenue, not raising revenue. i think the first place we look on the revenue side is a more efficient revenue system, because my calculation, and i know the revenue system will not agree with this, but i believe we are only collecting 76% of what is owed under the current system. if we actually collected the

money we are supposed to collect under the current system, we would not need any tax increase or additional revenue. we would have additional revenue, and we would in large measure, eliminate the gap. that would still mean -- the current gap -- we would still have serious problems on the spending side of the equation, because of the baby boom generation. the undeniable fact is, we will double the number of people eligible for medicare and social security. i have had people who are on the more liberal side of the equations attack me and say i am for cutting medicare and social security, and that is what my goal is. i just say to them, if they are seriously concerned about medicare and social security beneficiaries, then they had better get serious about how we deal with an utterly

unsustainable course we are on. because the fact is, both of them are cash-negative today. medicare will go insolvent in eight years. social security will be insolvent not far behind. both of them are now putting pressure on the general fund. , because we go out of the general fund, the trust funds of medicare and social security, money that we have borrowed from them. and we have borrowed in the hundreds of billions of dollars. and that is going to have an immediate budget affect which is part of the conversation you and i were having the other day, that those who focus on the publicly held debt. i think it is important to repeat, because there is a lot of reference here to various debt stabilization levels, and the 60% of debt to gdp is based

on that the publicly held debt. that is the debt that we owe the public. it does not count the money we owe the trust funds. when you look at all of the debt, which you and i were advocating we have to do, from the budget perspective we do, because the reality is the debt that is the gross debt of the united states includes what we owe to the public. it also includes what we owe to the trust funds of social security and medicare. when you look at it on a gross debt basis, we are already this year. to have a debt that is going to be 9% of the gross domestic product of united states -- that will be 90% of the gdp. we have not been that high since after world war ii. as a share of the publicly held debt, our debt is over 60% of gdp. what most of the witnesses here are advocating is a dead civilization goal of 60% of

gdp, -- and dead civilization goal of 60% of gdp, which i think is a worthy goal. of the publicly held debt. again, i think it is important for members of this committee to know from a budgetary standpoint, that gross debt has to be very much on our minds, because we have to come up with the money to pay back those trust funds. that can only come out of current income. now, let me go to the witnesses. let me ask you this question. you have done at the scenarios. i applaud you for going through and actually coming up with alternative scenarios. it is sobering, is it not? and you are well known as

conservative financially. you are somebody that has been very clear with respect to the long term trajectory. when you go through the efforts to come up with a plan that stabilizes the dead as 60% of gdp, just a whole lot of very unhappy choices, is that not the case? >> yes, sir. i think any reasonable path that involves a significant changes. -- to what you might call the sacred cows of social security and medicare. as i said, i think some increase in the tax burden. i do think that the best way to go about it, as you implied, is through a radical tax reform, because the way economists see it, the inefficiency of the tax system depends on the marginal tax rates. and if we can get rid of a lot

of tax expenditures, we can lower those rates below today's level and still raise additional revenue. >> but let's be very clear. when we talk about that, we are talking about things like the interest deduction on mortgages. we are talking about the fact that today, the health care benefits are untaxed. you get, as we all do, benefits -- most of us do -- benefits from our employers. those are not taxed. that is $2.50 trillion, by the way. -- over the next 10 years. that is real money. >> [inaudible] and grows over time. >> and grows geometrically over time. let me ask you with respect to that, and i will go to the other witnesses as well, we will have

to deal with the social security and medicare. medicare is the 800 pound gorilla. it cannot be allowed to continue to grow at its current rate without swamping the whole system. and those who say they care about medicare beneficiaries, and i believe all of us do, and those who say they care about social security beneficiaries, and i believe all of us do, and those who care about the tax burden on our taxpayers, and i believe all of us do, is it not true, dr. pinner, that we are headed our the course that threatens all of those interests? >> yes, it is, sir. we should not exaggerate the pain involved in this too much, because as i noted, even and are most severe cuts to social security, most of the population ended up with higher real benefits then they get today. that was not true of the most

affluent, because of our progress of indexing system. in our middle-ground scenarios, the real value of benefits does continue to go up over time. >> it social security is the easiest one to deal with. >> that is true. with regard to medicare, that is much more difficult, conceptually and politically. conceptually because we do not know how well all of the frequently suggested options would work. politically for very obvious reasons. again, after you do what you can to get rid of the inefficiencies in the system, the major driver here is a technological change, which makes health care more expensive every year. and so what we are talking about is improving quality of health care over time. and we should not lose sight of

that. it would be easy to finance the quality of health care we have today, but it is what is promised for the future that is so difficult. >> let me go to the 800 pound gorilla, because it is medicare. dr. rivlin, what would you recommend to this committee and to the congress that we do to deal with medicare and its threatened insolvency? >> that is the hardest question, but i think there are a lot of partial answers. and we do not know, really, how effective some of the things that have been suggested in terms of making the health care

system more efficient can be, but they ought to be tried. and certainly, putting in place a strong at medicare commission that picks the best ways of changing the reimbursement rates so that they favor a more efficient health service delivery and cannot be overridden by the congress, which has been happening time after time, as you well know. and other kinds of ways of reducing the rate of growth of medicare spending. we are lucky, and a sense. we have a very inefficient health system. that may sound counterproductive, but compared to other countries, we have a

very large opportunities to make this system more efficient in the near term. and in the end, we are going to have to worry about rationing. i do not think we are going to get there for a couple of decades, probably. we have the opportunity to be more efficient. >> let me ask you this question. i ask all the witnesses this question. senator gregg and i wrote the cbo and said, what would be the most effective things we could do to contain exploding health care costs? their answer was clear and compelling. number one, they said, you have got to begin to tax cadillac plans. you have to reduce the tax exemption for health care. number two, they said, you have got to reform the delivery system. instead of paying for procedures, you have got to begin to pay for quality outcomes. those of the two most important

things you can do. you agree? >> i agree. i think an enormous opportunity was lost by the obama administration in not embracing it senator mccain's notion that the tax exemption on employer- paid health insurance should be gradually phased out. that is a better approach, actually, then taxing the cadillac plans. although, they -- gu>> that is what cbo did recommend. i morris did a little bit. they really said, phase out. -- i morphed it. >> they get to the same objective. you can do it way. it is important that we not have the government of favoring

excessively generous, through the tax system, favoring excessively generous health plans, which encourage people to use too much health care and encourage the providers to deliver it in in an efficient manner. and the other piece is all of the things that go with making the health care delivery system more efficient. not all of which we know yet. we need to experiment with that and figure out how to do it better, because it can be done better. >> we know it can be done better, because in this country we have systems that are relatively low-cost that have the best outcomes. may 0, cleveland clinic's. -- mayo, cleveland clinic's. >> we know something about how they do it. it is a question of spending -- spreading it to other systems. >> with respect to medicare,

what do you think would be leading alternatives for us to consider to deal with the exploding cost? >> i tend to regularly out to the reports of cbo which i think our phenomenal. it is nice to sit between two former cbo directors. that report you requested it was important focused on the right things. our tax preference for health care is one of the things that is driving up the cost. it is putting us into insurance systems -- we are demanding more health insurance and less in wages. that is not a rational policy. that is what the tax incentive is doing, and pushing up costs. it is unfortunate we have not been able to go at that head-on. i am of the camp that you pull that back as much as possible. i basically say that things in the report -- paying for outcomes rather than procedures make sense. the comparative effectiveness studies which were put in place are very important.

there is a second step of that. it is not just you study it and put the report on the shelf. you then have to use what we find it to limit what health care would be compensated for by medicare-medicaid or other insurance. one of the things -- rationing does not have to happen immediately. we cannot make it a bad word. rationing happens in a system like this. you cannot have everything paid for in an unlimited way. we need to be able to have a discussion about what should be covered and i compared health care is one of the most explosive discussions out there. -- unfortunately healthcare is one of the most explosive discussions out there. there are some of the inefficiencies that could be run out. it needs to be acceptable to talk about the trade-offs in health care just like in other areas of our economy. >> senator sessions? >> we had an excellent hearing when? tuesday. dr. reinhardt, university of

maryland and testified. mr. johnson and others. one of the things we discussed, and we should get on the same page about is what do we mean when we say debt to gdp ratio? what is the best number? the european union uses 60% of debt to gdp ratio. and a meeting that we had with some chairman leaders -- german leaders, they count local government debt, too and that. is that right? i did not know that. secondly, i assume there's 60% would include the internal debt, the non-public debt, too. i don't know. how is it driven by the

unique accounting procedures we use? what i am saying to you is when we discuss this with the american people, what is the best number we should start using? i have used the public debt simply because nobody disputed that there was a bottom line at debt figure appeare. what i have learned it in health care legislation, and my belief that the president understated the cost of his plan, it is because cbo does not score the internal debt. but, since we now know that medicare and social security are are on a insolvency trajectory that is very real, not like it was 20 years ago when it this reality was not so close. do we not now need to reevaluate

that and perhaps begin to discuss the issue by utilizing the gross debt, rather than the public debt? dr. rivling? ? >> i think you are stuck with using both numbers, because they have different significance. both are important. if you talk about the public debt, that really is what we owe to the public, including other countries. roughly half of it is owed to other countries. they hold our debt. it is important -- >> is that individuals or nations states? >> it is mostly nation states. >> i am sorry i interrupted. >> it is government and central banks in other countries.

china, japan are the largest ones but not the only ones. it is important to keep that in mind, and that portion of the public debt, because that makes us a very vulnerable to the policies of those countries, and it is one of the reasons for worrying about the public debt. there are different reasons for worrying about the total debt. -- because we are now at the point at which we are. have to start redeeming net debt -- we are at the point where we have to start redeeming that debt. we will have to be buying back those bonds, we the taxpayers, buying back those bonds in order to make sure that the social security and medicare payments are made. so, that total debt is important, too. you cannot oversimplified by

saying there is only one important number. there are two important concepts. >> dr. pinner, it seems to me what we are doing this, since we are not raising revenue or cutting expenses, we are converting the internal debt to public debt inevitably, inexorably because both of our trust funds are not in surplus or soon will not be in surplus. is that the danger of the internal debt? >> that is exactly right. i wanted to point out that when we, in this report, due our baseline, the baseline implies that the dead in the trust funds is going to gradually be sold -- the debt in trust fund will be

sold, so it becomes public debt. it is not that many years where the distinction between gross and net debt disappears. -- because social security and medicare and the overtime. >> but to keep us from being too 0 over -- too overawed, cbo is scoring at, i believe. argonaut? -- are they not? the transfer of internal debt to public debt. if we focused on public debt, we have some sort of protection. but when we increase, as the health care bill would have done, the internal debt, i do not think we can any longer suggest that is not at cost, an increase in the debt of the

country. following up on that, now, social security, i believe it was stephen more who made the point. i do not know at this is been fully approved and economically. if we had a 1% quarter growth rate than our projections now have for the american economy, the social security would not go into default. whatever, we know that growth makes a big difference, particularly in social security. so then economic growth in the economy. of course, would you raise taxes, it diminishes growth. debt diminishes growth.

dr. rheinhardt testified that the level of debt we are in will take as to reduction in economic growth by 1% of gdp, which is a stunning figure, if that is accurate. i think all the panelists agreed it was accurate. three of them did not dispute that and acknowledged that. it seems to me we are caught between this damned if you do, damned if you don't. i am inclined to think we have to -- cut spending. make sure that every dollar gains us something in terms of growth, and increases the debt as -- the least possible. what is your thinking about the comments of growth and the size of debt?

>> growth is a very good thing. we are all for growth, i think. the more the economy grows, the easier it will be to solve this problem. one of the illustrations of that is what happened in the several decades after world war ii, where we have a large debt, over 100% of gdp, and the economy was gorowing rapidly, so the debt to gdp ratio came down. the dead came down right after the war, but after that, it was the growth that was doing it. i want to say one thing about social security, and that is growth is good for bringing revenues in, but our benefits

are indexed to wages. and growth pushes up wages. unless we change the way the formulas are calculated, growth is not have best -- help us on social security. >> do you think the index should be more fairly inflation, rather than wages? >> it is not exactly a question of fairness, but if we are going to bring down the rate of growth of social security benefits, in the distant future, not for people who are retired now, then that i think we could index the benefits, the initial benefits, to prices for people above the middle or above the 60th % out. that would be one way to do that.

-- above the 60th percentile. it would be less generous for people at the top than people at the bottom. it would help a lot. >> i just read "fortune," magazine. they had four of the top and testing -- pimco, and jeremy seagal -- 3 of the 4 said the new normal is low growth for the next decade due to debt. mr. seagal was more optimistic, thinking that technological breakthroughs could help us. it was pretty grim. these are people telling customers how to invest their money, and they were not optimistic. >> let me just say, here is my

recollection. i was going over this with some intensity last year, and my rough recollection was, if we had 1% more growth than the actuaries are estimating. they are estimating very low growth for the next 50 years in united states. >> 2.2%. >> if you had 1% more economic growth, that takes care of 75% of the problem. here is the dirty little secret. from a budgetary standpoint, it does not take care of the problem at all. we still have this circumstance where we have to borrow it from the general fund, we have borrowed money from the social security trust fund. that money is going to have to be paid back. the only way it can be paid back is out of court receipts.

this is what i think most of our colleagues -- the only way it can be paid back is out of current receipts. most of our colleagues do not have their mind wrapped around this. this will have a significant effect on the rest of the budget. the general fund has been able to borrow from the social security trust fund, $180 billion per year. now that is ending. that source of money is ending. -- social security is cash- negative and permanently so in 2016. where is that money going to come from? when the situation is reversed and the general fund has to start paying off these bonds that represent the borrowing that has occurred? we have to help our colleagues understand, we are headed for a very different budget circumstance.

senator whitehouse? >> thank you, chairman. i thank all of the witnesses who gave a very valuable testimony. i want to extend my particular participation to dr. rivlin, and for many years of service. -- her many years of service. i would like to to really focus on dr. pinner. i want to thank you for being here. i thank you very much for presenting -- choosing the nation's fiscal future reports. it is the first time that i have seen a budget document address, in anything other than a cursory way, the value that can be achieved from reform in the health care delivery system.

you put it in the context, on pages 85-86, and later on 95- 102, of the medicare system. but, um, if we are, in fact, engaged in achieving those "very large opportunities to make the system more efficient in the near term," if we are engaged in capturing those, it is my understanding that because they are systemwide reforms -- if a hospital increases quality, reduces infections to zero, we are no longer paying $7,000 per infection -- $70,000 per infection, it is not just the medicare system that saves. is everybody who pays for health care.

if we are good at, and i take the number as being somewhere between $700 billion in excess costs and waste, and $1 trillion in excess cost and waste, which is the treasury secretary o'neal number, if we can get a significant chunk of that -- i know it will take time. it will be an ongoing learning process. is it not true that many of the benefits of that will fall outside of the medicare and medicaid system, and will help with the overall burden of health care cost that the economy has to bear, helping, in fact, private companies that are buying in the private market and buying in the private market and a parallel with the assistanc