but they have been more active in the market, because in the mark -- in effect, they are at the lender in the market. >> that pay interest on this debt to the federal reserve. however, the federal reserve pays it back to the treasury. one of the federal reserve buys more of the public debt. the federal reserve was not mentioned. what prevents the federal reserve to take a more active role in the management of debt? >> frankly, i consider that self dealing. you have one hand buying debt from the right hand, which is trying to distort market conditions. you can end up having an impact on the market in the short term, but you cannot change

market forces over time. frankly, in my opinion, that is a larger version of how the government has taken and all the social security revenues and spent it on something else, and led it to itself. i think that is part of the problem, not part of the solution. if the end up looking at the federal reserve's balance sheet, and if you recognize that fannie mae and freddie mac are not consolidated into the government's balance sheet, our situation is actually worse than the numbers we showed, because they don't consider the federal reserve and fannie mae and freddie mac. [applause] >> the last speaker described the fiscal situation as an existential threat to the country. i think all of you would probably agree with that characterization. most of your solutions have focused on medicare and medicaid

spending and social security spending as to be parts of the budget that i would say our human security spending, and this is very little about spending on military security. i am curious to know from each of you, do you think the military spending should be treated differently from any other part of the budget, and if so, why? >> no, i don't. i think that in looking for solutions, all parts of the budget must be on the table, including revenues. i think that there is certainly opportunities for savings in the pentagon budget. the reason to focus on the larger programs, they are all about the same size right now. if you put medicare and medicaid together, social security and defense are somewhere around $700 billion. you might say it is an equal problem. if you are looking at today's budget, that may be the case.

but when you look at the factors driving the growth of federal spending over time, it is aging of the population and health care costs, which will not have the effect on the military that has on social security, medicare, and medicaid. projections on military spending, it is right around 4% of gdp right now and will probably fall a little bit as the war winds down. whereas the big three entitlement programs are somewhere north of 8% right now and will double in the next 30 years or so. it is not what is contributing to the deficit now, but what is going to contribute to the long- term structural problem that i described at the beginning. that is why i would focus more on those programs, but everything needs to be on the table. >> there is a tremendous amount of waste in defense and homeland

security and many other areas of government. so nothing should be off the table. i think that is important. a lot of our defense spending is based upon past threats. it is not focused on current and future threats. we have huge problems with regard to our acquisition and contrasting systems. the all volunteer force is probably not sustainable from a financial and fiscal standpoint. it is very, very expensive. so yes, it has got to be on the table. >> there is a joke among people who work with entitlements, that with the growth of social security, medicare, and medicaid, present the government will be nothing but a pension plan with an army. if you look at the map, that is what you end up with. i went to grad school in the uk. my older brother is in the military and serbs in kosovo --

served encodes a vote. -- my older brother served in kosovo. you may not agree with the military actions we have in place now. it seems to me that having a capacity to do those things when we feel they need to be done is a very important thing for the federal government to have. if we are spending 4% of gdp on the military now, how much lower do you want it to be, and how much breathing room will that give us on entitlements? the answer is probably not a lot. >> i would like to say that i definitely think that defense needs to be on the table to be talked about. when we are talking earlier about how difficult this was going to be, and the first person asked about the bipartisan challenges here,

tackling that along with the things we are talking about would probably double, triple, or quadruple the complexity of all this. that does not mean we should not put on the table. >> i have a question and comment. it's not just the numbers issue. is blown up -- is both law and cultural -- it is both bull and cultural. seems to me like if we work for fiscal reform, but the outcome might be something we do not necessarily want, slow economic growth or world where the u.s. is no longer the dramatic force that it is today. >> my personal view is, our economic growth is going to be

slower than historically has been the case, that our savings rates will be somewhat higher, our consumption levels will be somewhat lower, and our assumption of debt from personal standpoint is going to be somewhat less because i think the american people get it. they are already adjusted their behavior. whether or not that will change in the future at some point, only time will tell, but their behavior has changed. we have to look at the leading indicators, which are a matter of concern, not just with regard to fiscal policy and public finances but also with regard to education, basic research, critical infrastructure, and a variety of other things that ultimately will determine whether or not we will be in a better competitive posture going forward. when you look at all those things, i think yes, america will state a great country, but if we want to continue to be the

force that we are today, we are going to have to change course and make tough choices. >> it is not really a matter of choice that we do something. it is either we could do something now in advance, our goal over a cliff eventually and wait to see. they will and have a good, legitimate debate about the size of the debt or the size of the deficit that countries should have. but the course we are on, by any definition, is unsustainable. some choices need to be made. that is unavoidable. >> david walker, you put forward a rubric of non-partisan solutions that would get bipartisan buy in. could you or others comment. the sea in criminal law hanging

fruit for nonpartisan solutions, or trade-offs that speak to some of both sides best ideas in being a coalition to start putting those in place? the two easiest things to focus on would be statutory budget controls that would take effect after the economy is recovered and after unemployment is down significantly, because you don't want to take effect before that. secondly, i think there is a social security deal to be had. there has been since 1998, but is just a matter of the president and congressional leadership wanting to go for it. i think we need to do that, not because it represents the biggest challenge, but because we get some points on the board and enhance public confidence. we build credibility, and regain

momentum to be able to take on tougher stuff. >> i agree with that, if you listen to what bill novelli and i both top track, we did agree 100%, but there were elements that we agreed upon. we understand what we need to do to fix this program. we understand the pros and cons. it is a mature policy issue. health care and medicare is a lot trickier. starting with social security really does make sense. >> i have been following the social security debate closely for a long time, and i was struck with bill and andrew, who have not always been on the same side of the social security reform debate. they were saying things that were similar and things where you could get a bipartisan agreement if he could do it out of the context of political advertising and people trying for political reasons.

they have said there is a deal to be made. one of the things that concerns me about the health care bill is that a lot of the so-called low hanging fruit was taken in that bill as an offset to pay for the new benefits. to me, that is the thing that is most fiscally concerned about that, because even if all the savings are achieved, and all the tax increases actually go into effect, you are still on an unsustainable course, and you would have used a lot of that so-called low hanging fruit. i don't think there is much that is low hanging in this context. >> there is no low hanging fruit, but hopefully there is a medium hanging fruit. social security is an example of this. everything on the hill is so gridlocked and politicized.

but there is a chance. their people up there who both understand the social security situation and they do want to do something. it may be that we have to wait until the november elections, but opportunity is there. >> i am a graduate student. as a representative of the next generation, i was just wondering, what can we do as the next generation besides just writing our congressman, and secondly, how are you engaging our generation, such as like social media and other forums like that? >> our youth outreach coordinator was here and he was with me at a forum last night. i know he had to leave for another engagement, i guess he is not still here. we have lots of field staff around.

we have a specific youth outreach program at the concord program. i am not part -- i am probably not the one to describe it. stephan really is in touch with a lot of other youth groups. don't people are involved in lots of issues. -- young people are involved in lots of issues. some are interested in fiscal issues and some have different views on it. that is what your generation brings to the table that the rest of us do not. really is a very engaged generation. we are trying to raise the awareness of fiscal issues, so i would encourage you to get in touch with staff and at the concord coalition. he is much more tapped into the

youth of our reach than i am. >> for everyone out there thinking about these things, i think the key is, do not punish politicians. don't punish them for telling you things you don't want to hear. when i think back to the presidential primaries, both the democratic and republican side, i remember and then senator obama saying everything has to be on the table on social security. he got punished in the primary and he retreated to a position that was simply not realistic. they don't do this because they are bad people. they do it because if they continue to tell you the truth, a lot of people out in the public say i am not going to vote for that guy. the same thing happened on the republican side.

the problem is not simply members of congress who we all can them and act as if we are better than them. the problem really lies out with the american people who are not willing to have difficult things told to them and they are not willing to take difficult choices. >> there are two things, and especially for young people, but really for everybody. things are being done to you, not for you. your future is being mortgaged at record rates. relative investment in your future are being cut down because so much of the budget is on autopilot, and the country is facing increasing competition in the global marketplace. so you need to be informed, you need to be involved, young people need to start using social networking in order to let their voice be heard. in addition, you have to

recognize that in addition to trying to get elected officials to make tough choices sooner than later, but to allow them to tell you the truth and not punish them when they do the right thing. the government is over promised and under delivered. for your own personal financial planning, you need to understand that. the good news is, if you are young, the power of compound can work for you if you start early enough and make wise choices. at the peterson foundation, we have a special effort with regard to young people as it relates to social media, facebook, twitter, movies, youtube pieces, mtv u, we do things on college campuses, etc., and stay tuned for i what u.s. aid solutions which comes out in two weeks.

-- for iowusa. don't people bear a disproportionate share of the burden. -- young people bear a disproportionate share of the burden. >> i am asking about the value added tax. sales taxes have traditionally been the domain of state and local governments. it was reported that state governments, when you look at their explicit and implicit liability, they are also in a world of hurt right now. given the situation that states are in, does it really makes sense to ask them to bail out the federal government are raising their tax base? >> i think the value added tax

is a form of sales tax. it is self enforcing, so you have fewer problems with evasion. it would not be my choice. my choice would be scaled down programs to try to minimize increases in taxes. at the ended the day, if you are going to have a european size welfare state, you have to start taxing away the tax. you cannot finance all these programs was just tweaking tax rates on people making over 200 bid to thousand dollars. -- over $250,000. we have to finance it as efficiently as we can. the question is whether people are really willing to swallow it. >> did you say european welfare system? >> european sized welfare

system. >> this is part of the problem. there was a column last week that sounded like the coming of socialism. the idea of looking at a vat, i think everybody said it, everything needs to be on the table. we really need to take a serious look at this. it will take a long time to take a look at it and come to grips with it. yes, we should look at it. >> state and local governments have their own problems because of medicaid costs, underfunded pension plans, unfunded retiree health care, deferred maintenance and other critical infrastructure costs, higher education expenses, etc. they are going to end at hitting

the wall before the federal government as they can not print money, and because they have to be more concerned about the credit ratings. the states have to be concerned about it now. the problem is, how are going to deal with this fiscal gap? my personal be is, everything has to be on the table. yes, we are going to have to have more revenues because the government has promised to much and waited too long to solve the problem at historic levels of 18% g d p. i think the problem is primarily going to have to be sought on the spending side more than the revenue side. the debate is, what form of revenue? some type of consumption tax, but it needs to be coupled with statutory budget controls and other spending constraints or

else the american people will not go for it. they will not vote for it unless it is coupled with other things. the vat might have to be earmarked for health care. you need to coordinate it with the states, and this is a year cannot have some revenue sharing or some integration in order to try to solve the problem. >> that was exactly the point and i just want to follow up on that. i think we can think outside the box on that. if you did go to the vat tax, you might think of some sort of sharing on that. it will have to be on the table, for the reasons that everyone is explaining. >> i want to thank all of you for joining this conversation. the vision for this forum was to create opportunities for members of the university and academic community to engage with policy

experts to have the conversations we have had to try to find ways of advancing solutions to the important and critical problems facing the country. that is just what we have had here today. we are grateful for the vision. from all of us here, thank you so much for joining us. they get so much to the members of our panel. good afternoon. -- thank you so much to the members of our panel. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> for more information about health care, visit c-span's

website and link to other health care information. this week on america and the courts, a moot court on a hypothetical case on whether nine u.s. citizens can be denied a life-saving vaccine. acting as attorneys and judges in this mood court our law school deans and professors and current and former federal and state judges. watch america and the court saturday at 7:00 p.m. eastern. >> flexible policies actually make employees more, not less, productive, because as you all know, instead of spending time worrying about what is happening at home, your employees have the support and peace of mind that they desperately need to concentrate on their work. >> watch something on c-span that you would like to share with friends? at the new c-span video library, you can search it, watch, click, and share it.

over 160,000 hours of video from yesterday, or last year. every c-span program since 1987. the c-span video library, tables latest gift to america. >> coming up later on c-span, a panel examines ways the u.s. can reduce its dependence on fossil fuel. then, president obama and health care. next, a discussion on the u.s. economy. financial markets and health care with robert samuelson of "newsweek. from "washington journal," this is 50 minutes. >> "washington journal" continues. host: robert samuelson is our first guest this thursday morning. a columnist for a long time at "newsweek" and "the washington post."

what does a nation like greece with 11 million people, and once supported by the european common market, has to tell us about the perils of a financial market? guest: @ think the message is sort of a mixed political and financial message. that is, that if the government, if a society continues to overspend year after year, decade after decade, at some point there is a reckoning. and greece, like many other modern advanced democracies basically spent more than it is taxed. huge deficits and huge debt and now the financial markets are increasingly skeptical and less willing to lend to greece. so greece now is put in a position that they have to cut back either on spending or raise taxes and do both, and these are not small adjustments -- they are wrenching social adjustments. and the same thing may await us

if we did not bring the commitment to the government has made, and our willingness to pay taxes to pay for the commitments, into better balance. we have been hearing a song for decades. we have done very little about it. but the message from greece is sooner or later the reckoning does come. host: what is your assessment of how washington has been responding officially? the president who has occupied the seat on pennsylvania avenue in this building behind me, this increasing concern? we seem to continue to spend, although we keep hearing about the perils of building up our debt. so what is happening politically that the response has been what it has? guest: the response has been entirely consistent -- which is, let us put it off. it is republicans, it is democrats. the republicans like to cut taxes but they don't want to cut spending. the democrats would increase spending but they don't want to increase taxes. you basically have a consensus

even though there is an awful lot of rhetoric, but a consensus among practical politicians that they don't want to do anything unpleasant for their constituencies. it is understandable but the point is sooner or later, if you do so -- to much of that, evade these problems too long, there will be a reckoning and it will be imposed by the financial markets that become less willing to lend to you so your interest rates go up and the budget situation deteriorates even more. host: staying with politics, other than a reckoning, what could change the balance politically? would it take a particular strong later -- legal or public asking for change? guest: the public and very asks for change but they really don't want it. they want the deficit reduced but they don't want spending cuts of the taxes. i think the politics on both parties reflect the underlying public opinion. my on have a conclusion after rating for this for a long time,

as he puts it, is that it probably will take a genuine crisis to force major changes but in the midst of a genuine crisis, the changes will not be pleasant and they will have to be fairly abrupt. host: we welcome your telephone calls, e-mail and tweakets for a columnist robert samuelson, about what is in store for our nation in terms of financial status of its -- status and lifestyle. his book is called "the great inflation & its aftermath." what is your thesis? guest: in the last 50 years, the most important economic event is the rise and fall of double- digit inflation. for those of you listeners who do not remember, we went from a society who basically had no inflation in the early 1960's and by the end of the 1970's we had double-digit -- 12, 13, 14, 15%. at the beginning of the 1980's, paul volcker, then chairman of

the federal reserve board under president reagan, essentially put this country through a crushing recession, unemployment got to 10.8% but it did purge of the society from inflationary psychology and you had a gradual decline of inflation and gradual decline of interest rates that triggered a boom in the stock market and triggered really two decades of prolonged prosperity. and most of that, in my view, stemmed from the triumph over double digit inflation, which stabilized the economy and, like a set, led to much higher stock prices and home prices, but ultimately that prolonged and -- that prolonged prosperity gave rise to the plan into a crisis that broke in 2007 because people got complacent and careless. host: you continued this theme in a recent column march 22 in "the washington post." "the washington post." you sugge