this is something that we have to address in the coming years. it is not something that we have to do overnight, but is a conversation that we have to start sooner than later. host: use the word scary in the headline of this washington times article that came out on march 26. that will rise to 90% of gdp. how scary is that for you and how does the government and the citizens turn this around? guest: if we were at 2019 and we were still not addressing this, i would be worried. it is something that we can manage. is not something that we should address in the veil of a recession. we do not have to cut the deficit immediately to zero. it is manageable. it would be unwise given the growth picture. we do have to start a national conversation of what our spending priorities, our tax priorities, and how we ultimately get the deficit to a sustainable path?

the deficit is what ultimately piles up year after year. if you look at the cbo numbers, these deficits are fairly large, even by 2020. we have to think about, what do we want in terms of revenue? what do we want on spending? host: andrew biggs of american enterprise institute, if we do not start addressing the situation now, how much is it going to hurt us in the future? tesco 90% of gdp is an interesting crossing point -- guest: 90% of gdp is an interesting crossing point. they looked at debt crises and fiscal crises throughout the world are the lot history print 90% of gdp was a crossing over point for countries tended to feel the bite of higher debt. for years, which could borrow

and borrow and we would not see the effects of the economy. at around that level, you start to see higher interest rates, higher inflation. that makes it all the more difficult to get on top of these problems. it is a difficult scenario. what worries me is not that we have a deficit today, we would have that regardless of who was in power. what worries me is this budget projecting enormous debts and high annual deficits even to 2020, 10 years from now. this says that under the obama administration's own plan, we're still want to have a very high debt. with all the compromising that goes on in congress, it is not want to get better. it is likely to be worse than what we're seeing here today. host: some of the numbers provided by the cbo show that public debt projections under president obama's budget by the

end of 2009, $7.50 trillion or 53% of gdp. the 2020 projection, $20.30 trillion or 90% of gdp. deficit projections, $132 billion will be added to the deficit this fiscal year. total by the end of the fiscal year will be $1.50 trillion or 10.3% of gdp. we will continue our discussion of that. if you want to get involved in our conversation, the numbers -- it and also send us a message

our first call comes from coral on the democrat line. i think our problem, as a country, we have to recognize the fact that over the last 30 years or so, we would to a conservative economic philosophy. -- we went to conservative economic philosophy. it has been failing us. they say we should cut spending and not to anything about taxes. we have a business sector here who really has not been contributing their part to society for the past 30 years. i would like to see what their answers are to their to -- to my comments. host: if you are blaming future

deficit on debt on the conservative economic philosophy, the increase in spending going forward is driven almost entirely by social security and medicare and medicaid. without those programs, the government budget would be roughly in balance going into the future. i do not think it is easy to blame those programs on conservatives. second, tax revenues, even if we kept the bush tax cuts, even if we made them permit, still would rise relative to the size of the comet. -- size of the economy. it is not too little taxes, it is not reductions, it is the -- is that spending is rising. we can make different decisions on how to face that. rising spending is the source of our future deficit.

host: dallas, texas, republican line. caller: i take exception with what andrew biggs said. such a security -- so security is solid until 2037. -- social security is solid until 2037. what's our law makers and congress and the past presidents have not been really good stewards of our money. they have borrowed our payroll taxes for other programs and then they put treasury bonds and now people -- i would like for him to answer what i said. guest: social security does have a trust fund which consists of a special issue non tradable government bonds. when social security runs a

surplus, that cash to goes to the rest of the budget, which spends it. they are a function of the retirement of baby boomers, lager lifespans, if your work for supporting this program. that is driving rising cost break the trust fund bonds will be honored. it will be paid back by the federal government. they need to raise taxes, cutting other spending or running a budget deficit. we face the same burden with or without a trust fund. i am not saying that we should default on the trust fund. the costs are increasing in social security and the other entitlement programs. host: christian weller? guest: when it comes to our long-term spending problems, i think we need to be very clear that health care is different than social security.

yes, we will see some rising cost when it comes to social security because of the baby boomers' retirement. health care is a different issue. there is medical inflation that really drive the cost and we have to get that under control. that goes back to the first caller's question of what do conservatives -- what did conservatives do when they were in charge? they cut taxes after the administration had generated significant surplus to ultimately begin addressing the crisis or the challenges of the aging society. when the bush administration came in, they ignored those challenges, cut taxes in a rather ineffective manner. this quarter the opportunity to put the fiscal house in order. -- they squandered the opportunity to put the fiscal

house in order. we have lost 10 years to address these issues. . . caller: how could you sell insurance when you don't have the money to back it up? aaa is sold all over the world. there is no accountability, no fiduciary responsibility. why is that not been addressed by congress or the senate?

host: how much responsibility does aig bear in our current debt situation? guest: it is part of the problem. it is hard to score by the various agencies have much money we are going to lose. it is not really like we are spending the money. we are buying shares of aig, citibank, and other banks. we are getting the money back. we just had a discussion over making it $7 million from citibank. is difficult to know how this will play out in the long run. that does not detract from the larger problem. insurance companies and banks all working irresponsiblely and brought down the entire u.s. economy. we do have to address the issue of financial regulatory reform if we want to put the budget in order but also pu the u.s.

economic growth on the growth path in the long run. we node to budget. i'm a little less worried about aig's affect on the budget. i'm more concerned about congress being able to pass a delay. >> we are talking with andrew biggs and christian weller. a senior fellow. you can read more about both of them on their respective websites. back to the phones. from virginia for republicans. good morning. caller: good morning. thanks for coming in.

one of you said well, we have time to work on this and turn it around. i've never believed that. if you take care of business now and start this now, later, it will be better. everybody stops driving the car when gas prices went through the roof. when it is fixed, they start driving again and burning fuel the same way again. i read through the healthcare bill as much as i could understand. it's not really scarry to me but it seems to me a little bit of a socialist grab. i guess for people out there that don't have insurance that could use it. that's a huge expense. i'd like to see if any of you can justify what the benefits are compared to the cost. thank you. >> andrew biggs?

guest: i'll start with a point you made towards the end that was if we have time for this. i remember back in the bush efforts. people were saying you are crisismongering. we have the same issue here. we are not in the crisis yet but the ship of state moves very, very slowly. in we want to avoid that 90% debt to gdp point in the future, we have to start today. we could take up an entire show talking about this. i'll make one point. even if the health points reduces production. which is around $140 billion, i don't believe it is going to do

that. that is about $140 billion is about as much as the federal government will baro this month. it's a tiny reduction compared to the overall baroing. it uses up things that could be used to fix entitlements. the savings don't go to medicare. they are spent elsewhere. we have to go back to people and ask them for more. i suspect they are going to be unwilling to do it. the real problem is the healthcare reform bill could be used for something else. you cannot have ultimately a sense of a budget reform without really addressing the healthcare inflation problem. the healthcare reform act is a down payment on that. we have $140 billion according to the latestests. you are going to get a more

you are going to get a more sposs tiff it's not the entire answer, but it gets us part thereby broadening coverage, having a more responsive health care system, and ultimately starting to link -- look at inflation and what is called been in the cost curve. i think that is the right direction to start thinking about how we will get a handle on the budget. host: our next call is from loretta in cleveland, ohio. caller: i question for mr. biggs. my question is, what was the deficit when the last deficit projections was put in by president bush? just before president obama took

office, everybody is talking about the debt and the deficit, but what president obama has initiated is less, based on what we need. he put in the minimal amount to get the country going, but all we hear about is the deficit, the debt, the deficit, the debt. what did president bush by his last year when he left in january 2010? he put in something, and who is going to pay for the wars? who is going to pay -- you talk about medicare, but there is not medicare. it is medicare advantage. the ceo score it had lower for republicans. when they finally come out with the numbers.

it was three times the amount that they had originally said it would be. what president obama did is cut out the waist and abuse in medicare advantage. host: we'll leave it there. andrew, go ahead. guest: one point i think i made early on, i don't hold current deficits against the obama administration. they inherited a difficult economy and financial crisis. you are going to run large budget deficits this year and next regardless. the concern is looking out long term.

we are saying if you get everything you want from congress, you are still going to run a deficit. these problems are never going to fix themselves it helps to set the record straight another 35% is pafert stimulus and deteriorated economy.

the lesson here, however, is that the bush administration left legacy of tremendous debt. ultimately, it's a story of missed opportunity. the drug benefit was not paid for and the precipitation drug benefit. and then you have tax cuts that by all accounts have not produced the general results they were promised. the legacy of tax cuts and spending are still with us and create budget problems. that means going forward, we cannot relitigate where we were by going forward, we have to

take a hard look. the ones proven to be ineffective, we need to take them back. for instance, paying for some of the healthcare benefits and finally starting to increase healthcare. >> andrew biggs, would you focus on reducing spending or is there going to have to be significant tax increase? these deficits are so large, you have to do both. they are very large deficits. my case for spending reduction if you are in an aging society, you want people to work more and save more. if you raise taxes, they are going to tend to work less,

save less and retire earlier. there's a resent study by two economists who looked over a 40 year period that did what you call a fiscal console i hadation. they found that the efforts at cutting spending were more effective than the ones lowering taxes my experience tells me we should focus on the spending side. >> christian, do we lean on reducing spending? or increasing taxes?

you are still collecting payroll taxes. that tells you this is fairly large. you have to look at where we would actually start cutting. there are some bare bones programs on the spending side that leaves us ultimately looking at the revenue side. you need to start with the tax cut that's were enacted in the last 10 years.

we start with the diff i dend tax cuts and capital gain tax cuts. we take them back and start filling the whole on the revenue side. that's a good start to get us going in deficit reduction. host: james on the republican line. caller: i'd like to have my full time here, please. i'd like to say that our spending goes back to when a prior caller said about the wars in iraq and afghanistan and the whole war on terror. look at the pretext to going into iraq and iran. i had a conference with general joans about this. you have to look at what caused that attack on 9/11. and the resulting.

host: james, we understand you are violating one of our rules and so we are going to cut you off. and move on. caller: good morning. last year in august and september, the government had to borrow money to pay social security because not enough was coming in the till. not enough coming in from payroll to supply those people on social security at the time. i'm one of those. i just turned 62. we are going to increase those numbers to around 70 million within the next 10-15 years if

the social security trust fund is solve ant, why do they have to baro money to pay the recipient. you cannot put ious in there. it's broke. the system is broke. it's not going to come back. it's going to have a huge -- that doesn't even count medicare and medicaid. it's a pyramid sceem. it will collapse. it has to. >> the simple answer is that the trust funds are real and backed by the government. nobody is talking about defaulting on them. we can pay full benefits until 2037 with the trust fund. that requires the federal government to come up with the money in other forms. this was never a surprise. that was always the plan

starting in the early 1980s. the challenge we faced under ron alt reagan and under bush. part of the other deal was that the administration would make whatever is necessary to protect that money. that deal wasn't upheld. we have a problem on the budget side that is now spilling over to special security. it's not a problem created by social security.

we node to get a hand l and start looking at this in a serious fashion. host: we have a twitter message, the problem is when you suggest entitlement cuts, democrats suggest that republicans -- republicans whine that democrats are killing old people. guest: really? if there is that rhetoric, it's certainlyly going both ways. i don't think healthcare reform has to mean dying sooner. i'm skeptical about the current cuts they need to see more of

these costs. we think about what we are getting with our money. as long as they have a system where people are not baring a cost of the healthcare. no, we don't need to die sooner. host: i just want to ask you, if the numbers hold up going into 2010, how is that going to affect this administration or any other easy ability to try and get more people working and grow the job ranks? guest: it looks like the 30,000 foot level. we need to grow the economy.

we have to get back more than 10 million jobs to catch up to where we are the second challenge is to reign in the short-term deficits. then we are left with these long term structure problems to a large degree created by the healthcare issues. there is some disagreement on how we ultimately face the healthcare issue. healthcare by it self is a fairly complex issue. you expect them all to be brain surgeons and financial wizards. you ask only push so far. you ultimately really need to create more transparency and mp