say, it ihere it is an idea for0 billion, an idea for another 20. we met with the president before our meeting convened, and he definitely wanted us to come up with specific proposals. i do not know who will be on the various committees, but we do not have too much stuff. we will be talking to economists. we will be talking to people in business, in the administration, to find out what those proposals are. host: how much money will the commission get to do its work? guest: very little. there are only two, three full-

time staffers right now. host: we covered that commission hearing commissionthe debt -- hearing commissionthe debt -- the debt >> after that, at a forum on the federal budget deficit and the national debt. bitter, the head of the securities and exchange committee is asked about the fraud charges against goldman sachs. >> the people who are coming to us in the housing market wanted to have the security that gave

them exposure to the housing market. that is what they got. the hearing when nearly 11 hours. see the key moments. it is washington your way. every program since 1987, free online. >> president obama on the economy and reelect -- regulating financial. this is about 30 minutes burda >> it is good to be back in quincy. thank you, everybody >> it is good to be back in quincy.

patrick quinn is here. your fine mayor, give him a round of applause lisa madigan. . secretary of state jesse white. i miss you guys. being president is nice.

you live above the store. it is a short commute. one of the toughest things about being president is said and i get a chance to come home as much as i would like and visit with all of you like i used to. i see a lot of familiar faces in the crowd. part of the problem is that when i travel a causes a ruckus. i do remember the last time out is here at think it was in this building that we were building a fan base. i still remember that day. it was a picture of what america is about. you have people from all different walks of life coming together.

everybody was working hard. everybody knew there was a challenge coming. everybody was there because they figured if we were all working together then there was the reason why we cannot handle this. we had handled things before. that is the american spirit on display that is this theory -- spirit of quincy and illinois. it is good to be reminded that and come back to spend time with you. we spent some time in iowa and missouri and now back here. yay., misery. how about i attaci left? we are in illinois.

over the last couple of days we have talked to workers who are busy building when a blaze for these wind turbines and by a few plants, family and small- business owners trying to navigate through tough economy and talk to farmers about what is happening. because it is folks like pawlenty live in towns like quincy and give america its heartbeat, that is why it is so important. if this sounds like this were working men and women built the american dreams with their bare hands. this is where our roots are. a young man came in the city is my cousin. there he is. fourth generation?

i told them he was better looking than me all of us trace back to this experience of parents, and grandparents building this american dream. that dream is shared by every american. we can give our kids opportunities that we did not have ourselves. times are tough in quincy. america. economy since the great depression. even though our economy is growing again, even though our markets are climbing again and our businesses are finally beginning to create jobs again,

there are a lot of folks who still aren't feeling that recovery in their own lives. and i've heard their stories across the country. i've read it in the letters that i get each night. and a lot of them are worried about whether or not they're going to be able to sustain their dream for a better life. many felt that way even before this most recent crisis, even before the economic storm of the past two years. folks were living up to their responsibilities as best they could, working hard, looking after their families, giving back to their communities, but they kept on finding themselves getting hurt in this economy in ways they didn't expect. and part of it was because washington and wall street weren't living up to their responsibilities. [applause] that's why i asked to be your president. that's why so many of you joined the campaign. you joined me because you believed we had it within our

power to change things. you figured could solve the problems that had been holding us back year after year after year, and focus on working americans again. you believed we could keep the american dream alive in our time, and for all time. and so that's what i want to talk about today. when i took office, we were in the midst of this historic financial crisis brought on by reckless and irresponsible speculation on wall street. that in turn had led to a recession that hammered main street across america. and you saw lost jobs and lost homes and lost businesses, and downscaled dreams. the first thing we had to do then was mount an aggressive response - to make sure that this terrible recession didn't

turn into another great depression. and let's face it, that required some tough steps to stabilize the financial sector. and some of those steps weren't popular. i knew they weren't popular. i've got pollsters. they told me, boy, that's really going to be unpopular. but we made those decisions anyway, because the well-being of millions of americans depended on them. even if they didn't poll well, they were the right thing to do. it was the only thing we could do to take those steps. so we took these steps to get america back on its feet. we aimed tax relief right at the middle class, the cornerstone of the american dream. we made sure that we cut taxes for 95 percent of working families, put money in their pockets because they were experiencing hard times -- fewer hours or somebody in the family

being laid off, making sure that they could still buy groceries and pay the bills to keep the economy afloat. we cut taxes for small businesses. we cut taxes for first-time homebuyers. we cut taxes for students and parents paying for college. and all of this -- not only did this help those individual families, but it increased purchasing power and spending power for businesses all across the country. and then we extended unemployment benefits and we made cobra cheaper for folks who had lost their jobs. and then we helped give help to the states. and pat quinn will tell you, because of the federal assistance that was provided, we averted some massive layoffs of teachers and police officers and firefighters all across the country.

so we did what it took to rescue our economy and spark its recovery. and that work goes on. and so i'm pleased to see that we were losing 700,000 jobs a month when i came into office -- now we're gaining jobs. the economy was contracting -- now the economy is growing. the markets are back. we're making progress. we're moving in the right direction. but, keep in mind, i didn't run for president just to get back to where we were when we started. i want us to do better than we were doing. i want folks to have more opportunity. i want people to have more and better jobs. and i want our young people to be getting better educations and more access to college. it's time to rebuild our economy on a new foundation so that

we've got real and sustained growth. it's time to extend opportunity to every corner of main street, in every city and every town and every county in america, so that young people don't feel like they've got to move someplace else to make their way. they can stay right here in quincy. they can stay in monroe. they can stay in macon. they can stay in fort madison. it's time to create conditions so that americans who work hard can gain ground again, and they don't have to take out a bunch of credit card debt. they don't have to endanger their long-term financial future. and that's what -- that's at the heart of all our efforts. it's why we made the biggest investment in clean energy in our history, creating middle- class jobs in middle america that harness the wind and the sun, and biofuels -- that won't be shipped away, jobs that will stay right here in the united states of america, and create energy independence so we don't have to import as much

oil. it's why we took on the special interests and reformed the student loan system so that it works for students, not bankers. i don't know if people paid attention to this. because we were having such a big debate around health care, people may have missed this. the way the student loan system was working, the federal government was guaranteeing these loans but the banks were still taking billions of dollars of profits out of the student loan program. and my attitude is, well, if we're guaranteeing them, then where's the risk? so what are you getting paid for? so we said we'll just lend the money directly to the students. that saved tens of billions of

dollars in wasteful spending that we're now reinvesting in making college more affordable and upgrading america's community colleges, so that every young person in america can get ahead in the 21st century. [applause] and, yes, quincy, that's why we finally passed health reform in america -- [applause] -- reform that will begin to end some of the worst practices in the insurance industry this year. so this year, they're going to -- they will have to stop dropping you when you get sick. this year, children with preexisting conditions, they've got to be able to buy insurance. this year, some of these lifetime limits that mean that you got insurance but you still end up being bankrupt -- those practices are going to end. and in a few years, millions of families and small business

owners are going to have more choice, more competition. you're going to be able to purchase the same kind of high- quality, affordable care that members of congress get. and you know that's going to be pretty good. you know they're going to give themselves good insurance. you're going to be able to buy it, too. and by the way, this reform will reduce our deficit by more than $1 trillion. and, listen, don't -- this notion -- i know the debate was contentious. but the truth of the matter is since i've been here, i've already met -- i was in mount pleasant, iowa, met a woman -- [laughter] -- met a woman at jerry's -- you know jerry's, right? this is a restaurant there, and met a woman and she said -- she came up and she said, "my husband is self-employed. i'm a homemaker. we both have preexisting

conditions. we need help now." and i told her this is exactly why we fought so hard for health care reform. and then today, i met a woman who had breast cancer, and she was wondering how soon can we start moving on some of these programs inside the health care legislation. this isn't some abstraction. sometimes, the folks who were fighting us, they made it sound as if, oh, he just wants big government, this -- no. i just want people to be able to not go bankrupt and lose their house when they get sick. i just want them not to have -- see their premiums doubled. i don't want them to be taken advantage of by insurance companies. i want you to get a fair deal and a fair shake. and that's part of my job as president of the united states of america.

>> i love you! >> i love you back. now, speaking of -- speaking of you getting a fair shake, that's why we need good old common- sense wall street reform. and we need it today. we don't need it next year. we don't need to do another study and examine it. we need it now. and in case you're wondering, let me just take a minute to explain why it's important to you. the crisis we went through, it wasn't part of the normal economic cycle. what happened was you had some people -- not all people -- there's some very decent people here who are in the financial sector -- but you had some people on wall street who took these unbelievable risks with other people's money.

>> damn. [laughter] >> they made bad they were making bets on what was going to happen in the housing market, and they would create these derivatives and all these instruments that nobody understood. but it was basically operating like a big casino. and it was producing big profits and big bonuses for them, but it was all built on shaky economics and some of these subprime loans that had been given out. and because we did not have common-sense rules in place, those irresponsible practices came awfully close to bringing down our entire economy and millions of dreams along with it. we had a system where some on wall street could take these risks without fear of failure, because they keep the profits when it was working, and as soon as it went south, they expected you to cover their losses. so it was one of those heads,

they tail -- tails, you lose. so they failed to consider that behind every dollar that they traded, all that leverage they were generating, acting like it was monopoly money, there were real families out who were trying to finance a home, or pay for their child's college, or open a business, or save for retirement. so what's working fine for them wasn't working for ordinary americans. and we've learned that clearly. it doesn't work out fine for the country. it's got to change. now, what we're doing -- i want to be clear, we're not trying to push financial reform because we begrudge success that's fairly earned. i mean, i do think at a certain point you've made enough money. but part of the american way is you can just keep on making it if you're providing a good

product or you're providing a good service. we don't want people to stop fulfilling the core responsibilities of the financial system to help grow the economy. i've said this before. i've said this on wall street just last week. i believe in the power of the free market. and i believe in a strong financial system. and when it's working right, financial institutions, they help make possible families buying homes, and businesses growing, and new ideas taking flight. an entrepreneur may have a great idea, but he may need to borrow some money to make it happen. it would be hard for a lot of us to buy a house -- our first house, at least, if we weren't able to take out a mortgage. so there's nothing wrong with a financial system that helps the economy expand. and there are a lot of good people in the financial industry who are doing things the right way. and it's in our interest when those firms are strong and when they're healthy. but some of these institutions

that operated irresponsibly, they're not just threatening themselves -- they threaten the whole economy. and they threaten your dreams, your prospects, everything that you worked so hard to build. so we just want them to operate in a way that's fair and honest and in the open, so that we don't have to go through what we've already gone through. we want to make sure the financial system doesn't just work for wall street, but it works for main street, too. it works for quincy. it works for mount pleasant. it works for macon and fort madison. now, let me explain to you what this reform should look like, because one of the things you discover when you get to washington is what's black is white and what's up is down and sometimes people will --

so let me just be very clear in terms of what we're proposing on financial reform. first -- and i know this is important to you because it's important to me -- we're going to make sure the american taxpayer is never again on the hook when a wall street firm fails. never again. we don't want to see another bailout. that's what this reform does. now, you've got some -- you had some who were saying, cynically, just claiming the opposite, that somehow this was a bill that institutionalized bailouts. what this bill did was it said, no, if you have a firm on wall street that fails, the financial industry is going to pay -- not taxpayers. so a vote for reform is a vote to end taxpayer-funded bailouts once and for all. if a crisis like this again happens, financial firms are going to foot the bill. that's point number one.

point number two -- we're going to close the loopholes that allowed derivatives and all these other large, risky deals that don't make a lot of economic sense and that could threaten our entire economy -- we want to bring those deals out into the -- out of the dark alleys of our financial system into the light of day, so that everybody knows exactly what's happening, what risks are being taken -- investors, shareholders, everybody knows what's going on. that's the second thing. number three -- this reform is going to give you more power because we're going to put in place the strongest consumer financial protections in history. because -- and the reason this is important -- the reason this is important, this crisis wasn't just the result of what happened on wall street. it also happened because there were a lot of decisions by folks out on main street who were taking out mortgages they didn't understand, credit cards they didn't understand, auto loans that weren't a good deal. some took on obligations they couldn't afford. but millions of others were

deceived or misled by shifting terms and confusing conditions and forests of fine print. and your attorney general, lisa madigan, has been fighting on behalf of consumers in this state and she knows how badly we need these protections. in fact, lisa and a bunch of other attorney generals came to testify on behalf of the need for these consumer protection bills because they see this stuff in their offices every day. and it's true all across the country. now, some argue that giving consumers more information in clear, concise ways is somehow going to stifle competition. i believe the opposite. see, i think if you know what you're buying, you can make a good decision. and that means that the companies, instead of competing to see who can offer the most confusing products, companies will have to compete the old- fashioned way, by offering the

best product. but that's not going to reduce innovation or competition. you just should be knowing what you're buying. it's like a lemon law, right? you don't want to go into the used car lot and get something where they've changed the odometer and put a fresh coat of paint on some old beater and pretend like it's a new car. well, it's the same thing with financial products. you should know what you're getting. all right, so that's the third thing. finally, we're going to give the people who own these companies, these financial companies - mainly investors and pension holders and shareholders like many of you - we want you to have more say in the way they're run. because some of these firms, they've got these huge salaries, huge bonuses that create a perverse incentive to encourage people to take reckless risks. but if you own stock in these companies, you need to get some say in how they operate.

you'll get to decide how managers are paid and how those firms operate. and that means that we'll actually increase the connection between main street and wall street. they'll be more accountable to you. so that's the reform we've put forward. these are the reforms that we're putting forward, accountability - which means o more bailouts. closing loopholes - no more trading of things like derivatives in the shadows. consumer protections - no more deceptive products. a say on pay - so that we give shareholders a more powerful voice. that's what we're trying to do. now, i don't think this should be a partisan issue. everybody - republicans, and democrats, and independents - were hurt by this crisis. so everybody should want to fix it.

so i'm very pleased that after a few days of delay, it appears an agreement may be at hand to allow this debate to move forward on the senate floor on this critical issue. i'm very pleased by that. and i want to work with anyone -- republican or democrat -- who wants to pursue these reforms in good faith. and there can be some legitimate differences on certain issues, but the bottom line is consumers have to be protected. we have to end bailouts. we've got to make sure that these trading practices are out in the open. we've got to make sure that people have a say in terms of how these firms operate so they're more accountable. so as long as we're adhering to those clear principles, then i feel okay. what i don't want is a deal made that is written by the financial industry lobbyists. we've had enough of that. we've had enough of that.

i want to listen to what they have to say, but i don't them writing the bill. i don't want democrats and republicans agreeing to a bill written by them, for them. i want a bill that's written for you, for the american people. so we're going to see how this debate unfolds. we're going to get this done. and we're going to get it done because you demand it. it's been two years since this crisis, born on wall street, slammed into main street with its full fury.

and while things aren't nearly back to normal out here, they're getting back to normal pretty quick up there. some in washington think this debate is moving too fast. they think, well, this is kind of a political game, let's see how this whole thing can play to our advantage in november. see, that's not how i play. i've been calling for better rules on wall street since 2007, before this crisis happened. so i don't think we're moving too fast. i think we've been moving too slow. it's time to get this done. and i don't think you want to see us wait for another year or two years. i don't think you think washington is moving too fast. i think you want to get this done. [applause. ] you shouldn't have to wait another day for the protections from some of the practices that got us into this mess. we can't let the recovery that's finally beginning to take hold fall prey to a whole new round of recklessness. if we don't learn the lessons of this crisis, we doom ourselves to repeat it. and i refuse to let that happen. so the time for reform is now.

quincy, let me just say this. through all the noise and the lobbyists and the partisanship -- and i know sometimes you're watching tv and saying, sheesh, everybody is yelling and hollering, and why are they so mad? but this debate comes down to a simple choice, are we going to go down the same road, where irresponsibility of a few can put millions of families at risk and stick taxpayers with a tab? or are we going to protect consumers, and strengthen our financial system, and put rules in place that keep this from happening ever again? are we going to give in to the special interests, or are we going to score another victory for the american people? are we going to stick with the status quo? or are we going to bring about fundamental change that makes things work for ordinary americans? we've got the power to do something about this. that's all it comes down to -- the will to act. i still believe we can come together, just like you all came together during those

floods, filling those sandbags -- everybody joining together, everybody breaking a little sweat, everybody helping out. that's how america got built. we are not powerless in the face of our challenges. we don't quit when things get tough. we're not afraid. when something happens, we come together. we move forward. we act. we are americans -- our destiny is written by us, not for us. and if we remember that and summon that spirit once again, we're going to strengthen our economy today and tomorrow, and restore security to the middle class. that's what we're fighting for -- the american dream right here in quincy, right here in illinois, all across the country. god bless you, and god bless the united states of america. thank you. [captioning performed by national captioning institute] [captions copyright national

cable satellite corp. 2010]

>> president obama talking about the senate financial regulations bill. republicans of of the packaging changes to move forward after voicing earlier objections. that he will hear from richard shelby, the ranking member on the banking committee and banking chairman chris dodd. >> i will be brief. i want to thank the republican leader, senator mcconnell, for his time. i want to think my friend senator reid for helping bring is where we are today predicted a one -- where we are today. i want to thank senator dodd.

on many issues dealing with the banking committee. what we're bringing to the floor now is something very complex, very far-reaching. the idea that something should be too big to fail is very important to me. nothing should be too big to fail, in my judgment, in this country. and i want to commend senator dodd. in our negotiations, we have reached some assurances in that he has and his staff have made some recommendations that we like. and we made some they like. i think we made real progress on that. i know we have to seal it, but i think that senator dodd is working in good faith on that. but we've got the derivatives title and we've got the consumer

products deal. and we haven't been able to resolve those yet. i hope we will on the floor of the senate. we moved to a new forum, and it's going to be a very important debate in the weeks ahead here, because this is very, very important to the american people. a senator: mr. president? the presiding officer: the senator from connecticut. mr. dodd: mr. president, let me begin by thanking the majority leader for his work on this. and let me thank the minority leader as well. this has been a bit acrimonious over the last ten days or so as we tried to get to the floor,th bill. and of course i want to thank richard shelby. he and i, as he points out, have been working together over the last 37 months during my stewardship of the banking committee that i inherited in january of 2007. i noted the other day there's some 42 measures that have been brought out of our committee. 37 of them have become the law of the land. this is a good result.

we're now on the bill which the american people want us to be on. this is an important issue. we had the headlines of the hearings here yesterday involving mortgage deals; the other headline about greece and its debt, its bonds were sinking, causing economic problems in europe, potentially here. these problems are huge, mr. president. and as senator shelby has said and i've said over and over again, that is complex area of law we're talking about. and it has to be gotten right. we've had very good conversations on a number of issues going back over many, many weeks. we both shared that we again have institution that is become too big to fail with the implicit guarantee that the federal government will bail them out. i'm satisfied that our bill does that already, but i appreciate there are others who would like to see it tighter, think we can do something to make this better and more workable. i'm anxious to hear that. i know my colleague from

california, barbara boxer, has ideas she would like to raise. i mentioned my colleague from alabama, he has issues he'd like to raise. we've had great conversations as two people with goodwill can have. we're going to have a very busy couple of weeks coming up now. there are a lot of members who have very strong feelings about this bill. our job, my job, our job will be to see to it that people have a chance to offer their amendments, to debate them and to go through that process. i may sound pretty old-fashioned, mr. president in, this regard. as i pointed out last night, i first had a vow to this chamber as i sat here in a blue suit as a page, watching lyndon johnson sit where you are, mr. president and watching mike mansfield and everett dirksen, listening to debates on civil rights in the 1960's when this chamber in

difficult moments worked together for the achievements of our country. i have great reverence for this institution and i want to see it work as our founding fathers intended it to that where you have important debate that, we work together. and that's what i intend to do as the manager of this bill, to make sure that each and every one of my colleagues, whether they sit on this aisle or that side of the aisle, we're fall this chamber together to try to improve the quality of life for the people who have been so badly hurt, the homes lost, the jobs that have evaporated, the retirement accounts that have disappeared from people. they want to see us work together to get a job done to make a difference for our country. and i firmly believe that we can do that. and i will do my very, very best, i say to my friend from alabama, i say to the minority leader as i said to the majority leader, to act with fairness, to work together to try to resolve matters so we can have a good outcome on this bill. obviously we can't predict that. i know there will be some who want to make this a big fight, that that's a great, great issue

maybe for the day or the week. do you it, and who wins, who loses here. that's a great story. but this is not an athletic contest we're involved in. it is a decision to try to put our country on a far more sound footing of security. i look forward to working with senator shelby. we're good friends. i admire him immensely. he understands the job of being a chairman. i'm determined to get the job right, mr. president. i encourage our colleagues who have ideas and amendments to come forward, share them with us. we're going to set up shop over the weekend to make sure we're there. we've so* we've got ideas we can consider, accept, maybe modify, make it work right. from that spirit, we can do a good job here and we can leave this chamber at the end of this congress knowing that we confronted a serious problem and stepped up to the best of our ability to try and solve it for the people we seek to represent. with that, mr. president, i

thank the majority leader and his staffer and others for their work. i thank senator shelby and his work. again, this conversation will continue. we've got a lot of work to do. it's been very worthwhile and very productive over these last number of weeks, and we intend to keep it in that forum. and i thank the minority leader as well. and the republican conference. i know it must have been probably a healthy, good, vibrant conversation for the last hour and a half in there. but even those who question whether or not we can do this, i want this institution to get back again to the idea of listening to each other, debating the issues, taking our >> will get an update on the dead challenges that greece is having. later, and but that arizona is immigration law with john cavanaugh.

>> the peterson foundation hosted a forum on the federal budget deficit in the nafta debt. speakers included former president clinton, bob rubin, and paul volcker. we will also hear from several members of the president's national commission. >> of 1 to welcome me to the 2010 fiscal summit. advocate the great minds around the room. -- i look at the great minds around the room. it is our hope that we can come together in this summit and make progress on reaching consensus in three main areas.

first, the nature and magnitude of our fiscal challenge. second, the feature and a general direction of solutions. third, how do we educate and activate american citizens to do something about it? we have all kinds of ideas and of ideologies represented here. while we may not agree on a whole lot else, most of us agree on one thing -- are present physical course is unsustainable. at a time of multiple bailout, one of comfortable thought lingers in the back of our minds. who is going to bailout america if our policies continue to stumble down this unsustainable path?

once he put it down, do not be able to pick it up. [laughter] i believe the issue be addressed today has become more urgent with time. the real purpose of today's summit is to listen to you. before that, i simply would want to summarize some views of our foundation. it is important to clarify how we define the problem. we make a very important distinction between current budget deficits and are longer- term structural deficits. contrary to some perceptions, the short-term deficits are not my primary concern perino we understand the urgency of the economic hardships, the painful effects of high unemployment, and an urgent need to create jobs. it is the longer-term structural deficit that are

pushing those of us in our foundation of the financial richter scale. in the nixon white house, we had to herb stine, who is also humorous. you may find the term nixon humor is an oxymoron. he said is something is unsustainable, it tends to stop. he also said if your horse dies, i suggest you dismount. keep acting as if we can ride this horse indefinitely. it is time to dismount and address this challenge before the crisis occurs. another concern we have a are ballooning interest cost. in only 12 years, interest costs and entitlements alone consumed 100% of the projected revenue.

these huge interest costs will buy as nothing and would john of critically needed investments in a much more competitive world. and speaking of education in needed infrastructure. what we would be doing is spending our children's future rather than investing in it. it is also important to recognize that by addressing these issues soon we can make a decision on reforms fairly, thoughtfully, and with compassion. in a crisis, the government could be forced to make changes urgently, and injuring important social programs on which so many americans depend. as the lucky son of greek american parents, i decided not to focus on the fact that they were greek given the current financial situation.

[laughter] i am deeply concerned about preserving the social safety net for those in need. make no mistake, no safety net can be considered safe in times of genuine fiscal austerity. college generational theft for fiscal child abuse. beyond the numbers, what with these burdens mean to our kids and grandkids? when need to ask ourselves not is this sustainable, but is it moral? we are not talking here about money. debt of this large could bring about a radical change in this nation, a change in the idea of america and what it is about. generations of americans can be

facing a future less bright than the past. for our kids, there would be fewer jobs, greater burdens, more insecurity, and it diminished grievances. americans have believed that this country of ours is an exceptional place with exceptional possibilities in store. we have lived on the basis of ever expanding horizons. without that, what would americans be? politics in this democracy of ours has always been a tough business. we've been known -- bemoan the loss of civility another day. imagine how much more brutal our politics will become when they are fighting among factions to hold onto their piece of a shrinking economic pie. what of america's leadership in the world has look to america to

light the way and keep it safe. how can we lead effectively when we are more up to our eyeballs to nations that may have a very different interests at heart? there is an old saying that running into debt is not so bad. it is turning into creditors that hurts. for those of us to believe that the world still needs america's leadership, for those of us to truly care about leading a better country to our kids, we have no alternative but to get our economic house in order. america can no longer be america, who can be? how do we undid this whole we find ourselves? we believe that everything should be on the table. expenditure cut must play a major role. some have tax aversion syndrome.

they have never met an increase they did not take into everything in their power to stop. that is an untenable position fiscally and politically. given the bounces weekdays, addressing these without any revenue increases does not add up. it doing so was devastating. the social contract is part of the fabric of our society. any solution should recognize that the core of these programs must remain intact, part of the early for those who need them. meanwhile, some seem to have an entitlement fixation. they have never met a universal entitlement program they did not fall in love with.

if all of us are on the wagon, who is going to pull it? we are told the social security is "solvents" for another 30 years or so because of a $2.40 trillion of assets in the trust fund. you did not hear it. i was putting quotations around the word "assests" -- is because they have already been spent for other programs. i believe there are purchased to reforming social security that are passionate, fair, and reasonable. if we act before a crisis occurs, effective reforms can be implemented that are sensible that would preserve this indispensable safety net for those who depend on it. we would suggest for

consideration some combination of gradually increasing the entitlement age, indexing longevity, and reducing the benefits for the well off. then one could lift the tax cap. if we would address the security reform, it will provide a much- needed confidence builder with our valued foreign lenders said they do not lose faith that we can manage our own fiscal affairs. adjusting social security -- addressing social security only deals with a small part of the fiscal program. health-care costs in the u.s. are double those of the rest of the developed world. there are no appreciable difference is an outcome. health-care costs are the big elephants that could bankrupt our economy. they deserve the highest priority on the fiscal agenda.

in order to have a major impact on the newest, we believe we must address many basic health care cost drivers that have hardly been reforms at all. take the fee-for-service. if you hired a room full of economists and tell them to come up with a highly effective incentive to inflate costs, i do not think they come up with something this perverse. there are other largely health care costs. a disproportionate amount of spending occurs in -- and how to expand the use of integrated clinics would have improved outcomes and reduce costs. recent welfare legislation put

in place to mechanisms that have the potential to foster the needed implementation of those reforms which have been tested and provide much needed research and experimentation for those that have it. the indefinite payment advisory board and the innovation center will we have the political will to attack this potential? there are few other reforms that we believe should be on the table for consideration. a progressive consumption tax that not only increases revenue but increase the savings. increases our savings is a national imperative. an energy or carbon tax to reduce its dependence on foreign oil and foreign lending and respond to the environmental challenges.

so-called tax preferences would abrogate to about $1 trillion a year. i can also understand why the american people believe that there are significant savings to be found in the defense budget that is larger than europe, china, japan, and much of the rest of the world combined. finally, p but it controls like finallyay-go rules. -- finally, but it controls like the pay-go rules. we need to implement these kinds of reforms. we believe in time action de it is because we do not want to see our features diminished. we do not one necessity to force radical disruptions in our way of life. we do not want to see that safety net prey.

-- fray. how do we get there? this is a nation whose enthusiasm from shared sacrifice is restrained. i heard it said the we spins like socialists attacks like libertarians. our special interest politics seem to operate on one imperative, give us more. it is part of the culture "i want it all, i want it now, and i don't want to pay for it." we believe there are other interests that can transcend the "mrore now" syndrome. there are those who do not identify either party with whom spending is the number-one issue when they go to the ballot box may be the most important general interest group is in the

young. they have the greatest stake in the future. the status quo is a raw deal for them. right now, too many are in the philosophy class when asked which is worse ignorance or apathy, he mumbles, i do not know. i do not care. our ceo will speak more about engaging other constituencies. boston people see me as a dr. doom, i am still hopeful. america has based worse challenges before. after world war ii, our nation faced a public debt of over 110% of the gdp, twice what it is now. a world economy was in shambles. that generation managed to reduce the public debt to less than 30% of the gdp in while

simultaneously launching and paying for the gi bill, the marshall plan, the un, and building the interstate highway system. they did it with courage and commitment and a positive image of a nation at peace. so can be. we need a positive vision of what an economically healthy growing america would look like. the adventure of america has only just begun. we can open a whole new chapter of innovation and growth. -- if we unencumbered ourselves of our massive debts, our future can be larger. we will be able to look our kids straight in the of, though proud of the work we have done, and

have confidence and hope in the world that we are handing off to their care. where the much resilience of countries. where the most entrepreneurial. where are the most -- we are the most innovative. if we provide the resources to invest in this country's indispensable assets. yes, we can produc. let me change that do yes, we must. [applause] ♪ >> good morning. i am vice-chairman of the

peterson foundation. i will be taking you through our program today. a brief note about our foundation and why we are all here. what we confront and how we address it impact my generation and future generations of america. that is what this foundation is all about. we dedicated to preserving economic opportunities for tomorrow by making wise fiscal decisions today. from our perspective, the problem we face is inherently nonpartisan. it is about math. it is about the realities of debt and credit. it is about investing in the future versus consuming today. . .

>> i would not introduce our first panel. i can just imagine -- i will now introduce our first panel. until they get a phone call from the president asking them to serve as cochairs of the national commission on fiscal responsibility and reform. i am not sure there is a more perilous assignment and is one. this past weekend even describe their role as jumping out a plane without a parachute. but i am sure their job is critically important. we would have trouble finding a betters1y team to lead such a

commission that in two men of reaching across the aisle to get things done. alan simpson and erskine bowles or principal leaders who have consistently put their country report narrow partisan interests. mr. simpson represented wyoming in the u.s. senate for nearly 20 years and took the lead on contentious issues such as social security reform. as white house chief of staff under president clinton, mr. bowles help broker budget deal that paved the way for the nation's first balanced budget in 30 years. we applaud president obama for establishing this commission and for choosing these two great americans as coach fares. they have already demonstrated they are a team and are leading the way on the bipartisanship that we so desperately need. who better to direct this discussion and lesley stahl of cbs news? please welcome alan simpson, erskine bowles, and lesley

stahl. [applause] >> hello, everyone. thanks for coming. first i want to ask alan, how is your niece? -- have is your knee? it is new, and it is seven weeks old. it is healing. i have not had a drink. erskine has not been sympathetic at all. >> now that we have dispensed with the funnies, our topic is kind of heavy. senator simpson, let me just are often ask you whether the word "doable" is going to be factored

into your deliberation. if it becomes pretty clear that there is a solution that is obvious, will you just toss it out there? or will the idea of whether this can fly politically be woven in to everything you do? >> let me just thank pete peterson. that wonderful man has been working with me. we worked on social security. he is more than all the things you see. there is a deaconess to him called patriotism. that is where he springs from -- there is a deepness to him. when we got the call, joe biden called and said i have a real deal for you. i said sure, joe, i have heard that for 30 years from you. he said my co-chair would be

erskine bowles. i have the deepest respect and admiration for him. i called erskine and said we have to talk to the president and see where he is. and we did, and all i can tell you is both of us agree that we may be only able to move the football a yard, and i have no idea, but i can tell you that i have no illusions. we will get savaged from the right and left. every time we go somewhere, someone says, are you going to have of vat tax? what are you going to do with the veterans? everything is on the table, including the new health bill. that is on the table, too. there is not anything off the table. that may be the only thing that will save us, and yesterday the commission -- there was not a single member of the team that did not know that this was one

of the deepest problems of this country. >> let me get back to my question about "doable," which may be at the heart of this. i was thinking about this, and it reminded me of the israeli- palestinian analyst problem. where there is a roadmap -- it has been a road map since president clinton was in office. everybody knows the answer, and to some extent, this is what you are confronting. everybody knows you are going to have to raise taxes and cut big things like putting restrictions on social security. everybody knows that. so what is your commission about? is it going to be a negotiation, more than looking for the answer? the answer is pretty clear, isn't it? >> it is going to be some of that, there is no question about it. >> i don't know anybody who is less partisan or has been kinder to me then pete peterson.

i think we are all blessed that he would give us this opportunity to educate the american people, so thank you. [applause] lesley, it is going to be about trust. if both sides, and hopefully we will end up with no side, but will just be american citizens, but if both sides do not believe that the other side is serious, that we are not in this for political gain, but we are here to solve these really big issues, and if the right does not believe that medicare and social security have to be on the table, that we have to reduce the cost, that we are serious about balancing the budget, and if the others do not accept the fact that we are going to have to have some new revenues, it is just like michael peterson said.

this is arithmetic. i am good at math. we cannot solve this problem by talking about foreign aid or waste, fraud, and abuse. we have to seriously attack!q e big problems, and we have to do it now, because if we do not, they will not be solvable without that word "bankruptcy." >> so in other words, this whole exercise is much less about getting the answer, because the interest pretty clear, that it is about getting those 18 people not to exercise a veto. >> the arithmetic is clear. the solutions are relatively easy to see, but the political will to step forward and make the tough decisions is where we have to do our job. >> everybody is talking about peake.

-- everybody is talking p pete. we have been working on this since the 1970's. >> since world war i. >> my claim to flamfame is thati convinced the peterson to do a piece on "60 minutes ago we had a huge deficit issue back then, and they got the budget books, and all the citizens solve it. they just did it. it was clear. raised social security eligibility, that age, i don't know how high it has to go. put on some taxes, gas taxes, everybody thinks that would be a good idea, so attacks, whatever. so that part of your problem is

over. would you agree with that? >> people use flash words in washington. the emigration flashed word is amnesty. another one is national id. "taxes"is ours. in every situation here, there is the motion, fear, guilt, racism. those things either pass or kill a bill, whatever the issue. anything i have heard in the last 10 years does not affect anybody over 57.

it is very predictable, but speaking of predictable -- >> i thought it was very interesting yesterday, we had our first public commission hearing. everybody talked about the fact that the path we are on today is not sustainable. everybody from the president to the chairman of the fed to the two former leaders of the congressional budget office, to peter orszag. then everybody on our commission agreed. but paul ryan, a congressman from wisconsin, said it best. he said this is the most predictable economic crisis in history. and it is. this nation is on autopilot, and

if we do not change and make big changes, we are going to face disaster. he was terrific. let me tell you how broad a consensus is. and the stern, who is recently -- andy stern agree with him 100%. all of us here realize the problem. where i disagree with you is, we have a real education issue in america. we have got to make sure that the american people understand how big a problem that is. that is why what you are doing here is such a big service. this will educate a lot of people. secondly, what we have got to do is get a real set of numbers out there that everybody agrees to. what allen and i have said is we are going to use the actuaries numbers from social security and medicare. that is pretty hard to argue against.

then we will use the cbo for everything else. we are not going to use the administration's number. we are born to use the numbers that have the greatest credibility. then we can allow a lay out the options -- then we can let out the options and make the best decisions. >> if i asked each of you to right now tell the american people how dire the situation is -- >> oddly enough, in my travels, the american people know something is terribly, terribly wrong. you can call anybody from kobe, wyoming to debut, and they will say what is wrong with our country? that is why these organizations sprang up, the tea party, these other things. >> but there are no new taxes organizations. >> but they know that something

is desperately wrong in america. that is the key. as long as they do, that is what we are trying to tell people. something is terribly, terribly wrong with this country, a dysfunctional congress. we were taught and trained by her handlers to bring home the bacon, and now the peake is dead. -- now the pig is dead. he does the math, i do the color. if we can build trust in this whole commission, we are going to get to the promised land. here is what i tell our students at chapel hill, and they immediately get it. this is a fact, not a forecast. this is where we are today. if you take the revenue of the country this year and but it up against the mandatory expenditures that are principally the entitlements,

medicare, medicaid, and social security, they equal each other. that means every dollar we spend on education, transportation, the military, homeland defense, every single dollar is borrowed, and half of it is borrowed from foreign countries. just stop and think about that. all my friends to say it all we ought to be talking about is jobs, jobs, jobs. one thing i know having been a small business guy, we cannot create jobs and small businesses cannot grow without capital. there is not going to be in the capital. it will be crowded out. people say we had better invest in education and training, infrastructure and innovation to be competitive. there will not be any money for it. we have to take these big steps. the biggest thing of all, half

that money is borrowed from foreign countries. some say what if the chinese quit buying our debt? what if they start to sell it? the crisis we are going to face is tremendous. greece and portugal just went through it. spain is coming up. >> what about the baby boom wave coming in to social security and medicare? >> that is basic arithmetic. you cannot solve that problem through increased taxes, because no matter what else you look at today, you have the cost of health care growing faster than the gdp. you have a old guys like me who are aging right into the problem who have all these issues that have to be dealt with. >> senator simpson, your honor commission in the 1990's that was an entitlements commission. apparently everybody on the commission absolutely understood

even then how dire the entitlement situation was, and yet nothing came of it. it collapsed. my question is, what did you learn from that experience, where it was a failure, that informs you for this one? >> we learned that when the economy is like roses, and everybody is consuming and buying everything they can, they ignore everything. but these are different days. that was a great group. that was subject danforth and bob kerrey, and we did a lot of work. -- that was jack danforth and bob kerrey. we had a game where we would say we would cut spending, and we would say what would you cut? there was a good record of it. i have been on commissions before that have not all fail. the select commission on immigration, we did to bills. the reason it failed as we could

not get a more secure identifier. i was on the iraq study group. we had to agree on every word. they have adopted about 57 out of those 79 by now. there is more than skepticism in this city, which was here when i was here. now it is cynicism. you guys will fail, you guys will fail. what a laugh this is. >> what happens if you go through the exercise, it is all public, we all watch it, and you end up deadlocked? both sides have a veto out of the 18. what then happens? cracks in my opinion, that will not be victory, but we will have made real progress, just as peake and michael are making here. we can educate the american people as to what this problem

is and we can get some push from them on the elected officials to actually they said to these big problems, and i can tell you, every grocery store i go into, it is amazing. people come up to you everywhere and say please take this on. please do something about it. please do it for your grandkids. we have to do this. if you think back, in 1997 when president clinton asked me to lead the negotiations to balance the budget, there was not a person in the press who did not think it was a joke. there was little support in the congress. i must have spent months locked up in conference rooms with speaker gingrich and leader lott. you all zero me a lot for that, i am telling you. -- you all all me lockeowe me ar

that. [laughter] we stayed at it, built up some trust in each other, and got to a solution that did balance the budget. that is what we have got to do again. >> i assume you are both pretty optimistic about this, but on day one, which was yesterday, your first meeting, a republican group held a big news conference and said that you were a trojan horse for a bayou added tax commission, and the liberals had another news conference and said we need to raise spending on infrastructure and education. so it sounds like both sides have shot off their cannons, and you are going to go inside and have to already deal with something they have put on the table. >> we have been there before.

when you rick -- when they rip your skin off, it grows back double strength. i am pro-choice, rather than a baby killer. i get called a lot of stuff. never let them destroy who you are. that is not who we are. vat tak -- what the hell? you would think you are coming in and slapping that on top of the income tax. children, veterans, all those people will not have anything when it is also up up. if people cannot understand that -- we will do the best we can to let them know that everything you love will not be there. how is that for an answer? everything you deeply loved, when you but your shirt, your

heart fell out. everything they are in government is not going to be there. that is because of automatic pilot. >> let me ask you both one final question. how do you get the public to really accept the idea that everybody is going to have to make a sacrifice? how did the american people into that frame of mind? they are not there now. >> we have to convince them, in my opinion, that this problem is real. we have to convince them that paul ryan was 100% right, that this is the most predictable economic crisis in our nation's history, and if we do not do something about it, we will be a second-rate power before you know it. >> i agree. someone just said we will do something with the money supply, we will print more. but then instead of america the

beautiful and powerful, we become a second-rate. we are not going to expire. we will just become a second- rate. >> on that lovely note, i think we all wish you the best of luck. >> sure, i can hear that. [laughter] [applause] ♪ >> as we said earlier, this

summit is about convening views across the spectrum. our next panel discussion is right on mission. i will not predict that are payless will agree on all the steps we should take, but i am hopeful that our experience moderator can find some common ground on these issues that affect all of us. with us today are of two members of the national commission on fiscal responsibility and reform. . rivlin who was the first -- alice rivlin. she cochairs the debt reduction task force. her fellow co-chair is a former senator. the second is paul ryan, republican congressman from wisconsin. he has spoken out regularly about the importance of addressing these difficult fiscal challenges. in addition, we have larry mishel.

of greenspan will be joining us a little later. he is the founder and executive director of the center on budget and policy priorities, a think tank that focuses on federal fiscal policies. lastly, neera tanden who has been involved in health care reform for more than a decade. the panel moderator is gwen ifill. please welcome to our next panel. [applause] ♪

>> you will notice we are missing one member of our panel, but he will be here shortly. we are going to get started without him. as you saw from the last panel, there is a lot to get start with. we just heard erskine bowles and alan simpson saying that this is the most predictable economic crisis ever. i will start asking it to explain a little war by what -- a little bit more about what you meant by that. >> i said this in the context of par. i remember vividly 2008. we had the chairman of the federal reserve, that treasury secretary coming up to the hill in a panic, talking about a

crisis, and then we engage in crisis management in congress. we came together and put together a very broad plan to get out of that crisis. that came up and got us by surprise. we can go back now with hindsight and untangle the mess, but that was a surprise crisis. this one is not. this i say is the most predictable crisis we have ever had. we see the problem of the horizon in europe. greece, italy, spain, portugal -- we know a debt crisis is coming. we know that interest compounds viciously when interest rates go up. this is something that is easy to predict, and therefore something we should tackle. what is crazy about this, we have yet to muster the political will to actually prevent this crisis from occurring. >> i agree with that. we have actually known about

this crisis for a long time. the fact that our entitlement programs, especially medicare and medicaid and also social security are on track to grow faster than the economy is growing. our taxes will not grow that fast. we have known that for a long time. something else has changed to make this much more urgent. we still have a sort of manageable debt, about 37% of our gdp. but we have come through this terrible recession, and that has given us a much bigger deficit. the recession itself and the things we had to do to combat it, that deficit will go down, but we build up our debt. we used to think that 20 years from now we would have debt equal to 50% of gdp. we are there now, and is rising fast. we are not greece, but greece is a useful lesson.

if you have massive debt, eventually you are creditors lose confidence. i think we are on the verge of having that happen to us. but there are things we can do about it. it may be a predictable crisis, but it is not unnecessary crisis. >> what is interesting to me is this talk about predicting a crisis, when in fact we are in a crisis, and i do not have -- i do not hear any discussion about it whatsoever. one out of three workers will be unemployed or underemployed at some point around this year. around 45% in some minorities. how about that for predictable crisis? we are actually in one. the discussion overlooks the fact that we have a very large

recession. we have an out of control economy, not the government budget. david walker and i wrote an opinion that said the first set toward deficit reduction is actually generating jobs. -- the first step toward deficit reduction. that is a complementary path to deficit reduction. george w. bush said in a time of war and recession, you have to have a large deficit. president obama would agree. there are some people that disagree, but this is something that hopefully we can all agree on, that we should not let this focus on the long-term structural deficit kill the opportunity to generate millions more jobs that people need. we talk about the worry about our grandchildren. that is true, but people are being scarred right now that is

going to leave a permanent scar our productive capacity. we are going to have poverty to% higher next year that it was before the recession. >> i want to get everybody to respond. >> i definitely agree that we all have to have economic growth now. even those who are most concerned about the deficit recognize economic growth is the way -- the cheap way to insure we are addressing the deficit over the long term. we understand that long-term deficits -- at long-term investments are a problem. we have to make tough choices over the next year or two.

we have to make decisions now to ensure that we do not have to make tougher and worst decisions down the road. >> i am not sure that john maynard keynes would even be a keynesian today, considering where we are. what is driving the deficit is the excessive spending -- excessive spending with more borrowing that does not lower unemployment. are we lowering tax rates and to produce incentives to create jobs? that is good. here is the economic climate in the future. in 2010 we are growing. what is coming in 2011? tax rate on capital, labor, and income. it is a black -- is a bad climate for a small business. we are going from easy money to

tight money, from lower tax rates to higher tax rates. that is not a good recipe for economic growth. what is behind this recession and these deficits is this huge, massive structural problem in the entitlement crisis. it is going to sink us. it is a predictable, forthcoming debt crisis. we do not have a lot of margin for error coming out of recession. it's on an unsustainable trajectory. it goes to levels that the models cannot predict what will happen to the economy. >> i think the american people are smart enough to think about two things at the same time. i am not sure that larry thinks that. i agree we are in a very deep recession now. we need to grow the economy.

the increase in the deficit we have had, i believe was absolutely necessary. part of it was automatic because of the recession. some of it reflected the things we need to do to help grow the economy, but while we are doing that, we have to think about the future. there are things we could do now that would reduce the deficit in the future that would not hurt the recovery at all. >> it would actually help it. >> i think there has been too much talk in this meeting already about social security, but i will come back to it because it is an easy example. we know that the social security system is out of balance. the things we need to do to get back in balance might include raising the retirement age in

the future, changing the way benefits are calculated so that upper income individuals do not get as much, but you would never do that for people who are already retired or people who are about to retire. so doing those things does not hurt the recovery effort. it does not damage the recovery at all, or the current benefits of people who are already retired, but it would give confidence to our creditors that we have our house in order, that we are actually thinking ahead, that we are not just thinking about the next six months or the next two years. we realize we have something looming at us, and we are smart enough to do something about it. >> we could spend the entire time talking about social security, you are right.

someone asked, what is the big fish in a sea of options here, ways to reduce the deficit? one reply was, there is one big shark, and its healthcare, and everything else is sardines. >> what is critical, the bill was a framework. i think it is incumbent on the administration to ensure that we have aggressive action to ensure that we have savings. having gone through all that long discussion and having a lot of battles guards around it, around the issues of payment reform, there was aggressive deficit reduction in the bill.

health care is actually helping us with our long-term deficit picture. there are a variety of initiatives in the legislation that actually change the way we pay for health care. those are a little bit of a framework. there are programs that will ensure that we have models. most important is for the administration to really lead on that and ensure we have aggressive action, that those initiatives are transforming the way we pay for health care to paying for quality, giving less incentives for overuse. it is important for the administration to ensure we capture those savings by taking aggressive actions.

>> to save time, i agree with everything alice rivlin said. on health care, we see things a little differently. we got an interesting report from the chief actuary at medicare on friday. the federal commitment to medicare increases. the claim of deficit reduction evaporate right away. the only way under this kind of architecture of a health care system to achieve these kinds of savings is too deeply and systematically ration care. that is the word people do not like to use, and it occurs in many ways, but i do not think it should occur primarily from washington.

i think the health care bill is a fiscal train wreck. we have for entitlements now. the fourth one says to people, if you make less than $100,000 a year and your health care expenses exceed up to 9% of your income, don't worry about it. the federal government has you covered and will pick up the rest of the tab. that is the biggest piece of social legislation to have passed since 1965. i have no doubt that it will exacerbate our fiscal problems. >> what the chief actuary found was that when you cover 30 million people, it costs money to do so. spending goes up, but the amount of money we are paying for each person who has health insurance goes down. so we have a trajectory where we

are lowering cost per person who has insurance. it makes all of us recognize that that will cost money. but the chief actuary found is that we are actually saving money over the long term. what we should recognize is that we have greater efficiencies when we actually -- when you actually enter people, there is less cost over the long term. in terms of other issues around us, cbo says we will have one trillion dollars in savings in the second decade. we recognize we are insuring 30 million people. we are ensuring a system where people have a right to health care. >> we have very efficiently stumbled into to hot-button tried away. we will keep coming back to them, but it makes the point,

what do we have the stomach for in this country? >> that is the way some people are framing it. i disagree that it is about what kind of spinach we want to eat. this debate is not a simple matter of mass. it is about what kind of nation we want. what do we want to spend on and tax for? we have a social security shortfall. that is something we can address. it happens that we cannot pay every benefit promise for the next 30 years or so. that is the least of our problems. but lesley stahl cavalierly said, let's raise the retirement age. she did not know that life

expectancy grew a lot over the last three decades. it really only grew for the people in the upper half of the income distribution. people in the bottom half are not living longer. we have a problem of inequality that we have to deal with. we just saw a massive loss of wealth. 401k's are now called appropriately 201k's. the problem we have, not talking about social security shortfalls, but water going to do about retirement in this country? >> i agree with larry about his basic premise, about what kind of future do we want? aside from all the gloom and doom, the crisis should be seen

as a big opportunity. we know that we have a tax system which is inefficient and does not raise as much revenue as it could from a simpler tax system that would be better for the economy. we know that we have a very inefficient health system. we need a thorough reform. we need to make the health system more efficient. in a way, that is an advantage, the fact we spend more than other countries. we have a lot of any effective care that we can take care of

before we have to do any rationing. >> i agree, in many ways with what you said. we have to come up with better ways to help assist retirement. it is a three legged stool. we have to give people better tools to better prepare for retirement. this is not a spinach eating exercise. it is an exercise where if we do it right, we will have a more prosperous future. the cbo is telling us we are in a lowered standard of living. if we turn this around, per- capita gdp is going down in the future, a lower standard of living. look at the cbo projections forward. because of the deficit where

bequeathing the next generation, we are giving them a lower standard of living. this is doing what we need to do to make sure we can grow and prosper and have opportunity. the big difference in philosophy is that we have is what size of government we are going to have. from my perspective, that determines how much individual opportunity and achievement we are going to be able to have. >> you are late, so we are putting you in the deep end of the pool. tell us about this. the difference in philosophy is what we are talking about, whether what the problem is, whose responsibilities of and the problem is.

we touched on health care and social security. how would you define the problem? >> the problem is not the immediate deficits which are necessary to deal with the most severe economic downturn since the depression. i think we go in the wrong direction when we start saying things like we cannot afford to extend unemployment benefits, which we need, even for jobs, so that those workers will have money in their pockets to buy products and businesses do not lay off more jobs. the problem is the long-term structural imbalance between the level of revenues will bring in an amount we spend. there is no mystery, that is the core of the problem. we have to deal with that long term structural imbalance. >> let me turn to taxes. pete peterson believes that is

something that we ridiculously take off the table all the time, when in fact that is part of the solution to the problem. how much of the solution do you think it ought to be? >> the first point is the key one, nothing can be off the table, certainly not revenues. health care costs are the single biggest contributor to the problem, system wide. you cannot year after year have medicare and medicaid costs grow significantly slower than health care costs. it cannot be done without a two- tiered system in which we draw lots of our citizens out to dry and not let them have the benefits of modern medicine. so we have to find ways to slow the rates of growth systemwide.

we do not know all the ways to do that. it is going to take time. it will be a number of years before we get major savings. we know we have to close the long-term social security shortfall. there is bipartisan agreement that we are not going to slash benefits for people who are already retired today. the changes for social security will be made gradually and phased in over a long period of time. that means not only during the short run. the single major place that you get the most deficit reduction from is going to have to be revenues. over the long run, it will have to be a balance. the single largest contributor has to be from slowing the rate of growth of health care costs, but no one thinks we can slow health care costs so much that you could do the whole job there, because there will be medical breakthroughs, and they will save lives, but they will

add to costs. >> it is that an accurate take on what happens to health care? >> i agree totally with of that it will take time to realize the savings -- i totally agree with bob. i believe that the cbo was very conservative and that we could realize greater savings when we rambo's up. but i do not think we should -- when we ramp those up. it has to be part of our understanding of what the long- term picture is and how we make tough decisions about the budget overall. >> i agree with that, but i

think we have to start now to strengthen the health care framework that is already in the bill, to give it more teeth, and think hard about how we get the health care settings down the line. it is not going to happen tomorrow. we will have breakthroughs in health care that people want and need to have, and health care will be pressing on us for ever. >> what about revenues? >> revenues have to be part of the solution. i believe we can shift our tax system to a much more fair and productive one. that can mean taking our income tax and making the base much broader, getting rid of a lot of the special provisions. it is easy to say that in the abstract. some of them are things people really care about, like the

mortgage interest deduction. but if there ever was a moment when we have proved that we overbuilt high in housing, we did it. the mortgage interest deduction contributes to that. we did not need to abolish it, we need to phase it down. >> congressman, you live in the world of reality more than abstract. let's talk about taxes and whether that is part of the solution or even can be. >> i try not to get into table top. this is my 12th year in congress. i have served in democratic and republican majorities. here is the problem on taxes. when you take the pressure off of the need to reduce spending,

you never reduce spending. if you go to the quick fix, you never get the spending down. we need to focus on the problem, which is spending. it is not revenues. of course we should clean up our tax system. it penalizes growth and is making us internationally not competitive. i think we need to focus on that spending line, and like bob and alice said, what really matters is the trajectory. heritage and brookings did a paper a couple of years ago that i thought was very significant. it said let's score keep these things are long-term. let's show the trajectory of the american fiscal balance sheet. if we put these reforms in place and show the out your

differences, it will buy us breathing space in the credit markets. that will help us in the near term with growth as well. >> let me disagree with congressman ryan here. i do not think it is accurate to say this is simply a spending problem. it is an imbalance between revenues and spending. let's remember that 89 years ago, in 2001 the cbo forecast surplus is as far as the eye could see. chairman greenspan worry that the surpluses were too large at that point. a number of factors intervene, including massive tax cuts that were not paid for. it is interesting to note that if the policy makers adopted a policy that any of the bush tax cuts they wanted to spend, that would pay for and not deficit finance, 40% of the gaps in 20 dicty would go away.

a second key point is the distinction between spending and taxes is very artificial. we have over $1 trillion in what is called tax expenditures. this is spending that uses the tax code as the vehicle for the spending. that is nearly as much as the current cost of social security and medicare combined, and it is double. everything we did spent -- everything we spend on every domestic entitlement program is half of what these tax expenditures at up to. on the last deficit commission in 1994, mr. greenspan testified and call these tax entitlements. if we want to keep the pressure on spending, the pressure should be on all the spending that is in the tax code as well as the spending on the other side of the budget.

>> what he said. >> one of my concerns about the deficit discussion is the excitable nature of the fear mongering. the idea that somehow our standard of living is going to be lowered 30 years from now when productivity growth is going to be to present some of the year, per-capita income is going to be far higher 25 years from now. secondly, you get the fear mongering also, unfortunately, from senator simpson. on the talk shows, he says we cannot grow our way out of this, even if we had 10% a year growth. in fact, the commission has a goal in 2015, and growth between

now and then is supposed to be 4%. if only it were 5% a year between now and then, it would hit its goal without breaking a sweat. that is far from getting the 10%. where does he get that we could have 10% a year growth and we would still have a problem? it seems untethered from economic analysis. the public needs to know that there is a challenge we have, but if it is fear mongering, false crisis mongering, we will not get the decisions that are wise. >> so deciding cbo numbers is fear mongering? >> i do not think it shows that per-capita income will be lower 30 years from now after taxes that it is now. >> i think we have fear

mongering on one side and denial on the other. i think larry is in the denial camp. that become back to what bob was saying, and i was glad to hear him reverence the surplus that we actually had at the end of the 1990's. we got that surplus partly because the economy was growing quite rapidly, and it was growing rapidly at then tax rates which have since been cut. so there is not much evidence that going back to those tax rates eventually would be deleterious to growth. the only way we got it was by a very strict budget rules that meant that spending went up very slowly throughout the 1990's until the end of the decade. that was real restrain, bipartisan restraint, on the part of the congress which was controlled for much of that time

by the republicans and a democratic administration. it is harder now, but spending restraint is not impossible. >> there is an important point here in what alice just said. i think it is that restraint, wind up and realistic, can work. when you try to impose restraints that look good for those policy makers who are putting them in place do not take effect for a number of years, and go so far that they are politically unrealistic, that does not help at all. that is when the system blows them away. for example, the gramm-rudman targets were far too severe. they were blown away. the limits that were put into

effect in the 1990 bipartisan agreement, the first president bush should give great credit for that. the 1990 agreement had pay-as- you-go rules and caps on non entitlement spending that were set at realistic levels, and they were adhered to. that was continued in the 1993 clinton agreement, and those were in here too. in 1997, there were spending caps on non entitlement spending put in that were far more severe, and they got blown away. it was partly because the deficit disappeared and there was less need, but also they were so severe, they got blown away. also in 1997, although it medicare savings did not take effect except for one big one. this was the physicians the thing. it was poorly designed in 1997.

it was originally designed for modest savings. it turned out there was a formula that caused a huge cuts in fees to physicians. . .

>> you have to change the law and then enforce that with budget discipline. iboth parties messed up on budget targets, discretionary spending caps. i have been pushing those issues since i got into congress. you cannot just put deficit caps into place or spending targets into place without fixing the underlying spending. you have to do both. they will not work without the other. changed the law on entitlements and discretionary to get the trajectory down and then come in with a very -- scheme to enforce discipline down the

road. >> i agree with bob, but, i think one can also make the case for being a little bit conservative. especially on spending. there is no point in being so aggressive that you cannot enforce it and you have to turn it around but over the long run, if we grow the economy as fast as larry things we are going to, we are going to have plenty of room to do more things than we want to do. we should not be locked into things that people decided were necessary now and we find we cannot afford in the future. >> my want addition to that is i have trouble just talking about spending. both substantively and

politically. i come back to these tax expenditures, let me give an example, i am not calling for cutting child care. it is a nice example. if you are a working low income family and make $25,000 per year and child care costs are high, you may be able to get some assistance for subsidy from the government to help with your child care costs. if you make $5 million per year, you qualify for a subsidy for your child care costs, too. the low income family gets a spending program and the high income family gets a tax credit. a subsidy is a subsidy is a subsidy. they are both subsidies. when we get into this artificial thing where we -- >> one is untouchable and one is not. >> it is a precise example of

why, if you focus just on spending and leave taxes aside, what it means is that you are going to look at those programs that provide various supports and subsidies to low and middle income people and you will put to the side of those programs that provide subsidies to corporations and high-income people. let's treat them all equally and put them all on the table. that is why i get uncomfortable when i hear the congressman's discussion. some people say that we agree we should reform and number of these tax expenditures but they propose it as part of a deficit- neutral tax reform that does not provide any help for long term deficit reduction. in 1986, i thought the bipartisan tax reform act was great. we cannot afford another one

like it. we need tax reform but it needs to contribute to deficit reduction. just as reforms in health care as -- and other areas. >> i think this relates directly to what the congressman said earlier which is you have to limit the government's because that allows the private sector to grow. there is that direct correlation. just to go back to an earlier point, we did see in the late 1990's a time of profound economic growth and higher tax rates. we have to recognize that the experience tells us that these things are not actually in direct conflict. one is not at the burden of the other. we can have investments that helped economic growth just as we can have targeted tax savings that can help economic

growth. the idea of that we can only do one and not the other is not shown by the facts. >> we do need a fundamental tax reform if only for the recent we are now in a global economy and we cannot take for granted our super power status. bob is right. the tax code is an appropriations bill. i have been on the ways and means committee for 10 years. i remember the last committee we had. one quick story. i wanted to make sure that members of the ways and means committee did not dig in and say they will do this tax expenditure or that tax expenditure and said we will reserve judgment but the problem is other members circulated letters saying we will never offer this particular tax expenditure and i did not get

nearly as many signatures as the other guys. >> cutting the military will never be an option would of course i am talking tax code. >> i think there are lot of savings to get out of dod, for sure. bob is right about the tax code has become an appropriations bill. we appropriate to the tax code and that needlessly basis rates which depresses economic growth, entrepreneurship savings. let's stop doing all this social engineering. i completely agree with that. at the end of the day, where we will disagree is the level of taxation we will have. my disagreement is based upon my " the desire to maximize economic growth and job creation. >> i want to draw out a little bit.

two-thirds of the tax expenditures go to the upper 20%. leaving them off the table, it has very direct distribution consequences. we should be reading directly into this discussion, what the last 30 years have been. the last 30 years, we have seen that the bottom and the% of families received about 60% of the income growth and the upper 1% about 56%. the upper 10% got about one- third of the income growth. -- about two-thirds of the income growth. these are actually pretax figures. after tax, it is even more distorted.

>> but wanted to get back to this question that the congressman just raised about taxes and economic growth. there is no precise level, if you are at this level share of the gross domestic product, growth is terrific, and if you are 0.5 points or one. about it, growth is there. a tax system could have a low rate of revenue collection and the inimical to economic growth because of the nature of taxes and have a much higher level of revenue collection and the better for tax collection. take the corporate income tax. we have the second highest marginal rates among other advanced countries but we actually take in a lower percentage of corporate profit in tax than many of our

leading competitors because we have so many loopholes. we applied a high rate to a narrow base and even within the corporate sector, some types pay higher rates and some pay lower rates. you could perform the corporate tax system in a way that makes our corporations more competitive by lowering the top marginal rate but you broaden the base to such a degree that to increase the total amount of revenue we are collecting as share of the profit. the second question, i think most analysts would agree, the thing that is dangerous to robust long-term economic growth this decade after decade after decade of running deficits of the magnitude projected into the future, modestly higher tax rates would contribute to this large part of the plan to significantly address long-term deficits. that would be much better for

the economy than having hired debt and lower rates. there are important studies that show some western european and other western countries appear to have improved growth even as they raised rates -- excuse me, even as they raced revenue because they raise revenue in economically efficient ways and invested the money in things like infrastructure that were positive for long-term growth. the bottom line is there is no simple measure, here is the hard yellow line. you go $1 beyond that and you kill economic growth. that is not right. our main focus should be short- term cannot do what we need to do to get the economy back and longer term, we have to bring the long term deficit and debt down. higher revenues will have to be a part of that. we had robust growth in the late

1990's and changes in other areas led by system-wide health care reform has to buy part of this to -- has to be part of this to. >> one observer said the administration is on a suicide mission and there is no silver bullets that anybody will agree on to get to the long-term or short-term solutions. what can a commission, and the commission, and the panel discussion, due to agree with what the problem is and begin to address it? >> i think the commission is well agreed on the what -- on what the problem is. the dimensions of it, the numbers, the growth rates, debt, and sustainability of it.

we are not agreed and probably will not agree on an exact solution. if we can put forward some practical proposals that control the rate of growth of spending in the future and that raises revenues in a pro-growth way, i think we will get a hearing and the congress. my sense is that the american public doesn't realize there is something wrong and something needs to be done and maybe after this election, we will be able -- we will be ready for sensible solutions. can you agree on the priorities? >> we do not know yet. we met for the first time yesterday. i could not possibly answer that question. i hope so. >> larry?

>> my hope for the commission is that at the end of the process, we have a more informed public then we do now. i think that first and foremost, that means talking about the interrelationship between these problems which i it knowledge. we have structural and fiscal imbalances. how do we deal with that? the needs for growth and competitiveness. the need for health security and retirement security. part of that is the american public has a lot of ideas that may not be so accurate. those were mentioned. many people think we have tremendous abuse. one person's waste and abuse is not on others. >> and earmark is another person's post office. >> we say to not raise taxes. if we cut spending, somebody

says do not cut my program. i think we have 30 years of people looking hard at the budget to find savings and have not been successful, republican and democrat. i would hope some of these ideas would be openly discussed and we have a more clear debate moving forward. >> i will ask you to respond to that, as well. at a time when americans are feeling so much economic stress, and did not want to hear from this, they do not want to hear about problems, how do you begin about -- to take priorities to speak to that? >> people are worried about spending and deficits and debt. they see the correct -- they see the direct correlation. i get that all the time at home. i cannot think it is wise to get into the table talk of what it should or should not do. we need to start hashing these

things out. if we only do one thing which is public education, like the peterson institute has been doing, that is a huge service to the country. i hope it goes beyond that and comes up with solutions. the social insurance strategies of the 20th century are not sustainable and the 21st century. they have to be redesigned. we have to decide what our principles and values are as we do that. most of us believe we have to have a safety net to help people who cannot help themselves or temporarily down on their luck but it cannot suck everybody in society into a system of dependency because that will train our economy from reaching its potential. we will have disagreements about where those lines are drawn, but the point is this -- these programs must change if we are going to avert a debt crisis. >> an area of agreement, i want

to lot the congressman about talking about the pentagon -- laud the congressman for talking about the pentagon budget. that area of spending is on the table, as well. i am profoundly hopeful about the commission's work given the last year that we had. that was an area where the congress, for the first time in a long time, actually paid for something large. part of the reason it was a difficult thing to do was because it was paid for through revenues and savings and part of what animated the president was the long term deficit and debt issues around health care.

what one of the most important issues for the president was to ensure there were savings in the second decade which put us on a better path. i think leadership came together to tackle a large problem. there was a lot of disagreement about that and one of the things that people should realize is that we face an opposition that both said we need savings and the system and we need to cut costs. that is something the commission will face, as well. at the end of the day, we were able to do something large and important and something that helped the deficit. >> remembering the 1994 commission that i served on, it was viewed as not having

succeeded. we did not reach agreement on anything. i think it is going to be very difficult to get 14 of 18 members of this commission to agree on major policy changes. i would recommend not that we give up on it but there we did not set the expectations too high because one thing we do not need is a story line that we have another failure. i do think that it would be hopeful but what the congressman just said is exactly what you do not want to say to the public. i think it is inaccurate. to say the fundamental problem is social insurance by its nature is unsustainable seems to be entirely incorrect.

the long term in balance is about 0.7% of the gross domestic product. that is about the same cost of making permanent the tax cuts of people over $250,000. >> what about the $30 trillion in medicare? >> let me get to that and a second. >> we are winding up here. >> medicare is clearly a big increase in cost in part of the issue. but, it is not because there is something inherently inefficient and medicare. it pays providers less and has lower administrative costs. the problem our health care costs system-wide. transform medicare into something that no longer functions as an effective safety net and not dealing with health care costs systemwide would greatly increase hardship among seniors without dealing with the problem.

the bottom line, and this is what most important for the public, there are no easy answers. the average retiree benefit is $14,000 per year. it is not a fat benefit. medicare is not wildly and efficient. the structure of the tax system. it is not foreign aid. you cannot say make abuse go away. the choice is really part difficult. part of the problem is that many of the public believe there are easy choices and members of the bridge that members of both parties are avoiding. add g getting people on the nature of the choices, they really are hard. that may be the most important lesson the commission can teach. >> we are here all day to talk about choices and this is a good way to start it off.

thank you, very much. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> i would now like to introduce somebody that needs no

introduction -- introduction, robert rubin. [applause] >> i hope you are here, bob. >> thank you for the great introduction. >> we had lunch yesterday and he produced to pick up the check. >> we allocated it by net worth. [laughter] >> you democrats believe there is a free lunch. [laughter] >> you spend a lot of time in financial markets and trading and so forth. you also fought about the fiscal situation. a lot of talk about the public being sustainable or not

sustainable. where do you come out on that? we are talking about longer- term. >> as you know, the congressional budget office, when they reach estimated the budget, was projecting a debt to gdp ratio of 9% by 2020. i do not think -- there is no mainstream analyst that i know who thinks about numbers anything like that are sustainable. it is essentially unanimous that given our savings rate is this context which is highly exacerbating with respect to the risks. we have a low savings rate. we have a very large annual maturities that have to be funded and we have heavily overweight positions. put that all together, there is

no main street analyst that thinks the situation is sustainable. i think there are only two choices. we act prevent the bully which is very difficult buta -- difficultblyk, -- we act preventsaably just very difficult. i am more worried about this than anything in my adult lifetime in terms of the economic future of our country. >> what do you think the risks are if we cannot take significant actions? >> i think the fiscal situation we face presents multiple risks of various degrees. as a congressional -- the conventional view is to crowd out capital so that interest rates will be higher.

a variant of that is the comment that was made to president clinton deficits choking off the recovery before it starts. if you had the kind of higher rate, that could get choked off. right now, deficits are affecting this is confidence more generally and adversely affecting hiring and investing. the more serious risks are concerns about demand for capital for future inflation or both create a deficit premium that deter investment. the most severe of all these risks is what we described a few moments ago which is severe disruptions in the capital markets and the enormous impact that could have on jobs and on income and really on the

economic well-being of all americans. unfortunately, there is no easy escape from this. i do not believe and have not seen anybody put forth a way to muddle through this. we need to face it. these are difficult measures. not measures you put into place now because of the high rate of unemployment. rather, we need to commit to some realistic incredible ways to take action when the recovery can sustain the effect of those actions. if we do not do that, i think the probabilities are overwhelmingly high that we will have a fiscally-driven crisis that will be severe and we will have to take very difficult measures to come back from that. >> as you know, our foreign borrowing has increased dramatically and 4 give the

name, the peterson institute for international economics forecasts it can keep you up at night given the foreign debt levels. we have become extremely dependent upon foreign lenders. what do you think the odds are that they lose confidence somehow in the u.s. and what would the effect of that the. what would cause them to lose confidence? >> i have been around markets for many decades. the psychology of markets is an unpredictable thing. the one thing you can say with confidence is if you are around long enough, psychology can change quickly and dramatically. i think that i do not know

anybody in these processes that does not think at some point that as the markets look at this enormous in balance between supply and demand for capital is created by our fiscal deficits. the possibility of inflation seems like a lesser risk. at some point, the psychology will change. it can be very rapid and very harmful. when that will be is unpredictable. there is a tendency to say this is a long-term problem. i think that is a very dangerous point of view. we cannot act now. with time% unemployment and the recovery in the early stages, we should not act now. what we need to do is to find

the political will to take action now and put into place measures that will take effect when the recovery coast to work. >> i think we need to put into place measures that are both real and credible to the markets that will take effect when the system can absorb the effects on the school. we have to hope we grow enough and quickly enough that we put these into place before this fiscal issues have too great an impact. i heard one of the speakers say, and i agree with this, our nation has tremendous distribution problems. you cannot do either of those things without a healthy economy and you cannot have the capacity for public investment that we need unless you have a fought -- a sound fiscal regime.

i have worried about your income being excessive, frankly. [laughter] i have not wanted to discuss it publicly. >> i worry about how i can get you to talk to me. [laughter] >> i would be a very illegitimate child if you over did that. >> there is widespread agreement but i want to hear your views on social security being a part of a problem. some people say 10% or something like that of the gap. it is only a small part of the problem. there are people who are saying that social security trust funds have a $2.50 trillion of assets and the system is solved for the next 30 years or so. to put it differently, in terms

of the fiscal ability of the u.s. to meet its obligations, what do these bonds in the trust funds provide in terms of additional fiscal capacity for the government? what are they worth? what do they do? if the american people did not think there is a problem, you can rest assured they will not be inclined to do much about it. >> sadly, i think the risk proposed by our fiscal situation will affect us massively independent of the social security problem. i hope that your efforts and the efforts of others bring the level of understanding to the point where they hold their elected officials responsible for taking the difficult measures we have to take to get back on track. the social security question is a very complicated question.

we dealt with what these bonds mean when we had a deficit problem. let me put it into simple propositions, if i may. the $2 trillion worth of bonds to not add independent resources to the government. you have a creditor and a debt hor to the good faith of the u.s. that is one point. however, in terms of social security itself, it gets quite complicated. there are obligations of the u.s. government. as long as the federal to government has resources sufficient to beat obligations, if there is an annual shortfall, these bonds can be

redeemed and they have the absolute full faith and credit to be paid to meet social security obligations. the problem we might face is the federal government either cannot borrow, and hopefully that will not happen, or, the congress and administration will not agree to raise the debt limit, you could have a situation where the government does not have adequate resources to meet all its obligations. i could tell you, there is no clarity as to who has priority in those situations. you have the bonds but all the obligations are deemed to be credit obligations and there is no settled law on how the resources of the federal government will be allocated.

hopefully we will never face that. can i add one more comment? >> i think it would take an elephant gun to stop you. >> i am inclined to make the comment. we are not remotely like the situations in portugal and greece them. -- greece. we are not remotely like that. there is a fiscal crisis going on in europe right now that nobody would have thought would happen if you years ago. i think we should try to learn from that, how important it is, that we never face anything even remotely like what they are facing. >> i have been waiting for 30 years for you to make a specific headline estimate or

projection. i have considered you an expert in constructive ambiguity. i want to be sure i understand what you said because this is a really dramatic headline. you expect an economic crisis to hit before 30 or 40 years from now. is that right? it is such a bold statement. >> let me say it slightly differently. >> i am sure you want to. [laughter] >> by the year 2003, the congressional budget office is estimating our debt to gdp ratio is 130% of gdp. i live in this world. i speak to economists every day. i do not know of anybody who thinks that we will get that far or even remotely that far without having very serious disruptions in the capital

markets that would have enormous effect on jobs and income for all americans. >> thank you, sir. you are the ideal person to introduce president clinton. in fact, who better than you to do it? you worked very closely with each other and the congress to bring about a period of enormous sustained growth combined with fiscal responsibility and jobs. before you do that, i would like to commend the president on behalf of his remarkable philanthropic work. mr. president, if you are here, you obviously to serve enormous credit for your record on fiscal responsibility and a strong economic job growth. and bob is certainly the best equipped to talk about that with you. however, i very much doubt that

you have received enough credit for the extraordinary work of the clinton foundation. i have been privileged to attend the last two annual meetings and the foundation's work, for those of you who do not know, include an extraordinary array of philanthropic projects, including hiv, the climate change, childhood obesity, assistance for small business owners, and helping african farmers increased yield, at these annual meetings, president clinton attends the entire meeting and i was fortunate enough to sit near him at the last meeting. it was simply remarkable. after each of about seven or eight project descriptions and progress reports, the president for a few minutes would add a few very interesting new pieces of information on every one of these projects and then at the end, some important insight into

where to take it from there. mr. president, it seems to me that while you get a lot of credit for what you have done in the way of fiscal responsibility and the growth, you do not get enough credit for your remarkable contributions as a post- president to society. just to be sure, we should recognize that as much as any president i have known, your post-presidential record is a thoroughly admirable. take over in introducing the president. >> ok. [applause] >> that was very good. you were very good. [applause] >> thank you. before introducing the president, let me introduce bob schieffer who is been the anchor and moderator of "face the

nation" since 1991. bob will conduct the discussion with president clinton. in today's world, bob seems to be an increasingly rare commodity. i have had the opportunity to be on his show and always greatly welcome that. he was tough but the sen. he was committed to exploring the substance of issues and the politics. he was committed to giving you the time and opportunity to explain what you were trying to say. it is surprising that after such a remarkable career, having covered all of the four major national washington assignments, the white house, pentagon, department of state and congress, treasury should be

one, he is a member of the broadcasting hall of fame, the winner of numerous awards, over 30 years of a journalist. as i said a moment ago, bob schieffer will be interviewing president clinton, who i now have the honor of introducing. let me thank pete for letting me introduce the president. that was a great privilege i had many times during the six and a half years i served in his administration. every time i had that opportunity, it felt a very special and it still does. will not recite from the resume of the president. you know what to well. let me give you some observations from working with him for six and a half years that might go to the heart of why he was such a great leader of our country and also go to the heart of the purpose of today's fiscal summit.

president clinton was an outstanding decisionmaker. he energetically sought to understand all aspects of whatever was in front of him and absolutely insisted on hearing from those who had a different view than he did. after thoughtfully weighing and balancing all considerations with the recognition that all these views are about probabilities and not certainties', the -- , he decided and acted. he proved the thoughtfulness and decisive this could be brought together into what and -- -- into one great leader. in order to restore and maintain a sound fiscal regime, he believed that a sound fiscal regime was important in itself and was also critical to provide the capacity, fiscal and

political, for the public investment that was so necessary for economic future. fundamentally, his view was that sound fiscal conditions and the public investment that they allowed the government to do were absolutely essential if we were going to achieve his objectives of competitiveness, growth, robust job creation, and increased income at all levels. increasing those objectives -- embracing those objectives, his legacy had massive job creation, increased in comes at all levels once the recovery took hold, and a transformation of our fiscal condition from the large deficits that he inherited to a substantial surplus he turned

over to his successor. this was truly a remarkable achievement. with that, it is my pleasure and privilege to introduce the 42nd president of the united states and a thoughtful and courageous champion in addressing the nation's economic challenges, william jefferson clinton. [applause] >> thank you. >> thank you. i have not gotten a standing ovation like that and a long time. mr. president, we have heard a lot of things this morning. why don't you want just start off by setting the stage for us.

where do you think we are right now and where do you think this is going and how serious is this? >> first, i think it is a very serious problem. i think the problem with these meetings is we tend to be preachy but i noticed the other day in one of the liberal blocksgs.,, and i think you have done a wonderful job on this, and i am grateful, but we were criticized as being in a terrible recession and spitting like crazy. i think we forget that a lot of people do not know all of the facts. one thing that bothers me most is 48% of our debt is now held

by non-american sources. i think this is a national sovereignty issue about control over our economic destiny. i am a free trader and i like to cooperate with everybody but i do not like to be in somebody else's control and i do not think america should be. when president bush was in office and the reversed our policies, there were some economists on the other side that made this superficially rational argument that national deficits and debt did not matter because we live in a global financial system and we were almost doing china is favored to take that cast off their hands they got by selling us their stuff and putting them finance and my tax cuts. i do not agree with that for the same reason. i think we cannot solve this problem unless we see it in the

proper context. this deficit problem is a problem of an aging civilization. if you go back to the dawn of time and study the oldest civilizations, they all have one thing in common. once you become successful, you tend to become [no audio] [applause] [inaudible] . countries like haiti, the problem is they did not have systems. no matter how smart you are or how hard you work, there are no consequences. you need systems to build great countries. once they are built and they do great, they tend to become more concerned with holding on to the position they have in the budget than furthering the purpose for which they were established. we like to believe that america

is forever young and we are always the future country. if you look at the budget, we were spending 17.2% of gdp. we did not get better outcomes. we cannot afford that. we cannot solve the deficit problem unless we deal with underlying health care costs that affect health care spending and other spending, as well. it said that germany and netted 300 million jobs without taking into account the drag, the subsidies impose on the rest of the economy, if you extrapolate that superficially, it is 1.2 million jobs but in fact it is

much more because of our capacity for solar is much greater. the sun shines in germany as about -- about as much as it does in london. they still decided to make a bet on the future. we have two crises in education. uniform equality. i strongly supported the higher education reform initiative but i think most of it will be gone within five or six years. we had the biggest increase in higher education aid since the gi bill and the benefits were gone in five or six years. the delivery system is flawed. it has to be changed. we had the same problem in finance. all of these derivatives and hedging mechanisms, they started out with agriculture. every farmer i know of any size

always hedges against dramatic changes in crop prices. there was a great article last week saying that one solution would be to have the same sort of clearing house that they have. you have to see the fiscal crisis we have as a part of america's challenge to modernize its delivery system. that means we have to be careful about how we get rid of the deficit. the easiest target is the discretionary, non-defense spending. we are already dramatically down in research and development and we will pay a terrible price if we do not reverse that.

i think it would be helpful and i am honored to be here and thank robert rubin for his introduction, i think he is a great -- the greatest secretaries since alexander hamilton. i still believe that. i think you are all here to think about this. i supported the president paz stimulus program. it was difficult for me to say that because i hated to do anything to increase the deficit but the economy was contracting out such a rapid rate, this deficit would have been worse if we have not done anything to try to stabilize it. for whatever it is worth, that is my general take. we will not succeed unless we do

something to generate more jobs or do something to change the population distribution which means more immigrants and other issues across the board. >> let me just ask you this to get you on the record. do you agree with what the commission that president obama put together announced yesterday that everything has to be on the table, including the newly passed health care reform bill? >> sure. i would think the president would want some sort of good faith, bipartisan effort. if i was in congress, i would have voted for that bill because until you get the coverage system straighten out, you will never get costs down. you cannot let -- last year, when the health

system was down, -- when the economy was down, health and profits were up 50%. at the time they assumed health care reform would be defeated and they did not care what happened or how many people did not get injured. they kept charging more. i agree everything has to be on the table. keep in mind, older societies are obsessed with security. security for us is national defense, social security, medicare. believe me, i invested in new weapons systems. i support the conflict in afghanistan and what we are trying to do.

but that does not mean there should be no review. i think the secretary of defense, who by the way i think has done a fabulous job, has shown that in a willingness to review some of these weapons systems. i think we have to put everything on the table. >> congressman ryan said this morning that there is no way that the new health care reform legislation is not going to exacerbate this problem. do you agree with that and if this is on the table, what do you do to make sure that does not happen? >> i do not agree. at least it will make people in the small business markets have some market power with these purchasing exchanges. i think if they created a public option to compete with the insurance agencies it would have helped. nothing could be worse than what we had. those guys against this work in

effect defending -- their only answer to spending 70% of gdp on health care when every other big country in the world was at 10.5% or less, there will lead defense to spending one trillion dollars more than anybody else was to let people buy insurance across state lines, which i agree with, by the way. also, to do not practice reform. the problem with that is if you look at it, it has modest results. i think you would have more success by having more self insurance by large pools of doctors. if you look at a university in

texas, they embraced the elemental principle that the humongous percentage of the malpractice is committed by a very small number of the doctors. it is like the most violent crime is committed by a tiny percentage of criminals. the average malpractice premium for specialist dropped 50% or more. we could do that everywhere. you would have to say they could cross state lines so you could get a virginia, maryland, and d.c. boxed into groups. i think that should be done. if you want more primary care physicians, let them do what we did with the world health court going back to the 1970's. let them knock off 20% of that $250,000 medical school that for every year they work in an underserved area or special day. -- or specialty.

>> you are a pretty good politician. that would be the general consensus in this room and across the country. if you were going to run for office right now, and obviously fiscal responsibility was a big part of your administration, how do you frame that? how'd you get elected and how you state elected by telling people we are going to have to do something here? we have to do something about medicare and social security? we may have to raise taxes? how do you get elected and stay there? >> first of all, i would say the end result works. the second thing i would say is america has got to back -- get

back into the future business. we have to be a tomorrow country. we have to get more jobs and revive manufacturing. we cannot do that if we keep mortgaging our future to other people. half of our debt is held by people in other countries. pretty soon, it would be 75%. i would then tell them that i would be careful how i did this. i would do everything i could to minimize the burden is on the old, poor, and unfortunate, but in order to do that, you have to change the way in which we do health care, energy, education. you have to reverse the age ratio. that may not be popular. >> let's talk about that. that is sort of in the news

lately. immigration. the you see that as part of reform? >> i do. i think the bill senator mccain supported before and the efforts the president is making, they should go back and pass something. i do not like that arizona bill but i get why it happened. i also just came from mexico. it is horrible what is happening along the border. i was -- plan columbia, which helped columbia and the countries around it and the efforts we made to break the colombian cartels and do the things about the entered development bank had a 15th anniversary bank and secretary died here and i went to what wasne