okay, we bring this tax back, rather than having a permanently lower social security tax, in which you double the long-term shortfall. i am concned about that. as far as the deficit, i am 0 concerned about the deficit. we have 9.8% unemployment. the reality is if we found the waste, fraud, and abuse come and cut its budget, he would be cutting the economy. no mechanism will bring that into the private sector demand at the moment. there are stories about crowding out interest rates. i am not troubled by the deficit. i will point out that i think the deficit hawks have been disingenuous on this. they're using this economic collapse as a cudgel for beating back programs like social security and medicare, that many of us to value highly. the reality, the debt we incur right now is not a burden on our

children. it is coming at the expense of great from employment. in fact, there's no reason why the federal reserve cannot buy the debt, as i is doing, and hold it indefinitely. that means each year, you have the federal reserveoard all of the debt, getting interest from the treasury, at the end of the year, it pays it back. they pay back $77 billion last year. there is no reason why we cannot do that when weave to worry about inflation becoming a problem, hopefully not too far in the future. if we need a precedent for this, japan's central bank opened amounts of debt equal to its gdp. that would be about $16 trillion in the united states. they don't have a problem with inflation. >> i think washington makes its be decisions when there is a crisis. we are about to create 1. my senses when we get there, we will see deficit reduction of some sort, whether it is a trigger that was somewhat

proposed in the whole simpson plan, where we begin a process where you don't make a plan, things began to happen. the senate orin house, it will happen. >> what is the deadline? >> the second quarter. >> if we have deficit hawks who worry about the deficit -- i think we have had a lot of blame on both sides. part of it has to do with the fact that it i a long-term deficit issue being different from the short-term issue. what do we do in the short run? we think we should stimulate demand. look historically at what happened when we stimulated demand by running deficits. they got followed btimes where we started trun surpluses or we reduced the debt quite drastically. it was due to the fact there was discretiony spending that did not have automatic growth in it. the long-term issue is unique in

our history. we have a spending curve largely due to the growth in health care, and this rapid growth in number of retired people. the way we have structured some of our retirement programs, the spending curbs is growing faster than the economy. it never comes around. you have got to get to the long- term issue to get the budget in order. where the rubber hits the road is for the first time in u.s. history, in 2009, we were at a point where when congress walked in the door, every dollar of revenue have been spent. we had cut taxes enough and loud this automatic growth to grow enough that the automatic spending, the entitlements, including interest on the debt, was in excess of the revenues. every decision congress made on the discretionary side, to anythi it wanted to expand to deal with the deficit, to deal with the recession, had to come out of financing additional deficit.

to confuse the long-term and short-term messes up our ability to figure out how to solve these problems. the debt commission has the right focus. it is mainly on the long-term. none of them came back for doing anything in the first year or two at all. their focus was trying to get at this long-term problem, which is very serious. the problem is, because it is long-term, it has been allowed to get so bad, and it has weakened the case of the people who do think we need short-term stimulus. they dodged the long-term issue. by doing that, the debt constantly grows. it is putting additional pressure on the system to solve the long-term problem by doing short-term fixes. it reduces our ability to have stimulus by dodging this long- term issue. >> i have three comments to try

to provoke you in throwing things back at me. first comment is, general agreement in the first part of the discussion that you have to talk about fiscal policy, not about budget deficits. we ought to be talking about how to create a gross economy that can compete in a very competitiv world, with the appropriate-size government, tax rates, tax system, appropriately designed programs, appropriate investments, in order the united states is the most competitive country in the world come at a time when there are lot of other competitive -- competitors who also have other advantages in place. that discussion we rarely have. what should our overall fiscal policy be? i fundamentally disagree with all of you in that you then proceeded to take off the table anything you cared about as one of the tools to create that this policy. in each case, if there's going

to be a so-called cut, that must be reinvested in my thing. we saw this with the health care bill. many of the items that used to be on the table for deficit reduction went to pay for the vast expansion of our health care system. similarly, social security advocates will say it needs to be reinvested in social security. grover would say it has to be reinvested in bringing down the tax rate. everyone takes off the table the biggest things where you could actually have an impact on fiscal policy. >> let me just say -- the only one i took off the table was investment in investment in children. >> the one thing you learn is there is somebody who loves it all. all of it has flaws. you sit through these reviews. there is someone who loves every piece of the bget, every piece of the tax code has a flaw.

every piece of the regulatory system has a flaw. the thd point, and this is more admonishment to a fellow democrat, when you reject the markets as a tool for allocating resources, understand what you're doing is appointing washington, our little budget office, the congress, and our regulators, to then do that allocation. when i sit and think about having a national health budget, for example, and we are going to determine whether or not we have enough doctors in sioux falls, south dakota, based on somebody here making thatetermination, it causes me a great deal of difficulty, because it cannot be done. it is the best way, ultimately, to undermine the authority and prospect of government to ask the government to do something that it nor any other big entity can do. i don't understand how many of

ou big corporations are able to function with 150,000 employees worldwide. the idea that government can make these decisions is hard to believe. in the health care area in particular, it is so close to people's hearts. i never quite understood why health is more important than food. none of us believe there should be a government farm. none of us believe we should get -- have a government store. there is a system of assistance through vouchers, cold food stamps. if you apply that to health care, we think this bind the government hasts own hospitals, its own distribution system, and vouchers the would be a horrible thing. health is somehow different than food. the last point i take on this is the viewpoint about the difference in cost. turns out we do have some competition in health care. not a lot, but some.

it can cost you have as much to get treated for the same disease with the same outcome if you go to rochester, minnesota, as opposed to miami, florida. competition even in this horrible system we have got in health care -- expecting that we really can allocate in an economy like this and do it right really sets itself up to fail, regardless of your philosophy. can it be done? in my experience, when the government was somewhat smaller, and mind you, but it was balanced, is that it cannot be done. we don't have enough people. if we did, it would make a lot of mistakes. that would undermine the authorities and reputation of the government to the extent it could do it. >> i feel somewhat admonish. let me pull pullout, the government already does do a lot of these things. ey decide h many people

going to meant school. we restrict the number of people in med school. during the clinton and ministrations the number of people brought into the country was cut in half for medical school. i do not imagine micromanaging the health care in this country, but i do envision -- i would love to get rid of patents o prescription drugs and medical equipment. no one should ever be looking at paying $1 million for treatment for your prescriion drugs. we set up the question the wrong way. we will get the wrong answer. mind you, -- my view is not one the necessary to "reject necessarily requires more government intervention -- my view is not one that necessarily requires more government intervention.

i understand we are lending the money from the trust fund, but under a law that goes back to social security. would be opposed to cutting social security. if we did cut it, we would say, we should not be taxing people and using it to fund the pentagon. i don't think that is very honest. the last point, again, i was not saying that in jest when talking about europe. it is not my ideal way of forming a health care system. if you have vouchers, it would produce savings. i see no harm in it. sarah palin as saying everyone's grandmother is dying because they don't have health care. people have the option to go to canada, to england, to these places, and put money in their pocket. i think it would give us better perspective about the world.

i do not know how many hospitals ther are on the canadian side taking in americans coming across the border. >> i direct the economic policy department. the question is for you. there is a handy chart on all of our chairs. it represents a kind of work that has been done over the last 12 to 18 months. they came up with ideas on how to tackle a national problem. to every- everyone of them has taxes on the table in some form. most of them in some significant

form. yet, one has to sign the pledge to make it to the republican primary. it is getting back to the point that the door is closed for discussion about any one of these options once you sign that pledge. my question to you is how in the world can and elected representative give this issue to someone else? that is what republicans do these days. this chart suggest that they cannot be. how do you square that circle? how do you take the pledge seriously trying to square that circle? >> it is a commitment.

somehow it was pulled back. he was replaced by a senator who promised the voters of ohio he would not vote for a tax increase. this is a commitment that is misunderstood by the voter and citizens of the state of the senators and congressmen who represent that state. take a look at states like new jersey or the governor is not raising taxes. they took $10 billion. some states say taxes are going down and they can negotiate. i think what is most exciting is not washington, d.c., which will be under gridlock for the next two years -- there will be a

disagreement about what direction the government should go in. we have 21 states with republican governors and republican legislators. they are not going to raise taxes. pennsylvania, ohio, wisconsin, texas, florida, south carolina, and georgia. we have some states with democratic governors -- california, illinois, and massachusetts. it is very constructive for people to take a look at those states that are open to tax increases and those states where elected officials say th are not going to raise taxes. that is the difference in the approach. it you have a problem with spending, raising taxes does not solve the problem. you are an enabler, -- taxes off the table are the only time we get spending restraints.

it is one of the things that is misunderstood. from 1993 you that the clinton tax increase which passed with only democratic votes. from 1993 until three weeks into the obama administration when he raised taxes on people who ear more than $250,000 a year -- that 16 year. without x increases. that is e longest time without tax increases. it ao had a collapse of the clinton spending plan. they did not snd as much as they planned to bid for the republicans took over the house and senate. >> is that not the point? we did borrow during that time

-- we had a surplus when it was over. we went to the decade of george bush and the big deficits under george bush. we had the collapse of the financial market. that turned us back to the era where we only deal with one side of the equation. that is not an answer. you need a plan on both sides of the equation. that there is a spending problem, that should be dealt th. that does not mean we will never again raise revenue. >> i did not at the time and i do not now associate myself with plan. spending >> i do not want to avoid -- divide the government that way. big giveaway between the tax cuts in the spending increases is the other side of the balance

sheet. we have gone to a government that has operated since 1997 with spending increases for entitlements and interest on the debt. it has been defense increases and tax cuts. that does not balance the sheet. politically, the dilemma is that what we are into at this point in time is going to the public and asking them to give up something. that includes the middle class. we have not been there for 13 or 14 years. it will be a fundamental problem. it will include taxes. i think the tax you collect is

not from the public. by reducing spending or reducing the taxes you have to collect to support that spending, the fact that we spent $30,000 now every $10,000 to be paid by our children does not mn it is not a tax. we -- if you want to cut long running spending, you have to cut taxes. >> i want to thank the aspen institute.

impact of the federal deficit. >> the united states, richard nixon, saturday. >> it is somewhat simple but very important. it is whether the president can withhold material evidence from the court. maybe there is an assertion that the the evidence of false some confidence of communication. >> you can listen to that on c- span radio. you also can see it online. c-span.org >> i am an education president here. each year we have a competition called student cam. it is with great 6 through 12.

we chose a topic because we want them to explain how the federal government has affected an issue or event in your life for a community. once you have your topic, you can begin again research. you need to fully develop it and provide different points of view and put it in a 5 to 8 minute documentary. for more information, you can visit our web site or e-mail us any questions you have. go get started. we cannot wait to see what you can do. >> now a discussion on the u.s. war strategy in afghanistan from today's "washington journal." this is 30 minutes. , k fellow at the new american security. he is a former army ranger himself and served as a civilian adviser to retired

general stanley mcchrystal. he served on the assessment team and was on active duty in the u.s. army from 2000-2004, leading a platoon of army rangers in 2002 in iraq -- and was in iraq in 2004. what did you hear, what do you think this recent report was intended to signal? a guest: i think it was intended to signal that we need more time before we can determine whether or not we are having success, especially regarding afghanistan and pakistan. against al qaeda, it seems that the administration is pretty confident that they are having an affect on al qaeda, leadership. with afghanistan and pakistan, it is difficult to brave the administration's hallmark because so many of the important metrics -- to grade the

administration's homework because so many of the import metrics are subjective. certainly, it is too soon to tell whether or not the administration has been able to make some headway. while we have seen some quite dramatic tactical successes on the ground in different provinces, will not know the full effect of those strategic operations until after the 40 fighting starts up again in the summer. -- after the fighting starts up again in the summer. host: a word that seems to pop up with regard to what we heard ail."rday repeatedly as "frie would you agree with that? that the congress is friel. guest: i would agree.

right now, in the winter in canada more -- in the winter in kandahar and helmand, we have achieved what we intended this summer. having said that, we will not know whether that will endure until after the taliban tries to regain control over the terrain they had control over last summer. host: i wonder about public temperament overspending, and also, the politics of the house to move into republican control. guest: on the one hand, i have sympathy with americans concerned with the cost of this war. and i think the president and democrats alike -- and republicans alike can move to a kind of counter terror campaign that would be much more limited in scope as well as cost. the difficulty is that you have

to have a response will transition between the two and you have to build of certain key institutions within the afghan state, specifically security forces, in order for that to happen. on the other hand, if you look at the congressional elections of just a month ago, afghanistan was not really an issue. even though americans are concerned about the cost, that was not one of the priorities in the congressional elections. host: our guest will be with us until about 20 minutes past the hour of 8:00 in washington. we will take your phone calls and e-mails and twitchell comments about the progress of the war in afghanistan. -- and twitter comments about the progress of the war in afghanistan. this was printed in the "usa today" --

but how capable are those soldiers? guest: that is the question to rest. it is difficult to gauge that. it is another thing to determine whether those are effective on the battlefield. one way to gauge whether they are effective is not just to focus on the size of the afghan security forces, but to look at how many noncommissioned officers are present for duty on any given day, or to look at the attrition rates. over the past 18 months, the afghan army has been a bit of a success. it has always been stronger than the national police. and with general caldwell going in there about a year ago, we started taking bertran in the army much more seriously than we did previously -- taking the training of the army much more seriously than we did previously. host: the "new york times" chose this as its lead on the briefings yesterday --

give us more detail around those things. guest: i was just in afghanistan and spoke with everyone from general patraeus just to regular afghans on the street. one thing that everyone can agree on is that the current strategy has -- to borrow general patraeus his words, to devote a keyless heels. one is that we have -- two

achilles' heels. we have an afghan government that is able to effectively cover the people and not act in a predatory way in other sections of afghanistan. they have to do their homework because i cannot determine the degree to which these sanctuaries in pakistan are having an effect on our operations in afghanistan. but as a social scientist commodified backup and look at the broad civil wars and a insurgencies over time, it is very difficult to be successful in this type of counterinsurgency campaign if you have a across borders like we do with afghanistan and pakistan. i do not think we have a strategy within the u.s. government and within nato to do something about these sanctuaries in pakistan. pakistan is have been unwilling to go after -- pakistanis have been willing to go after the

islamabad and other troops that are targeting their regime in kabul, but also those that are aiding and abetting those groups. and i'm not sure that we will achieve is strategy in pakistan in time. the pakistanis have been pursuing logical strategies. since 2004, 2005 they have been supported these groups because they want to make sure their interests are represented against, for double, india, and afghanistan. -- for example, india and afghanistan. there is amount of monetary commitment that will be entering and their strategy of employing these parks the actors is ultimately doomed is the message we have to get across. -- these proxy factors is to ultimately doomed, is the message we have to get across. >> alternately, it is afghans who must secure their country.

and it is not nation-building because it is afghans that must build their nation. whether we are focused on disrupting, dismantling, and defeating al qaeda in afghanistan and pakistan and preventing its capacity to threaten america and our allies in the future. host: with that strategy, how does governance in afghanistan lead into that? guest: what the president is trying to accomplish as quite minimalist. we are trying to defeat al qaeda and target other transnational terror groups that threaten us. unfortunately, the neat -- the means that we need to do that are somewhat maximalist. to prevent them from returning to afghanistan, you have to have someone competent afghan security forces. when you talk about governance

in pakistan and these forces in afghanistan, you are talking about the same problem. you can hit the haqqani network all you want, and we have decimated their leadership. but both of those groups will be resurgent if they are able to play on the grievances of the afghan people and rely on the sanctuary to rest, reset, and commit another offensive in the spring. host: in addition to military experience, here is our guest educational master's degree from bear group. let's take some calls. beginning with pennsylvania. patrick, a democrat. caller: he keeps mentioning we have to stay longer. we have already been there 10 years. how much longer do we have to stay there? 101 years? -- 10 more years to get 20 more

years? let's figure how long we're going to be there. guest: i take the caller's point . a went there just after the evasion. i was a light infantry platoon leader. i've been at this for a long time. i remember in 2003 we decided to shift a vast amount of resources over to iraq. that was a blunder. we had to begin a new in 2008 and 2009. i share your frustrations. i've been fighting the talbot for a lot longer than i would have wanted to fight it -- i've been fighting the taliban. each trip costs about $1 million a year. -- each troop cost about $1

million a year. we have to let u.s. interest in the region. we have to think about these terror groups, such as al qaeda that are in afghanistan and pakistan. with the transition to a much more sustainable transition in afghanistan. we never truly left japan or germany. we left there and we remained there to keep the security presence. i think we'll have to do the same thing in afghanistan. i think it will require an enduring u.s. presence, probably for 10 years. the key is to get it to a point where it is sustainable financially. host: will you respond to this twitter message? guest: it is difficult to measure the effects the drones are having. we learned about these attacks a year and a half ago.

i worry that some of the tactics that we're using that are having a devastating affect on al qaeda's see your new ship and elsewhere, i worry there will be some blow back on the spirit we see folks being radicalized not just in the frontier areas of pakistan, but in london and paris and with the times where bonnember. and in connecticut. with respect to the pakistani, we've been successful in supporters in sharing intelligence and allow these attacks -- we don't want to take responsibility. i think the pakistan's have to take responsibility for the flight of the militant groups in their territories. otherwise we will continue to see the kind of a pullback from

the tactics we're using to achieve operational gains. host: next to bethlehem, pennsylvania. caller: i would like to think the judgment for his service to our country. what are -- i'm a vietnam person. what can we do currently, those of us who are civilians to change the hearts and minds so that we are not schizophrenic with this war? what else does our government need to do to help you in the field? guest: thank you for your service. one of the things i would say is that there are a number of different things and i predict that washington can do to be supportive of the troops in the field. the enormous amount of money

that we are sending to afghanistan right now with minimal supervision is feeling this conflict. the government of afghanistan and the taliban and other insurgent groups have an interest in this conflict continuing because they are making some much money from kickbacks and corruption. the arch american can lobby his congressman to creep a provision where the money that we're sending to afghanistan, if in oneot sspent it fiscal year, it carries over to the next. that seems like a small thing. it addresses a larger problem, the enormous amount of money that we're putting into afghanistan that is distorting the economy as well as feeding a lot of the corruption that is proving so deadly to try to establish any kind of effective government. host: this goes back to the

macro level, this tweet. guest: we have lots of interest in the region. vital interests. that extends blood and treasure. those interests are what the president said. we're trying to ensure that al qaeda does not reestablished safe havens. they have been denied safe havens in pakistan. pakistan has about 60 nuclear weapons. those are the vital u.s. interests. ande trying to protect them building up security forces where we can fight for the denial of safe havens in afghanistan and try to increase the capacity of the pakistani government and the will of the pakistani government to go

after a lot of the insurgent groups and terrorist networks that are in their. host: we will show you some of the headlines coming out of the report. this is from low rocked -- this is from little rock. caller: i want to thank your guest for his service. tell me why it is possible to pursue a different approach, such as what is that of engaging in a nation building strategy in afghanistan, why can the u.s. not look at an option of pulling back to the relative safety of a neighboring country such as turkmenistan, operating out of a base of turkmenistan and instead of trying to create a functioning country out of afghanistan? guest: that is one of the comment frustrations you here. can we do this in a different way?

may not turkmenistan but made from carrier groups, arabian peninsula appeared can wait attack these guys of tomahawk missiles? we tried that during the 1990's, and to attack al qaeda remotely. we did it during the clinton years and the first years of the bush white house. i have a little bit of experience doing this. direct action against terrorist networks, one of the things you need is up to date intelligence. it is difficult to get that kind of human intelligence if you're not actually in proximity to the networks themselves. not we're trying to do is creep switzerland and central asia. we are trying to build up a reasonably competent afghan military where they can resist the taliban. in 2001 and 2002, the northern alliance, with some u.s. help,

was able to roll back the taliban in relatively short order in 2001. we are having more difficulty doing that now because of the safe havens in pakistan. again, what we're trying to do is build up the security forces to some sort of reasonable compensation. i do not think any american wants to try to get afghanistan to the point where it is first a country that takes too much time and investment. but trying a lot of those other strategies -- we try the mid- 1990s. it did not work. what we're doing is limiting counterinsurgency operations to buy time and space to build up certain institutions within the afghan state that will allow us

to transition to the type of more limited counter a terror campaign that you and many other americans desire. host: this is from a twitter writer. guest: actually, i think the lady on twitter, we might disagree about a lot, but we agree that al qaeda is trying to kill us by death by 1000 cuts. about $4,000 to recover some explosives and caused us to spend millions or maybe billions of dollars in airport security and it has had a disruptive effect on our economy. that is exactly what al qaeda is trying to do. they are trying to bankrupt us with death by 1000 cuts and disrupt our economy.

the difficult thing is that in order for that not to happen, one of the things we have to do is get more comfortable with living with the terrorist threat. we cannot expect our government will be able to protect against every single threat from outside. we have to learn to be more resilient as a nation. the british public in the 1970's and 1980's and what the israeli public has done during the first and second intifadas. host: this is from ""the wall street journal." guest: and from the new york times -- host: and from ""the

new york times" -- and from "usa today" -- host: there is a bait and switch feel to it. host: i am going to go to the phones. i'm sure your comments on this. illinois is next. this is a democrat. caller: i have a question for you.

they get funds from the poppy seed fields. why are we not destroying the poppyseed fields to destroy their money-supply? once that happens, we have a sharper defense against them. once we can move them out, from people to survive, then you can maybe start to regrow the poppy seeds or something and have the security forces be the ones to guard over the poppy seeds. that is a huge -- they are making so much money from that. host: let's get a response. guest: you have put your finger on a policy problem that affects americans and nato officials since the early years of this war. one of the things that we come to the conclusion of, and this is the late ambassador holbrooke moved policy in this direction,

is straight out eradication does not work. create positive incentives as far as alternate agricultural strategies and kandahar province is does work to a certain degree. you're exactly right to focus on the policies as a problem. again, we do not know that much about the talbot finances, or i do not. maybe people with higher security clearances know about this. that is not exclusively for the taliban and other insurgent network get their support. it is one of the sources. we have through trial and error trying to figure out ways to reduce poppy cultivation in afghanistan. so far, we have a better solution now that we did two, three, four years ago. kudos to you for putting your

finger on a key issue. host: next call from florida. ron, republican. caller: the big, bad american military cannot be if you guerrilla fighters stuck in caves. you have not done anything of it except kill some women and children and spend a bunch of money. this war is all a bunch of bull shit spend money for the industrial complex and to keep feared going in this country so you can keep that industry going. host: to live. guest: -- host: thank you. guest: there were defeated in 2004 and 2005. they have been reconstituted in 2005 and 2006.

second, unfortunately for u.s. industry, this war in afghanistan does not support the industrial complex in the way that a large industrial war like the second world war or the cold war did. the types of equipment they are using -- is a low-tech war. these dirty quillworts, and i have fought them and iraq, are not the kind used planes and equipment that may be appreciated by the industrial complex. i would push back on new little there. speaking frankly, i think it is a slur against the american fighting men does it all his son is killed women and children in afghanistan. host: a passer, texas, is next

-- el paso, texas, is next. are you there? moving on. joyce, a democrat. caller: you know for yourself that kashmir is one of the most beautiful places in the world. it was always don't to be pakistani territory -- it was always known to the pakistani territory. help the indians to takeover and destroy and killed those pakistani that lived in kashmir. why should pakistan ever trust us when we treated them that way? we have then it almost totally out of the eyesight of the press. those of us who know what is going on and watch unit -- we're

watching this carefully. thank you. guest: first off, i think the mountains of east tennessee of the most beautiful place on earth. i appreciate the call from my fellow volunteer state native. with respect to india and pakistan, there's a belief that you cannot get pakistani support in the war in afghanistan until you somehow soft not just kashmir but the larger threat perception. they are overwhelming lead oriented to the east. you put your finger on this as well. they look at u.s. relations as a series of betrayals. cause of their nuclear programs, we cut off all ties to the pakistani military. that was in 1989. that has caused some

consternation because one of the things we lost for a lot of those close contacts between the u.s. military and the pakistani military. i take your point. the problems of afghanistan are wrapped up in larger regional problems, including a rivalry between pakistan and india that we're not done a lot to address. the pakistanis have a reason to feel somewhat betrayed by the united states because there have eriods we lostut thos interest or cut ties with the pakistanis that has been difficult to claw our way back from. thank you. go vols. i think in 2011, 2012, 2013, you'll start to see a gradual transition over to afghan control.

president karzai has stated he wants full afghan sovereignty. all our nato allies have signed up to that. i think that is what you'll see. you'll see a transition over to afghan control. the trick is to see what we can arrest taliban momentum and buildup credible institutions to lawful and effective transition. host: our guest has been andrew >> the jobless bill into law. today on "washington journal", a

congressional reporter has the latest on congress. the sessions this weekend, and what we can look forward to next week is what she will be covering. and then one person, frank gaffney, will also be there. and our last guest will talk about the tax cut deal and how it will impact consumers and the overall economy. this will be live 7:00 a.m. eastern on c-span. >> i think the prime minister of this country has a great deal of power, more than what people realize. he has great power, the president of this country has a great deal of power. the president of united states may find it very difficult. >> there are a couple of seasons

empowerment -- c-span programs. a documentary filmmaker will be on "q&a" as low as our other guest at sadder day and sunday at 8:00 p.m. eastern. -- saturday and sunday at 8:00 p.m. eastern. next, some officials from the bush and ministration. the former homeland security secretary will speak about the nuclear in terrorist threat posed by iran. they advocate a more aggressive u.s. policy towards the country, focusing on regime change. speaking at an event in washington hosted by executive action, a cocoa -- for recent -- a call for rescinding a policy. this is a couple of hours. [captioning performed by national captioning institute]

[captions copyright national cable satellite corp. 2010] let me thank you all for being here today. let me say that the timing of this symposium, it is a very appropriate time that we are here today discussing the issues before us.

it is on the heels of the failure of the talks earlier this month designed to reduce the nuclear threat posed by the regime in tehran. they were indeed a failure. whoo one's great surprise, has been around a situation for any length of time. also over the past few days, the world is once again witnessing of the population is making his marketing of sure of. there are protests against the government. very brave people on the streets of tehran expressing themselves in a way that is very dangerous for them to do so. it is timely and appropriate that we bring together a distinguished panel of speakers to help us understand the nature of the threat posed by the bureaucratic dictatorship in

tirana and propose viable policy options in that regime. without further ado, we will get to those speakers. the first will be the hon. michael. he was the 81st attorney general. he was appointed u.s. district court by president ronald reagan in 1988 and served until 2006. in the last 60 years -- years he was a chief judge. >> thanks for that introduction. i want to thank executive action as well. for organizing this symposium. and for giving me the privilege of this microphone at this time. this is one of those moments in history where we know that

teacher generations are going to ask what we did to events in good can resist evil. they will ask that, because this is a time when they threaten to destroy civilization as we know it. at the center of the threat, the regime in control in tehran threatens people. the world a large must be concerned as they develop nuclear weapons. the question that we have to ask ourselves is what have we done and what are we doing to bring about the only end to this threat that can be permanent. we must have regime change in iran. this country has not done all it can analyst could. what it has done and what it is doing, -- it is our job to make

sure that we remove any stain upon the united states. i am a lawyer, and we have made our case. some policies and facts of law that we have been looking at are of great concern. a series of attempts where the united states engages the iranian regime. each attempt less successful than the one that preceded it. this is an important part of this history that began in the 1990's during the clinton administration. the secretary of state made a designation. that designation continues to this day. i do not want to have to reveal

-- review in detail the history of this. i do not have to review the entire history of this or ask what is the mek. it is the only organization of iranians inside and outside that opposes the rehashing and favors a government in iran as democratic, secular, and a republic. it is one of the few organizations that fits that organization -- is the only one. 3500 members are part of this organization that live on the border of iran and iraq. it is referred to as a camp for city. . these people fled iran and set up on the border so they can live to free their country.

in 2003 the residence used the weapons they had available to defend themselves. there was a written confirmation from the deputy commander they were protected persons under the geneva convention. in 2003-2009, they protected that unfilled the obligation we undertook in 2003. january 2009, united states turned over the responsibility force occurred before iraqi security forces. general david petraeus said that the united states has been assured by the government of iran that the residents of this area would be protected and he would proceed with the tears for a security responsibilities based on that. the residents have a great source of anxiety.

iran and would like nothing better than to see that community repatriated back into iran for crippled to the place is knoller a threat to the regime. there is increasing pressure on the iraqi government. in june 2009, head of the iraqi government, supposedly for private reasons -- next month iraqi security forces attacked residents of this area. .

>> we are all excited to be here today. we focus on helping all

americans. from child savings accounts to those to help americans with their financial security to investment options. today, we brought this panel together to talk more fundamentally. this will be an opportunity for an open and honest dialogue. the decisions made today may impact the financial security. i want to introduce our panel. first we have a fellow from the urban institute who specializes in tax and budget policy.

she continues to be a leading voice on taxes and public policy in washington. we had the executive director of the aspen institute for financial security. he is a leader in supporting economic security. next we have in the stern. -- andy stearn. he is a research fellow at the georgetown public policy institute. next we have grover norquist. he is the president of american tax reform. he leads an abbott c. group -- an advocacy group.

last we have a columnist from the "new york times." with that, i want to turn it over to david. thank you. >> thank you for coming. this is a discussion about the deficit. we will dive right in and get this conversation going. it seems the fundamental question we are debating is how big government should be and how we go about paying for that government. of what to answer the first of those questions, which is how big should government be. it should not be any bigger and should be smaller than it is now. it should basically continue to grow as the population ages. i would like to throw the

question out of how big government should be. i want to start with the framework that much of what government does is very popular -- medicare, social security, and the military. it is not just a question of how big government should be, but americans seem to want government to be bigger than they should pay for. i'll let the other panelists job in. >> thank you, david. i am going to twist your question around. in some ways it is the wrong question. 36% say the european state is a

fundamentally an important question. do we have the rating at 40% or 33%? we go back -- we go back and forth on this seesaw battle. how well do we grow the economy? that largely determines how large government is going to be. we have a chance to double our personal income. another problem is the dilemma we are in right now. we spent $30,000 per household. it collects $20,000 in taxes. neither liberals or

conservatives are playing by a role where everything has to be a balance. that $10,000 gap will continue into the future. we are spending 50% more than we are taking in in revenues. we have to get the system and to balance. besides have to play by the rules. >> i think it is the wrong question. we think about how big government is, we are focusing on a meaningless number. if we were to have a single- payer tax system or medicare system, that would enlarge the size of government. all the money coming in is paid out. that does not make the government bigger.

we require people to buy health care. how is that not big government? we are still just as large in terms of the government impacting the economy. currently we spend about $300 billion on prescription drugs. they cost about a 10th as much. the point is, that is government directing large amounts of money. we give everyone a subsidy when they bite their home. we can have a government subsidy and say we are going to tax everyone and then we are going to subsidize your home. that is big government. instead we have a tax code where you get a tax break if you buy a home. you do not have to pay tax on your interests. that is not big government.

we are in washington, so we are used to silly things. >> if we think about the actual politics, i agree we should create our own economy. what this debate will come down to, we keep medicare as it is. that is a decision where government will continue to grow significantly. or do we fundamentally change medicare? it seems to me that is the essence of what will be very difficult. i believe that some solutions will work. some are big and some are small. grover, it seems like you want to get in. >> what most conservatives are looking to do is take entitlements, which are not pay as you go, -- things would be --

and move to a defined contribution plan. you're seeing that now lie in state legislatures. utah has passed a law. they will have a defined contribution pension. they will pay 10% into the defined-contribution plan. the number of states will be following that path. the federal government is moving in that direction with federal employees. social security, medicare, and other entitlements. we tend to think about spending and taxes without focusing on the regulatory burden. if you buy a car, you got to pay

for the following. that regulatory burden is getting to be a big piece of its period had you get more growth? -- big piece of it. how do you get more growth? >> let me ask you one specific thing. the american people have been persuaded that they do not want to raise taxes. >> is a work in progress. >> medicare remains extremely popular. social security remains extremely popular. when one party talks about doing something to change that, how do you deal with the gap

between americans wanting lower taxes and wanting a government to support them? >> the original conversation was that anyone who is jogger should be able to move into defined contribution -- anyone who is younger should be able to move into defined contribution. it went over time as it has in chile and other countries to move people to a plan that does not have these unfunded liabilities. they have economic growth. everyone in the country is a significant shareholder or investor. you do it with choices. a lot of people are older who are uncomfortable with change. the congressman are not going to

go into a room with the president and give you a one size fits all reform that is an improvement. the programs are popular compared to what politicians say they are. i think the way to go so you do not end up with unnecessary opposition -- you also do not want to end up with opposition because you gave people false choices. >> i want to take on it grover's point about choice. i also want to say that when we shift from a defined contribution system, it is a lot about shifting the cost and shifting the rest. that has an extra toll on

working people. one reason the people did not like the choice was because they understood the risk that entailed. i think a conversation cannot get away from the fact that we cannot control our costs by just shifting all the rest to individuals and individual families. one of the reasons they crave the insurance business is because it is a way to reduce risk. that is a good thing for government. in this deficit conversation more we talk about the size of government, i think the new lots i would put is that we cannot control cost just by shifting costs. the move to make more of the government with a voucher system is a risk shift. >> we are all here because the

social security system and the medicare system is paid for by people investing now for their future. they are investing -- madoff went to prison because of this approach. when you talk about personalizing it, you're giving people control of their assets whereas now they have nine. the risk is there. that's why we have competition. >> i was hoping grover would give me his greatest quote. [laughter]

i am glad i got it right. >> this is a conversation that is a little small. our country and the rest of the world is living to the most profound economic revolution in world history. if you think about agriculture being a 3000 year transition, we are in a nest of a big structural transition. we have seen big gap between the rich and everyone else grow wider. american workers have not gotten a raise in 30 years. people are right. the truth is, we need a plan that makes america competitive. it is true that our medicare system does not, but it is also true that we pay more than our competitors. it is true that we have a tax system that has all kinds of gimmicks and earmarked that other countries do not have. we do not have a tax like other

countries where exports are not taxed, but imports are. it is not an issue just about defined benefits or contribution. there are ways to do all of those things. america needs a 21st century plant and we are still in the 20th century. -- 21st century plan and we are still in the 20 a century. we have a fiscal deficit, obviously. we also have an investment deficit. there is a lack of investment in a high-speed rail. how is america going to do what we did in the eisenhower years where the interstate system was the basis of commerce? we do not really have the best in the world.

there are all kinds of questions. it is a recipe for terrible decision making is about investment. you have to hurt someone else to get the money for countries to invest. we have a dedicated find it to find it infrastructure and investment. -- we have a dedicated fund to fund infrastructure and investment. >> i think andy is understanding the problem. it is not just the deficit issue. the deficit is a symptom of a much bigger problem. as long as we think we will get at that problem by reducing the deficit, we do not get into the issues and was talking about, which was getting the government to be invested in people. the most important investment is

in human capital. there are also people who have career transitions and other things like that. we also need physical capital investment. we keep our taxes rather low rather than our spending. we are running up large debt which is running up compounded interest payments. also, even if we had invested near zero, this is a budget that is oriented towards consumption. all of government growth is destined to add to our health care and benefits as we grow older. we get some investment in children. you take the $1 trillion of

additional revenues that are expected in the near future and none of it is destined to go to children. the growth you get in revenues, none of it is destined to go to children. it is a budget for a defining nation. i care less if the government is 33% of gdp. we still we do not have a system that is that all modernized. to we do not as tough to get at the deficit. we have to get the structure of these programs.

you are going to have gridlock, meaning not worth spending, out of the house of representatives and washington or the next two years. the big fight that just happened last night where they tried to reach out a year and add a trillion dollars into the budget. it was defeated. there will be a fight to the there and not too much will move. that is reasonably healthy. on the question of growth, there are two areas that obama has done that could be his version of welfare reform. it does reduce the cost of

capital, which would create more jobs and opportunities and bring money to the united states. the other is reducing the income corporate tax rate. the rest of the world's, europe is on the average of 25%. that is not where we want to be on the corporate income tax rate. we used to say that we are not as bad as japan. they are below us when you count state and local taxes. some of the left of center think tanks that he has worked with. the reagan people foolishly did not accept that and went with the accelerated cost recovery system. it was a political mass -- mess.

expensing drops about 1000 pages out of the tax code. it reduces the cost of capital so the world will spend capital here. i think there is real opportunity on the growth side. the bolt over the next 25 years is to cut the government in half. now it is my hope to do that. you do not need to reduce government spending this year from last year, but you mute -- you do need to hold down wide growth makes the government unless expensive cost for production. there is labor costs, capital cost, and the cost of government. you do not want the lowest labor costs in the world. that is not the way to get ahead.

you want to reduce the cost of government so that we can be more competitive. >> the corporate tax rate -- we do have a higher corporate tax rate in terms of what we actually paid. i recently looked back at the cbo productions for -- projections for 2000. we had a huge surplus in 2000. it was about $750 billion trade that is quite a lot to be off. that was due to more rapid growth. the federal reserve board allow the unemployment rate to get way below the accepted wisdom of the economics profession. it cannot get below 6%. it actually got below 4% in

2000. >> let's talk about the specific taxes. there are deficit reduction plans. we have talked a lot about a value-added tax, a national sales tax. the plan included a so that tax. -- soda tax. there's also talk about a bank tax. there is still some talk about a gas tax. there is talk of fundamental tax reform. which of these are actually likely to break out of commission reports and panel discussions and have a serious chance of becoming part of our tax code or a bigger part of our

tax code 20 years from now? >> we are seeing the end of earmarks. in yesterday's vote in the senate, and we need to think about expenditures. there are ways that congress has allocated money to spend through the tax system. a totally distorts all kinds of different behavior sprague there is a lot of synergy to try to make the tax code simpler. make people understand how much money to keep and how much money goes to the government. i think that is good. in the end, the competitive american economy likes to talk about corporate taxes. most of them sat -- most of them some -- most of them have some sort of consumption tax around the world. it also taxes our exports to

those countries and we do not tax their imports to us. we have a stupid economic system in the way that we deal with our tax -- are corporate tax income. it has to change. >> you think tax reform is somewhat likely to happen. >> that is the easiest way forward right now. >> [laughter] >> 20 years, a whole bunch of other interesting product lines. there is potential agreement on something like the tax bill in 1986. you reduce marginal tax rates, corporate and individual, and eliminate tax deductions and credits. there are two challenges. in 1986, you had ronald reagan

standing there with a baseball bat saying, make these changes. a lot of people who otherwise that the tax rate was a dirty trick for tax increases because people had talked about tax reform in the previous 15 years a ltd. -- a limited production and credits. as long as eliminating deductions and credits are indeed context of a revenue- neutral reduction in rates, there would not be opposition from the majority -- the republican majority in the house and the senate. that is the challenge great if we can get that agreement that it is revenue neutral, it will pass. >> we are now spending $30,000 per household. we are collecting $20,000 in taxes. that gap does not go away if we keep current policies in place.

there is got to beat give on both the spending and tax cuts. -- there is got to be give on both the spending and tax cuts. we are borrowing so much from abroad and we're putting some many burdens on our young people, that gap has to give. if we draw a line in the sand and says -- that says no tax increase whatsoever, if that is off the table and we think we're only going to get there by is cutting spending, i think we're putting blinders on. on the spending side, medicare is designed like a lot of private systems. we have a fundamentally flawed design from the beginning. you and i go to the doctor under an insurance plan and we bargained over what everybody else would pay. that is a system that cannot work.

we have not agreed to is what the reforms are to get at it. woodstock the problem by having government control everything. -- what solve the problem by having government control everything. we have not agreed to what we will do there. we have got to get out some growth. the automated -- that is unsustainable. we have to close that gap. it has to include some tax increases. it ends up to be a fairly conservative policy. it is like cutting a spending program. >> from a -- getting rid of these deductions is great. there are a lot of people who feel like those deductions benefit them personally.

i am not saying that these are good policies. a lot of people think they are good policies. how do you deal with the tension between the perception or the reality that these are -- the middle class has endured a decade of little to no pay increases? >> tax code is not neutral here. we actually use tax expenditures to promote behaviors' that we consider valuable. some of those are very, very important for middle-class. it's fine to have a conversation. the real place is not to eliminate tax expenditures. i served on a group where our fundamental question was, why aren't we using our tax expenditures to promote savings? about the we serious

kinds of tax expenditures that would put every child into the investment system? that would be net savings. why aren't we expanding and so that people tend not only have a mortgage deductions, but have tax savings or the first down payment so that we have less -- so that we have more downed and less debt. there are valuable behavior's that matter. in the fundamental tax reform, which i hope is coming, i hope we used -- i hope that we keep some of the things that aren't justifiable for the financial security. >> in terms of the tax expenditures, you can let someone take a deduction at a 39% rate.

that does not make sense. giving a middle-class person some tax deduction, that makes a lot of sense. it is kind of striking to me. at this point, there is a widely held view, including at the imf, the financial sector is bloated. you have enormous salaries there that people could speculate, they're basically gambling. if you gamble in las vegas, we tax that. to why should we tax that here? in terms of perspective of a middle-class investor, it would be a wash. there is good economic research

on this. if i have $100,000 in a 401k ended lloyd's over 20% a year and suppose we would double the cost of transactions, it would flip over to 10% a year. that is neutral to me. i could not care less how many times my money flips over. this does not get considered in washington. you could get $150 billion a year from the tax. we would not be able to collect it, it would go overseas. i cannot believe that there -- that they are that much smarter in the united kingdom than the folks in washington. >> i know we will not get into a discussion of first principles here. for the record, when you hear the expression tax expenditure, understand that this says

something very important. the idea that if the government fails to take a dollar from you, that it has just spent the dollar, it implies that the government owns all of your income. the king gave the peasants that money. when i walk down the street and a mother wrote -- and a mother walks by and does not steal my wallet, he did that give me that wallet. he did not give it to me. if the government does not take a dollar from you, it did not give you the dollar, you earned the dollar. this is why when people drop the term tax expenditure, they lose half of the audience, starting with the republicans. if you want to get rid of tax deductions and credits, in order to have a cleaner code, a code

that the government interferes in less, there is a lot of support for that credit that was what 1986 was all about. when you use the term tax expenditure and suggest that when the government does not take your money, it is giving it to you, there is a challenge there. allow choice is to say you can have the 35 rate and less deductions and credits, but there is a way to transition over. if you want to get rid of deductions, there is a 20% rate. it would be less disruptive for people who plan their lives around certain deductions and credits for mortgage and other spirits they may not want to give them up right away. >> i am not sure that you mean all republicans.

>> i do not believe he would support the. we had a conversation about this. i do not think he would vote for this if it were put up for a about a great it is not about the idea of raising taxes, he assures me. >> the point he is making about it is your money is correct. people contribute everything to government. the same thing is true about direct spending. the government is the one that is giving back their money. if you want to cut spending programs, i can design a spending program that is exactly the same whether i call it a tax deduction -- people sit around and say, we cannot get rid of these spending item. let's put it in the tax code edible did the same thing. they talk about the exact same item.

all the complaints that it is your money, it is your mind. ronald reagan also favored cutbacks. he did it in 1982. he did it in 1984 are. he favored it in 1987. yes, he was careful because he'd wanted rates to below -- he wanted rates to be low. people are dodging one part of your question, david. the fundamental dilemma, political dilemma facing our politicians and, is that the middle class pays for most of government. the middle class has to be asked for the title of the session. it is a shared sacrifice. it is a shared sacrifice toward

greater gains. democrats has to be engaged. -- the middle class has to be engaged. the middle-class has to be engaged in that issue. it is not just an issue of taxing the rich. >> let's get specific about some spending programs. how should we think about the eligibility age for medicare and social security? understand that people of higher income have longevity. they were not said five or 10 years ago. they were said many years ago. social security -- is it reasonable to say to people, we are living a lot longer. medicare is not plan to kick in at 65. it will kick in at 67 trade is

that a hardship? >> if that is what it takes to get things in balance, but there are much more thoughtful and appropriate ways to keep things the way they are. it is not individual policy decisions. we have more people in the system, how do we deal with it? it is a truth that other countries spend 5-7% less than we do on health care. they have figured out the designed from switzerland. -- they have figured out the plan from switzerland. what would you do if you wanted to fix the health care system? i would go to raise system like france has. i do not know why we always go up to date, how do we make cuts? we are at a point where we need

to make structural changes to compete. people are living longer. i think we always go -- i am not saying that we do not have to make tough choices. >> we did raise the retirement age. we are raising it to 67. we are paying a lot more. we are not getting a lot more. rather than focusing and telling middle-class people that they cannot get the same health care, we should be focusing on fixing our health care system. we pay for insurance -- we should be looking to lower our costs. when you raise this, they said, this is really hard to do. it is mindboggling. we have a problem here, and we know that is really hard to fix, so we are going to do something

else. it is running from the tough choices. >> let's say we accept all the changes. do we change the retirement age? i would still increase the retirement age. if you look at social security, people are retiring for about 10 years more than one the system was first established. if they would retire for the same number of years today, that is about 13 years on average, they would be retiring at about age 75. thinking that we will design a retirement system -- what will the system look like in 2015? -- 2050? it is absolutely silly. we are 1 foot -- one-third of

adults will be on social security over one-third of their lives. it has become a middle-aged retirement system. that is not good for the system. this is a threat to the system. over half of the benefits went to people in the last 10 years of life. more and more is going to younger and younger people. the system is less and less progressive. i think it is a great threats to the very ill. the typical couple, they think they are ready at age 62 for what will happen to one of them when they are 90 or 92% and they are not. we're threatening the very old by this design of the system. i would increase the retirement age is to fix the system. a 21stalking about century model.

we want a 21st century social security system. i know we have had this discussion. it does not disfavor minorities. what happens is that we have these 10 years of extra retirement, everybody on this table gets 30,000, 30,000, $30,000 of additional benefits. we're sympathetic to the disabled. social security does not affect the disabled at all. the people did die before age 62 do not get any benefit out of helping the retirement system. to give that person 15,000, -- it is worse than going into the city and pouring money off of the roof. it is a very bad way to do

things. we need to make a much more progressive system by getting at this retirement age issue. >> i think it is one of the most popular and important programs we have come up with in the last 75 years. the one thing i think it's ultimately sad is that social security is not the deficit problem. here we are at a deficit conversation once again discussing raising the retirement age. i do not know why it is on the table. we will call you back and have a different conversation for social security. i do not think we are all the same. the incentives are there. you'll get so much more from the social security system if you will delay your retirement to age 70. that is already there in the system. those incentives are there. my group has already had an

increase and retirement age. we put those things in place. it is the wrong place for solving the retirement system. you have answers, david, that the medicare challenges -- the very popularity of these programs tell you something about what americans are holding not as the basis of their financial security. much of the gains we have seen and longevity are coming from keeping children alive. this is much more related to the jobs question. how many people will find gainful employment? more complicated issue, not really a deficit issue, in my view. it is an issue that we have already dealt with. we already raised the rates of how long you have to work. let's come back later.

let's have our own commission for social security. let's deal with that fairly. let's not lump it in. it is not the debt as a problem. >> social security starts running a deficit after the trust fund within the next five years. it is projected to run at of its trust fund by 2037. you will no longer be able to pay the promised benefits. it would be a major political issue. i understand that from an accounting perspective, it is different from the rest of the deficit. should it be part of this discussion? should it be treated separately because of the accounting? >> it should be treated separately because of it is one of the most cherished programs. it has always been treated

separately. we should not make a 25% cut now. that is my problem with this kind of mathematics. scaring people with a ponzi scheme. this is a social insurance scheme. to many communities, too many people understand that absolute vitality -- i work on private savings. all that wonderful work on private savings is meaningless if you do not have an effective system of baseline insurance underneath. i think we should be careful. this is not the time to burn the candle at both ends. >> let's stay on health care for another minute. we saw an incredibly bruising

fight over reform. once satisfied the specifics of that. let's talk about the cost issue. it seems to me that this is a perfect example of people wanting more government than they want to pay for. everyone talks about how important it is in health care, but we -- how dare you take away my health care? death panels, etc. how do we get to a point in which people are willing to accept that we can have a system in which we have absolutely every test and treatment and every procedure that we want? >> we are moving toward -- particularly with the legislation to have the government takeover -- take over health care. what we should be doing is

moving in opposite direction great if you want to keep costs down, competition keeps costs down the only way a powerful monopoly can keep costs down [inaudible] how did they do that in the post office? they did not deliver the mail on sunday. the way they drop the costs is through rationing. that is what the private sector does. stepstep one, tarp reform, whats different in europe? one of the things, in addition to the corporations that we do is our court law. i am not fixed by -- not excited

about trial lawyers who step in between contract and raise the cost of health care for people. it is an additional cost. if you allow people to buy insurance across state lines, the way you can buy most of their products, from somebody in another state, the numbers suggest you drop up to 15%. that helps with all health care. i would go to more competition. we see that with lasik surgery. it is less some -- less expensive every year. there is more competition. the same thing with cosmetic surgery, which is less expensive because of competition. >> do we imagine a system in which people will go out and shop for chemotherapy the way they shop for lasik surgery? >> an awful lot of health care would have competitive advantages and health insurance. we ought to have that

competition. i am less excited about the government rationing care and more interested in looking to give people more options and have more competition in how the paper that, and for innovative ways for people to save money for their health care, help savings accounts, and so on. there are a number of areas where we have tried to move into that direction. the democrats voted down all efforts to reduce the cost of health care through greater competition to give us a one size fits all state-run plan. we need to look back at that again. now we are having the conversation. >> i see the monopolies of the drug companies, the medical equipment suppliers. this creates incredibly perverse incentives. there was a front-page story about a testing company in massachusetts -- massachusetts trying to get young men to sign up for the test. they got $4,000 from the insurance companies for each

person they could get a swathe of saliva for a bone marrow directory. that is obscene. why is there money there? it is a patented test. economists can jump up and down hysterically to talk about 20% tariff on imported tigers. when you talk about having patents for prescription drugs and medical equipment, you're often raising it 2000%. this would all be cheap if they were sold in a competitive market. that is why we need competition. we could pay up front. that may sound strange to you. and i need to get $30 billion per year from the government. the drug companies insist the money is well spent. they tell us those people are very bright. we get much better medicine

because we do not have perverse incentives. another way to have competition, a recently said this as a joke, how about medicare vouchers where people can buy into the health care system for countries with lower cost? i can go to canada. my wife goes to denmark. we put $10,000 in our pocket each year. that is the difference. those are not my numbers. those are cbo numbers. it would drastically impact health care. it could be more expensive, the doctors, the medical suppliers. >> what would you like to see happen over the medium- and long-term? >> he is talking about how we will ration care, you cannot afford it, so you don't buy it, which we all saw before. you end up with no mandate and

no insurance. we ration care that way. i know people never went to the doctor because they could not afford it. that is different than rationing by income. this is not complicated. we have countries that have designed a health care system that has less cost. different people like different countries and what they do. none of them are based upon the rationing method. soft money, the cost is somewhere else. money shows up in any campaign in different ways. why does america not look at what our competitors do successfully? they say the economy is a miracle that made it through, germany. what is wrong with their system? >> you have a highly regulated system. there's a mandate in which everyone get private insurance. >> there are six funds, or

whatever they're called. you get choices. it is a 5% to 7% lower cost. look around the world. we do not have to believe -- we can do this as necessary. >> i believe germany's gdp still has made less of a recovery than ours. anyone else on health care? >> i want to point out the fundamental dilemma. somebody has to say no. somebody has to say that this price is too high. if a drug company wants to charge $1 million for the next bill, somebody has to say no. it has to be the government, an individual, or some intermediary. i think, given the debate that goes on that we have had for ages, i don't think it will ever be the government. we will not accept that level of regulation. there's a reason for that. it has to do with the fact that the u.s. would go that far

toward a british-style system, how do we decide what health care will look like 20 years from now? it is one thing if you're canada and you look of the u.s., they are paying 50,000, we can pay 40,000. there is no market out there at all. individual does not work because of the reasons lisa has raised. you will discriminate against the people who cannot afford it. i think in the end, we will push a lot on this issue about how to do it with intermediaries. that is the direction both andy and grover talked about. some cases, we talk about vouchers and premium support. alice is trying to work on that. people are talking about bundling goods and services in a payment system, so you get a payment for the elderly person for this set of procedures, and the providers have to decide what they will do with that

bundle. i think we have to be honest about it. somebody has to say no. my bottom line on that is everything we do in government systems has to be put in the budget. you cannot have open-and the budget. if it is open-ended, people will charge what they want or do what they want. you never get the system under control. you lose the pressures to do the types of efficiency things that we have mentioned. you have to put these things in a budget. individuals come intermediaries, the government, they have to put together some sort of budget to force the constraint on the system, to force us to decide to do things efficiently, and not just let providers charge whatever they want or pushed through whatever services they think they can get by with. >> let's turn to discretionary spending before we turn to the audience. being honest with you, what do you think it's a reasonable target for waste in the non-

defense discretionary? >> -would be an acceptable answer. understanding that is not the main way to deal with the deficit, what is a reasonable target for how much we could bring down spending? this is not from the stimulus levels, but from where spending is supposed to be in 2012 and 2013. how much can we save? >> i would not expect a net savings. this is the investment component of government. that does not mean there is not waste their. we can find many programs. i would not have a problem saying there are certainly programs that should be cut back or eliminated altogether. the net story, where do i think we should be in 2014, it will be a higher level of discretionary spending. this is where we have r and d in the budget. infrastructure spending come

education. with the number of areas, most of the things are in that portion of the budget. i would expect it to grow larger. it does not mean there is not a lot of waste. the net will end up higher. >> i think we have the budget structured wrong. i feel like we will never get real investment for big projects -- project that we need, whether it is broadband, high-speed rail, water and sewer, by trying to target out of a discretionary, non-defense budget. we have to have dedicated revenues like we have with the transportation trust fund. that means we have to hold discretionary spending down or reallocated differently. my plans to take $4 trillion in a different framework. there's a different ratio between defense and non-defense. we are missing an investment