hometown security. see something, say something will be the second phrase i wanted to walk out of here and remember. it is a simple and effective public awareness program. it began a series in new york with the transit authority. the the purpose is people will be alert, not alarmed. if they see something untoward, unusual, they should report it to the appropriate authorities so it can be dealt with. we have seen very good response to see something, say something and we have expanded it to federal buildings to major transit systems like amtrak and sports and entertainment venues. we often have to think about the so-called soft targets to the hotel industry.

when you add those of together, the fusion centers, the warning centers, each of these elements learn from and build on each other. they help us in any number of ways. to carry them out we have trained 50,000 law enforcement and we haven starsars worked with local communities and organizations on how to incorporate the lessons learned and implemented lots of new training and we are doing all this and at the same time, according everything we do and it is important to say it again. the importance of protecting privacy, civil rights, and civil liberties. because as michael said in the

first intro to meof the introduo make, we have to sacrifice liberty to security. we do not. we have to think about them at the same time and look for common sense and pragmatic ways to make sure that both are being pursued. as we have worked across the country, we become not just stronger. we become a bit smarter and we learn from every incident. we learn from what has been done in different states and different locale. the intel center in albany is a good example. the new vigilance project is another. analytic and historic catalog of terrorism cases since 9/11 which we can share across the country. we know that we have better

equipped our states and localities around the u.s. and we know that we're beginning to hear some of the things i have been saying echoed back to us. always a signed the messages being received. let me if i might talk about shared responsibility from an individual standpoint. we have continually recognize the role of the public. according to one recent outside analysis, from 19992010, there were a total of 74 plots properly characterized as terrorist and there are definitional issues. the study, there were 74 plot

spoiled. they were motivated by a variety of ideologies. al qaeda, al qaeda-type affiliate's, representing about half. what is most critical to note and does not get the attention it deserves is that the public, individual members stopped one- third of those plots. the kind of vigilance we have madin encouraging through the campaign has already helped save lives, protect property, helped plots in nearly three of 10 discovered since 1999. when you're at the fact that federal, state, and local law enforcement in terms of the other remaining plot came from old-fashioned shoe leather, old- fashioned police work, and

community oriented policing and knowing neighborhoods and knowing what makes sense and what does not, those things combined together are 80% of the plots that have been foiled. vigilance as practiced by trained first responders and law enforcement makes a huge difference. for us to be informed needs -- means to wiwe need to engage asa nation. to discuss and know about what are the recruiting tactics that are being used, and to know that our adversaries are increasingly relying on glossy english- speaking magazines, appeals by a social media, even hip-hop videos, if you can imagine that. we have seen an increasing

sophistication of threats from cyberspace. including using major news events or natural disasters to target unsuspecting users. with scams and malicious code. while a sense of awareness is important, we all have to be willing to keep moving, keep learning, and to do a bit more. we can learn more about the signs or indicators of potential criminal or terrorist acts and to say something to the proper authorities. it was a street vendor, after all, who tipped off the police to the times square bombing attempt. in january, it was alert city workers in spokane, washington has reported a suspicious backpack and toward what almost certainly would have been a

deadly bombing along the city's mlk' parade route. we can practice better cyber- habits when we are on line but also make sure that our children are practicing safe cyber-habits and we are cognizant of what they're doing online. this is especially relevant in the wake of several major breaches and fishing attacks that recently targeted the american public. we can take the basic steps necessary to deal with an emergency when one happens. people could not call each other on cell phone. there was no way to do it. they could know whether a family -survived ord not survive.

those families who had rian vacation plans, where they children were supposed to go, if something were to occur were in good shape. the others had hours and i and sometimes days of worry trying to locate their loved ones. those kinds of efforts that sounds so basic -- making sure across this country, every single person is incorporating and understanding the role. also we're still a young

department. we know when people are not relying on the department to address the challenges. inally,i if i might, let me close with the notion that what i have suggested to you today about the evolving nature of the threat, you may have heard some about although i'm not sure people recognize how quickly the threat is evolving but nonetheless, it is there. you perhaps have heard some of these things we're doing and perhaps have not put them into a total framework of steps that interact with each other to help us strengthen our homeland security.

perhaps you not have thought about the role that each of you play. there are elements of our protection. we have accommodated to new threats as threats have changed. when we were in the middle of the cold war, we all knew that -- where the closest fallout shelter was. we learned to hide under our desks and to keep children indoors during polio epidemics. some of these things worked and some of them sound silly in retrospect. i have to tell you, right now, we need as a country to keep adapting, to think ahead, to be nimble and adaptive as

individuals as communities. we cannot provide guarantees. among all the things i have discussed are steps f orward, we cannot put the country under glass dome and seal it. we have to deal with risk and maximize our ability to prevent something untoward from happening. we have to minimize the disruption that is successful -- that a successful attack could cause. we have to be proactive and thoughtful, thinking always what could be around the next corner. and on the other hand, have confidence that we have built in our communities the ability to

respond quickly and to come back and is with that kind of confidence that we proceed. our greatest source of strength and our greatest sense of security will always ultimately rest now with any machinery, not with any technology, not with any one federal department but it is going to rest fundamentally on the citizens of our country. we have to make sure that the rian gauge in a way i have described and perhaps others as well. that will be a fitting way to commemorate the upcoming tenure anniversary of 9/11. thank you. [applause]

i am going to sit down now. >> thank you for your thought- provoking remarks. i am one of the co-director of the liberty and national security program here and i'm going to moderate our question and answer session with the audience today. just a few ground rules for people. we have two microphones, one at either end of the room for people who want to ask questions of please identify yourselves to the people holding the microphone. i understand we have 15 or 20 minutes for questions and

answers. please keep your questions short. when you take the microphone, please identify yourself so we know who is speaking. since i am the moderator, i get to ask the first question. i want to come back on something you mentioned about the fusion center and the suspicious activity reporting system which, as i understand it, is a system by which we collect information at the state and local level and funnel it in a way that is useful to counter terrorism and other anti-crime efforts around the country. my question to you is, how do we guarantee the quality of the information that is going into the system and when we are collecting information, how do we guarantee that it is not infected by biases that may occur and finally, when you take information out of context, do not lose something and how to

account for that when you are talking about bringing this information back into the federal system? >> let me address that in two ways. one is from a law-enforcement perspective, when we are talking about suspicious activity reporting, this is a discipline. there is a protocol, there is a protocol about what kind of information and how it is to be collected and handled at local and state level. there is a protocol and curricula to teach the protocol. when i talk about the front line personnel that have been trained, they have been trained in accordance with protocol and we have a department on civil rights and civil liberties. they helped create the protocol and we had a review by outside groups and they looked with

healthy suspicion that these kinds of things we want to make sure that we are [inaudible] the second thing is that one of the real capacity building things, we need to do across our country is get the capability out of washington and into the country so that all data does not flow into washington, d.c. removed from its context and from local appreciation about what is going on. one of the first act cited as secretary was to take intel analysts who were working in d.c. and moved them out to work directly in the fusion centers themselves so they can train

others and analysis but also so that we got a more organic sharing of information in the fusion centers before it got to washington, d.c. or indeed came back. let me describe an example of how this works. i will use a real case. there is an individual who was from colorado and he was dragging -- driving across the country. he was building backpack bombs designed to attack the long island tunnels. i -- these bombs were hydrogen peroxide based. that is a data point. that is intel. how you turn it around and how you turn it into information sharing is to share information about what kind of bombs were they, what kind of power what they have, suggesting that

police department's survey beauty suppliers to see if they had seen any unusual sales of high-quality sales and so on. was this a unitary plot or were there others that planned to go on around the same time. i hope that gives you some sense of what furman information sharing aspect we're trying to build here which is trying to get information to washington but to get information back. >> i think we're ready for questions from the audience. >> i am a tax attorney and a

loyal supporter of the obama administration and i have a short question jane may. there were enormous electronic storage facilities set up to get copies of all e-mails transmitted in america. would you happen to note that is the truth that the bush administration was trying to collect all e-mails and it was the truth, has the obama administration shut down these collection efforts for all our e-mails being transmitted to some government agency? thank you. >> i cannot comment because i do not know the answer but i can tell you how we are interacting with the nsa. the cyber-world has basically, if you look at cyber-security pursuant to president obama's

review which he instituted at the beginning of the administration, the issue was how to organize cyber-security for the u.s.. this was a rapidly evolving area and there were things to alter the government people had different response will -- responsibility and budget life and so forth. under the review, the department of defense has responsibility for the dot-mil universe and for the intersection of the private sector which in fact controls 85% of our nation's critical infrastructure. we both need to use the nsa. we were not going to build two different nsa's. it is a huge national asset and it is impossible to replicate on a commonsensical basis. what the secretary of defense

and i did was to negotiate how each of us would use the technical resources of the nsa and under our memorandum, the folks from the department who are at the nsa and i have folks at the nsa, have also with them people from our office of privacy, people from the office of civil rights and civil liberties and people from our office of general counsel. because we do not want the american people fearing that in our effort to protect the cyberworld from attack under things that under -- that are under our jurisdiction, in our efforts to do that, we are somehow going through and improperly reviewing, collecting, or retaining personal data.

>> just a question. what are your thoughts on the rebuilding of the world trade center and with that make it a bigger threat than it was before and what could the federal government do to work on security between the nypd and the port authority? >> the decision to rebuild is a local decision. i think some of the leaders from the law enforcement community are here at the lecture this evening. i am very confident that whatever decision is made that the people of new york and new york city are well protected. it is an impressive operation. >> i am from "time" magazine.

i wanted to ask about another instance where dhs is unambiguously collecting private and personal information which is that borders. the imaging and digital devices. dhs has surged power to do that. search power to dorchhas that. can you explain the policy and why that is not a dichotomy between security and liberty? >> the longstanding law has been that the powers of the government at the borders in determining what and who comes in are different than when to get into the country. the standard of proof for

collecting evidence is lower at the borders. once you're out in the country, that is different but the border issue, the border is different. our authorities our large and we have huge authority and futures possibility there. that authority, there is no new law being created was extended to laptops and there have been from a proportional basis very small percentage but very and detestable percentage of laptops that have been seized at the border to look for things like in some cases, they have found planning literature and some

that have found pornography, child porn in particular and the like. those are turned over to whomever the local u.s. attorney is for possible prosecution. there is -- there is a public misconception that we are simply willy-nilly taking laptops and reading them for our own wishes and that really is not true. it is the same authority we have to search somebody's backpack when they come into the country. as i said earlier, those authorities are longstanding and have served us to good avail. >> thank you for being here.

my question is you spoke today about the importance of information sharing and you also spoke about local and state law- enforcement now being at the front lines of national security. one of the things that you hear if you follow these issues is sometimes, state and local law enforcement and other first responders and other players on the state and local scene have difficulty sometimes getting the information they need to do their job because the classification system, the system for classifying documents at the federal level has been the same system that has been in place since the cold war. emphasizing compartmentalization, need to know restrictions, the lengthy and cumbersome process for getting clearances and in

various ways making it difficult for people to get the information they need on a timely basis and these problems are compounded by the fact that a lot of information that does not need to be classified is classified. is that -- how have you dealt with or experienced this issue and what are some of your thoughts about potential solutions to make information sharing more effective and to do with the issues that classification causes? >> i agree. we have -- we really need to be as transparent as we can and we need to deal with classification in a way that facilitates information sharing on a real- time basis. on the kinds of things that we're dealing with on a regular basis. you can address it a couple ways. one is to look at the classification system itself and

we have been working with boj on that. pursuant to the presidential directive. the second is to increase the number of people who are qualified to receive information at different and higher levels of classification. one of the efforts being made at the fusion centers is to increase the number of people who can have access to classified information in their own right. the third way to deal with that is to more quickly turn around products that can be shared at the fouo level for purposes of general threat information, contextual information, situational awareness.

the night bin laden was killed, dhs and the fbi within a few hours had a product out that was distributed throughout the country. followed up by a more classified product, of course but something that could go out immediately. those are the three basic elements that we have to deal with. >> i am jacob good wwin. i want to ask a question that has common sense bumping into political correctness. i do not mean to be insensitive but i want to ask you a sharp question. you said earlier in your remarks that there is no single portrait of a would-be terrorist and the administration has no interest in profiling and not only are those profiling policies illegal but they are ineffective.

common sense tells me that in most of the cases since 9/11 that we have made arrests, it would not be profiling to discover that most of the suspects or the convicted parties have been typically under 30 or 35, often muslim. it is not -- my question is, how do you square what most people would say if they're talking to that common sense would suggest those are appropriate parties to focus more attention on given that those were the parties that most often are arrested? not to say that all men under 35 who are muslim are suspect. not all. my question is, why would not the department focus more of its attention on that category of individuals who turned up most often as a suspect? >> because you're not using good logic there. you have to use actual

intelligence that you receive. and so you might -- all you have given me is status. you have not given me a technique, a tactic, of behavior. something that would suggest somebody is not a muslim but islamist and has moved into the category of violent extremists. we have ways to make some of those cuts and they involve the intel that comes in and the analysis that goes on. for example, we oftentimes or travelers entering the u.s., we will do a secondary inspection

just because they are a 35-year- old male who appears to be muslim, whatever that means. but we know from intelligence that if they have a certain trouble pattern over a certain time, that should cause us to ask some more significant questions then if they do not. that is what is secondary -- that is what secondary is about. we continue to focus our self and those with whom we work and those we train not on status issues but on actual behaviors, tactics, and techniques that we can associate from intelligence that we now that we have learned and other countries have learned that could translate into possible criminal or terrorist activity. >> we have time for one more

question. maybe over here. >> i have two very brief questions. new york state opted out of secure communities and i would love to hear your thoughts about whether you believe the program makes us more secure. my second question is about a month and half ago, the arab and muslim-american communities were glad to hear that the program was suspended. what happens to the individuals who did register and have delayed applications now. is there some mechanism that is in place to do with those? >> yes to the second and we will talk to with you afterwards so we can get the information on

that. with respect to secure communities, let me describe what it is. it is an information sharing agreement between us and the fbi that says when an inmate is being booked into jail or prison and their fingerprints are taken, there run not only against criminal databases but against immigration databases. it is part of our effort on the immigration side of things to prioritize those in the country illegally who also are violating other criminal laws. find those persons first -- where do you find them first? jails and prisons. we have seen that is turning. that -- it focuses the immigration and customs enforcement where it needs to focus. i will simply say with respect to new york, there has been a

lot of miscommunication and understanding about secure communities. i think we have to accept responsibility for that. the plain fact is this is a federal interoperable lovaine sharing system so the notion that individual states have signed agreements to be in it or out of it was inaccurate. >> with that we will end. thank you very much, secretary, and thank you all. [applause] >> in a few moments, a european union news conference on an e.coli op brick that has sickened several thousand people. in a half-hour, an update on a

new food safety law that expands the fda's authority to regulate imported food and order food recalls. after that, a panel of four former directors at the congressional budget office on the federal deficit and debt. >> a new strain of anti -- of e.coli has killed 20 people and sickened more than 20,000 across europe. tuesday's briefing by european union farm ministers on aid for farmers affected by reduced sales of vegetables and fruit. this is half an hour. >> that afternoon, ladies and gentlemen. welcome, everyone to today's press conference. today, with the commissioner's

-- the commissioners would like to inform you that what happened at today's meeting. what was at the agenda and what we decided in these important issues which keep everyone busy in your. first of all, a week ago, the agricultural meeting -- he touched upon the issue of the e.coli outbreak. this had food safety dimensions, it has claimed the lives, and we would like to express our condolences to the victims and we wish a quick recovery to those who are suffering from the disease. this has a very serious economic consequence. this could ruin farmers who have -- maybe have worked all their lives in the sector so this is an important issue. this is why the hon gary and

president decided -- the decided we should convene the agriculture council of the european union. i would like to turn to the health commissioner. please inform us about the latest in this area and what you said to the council. the floor is yours. >> thank you. to start with, let me also express once again my condolences to those who are suffering as a result of the death and disease that has been caused by this outbreak. in the current stage of the crisis, we need to focus our efforts on supporting the patients suffering from the disease and find the source and [inaudible] 1000 cases.

serious complications have developed in 600 people. sporadic cases are reported in 11 member states. 13 cases and the united states has reported four. the commission is using all the tools at its disposal and is working hard with the ad -- to contain this outbreak. the importance of rigorous science and coordinated communication -- this cannot be overemphasized. this is our message that was echoed by the numerous interventions in european parliament this morning. we need to be sure that the aba said the commission put into the public domain can stand up to rigorous scrutiny. in trying to look for information, we not -- must not

come to hasty conclusions. it is important that this is [inaudible] to trigger rasfff when members are confident of the evidence. the outbreak is limited geographically to an area around the city of hamburg so there's no reason to take any measures. in light of this, we consider this as disproportionate. we are in constant contact with countries to lift the ban which is considered disproportionate. we cannot emphasize enough how important it is that we work together, cooperate, and share expertise. addressing this outbreak and

bringing it to an end. the european consumer has the right to feel confident about the food they eat. we can and we must do everything we can to ensure that the food they eat is safe in order to avoid any more loss of human life and suffering. we must learn the lessons from this outbreak and look at our systems and look at options and possibilities there are and where changes maybe needed. in order to emerge stronger for the future. now, it is not the time for recrimination. this is the time for cooperation and solidarity. thank you. >> any questions for me at this

stage, i can take to the real questions. i have to leave. >> is it also a matter of improving controls from a preventive point of view to avoid contaminated products ending up in the consumer's plate before people die and try and improve on things? something should be done progressively. thank you. >> we have to take everything into perspective. this is intended to do what you are talking about. ensure that the food coming on

the plate of our citizens is wholesome and without any problems. problems do arise from time to time because of certain issues that are not the ordinary way of doing things. happenings that are out of the normality and this is where the other systems we have of rapid alerts and controls kicked in to ensure that in any incident like we're having now, we are informed as much as possible of what is happening and we can act as fast as possible to try and eliminate the problem as it arises. as what happened at the beginning. it happened and it was controlled and we have introduced new procedures in that sector to control as much

as possible. this is the same. [unintelligible] our policies on food production, our policies on food safety i believe is the best in the world. >> either any questions for the commissioner? >> thank you kamala ladies and gentlemen. the next issue was in connection with fruit and vegetable growers and farmers and important to see that we retain and to keep the health of people and you need

healthy food and farmers, producers, europe needs those farmers who produce top quality food and to produce for the european market and these people ended up in this situation through no fault of their own. and despite the fact that laboratory studies have shown that this is not from sprouts and from cucumbers for the contamination came, the market has dropped 2/3 -- fruits and vegetables cannot be sold now in this is the situation that has to be resolved now and we have to restore confidence in consumers and we have to make farmers believe we're not leaving them alone and it is worth their while to continue working. the council had to make a responsible decision and we have made this decision.

we have to make compensation to farmers and for the damages that have suffered. we need a swift solution and our commissioner came to our meeting with a set of proposals. i would like to ask our commissioner to explain this proposal to us. >> today's discussion and the proposal i made follows on discussion we're already had in the informal council of ministers in hungary last week. that council already touched on the issue. at the time, the commission promised to look at all legal and budgetary possibilities for supporting the sector. there are limited instruments which the present council

regulation allows the commission to use in such situations. on the basis, given the crisis situation, we have tried to improve the measures already earmarked for organizations and give them more flexibility. there is a feeling we're not going to take account of withdrawals carried out by producer organizations. we're not applying 5% of annual production to the -- until it is withdrawn in -- from the market. we're not going to put the limit of 0.3 of operation of funds used for crisis management. -- crisis management measures given the scale of the crisis. none of these measures can be activated, even those which have

started harvesting. and marketing produce. that measure can only be triggered before harvesting has taken place. we have allowed flexibility for producer organizations but given the european scale of the crisis, we have decided to provide financial aid by organizing article 9.1. with rex -- funded 100% by the community budget. that is -- that aid will enter compensation at a certain level of the reference price. compensation for a certain category of producers and products. for non-members as well.

the non-members will have to monitor the quantity withdrawn from the market so they have to conclude a contract with the existing producers and compensation will be based on the producer organization. as for the fruit and vegetable sector, all community aid is channeled through producer organizations. as a reference. -- as a reference period, we opted for the price of products covered in this support. we have proposed a compensation level of 30% of the market price in that reference period. the market price in the reference period is higher than

the price at present. for the present, we do not have exact details of prices on all community markets. that is why we have taken as a reference 2007 through 2010. we have also proposed a financial amount in an initial stage of 150 million euros. following the discussion we have had at this afternoon's council, where member states gave justifications and asked for these figures to be revised upward, i gave a commitment to revise these figures. the level of compensation and the overall amount and come back with an improved offer. a substantial balanced and justified figure in light of the current situation. we can do this analysis fairly quickly and come back with an

improved proposal and then propose it in the management committee. we will have to discuss and vote. wait make an improved proposal to the management committee for a speedy decision. probably at the beginning of next week. there were. i feel discussions that took place were very constructive on the decisions to be taken now but also on the perspective. in the council, i stressed the fact that in the decision taken reforming the c.a.p., we must bear in mind the room for action is limited for these crisis measures. it puts the commission in an awkward situation but there are few measures for acting quickly and efficiently so we need to draw conclusions from that.

and take into account the chance of improving these measures and make them more flexible in decisions we take with the council and parliament on the basis of proposals in the context of reform. >> thank you. i would like to make one edition. the member states have many comments in connection with the commission proposal. they wanted to add other products to the list and wanted to increase the reference price that is active in cooperation between us and based upon the member state inputs we're going to change and modify the proposal. the member states said certain countries imposed unjustified bans on the european fruit and vegetable exports and they wanted to lift that as soon as

-- they wanted to make sure these were lifted within a few days. we also want to make sure that farmers receive compensation within a few days. leeson tillman, if there are any questions, we would be happy to answer. >> i would like to put this in spanish. you were talking about revising the figure upwards but we have not had any figures as regards the losses at the moment from the crisis in europe. to what extent can you improve, what are the actual needs? these have to be known. the spanish minister said there

would be a promotion campaign to try and recover the image of the industry. the commission proposal cannot take into account losses but we have to look at our budget. as the budget is limited and you are aware of the pressures on the budget, within the budget, we have to find a balance between the level of compensation that we can offer producers, and the types of products to which they would apply. after they were received, the most affected are cucumbers, tomatoes, and lettuce and today,

there are other products that have been affected. peppers, and we have to target products that have been affected and also, products where there is a week capacity for storage -- a weak capacity for storage. they have very small margins for preserving these products. what are we going to do is provide a proposal that is balanced, looking at the budget we have am looking at the products affected. but we are operating within a single market and we have to bear that in mind. as regards the promotion campaign, i said in the context of the programs we function within the european union for the fruit and vegetable sector,

i asked the agricultural services to accelerate the projects for promotion of this sector. so that by the autumn, we will have selected and decided on these projects and then we could have promotions -- promotion campaigns in the eu. another question from spain. i am over here. it said the figures would be corrected upwards. several ministers asked for 100%. can you manage that? >> there are two things. we cannot have both compensation because hundreds -- some may need 100% or 130%.

we have to bear that in mind. we also should not forget that for producers that are members of producer organizations, they can already get losses compensated through the budget of the producer organization and a part of that budget comes from the community. so when the commission said 30%, you have to be aware that added on to that is what farmers can get from the producer organizations. i am prepared to revise this accord, but i do not think the budget available at the moment will mean that we can go up to 100%. for all products and for all producers. i am aware that we have to provide support in consistent an amount as possible.

within the limits of our regulations and of our budget. >> the president of the council has to leave in 10 minutes time. it is time for two more questions. >> i am from tv and andalusia. i would like to put my question in spanish to the commissioner. i would like to know whether most countries concerned asked for 100% compensation? and has the council considered asking for germany to pay part of that compensation out of its own pocket? >> if this is about the council,

the council should reply. i cannot speak on behalf of the ministers. out of respect for them. >> we had a lively debate in the council and all member states commented on this agenda point. the level of compensation. mimicked -- many member states said they wanted 100% but given the fact that they do not want to overcompensate, we have to start from realistic opportunities. we have to find the fastest and best solution for the farmers. >> i have a short question. what is the time frame, when does the money flow to the farmers?

>> as for the commission, my aim is to have it happen as soon as possible, in a few days. so following today's discussion, on the basis of a proposal already prepared which was already discussed today in brussels in the management committee, the commission will come back tomorrow with an improved proposal. tomorrow, i imagine and there will be three days within the commission for a commission regulation to be adopted and approved. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

we are going to get started. good afternoon. i am still enjoys. on behalf of everyone of the maryland school of public policy, i am happy to welcome you to what will be a likely discussion about the budget problems facing the country. this is the latest in a continuing series of conversations we're having about

national importance. i am delighted that so many people of diverse backgrounds and organizations founded by their singular attraction to discussions of the federal budget are with us this afternoon. before we move on, i want to pass on a couple of think use. the first is to georgetown university press, which is a co-sponsor for this event. the second is the house budget committee for letting us use the hearing room. it is indeed inappropriate forum for discussion of the debt and deficit. we were treated to a near- government shut down earlier this year. by early august it will be necessary for the federal government to increase the country's debt limit in order to present an end president did level of the dutch. the that -- the levels are unsustainable, making it imperative that something be done about them.

there appears to be little consensus by what, by when, and by whom. to help us address these questions, we have a list of panelists to our go-to people. indeed, this is one of many things they have in common. not only are they among the nation's most accomplished economist, but together they constitute half of the individuals that have been directors of the cbo. cbo as most everyone knows and most everyone in the country has its founding in 1975 become the source of objective analysis of federal budget issues and a critical juncture help to clarify perimeters of the school debate. the one we are engaged in now will be no different. i want to briefly introduce each of them. it recognize all of their accomplished, and i take all the time we have, but i will hit the high points. we can then move to their immediate thinking on the current budget challenges.

to my right is alice hamlin. she is a senior fellow in the economic studies program of brookings. she has almost literally down and all. she's a former director of omb. chance had a couple of sense of brookings. she was co-chair of the task force on debt reduction. and also on president obama is that commission. in 2008 she was named one of the greatest public servants of the past 25 years, but there is a single line that represents her greatest accomplishment. it simply says she was the founding director of the congressional budget office, which she served up from 1975 to 1983. enner. right is ruby pointe previously he was a managing director of the parents group, which is a p&g company.

the is been affiliated with the american enterprise institute and held many positions at government, omb, hut, and council of economic advisers. he was the second director of omb. robert reischauer is president of the urban institute. he was the vice chair. he is also one of two public trustees of this also security and medicare trust fund. he has also worked at brookings and what alice when she set up cbo in 1975 and also served of the agency's assistant director and deputy director. froms cbo's third director 1989 to 1995, during which the great time i have the privilege to work for him. you may be expecting me to tell you that douglas holtz egan was the fourth director of cbo's, but this is not true. he was the sixth director of

cbo. having served from 2003 to 2005, he came immediately from the white house economic council of divisors, before which he had is distinguished economic career. he was director of economic policy for the john mccain policy. even though we are in the house budget committee hearing room, where each of these individuals has spent countless hours delivering prepared statements, we wanted to avoid prepared statements and make this session as interactive as possible. therefore i will pose questions to which each of the panelists will respond if they so choose. for each question i will then open up to a more interactive discussion among the panelists, and then the panelist and the audience. i cannot wait. i'd think i will start with the

first question. that is that the financial markets, for example, standard and poor's and moody's, and others say it would take a credible plan to reassure them about the ability of the u.s. to reduce debt in the medium-term. what i would like to know from the panelists is, what does a credible plan book like, and that is, what would be the minimum requirements for a plan to appear credible? i will turn to alice's first. >> yes, i do. for philwant to think phi writing this book in recognizing cbo is an important organization. back to the question of what is a credible plan? there is no single answer to this. i spent the last year and a half serving on to commissions, and

the objective was to answer that question, how do we get the federal budget back on track. the president's commission and the one i co-chaired with my old friend peak demand sheep were both bipartisan. i think we learned it is possible to put together a bipartisan plan that answers that question. -- pete dimenischi. we decided that you were not aiming to pay off the debt or even to balance the budget. the first thing to do was to stabilize the debt so that it is not rising faster than the gdp is growing. stabilizing at roughly 60% of gdp has come to be sort of a

mantra of what constitutes the objective of a credible plan. when you start working through the numbers to see how you get there, you do not have much choice. you have to do something to put social security on a firm foundation. there are lots of ways of doing that, and we may get into a discussion of what is the best way later, but you have to slow the rate of growth of the entitlement programs or you cannot get there. and on the other hand, you cannot do that quickly, so you are immediately driven to the discretionary spending side, which can be controlled faster. both of the commissions rose discretionary spending for quite a number of years. when you get through all of that, even if you start with an ideology that says it is a spending program and not revenue program, you realize you have

not solve the problem and have to move to the revenue side. that drove both commissions to substantial tax reform that would improve the efficiency of our taxes them and allow us to make -- to raise more revenue with lower rates. i think the arithmetic right to there, that that basically is that outline of a credible plan. >> thanks for organized this, and think you for a very good book. i do have one disappointment. we have all spent countless hours testifying here. i was really hoping to set up there. [laughter] here we are in the pits again. my great fear is maybe there is no such thing as a credible plan in the following sense that the parties that have become so ecologically appear in the ideologies are so far apart that what one party might think

to be a credible plan, the other party thinks to be totally non- credible. it is very hard to see them agreeing to the plan that alice put forward. partisanship, but i do not think that is the right word any more, though i have used it often myself. hard to think of anyone more partisan than tip o'neill. president reagan could deal after deal with him. the two of them agreed secretly not to oppose the recommendations of the greenspan commission on social security. cannot the imagine somehow speaker brainer and president obama agreeing to anything like that. it would have been nice if they would have agreed not to oppose

or support the recommendations of the fiscal commission when they came out instead of recommendations that i would adopt in an instance on health care costs. again, it is very hard to imagine what kind of plan the parties could agree to today. >> thank you for hosting this discussion, and congratulations on the book. when i walked in the room i was handed an envelope, which i understand has a credible plan in it. [laughter] but so as not to be an advantage over my colleagues here, i have decided not to open it yet, so maybe at the end i will open its and reveal the credible plan. credibility has a lot of different dimensions, and some of them are substantive, some are procedural, and some are

attitudinal. i do not think credibility involves a number like it has to be two trillion dollars over 10 years or three trillion dollars or anything. i think it involves taking a significant step in the right direction. this is a many inning game that we are in, and it has just begun, and i think all of us would fall over in a dead faint if the plan that would get us to 60% of jet -- debt to gdp ratio were enacted this year. what would we do for the rest of our lives? [laughter] >> sounds good to me. >> a certain serious not for to a really important how big, and

something that is perceived by markets and leaders as being sustainable. that involves a degree of balance as alice has suggested. not all taxes, not all spending, because i think anybody with any political judgment at all would say if we go too far to one side or too far to the other there will be a political reaction, and different group of folks will come in and turn the card over again. it has to be a plan which the public and the policy makers think is the best they can get, and understand that they will have to take this medicine. i will talk about that later in answer to some of the other questions that are raised. it have to has -- it has to have safety belts that if the ends do

not go right in the sense of the economy or world events, there is a way out that does not involve huge and wrenching procedural changes, and there has to be some kind of enforcement mechanism that if the system tries to undo it, or it fails to achieve at the modest goals of that it has, there is someone standing in the background that will push us forward. those are the elements that icy and the credible plan, and let's hope they are in here. [laughter] ." >> let me also begin by thanking the right people. it in any way i contradict what is in his book, it is the fault of all there, not the

interviewee. all my life i have had to go after alice rudi and bob, and i always -- they always say everything i'm going to say again come into this happening again. [laughter] i am delighted to be here. on the credibility issue, the reality is credibility is something the market believes, and that is a very slippery concept, so we do not know. it has been incredible the market has believe that things they have believed it thus far. certainly changing the direction is imperative, but we do not know exactly what it will buy into. i think we should think about it in particular ways. number one, it is not our bright line. there is more and there is less, and just as there is no bright line, at which point interventional -- international markets will lose their faith in

the united states, i believe we're close to that and should move in the other direction as quickly as possible. we do not know what the number is or the content is. more is less. every juncture we need to be getting more in the way of the long-term fiscal out set. what we're really worried about what is the first step? is the first step corn to be compelling to those international lenders that we care so much about? i think we do know a couple of things. i think the policy changes are better than process solutions. it is more convincing to actually change the actual structure of entitlement programs as to reduce the budget commitment in the years to come than to set targets for the promise to do that at some point in the future. the more we see the congress and

administration touch the kind of policy choices, which alice went right to, i think the more we see that the better. her menu choices are the right choices. the more they can get of that in the first deal, the better off we will be. the less we see of them and the more we see of appeals to targets in triggers and promises that -- the next crowd will be really good at this. >> are there anything that any of the panelists have to respond to what they have heard from each other? >> i would like to make a comment on doug's definition of credibility, which is what ever markets will believe in to cast our eyes back a few years and remember markets will delude themselves vary greatly as long

as they possibly can, and we saw that right after the fiscal crisis. i would not put a lot of faith -- to get by all you need is for them to believe, but they will believe in almost anything that makes them a book. -- makes them a buck. right, but when markets move, they move fast. and i agree with what several people have said there will not be one plan, there will be a series of plans and did not mean to imply otherwise. i certainly agree with doug that it is a lot better to do substance than process. on the other hand, we're running out of time with respect to the debt ceiling. when you think about what it would take to actually legislate significant medicare and medicaid reform and tax

reform, i do not think we will be able to do that by the second of august. the question is, what combination of substance and process can we put in place that is credible? >> i would like to, if there are questions from audience in terms of what a credible plan looks like, what might look credible to you, if anyone has any questions, we would be happy to entertain them. there is a microphone we can get you. all you have to do is raise your hand. please identify yourself and where you are from when you ask the question. >> [inaudible]

>> i do have a credible plan. [laughter] i think we have it now. >> a couple of years ago or even last year we would have sent -- said we would have to distinguish between the immediate near term in the medium-term. a point in some eyes may be underscored by the economic reports of recent days would suggest the economy is doing very badly, and the main story to it doing badly is cutbacks in spending, particularly at the state and local level leading to big hits and employment at that area. i know i have had a conversation with each one of you talking about the need to distinguish

between pushing the economy in the short run, and somehow credibly moving in the medium term to doing opposite. it is not at all clear that the political system is able to do that sort of thing. we obviously went a long way in the stimulus package two years ago, and now we are full speed ahead for the current administration is trying to people speed ahead going in the other direction with total rejection of the notion that the level of the federal debt as the has anything to do with stimulating the economy. is there any prospect remaining for trading off some restraint and restraint in the very short run with credible, that men's that would take affect two or

three years down the road? >> when things were really bad, i never thought there was a contradiction between the short and long-run that would have been possible simultaneously to announce various kinds of short- run stimulus programs while putting a plan on the street that would in fact pick things up in the long-run. i think there are a lot more -- [inaudible] things are not as bad. spots in theow sough recovery, but that is not uncommon. and i think --[inaudible] playing with stimulus even conception elite is somewhat risky when you are are ready in the recovery given the time line that has any effect, but

politically there is no danger of that, absolutely no prospect of another stimulus program from either the fiscal or monetary authority in my view. >> i think as reduce it just, it was a great opportunity missed that we did not do it stimulus simultaneously with long-run deficit reduction, and i do not just mean two or three years from now. the real problems are out there a decade or more ahead, in many of the things that we could do now and must do now are things that will not take effect for quite a long time, but should be legislated to show that we are serious and can do them. you still have a timing question. i would be opposed to cutting

the deficit to quickly right now, and i would be very much in favor of cutting it out in the future, and i think that only makes sense given the fragility of the recovery. >> i was going to call on doug before he raised his hand, because i was sure he had something to say about that. >> i am on record about being a lot less enthusiastic about the stimulus measures that others have been. number one, i believe the situation is incredibly urgent. if you look at the measurable parameters, the things you can take a look at on the number of -- gross debt to gdp is above 90%. higher probability of a sovereign debt crisis. look at the qualitative characteristic of the united states, heavy reliance on short-

term borrowing. short-term borrow short. they have lots of contingents and not terribly transparent obligations. we are in terms of the theory of the case for getting in trouble. we looked like that kind of a place, and i think there is tremendous urgency in getting something done. step to an argument is i started cynical and went downhill. turn off and turn on that simultaneously as awesome but i would count on. i do not want to confuse the debate with that. let's get on with controlling the debt. the third thing is i think there is a tremendous over blown perception about the near-term impacts of discretionary spending cuts. when the house see our came out

earlier this year, the $100 billion number scale, it changed actual purchases of goods and services in 2011 by $8 billion. it's a 15 trillion dollar economy. that is nothing. in the way iset away ♪ terribly troubling to me. it takes a lot of time to underspespend money, too. i live for the day congress cut so aggressively to impede recovery. we have never seen that. i would like to see that. we have returned and a troubling way on a bipartisan basis to the policy making regime of the 1970's in which fiscal monetary policy were very reactive, attempt to find-tune the

economy, target unemployment so we do not worry about inflation, do not worry about the fiscal situation. the outcome of that policy regime was not good. it was high unemployment, poor performance, and i think we have lost that lesson in history, and i would like to set a strong fiscal path. what will spending do and what will taxes look like? >> other questions? tony. >> toni mccann, public policy program at school of university of maryland. having been up here in the 1980's, you look back to which a time when agreements were reached and we made progress. the series of agreements, every time we came back from reconciliation bill, the deficit was bigger and the problems extended as far as i could see.

it did not seem to me that we actually made progress until we overheated economy in the late 1990's and were able to generate revenues to solve the problem. with that background, what does that say about a credible plan when we made hundreds of billions of dollars in cuts in medicaid and really never change the program hardly at all. >> i do not know, but i will say things anyway. >> certainly anyone who is sitting thinking we will just run the clinton playbook and it will be fine, should take that notion and put it aside. we are not going to get a peace dividend.

i hope we're not going to count on a .com bubble that we believe will come on forever and that will pledge that way, and certainly we're not in the time of the baby boom, so the programs change things considerably. you cannot look back and say it worked, we know what to do. different world. that is the biggest thing. the second thing is among conservatives, there are some that are fascinated with the idea of these sort of regimes of across-the-board cuts. 1 percent across the board for the next five years, that does not fix the problem, because unless you change the programs, and the issue reform medicare and medicaid and reform social security, all of those three programs are basically

broken. they are not delivering the quality of service we would like to see. we have a simultaneous obligation to have a secure state met for the next generation that requires reforms, and the fact if you do not change the structure, one to start doing the cuts the come back to life. reform is the key word. it is not enough to balance, you have to reform. >> you harkened back to the 1990 and 1993e budget reconciliation bills were real red meat. they did well worth it trajectory for discretionary spending. they did raise taxes, they did cut entitlement programs and combined with the strong economic history of that time and some luck, we ended up with

for years of budget surpluses, which i do not think you or anyone on this panel here in 1995, even in 1997 after the balanced budget act was passed would have predicted. so the 1980's, there were a few things done. i would argue based on the work i have done and others have done that while it came nowhere near achieving objectives, it did hamper the growth of deficits, so i do not think it is the same kind of situation that we're looking at right now. >> i was going to say much of the same thing, but to emphasize not only that the processes we

were working under in those days did a lot of good. paygo actually mattered, and the caps on discretionary spending actually matter. spending was rising very slowly, and the economy was growing faster. i saw bill hoagland walken at some point, and he would argue that it actually had impact. it was not nothing. i would not rule out the efficacy of strong process roles. >> reflecting back on the 1980's, i think one question -- one thing your question brings out clearly is as we did find spending cuts in this town, because we went through the 1980's with a large number of what is called tax increases, the first of which was a bill of 1982 i heard it characterized

by some as the biggest bank increase in history. it was a tax increase relative to a line that was pledging -- plunging. similarly with your remarks about medicare or medicaid cuts, there are things that slowed down the rate of growth, but did not really cut things. when you put that on top of the recovery that is those figures by today's standards, it was still disappointing then. it really did create a lot of frustration and the congress because they had done the entire thing. they change the tax to retreat. -- they change the tax trajectory. they got it to go up. that is what they got ultimately, the frustration. i have been reading -- reading

about the british austerity program. they compare everything to last year, and it is so refreshing and so easy to understand. i just wish we could do that in this country. >> thank you. we will return to work questioned later, and i have four questions to ask. the question is this, we have heard a lot of people make arguments recently that perhaps having the u.s. default on the debt would not be so bad. if that is what it took the congress and president to get serious about taking steps to reduce the debt. my question for the panel is any -- is there any plausible argument in your view that says it the fault is a necessary step to get serious about debt reduction that it is a desirable thing, and should we draw a distinction between a little the fault and a default, one that may be is only two or three days of and its people attention and

then move on, versus something that is more long-term. >> eve said two out of it was not a very big apple. it is a bad idea. the fault is a bad idea -- default is a bad idea period. the idea that somehow whe need o raise interest rates in order to default in this country is a bad idea. everything about the avoidance of default should be conditioned on the recognition that raising the debt limit is a recognition of -- recognition of the symptom. the problem is the debt. we should fix the problem and deal with the symptom.

i just cannot endorse anything that involves defaulting first. >> i saw i was warming up, and i thought -- >> sorry about that. >> i agree with your basic point. is there a constructive perspective on this issue, and by default what we're talking about here is the failure to pay in a timely basis, obligations of the federal government, and that might mean that social security recipients receive their payments and those that have interest earnings received there's and urban institute has none of its bills to the federal government paid, so i know -- >> [inaudible] [laughter] >> i wanted to get you on board

here. it strikes me that we do not have forward movement on this, in part because a significant number of policy makers and a larger number of people in the public are not convinced that pang -- pain and sacrifice is unavoidable, and some time we have to change that situation. we also have a number policy makers that have staked out positions which in no way are in concert with resolving this issue, and they need some cover, so if there were some way to engineer a 700 point drop in the stock market or something like that for a few days to shake people up and say you have to get serious about this, and we

have to do it in a sustainable kind of way, do i advocate that? no. do i think that is risky? yes. but we are looking for adult behavior and cnn. [laughter] >> the only trouble with the 700 point drop is it could be a 2100 point drop before we are all finished. i find the talk around this totally baffling. i agree the dumbest thing to do would be to default, even for one day at this point. i find the men -- even dumber politically the idea of prioritizing things where we make sure the chinese get their interest payments, but we are dubious about whether we will pay social security benefits or pay the bills of people here at home. that does not seem to be a winning political strategy somehow.

for a time in my life i worked internationally. there are more countries that do not pay their bills band to pay their bills. when you work in a country like that, it is a very bad thing, because someone has to choose which bills to pay and which not to pay. if you talk about an opportunity for favoring political friends or taking side payments, the amount of corruption that kind of situation in genders is very problematic, so i do not seem much good coming out of these notions that somehow we have a big budget deal, it will be ok not to pay interest for a few days. it is playing with matches around gasoline as far as i am concerned, and it would be an incredibly stupid thing to do. >> i agree. i want to be firmly on record default is a bad thing and we

should not let it happen. >> that is clear. >> i think it is important to emphasize how misguided is this notion that if you do not raise the debt limit, somehow it will all be ok, and i think this is at the heart of this crowd that believes there will be no real pain. the problem is we have had 2.3 trillion dollars in revenue coming in. it might be politic -- politically risky but if you could pave the debt service to the chinese and still have two trillion dollars, but there is 2.1 in mandatory spending. at that point you have 04 0 for national defense,

infrastructure, education. it is hard to believe that is either politically viable or rational at all. it is like saying to the bank i would like a second mortgage. in the house has no roof, the windows are broken, you have the citing falling off and there is no way you look at the second mortgage. this makes no sense from a credit management point of view. it does not add up. what is worse about it from an absolutely strategy is -- political strategy is the problem is not gone. if you want to cut spending, change the law. >> we have a remarkable degree from the panel that can -- defaulting on the debt is a bad thing. [laughter]

now i would like to entertain questions from audience. and anything anybody would like to ask. >> i am a graduate of the school of public policy. i work in the community development space. since we're all in agreement about defaults, getting back to the question of cutting the debt, the tax reform, so a historical question and in a sense of what will happen in the future. in 1986, did that have significant impact on reduction and the debt, and what do you think the prospects, even though tax reform is not the silver bullet to solve everything, but do you see the likelihood of significant tax reform in the next two to three years? >> i do. the question about 1986, that was done in a revenue neutral fashion. it should not have been, but it was.

the kind of tax reform we are talking about now, i believe must not be done revenue neutral. we must have a more drastic base broadening than we had in '86, such that we can lower rates and still raise more revenue. >> i think it is almost a necessary condition for resolving the budget problem in the long run. it is very difficult politically and the fact that we showed that in 1986, and the fact we have not seen that since 1986 is an indicator for how difficult it would be. i have seen no prospect of resolving this without some kind of increase in revenue. i see very little prospect of conservatives ever agreeing to a new tax like the value added tax or new tax. it would be crazy in my view to simply raise rates in the

current an inefficient and unfair system of taxation, so the only hope i see is the ability to raise more revenues but with lower rates. the only way you can do that in my view is with a very radical tax reform that broadens the base very substantially. >> just another footnote on the 1986 tax reform, it was revenue- neutral overall, but for certain individuals it was tax cuts and increases for individuals. they thought this was a trade- off that would not last, that once they were off, they would come back to the ways and means of the finance committee and undo some of the tax increases that were imposed on them on the corporate side, so we do not

have a history here of true at revenue neutral tax reform, let alone tax reform that raises a great deal of money, although i would agree completely with alice and rudy that if there is going to be a significant contribution of revenues to the solution, and i think there has to be, that tax reform is a critical aspect of that, but that brings us back to alice's's original point is that it is getting late. tax reform in 1986 was the result of many years of work and study and analysis and -- in treasury and elsewhere while lots of people have discussed the ideas of reducing itemize deductions or various tax preferences, getting the dial's

set right on things like that are not easy to do. >> the last footnote on the 1986 tax reform is that while it was intended to be neutral, it did not play out that way. indeed, the corporate money never showed up. in part because i think we made a bad choice in how we structure this. it lost money, and it drove the pressures somewhere after that. i think that is important to remember. tax reform is really hard to get done. you can count on one hand the number of substantial broad- based reform. on the evidence, this is an incredibly difficult policy task to achieve. i think this one is even harder for the reasons that have been outlined. the right reforms in this day and age are the ones that lower

the corporate rate, in many cases quite dramatically. but with a corporate rate -- what were the corporate rate so we get in line with everyone else. -- lower the corporate rate so we get in line with everyone else. i am not a political expert, i have proven that, but i do not think that will be a winner. if you are not going to do that, you have to drag into revenue neutrality. there are some real serious political opposition to getting another tax in the system. this is a territory that i believe, if we get it done, and i firmly believe we need a better tax system, it does not happen. >> it certainly does not happen fast. and i sense that there really is a difference atmosphere with

respect to spending through the tax code, that even many conservatives are now recognizing that we have done a lot of spending to the tax code and call it tax entitlement, a tax earmarks or what ever, some of that is fair game. >> other questions? bill. >> [inaudible] >> i apologize for being late, what is the best and worst memories you have while you were director? [laughter] anyone? >> people are struggling for their worst memories i am sure. there is such a long list of best ones.

anyone want to take that? >> my best memory is when i was noted for wearing a dark suit with the red tie a lot. that might be every day. i was invited to breakfast by a dear friend, and when i return to the office the entire staff was dressed in my clothes and standing in the great hall and serving my favorite foods, twisters and diet cokes. there were pictures of me in this very suit and tie all over the place, and i will never forget it. it was the happiest day of my life. the worst day for me was the night of the house vote on the prescription drug bill in 2003 where i was -- since our work was done and it was just

recreational boat commenting, i thought it was ok to slow -- fly home. i turned on the tv in the were still doing recreational boats counting. it was clearly one of the fiscal missteps of the past decade, and it was one of the political policy missteps in the way the pope got done and the nature of strong army to get the boat, and that was a bad night. >> anyone else have any memories? >> wait a minute. [laughter] >> should we just let him hang? you can think about that some and we can come back to it. >> one i remember was the moment in which we really established

the cbo as a nonpartisan agency, which as i remember it was about two years into the cbo's history. we had two years of president ford, and every time we said anything that was critical of anything that the administration had done, like it would not save that much money or whatever, the republicans were all over us. then unfortunately president carter put forward an energy plan that did not look to was like it would save nearly as much as they were planning, and we said so. although some republicans were saying isn't it wonderful we have a non-partner -- non- partisan congressional budget office. the non-partisanship was

established from then on. >> i want to ask another question, and it is taking off from the discussion of tax reform that we just had, and it is partly a political question, but it is partly a policy question. it seems increasingly like many democrats would not accept a plan that such as medicare and social security, and in fact the lesson we are supposed to have learned out of the special election in the buffalo area is that if you touch medicare you will be defeated. republicans will not touch a plan, apparently, that raises taxes. i am wondering, as alice said it is getting late, i am wondering if there is any way politically to touch either of those things in a way you can actually bring the two sides to agreement. i guess the other part of the question is there a distinction between what is politically feasible and perhaps what is

desirable or could we have this happy circumstance of both being the same thing? >> well, from a substantive point of view, there is no way of solving this problem first of all without getting some handle on health cost. if you thought of financing them by raising taxes, you would have to raise taxes every year because they are growing faster than our income. that is an essential part of the problem. the only other part of the budget that is growing and causing this problem is also security, and it is growing much less fast, but i think there is a lot of room for reform with that, and we hit the two hottest button issues you can imagine. i do not think government has ever invented anything as popular as social security and medicare is very close behind in math, but in my view they do

need reform. i do not see an answer to the question without some increase in revenue. of course a ferocious battle on how much, a solution has to come from their purses slowing down spending growth. how do you get there politically is a great mystery. i do not think we do have much -- forgetting about the debt limit debate, i think more generally there will come a time when people will stop investing in our debt, and we do not know when that will happen maybe it will not happen for 25 years, but i think it very well could happen in two years depending on circumstances. i see this as a race between a political system that is moving glacially toward some kind of solution. so glacially it is hard to see any progress whatsoever, and an economic system that is heading

toward a crisis. so far the crisis path seems to be winning the race, and hopefully that will change soon, but i am very pessimistic right now, because i do not see much kind of change anytime soon. >> i think that is absolutely right, but i guess i am less pessimistic. i am always the crazy optimist. i think it depends on a bipartisan group of leaders, and i think it has to include the president and the leadership of both parties being scared enough that they've recognized that they have to put together a package that they are not going to like, that it will have some things in it that each side does not like. we did that in simpson bowl els, in sitting members of

congress and five committee members signed its, and all felt there were things in it that they did not want to support -- simpson-bowls, it and five sitting members signed it, and all felt there were things in it they did not want to support. tom coburn said it best. we have to get that spirit to come to the forum, because people are scared enough of the consequences and the things we have been talking about appear that they are willing to give up something for the good of the country. >> on medicare and social security, we know the substance of that. that is not complicated.

the important thing is for the american people to recognize that the status quo was unacceptable. in fact, as i said earlier, all of these programs are broken from a budgetary, substantive point of view. our obligation to the safety net requires that we actually fix them. that should change the policy of putting them on the table. it does. in polling i have done at my think tank, if you ask -- for example, with the debt limit question, we asked about a clean debt limit increase and nine out of 10 americans are opposed. they are sick of the whole thing. if you ask what would you put on it to have it be sports -- have to be supported, they say changes to medicare and social security to make them both fiscally sustainable.

if the choices presented to the american people, if you do not get to keep what you have forever, if it is not going to last, they will be amenable to changes to the programs. they want them to last. on that front, i think you can get it onto the table. the tax thing has always been problematic for republicans. did i say that right? i think there are two things to recognize about that. one, there is a lot of tax policy that has nothing to do with raising revenue in an efficient action and it does look like social policy in disguise. -- like spending policy in disguise. and the other is that historically, when they have agreed to both spending cuts and tax increases, and they have been hoodwinked. they have gotten a tax increases and not the spending cuts.

i think if this sequencing was right, you would change the tax debate considerably. i am with alice. i am optimistic. this country will get this done. >> no risk of me agreeing with him. i am deep in the camp of pessimism. i would disagree with a lot of the things doug said. the consequences are not real to most americans at this point, and unfortunately, not too many political leaders as well. they might understand that these programs are broken from a budgetary standpoint and want them to be around for their kids and grandkids, but that is a whole lot different from saying cut my benefits. from a beneficiary standpoint, medicare is not broken.

it is a terrific program. social security is not broken. even presenting to the american people that, you know, you're living a lot longer. a larger fraction of your total adult life is being spent on social security. do not think we should raise the normal retirement age along with a longer life you're going to be leading? a huge opposition to that. and you wonder, where can you really start this conversation, because what we have to do is tell the american people they're going to get less for more. they're going to pay more and get less. we have been in a sense living beyond our means as we look forward, and that is not an easy thing to do. we have been having a great sale on government services for the last 20 years, and you do not want the sale to come to an end.

so, i think it is going to be hard to get reason to prevail. in this discussion. the fundamental change that has taken place since the last big budget deals is the communication revolution that we have. cable television was not around the way it is. news broadcasts that were mostly opinion and less objective news did not proliferate. there were not loggers. there were not facebook and twitter and all of these things. an objective presentation -- where an objective presentation of the evidence could dominate the debate, nothing dominates the debate now. and i think that will make it difficult to come to a resolution without some kind of

external crisis. >> others want to respond to anything they have heard? > i thought rudy was going to say he is even more pessimistic after listening to bob [laughter] i have a follow-up which is a question i'm asking to a group of economists who have been around the political process for a long time, which is, what is behind you are all saying is the increasing polarization. that is, there is a gap, it seems to me, between the leadership and the rank-and-file in both parties, and there are a lot more people who have, i guess i would call it taken the pledge. the pledge on the democratic side is we will not touch medicare and social security. the pledge on the republican side is we will not raise taxes. when i have heard a little bit is maybe we can raise taxes if we can say it is not a tax increase. it is just tax reform or eliminating tax expenditures or

cutting back untack expenditures -- back on tax expenditures. i'm wondering if anyone would on how in anent an increasingly polarized environment any sort of solution will involve moving toward the middle? >> it is the major factor. i would put it ahead of the communication revolution. i think it is interesting to look back to the 1950's and see the changes in the two parties. the democrats had some incredible fiscal conservatives, eastland, dennis, russell. whatever you thought of the rest of their views, they wanted to control spending except on defense. the party ranged from those guys to proxmire on the left. in the republican party had a

range of ideologies from one yowho was as liberal as any democrat today to the first stirrings of the coldwater movement. the ideologies of the two party had a huge overlap. that made it a lot easier to cut deals. some of the most difficult things were cutting deals within the party as opposed to cross party. the situation is so different today in that there is essentially no ideological overlap between the two parties. as i said before, the gap between what the two parties believe i do not think has ever been greater. >> anyone else? doug and then alice. or alice and then doug, how about that? >> in the midst of all of this gloom and doom, i think there has certainly been polarization and there is less of a medal on

capitol hill. but i am not sure -- middle on capitol hill. but i'm not sure that we should conclude that the american public is significantly more polarized or significantly dumber either than it used to be or voters in a lot of other places like the u.k. were they seem to be able to face up to these things -- maybe they're overdoing it. but if you get a reasonably represent a group of people in a room -- and this has been done multiple times -- and you sit them down and say look, here is the problem. these are the spending pressures. this is the revenue side. these are the facts. here are some trends. you get pretty reasonable answers. people can do that, average people, and we should not forget that. the characterization of everybody as having extreme

views -- i do not think they do. they're on a city councilor in a city with the budget deficit, or on the state budget legislature, then they managed to come to the metal and make some reasonable -- manage to come to the middle and make some reasonable choices. i do not think that is impossible at the federal level. >> the points that are the same to me and do not strike me as dramatically different are exactly what alice said. lots of studies have failed to find the disappearing middle, failed to find the polarization, failed to find the intractability of politics in the american people. i agree with alice completely. the bottom -- if the retail politics were strongly enforced all the way through, that is what the american people believe and want. the question is, how does that work?

at the other hand, it is still the same. my view is that in this town, if you want bipartisan solutions, that begins and ends with the president. the president is the only official elected by all the american people. only the president has sufficient capacity to provide cover for all of those in his party to cover a tough vote and things like that. congress is a partisan place. it has a chairman and ranking members. it has majority staffs and small staffs. it has majority offices and back offices. there is a lot of partnership built into the structure of congress. only the president can reach across the aisle. we have had two presidents who are not good at this. i do not know why, but we need more of that, and that does not -- that has not changed. there has been in gerrymandering of district and a safe seat

phenomenon. i think that is a real problem and one that merits serious consideration. then there are some of these mechanical things. i cannot speak to the democratic side, but on the republican side, i think there was a vast misinterpretation of what the contract for america meant. in my view, the contract for america was a document hammered out by some very strong-willed individuals who did not agree on everything. this was not a group of shrinking violets and they were not an automaton. they hammered out what they thought they could agree on in a short amount of time and off they went. it was enormously successful electorally. the mistaken conclusion drawn from that was, hey, if we all say the same thing, we will win. it produced this desire for clones within the caucus, and if you cannot adjudicate differences within your caucus, you're not going to be able to develop their reflexes to reach across the aisle.

that happened certainly in the house of representatives for republicans. i think it has had a damaging impact on the nature of the overall process. i think we need the same thing out of the president. the american people believe the same thing. in between, there are some mechanical differences in getting things done. >> i would like to agree with the analysis of the american public, that it is not a whole lot different from how it has been in the past. it is a bell curve more than two polar extremes. when you sit groups of people down in a room and you have some budget experts or some policy experts describe the problem to them in a sensible way, they come to a sensible, middle of the road decision. but when they walk out of the realm, policy is interpreted for them by interest groups, but

bybsters -- by loggebloggers, cable television, and they quickly get polarized and diverted off to the side. we of heard it suggested that we reform the tax code in a way that gets rid of some of the spending funded through the tax could. if we're talking about ethanol subsidies, everyone outside of ohio and nebraska can agree, but that is chump change in this game. what we're really talking about here are things like preferences that affect health, retirement, housing, charitable giving. that affects the middle and upper middle class of america. you see the tense to describe those situations -- attempts to

describe the situation, and it is not as if you can get a large fraction of the public embracing them, even simple things like why should we allow mortgage interest to be deductible for second homes? we might, all of us who do not have one, might reach a consensus there, but you know, if you are part of hoboken or north carolina or new hampshire ies where this is very important, it is a matter of life and death. >> i would like to know whether anyone in the audience has any opinion on the topics of either taxes or entitlements. [laughter] surely, someone does. let's open it up.

>> apologies for speaking twice, but i want to call attention to something. our public opinion wing at the school recently did a budget survey in which we asked 1000 people or so to address in detail, systematically, the discretionary budget, and then also asked questions about social security, entitlement, expenditures like mortgage deduction. the consensus answer with people who were confronted with this was the people ended up making decisions that would reduce the discretionary budget by about 75%-80%. a substantial share of that was tax increases that people supported. the majority of tea party sympathizer supported tax increases in this particular context, etc. you can say, what does that

mean? by itself, it means nothing at all. bob is absolutely right that if you put that against the drivers and the people who support the second mortgage interest deduction because their entire communities depend on it, on the other hand, there might be some potential here as part of the campaign, the sorts of surveys, if the sorts of things were given some publicity in some mileage and politicians could use them to some degree as protection and say we have some scientifically selected groups of americans who do not like this. they did not say they like a tax increase. they do not like the social security changes. but a majority of people said we could live with this as part of a package. there might be something here in the pr. >> that is a comment.

anyone can respond who wants to? other questions? no one has any questions about entitlements? you can ask about anything you want. >> i wanted to pick up on your point about the cacophony of noise and polarization. i do a lot of work on the debt limit, as most of you know. to pick up on doug's point, this is about paying bills you already incurred. my guess is that most of the people who are dramatically opposed to raising the debt limit think it is the same as a credit card limit, a belief in which they're wildly assisted by most of the press, and i am sorry to say, by many of their elected representatives. that leads me to think about, it is also easy to say i do not want you to cut my medicare benefits if i think i have paid for them and paid enough to cover them. franklin roosevelt was no 80 it.

he knew why he wanted to have diot.idual -- no immediat he knew why he wanted to have individual programs so that no one could touch them in the future. how is it that everyone seems to be entitled to their own facts? >> i think as doug said, it really requires a lot of leadership and it has to eventually come from the president. there is no one else in the country -- [inaudible] i think leaders will get the kind of shout from time to time if not outright get assassinated. it takes a lot of courage and strength. i hate to say anything optimistic in this group, [laughter] but if there is any help, i

think it comes from the fact that other countries have resolved these issues. you see it in places like canada, australia, new zealand, sweden, etc., where they have come to agreement on some pretty severe austerity programs. they have reform social security. now the thing that makes me nervous is that all of these countries face real or imminent crises. in other words, they did not really act until they got scared, and i think that is a disturbing thing. but when they acted, they acted quite rationally. you might not like all of the solutions they adopted, but they were not done in a panic. they were not totally mad. so there is hope. i did have a privilege of lunching with the canadian minister of finance the other day and asked him, how did you do it? how did you turn the country from cheering on spending to

really being very concerned about deficits? he said, you have to keep a really simple. we convinced people that debt was bad. and that did it. and now, the canadian government runs deficits at their own peril. >> anyone else on that? >> i think we have come down to, what is different about us from the grits or the swedes or the new zealanders, -- british or the swedes or the new zealander, who ever they are? is it that our credit card limit has been too high for these years? it is certainly partly that. is it that we have a system of government which makes budget making much more difficult and complicated than a parliamentary system? or is it the power of our interest groups and the media

exaggerating the horrors of doing the things we know we ought to do? i do not know the answer to this. it is some of each, but i cannot think it has got to be disabling. i come back to the same situation. i was talking to european the other day and he said, i was reading about you laying off teachers, laying off state and local workers. isn't this going to cause riots in the street? i said no, i think people understand this as an unfortunate necessity of having to balance budgets at that level. or at the city level. why we do not understand it at the federal level is not clear. >> years ago when i was at

syracuse university, i became pessimistic about my chosen profession and decided i would be much better served by producing one economically literate journalist than 40 economics majors a year. i launched a program. to cut to the end, the course got canceled. during the exercise, allowed students to turn in their assignments in whatever media they were going to go on to do professionally. writers wrote. newspaper guys, short. magazine writers come along. -- writers, long. one assignment was to cover the brewers.

it was a tragedy. different story. [laughter] he came back to me with a guy trudging along with a lunch box. i said, how can you do this? he said, economics is about taking the motion out. television is about putting the motion in. i remember that to this day. you have to inject into the debate emotion. we are all policy geeks. we want people to look at debt versus gdp. now. it is about attacking -- attaching fax to a motion. if you do not do that, you will not succeed. s to emotion.fact som

if you do not do that, you will not succeed. injectou're trying to emotion into something like that is evil. hasn't that already occurred in some segments of the population, which has generated the idea that we do not need to raise the debt limit? how do you get people concerned about something and at the same time be educated about it? >> i'm going to rephrase. the observation was made you're not entitled to your own set of facts. not true. but you are entitled to your own set of emotions. you have to trump that with the strong promotion of the consequences of debt and how bad it is.

that is the marketing challenge of this moment. >> what you have to say is, i should not be running up debt, but i should pay the bills i have charged. most americans think they do not have any debt because the mortgage does not count, the loan from the car does not count, the loan for the refrigerator does not count. it is, i should not overcharge. i should not borrow more than i can pay. i should make every effort to pay the bills that i have incurred. maybe that is the way you tie the debt limit to shrinking -- to a path that in forces and lowers the debt. if we had a balanced budget, we would have to raise the debt limit. if h.r.-one had become law, we would have to raise the debt limit. we would need trillions of dollars. >> any other comments?

>> i do not think it is going to be hard to convince americans that debt is evil when they have mortgages, as you say. they buy cars. the finance education with debt. they start businesses with debt. you have to be schizophrenic to say debt is bad when it looks like this, but debt is my road to opportunity when it looks like that. >> but that is exactly what canadians do. [inaudible] they're not the only country that has done it. the swedes underwent a remarkable transformation. >> part of dealing with

entitlements is actually understanding the implications of what congress does. all of us have seen pieces of legislation passed in which the scorekeeping roles came up with a set of protective expenses that nobody really believed to be true. the most recent of that is the affordable care act in which now, the cms actuary has said he does not believe it. that is because of the rules that you operate under. if you're going to make the role of the congressional budget office more effective in helping congress understand what it has done and what it has not done when it passes debt reduction legislation, for example, what rules would you add or change? >> i will be brief.

i have two responses. number one, i believe there are rules that should be changed. i think there should be symmetric treatment of spending and taxes in terms of construction of the baseline. i personally would take every refundable credit and count it entirely as an outlay. the moment you make it refundable, it is independent of the state of the world. i do not think that is the problem. the affordable care act, i mean, i think some people believe -- i do not think it is a good idea from a budget standpoint. it is not a cdo problem. it is a congress problem. if congress wants to gain the rules, congress is going to gain the rules -- game the rules, congress is going to game the

rules, and they do. do not blame the rules or the cbo, blame the congress. that is who did it. the congress did that to them period. >> the particular example you're talking about, cms as well as cdo in its baseline estimates -- cbo in its baseline estimates had very similar cost estimates. what the actuaries said was that the payment mechanism for providers was going to be reduced by about 1.1% per year often to the future, which would make medicare payments to providers a lot lower than those from other payers, private sector pay years, and that overtime, were there not fundamental reforms in the delivery system of health care -- which there could be --

brought about by this pressure and other pressures -- this was unsustainable, probably. some providers would stop serving medicare beneficiaries. there would be an access problem and there would be a political reaction to that. we have seen that in a sustainable growth rate adjustment to the session -- to physician fees were the congress has not adhered to the loss. it hasn't solved the system from the cuts -- congress has not adhered to the laws. absolved the system from the cut every year. when congress reneged on what should be done, the action is scored again, and has been every year.

>> all of that is absolutely right, but i think the dead put his finger on the more profound put his fingeraoug on the more profound problem, and that is that congress keeps skirting rules. what has happened now? congress passes temporary tax cuts. the number of them is growing, growing, growing. so they do not get into a base line and it is totally unrealistic. they have renewed that tax line how many times? 15 years in a row. the base line has gotten more and more unrealistic, and we debate things though, still, a

round is totally unrealistic baseline. i agree that i would do some things to it, but i think whenever i would do to it, congress would figure a way around in a very few years. >> what is the alternative? to give the cbo the power to say what is a reasonable base line and what is a reasonable interpretation of what the congress will do in the future? i do not think so. you do not want the cbo or any group of technocrats doing that. you want them applying the rules in a very straightforward way. this is what the congress said would happen under this particular law. if it does not happen, you can provide some alternatives, but you have got to take the congress at its word. giving the cbo a lot of discretion as to what it will do

in the future is a road to disaster for the cbo. >> i have to be even more optimistic than alice. first of all, i think bob mentioned the fact that we will never get people to feel the debt is evil when they have so much personal experience with it that works out for them. i think that is not true, because a few years ago, people realize they were sustaining a debt that was unsustainable. people got calls of, you had a credit line for $10,000 but we are taking it away today. i think people kind of appreciated as forced lessons in living beyond their means.

now they're forced to live within their means. i think people are more sympathetic these days, having lived through their own private, personal crises of the past couple of years. when they hear that the federal government is borrowing at an unsustainable rate, they have a resonance with that because they understand that personally. i have seen a change in reception to the idea that debt can be an unsustainable thing. second optimistic point. if you look at all of the plans that various fiscal commissions, task forces, study groups all came up with, if you do a diagram of all their proposals, there is a lot and a lot of money in the intersection of those proposals. it is just that the politicians are not willing to commit yet because they do not really want to have to dive into that

intersection. they want to pretend there is nothing in an intersection because they do not want to have to move there. i think taxes have to be a big part of the solution. i actually think, in my glass half full view of the world, that even paul ryan is proposing to reduce tax expenditures. he is just proposing to cut spending before he cuts tax expenditures. i believe we're not that far away from coming to an agreement about reducing tax expenditures as a significant part of debt reduction. how do we get the conservatives who are wedded to the no new taxes' pledge to better come to terms with the fact that tax expenditures are spending? you can cut tax expenditures and shrink government even as your raising revenue.

and getting the liberals on board to, because once liberals realize that it is spending, they do not want to cut it either. we saw that from the ranking ways and means democrat recently. how close are we to making some progress, do you think? what is the key? what we have to tell chairman ryan to get him to like pause after the first part were he raises revenue by reducing tax expenditures but before he spends a dollar lower tax rates. what do we say to the democrats to let them know that there are progressive ways of reducing tax expenditures? >> anyone? >> i think doug made a good point a while back. my own experience in trying to sell tax reform to republicans

is they say, now you're telling us you're going to lower their rates and broaden the base. but if we do that, just wait. pretty soon you will be raising vat rate again in financing all sorts of spending increases -- again andat trate financing all sorts of spending increases. that happened in 1986, so they have good reason to be suspicious. if they do finally agreed to more revenues, you must absolutely, certainly slow the rate of growth of spending some how. i do not know how you develop that ironclad guarantee. that is the really difficult part, the that is absolutely necessary to making progress. >> one answer is to get them all in the same room and they have to cut a deal because they are scared if they do not and some of the things we have been talking about will be part of

that deal -- never mind. >> i agree with rudy. i just want to say, i do not think you can, in this circumstance, pulled one thing out. the lesson is that it is all spending. the way i think about this -- look a bulls-simpson, for example. that gives you -- look at bowles-since then, for example. that gives you an example -- bowls-simpson for example. that gives you an example that this can be done. everything has to be out there

and you need the tax expenditure is to do the tax reform. pulling one thing out is dangerous, and you always have to remember that. >> the other thing is you need a credible enforcement rules. i think the lesson of the budget enforcement act of 1990 was exactly that. the president did agree to some tax increases. he came to regret it, but within the context of spending cuts and strong enforcement rules, and the enforced rules worked and ultimately brought us, along with a good economy, to a surplus. you have to do that again. >> an important point of that is, i think there rules worked so well because they weren't forcing a major agreement that was already on the table -- were enforcing a major agreement

that was r.d. on the table. -- were already on the table. that will be a lot harder to pull off now. >> we had two components to the rules. one was pay as you go for entitlement programs. that said, we have reduced entitlements spending. you cannot pass legislation that would increase it without paying for it somehow. that presumes we can get together and agree on some big entitlement reductions. then a procedure like that, i think, can be effective. the discretionary spending control was caps. that worked for really one reason and one reason only, and that was that the soviet union

fell apart. we had no rational reason for keeping defense spending as high as it was. in fact, over the whole period, real domestic discretionary spending rose during this great austerity. it was because we cut back defense spending so much that we could raise discretionary spending. it was not a time of true austerity, and that is what we were talking about now, seeking through austerity. >> while we're on that topic, we've not really talked about discretionary spending. i heard earlier, and correct me if i'm wrong, there was a point of view but across that maybe this is a first step. we're not going to do anything about entitlements or taxes, but

we will cut back discretionary spending as a sort of down payment. my question is, how much can we cut discretionary spending? i think of is correct -- bob is correct that it is almost literally the case that going back to 1970 we've not really cut discretionary spending, maybe once in the 1990's. how big of a cut can there be -- how big does it need to be to convince people like republicans that they can go along with an increase in the debt limit? >> if all the commissions have hard freezes and could hold the dollar numbers where they are, i think that is a possible thing to get agreement on. that is tough, but over time it saves quite a lot of money, and the numbers being bandied about

now is about one trillion dollars over 10 years. discretionary freezes are common to all of the plans, and some other small mandatory cuts, accompanied by a strong process change that would force the coming to grips with entitlements and taxes within a reasonable time, and i think it should not be too long after you raise the debt ceiling. >> i think you face the basic arithmetic problem. we all agree that the major part of the budget problem comes from social security, medicare, medicaid to a considerable degree. i think there is general agreement -- too much agreement,

in my view -- that you cannot change these programs abruptly. you have to phase in the changes so as to not disrupt the retirement plans of those in or near retirement. in order to -- if you phase in reforms very slowly, in order to show any progress whatsoever on the deficit in the shorter run without major tax increases, you have to hit the discretionary programs. that is my interpretation of what has gone on in all of these commissions and why they are, in fact, very hard on discretionary programs even their discretionary programs are not the cause of our basic budget problem. >> they may not be the cause, but as you go through them, both on the defense side and the domestic side, you can convince a lot of people that some of

this is not necessary and some of it is not high priority, and that we ought to be prioritized. >> that is true, but that is what you see people pointing to as opposed to the programs that do not work. well. uc policies that would -- do not work very well. uc policies that would -- you see policies that would freeze spending or beat the civil servants about. >> thank you. i am a cdo alumnus now at the center of budget and policy priorities. i have a question on a completely different topic. the federal government does not have a balanced budget

requirement. most state and local governments do. at the same time, state and local governments get a significant amount of their revenue in the form of grants from the federal government. do you think the coming budget debate will be a setting for some sort of renegotiation with state and local governments? >> i do not know. i look back to the canadian experience. lots of people looking different elements of that and pick out the things they like, but one of the things going on was that the federal government involved the provinces of a considerable amount of work and authority, despite the fact that the provinces were in terrible shape. it was done in part because it was perceived that the provinces

were more functional, could take on these problems and solve them in a way that the federal government could not. look at our states. they are showing themselves to be much more capable of taking on tough budget problems and getting their houses in order than we have seen at the federal level. i have some sympathy for the notion that in this setting it might not be a terrible idea to really rethink that mix and that the american people might be well served because the changes we now have to happen might happen more rapidly and more effectively. the question is will happen? i do not know, but certainly, there is some precedent for thinking it may not be a bad idea. >> i just finished a paper on this very topic. i will giveg, you my fearless forecast. i do think we will see this

affect state and local governments severely. i do not think, however, that our federal politicians will be ready to devolve responsibility for specific functions downward. they will finance them less generously, but i think they really do like the power that comes from say, the highway program or messing with education, etc. i would not see much outright devolution, but i would see the federal government becoming much stingier in the amount of money it sends downward. >> i agree with that. much as i would like to see the devolution and sorting out of functions more clearly -- i wrote a book about this about 15 years ago, which bill clinton liked a lot when he was governor of arkansas. when he got to be president, he liked it less. and i began to realize why.

i had proposed a balding things like -- devolving things like criminal justice, education, and some other things to the states. if you run for president, you have got to relate to what people care about most in their neighborhood, and that is crime in the streets, better schools, better housing. you find yourself making promises. i'm going to be the education president. i'm going to fight crime on the streets. no federal president can do that, but you have to promise to do it, and that is how many -- that is how we get so many of these cats and dogs in small programs that are not doing much. there is a feeling that the federal government has to be there to take care of what people care about most. i'm with you in spirit, but i do not think it is going to happen.

>> i agree that it is not going to be part of the package of whatever we do in the next couple of years, but it is worth remembering that if you are taking out your public finance textbook and saying, what is federal responsibility and what should be a local or state responsibility, things that deal with income distribution and opportunity, welfare health, education, along at the federal level, because the consequences of doing them well or doing them badly spillover across the geography of the nation. those things that affect the well-being of a more localized area can be devolved. the problems we're talking about stem from the large redistribution programs.

if we want a more roughly equitable treatment of individuals across the country in those respects and in the areas where growth potential is the greatest and the ability to control them the best and do them rationally is really at the federal level, then they should not be devolved. >> i have a final question for the panel, which is, as has been said, time is short between now and august 2nd. i'm going to lay out a scenario which you can decide how possible is. we do not reach a grand deal between now and august 2nd. in fact, we do not even reach a little deal, in the sense of policy changes being made. but there is something passed tied to the debt ceiling that has some procedural fix, which may include traders, targets, some other kinds of things, promises to do something in the future. in exchange for raising the debt ceiling. is there a way to do that that

would be either credible or that would work in your view, or would that just be punting the problem forward and no good would really come of it? >> it will not work, and moody's will downgrade us on day two. on the prospects of something like that happening -- the prospects of something like that happening are quite high because that date pushes right against the recess in august for congress and there are few things more sacred than the august recess. i think there will be a strong desire to get this over with, if not on the second, certainly before the seventh or so when they go out. >> i agree with that. august 7th, 3:48 p.m., the time of this is easy. >> when did they have their

plane reservations to get out of town? but if we go that route, it is likely that this is going to be like groundhog day. the amount by which the debt ceiling is raised will not be sufficient to get us through to the next presidency. it will be six months, come back and we will see what progress there has ben. -- been. >> i can even see shorter, temporary increases in the debt ceiling that start with freezes and what we went through with the continuing resolution. that will not result in any deals at all just prolong the bargaining process. there is one advantage of a temporary increase in the ceiling, and that is that the deadline is unambiguous right now.

we do not really know how many gimmicks they really have. august 2nd is kind of a wish she washy deadline. but if you temporarily increase the debt ceiling, that means that when that expires you have to actually retire debt. that becomes unambiguous, i think. it is a significant amount of money. that could well happen, but i could see this whole thing going on well into the fall with a series of temporary increases. >> as usual, i am a little more optimistic than your scenario. it is not unlikely that we will get a combination of substantive changes, mostly in discretionary spending, and a process change. i think there is a process change which is plausible and

attractive. i have been working with people at the bipartisan policy center. we call it save-go. reminiscent of pay-go. it would involve discretionary caps and a pay-go process that would apply to the the entitlements and taxes. why not just pay-go? because pay-go did not do anything but prevent the congress from making things worse. now they're going to get worse anyway, so you have to have additional savings that you're committed to in the future. but you would not have to specify initially whether they were on the entitlement side or on the tax side.

you could leave that until later with the trigger mechanism that would force you to come to grips with it. i think something like that could get us past the debt ceiling. then the question is, for how long? i think it would actually not be such a terrible thing to have a fairly short -- say six months -- increase in the debt ceiling that would force us to come to grips with these larger come a long run problems before the election. -- larger, longer-run problems before the election. i think we are getting towards a recipe for disaster with the debt crisis. we're getting towards the spring of 2014. i do not think we have that long. we have to do something within

the next few months that is credible and long range. >> for those of you who might be concerned [no audio] these issues will drop off the front page if the debt ceiling is resolved even for six months, remember that the new fiscal year begins october 1st and we will need appropriation bills to keep the government running at that point. we will be back into continuing resolution territory. >> buy your ticket now for the next panel. [laughter] i for one never worry the budget issues will drop off the front page. we have a few minutes left. i'm going to stop asking questions and see whether there are any remaining questions from the audience. >> what i thought you were talking about was a debt limit not big enough to carry us, but

not going to expire. you talked about what we did in the old days which was raised the debt ceiling for six months and then have it drop again. i will tell you, for people in the markets, that does not, is down at all. -- does not calm us down at all. >> i am talking about a temporary increase that would drop. it might not make markets happy. in fact, it would be nice if they were unhappy. i am not making a recommendation. i am making a forecast. [laughter] >> other questions? >> if i may, what i thought the scenario spelt out was one where we had an increase. we increase -- we agreed to increase the debt limit, but did

not accompany it with anything real, just a process. i believe that will be perceived as not real, and i believe that will be unacceptable. i believe moody's has said that in writing. that is my answer, that that is also not the deal i expect to have happened. i'm with alice. we will get a much better deal than that. .> we're about out of time on that note -- which i am sure is with the envelope involves pocket actually said, what we were just discussing, please join me in thanking the panel. [applause] everyone in the room is invited to a reception which will follow this event in room 121, a cannon, which is downstairs. there will be people to direct you to it. thank you all very much for coming.

thank you to the panelists once again for sharing your insights with us. >>, and security secretary janet napolitano on u.s. security nearly 10 years after the 9/11 attacks. washington journalists live the 7:00 eastern with segments on the selection and food safety. >> a couple of hearings to tell you about. the senate judiciary committee looks into the possibility of

extending robert mueller's term an additional two years. a hearing for ryan crocker on c- span 3. >> now, janet napolitano on u.s. security 10 years after the september 11 attacks. she was at the new york university law school for about an hour. >> agreed to be back at nyu. to talk about where we stand and some of the issues confronting homeland's security now 10 years after the attack of 9/11. thank you for that introduction. thank you, michael, for allowing me to come back. me to come back.