trying ntto focus on these counties and trying to direct resources to these counties. back when we did the american recovery and reinvestment act, in the rules developing section, we were successful in getting that bill to focus on these counties by directing the expenditure of 10% of those funds into those counties. when this report came out from cbo a couple weeks ago, its focus my attention once again to those communities.

when i first came on this panel, human side of this deficit. what i would like to ask today it is whether or not it is feasible to do $1.50 trillion reduction in deficit by cuts only. what will that do to that bottom 20% that has seen a 18% growth in their income? what will it do to those communities where 20% have been below the poverty level? what will it do to those communities and the people if we reduce this deficit only by cuts?

i like to hear from all four of you on that. >> i am delighted to go first. as you know, if you go east of i-90 and you are in north carolina, we have more countries that fall into that country than -- into that category than any other place in the union. if that part where a state, it would be the poorest state in the union. as you know, i have had many of our universities that operate in serve the people in those communities. i think if you think about what you have done, if you look at the continuing resolution you took about four hundred billion dollars of cuts through the continuing resolution. if you think about -- i think about what you are working on now with the budget control act.

the first part was $900 billion in cuts. you had another $900 billion in cuts. you have done about $1.3 billion worth of cuts already. i have always thought it has got to be some combination of revenue and cuts to get to the $4 trillion number we focused on. i think it is important to focus on the fact that these deficits are eking the budget alive. half -- eating the budget alive. they do not leave any money left over to do the work you want to see done if these deficits continue to grow. and interests on the deficits continue to incur. what we tried to do was to make sure in the plan we put forward that we did not make any cuts in the income support programs like ssi and food stamps.

and workers compensation. we tried to make sure that on things like social security, we actually uped the minimum payment to help those people who really needed it. we give people a 1% of per year -- bump up per year. between 81 and 86. that is when people made it the -- that is when people need it the most. we tried to be sensitive to those people that are most disadvantaged well we made the cuts we had to make. >> we have enjoyed our time with the. you have been very cordial. i appreciate that the plea. -- that deeply. the irony to me is if we do not get their, dick durbin always

ask --where is the tipping point? i do not know where it was. i know it will come swiftly. it will come by the ratings in -- and the market. it will not come by anything any chart has of a disclosed. at that point, interest rates will go up, inflation will go up, the very people who will be hurt the worst in that procedure are the people you speak of with such passion. this is a tremendous irony. by doing little or nothing, the tipping point comes, the little guy is going to get hammered. worse than ever he or she is now. that is the irony. the strange, hideous irony. >> would you not say that if we work to do it, let's do it, let's do it on the backs of those same people? what happens to that chart in the next 30 years where we have a tooth and 75% increase in income -- a 275% increase in income for those people in 1%.

if you are in the upper lento, you saw an increase. -- upper quintile, you saw an increase. let's say let's do it. let's cut the deficit by $1.50 trillion. let's do it by cutting medicare, medicaid, cutting education, cutting programs, health care, and we will have saved the market. what will we have done to these communities? that is my question. >> that is not a question that we should answer. you should not do that. there are two points. we are all making the same two. . -- we are making the same two points. one is we need to cut the deficit but not by hurting vulnerable people. you should avoid doing that. secondly, the importance of

avoiding a double dip recession and a lost decade of growth is extreme and will hurt those people most if you do not avoid it. >> i am the last year. -- i am the last year. -- here. you heard anything humankind can think of. i will suggest the answers that were given are relevant and important. one of the reasons our group did not get as big reductions in appropriated accounts as other plants was because we came upon the idea that we were going to have to come up with revenue, we ought to have a budget that was understanding in this area or it would be attacked to destroy it as we were trying to create a country that was strong again. we did take care of the problem. i will tell you from my own

experience, one time i asked a wise man, what do we do to help poverty? the person said i can tell you in one word. i thought, he must have ties with the holy spirit. he said, a ticket. -- educate. people must get educated. that will not solve the bread on the table. any plan should look at whether the poor people are getting educated. >> i agree, sir. >> secondly, the country has to grow or there is nothing to split. there is nothing to give to our people. whatever problems you are talking about have to have growth. that is why our tax plans are growth tax plan. there's this, our says. -- theirs is, ours is.

we call it that and we asked expert, they say your tax plan will cost better growth than the plan we are under now. that is what we cut corporate taxes. people should not say, why you cut that for? they are not making as much to give to our people in wages. they are going elsewhere because our taxes are too high. it is not what people say. the reality is competition. you cannot force them to stay in america. education and a fair tax for corporations belongs on this. >> the time is expired. we recognize the gentleman from michigan. congressman camp. before i do, i wish to thank him for arranging for the committee to use this room. your chair is very comfortable. >> i want to thank our witnesses for being here. i do have a question. in the plan, he recommended

that the united states moved to a territorial tax system. i agree with that recommendation. i think of current system is one that means our companies and workers are not competitive. do you share that view? is that what you recommend the move into that system? >> i have read what this committee put out. i was in favor of what you put out. >> do you believe in our proposal there are ways to move to a territorial system that is not great incentives for companies and a ploy is to move jobs -- that does not create incentives for companies to move jobs to other parts of the world? in the commission's meeting, you were focused on moving to its territorial plan that did

not make of companies less competitive. do you think that can be done in a revenue neutral revenue plan? >> i do. i think if you stay on a worldwide system and you force companies to leave those dollars overseas, naturally, if they are going to have to pay a big tax to bring them back, the likelihood is more probable they are going to create a job somewhere else. that is a reason i support a territorial system. everybody else in the world has gone to it. >> you also recommended a complete overhaul of our tax code. i appreciate the model you set up where you tried to lower rates in exchange for doing away with various provisions.

i think that has shifted the debate on what tax reform might mean. your reform proposal would raise revenue compared to the current policy. you did not do it by raising taxes. a lot of people get those things confused. why did you choose that route of raising revenue through reform rather than imposing new taxes? >> i felt like based on my experience in the business world and the economists i talked to, it would great dynamic growth and jobs and opportunities. i felt it just made sense to get the spending out of the tax code and we could use that money more efficiently and effectively by lowering rates and reducing the deficit. >> thank you. dr. rivlin, in your plan, you had the government's share of

our gdp around 21%, i believe. is that correct? >> yes. >> and that is basically $1 out of every $5 of our economy would come to washington d.c. that is more than highest levels of revenue we have seen in the history of the nation. i think there has only been one time were the government's take has gotten anywhere close to that level, and that was during the internet bubble. >> we examine the other people's research on this. i don't read the record as having much evidence at all of a connection between the exact

proportion of the federal government's revenue and economic growth. the reason ours went up was, as i stated earlier in the hearing, we didn't see how in this very new situation of a much older population and the tsunami of the baby boom, we did not see how we could fulfill our obligations to those people and performed other services of governor without having the government in that range. has been there before. this is not taking on new government responsibilities. a is just saying we've got lot more older people and we've got to take care of them, and that is going to maine slightly higher government spending than

we had in the days when the population was a lot younger. >> senator, let me just say in my past life i have used percentages like that. i have learned that on many of them, there is no reality attached to the number. nobody can tell you that 19% is better than 19.5% or 20.6%. you have the rest of the policies right, things in our kind of economy, the problem we have in this country has been expressed over and over again today. that is the population is growing older. the population has less workers per retiree, and so you have -- when we look at that 18.5 which

was used as an the historically significant number, we did not have the system graphics. -- this demographics. we did not have this kind of problem. we saw that by trying our best to use the tax code to generate some extra revenue in the manner we have suggested here. at the same time, we have taken on the responsibility of some of the programs that are going to sink us if we sit by and say we have to have 18.5% and that is all on the revenue side, and what are we going to do about the exploding cost of the programs? i think we have solved it in a pretty reasonable manner. if you want to just say let this one go out there, we will fix it some day, we cannot fix medicare it -- medicare in the

last 21 months. there is no positive evidence that any of these numbers are absolutely right. they are right, they are in the range, and we will survive with 21%, i am sure. >> you also had two new tax structures in your proposal, one was what you described as the debt reduction sales tax, or most people would consider to be the value-added tax. the other was the tax on sugar to drinks, beverages. did you do an analysis about the cost of those two new tax structures in the implementation -- on our economy and what that might mean? >> you are right that we did have the debt reduction sales tax -- we did not call it vat, but it was analogous to that. the senator and i and members of the group all believed that it would be sensible for the united states to move part of its tax burden of the income tax

and onto a broad base consumption tax. but this is not the moment to do that. we realize that, and eventually took it out, though we still believe in it. wheat revamp our income tax proposals to make it part of the lost revenue. the sugar drinks, that is not going to change the economy, whether at the margins it discourages people from drinking too much soda. i don't know, but we had a reason for doing it. >> we did not look at the economic significance of it. i understand sometimes you are just outvoted and you have to do things that are not necessarily the greatest. >> i get that park. [laughter] >> thank you very much, i yield back.

>> the gentleman yield back. senator kerrey for massachusetts. >> first of all, i want to thank each of you for your extraordinary service in this effort, which is important, and over the years. we are appreciative to this contribution to the dialogue and i hope it will be a contribution to more than a dialogue but to results when submitted. i just want to spend a few moments on the context that brings us here. administrator bowles, you open up with a comment that caught my attention, two comments. he said this is the most predictable economic crisis in history that we are looking at coming at us. even as you paid in the minimum figure of four trillion, which is what you think we ought to do, but then you said you are worried we are going to fail.

i want you to speak to that for a moment. >> you all have done a great job of stopping the leaks coming out of your committee for an extended period of time. but over recent days, i have been able to put together some of the proposals that you all are considering. i have also listened to some of the back-and-forth that has been in the press, and i have heard people talk about simply settling for $1.20 trillion worth of deficit reduction, maybe 1.5. doing it across the board, which is never the smart way to make any kind of -- to control

any of your budgets in any way, shape, form, or fashion. i have even heard talk that if you end up doing 600 out of defense and 600 out of non- defense, that the day after the sequestered takes place, you will have people in the house and senate be working to get around the sequestered. i think that would be disastrous. i think people would look at this country and say, you guys cannot govern. i think people would look at it and say you know what, they are really not going to stand up to their long-term fiscal problems and this is not going to be a powerful country in the future, and they would think that we were on our way to becoming a second-rate power. i think it would be a disaster. >> i want to build on that a little bit. we all know the figure we should hit in order to stabilize the debt, which is the mission -- ought to be the mission of

the congress, four dollars trillion. -- $4what is the impact in the marketplace? what would the impact be on discounting our debt, a write- down if we hit 1.2 or 1.5. are we going to be back here almost immediately with the same issue sitting on the table? >> you could lose 1.2 to to 1.5 by an increase in interest rates back to the normal rate, but you would not be accomplishing very much if you did that. plus, the effect it would have on how people would look at this country would really be devastating. i can tell you when we went through this whole debt default fiasco before august, i can tell you globally, countries lost a lot of respect for america and they lost confidence in us that we would really stand

up and address our long-term problems. >> pete, i am sorry that al had to leave, we had the great pleasure of working together on a number of issues. i trust your judgment, and while we are not wearing partisan hats here, hopefully, you are republican, and i would like you to share with us your perception as a longtime legislator, when, in your memory, has a committee in congress ever had the right to put together a proposal that would be voted on by expedited procedure at both houses of congress with 51 vote majority without amendment? >> the answer is never. i will tell you, when we passed

effectively in the senate a bill that created the budget committee, it was the impoundment and budget act, as you recall. it was to be authorized the authority of the president to impound and at the same time to create a budget committee. senator robert byrd, the expert extraordinary on the senate, spent weeks on end trying to figure out a way that you could assure the passage of bills that pertains to the budget and not destroy the filibuster rule. in the end, he quietly abn and -- he quietly gave been and -- he quietly gave in and the budget act, if you go look at it, if you read it, and do what i did, i decided that it meant that i could take a reconciliation bill to the core of the senate and it could not be filibustered. i competed with robert byrd

because his own riding said he had found a way without changing rules of the senate to get around filibuster and give authority to a committee. so we gave the budget committee and the senate the authority to act without a filibuster, but nothing as powerful as this committee. >> what would be the implication -- director rivlin, you have headed up the cbo and the omb as well. what would be the implications in your mind of the united states of america not meeting with every -- everybody understands is the financial challenge facing us, stabilizing the debt and beginning a long term fiscal path. how would the world view this, given the fragility of europe right now and their efforts on greece, italy, spain, etc.? >> i think it could be devastating.

i agree with erskine, it would be even stronger. we could face along period of stagnant growth, another recession which would be worse than the one we are slowly climbing out of. it is very hard to predict when this might happen or what the courts might be, but certainly in the last few months, we have seen dramatically in europe that sovereign debts of a quite solid seeming countries can go down very fast, and that could happen to us, and we could just lose the confidence of our trading partners and ourselves. i think the problem is, if we are seen by our own citizens as not being able to face up to problems and solve them, we are in deep trouble. >> importantly, i think it has been put on the table here clearly today, and i am trying

to reiterate this -- it is possible to put revenue on the table to tune of a trillion dollars plus with tax reform, is it not? you don't have to raise tax rates. in fact, you can do the tax reform with specific instructions to the tax committees to hold the rates down, lower the rates, get a lower range on the base, correct? >> right. >> we actually went out of our way to get some experts together, the best experts in this town and ask them that that section 404 give that kind of authority that you just alluded to that committees perform the following and reported back, and that bill would carry with it in the senate the same prerogatives that the original bill carried

when it was created. >> you and i met and talked about your concept with respect to health reform, and i appreciate the contribution of it, and i have been trying to work through how we might be able to do some of those things. those initiatives about how you guarantee the coordination of the lowest health care plan and still get coverage in certain areas. i don't want to get stuck on that for the moment. i want to deal with the bigger issue here. i assume all of you would agree that you can do structural reforms in medicare and entitlements that is not necessarily just the premium support approach, is that accurate? >> certainly, there are several approaches. we like that one. >> for instance, the age thing that senator portman asked about, that is structural reform, isn't it? >> i actually would not think of raising the age and structural reform.

>> give us some thoughts about structural reform that you think would conceivably alter it, whether dual eligible, part a, part b. or their other components? or how about this, that he began to move the entire system of a fee-for-service were possible where it works, if you move into a value based payments system. >> yes, and that is roughly what we are proposing. >> senator kerry, i have a lot of opinions about health care. i think the current system doesn't make any sense to pay twice as much as any other developed country for health care and have our results ranks somewhere between 25th and 50th. we have 50 million people roughly who don't have health care insurance. i just ran the public health

care system in north carolina reports to the president of the university. those people get health care, but they get it at the emergency room at 5to seven times the cost of going to the doctor's office. it just gets shifted in the form of higher taxes. we have to have real structural reform in health care. i believe all people ought to have health care, but i don't think anybody should get on the government's or the taxpayers checkbook for a cadillac plan. i don't think anybody ought to get first dollar coverage. we ought to make sure that people have skin in the game. if you are going to have everybody have coverage, then you have to have her body have a medical home. then you have to make sure that educational institutions like mine are producing more primary-care doctors and war nurse practitioners and more physicians assistants and not

so many specialists. i think if you want everybody to have prescription drugs, and i don't know why in the world you would not have medicare negotiate with the drug companies for prescription drugs that the taxpayers are going to pay for, and i don't know why anyone who is getting drugs from the taxpayers ought not to have generic drugs. if you don't think that hospitals and doctors practice -- we have to have some kind of real tort reform. we have to go to paying for quality, not quantity. at the end of the day, nobody likes this, but without talking about death panels and the kind of crazy stuff, you are going to have to do something about it. those things have to be done if you are going to address health care. >> the co-chair recognizes the gentleman from pennsylvania.

senator toomey. >> i want to add my voice in thanks to the folks who have come here today for the work you have done. that may touch on a couple of the issues and develop a few a little bit further if i could. we all know as a given that the federal revenue is ultimately a function of our economy, but i think it is worth noting, and i think you will all agree that the growth of federal revenue is related to the growth of the economy, but in fact, federal revenue will grow faster as long as the economy is growing, than the growth of the economy. since dr. rivlin is the professional economist on the panel, i wonder if you just confirm that as a general rule, if we have strong economic growth, we will have even faster federal revenue growth. >> that used to be true, senator, before we indexed the

tax system. it is much less true now. if you have strong growth, federal revenue will go up a little faster than the economy, not much. >> so we could have a discussion about how much that is, but even now there is some additional growth, faster than gdp growth. one of the things that came out from our discussion with cto -- a wet cbo -- with cbo about this is that one-tenth of 1% of additional gdp growth on average, over 10 years, they estimate results in about $300 billion of additional revenue to the government. this is not perfectly linear, and i understand that, but very roughly, if that were to be roughly true, less than half of 1% of greater average economic growth would result in about 1.2 trillion dollars. that is the statutory goals here. i am not suggesting that is an alternative, but i think it underscores how important that whatever we do attempt to

increase it -- to create a internment to maximize growth. -- to create an environment to maximize growth. the most constructive thing we can do to mechanize it -- maximize economic growth is major reform of both the corporate and individual tax code. i don't think there is any dispute about that, but i wanted to drill down a little bit. for instance, there are many approaches one could take. for sake of argument, if we were to reduce the value of all the deductions that are currently available to individuals and we had an equivalent reduction in rates for the sake of argument, everybody agrees that would be very pro-growth, is that right? is that the consensus on that? i am understanding from both mr. bowles and senator simpson was that when you folks looked at this exercise are reducing -- this exercise of reducing deductions and credits and write-offs, lowering rates, you did it with roughly a 10 to one ratio.

for every dollar that was dedicated to lowering rates, there was a dollar dedicated to the deficit. 10-one, 11-one, that was about the ratio. do you recommend that we take an approach like that on the individual side where we would do that kind of simplification, lowering rates and have a ratio comparable to that? >> i think you will run into some of the problems that senator baucus brought up. that is why we presented two options. you go with the zero plan and get rid of all the tax expenditures, then you do create enough resources that you can use only 8% of the resources and still generate a trillion dollars worth of additional revenue that could go to reduce the deficit. however, if you are going to go back and not get rid of all these tax expenditures but keep some of them, like some of the democrats will want to keep the

earned income tax credit, the child tax credit, some of you may want to keep -- go to a credit for mortgage -- to help people with their mortgage debt. some might want to go to a credit for charitable contributions. anything you keep gives you a smaller pie to work with. you will still come up with a trillion dollars of deficit reduction but that one to 10 ratio will not work anymore. >> does everybody on the panel agreed that if any package were to include net tax revenue, it ought to come in the context of reform that actually lowers marginal rates? >> yes. >> let me move over to health care for just a second. i am glad that there was a consensus. i think it was unanimous, that's our health care project healthcare is driving the debt

crisis that we have. has been our -- my view that in fact our medicare plan essentially drives the entire health care sector, and while there is obviously a significant private sector component, to a large degree, it is the reaction to an ax in the context of what medicare does, so medicare is the real driver of the entire health care picture. you agree with that? >> yes. >> yes. there are instances in which medicare has actually done significant reform and the private sector has followed. >> i agree with part of it. i am not sure you said only, but medicare is one of the drivers of our deficit problem. it is not the only driver. i think it is the number one problem. >> i meant to say the primary driver. senator kerry talked about structural reform.

in my view, meaningful structural reform means getting away from -- because we use this -- getting away from fee- for-service, because that is the heart of the design. because we use this terminology and assume that everyone knows it, i will take a crack at what is described as fee-for-service. tell me if i'd characterize it right. we have a committee in washington that specifies the price it will pay for every conceivable medical procedure, the circumstances under which it will pay, the people were -- who are permitted to performance, in which venue they are allowed to performance, and it is a -- to perform at, and is saying completely government control mechanism, which also does not account for when the outcome is successful or not and whether the procedure needs to be repeated. is that a fair characterization of fee-for-service? >> i think what i said earlier in answer to senator kerry was that i think we are going to have to move from paying for quantity to paying for quality. i think you are saying something

very similar. >> i am. at the heart of this, this necessarily creates all kinds of inefficiencies, miss allocations, and the solution -- misallocations, perverse incentives, and the solution has to be to get away from this. by last question for everybody, are all of you confident -- in- line >> before you proceed, i did want to make an observation. we recognize that medicare has very significant problems of the type you are alluding to. that is why we are here suggesting that it be changed. at the same time, we have explained why we said that we don't move so quickly with getting rid of one and establishing the other that we lose both. or lose all reform. >> one of the things that concerns me is that as long as we leave a significant fee-for- service component in place, i worry whether the reforms are capable of defeating the mechanism and the misallocation

and the perverse effects of that fee-for-service. -- do you think it is possible that the plan that would -- to devise a plan that would transition away from fee-for-service that is some sort of premium support model, that is designed to ensure that the most vulnerable people have the coverage that they need? >> for the time being and for the foreseeable future, it seems to me that you cannot do that. you have to go with some transition. or you would not get the other done. that was the question where the -- whether you can get it done. i am not an expert on medicare. that is why i do not answer some of your questions. what i am saying practically, i don't think he could be done now under this circumstance. >> i am not suggesting that so much, but i appreciate the response. dr. rivlin? >> well, i agree with the

senator. i think the idea, we believe that actually on a well- designed -- a competition on a well-designed exchange between comprehensive health plans, particularly capitated plans, they would win out in a fair competition. there are parts of the country, especially rural parts of the country, where it probably is not feasible right now to do that, and that is why we think there ought to be a transition, and that it is much less scary for seniors to say if you like what you've got, you can stay with it, but you are going to be offered something which is likely better. >> i would say you look at some of the policies in the -- pilot projects in the affordable health care act, the have some good examples in their of

experiments going on today to do just what you are talking about. >> thank you all very much. >> the gentleman yield back. the chair recognizes the gentleman from maryland. congressman van hollen. >> thank you, mr. chairman. i want to join my colleagues in thanking all of you for your terrific service to our country in many different capacities. mr. bowles, thank you for recognizing that actions of the kind already taken to date, including passage of the budget control act, which is already achieve significant savings of close to a trillion dollars in discretionary funds, which is not far from the target that all of you set in your work. the major difference being it actually had a higher part of that coming from defense cuts, is that not the case? >> we actually divided hours -- ours between security and on security.

-- security and non-security. >> half of that is $600 billion. i think the figures will show that your proposal to of more -- your proposal took more than has been taken to date from the defense side of the equation. many of us view your approach here is balanced approach is, balanced remarks. i want to put the discretionary pieces side, because we have a -- we have come close to achieving your target. in simpson-bowles, as you mentioned, you had about $500 billion gross cuts in medicare and medicaid. you actually took some savings out of that. net it was around four hundred billion dollars. on the revenue, i just want people to understand, because what you have an older plants -- what you had in both your plans was in genuine joint tax committee storable revenue. your baseline assumes as part of your deficit projections that we would have about $800 billion, which is equivalent to

about the amount of money that would be generated in allowing the rates for the folks at the very top to lapse, correct? >> that is correct. >> on top of that, you had proposals for tax reform to generate another $1.20 trillion. >> that is exactly right. >> again, on the budget committee, what we call the current policy baseline, compared to cbo, that is about $2.10 trillion tax cut compared to current law. excuse me, revenue increase compared to current law tax break. looking at your testimony, dr. rivlin, you comment about the same place, about $2.2 billion. -- you come in at about the same place, about $2.2 trillion.

let me just ask one other question with respect to tax reform. i take it from looking at both to reports that you would want tax reform to be done in a way that maintains at least the current productivity of the tax -- current progressivity of the tax code, is that correct? >> yes. >> hours a slightly more progressive. -- ours is slightly more progressive. >> you both in written testimony suggested we might want to do a two-step process. a down payment and then something else. it specifically say as part of that downpayment you would include about four hundred $50 billion of what you call tax -- $450 billion of what you call tax expenditure savings. i assume there for that you see that as something you could do for deficit reduction purposes, not necessarily at the same time as tax reform, and if i look at the one she picked out, you think they could be what we call rifle shots, is that right? >> right, but it should be consistent with our notion that you have a tax reform idea, you move some of it forward.

>> on net, your tax reform ideas would generate $2.20 trillion. on the current policy baseline. let me talk about jobs and the economy, because the congressional budget office has said that about all little over one-third of our current deficit today is a result of the fact that we have a very weak economy. we are not operating at full potential. i think all of us agree we need to get the economy moving again. dr. rivlin, you pointed out, and senator domenici had about $180 billion of payroll tax relief. -- $680 billion of payroll tax relief. i think he said the other day you would go bigger than the president does the job plan. do you believe that something like that is necessary at this time? >> yes, i think we are in danger of slipping into stagnation and we should do something about it.

>> mr. bowles, would you agree that it would be a bad idea this coming year to have every working american see an increase in their payroll tax relative to last year? >> on the payroll tax that was in the president's proposal, i think it was about $240 billion, and it is hard for me as a fiscal conservative to say that i could see support a -- to say this, but i could support a continuation of a payroll tax deduction for another year for employees. it is very hard for me to understand how an approximately $600 deduction for the employer on a temporary basis is going to be enough to get them to hire a full-time, permanent, $30,000 a year employee. i don't think i would support the payroll tax deduction for

the employer. i could see supporting it for the employee if we could pay for it. >> thank you. >> i would not argue his suggestion as i see it, it is still alive. what he is talking about is certainly better than nothing. >> thank you, senator domenici. on health care, doppler project -- on health care, dr. rivlin, you testified many times that you thought the affordable care act introduced a number of important innovations. i agree with you that we need to do more in terms of modernizing the medicare system to focus more on the value of care and quality of care -- quality of care versus the quality of care. -- the quantity of care versus the quality of care. i do have a question with

respect to your version of the most recent premium support plan. that is, if you are confident in the market forces driving down the prices, and if your argument is that medicare is driving those market forces, then why would you need a fail- safe mechanism? why would you need to say if you don't achieve the goal we want in savings, you have to have gdp plus one, and if it is not keeping track with the market, isn't that just a cost transfer to medicare beneficiaries? >> i think we are not absolutely certain how the markets will work. we have seen even in the limited market that is medicare a bandage that in some places they -- medicare advantage that in some places they work well and come in under the fee-for- service, and in other places they do not. we think this is a much more robust plan and medicare

advantage. -- van medicare advantage. -- than medicare advantage. the reason you want the fail- safe is so the congress will absolutely know what they are going to spend going forward on medicare. it is not going to grow faster than this. it is a defined contribution. we think that is very useful, and ask for the cost shifting, -- and as for the cost shifting, there might be some cost shifting, but then you could arrange it so that this cannot -- so that it is not cost shifting on to lower income people, it is means tested as we were saying before. it is cost shifting onto people who can better afford it. >> again, if we are confident that the market forces were going to work the way intended, then i don't think there would be a need for a backup. i do know that members of congress, folks on the federal employees health benefit plan,

for example, never planned bid, -- different plans bid, and there is a defined support mechanism that is set in law. 28%. i am not sure why it would be proposing something different for medicare beneficiaries to let me close by saying we asked cbo to take a look at some of these ideas, including one -- said competition among the managed care plans, and another one where we threw in the rate for premium support. it was not the second lowest bidder, but it was along the lines of marketplaces. just having competition among the managed care plans, it was about $9 billion between 214 and 2021. -- 2014 and 2021. adding in this other mechanism achieved up to a total of about $25 billion. it is critics clear from these numbers, we are going to need to do other things.

this is not a panacea, at least according to cbo, for dealing with the medicare challenge. we need to look at a lot of these other innovative ideas that are out there, including some of the things that have been talked about today. thank you, mr. chairman. >> the gentleman yields back. all time for member questions has concluded. senator simpson did mention, mr. bowles, that you had something you might want to present without objection. i would certainly yield you a couple of minutes if you have something else to present to the committee. >> i can do this very quickly. i tried to think if i were sitting in your shoes or i was the go-between, as i was in what became the simpson-bowles plan, if it was possible for you all to get to the $3.9 trillion deficit reduction, given where

your positions are today. i think it is. i think you can get this done. i would just go through the arithmetic briefly. you have to flesh out the policies, but if you look at where i understand the two sides now stand, and this is just from listening, which is what you have to do if you are the guy in the middle. the proposals for discretionary spending, these are all above the $900 billion and the $400 billion that was in the continuing resolution. this is in addition to the $1.3 trillion worth of spending cuts that have already been done. you all are between $250 billion and $400 billion of cuts on discretionary. so i assumed we could reach a compromise of an additional $300 billion on discretionary spending cut. on health care, you are

somewhere betw$5lion of additiol health care cuts. i assumed that we could get to0e by increases in the eligibility age for medicare that i discussed with senator kerry when he was talking to me. that would take you to $600 billion and it would come -- not on the provider side, which would balance that out. on other mandatary cuts, somewhere between $250 billion and $400 billion. i settled on $300 billion there, and we had enough cuts to get you to $300 billion on the other mandatory. interest will fall out at approximately $400 billion. the savings there. you agreed on cpi of approximately $200 billion.

the total is $1.8 billion. that left me a little short. that gets me to revenue. on revenue, i took the number that the speaker of the house, i had read, had actually agreed to and i was able to generate $800 billion through revenue from the speaker's recommendation. if you did that without dynamic scoring -- and on dynamic scoring, i am on the reagan plan, trust and verify, as we talked about earlier. if that actually comes, great, you will use it to reduce rates or reduce the deficit. but if you add the $800 billion there, that is slightly more progressive after you have done it than before. then i think you have something you might be able to work with the democrats on. that would give you an additional total of $2.6

trillion added to the $1.3 trillion you have already done. that's $3.9 trillion of deficit reduction. i think that would create a lot of excitement that people in the country and i think it would go a long way toward building of confidence that we really could stand up to our problems. >> thank you, mr. bowles. you certainly created some excitement with the press, i think. i would say don't necessarily believe everything you read and hear about the proceedings of this committee. i do want to thank every single member of the panel on behalf of the joint select committee for deficit reduction, not just for your presence here today away from your businesses and families, but more important, everything have lent to the body -- the entirety of what to have lent to the body -- of what you have lent to the body of

work to try to address a very real crisis that we face. i do thank you for that. your testimony was certainly sobering and helpful, not the least of which is timely. i want to remind all members to have three business days to submit questions for the record and i would ask our witnesses to respond promptly to the questions. member should submit their questions by the close of business on thursday, november 3, with no other business before the committee, without objection, the joint committee stands adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> here are some of the things we are covering this morning on our other networks. in an hour on c-span2, in the british house of commons, prime minister david cameron will take questions on the european debt problems and britain's role in the eu. live coverage from london at 8:00 a.m. eastern. later on c-span,3 the head of the transportation security administration, it will testify about aviation security. live coverage from the homeland security committee of the senate beginning at 9:30 a.m. eastern on c-span3. >> every week in an american history tv, the people and events that document the american store. this week american artifacts, the white house curator on the decorative art rarely seen outside the white house now in

the smithsonian gallery. from the civil war, historical fiction. it is written a prequel and a sequel to his father's novel. the cold water formed president committee -- the goldwater for president committee follows him. look for the complete we can schedule at our website. or for our schedule in your in box, click the c-span alert button. >> coming up and a few moments, your calls, e-mails, and today's news live on "washington journal." the house is back in this morning for members' speeches. later, the chamber will pick up a couple of measures to reduce problems for small businesses. lighthouse coverage on c-span. coming up in 45 minutes, we will get an update on the work of the joint deficit-reduction committee. congressman bill