he is the guy that put out an actual plan to reduce the deficit and set the tone for the debate. we were talking earlier, we might want to revisit lessons learned, what you can tell us about where this town is moving. let me dispose of the deficit >> our team put together a program, $1.50 trillion in savings, a very serious effort. it was designed with the effort of not -- with the idea of not offending democrats. the basic spending package would put together put revenue on the table, but through base broadening and getting lower

rates. that was pretty much rejected out of hand. like jim clark board said on sunday, the democrats have yet to coalesce around a plan. it is challenging to negotiate with the other side when they themselves are still negotiating with themselves. so we don't have much time left. these are statutory deadlines that cannot move. if the full $1.50 trillion agreement is out of reach, then hopefully we will get a plan b, which is something shy of that, to mitigate the sequestered. no matter what happens, we will put out another plan. we will budget in march, meaning the house of representatives. we will budget and showed the country specifically and exactly how we will take on this fiscal problem. not just postponed it, we will solve it. we will put our fiscal roadmap to replace the sequestered, but

also keep the debt from getting up to these levels and reform these entitlements and programs in the tax code. we will approach -- propose again like we did in april a plan to do that. >> as you just noted, you did that in april. you put out a plan that was detailed and controversial. you still have the scars to show for that, i assume. i am just curious, in the months since then, seven months since that point, what have you learned about the viability of a serious plan about what the political traffic will bear, and whether you have brought anybody along the way. >> i started with this when i became the head of the budget committee in 2007. i set forth to write a plan to trim the desk -- the debt crisis. took about a year of running numbers with cbo and others to put together the road map for

america's future. i had seven co-sponsors. congress and reintroduced it and had 13 co-sponsors. we got every republican but for to vote for it in the house. all republicans but five voted for it in the senate. largely because of the infusion of energy from our new freshmen , less career people, we dramatically moved the center of gravity on this issue, especially within our own caucus. what i get out of this, from spending time with erskine and allen on that commission, spending time with alice rivlin, to fix this problem in the making, it is erskine bowles and alice rivlin tight democrats who we agree with on the elements of tax reform, on the elements of and taught and tax reform, on the basic principles. the problem is, those are not

the kind of democrats running the white house or in charge of the house and senate. what that means is we might have to wait for an election, but if the election goes the way we wanted to go, i see an opportunity to work with moderate democrats to form a center-right coalition where can once and for all fix this problem. we beat a lot of the blue dog democrats, but there are some jim cooper types still there. so i see some of these democrats there. >> be more specific. when ronald reagan came into office and he had to pass a budget that was also controversial, he could not do it with republican votes. he found roughly 60 -- is there a 60-vote caucus? >> no, but we don't need that. we still pretty good about the senate. you can never take these things for granted, but what i am

saying is, i think there are intellectuals in the democratic party who are the centrist talks. they more agree with us on the nature of these things and then the progressives, but the progressive run the party, and if they are in the majority, they call the shots. if we can get the majority, then what we need to do is work with those centrist democrats to put together a coalition to fix this. >> just to play devil's advocate here, if you want to draw those kinds of people into this exercise, don't you have to make some move in their direction on revenues? >> is it really feasible to think in the political system have today that this is a problem that can be solved with no revenues? >> you saw pat solis, a great conservative senator from pennsylvania, show how we would do that with his offer in the super committee, which has --

which is broaden the base, lower rates for groat's, and on a static basis, you can still get more revenues. the neat thing about our tax code is the tax base is quite narrow. by broadening the tax base and hitting new rates that our program, you can actually deal with revenues that way. but let's not take our eye off the ball, which is spending is the problem. revenues still climb as a percentage of gdp, but nowhere near that. we have to deal with the spending problem. what i have learned in my 13 years in congress is if you first go to the revenue fix, what it does is this place the need to deal with spending. let's get spending under control. let's get fundamental tax reform that is pro-growth. our budget calls for a top tax rate of 25% for businesses.

it is internationally competitive and is pro-growth and we can get through pro- growth tax policies of broader, more reliable income stream to meet this government which we are getting back down to 20%. we think that is the way to go. >> is that the size of government that america is going to be ready for? >> it is what we have had for the last 20 years. >> summer happy with that and some are not. is there a consensus? >> the average is 23%. >> are you would take the government back to that point. >> i don't look at some magic number. what matters most is economic freedom. do we have an entrepreneurial economy and our entitlements under control? open ended, defined benefit programs are totally unsustainable because these are

pay-as-you-go programs and we are doubling the amount of retirees in the country. it is a consumer, patient centered system and we have to go to a defined contribution system where we finance the benefits for people who needed the most, the sick and the poor, and finance the benefit much less for the people who need it the least. that is a way to fix this problem, which i believe there are some centrist democrats who believe -- who agree with us on that, and to me that is the secret to fixing this problem. progressives want a government run health care system. they will not agree with us so far on lowering tax rates. they want higher tax rates. they want the top tax rate to go to 50%. in wisconsin, where i come from, nine out of 10 of our businesses file as individuals.

we are going to crank up their tax rate to 50%. overseas, which in wisconsin means lake superior. [laughter] the canadiens are lowering their tax rate to 15% on all their businesses. we have to be competitive. >> let's go to the core of that spending issue you just mentioned, the entitlement program, and specifically to what you did earlier this year. you put on the table a premium support alternative to the current medicare program. you either moved the debate or you have created the campaign ad for every democrat in the country next year. >> that have not shown me pushing an older woman off the cliff in a wheelchair. this is the plan that bill clinton's bipartisan commission recommended in the late 1990's. this is similar to the plan that alice rivlin -- we offered this

plan. i believe there is a center- right coalition in the making. premium support is basically the same thing federal employees and members of congress have. you get a list of guaranteed coverage options, which works like medicare advantage, plans that are pre selected by medicare competing against each other for our business as patients, and then medicare subsidizes are premium based on who we are. doing it that way, according to the actuaries, makes the program solvent and wipes out trillions of unfunded liability and keeps our debt load it is debt levels from getting out of control. it also helps us get at held inflation. that is a longer conversation, but i really think it is the right way to go with reform. the alternative is command and control, price control from this

on license board of 15 bureaucrats that or appointed next year. what the medicare actuary is telling us is that by the end of the decade, medicare will be merged ad rates lower than medicaid. they will start at 60 cents on the dollar and go down to 30 cents on the dollar. it will be unsustainable and the system is going to collapse. we think this makes medicare viable. it applies to 55 and below. we think it is the smartest way to go, and it is an idea that used to have bipartisan support, but now you have more aggressive leadership among the democratic party that is trying to use it as a political issue. >> the president did put on the table last summer in the conversations with speaker boehner the idea of raising the eligibility age for medicare. that is not what you would do, but is that a sign that the back has been broken on this, that

this conversation is no longer a debate but an actual search for a solution? >> the debate has been moving for a long period we could age reduction in our request as well. that does not fix the problem in and of itself. >> the president has done one thing that has been constructive. he has acknowledged that medicare cannot just be fixed with tax increases, but it is going bankrupt. now that we have that acknowledgment, are of the taking the plan -- do you want 15 bureaucrats rationing this program and telling your provide what they can and cannot give you, or do you want to be in control? do we want to support people who needed the most? i like our odds, and the nevada congressional race that was fought over this issue went very

well for us. we cannot duck this issue. i have done over 500 town hall meetings in wisconsin talking about the specific ideas. we beat john kerry, but that is about it. [laughter] not from a big red area, if people see the facts, i think the respond very positively. >> one big picture question and then we will open it up to questions from the audience. when you step back from the picture we have been talking about, i am wondering what you think has really changed in washington. i am thinking about the possibility that maybe you start out with spending but something has happened here, that we are having this conversation about where and when you cut spending, not whether you cut spending. i am not sure that would have been a conversation in this town

10 years ago. has something happened here that is better than the ugly picture that presents itself to the country? >> the problem is from our perspective, we don't have partners on the other side of the aisle who have brought plans to show how they would do things differently. we put out a specific plan that keeps the debt from getting above the 60's of gdp and goes down from there. we never came close to the 90% debt levels. the president gave us a budget that was just a rubber stamp of the baseline. has been over 900 days since the senate passed the budget. in the budget control act, they deem themselves appropriation number so they don't have to do budget next year. they decided for three years now, don't even offer a budget. so our government has not had a budget since the 2009 obama

budget. side.'t have that other the kind of tax increases you would need to close the gap are huge if you go down the be-50 route they were talking about going, 50 percent tax increase and 50% and spending. what i am trying to say is there are moderate democrats who do talk about these things, they are just not in charge. that is the point i am trying to make. i think the fact that they aren't having political problems to not offering a budget speaks to the fact that we are beginning to see rewards. >> a final thought, the art of politics is compromised, and one of the questions democrats raised is whether or not you could deliver a compromise of

any variety, given the makeup of your caucus and the tea party. what is your answer when they raise that? >> it is tough to talk about compromise when they offer nothing in return. it is difficult to see where you are going to compromise when you have nothing in the alternative. we realize the president took a path on his budget. i were thinking at the time was we will put our budget out there and they will follow up and start negotiating. they never ended up doing that. alan simpson i went to the speech with the president where he double down on demagoguery and class warfare and all that, and decided to fight us politically, rather than join us with an alternative budget to actually negotiate and compromise. what we get out of that is, they are very tethered to ideology and if we are going to get a compromise, we will have to win

an election and then include moderate democrats to get one. >> let's open it up to questions or comments. could we get a microphone up there really quickly? >> most corporate reconstructions, ceo's have a burning platform. there is an extra or internal event that causes change. sitting here this morning and listening to the sessions and the ones before, you wonder why external events needs to take place, as we witness the events in europe where there is significant meltdown, i think many of us thought they would model through, but now we doubt they will even be able to muddle through. what external event would shake people on both sides of the

aisle into action? you are kicking the can down the road -- not you, but the government's kicking the can down the road continuously. obama said they were moving the ball but not kicking the ball down the road. what event has to take place? >> with the current government have, it would probably be a real credit crisis. the point we are trying to make with our budget is, let's do this on our own terms. let's do fiscal consolidation and reform on our terms where we have -- that means it is probably an election that is going to have to occur to do it the way i just described it. our hope is that the credit markets see that and give us time to have the election to do this. europe is the big wild card. if we have a real problem and that precipitates a contagion that starts washing up on our

shores, that is the fear we have. our hope is, we go to the country in november 2012 and say here is what we will do if you give us the ability to do it. here is specifically a plan to preempt the debt crisis, to get the economy growing, to make america competitive, and to do it on our own terms, so if we do win that election, i call it the opportunity society, the safety net versus the welfare state unmanaged decline. then we have an affirming election that gives us the ability to implement it and fix it. that is our hope, given that we don't seem to have partners on the other side of the aisle who are sincere in working with us to get the kind of savings we need. it cannot fix this without doing health care. healthcare is the driver of our debt. you have to remember, they put in their health care law.

they are not willing to open up that law. if they are not willing to open up that law, we are going to have to wait until an election to fix this. our hope is that it is an election on our timetable to fix it, and our fear is that the bond market vigilantes' get us in the meantime, and then it gets ugly. >> this is a version of the same question that martin asked, sucks.is that kind of sock even if the change in the white house a year from now and you get six months or so for everyone to get their feedback on the ground -- even if all that happens, that is 18 months from now, and that is bullshit,

i think. 18 months from now, maybe we get something done? >> i agree with you, but we control one-third of government. we don't control the other two- thirds of government. we put out a plan with revenues on the table to get a down payment. our hope is to get a single or a double. it a first down on the football field. our hope is to get a down payment because what i personally think is if we could show the credit markets that the american government is completely dysfunctional, if we can get a $1.50 trillion down payment on the problem, that helps by us the time we need to really fix the problem, but we are not even seeing that. one-third of government is what would control. we don't control the other two- thirds. just leave me to be realistic about it, which is, we are going to have to have the ability to actually pass legislation and

get a president to sign legislation. if we are going to go to the country and say here is what we are going to do to fix the fiscal problem once and for all. i just don't think like in europe, a small austerity moves that move the retirement age in 2026 and trim the edges, that will not work. you need a real bazooka. you need to really fix these programs which are the drivers of our debt. health care and entitlements, and we are posing very specific solutions to do that, which will wipe out the debt problem and get us on the path to growth. >> [unintelligible] >> from my own experience where i come from in wisconsin, people know there is a big problem and they are ready to be talked to like adults, not pandered to like children. when we see elections go against that grain, i am a living testament to the fact that you

can win in a began an evenly divided district. my purpose in putting these ideas out there three congresses ago or to demonstrate that these things are no longer third rails. if you can explain to people why we need to do this now and do it on our own terms versus an ugly credit market debt crisis process, the country will be there with us. we have to communicate this, and we can and we should. i think that is what we are going to do. >> questions, comments? >> you talk about communication. >> hang on a second for the microphone. >> he talked about communication. my question is, in the midst of an election year, a lot of different voices are speaking on behalf of -- how does the message across to be able to

achieve what you are trying to do? >> our thinking on that was, we control the house and that is it, so our actions are the best message we have. we have to act and actually pass legislation defining who will learn what we believe in. our budget is called the path to prosperity, a specific document that shows us all the budget reforms. we feel like our actions will help define us, and that is what we are going to be doing again. we are meeting with all the various people running for president, and each one of these people are pretty much by and large on board with the direction we are going. we are as unified as we have ever been. the budget bill is usually the toughest bill to pass. danny hastert said the hardest will he ever had to pass was the deficit reduction act. the hardest thing he did in eight years.

we just cut $6.20 trillion over 10 years, and it was one of the easiest things we have passed this year. we have 89 of these freshmen who came for a cause and not a career, and that has really helped us a lot. we are poised to do this and we are just going to go to the country and let them make the decision, the way we see it. >> congressman, thank you for taking the time. we appreciate it. [applause] >> defense secretary leon panetta appeared before the senate armed services committee tuesday to talk about iraqi security and the plan to withdraw u.s. combat forces by the end of the year. the committee's top republican, john mccain, question secretary panetta about the white house's iraq strategy. >> the fact is, if we had given

iraqis the number in the mission that we wanted long ago, if we had done what condoleezza rice, the secretary of state, had said, "everybody believed it would be better if there were some kind of residual force. there was an expectation we would negotiate something like residual force." the fact is there were not given the number and mention that the residual the united states troops would be there for. as general then she just mentioned, it cascaded down over months, mr. secretary, with 20,000 , 15,000, 13,000, and each time there was a different number given. it would be hard for me -- that was what they told us. maybe they were not telling us the truth, mr. secretary, but we have a relationship with them

that goes back many, many years, and they have always told us the truth. the truth is that this administration was committed to the complete withdrawal of u.s. troops from iraq, and that made it happen. >> senator mccain, that is just simply not true. i guess you can believe that, and i respect your beliefs, but that is your opinion. but that is not how it happened. >> it is how it happened. >> this is about negotiating with a sovereign country, an independent country. this is about their needs. this is not about us telling them what we are going to do for them or what they are going to have to do. this is about their country making the decision as to what is necessary here. in addition to that, once they made this decision they were not going to provide any immunity or any level of force that would have there, and this is a lot different than other countries,

frankly, senator. this is a country where you could very well be engaging in combat operations. if you are going to engage in those kind of operations, you absolutely have to have immunities'. those amenities have to be granted by an agreement. i was not about to have our troops go there without agreement. >> for months we did not give them the numbers and mission that was necessary in order for us to remain there, and again, your version of history and mine are very different, but the way it has turned out is the way, unfortunately, many of us predicted that it would. in the view of every military expert that i know, we are now at greater risk than we were if we have had a residual force there. by the way, i understand the american people's approval of withdrawing from iraq. we have not made the case as to what is at stake here and what the consequences of our failure

are. i thank you, mr. chairman. >> lots of talk about spending and the deficit on tomorrow "mornings "washington journal -- on tomorrow morning's "washington journal." in our magazine spotlight series, yuval levin about the political philosophy underpinning liberalism. >> for those who say that we are rushing this issue of civil rights, i say to them, we are 172 years late. for those who say that this civil rights program is an infringement on states rights, i say this. the time has arrived in america

for the democratic party to get out of the shadows of state's rights and to what forthrightly into the great sunshine of human rights. >> hubert humphrey spoke those words nearly 20 years before championing the 1964 civil rights bill into law. the two-term mayor of minneapolis and long term senator was vice-president under lyndon johnson, and later ran for president in 1968 and lost. we will look in his influence on american politics this week on the c-span series, "the contenders." that is life friday at 8:00 p.m. eastern. >> the supreme court has said that it will consider legal challenges for the federal health-care law and made the decision to hear 5.5 hours of oral argument in the case. c-span has requested that our cameras be permitted to broadcast the proceedings live, something the high court has never allowed.

you can read c-span letter to chief justice john roberts on our website, c-span.org. >> at the wall street journal's annual ceo council today, washington officials were interviewed about the economy and the federal budget. we will hear from house majority leader eric cantor and treasury secretary tim geithner. this is an hour in 10 minutes. -- an hour and 10 minutes. [applause] >> thank you very much. we are a week away from another very important fiscal deadline. it has been a year of important deadlines. we had a deadline of the budget resolution that was missed. we had the debt ceiling that was just about it achieved. i know you do not want to talk about the negotiations for the super committee deadlines.

can you assure people what they are worried about? there is a lack of political leadership of in washington. we have seen with the fiasco that washington somehow is so dysfunctional that it is not capable of rising to the fiscal challenge. can you reassure people that is not true? >> i will attempt to. ofre coming in on the heels a ballot snafu. [laughter] thank you for having us and the opportunity to engage in a dialogue. i would say this. first of all, relating what may happen next week or perhaps toward the end of the year

relative to the need to increase the credit limit of the country, we're not going to see a repeat of that which occurred in august. we provided a backstop in case they did not act in time. it is a sequestered that takes effect at the end of the year. we will not see any kind of a potential default moment that could have occurred. i think we are better set because of that. in terms of outcomes, none of us want to see that. that having been said, the question about washington leadership and whether we can muster the will to come together to produce results, i

remain hopeful. i do. i remain hopeful we will get there. without getting into the details, i did serve on the biden-talks, and i understand the pressure today are on a round this issue. i do not feel it is helpful for me to get into specifics. what you have going on in washington, there is certainly a divide. i know you have heard from our budget chairmen about our position as to what we feel should be the big deal. we assumed majority in january with 63 new seats, now 88 really dedicated to try to fix reform. what is on the case is jobs and

the economy. it is on a dual track. we really want to go about making sure the government stop spending money it does not have and do some justice in the jobs. we put on the table that so- called big a deal. if you include the war finding savings that everyone is counting, our savings are over $6 trillion over a 10-year timeframe. what is important about our big deal versus those being discussed by the other side is that we really demonstrate that we fixed the problem.

the deficit is being driven by this health care entitlement. simple facts help me. everyday 10,000 people turned 65 and become eligible for medicare. they receive their support from premiums and taxes. those revenue streams only cover over 50% of the program. that is your problem. every day you are at least 50% in hole. you cannot tax your way or grow your way out of that. if you have to change the architecture of the plan. that is why we did that. our commitment is to that. we have said that we will put everything forward, revenues included, if we fix the problem. everything for word, revenues

included, if we fix the problem -- forward, revenues included, if we fix the problem. we have not gotten anywhere in terms of getting the other side to join us and fixing the problem. that is a divide. i do think there is plenty of room non-committal to try to set the differences aside -- of room to try to set the differences aside. >> you took control of the house of representatives a few years ago. people felt the first few years of the obama at a myster administration was tough. have you managed to change

either legislation or the environment in way that is more friendly toward business and investment? >> we are very excited. expectations remain high. we are almost a minority in this town. we are one of three pieces in the puzzle versus the white house and the democratic controlled senate. we can stop injuries legislation to business from getting across. there is no more mention of a cap and trade architecture or of another obamacare. there is no mention of another bill that is far reaching and dangerous as dodd/frank because we are there. our challenge is to try to stop

the detrimental things we thought were going on with what leverage we have a. the leverage comes to us through the spending process. the old the leverage is tuesday we will shut it down. we do not want to shut the government down. it is trying to go about saying how we can use our leverage in the most effective way, gaining support to give the changes we need for business in this country. >> there has been an achievement on trade. you get these. is there a prospect for further liberalization of trade? there talk about improving this. do you have some specific plans? >> we're very excited about the accomplishments of the trade deals that have passed. look. that was five years and counting. it is a much bigger deal than

what was reported because of the wall that was hit in town five years ago. there is the unwillingness to get around some of the problems that labor had had with the columombia bill. we can do things. we're going to pass a bill that has to do with the withholding requirement for government contractors. it affect small businesses as much as any. it is something that the president -- we have it in hours. these are the type of things we need to focus on. we can come together. we can resume some type of forward strategy on manufacturing in country. it offers potential. >> if you return the victory and your colleagues are in the

senate, let's leave aside the fiscal picture, what measures particularly would you like to see passed quickly that would create a more business friendly environment? >> first of has to be lowering our corporate rates. this mind-set that it is not just pay more. it is about being competitive. i do not have to tell those of you in the helm of multinational corporations that it has to become justified given our tax code. i think that is probably first and foremost. we then are presented with the problem if you are going to do it on the business side, what you do with the passwords? most comes from small business.

that present a very big problem. we can easily achieve that if we all put our minds to it without putting in these preconditions as to additional revenues that are needed. both sides of the aisle will say we need to do this. >> what about immigration reform? this comes up every time. there's a lot of concern. students to come to that state's get education and not forced to leave the country. -- so that students who come to the united states to get education and are not forced to leave this country. many in your party are very hostile to immigration reform. >> paul ryan was here earlier. it was an effort that fred

barnes dubbed it the "young the gguns." the premise was we do not want to be the party of exclusion any more. we want to be a party that can relate to the next generation, it to a much more diverse populace to reflect who america is. we had an agenda from made that says you have got to change the antiquated laws of this country so that america can maintain his place as the statue of liberty to the world. most in america, our families came out of choice. not all. there were some who were forced here. we're all here now and living in a country that most of us believe is a country that can create and provide more opportunity than anywhere else. we want the best and the brightest.

we've got some plans to unveil some changes to the legal immigration system in this country. obviously, what about the legal situation? -- the illegal situation? there is this issue of immigration that has always lacked the decoupling that is needed. you black the law and we did you lack the law enforcement. we lack need to -- ou the law enforcement. our laws need to endorse. we ought to make it easy for them to stay here. the reality is they can often find just as promising

opportunity back in their home country and a venture capital with them. we do not want that. >> can i just move on to the federal reserve? we are in an unusual position. the chair was appointed by a democratic president who seems to be universally ostracized by the republican party. every candidate says they will hang them bernanke from the highest for a stop -- hang seng ben bernanke from the highest rooftop. is that a healthy position for the fed to become such a political football that the chairmanship is in so much in doubt? >> id is not healthy. it is not healthy to over

the fed.e we have concerns about what is lose money. we have expressed that. i am more concerned about putting it in hands of the congress and allowing the process to engage directly what goes on in federal reserve. although we may have differences that we conducted the oversight as much as we can from congress standpoint in a way that is an educated discussion about monetary policy and how it bears on our economy. >> should he be reappointed? >> i have respect for chairman bernanke. when he came to us during the t.a.r.p. days, he said we are at that point where we need to act or it could very well be armageddon.

i do not feel i was in the position to second people who spend their lives doing this. there is no secret as to what bernanke have pursued academically throughout his career as to his policies that he is practicing today. it was out in the open. i do not know if i am prepared to say yes or no. i do have a lot of respect for the man. although many disagree with what appears to be very loose monetary policy, if you look back in the writings prior, it should not be a surprise. >> on foreign policy, the republican debate -- mitt romney said a striking thing about iran. he said if president obama is reelected, iran will have a bomb.

if you elect me, they will not. can iran the stock from getting a bomb that will it take more than mitt romne -- be stopped from getting a bomb? will it take more than mitt romney? but i'll be in trouble for answering this. [unintelligible] we're very concerned about it. we may reach a point of which the time is too late. that is where a lot of the discussion is focus. when is that? where is the point where we will be dealing with a nuclear iran? nobody wants to get there. we are able to intervene and make it so. the question is how, who, and when? >> and if israel decides they

should strike them, with the united states support id? >> israel and the u.s., our interests are very much aligned when it comes to the war we are in. iran has been on the list of the state sponsors for terror more than any other, is a de stabilizer in in the region, and has a lot of influence in that region. my concern is that we in in america are sending the signal that we are willing and able to stand up with our allies. i am worried our allies' main come to a point at which they think -- allies may come to a point where they take it into their own hands. if there is, we have serious

problems. as you know, we work in concert very closely with our ally israel. hopefully, we can see our way forward. >> let's see if there any questions. >> left open it up. can we get a microphone there? >> it would not be a good session if we did not talk about immigration. to give you a view on how serious things have gotten, let me describe to you what we are faced with every day. it is much broader. i just had my leadership training for our company. we could not get one partner from saudi arabia or a tourist visa to get him nine days outside of new york to train

him there. ridiculous. i just spent time in china. the middle class in asia is growing. what do they want after their second car and apartment? they want to travel. we want to create jobs. if you could think of one short term program, all of them would like to come to the u.s. they say you have no idea what it takes to get a tourist visa program. there's the discussion about illegal immigration. it makes a stalemate. right? you'll not find a middle ground. i have had more than and up debate. it is sickening. there are some very good proposals i believe on the table. also in regard to the illegal immigration. it is a big issue. it proposes not to give it away for free. if you are an illegal immigrant,

you can earn the right to become legal. we will i give it to you right away. you have to pass a test of english. that is highly correlated to what economics that is you will get. secondly, if you have to pass a test in our political system. some of you come from countries where you do not know what the right to vote is. right? thirdly, many if you pay taxes, but if you have not, we will charge you with some taxes. did you have to pay to get your status. i believe these things are really good. they are really appealing. i do not understand why on something that this country has been built on, more than any other place, and at me as an immigrant has chosen to come here cannot get around something that fundamental. >> i would just say to you that

this country is built on legal immigration. to say that we at a political stalemate if we try to do this incrementally, i guess i have to disagree. the stalemate is because you want -- we want to do comprehensive. if we can make some progress, what is bipartisan? it is taking areas we can all agree on. most of us on both sides of the aisle agree on trying to do something about the visa lollaw. we can do that. there's no excuse whatsoever. all sides politically, philosophically are in agreement with that. when you get to these other questions about what to do with the illegals, i can tell you one thing. imagining the york going to

deport 50 million people out of this country is ridiculous. you can agree on that. as to the solution, that is when it gets tough. my experience has been the comprehensive notion will collapse under its own weight. let's take the pieces that we can move incrementally. if you have a vision out there. you want to go long term. it is what you can accomplish. as a reporter, you go about executing. i do not disagree with the vision. evidence shows it is very difficult to get comprehensive done. we should be able to do the easy stuff. >> right there. >> hello. this is about tax reform. it does seem that both sides of the aisle more and more are

embracing this idea, which is the idea of lowering the rate in lot of rid a looof a complications. why is it so hard even from both sides of the aisle? it is more than it used to be. >> week is the day while on that answer. i do think -- we could spend a while on that answer. i do think there are preconditions on the outlook of a 10-year time frame. the time spent on this is staggering. the impact of our tax system and code on the flow of capital to the most efficient use is also an enormous. it should not be. the reason why that has happened is because rational people in

competition come to this town to try to exact a little bit of an edge. in my opinion, that is what we're trying to change. if we're able to simplify the code and get rid of a lot of these preferences, all i think can win. transitions' will be tough. if you look at the proposals, whether it was bulls simpson -- bowles-simpson or the gang of six, the idea that we have the revenue target begins the difficult. if you're saying there will be an additional trillion dollars, you take the lessons.

if you were to say lower rates to 25% and turn off all the deductions, and on the political side these are important deductions. on the corporate side, a health- care explosion and others. turn them all off. -- health-care exclusion and others. it turned them all off. you can be your rate down. when he began to play with these and say i do not -- you can begin to play with these and say i do not want to turn them off because it is politically dea difficult. what ends up happening is there is no way to reach a revenue targets without seeing capital up.s rates comes

if your target is 28%, you're talking about doubling capital gains rate. i am a real-estate lawyer by training and trade. that is a huge impedimenta embarrassment. it reduces your return on the back end. it is about lowering the risk. it is an introduction over and above net neutrality and the cap on the growth of that. that is the start of the difficulty. secondly, at the political expediency. we do not want to all turnoff these preferences. i think it is the highest priority to get our economy going again. >> thank you. another question at the back of their. -- a t the back there.

>> what is missing? what is the burning crisis they get everyone's attention? immigration is at a burning crisis. one thing you said earlier, medicare and medicaid are $997 billion this year, predicted to double. what the obama administration is doing will not fix it. we have to have the house is burning down. they do not know what is going on. they are confused. they have too many subjects. the house is burning down because of an " the wall street journal" reported the main

reason the federal debt was downgraded in was because of the uncertainty of the federal government being able to pay for health care. if you were to circle the wagon, maybe in some of having 10. we ought to have -- maybe instead of having 10 points, we should have the house burning down. is it going to take a crisis to get anything tackled? >> think about crises and what that means to different people. students and observers of macro economic trends, people such of yourself is different than most people we represent, small

business people who are really worried about their job. they are really worried about repaying the bank note keeping their business open. we've got that balance open. if you want to know about the urgency right now, it is a lack of optimism and growth and the ability for start-ups to begin to grow again. i think the best illustration is 10,000 people a day and 50% in the hole. you say something like that to people and they say you cannot keep that system. we have taken it upon ourselves to go out there with it. we refused -- we were accused of political suicide. we said let's do it. you are exactly right.

we have to build the case. most people do not pay attention and feel like things in washington may not be as bad as all of the hyperbole says it is. >> we may have to wait until the election when paul ryan was here to have something done. one of the thing he raised is can we wait this long? will a crisis happen between now and then? what would you say our expectation should be? how should we look at the next 12 months? even in a bit of uncertainty, how would you suggest we look at the next 12 months per longer? -- or long hair? >> i am concerned about the type of rhetoric surrounding the political campaigns already. did you think about the

narrative that is going on in selection, to me the narrative is either going to be about fairness, and this inherent divide in the country versus trying to bring us all together. depending on which narrative wins, it will dictate the outcome of the next election. if it is really that you all in this room are so bad for this country and have not pay your fair share and the anger rises toward you and others who are successful and up, that scares me. that is not who we are as a country. in way, and this election is very much asking that existential question pureed do we believe that successful -- question?

do we believe that successful businesses can do good? are successful people socially responsible? does the social responsibility correlate into paying more taxes so that this town can decide where the money is allocated? do we want to count on successful people doing good to promote the opportunity for more people to be successful? that concerns me the most. if the rhetoric get so out of hand, it will be difficult to do something constructive between now and the election. i can tell you we got plenty of things. back to this notion of incrementalism. versus trying to take care of it all. we would all like to take care of the big deal. we have the biggest deal as far

as the deficit is concerned. in terms of tax reform, if it cannot come to an agreement because of difficulties put in place, there are some things that we can do. we can do repatriations and bringing up profits. that would be a job creating effect. we could do that if we put our minds to it. i am hopeful the expectations are that see it and rhetoric that may be different come together. >> do you have some sense of what is inappropriate level of proportion of gdp that should represent total federal spending?

we are around 25 right now. >> if you really want to quantify the divide, that is its. that goes back to this excess into question. what kind of country are we going to predict existential -- existential question. what kind of country are we going to be? we positive the reforms, making our medic cave system defined by benefit. -- we deposited the reforms, making our medicare system defined by the benefit. if we do not want to do that and we want to go about the kind of changes that are being discussed, we have some real figuring to do as to whether we will still be the growth engine.

>> given the demographics and cost of health care, you have to see dividend to reduce the benefits we did you have to significantly -- you have to significantly reduce the benefits. >> we are to put them in the budget. the problem with health care is the out of control health-care costs. we are not saying to reduce benefits. we're saying you have to have comprehensive reform. the president's health-care bill in many eyes has taken us in the wrong direction. we do not see validation by the congressional budget office that the costs are contained through the bill. we believe strongly is about competition and patience centered care, not mandates from

washington describing what kind of coverage you have to have. >> while the recount is going on backstage, we have been given a little grace. we have more time. any other questions for a liter cantor -- for lead cantor? -- for leader cantor? >> you said you're very 1%cerned about the de1the versus the 99%. don't you think i'm not making a deal in the summer you actually have helped those who are making the argument for the 99% and have changed the political dialogue? >> i do not think so.

what was behind the opposition to the proposal on the table during the summer was the fact it was not about taxing you. every proposal put forward by the president has been directed at taxing small business. that is it. that is where the money is. it is not the tax revenue with you. that is the real sense that we need to be about in country. why do we think it is a good idea to impose more tax burden on the small business people that we want to create jobs? if the problem was easily cured

by sam we want to up -- by saying we want to up y ouyour taxes, i think everyone would say fine. if we're going to say tax people more, we're not going to continue to dig that hole. there has never been a willingness on his side of the aisle to fix the problem. ande asking to come back tell us how to fix the problem. in the meantime, do not exacerbate the main crisis, the jobs issue. >> you have been very generous with your time. i greece. is up. -- your grace period is up. thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> thank you very much.

when technology goes down, you are the default position. are you surprised that we' still here with you being secretary? >> i was working very hard to escape. >> you are the guy who did not play politics. you're the washington road kill. you are here. >> do you think i am a political person? it wasot my idea. it is a simple thing. the president asks you to do something. you do it. i catry to talk him out of it. >> there are ways after waves of crises that you have to deal

with. has the experience of crises made it any more easy to deal with circumstances? you have a little bit of gwth here. >> you know i believe this. we have talked about this. i do think even with all of our challenges, and the base formidable challenge -- and we face formidable challenges, we are in a much better position today. we did some tough and hard things early to put out the worst of the financial fires and force private capital back to the system to clean out the weakest. i think that was very important. much better position

today than if we had hoped the crisis would burn out or pretended not exist. -- or pretend it did not exist. what happens is governments look at the political cause of it and pull away from doing it. that is what makes crises ores and much more expensive. we did not get everything right in the u.s.. we did what this country always does. this country, faced with peril, as a remarkable capacity to act and to do hard things. we will be stronger if we can revive that basic political strength in the way we did in the crises.

there are some bipartisan moments there. >> some would argue that the peril has not been poignt enough. >> it is pretty acute still. we are facing a consequential debate as a country. they are fundamentally about what role can government play and should not play in trying to create conditions for stronger growth. how are we going to go back to a point where we are living within our means? how do we do that?

the fiscal balance without hurting the growth? most of the debates are about those basic fundamental choices. how do we get more revenue out of the economy? how do we do that in a way that makes the system more fair? how do we get our commitments on health care and the pension funds more sustainable over time? how do we do that and still preserve the basic cmitment to americans for retirement? thos are important questions. we do not need to solve those things in a week or two weeks, but we need to keep making progress toward those things. the confidence in our future depends a lotn the political system. >> you are focused on the

unemployment. if you were to pick one indicator in the short or medium term of an area you are focusing on, would it be housing prices? there seems to be a lot of effort going into solidifying the market. is that because you think it will gain confidence? >> housing is very tough and hard. there's a huge amount of damage out there now. what is tragic about it is a lot of those homeowners are really just in its as victims. there is a very good case for trying to make sure if we reach as many people as we can, that they can stay in their home. that is a very strong and compelling economic, pragmatic case for doing that. housing now mostly reflects the overall weakness in the economy.

housing is going to be harder until economic growth is stronger and more people have a chance to get the job. the biggest driver of the pressure you see is the hardship that comes when someone loses a job. well we're going to do is continue to use the authority we have, and it is not unlimited, to reach as many people as we can. we can make a difference for hundreds of thousands of people. we will ach as many as we can. that will not substitute for congress to do more in the near term. the most important thing for the economy now, particularly because of the pressus caused by europe, is for this congress and washington -- it requires both parties. it is doing some sensible, substantial things. that there is a housing policy

that can compensate. >> what happens if the economy picks up and housing recovers? >> you cannot engineer a recovery in housing beckon with the broader economy up. it has to be the other way around. that is not an argument for saying get growth stronger and ignore housing. you cannot do that. you should do as much as you can to get more forced to the economy now. you can continue to reach as many of those people who, given a chance, it makes sense to help them stay in their homes. that is the right strategy. >> you mentioned whatever policies are generated here, you are at the mercy of europe. is europe having a liquidity

crisis or a solvency crisis or a liquidity crisis that could become a solvency crisis? >> i do not think you can talk about it in the same way. what you are facing is a teibly challenging mix of really substantial growth in the southern part of europe. government ought to large relative to the capacitivy. financials got too large. if they are trying to gradually put in place aramework that allows them to resolve this basic oblems. it is terribly difficult. it'll be difficult for our country but much more challenging for them. their basic challenge is make sure they stabilize italy and spain are at fulinterest rates but make sure that there is progress on these reforms to

make for a stronger. this is the difficult balance. you can see they're shoveling with it. they're gradually making process. i am not sure the proper metaphor. it is like 3 yards and a cloud of dust. it is very tough. this is within europe's capacity to solve. it is within their ability and grass and reach. -- grasp and reach. they have to figure out a way to get in the political support to do it as quickly as possible so they do not fall behind. >> do you feel it may be the european suffering? >> there have beea few of those. there have been avoidable mistakes. >> in do you find yourself in

the morning been unnaturally interested in [inaudible] >> i am mostly interested in this country and how fast we a growing and what is happening to income growth. as you said, we have been affected around the world by pressures in europe. we have to pay a lot of attention to where they are making progress and where they are not. >> how much progress do you think you and the president can have? you were almost mediated between northern and southern europe. >> we have a big stake in helping them get ahead. we're helping them directly and indirectly. we have a lot of useful lessons

from our experience. we have some value. not completely. they have been trying to replicate some of the things we got right. the returning to us for advice. -- bay are returning to us for advice. they will have to return. there have been moments were there trying to use us to help resolve some of the internal difficulties in this context, which we can do. this is europe's challenge and crisis. fundamentally, the resolution will depend on the choices they make going forward to. we hope to make some progress more quickly. >> this is a very unfair question, but if you were to rank these three institutions in order of importance the ecb, europeanand the,

governments, how would you do it? >> the european governments, the ecb, and the imf. one of the most important things we did was to have the government working alongside the central bank or be protected the independence and doing the things you have to do. there are brutal things you have to do to stabilize the financial system. it is very hard to do that if those fishermen are working in colict and not a together predict if those instruments are working in conflict and not take hard thing tovery do if those instruments are working in conflict and not together. it can provide some financial

assistance. in europe, add the rule will be supplementary. the imf can do a lot in the crisis. >> should the ecb be the last resort? >> i do not want to get in the middle of that existential question for them. i would say the following. there are lots of ways for the central bank to play a more effectiv role in resolving this with out of violating the obvious constraints we respected here. we respected them here. making sure the central bank is not providing a source of financing to governments. it is not rocket science.

the alternative is uncomfortable as you are seeing. it is very hard to get it to work. if you do not figure out a way r them to work together. >> are you talking to people in europe most days? do you know who to call in europe? >> yes. that is a very good question. you have to call a lot of people. they are sovereign countries. question was the right question them. there are still sovereign countries. they happen to share a currency. you have to talk to all of them. >> do you think in five years' time the eurozone members we have now will be the same? >> what i think does not matter. they believe absolutely it will

be. their basic view is that they will do everything they need to to hold everything together. there are some very tough reforms. i think that is the choice they made. >> we're asking our council members about their concerns. one of the low was concerns with the renminbi. how concerned are you about the renminbi? how interested are the chinese? is there a consensus internally about the trajecty? >> my consensus ishat the chinese appeal is in their interest to allow the currency to appreciate against the dollar. they're doing that at roughly the pace of 6% a year.

becausehere inflation is so much higher, it is moving more rapidly. it is probably tends term he amative -- 10% in real terms. it makes sense for them and us and for the system. it would be better for growth prospects everywhere, not just for chinese inflation, for it to happen more rapidly. it has a way to go. it is no surprise that the business is so divided on this. yet people in the u.s. that produce in china for expertorts. those things will obviously have different implications. these are not the only things that matter. you live in this world. china has been running a pretty large strategy.

if you want to sell it here, we want you to come produce here. if you're going to producer, we want you to transfer technology. we want you to serve your broader market outside of china. that is a strategy they replicated. it is not a unique strategy. it is an untenable strategy long term for a country as large as china. and our interests as a country are not just getting china to move more rapidly but to make sure they're dialing back and reducing the other very substantial distortions they put into the economy that shifts the plane filled. if they still -- playing field. they still control capital energy land. we want them to move to a system

where they are reducing the substantial distortions ty left in place that are adverse to our economic interest that undermine the political support here and around the world in system. that is a long answer to your question. they have a ways to go. they have room to move faster. growth everywhere would be somewhat better. >> is the short answer in the medium term and the currency will become less of an issue? >> it depends what they do with the currency. the challenge for policy -- the currency everyone can see. how you can tell every day how fast it is moving. the other stuff is very hard to

know where you're making progress. everybody experiences in a different. some people say it is getting better. some people say there is no difference. it is hard to measure this. this stuff will be more attractive over time. but the latter. matter. will >> there is a lot of cash but it is not in this room or this country. >> a lot is in this country and a lot overseas. >> should there be one tax? >> and not outside the context of corporate tax reform. organized, ite takes money. it costs between $48 billion. that is a tax cut to

by raising taxes o other individuals or businesses to pay for that, it is hard to make the economic case for that we don't have the resources. the central challenge we face as a country that relates to growth is how we make this a more compelling case for people to create and build things in this country. we will not build everything we need here in the united states, but we have a huge interest in trying to foster the incentives in favor of people creating and building things here. there are lotsf things that are important to that, like education, infrastructure, and

continued investments in basic science and drivers of innovation. you need to figure out a way to get a better tax system in support of that. our view is that congress should be focused on trying to put in place a better set up permanent incentives t support that basic objective. >> if you lose the loopholes and stop subsidies, is 25% about the right rate? >> let me say it a little differently. our view is that you can get very close, get the rate down to the average without doing [unintelligible] future deficits. you can clean up a lot of the distortions in the tax system in support of getting rates down that low and make yourself a better system. we think that is worth doing.

>> do you have a number in mind? >> i do, but not that i wish to share with you. [laughter] strengthen the incentives for progress. as i said, you can get it lower. lower than 35. >> the basic imperative is to get the incentives and the fundamentals better for people building in creating things here in the united states. it is our great strength in many ways, but we can do better at it. it is hard to do that without looking at the tax system. yocan do it without adding to the burden of individuals or adding to future deficits. >> comments, questions? yo can be unfriendly.

>> i have been struck by the conversations you'll have had here today. it is a pretty thoughtful group here but they seem to have bad vibes about the president and what he is doing for business. why is that, and can that be fixed in the year left of the term? want to askhink you me that question. you are asking me why the sentiment is so bad. of course, i hear it. i hear it from any of you all the time, people telling me directly all the time. you guys know what it is the product of. i think it is fundamentally unfair, and the basic strategy of this president -- we are going to work very hard to change that perception.

i think it has some cost to us, but i don't think it is justified and i do not think it is fair, particularly given the things this president did to try to fix an economy that was really at the edge of the abyss. of course, building on the initial work that was done by his predecessor in that context. what we are focused on is changing the basic reality, the economy not growingast enough. it can grow faster, and trying to push a basic package of sensible proposals to strengthen growth in the context of long- term fiscal reforms that they ink will make us stronger as a country going forward. we think there is a lot of room for doing that, despite how divided the country is. we think the things the economy can use right now, extending tax breaks for individuals, targeted tax breaks for businesses,

combined with sensible long-term infrastructure programs, more trade agreements, a better education system -- those things are fundamentally practical, good, growth-oriented policies right now, and there is no regulatory reform agenda out there within our reach that will come anywhere close to making a difference on that magnitude as those set of proposals for growth in that context. what we do not want to do is, i don't think we can afford to sit here for 14 months or 12 months and not act to help an economy that is still so weakened by the crisis, weakened by europe, and that is what were focused on, trying to change the basic realities facing the average american business now. as you know, given the way the constitution is written, that is not something we can do on our own. >> were you disappointed when

bowles-simpson was evaporated in the senate? >> that is not the way to put it. they did an amazingly consequential thing for the beit we are -- for the debate we are having. they took that framework and it was embraced by a group of senators. it is very close to what the president laid out to the community in september on the broad outlines in that context. i am very confident that ultimately it is going to look pretty close to that basic strategy. >> i can tell you that we call on 300,000 garages is, it is garages, small businesses in the united states, and they have the same view that you just expressed. they think things would be fixed if something would be done of sufficient magnitude. i want to ask you if you think that happens and there is something that could go wrong,

are you saying actually, if something happens, if it is is sufficient magnitude, things will go well? you think there are certain things that could happen and that people could agree on, and it will not be the right way to go. >> that is a complicated but interesting question. let me try to frame it a little differently. we face the economy not growing fast enough, still scarred by the aftershocks of the crisis, a lot of storms outside the united states hurting growth, and we have some really tough, long- term challenges. there are people who say you cannot do anything about the short-term, let's focus on the long term. that is not right. there are people who say, let's ignore the long term and just focus on trying to get growth strong right now and come back to the long term later. that cannot be right. we are taking the basic, sensible, pragmatic view, which is that you cannot do

everything. we cannot solve all the problems facing the coury right now, but if you do some say is -- some sensible things to help the growth rate right now, and you tie that to reforms on the physical stuff, you can make a big difference for long-term confidence and short-term strength of growth. these are not that hard. they are much easier challenges than many countriesround world are facing in this context. even if we acted -- that think about cost of action right now -- what happens? every american with the job's taxes will go up significantly this year. taxes will go up relative to th way they are now, and you leave the long-term infrastructure to

not address. you put much more pressure on the economy right now. if you sit there and debate the long-term future, you are making the economy meaningfully worse in the near te. that is not responsible act for us to take now. again, you cannot credibly argue that if we just do this package of tax incentives and infrastructure investments, that everything is going to be great. we still are left with some really tough things, but the fact that we have tough longer- term things is not an excuse for sitting here and not acting on the short-term inheritance. -- the short term imperatives. >> i am encouraged about -- i am encouraged byour positive attitude. >> don't read me wrong. i was just being honest. >> from my point of view,

[unintelligible] it has passed a point where a contagion is basically occurring. clearly, the banks were not in great shape to help themselves. they need to recapitaliz the way to do that is deleveraged. that is not going to help those economies. the impact and my country and in asia -- i certainly hope wean find a solution, but it seems to that the last six months -- >> 18 months. >> now the path has become overwhelming. >> i don't disagree with you. it is hurting us already. it isaving a big impact on emergi economies. europe has a very large financial system, compared to this financial system. when their finances are under

pressure, you see a much more disproportionate effect. i agree with all those things. this is a problem within their capacity to solve. it is not beyond their ability to solve. they are working through the very tough things they have to do to get there. obviously, not fast enough, obviously not attraction for confidence in the markets and get. they have a ways to go in that context. we have a big interest in them solving it. >> do you think fundamentally that they understand the scale of the problem, and thus the need for a solution of similar scale? >> they are trying to figure out how to get political consistent behind a set of too that allow them to do that. not to make excuses for them, but it is tough.

it is not like hamilton with a country deciding to be a coury a long time ag it is tough, but i do think they understand the basic imperative of that strategy and are just trying to find a mix of tools that they can get political support for. >> sectary geithner has been very generous with his time. [applause] >> coming up, at testimony from douglas elmendorf at a hearing of the senate budget committee. then from today's wall street journal ceo council, that chairmen on the fiscal commission, erskine bowles and alan simpson, followed by jack lew. >> the ceo's of the fannie

mae and freddie mac testify about their companies bonuses. live coverage of the house oversight hearing begins at 10:00 a.m. eastern on c-span3 and c-span.org. >> the c-span.org home page is now easier to use. the newly designed page features 11 video choices, making it easier for you to watch today's events, live and recorded. there's a section to access our popular programs like "washington journal," book tv, american history tv, and "the contenders." we have added in a handy channel finder so that you can find where to watch our channels on cable, radio, and satellite systems across the country. at the all-new c-span.org. >> congressional budget office director douglas elmendorf said that he expects the unemployment rate to hover around 9% through

the end of 2012 and that the country is only halfway through the economic slump. he also talked about a new cbo report and make predictions about various economic policies. this hearing is two hours. >> we want to thank douglas elmendorf for being here.

we want to focus on steps to strengthen the economic recovery and create jobs. last year in my request, the congressional budget office completed an analysis of the so- called bank of but achieved by a different fiscal policy proposals. cbo has no updated that work and we thought it useful to have director elmendorf here to report on his agency possibly his conclusions. i am hopeful that congress will consider this analysis in developing economic growth measures that might be passed before the end of the year. i like to briefly review the economic situation now confronting the nation. it is clear that economic recovery we are now experiencing is not what it should be or what we would like it to be. here are some of the factors i believe that are holding back the economy. unemployment remains stubbornly

high. the housing crisis that helped spark the downturn is continuing. we have weak consumer confidence and weak consumer demand. personal debt is still near record levels. businesses and consumers still face tighten borrowing standards. state and local budget cutbacks are continuing to create a drag on jobs and economic growth. and our debt is also a challenge to future economic growth. among these factors is continuing -- the continuing housing crisis is particularly notable. we can see that a surge in the housing market was a driving force behind the return to economic growth. housing starts rose dramatically in every one of those recoveries. but in this recovery, housing starts have remained low and continue to be. we know that some of the drag

holding back the recovery was caused by the nature of the recession that preceded it. the economists have found that following recessions caused by or accompanied by a severe financial crisis, recoveries tend to be shallower and take much longer. two leading economists found in their research, and i quote from their findings, "real per-capita gdp growth rate are significantly lower in the decade following severe economic crisis. in the 10-year window following a severe crisis, unemployment is significantly higher than the decade preceding the crisis. the decade of relative prosperity prior to the fault was in partly fuelled by an expansion in credit and rising leverage that spans about 10 years. it is followed by a link the

period of retrenchment that most often only begins after the crisis and last almost as long as the credit surge. in other words, we could see a period of low growth and relatively high unemployment for some time. we are recovering from a severe financial crisis. the most severe since the great depression. if we look at private sector job growth, we see that it has improved dramatically from where we were in the recession. january 2009, the economy lost more than 800,000 private sector jobs in one month. private sector job growth returned in march 2010, and now we have had 20 consecutive quarters of growth -- 20 consecutive months of growth. however, clearly we have to do better. we need considerably more job growth in order to fuel to a stronger recovery. the unemployment rate remains far too high, and as of october

it was still hovering at 9%. although the recovery is not as strong as we would like, it is a more recognize our economic situation would be much worse if we have not had the federal response to the recession and the financial crisis. including both the fed's monetary policy action in the fiscal policy taken by congress and the administration. that federal response to pull the economy back to the brink likely prevented us from slipping into a depression. and it may not have been slipping into a depression, we may have gone head first into a depression. two other leading economists, mark zandi and dr. alan blinder, completed a study last year that measured the impact of federal actions in shoring up the economy.

here is the key quotation from their report. "we find that its effects on real gdp, jobs, and inflation are huge, and probably averted what could have been cause depression 2.0. the policies will have cost taxpayers a substantial sum. but not nearly as much as most had feared and not nearly as much as policymakers -- had they not acted it all. comprehensive policy response save the economy from another depression. they were well worth their cost ." this next chart shows their estimate of the number of jobs we would have had without the federal response. it shows that we would have had 8.1 million fewer jobs in the second quarter of 2010 if we had not had the federal response. we see a similar picture in the

unemployment rate. according to dr. zandi and dr. blinder, if we had not had the federal response, the unemployment rate would have been 15% in the second quarter of 2010, it would have continued rising to 16.2% in the fourth quarter of 2010. it is clear that there further steps that could be taken to help shore up the recovery in the near-term. cbo's analysis looks as some of the steps and determines which would provide -- which would provide the greatest bang for the buck. here are the key findings. on the upper end of the scale, policies like and extending unemployment insurance and payroll tax cuts give you a higher impact on gdp for each dollar spent. on the bottom end of the scale, cbo once again found that extending the bush era tax cuts provide a much lower impact on

gdp for each dollar spent. it also found that the repatriation tax holiday provides very little bang for the buck. i look forward to hearing more about these findings from director elmendorf. to be clear, there is nothing contradictory about pursuing near-term economic growth measures at the same time we pursue long-term debt reduction. we can then we must do both. we need to give a near-term boost to the recovery while simultaneously -- simultaneously putting into place policies that will bring down deficit and debt over the long term. the debt as a reduction can be phased in after the recovery, but it should be enacted into law now. a lot to be very clear about this. from every group i have served on the fiscal commission, the group of six, we adopted that

basic strategy. it is clear that we must put into law now long-term deficit reduction plan. i believe that would provide a significant boost in confidence and the markets as people see the government finally putting its fiscal house into order. with that, we now turn to senator sessions for his opening remarks. >> thank you, mr. chairman. thank you, director elmendorf. we respect the work that you do. and we rely on it. i am not unaware that -- alan greenspan's testimony before this testimony, quoting cbo numbers, projecting 30 years of surpluses and that we would pay down the entire debt of united states of america and he wanted it know what to do with a surplus. we have been wrong before. he predicted 3.1% growth this

year and it will probably come in under that. dr. zandi predicted 3.9% growth this year. isdy's and alex has said it 1.6%. i do not agree that there is no contradiction between borrowing and taxing to spend today and the problems that have gotten this country into the fix we are in as i see it. we are in a long-term financial difficulty as a result of debt. we have extensive debt throughout the system, the government has assumed huge amounts of private debt, and i agree, we have a 10-year or more deleveraging process to go through. and we're not going to see the growth that we would like to say until that is through.

so i would oppose adding more debt. i think nothing could be more simpler. nothing could be more basic. and under the plan that the president has proposed, $450 billion in borrowing and spending in the near term, plus a $450 billion tax increase -- i do not believe that will be of benefit to the economy. and i would be delighted to hear your view on that, mr. elmendorf. and i do appreciate the fact that you predicted when we passed the first $800 billion stimulus package, you predicted that in the short run there would be some benefit, but over 10 years he predicted there would be a net negative because there is a reality of debt out there that will not be wished away. all of that was borrowed, all of that added to our debt, and i am sure that you would agree that

after that 10 years, since we paid none of that, we will let paid none of that down, it will continue to be a drag on the economy for decades to come, long after the short-term sugar high we may have achieved as a result of it. i am very concerned about where we're going. i'm concerned, mr. chairman, about the committee of 12. mr. zandi told us just a few weeks ago we had to have $4 trillions in reductions of deficit. $4 trillion, he said, as an absolute minimum. and i am not aware that they are moving toward that kind of an agreement. we're still in denial, it seems to me. so we learn nothing else from this financial crisis in 2008, it is that prosperity cannot be built on a foundation of debt. excessive debt, public and

private, provided the errors that pumped into the economy, the which resulted in a burst bubble. if there is a second lesson we should have learned, it is a help the rich and healthy skepticism for washington elite, many of the same people who fell asleep at the switch before the housing bubble, did not seen come in, and now want to create more debt in the government. a government bubble. i have patiently sometimes call them masters of the universe. they're even quicker to explain why the failure of their last position did not count against the one they are making today. they say that the mammoth stimulus failed because it was not big enough. or that the explosion regulations help the economy. we need more regulation, they

say. they frequently right to seek -- cite the cbo model, but they have projected negative growth in 2009. it certainly appears that you have been correct, "the increased debt will and rigid will tend to reduce the stock of productive capital and it will crowd out private investment." cbo's projections were that reducing the deficit by $2 trillion would eventually boost economic growth by up to 1.4%. that tells us what we need to be doing, reducing debt. so we need a long-term plan in a time of crisis, confusion, and fear. we should return to basic core principles, tried and true, pay your debt, spend within your means, and instead of asking the

taxpayers for bailout, washington must and the this honest accounting and waste and abuse that we have in our country. what we need is a middle-class agenda -- that means creating jobs for the private sector, producing more american energy, making the government lean and productive, confronting are dangerously rising debt, adopting a globally comparative tax code, of holding the rule of law in trade, commerce, in immigration, and finally, delivering to the good people of this country and honest budget that they have not had in over 900 days. thank you, mr. chairman. .

>> we will talk about the pocketbook and its condition. i am wondering, given the dimension of this problem, if we could take a minute to do all laying of the landscape and then address what is on the mind of the ceo group. every year i've talked to the ceo's and inevitably the discussion of uncertainty about the future comes up. we do not know what the regulatory structure will be, but tax structure, and so we

cannot make business decisions. if you ask about hiring, that is one of the fundamental problems. at root is our fiscal well-being in this country. i am wondering, erskine bowles, if you can start us off with the dimension of the issue now for folks who may not have spent the last five minutes reading the newspaper and whether or not you think that the super committee is actually going to have the political will to do something about it. >> shore. good morning. if you have not blown up yet, you're about to get ready to. [laughter] >> ♪ >> like you, i am a business guy and makes me sick. [laughter] i think we're facing the most predictable economic crisis in history. i think it is as clear as the nose on my face. i know that the fiscal path they are on here in washington is

not sustainable. worse yet, i know every member of that fiscal commission knows it too. the economics are very clear, the politics is very difficult, and someone asked me the other day, to give them an analogy. i said, yes, these deficits are like cancer. they are simply over time going to destroy the country within. i will give you a simple arithmetic. then you can draw your own conclusions based on your own company. if you take 100% of revenues that came into the country last year, not 20 years ago or 20 years from now, came in last year, every single time of it was consumed by are mandatory spending and interest on the debt. mandatory spending in english is basically the entitlement programs, medicare, medicaid,

and social security. that means every single dollar we spent last year on these two wars, on national defense, homeland security, education, infrastructure, high value-added research, every single dollar was borrowed and half of it was borrowed from foreign countries. that is a formula for failure in anybody's book. we did nothing but just take the hostage terry and stick our heads in the ground or do very little -- the ostrich theory and stick our heads in the ground are do very little. this is not a problem that we can sell in grow our way out of. we could have double-digit growth for decades and not solve this problem. it is not a problem that we can solely tax our way out of. if there is another democrat in here, and there is usually one r two. [laughter]

i can tell you, you cannot tax your way out of it. raising taxes does not do a dern thing to change the demographics of the country and health care growing at a faster rate than gdp. we cannot simply cut our way out of the problem. i think that has become pretty clear as they have gone through this last debate. that is why alan and i came up with a balanced and what i think is responsible, reasonable plan that takes $4 trillion out of the deficit, $1 trillion from the revenue, and $3 trillion from spending, so we do not get caught in one of those deals back in the 1980's. and we have a supermajority vote for it. we got a majority of republicans and a majority of democrats. we had six u.s. senators on our commission, 5 voting yes, all

three republicans. and two of the three democrats. the vote was as the spurs from the far left purging -- as disperse from the far left to the far right. we built it around six basic principles. but the first principle is simple. we did not want to do anything that disrupted a very fragile economic recovery. i do not think there is any doubt that this recovery was pretty fragile. today, where are we? obviously what alan and i want this group to do is to go dig, to be smart and bold, and i am not sure that they're going to do any of those three. the reason we came up with a $4 trillion is not because the no. 4 we thought was a great number.

$4 trillion is not the maximum amount we need to reduce the deficit. it is the minimum amount we need to reduce the deficit in order to stabilize the debt and get it on a downward path to gdp. if they end up just doing $1.2 trillion, i guarantee we will be back in this game as early as next year. we hope they will solve the problem. my best guess is that the probability is very low that they will. >> alan simpson, if $1.2 trillion is not enough, my guess is that you two wonder if they will even get to that at this stage. is that a fair characterization? >> first, i want to reflect on that thing before the last panel started. the work fiscal looks like -- right down there. all these great things were said

and i found that fascinating. we do not use charts. we do not use powerpoint. we speak all over the country together. this is a magnificent man. if you spend more than you earn, you lose your butt. if you spend a buck and spend -- and or 40 cents of it, you worst to bed. doing that today and tomorrow and the next day, you have got to be dull. and that is where we are. why is it not moving? what is happening? the $4 trillion is an absolute -- we thought it would be something they could swallow. we thought we could restore the solvency of social security without balancing the budget on the backs of poor old singers. stick your finger down the

throat the next time you hear that baby. we protect social security for its own sake. we cannot raise the retirement age to 68 by the 2050. we cannot change the co to thela change -- we cannot change the cola to the chained cpi. you have seen the ads from the aarp, they are savage eds. they point the finger. and they are impossible. and in grover norquist wanders the road -- wanders the earth with his white robe on. i tell you, it is not funny. because grover norquist has 95% of those republicans and says to them, don't you raise taxes one shred unless you reduce. so coburn stix and the thing to get rid of ethanol, 6 billion

bucks, it passes, and grover calls it a tax increase. that is ludicrous and deceptive. he is going to ask them to deliver. i think this disappoints both of us. what can he do to you? he cannot murder you. he cannot burn your house. the only thing he can do to you is that beat you for reelection. if that means more to you a date and your company in extremity, then you should not be in congress. -- if that means more to you than your country in extremity, then you should not be in congress. >> [applause] november 23 comes along, there is an all-schneider beforehand if there is any sort of history playing out again, and i say we do not get a deal. and the triggers fire off. $1.2 in trillion comes out of defense and discretionary spending. is that an acceptable, painful

resolution? >> no one will get blamed for because the election will be over. it only takes place in 2013. if he really gets up, they would just going to session and take the sequestration away. all they have to do is let just chile -- legislate -- -- or rethink the defense portion of the trigger. >> it will be a tragedy to do that. i say let leon panetta alone. i've known him for 40 years and he will do it with a scalpel. he is dealing with health care system that is $470 of your premium? $470 a year for military retirees? i was in the military. 2.2 million of them in a cost that much? bob gates, what the he is al? l he said, you take them on.

i have to take on the professional veterans. the reason things are so hot now is that we were so specific. we knew the interest groups would tear up if they ever thought this goofy thing would work. they laughed at first and now they are thinking, man, here we come. here comes the whole mortgage in the insurance industry and blue cross, all of those tax expenditures are trillions. $100 billion a year and they are only used by 6% of the american people. the little guy never heard of half of them. >> you would have loved it when we went to see gates. we were talking about these things and the defense department that we could cut. we got around to contractors. [laughter] i said, how many contractors view actually have? and they all huddled up and came

back a few minutes later, we got somewhere between 1,000,010 million. that is a narrow range. but that is the of -- 1 million and 10 million. that is a narrow range. i'm afraid the american people will think it solves a problem and it certainly does not. worse yet, as you are intimating, john, we're going to go to the sequester process. the cuts are basically $600 billion in defense and 600 billions in non-defense with a few exceptions of to decide. -- off to the side. if we only do the $1.2 jury in, most people will look at us and decide the debt and a full the s -- default fiasco that we went through in the summer, this proves that these guys cannot

govern. if they put the sequestered and and then they turn around and try to figure out the but the sequestered, because as allen said, because to not go into effect until 2013, then i think you can see some really negative effects in the marketplace. >> you're saying before we came on that the various groups that you have spoken with have said please save us from ourselves. we're looking for some outside divine intervention to untangle the political seizure that we are in. can you describe that a little bit more? you mentioned a a r p and various interest groups. why is that? why is that so on movable this time around. and second, what can this group do to help the process? who needs to be given some backbone? >> if was not the groups we were surprised that so that, because

we spent 10 months on the campus here -- i college campus, because there are a lot of students there. -- i call it a campus because there's a lot of students there. that would come up to us as they go out to roll call votes, democrats and republicans, saying, save us from ourselves. these are good people in both parties. they are frozen in place. they are frozen in place by a system -- and we did not spend any time on how we got there, but let me tell you about that. we were sent to congress to bring home the bacon. we were sent to get the tax code change. we were sent to get this and that. this gimmick, that gimmick, this grant, this railroad, this whatever. and if you did not do that, you were not reelected. now they are caught. the pig is dead. there is no bacon to bring home. they cannot leading gay guys on

the appropriations committee -- they cannot even get guys on the appropriations committee. the power of comte brain -- of campaign contributions is reached its ultimate point review help the guy with the primary, maxed out on on the generals, and at the end of the day, he came in and said, we never bought you, we just love you. that is how we do this so gingerly at all times. but now, when they see what could happen to them, they are in that congressperson's office, saying we never ask you for thing, buster, but this is it. we go down the pike if we lose this tax expenditure and you're going to deliver. i do not mean that in the form of retribution a bribery, forget that. it is called washington reality. and that is what is out there right now. >> these guys are absolutely understand the need to do something and the need to do

something now. and do it in a smart way. it is the politics that keeps them from doing something smart. you know, i spent my life in the business world. we really do need your help. and the problem you all have is not too different from the problems that the members of congress have. as i talk to -- alan and i both together talked to thousands of business leaders from the chamber to hear, and all of you had your individual thing appeared that you are worried about. you have your issue, your sacred cow. by god, someone like us talk and you get it. you know that these guys have to really cut spending and they have got to reform the tax code. whenever a form a task code,

they have to get rid of some of this back door spending in the tax code. things called tax expenditures. so you get charged up and you say you are going to help on that. and then you go back and talk you're washing guy, and they say, wait a minute. we've got this big issue and if we do this this guy would get mad at us. you can be for it in the general but do not do anything specific. so the business community really does need to step up. if you think this is really important. alan and i happen to think it is one of the most critical issues the nation faces today. i do not care if you are liberal or conservative. this is going to bite us all. the one thing we did fine as we went through this process is the more comprehensive we made it, the more people we got to support it. no one wanted their own office to be gored. ox they said, if everyone's

is going to be gored, then everyone is being asked to sacrifice somewhere. so we were able to get a broad coalition of people to come on board, because they saw that we were doing it for the country and everyone would pay a price because as a nation we had promised more than we could deliver. >> we have half a minute before good questions. but make sure that i'm clear on the answer -- what is going to happen, november 23? no deal, a deal? >> in my opinion, there is a 10% chance that they will go big. that is about 9% higher than anyone else in town gives it. [laughter] all they have to do is get a simple majority. we had to get a supermajority and we got it. i think the politics has changed some since last december.

because of what is going on in europe, because of that old debt default fiasco in the summer, i think more people understand the problem in the polls show that. and last, we have this hammer that makes these across-the- board cuts. and as you know, across-the- board cuts are never the way to get any budget under control. we have about a 10% chance to go big. doing about $4 trillion over 10 years. probably a 25% chance that they will actually come up with a real cuts that add up to $1.2 trillion for $1.5 trillion, which is their mandate. hopefully they will not all the gimmicks. that leaves about a 50% probability that they will not do anything. it would just completely failed. >> allen.

-- alan. remind that you can submit questions on your thinkpad. no as well as anybody that this cannot be solved by committee. it ultimately requires leadership. it is a dismal view of the state of our leadership at the moment. what are the chances that after the election you have the leadership and the political will in place to really tackle this in a serious way. >> i think after the election, the people who have been hiding and do not have the guts or courage to come forward when their country demands their leadership and their congressional leadership, i think in the elections some of those people will be defeated instead of allotted to the high heavens that you did not cut social security, you did not touch the fence, you did not touch medicare, if you did not

touch medicaid, and we love you for that while the country sinks. forget obamacare. colin l. this press late care, i don't care, it cannot possibly work. you know that in your heart. the honeywell ceo was on our commission and got up after six months and said who are you people? it's just stupid. but the problem is that politicians think that business people are stupid and business people think politicians are stupid. that is a real thing. i did not answer your question but i got a lot off my chest. [laughter] >> if if you look at the forecast, you would die. again, you can imagine what's $1 trillion does to the contras operating balance statements. if you put a balance sheet and

one side and an end, she and the other side, they could not tell you which is different. most of them, you can see what the results are. the current path is not sustainable. the markets are not going to let it go forward. as soon as the markets get their eyes of europe and refocus back on the u.s., i think you will see a real reaction. i think it will be a crisis and it will force these guys to it. >> how did you describe our country, as a horse? >> selwyn ask why interest rates were so low, because we were the best looking horse in the glue factory. >> it will not just an election, it will take a crisis. >> i think will will have a crisis before these guys will act. i hope they will light now. i hope it will act next year and right after the election. but again, in 1997, i negotiated

a balanced budget between president clinton and gingrich and lo steelt websitet. wanted to get a deal done and they were ready to put their partisanship aside and there was severe partisanship then, and they work toward a common goal of getting a balanced budget. but it takes up the leadership of both parties to get behind it. without the megaphone of the president who has been largely absent, it is really tough. >> question right over here. >> good morning, bob reynolds from popular investments. you're a presidential commission. you deliver your report in december. how surprised were you that your commission gave the president

tremendous coverage to do something and it was not even mentioned in the state of the union? and i like to hear your reaction. i thought was an unbelievable opportunity for him to really take control of this problem. >> if you think your surprise, you should have looked at us. as i said, and the [laughter] gushy headed the budget for president clinton. -- as i said, i negotiated the budget for president clinton. i knew what success was so i could go in there and negotiate the deal. i did not know president obama. neither did allen. we spent a tremendous amount of time up front with him and his economic team defining success. we did not want to come back with a plan that was here and they were here and the plan would fall apart. it does not do anybody any good. we negotiated a deal that got a

majority of republicans to vote for it, we had plenty of cover on the other side, that exceeded every single one of the goals that he gave us. so i fully expected them to grab hold of it and say that is great. though i like clinton, i created this, it is wonderful. -- go out like clinton, i created this, this is wonderful. [laughter] like every white house, there is a small, all of people that surround the president that he -- small cabal of people that surround the president that he trusts. they thought that it would be smart for him to wait and let paul ryan go first.

we fully expected in the state of the union when he mentioned the stimulus that that would be a great time to say, not only are we going to do this to get the economy moving forward, but we have to do this in the context of long-term fiscal reform and responsibility. he did not. we were sure that it was going to be in the state of the union. if you remember, he talked about the real need for this country to invest in education and infrastructure and high-value research to compete in a political economy. he was right about this. but he left off doing it in a fiscally responsible way. limited resources main choices and priorities. >> the terrible irony is that the mandatory programs are eating a whole for those programs. they are on automatic pilot. they cannot be stopped. i mean, medicare is on automatic pilot. and medicaid and these things,

and every day that they get deeper in their train wreck, if it takes it out of the things that he is speaking out. these things will disappear, get squeezed out. >> i spoke to the president of the university of north carolina. the money that we spend on k-12 is not up to international standards by any stretch of the imagination. we wanted to do our part to do a solution. we wanted more teachers and better teachers, more math and science teachers, and i said, are there some federal programs to do this were to mark this said, yes. let's look at it. >> 82 federal programs. do we need 82? hell, now. these guys when we were doing as, this would be a great nobel prize winning scientist, when his nobel project was running out of money and he turned to

his team and said, we're running out of money. now we have to start thinking. [laughter] that is what america is. we're running out of money and we have to start thinking and use our money more wisely. just like you do, you have to spend your money more wisely. >> question, comment? >> there is one thing that is very difficult and that is the word trillion. no one understands what a trillion is. a trillion is 1000 billion. if you really want to know that is -- what that is, the big bang theory of the universe was 13 billion years ago. we 016 of those babies. -- owe 16 of those babies.

the unfunded liability of the united states and all programs is $63 trillion. what we have these deficits? we always say, what you all think? i swear, we get the same core answer for tempered people say, is waste, fraud, and abuse. it is far and aid. -- foreign and oils a city'sid nancy pelosi's airplane. those other little things. the first thing is health care. we spend twice as much as any other developed country on health care, whether as a percentage of gdp or on a per- capita basis. and unfortunately, while we spend twice as much as any other country, how outcomes are not as

good. we rank between 25th and 50th on things like infant mortality your life expectancy or preventable death. so health care is number one. we have to get the cost of health care under control. secondly, defense. we spend more than the next 14 largest countries combined on the fence. -- defense. that is causing us to hollow out the rest of what we're doing in this country. we're not making the appropriate investment in education or research. it is not even making common sense. we have this treaty with taiwan that we will protect thai one of their invaded by a chinese. there's only one problem with that. we have to borrow the money from china to do it. [laughter] it's crazy what we do.

listen, the third reason is, it would give away half of our revenue in the form of back door spending in the tax code. the plan we put ford, we said, look, let's get rid of all of the tax expenditures. 100% of them. to's use 92% of the money reduce income tax rates and 8% of the money to reduce the deficit. if you do that, you can reduce the deficit by about $100 billion a year for 10 years, so about $1 trillion, and you can take marginal rates to 8%, up to $70,000, 40% of to $210,000, and have a maximum rate of 23%. and you can take the corporate rate to 26% and you can pay for

a territorial system so that we can take that up to $2 trillion captured overseas and bring it back to this country to bring -- to create jobs over here. i think that would have real dynamic growth. our tax code is the third reason. and the fourth reason is interest on the dead. i know you guys understand the power of interest. when interest rates go back up and we get downgraded again, it will hit us like something you've never seen. and that $1 trillion i talked about in 2020 of interest on the debt, it will not even come close. >> when that tipping point comes, markets will decided. one not be anyone with a chart from the white house of the congress. markets will decide when that comes. an interest rate creeps, guess who gets hurt most? the little guy, the most vulnerable people in society that people talk about and babble about all day long around

this place. >> that is a perfect example. we talk so much about trying to make social security sustainable. i am a democrat. i thought democrats were supposed to be for something that would actually be up the pavement to the little guy. and we did that, we took the minimum payment to 125% of poverty. that costs money. we get a bump in every economist told us that is when people's personal savings or now. and we made the -- we were the devils, right? we made a grave mistake by retiring -- raising the retirement age according to the aarp. we raised it one year, 40 years from now. we want to get -- give people a chance to get ready.

[laughter] but we did get the rate of growth, we slowed it down. we increase the pavement for the people at the bottom. -- the payment for the people of the bottom. the people attacking us are the aarp you're supposed to be protecting these people. >> then when you reduce the payroll tax to stimulate the economy, guess what system goes further into insolvency? social security. >> i hate to interrupt this presentation. thank you very much for your time. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> jack, for making it over here. he literally just walked in the

door. so you miss the erskin and alan show, but you were in the middle of it. you agreed to respond to it. oing to have to do. let me start with what the crew just heard from those guys, and you have probably heard a variation of their presentation before. they say things about the federal deficit like unsustainable path, broken process, and ability to get to the heart of the problem, and erskine at one point said we will have a crisis before those guys figure it out. by those guys, i think the man everybody in this town. you, cant by asking you offer a more optimistic scenario than that? >> if is not hard to be more optimistic than that. i think they did an enormously

public service this year in bringing their commission along to a set of bipartisan recommendations. while it did not get the job done, it helped shape the debate and in a lot of ways, we've all been working in a world shaped by the work that they did. i have to be more optimistic than that. i've said this a lot of the last 10 days. it is a parlor sport in washington, calling process is dead before they had their final chance. i've never seen something that complicated done before the last minute in washington. so the next few days are critical. i will not sit here and say that it is not% likely that a big deal comes out of the super committee. but i think it has been written off prematurely. let me take a step back and then i stepped forward to frame it. if you look at the negotiations that went on the summer, the president and the speaker were

this close to a really historic agreement. one cod take the depressing view that it fell apart, therefore nothing can happen, or that they started to show way toward working together. but working together is ultimately this week or sometime in the future going to be a balanced package, as the bowles- simpson commission did to put revenue and spending cuts on the table, big enough to get something done, that inspires confidence. it is not going to be done in a lopsided way. over the summer, president obama was willing to do things which were quite painful from the perspective of the democratic presidents. it was willing to enter unchanged changes in the coal -- he was willing to entertain changes in: and payments for various services that there are no payments for medicare. at the end of the day, we had all wall in july and august, and

anothertory has been told it somehow the president raised the bar. i think we had a wall because ultimately republicans in the house were unwilling to accept revenues as part of the package. if you look at where we were in the summer to now, we put our views before the super committee in a quite comprehensive package at the president sent them in september. they are now struggling with the same thing we were struggling with in july. what is the balance between mandatory entitlement savings and revenues savings that is fair and balanced and protect those who are at the most unfortunate position in life? and i am not sure what the outcome will be this week. i think if one can read in the tea leaves, they are struggling to get to revenue number that is large enough to have democrats move forward with serious and common changes, and it is still not care whether they can sell that in the republican process.

>> you are describing the situation in which a deficit reduction plan up $4 trillion over the next decade in the summer was unsustainable. now we're back up few months later to talk about whether a reduction deficit pn of a $1.2 trillion is even achievable. that sounds like it is walng backwards. >> let's remember what we did over the summer. over the course of the negotiations, we did not accomplish $4 trilln as we hoped. we did like emplace $1 trillion of savings in discretionary spending, the annual appropriation. if someone is putting together a 2013 budget, those caps have real meaning. the measure of doing well and an agency will go from did i grow or did i get frozen at last year's vel? frozen will be the new high one. -- i w closeon of by. billion

dollars in savings and t defense. these are serious tradeoffs. we have made clear we think the sequestered, work that happen on defense, would not be a good thing. that should not erase the thing that there are $1 trillion in savings. >> are you arguing -- >> the target for this committee is to get from one $1 trillion to another $1.2 trade and. i think this committee and members of the committee are going back and forth as we did over the summer and in an odd way, it is easier to go bigger than smaller. if you're picking just a few sacred cows, it is very hard. everyone in it together, it gets easier. i am not sure what number they

are shooting for. in some ways, they may get a slightly larger number. they may not succeed at all, but and make it a larger number rather than a smaller number. >> and a desire to inject some optimism here, are you ggesting in its own messy way washington has turned on the spending debate? the significance of the discussion is not whether to cut the spending, but how much and how soon and how fast? >> i think we have started. most americans do not realize that we have already started. it is not reasonable to say the goal was $4 trillion. we did $1 trillion and then we got up for an accomplice. -- then we got nothing accomplished. getting more than half way there would be a very important step. i have been rooting for success the super committee. i think it would be hugely

important for the country and for confidence, both to get the politics accomplished and to show that washington can work. it was a very bad day to have a display of dysfunction in washington. if you compare the united states to europe, look at the rating agencies have said. we do not have an immediate economic crisis in our deficit. we have a problem that we can see staring us clearly in the face, just a few years down the road. we have time to deal with it. the reason the downgrade happened was not because we did not implement immediate cuts. it was because the rating agency as the american people did, saw washington that was dysfunctional. i think breaking through that would be as important as the economic accomplishments. >> the cynicaliew of the process at the moment is that the white house would be more than happy to see failure, because it sets up an election

year dynamic of a president who wants to do the right thing against republicans in congress who will not budge. >> i think we i think we have ce debate. a very small number of extreme members of congress were able to hold everyone and the -- at the edge of a cliff. would we be willing to default or would we give in to what were the kinds of policy changes that with an even distribution were unacceptable? we said no to that for a good reason. you cannot deal on those terms. you cannot capitulate. we are not in that situation right now. the reason it was important for the world for us to get agreement on the debt limit is

recreated a window of time to have a more civil debate. i think there has been that kind of conversation. they are struggling. these are hard decisions. to turn it into a political issue is a mistake. it would be better to be done sooner rather than later. it has to be done right. it has to meet the same standards. is everyone being asked to do their part? get something meaningful done. >> you prefer success to failure. you being the obama administration. >> we have been routine for success. we have been trying to strike a balance. this is something congress set up. as you were saying, al simpson, the process is broken. it does not take a majority to get something done.

it takes 60 votes to do routine business. it is almost impossible to do difficult things in that environment. this process was set up to critic congress could function. a lot of people have said where is the administration? we sent a document in september with the detail. we went through a negotiation or the whole worl saw what the president was willing to do. i do not think there has been a congressional prague -- process with more transparency than this one. we have been giving the committee some room because they are in the best position to get a majority. one of the things they are focusing on is howo balance short-term actions the economy moving was medium and long term action to get a definitive

amount of deficit reduction. that is the right balance. >> one step back. the thing that would be reassuring to the markets and the people would b aeficit- reduction agreement that was a bipartisan a had the consensus behind it that allows it to endure and lasting. when you look at the budget that you have put together, you are projecting a percentage of gdp for government expenditures. you have republicans talking about expenditures the code down to 18%. that is an enormous gap. hundreds of billions of dollars. is there consensus? >> there is more consensus on what we need to do to stabilize

the medium term. there is a strong consensus that if you look at the beginning of the year, $4 trillion would keep the debt and deficits from going into the danger zone. we would have to take more action. this question of government size, it get very abstract very quickly. i have to bring it back to what is driving the numbers and are you willing to accept policy. i do not think democrats or republicans are willing to accept the consequences. it would mean a massive reductions in the national defence. a massive reduction in social security and medicare beyond making those programs sound for the next generation. on an abstract level, it would be attractive on the campaign.

i would doubt if they would own the consequences of those policies. it would mean ignoring the fact that we have a new generation retiring that is driving up social security and medicare. that is going to happen. they are getting older. the system was designed to pay for that. we need to deal with the shortfall. doing it as a percentage where it pretends these things happen without consequences is a mistake. we need to balance revenue with expenditure but we cannot pretend that we are willing to drop our guard in the world or eliminate social security and medicare for many of those who need it. >> you think the consensus will

be in the 22% range of gdp? >> i think you have a mixture of issues. on the regulatory stage, if we were where we were in the late 1990's where we were balancing the budget, i do not think you'd be hearing this debate. what has happened is you had a tax cut we could not afford. wars we did not pay for. a recession. we need to get back on track can be honest about what it costs to conduct war. we need to be honest in terms of tax cuts. i think that the issues on the regulatory side are related to the conversation. we have tried -- i do not think it is well known or understood,

to take the regulatory process and bring it into a check. we can show the benefits of regulations and have a better record in terms of out when costs than the clinton or bush should ministrations. the president had stopped regulations he thought we could not handle. we had a debate over health-care reform and wall street reform. these issues are inflated. we're not taking a step back from the fact we need to implement those initiatives. that will involve having rules. the sooner the better. the debate is creating uncertainty that is self fulfilling. a delaying action only adds to uncertainty. we should implement it and settle things down. >> let me ask you one question. you have seen this process for a

long time. i am wondering if you think one of the things that is obscured is the fact there may be a consensus on the need for tax reform. is that correct? when the dust settles, is that going to be a realization? >> prior understand to be the conversation, tax rorm has been at the core of dealing with revenue, a balanced approach. i think we need reform on its own. we have a system that has gotten out of shape again. every 30 years you need to clean it up. the tax system should not skew investment or creating disparities of burden that, apart from being unfair, creates

a lack of confidence that the tax system is on low level. you end up with confidence in the basic instrumentalities of the public sector. i think we need tax reform. to potentially lower rates and end up with a more progressive tax system. it has to be connected with dealing with the deficit. then we will be back where we started from. >> let's open this up. alan, do you want to start? the lights are tough. let me ask jack on behalf of the group. there is a strong sentiment in this room, and we heard it again last night we have heard it over the last three years that

this administration is unfriendly to business. does not understand what drives it and what would be necessary to get to these companies to start creating jobs again. i know you have heard this before. you oversee many of the policies on the budget front and the regulatory front. what is your response to that criticism? >> at the core we have overlapping interests. there ought not to be that sense. we know that the key to the economic future is all of the private firms investing in creating jobs. right now you have a situation where washington does not have the resources or the ability to create long-term engine of economic growth. the private sector is sitting on resources and lacks confidence in the economy to make investments.

unlocking the confidence is critical. my own view, and conversations i have had, issues tend to get conflated. if we saw demand going up, i think there would be more confidence. i do not think it is because of thrule making. if it were about will making, there would be more of a sensitivity to the fact that there are many areas where we roll back rules, we have tried to create a lower burden of regulation. thethe latest one was decision to delay the keystone pipeline. >> in the area of energy and environmental policy, we have been trying to balance our core responsibilities to protect the health and safety of americans

and to make sure we are planning ahead while the energy security of united states in a way that gives both halves of the equation the time and space to work get out. if you look at rules, they are a model for how to do rulemaking. we have had the auto industry and some of our biggest critics in the business organizations acknowledge that is a way you ought to deregulation. we have been working hard to do it that way. our record is outstanding compared to the predecessor administrations. the fact that the economy has not picked upper is not because of the regulatory policy. there have bn studies on it. we started this administration with an economy will in a deeper recession. if you look at the pattern of

the recovery, it is more similar to other recoveries than not. in a long recovery from a recession, that was something the president inherited. the actions he tk, i was not part of that team that was working on that in 2009. i think it is responsible for a significant amount of growth and millions of jobs. our opponents ridiculed it and that is fine but we also have to ask, what would add ripped demand have been like if we had not done the recovery act? would we have had a long recession? when the double dip have bn inevitable? there is a lot talks but we are to be able to continue to grow. the economy is coming back.

the regulatory program is more balanced than it is given credit for. we understand the need for there toe a partnership. we also have to ask our friends in the business community the financial crisis put an imperative on the public policy process to respond. wall street would -- reform was necessary. it has to be done right. we cannot be at a place where we look at the past problem and have a government intervention and to save the financialystem and not reduce the need for the government to step in. >> a question from one of the members about tax reform, does fair and balanced mean more than taxing millionaires and billionaires? doesn't class warfare impede the

ility? >> i think that the charge of class warfare is overstated. if you looked at what we have said, none is criticizing people who are wealthy or successful. in the conversations i have with ceos, i have yet to meet a ceo who has argued that the tax rates should stay where they are. maybe some of you have different views. i think it is a broadly held view among the people i have talked to that we should be talking about tax rates. political rhetoric is not the core of what i do. it is hard to talk about fair and balanced goingp from where they were in the bush administration without critics saying it is class warfare. if i can offer everyone in

packages that would accomplish meaningful reduction and establish a corporateax system with lower rates with tax rates that reflected what we can afford, i would give most of the people to sign up to it. i think it is common sense. >> ron, did you have a question? >> i am ron williams. we heard from the panelists about the impact that medicare is having. we also have an introduction of the care act. how d.c. the title of programs being modified -- do you see the entitlement ograms being

modified? >> the affordable care act had substantial savings in health care. they were scored in savings from the congressional budget office. i think they were politically validated because in the midterm elections, democrats who voted were accused of cutting medicare. because of the savings. the affordable care act is the largest set of health care savings ever. in addition to the size, it put in place a process that is intended to ban the cost curve. you look at what is driving public's help -- sector health care snding, it is the same thing in all of your corporate insurance plans. it is the inflation in the

health-care system. the public sector is not growing faster than the private sector. we have to address some of the issues in our health-care system if we're not going to get our hands around it. if the only decisions are to say that a poor person does not get care, i do not think that is going to do the job. i used to run the academic hospital. you have to cover it and charge everyone else more. if you look at the affordable care act, it was a systemic change. it is hard and controversial. the supreme court is going to have to decide. it has to be given a chance. if you look at the things the speaker was negotiating, it was taken on on the provider side

and the beneficiary side how to get a balanced package. there was an openness on our part to things that would have been considered heresy. we are going to have to get out of our comfort zone and set some boundaries. we cannot go to a place where we say we're going to art tting benefits for the poor or disabled or the elderly. we have to bend to the class curve and put more burdens on providers and individuals. that is what the system is willing to do. there has been substantial progress over this year in terms of the debate. i think the negotiations -- >> we are out of time. one more question. >> i will keep it short. sticking with the deficit reduction plan, if the super

committee is not successful next week, to you think it is possible to resurrect simpson and would you recmend that the president take the leadership sense even though -- they would have failed to do something? >> i think the notion -- it is important for the super committee to succeed. i think it would be important to do it now. it is a mistake to think that should they fail, this issue goesway. if you look at the end of the year, there is a perfect storm at the end of 2012. you have an automatic set of cuts that is triggered now that takes effect in january 2013. i think that is unacceptable. most republicans think in this. and democrats.

it was designed to be obnoxious to everyone. it was supposed to focus congress on getting its work done. one of the reasons the super committee is in gaged is because they want to avoid those cuts. another thing happens in january apart from these automatic cuts. that tax cut are set to expire in january 2013. the tax cuts should be permanent. for the top brackets should go away. i do not think there is going to be a strong sense that taxes should go off on all americans. on the contrary. there's pressure on congress to take serious proposal to send the payroll tax cuts until january 2012. we need to move this year.

should it get to the end of 2012, there will be action. if the super committee fails, i'm not sure it is the goal but the consequence of failure is that it will become a political issue. a framed with real conseences at the end, creating a window for action. it is better for that to happen now. i am willing to be optimistic that the risk of being rotten -- written off as a pollyanna. i think there is a lack of desire to fail. i think they may pull something out. >> jack, thank you very much. [applause]

>> i think we are all here. i would like to welcome my guests. there is no better group to have right now. we have spent a lot of time on united states fiscal position. taking a look at european markets, we have the 10-year government bond all at record highs against the german tenure -- 10-year. austria and france, four 0.5%. the first question i have is, what role is the imf's going to

play in the european debt situation? is it really too big to fail? -- italy too big to fail? >> if you are looking for them -- i think that brings the picture. net income is moving in the right direction. we are working closely with european members. we are pushing for comprehensive improvements. we are happy politically that the new government in italy and greece, we're looking forward to working with them. italy is in the g-20.

we are happy and honored to have them. >> the yield is above 7%. that is or greece and portugal got bailed out. >> that is true. they're determined to do cuts and reform. that is all the right direction. they have to act now. implementation. >> larry, is there room? >> i am discouraged by what my friend zhu min said. recognition is the beginning of a solution. the october agreement was ludicrous to suggest that to greece was not going to default. it