wanted things to go further in congress in terms of stopping the deficit from growing and making big cuts in the federal budget. they did not get there. jim jordan was at the forefront of that in the house. i see him as someone more likely to work with the house leadership now than at the beginning of the year. you see that now in his support of the rise in budget -- ryan budget. in those days, he might not have been as willing to vote for the ryan budget. >> we have seen them not be as rabble rousing as they were in the first six-nine months of last year. you see that in the way he talks about speaker john boehner. not that they were really at odds personally, but his pretty confident in the speaker's leadership. he would not even venture a

guess as to whether the speaker would not be the speaker next year if the republicans hold power. he has confidence for him in that respect. it is interesting what he was saying about the election. he is a hard-core conservative guy who is not ready to endorse romney. marco rubio, as senator from florida, has recently come out and supported romney. he is saying similar what we have heard from jim demint, that he is comfortable with him. >> and that is because republicans are, of all else, desirous of replacing the president. they can work with him to oust barack obama. you can kind of read between the lines and listen between the lines of what these members are saying. even jim demint, the very conservative south carolina senator, is giving a wink and a nod to romney despite the fact

that a lot of them have enormous about his waffling is about abortion and health care reform. these are really important to conservatives. on the other hand, they want electability. that is a big issue. santorum come as much as his views align, they worry that he is less electable. you worry about that being a big part of the discussion right now. >> what is the essence of what is going on behind the scenes to make sure there is a conservative vice-presidential candidate if romney does rise to the top of the contenders? we saw john mccain get more support after sarah palin was added to the ticket. will that help those like jordan say they can support this guy? >> the only candidate you hear

being talked about are those being seen as more conservative than romney. there is no talk of a joe lieberman are something like that this year, which is what we heard four years ago with senator mccain. you hear people be more willing to say, "i think marco rubio, i think chris christie." date usually give the nominee space to make that decision, but there be more forthright about wanting to see this person or that person in the consideration. >> for that reason, i think you will see met romney -- mitt romney leading toward a popular conservative candid it just to help -- candidate to shore up conservative.

santorum and gingrich are running in the south, but the view is that in the general election, they will rally behind romney and vote for him anyway, even in the southern states. you want them to come out and vote. by choosing a conservative vice- president candidate it will help to rally their base and bring more people out. >> i think we're definitely seeing a shift in the republican party where they are fearful of romney being the nominee, but now they are just wary. >> russell berman and susan, thank you for being on "newsmakers" this week. >> coming up, talking about the

politics involved in a presidential election year. each boat at a forum today and you can see their remarks beginning at 12:35 p.m. eastern here on c-span. supreme court justice anthony kennedy considered a swing vote on the court and describe the individual mandate as "unprecedented" during an argument on the constitutionality. they had two hours of argument on whether they can mandate americans to buy health insurance. the cases on appeal from the 11th circuit court in atlanta. >> may it please the court, the

affordable health care act addresses the fundamental and enduring problem. insurance has become the predominant means of paying for health care in this country. insurance has become the predominant means of paying for health care in this country. for most americans of it, 80%, this does provide effective access. excuse me. but for more than 40 million americans, who do not have access to health insurance, either through their employer, medicare, medicaid, this system does not work. the must resort to the individual markets. that market does not provide affordable health care insurance. it does not do so because of the

multi-billion dollar subsidies for the employer market which are not available in the individual market. it does not do so because of a risk of hipaa violations that preclude discrimination against people based upon medical history which do not apply in the individual market. that is an economic problem. >> those are problems that can be addressed directly. >> they are through this act, regulating the means by which health care is purchased. that is the way this act works. under the commerce clause, what congress has done is to enact reforms of the insurance market directed at the insurance market that preclude discrimination based on pre-

existing conditions that require guaranteed issue community rates and a uses -- it uses, the minimum coverage provision is necessary to carry into production those reforms. >> and you create commerce in order to regulate it? >> that is not what is going on here, justice kennedy. we're not seeking to defend the law on this basis. what is being regulated is the method of financing the purchase of health care. that in itself is economic activity with substantial effect on interstate commerce. >> any self purchasing -- if i am in any market at all, my failure to purchase something in that market subjects me to regulation. >> no. that is not our position at all. the health-care market is

characterized by the fact that aside from the few groups that congress chose to exempt from the minimum coverage requirements, those who for religious reasons -- reasons do not want to participate, those who are incarcerated, indian tribes, virtually everyone else is in that market which will be in that market. the distinguishing feature is they cannot -- people cannot generally control when they enter that market or what they need. >> the same it seems to me would be true for the market in emergency services. police, fire, ambulance, roadside assistance, whatever. you do not know when you are going to need it. i am not sure that you will but bush -- the same is true for health care. he did not know if you need a transplant or if you ever will. to extend -- there is a market. can the market require you to buy cell phone? that would facilitate responding when you need emergency services? you could just dialed 911 no matter where you are?

>> no, i think that is different. i do not think we think of that as a market. this is a market. this is regulation. you have a situation in this market not only where people enter in voluntarily as to when they enter and will not be able to control when they enter. >> that is in the same as my hypothetical. you do not know when you will need police assistance. you cannot predict the extent of emergency response you will need. but when you do and the government provides it. that was an important part of your argument. when you need health care, the government will make sure you get it. >> when you need police or fire assistance or ambulance assistance, the government is going to make sure to the best extent it can that you get it. >> the fundamental difference,

mr. chief justice, that is not an issue of market regulation. this is an issue of market regulation and that is how congress look at this problem. there is a market, insurance is provided through a market system. >> do you think there is a market for burial services? >> for burial services? >> yes. >> suppose you and i walked around downtown washington and we found a couple of healthy young people and we stop the man said, "do you know what you are doing? you are financing your burial services because eventually you will die and someone will have to pay for it and if you do not have burial insurance or you have not said money, you will shift the cost to somebody else?" isn't that an artificial way of talking about what someone is doing? is it not equally artificial to say that no one is doing anything -- was doing anything about health care is financing health care services? >> is different. the reason is the burial example is -- the difference here, while regulating the method by which you are paying for something else, health care

and the insurance requirement -- the key thing here is my friends on the other side acknowledge is that it is under the congress's power to guarantee the waiting to end, to impose the minimum coverage position. their argument in -- is it has to occur at the point of sale. >> i do not see the difference. most people will need health care. everybody is going to be buried or cremated at some point. >> one big difference, just as alito, you do not have the cost shifting to other market participants. >> if you do not have money, the state will pay for. >> that is a significant

difference. in this situation, one of the economic effects congress is addressing is the many billions of dollars of uncompensated costs are transferred to other market participants. because health care providers charge higher rates to cover the cost of uncompensated care and insurance companies reflect those rates in higher premiums, translating to $1,000 per family. >> is that not a small part of what the mandate is doing? you can correct me if these figures are wrong. it appears to me that the cbo has estimated the average premium in the market will be $5,800 in 2016. respondents estimate that young, healthy individual targeted by the mandate on average consumes $854 in health services each year. the mandate is forcing these

people to provide a huge subsidy to the insurance companies. for other purposes that the acted serbs. -- the act, which is to serve. if those figures are right, what this mandate is doing is not requiring the the people who are subject to it to pay for the services they are going to consume. it is requiring them to subsidize services that will be received by somebody else. >> i think that is what the respondents argue. it gets to a fundamental problem. >> if they have insurance -- >> it is how >> it is how insurance works. they do not have the effect of forcing insurance companies to take on lots of additional people who they cannot afford to cover because they tend to be the sec. -- they tend to be the sick.

the issue -- and you do so in the absence of a provision, it is not that insurance companies take on more people and need a subsidy coverage. fewer people and put insurance because their rates are not regulated. insurance companies when they have to offer guaranteed rating, they are entitled to make a profit. they charge rates sufficient to cover only the sick population. >> tell me what this. assume for the moment, you may disagree. assume for the moment that this is unprecedented. this is the case beyond what our cases have allowed. if that is so, do not have a heavy burden of justification? i understand that we must presume laws are constitutional. even so, when you are changing the relation of the individual

to the government, we can stipulate what it is, a unique way. do not have the heavy burden of justification to show authorization under the constitution? >> two things about that. we think this is regulation of people's participation in the health-care market. all this minimum coverage provision does is that inquiry -- instead of requiring insurance at the point of -- congress has the authority, the necessary -- necessary proper power to insure people have insurance in advance of the point of sale because of the unique nature of this market. this is a market in which -- although most of the population is in the market most of the time, 83% visit a physician

every year. 96% over a five-year period, virtually everyone in society is in this market. you have to pay for the health care you get. the predominant way is -- in which it is paid for its insurance and the respondents agreed that congress could require that you have insurance in order to -- that pro -- forbids health care from being provided. >> it may well be that everyone needs health care but not everyone needs a heart transplant. not everyone needs a liver transplant. >> that is correct. >> you could -- could you define the market? everyone has to buy food trade you can define the market as food. you can make people like broccoli. -- by broccoli. >> no. it is not a market in which participation is often unpredictable and often involuntary. it is not a market in which too

often do not know before you go in what you need and it is not a market in which if you go in and seek to obtain a product or service -- >> is that the basis for distinguishing this from other situations? you could say the person who needs this has blue eyes. that is -- can distinguish it from other situations. >> is the basis that explains why the government is doing this but is it a basis which shows this is not going beyond what the system of enumerated powers allows the government to do? >> yes, for two reasons. this is the test, this court has articulated it. is congress regulating economic activity with a substantial effect on interstate commerce?

the way in which the statute satisfies the test is on the basis of the factors that i have identified. >> i thought your main point is that unlike food or any other market, when you make the choice, not to buy insurance, even though you have every intent in the world to self insured, to save for it, when disaster strikes, it may not have the money. and the tangible results of that we were told, there was one brief, one maryland hospital bills 7% more because of these zero uncompensated costs. families pay $1,000 more. what was unique about this is it is not my choice whether a want to buy a product to keep me healthy but that -- the choice i am foisting on others if i do not buy the product sooner rather than later. >> that is definitely a

difference that distinguishes this market and justifies -- >> if that is or difference, i am uncertain about your answers to justice kennedy, can you under the commerce clause, congress create commerce were previously none existed. >> i thought the answer to that was since mccullough v. maryland, -- which did not previously exist. the job -- the answer has been yes. i would have thought that your answer, can the government require you to buy so funds or buy cereals, if we propose comparable situations, if we have, for example uniform united states system of paying for burial such as medicare

burial, medicaid burial, chip, emergency burial beside the side of the road, and if congress wanted to rationalize that, the answer would be yes. the same with computers. the same with cell phones if you are driving by the side of the highway and there is a federal emergency service just as you say you have to buy certain mufflers for your car that do not hurt the environment. you can -- does not depend on the situation? >> it does and if congress were to enact laws like that, i would defend them on a rational like that.

i think we are advancing and there were -- the question is whether or not there are any limits on the clause. can you identify for us some limits on the clause? >> the rationale currently under the commerce clause that we're advocating here would not justify forced purchases of commodities for the purpose of stimulating demand. it would not justify purchases of insurance for the purposes -- to situations in which insurance does not serve as the method. >> why not? if congress says the interstate commerce is affected, is that not the end of the analysis? >> no. we think the difference between the situations and the situation is that in those situations, your honor, congress

would be moving to create commerce. hear, congress is regulating existing commerce, economic activity that is already going on. thele's participation in health-care market and regulating to deal with existing facts. >> that is a passage in your reply brief i did not quite grasp. you say health insurance is not purchased for its own sake like a car or broccoli. it is a means of financing health care consumption in care of -- covering universal risk. a car or broccoli is not purchased for their own sake. there purchased for transportation or covering the need for food. >> health insurance is the means of payment for health care. broccoli is not the means of payment for anything else. >> it is satisfying a basic human need. insurance is a need -- a means. >> that is the difference between existing commerce activity in the market already

occurring. people in the health-care market purchasing, obtaining health care services and the creation of commerce and the principle we are advocating here under the clause does not take the step of justifying. >> when we go back to -- the justice asked a question and interrupted your answer to my question. tell me if i am wrong about this. i thought a major point of your argument was that the people who do not participate in this market are making it much more expensive for the people who do.

that is, they will -- a goodly number will get services they cannot afford at the point when they need them. the result is everyone else's premiums get raised. it is not your free choice to do something for yourself. what you do is owned -- going to affect others, affect them in a major way. >> that absolutely is a justification for congress's action. existing economic activity that congress is regulating. >> you could say that about buying a car. if people do not buy cars, the price that those who do buy cars pay will have to be higher. so you can say in order to bring the price down, you are hurting these other people by not buying a car. >> that is not what we're saying. >> i thought it was. >> other people will have to pay more for insurance because you're not buying it. >> it is because you are going in the health-care market, you are going into the market without the ability to pay for what you get to my getting the health care service anyway as a result of the social norms that allow -- to which we have

obligated ourselves. >> did not obligate yourself to that. >> i cannot imagine but if the congress clause would forbid them taking into account, you can do it. does that expand your ability to issue mandates to the people? >> this is not a purchase mandate. this is all law that regulates a method of paying for a service that a class of people -- [unintelligible] or will consume. >> i have seen three -- strands of arguments in your brakes. -- in your briefs. one of them is echoed today. the first strand that i have seen is congress can pass any necessary laws to affect those powers within its rights.

because it made a decision to affect mandatory issuance of insurance, that it could also obligate the mandatory purchase of it. the second strand icy self insurance affects the market. and so, the government can regulate those who self-insure. the third argument, i see all of them as different. what the government is doing and i think it is the argument you're making today, what the government is saying is if you pay for -- if you use health services, you have to pay with insurance. because only insurance will guarantee that whenever means for health care that you have will be covered. because virtually no one, perhaps with the exception of

40% of the population can afford the massive cost if the unexpected happens. this third argument seems to be saying, what we're regulating is health care. when you go for health services, you have to pay for insurance. and since insurance will not issued at the moment you have consumed the project, we can reasonably, necessarily tell you to buy it ahead of time. because you cannot buy it at the moment that you need it. which of these three is your arguments? are all of them your argument? i'm not sure. >> let me state it this way. congress enacted reforms of the insurance market.

began issuing community rating reforms. to do with the very serious problem that exists in 40 million people not be able to get insurance and not access to the health-care market. everybody agrees in this case that those are within the congress's article 1 powers. the minimal coverage provision is necessary to carry those provisions into execution because without them, without those provisions, without minimum coverage, guaranteed and issued community reing will -- rating will make things better. >> you are answering affirmatively to my colleague.

can the government force you into congress? there is no limit to that. >> no. that is the first part or argument. the second part is the means here that congress has chosen. the minimum coverage position is a means that regulates economic activity, namely, your transaction in the health-care market with substantial effects. interstate commerce and it is the conjunction of those that provides a particularly secure foundation for this statute under the congress's power. >> you talked about alternatives congress might have had, other alternatives that the respondents suggest to do with this problem and in particular, your report of mandating insurance at the point at which someone goes to a hospital or an emergency room and asks for care. in congress consider those alternatives? why do it to reject them? how should we think about alternative ways of dealing with these problems? >> the point of difference is

about one of timing. they have agreed that congress has authority to impose an insurance requirement or other penalty at the point of sale and they have agreed that congress has the authority to do that to achieve the same rejections [unintelligible] congress gets substantial differences in the choice of means. if one thinks about the difference between the means, they say congress should have chosen and that means congress did choose. white -- we can see why it was eminently more sensible for congress to choose the means it chose. >> i am not sure which way it cuts if -- let's assume it could use the tax power. to raise revenue and disseminate single payer health service. how does that factor into our

analysis? in one sense, it can be argued that this is what the government is doing. it out to be honest about the power is using and use the correct power. on the other hand, it means that the court can -- congress can do it anyway. i am not sure which way the argument goes. >> i will try to answer the question and get back to the question u.s. -- you asked earlier. i do think one striking feature of the argument that this was a novel exercise of power, is what congress chose to do is rely on market mechanisms and efficiency and a method it has more choice than with the traditional medicare or medicaid type model. it seems ironic to suggest that counts against it. beyond that, in the sense that it is novel, this provision is novel in the same way or unprecedented in the same way that the sherman act was unprecedented when the court upheld it in the northern securities case. the packers in stockyards act was unprecedented. the national labor relations act was unprecedented. or the dairy price supports. >> that all involved commerce. there was no doubt that what was being regulated was commerce. here you are regulating

somebody who is not commerce. i do not agree with you that the relevant market here is health care. you're not regulating health care. your regulating insurance. it is the insurance market you are addressing. you are saying some people who are not in it must be in it. that is different from regulating in any manner. >> commerce that exists out there. >> to the extent we are looking at the scheme, it is regulating that exists out there and the means in which the regulation is made effective here, the minimum coverage provision is a regulation of the way in which people and -- can participate in the method of their payment in the market of health care. that is what it is. i do not think, justice kennedy, getting back to your question. what matters here is whether congress is choosing a tool to use on the problem congress is confronting. that may mean the tool is different from the tool congress has chosen to use in the past.

that is not something that counts against the provision in the commerce clause. >> it is both necessary and proper, what you just said addresses what is necessary. >> yes. >> it has to be fully adapted, necessary does not mean essential. just recently adapted. in addition, it has to be proper. we have held in two cases that something was not proper because it violated the sovereignty of the states. the argument here is that this also is may be necessary but it is not proper because it violates an equally evident principle. the federal government is not supposed to be a government that has all powers. it is supposed to be a government of limited powers and that is what all this questioning is about. what is left if the government

can do this? what else can not do? >> this does not violate the norm as this court articulated it as it does not interfere with the state as sovereigns. this is a regulation -- >> that was my point. that is not the only constitutional principle that exists. this is the principle that the federal government is a government of enumerated powers and the vast majority of powers remain in the states and did not belong to the federal government. do you acknowledged that? >> of course we do. >> and the way in which this court and its cases has policed the boundary, what is the national sphere and what is in the locals fear, to ask if congress is regulating economic

activity? it is impossible in view of our history to say that congress is invading the state spear. this is a market in which 50% of the people in this country get their health care through their lawyer. there is a massive federal tax subsidy of $250 billion a year that makes that more affordable. regulations insure the kinds of bans on pre-existing condition discrimination and pricing practices that occur in the individual market do not occur. whatever the states have chosen not to do, the federal government can do. >> no. not at all. the power is not given to the federal government, that is for the states. the argument here is the people were left to decide whether they wanted to buy insurance or not. >> this brought -- what the court has said it will be a substantial departure from what

the court has said, when congress is regulating economic activity with a substantial effect on interstate commerce, that will be upheld. that is what is going on here. and to embark on, i would submit with all due respect, to embark on the kind of analysis that my friends on the other side suggest the court ought to embark on is to import due process. they key in lochner is we were talking about regulation of the states, right? the states are not limited to enumerated powers. the federal government is. it seems to me it is a different question when you ask yourself whether or not they're going to be limits on the federal power as opposed to the states which was the issue in lochner. >> i agree except the way in which the federal government stays in its sphere is by policing the boundary.

is the government economic -- regulating economic activity? >> the reason this is concerning is because it requires the individual to do an affirmative act. our law has been you do not have the duty to rescue someone if that person is in danger. you do not have a duty to stop a man walking in from the car. absent some sort of relationship. there is severe moral criticism of that role but that is generally the rule. here the government is saying the federal government has the duty to tell the individual citizen it must act and that is different from what we have in previous phases. it changes the relationship of the federal government to the individual in a fundamental way. >> i do not think so, justice kennedy.

it is predicated on the participation of these individuals in the market for health care services. it happens to be that this is a market in which aside from the group's the statutes excludes, virtually everybody participates. it is a regulation of their participation in that market. >> is critical how you define the market. if i understand the law, the policies you are requiring people to purchase involve must contain a provision for maternity and newborn care, pediatric services, a substance used treatment. it seems to me that you cannot say that everybody is going to

need substance-abuse treatment. substance used treatment for pediatric services and yet, that is part of what you require them to purchase. >> is part of what the statute requires insurers to offer and the reason is is big -- it is trying to define minimal and essential coverage. there is a market in which everyone participates because everyone might need a certain range of health-care services. and yet, you are requiring people who are never going to need pediatric or maternity services to participate in that market. with respect to what insurance has to cover, your honor, congress isn't tired -- entitled to its attitude of making judgments about what the appropriate tsk -- scope of coverage is. you might think you are healthy and you might think that you are being forced to subsidize every -- someone else. this is not a market in which

you can say there is an immutable class of healthy people who are being forced to subsidize the and healthy. this is a market in which you may be healthy one day and you may be a very unhealthy participant in the market the next day and that is a fundamental difference. >> that does not apply to a lot of what you are requiring people to purchase. pediatric services, maternity services, you cannot say that everybody is going to participate in this substance use treatment market. and yet you require people to purchase insurance coverage for that. >> congress is enacting economic regulation here, it has latitude to define essential, the attributes of essential coverage. that does not seem to me implicating the question whether congress is engaging in economic regulation and solving an economic problem. >> are you denying this? if you took the group of people who are subject in the mandate and you calculated the amount of health care services this whole group would consume, and figured out the cost of the insurance policy to cover the services that group would consume, the cost of the policy would be much, much less than the kind of policy these people are now going to be required to

purchase. under the affordable care act. >> well, while they are young and healthy, that made by -- that may be true. they're not born to be healthy forever. you do not know what among them is the person that will be hit by the bus are get this definitive diagnosis. >> some people will be hit by a bus. some will unexpectedly contracted or be diagnosed with a disease that is very expensive to treat. if you take their lost any calculate it, it is a lot less than the amount they will be required. >> to cannot just sit on their shifting their cause. >> they give the benefit they

would not otherwise have. i do not think it would be unusual to say it is and a legitimate exercise of the car myers power. telephone rates for a century were said to be the exercise of the commerce power in the way that some people paid rates higher than their cost to subsidize it. >> only if you make phone calls. >> it is a live in the modern world. everyone needs a telephone. and it is the same thing where they support the court upheld this. the economic get those as advantageous contracts. it is sure they can raise the month of milk. and the commerce power -as a result of the exercise of the subsidizing somebody else - >> and this is especially true, isn't it, general - >> -- because that's the judgment congress has made.

>> -- verrilli, because in this context, the subsidizers eventually become the subsidized? >> well, that was the point i was trying to make, justice kagan, that you're young and healthy one day, but you don't stay that way. and the -- the system works over time. and so i just don't think it's a fair characterization of it. and it does get back to, i think -- a problem i think is important to understand - >> we're not stupid. they're going to buy insurance later. they're young and -- and need the money now. >> but that's - >> when -- when they think they have a substantial risk of incurring high medical bills, they'll buy insurance, like the rest of us. >> that's the problem, justice scalia. that's -- and that's exactly the experience that the states had that made the imposition of guaranteed-issue and community rating not only be ineffectual but be highly counterproductive. rates, for example, in new jersey doubled or tripled, went from 180,000 people covered in this market down to 80,000 people covered in this market. in kentucky, virtually every insurer left the market. and the reason for that is because when people have that guarantee of -- that they can

get insurance, they're going to make that calculation that they won't get it until they're sick and they need it, and so the pool of people in the insurance market gets smaller and smaller. the rates you have to charge to cover them get higher and higher. it helps fewer and fewer -- insurance covers fewer and fewer people until the system ends. this is not a situation in which you're conscripting -- you're forcing insurance companies to cover very large numbers of unhealthy people - >> you could solve that problem by simply not requiring the insurance company to sell it to somebody who has a -- a condition that is going to require medical treatment, or at least not -not require them to sell it to him at -- at a rate that he sells it to healthy people. but you don't want to do that. >> but that seems to me to say, justice scalia, that congress -- that's the problem here. and that seems to be - >> that seems to me a self- created problem. >> congress cannot solve the problem through standard economic regulation, and that -- and -- and i do not think that can be the premise of our understanding of the commerce clause - >> whatever - >> -- this is an economic problem - >> -- whatever problems congress's economic regulation produces, whatever they are, i think congress can do something

to counteract them. here, requiring somebody to enter -- to enter the insurance market. >> this is not a -- it's not a problem of congress's creation. the problem is that you have 40 million people who cannot get affordable insurance through the means that the rest of us get affordable insurance. congress, after a long study and careful deliberation, and viewing the experiences of the states and the way they tried to handle this problem, adopted a package of reforms. guaranteed-issue and community rating, and -- and subsidies and the minimum coverage provision are a package of reforms that solve that problem. i don't -- i think it's highly artificial to view this as a problem of congress's own creation. >> is your argument limited to insurance or means of paying for health care? >> yes.

it's limited to insurance. >> well, now why is that? congress could -- once you -- once you establish that you have a market for health care, i would suppose congress's power under the commerce clause meant they had a broad scope in terms of how they regulate that market. and it would be -- it would be going back to lochner if we were put in the position of saying no, you can use your commerce power to regulate insurance, but you can't use your commerce power to regulate this market in other ways. i think that would be a very significant intrusion by the court into congress's power. so i don't see how we can accept your -it's good for you in this case to say oh, it's just insurance. but once we say that there is a market and congress can require people to participate in it, as some would say -- or as you would say, that people are already participating in it -- it seems to me that we can't say there are limitations on what congress can do under its commerce power, just like in any other area, all -- given significant deference that we accord to congress in this area, all bets are off, and you could regulate that market in any rational way.

>> but this is insurance as a method of payment for health care services -- >> exactly. >> and that -- and that is -- >> and you're worried -- that's the area that congress has chosen to regulate. there's this health care market. everybody's in it. so we can regulate it, and we're going to look at a particular serious problem, which is how people pay for it. but next year, they can decide everybody's in this market, we're going to look at a different problem now, and this is how we're going to regulate it. and we can compel people to do things -- purchase insurance, in this case. something else in the next case, because you've -- we've accepted the argument that this is a market in which everybody participates. >> mr. chief justice, let me answer that, and then if i may, i'd like to move to the tax power argument. >> can -- can i tell you what the something else is so -- while you're answering it? the something else is everybody has to exercise, because there's no doubt that lack of exercise cause -- causes illness, and that causes health care costs to go up. so the federal government says everybody has to -- to join a -- an exercise club.

somethingthat's the else. >> no. the -- the position we're taking here would not justify that rule, justice scalia, because health club membership is not a means of payment for -- for consumption of anything in -- in a market. >> right. right. that's -- that's exactly right, but it doesn't seem responsive to my concern that there's no reason -- once we say this is within congress's commerce power, there's no reason other than our own arbitrary judgment to say all they can regulate is the method of payment. they can regulate other things that affect this now-conceded interstate market in health care in which everybody participates. >> but i think it's common ground between us and the respondents that this is an interstate market in which everybody participates. and they agree that -- that congress could impose the insurance requirement at the point of sale. and this is just a question of timing, and whether congress's -whether the necessary and proper authority gives congress, because of the particular features of this

market, the ability to impose the -- the insurance, the need for insurance, the maintenance of insurance before you show up to get health care rather than at the moment you get up to show -- >> right. no, i think -- >> -- show up to get health care. and that -- >> -- unless i'm missing something, i think you're just repeating the idea that this is the regulation of the method of payment. and i understand that argument. and it may be -- it may be a good one. but what i'm concerned about is, once we accept the principle that everybody is in this market, i don't see why congress's power is limited to regulating the method of payment and doesn't include as it does in any other area. what other area have we said congress can regulate this market but only with respect to prices, but only with respect to means of travel? no. once you're -- once you're in the interstate commerce and can regulate it, pretty much all bets are off. >> but we agree congress can regulate this market. erisa regulates this market. hipaa regulates this market. the -- the market is regulated at the federal level in very significant ways already. so i don't think that's the question, mr. chief justice. the question is, is there a

limit to the authority that we're advocating here under the commerce power, and the answer is yes, because we are not advocating for a power that would allow congress to compel purchases -- >> could you just -- before you move on, could you express your limiting principle as succinctly as you possibly can? congress can force people to purchase a product where the failure to purchase the product has a substantial effect on interstate commerce -- if what? if this is part of a larger regulatory scheme? was that it? was there anything more? >> we got two and they are -- they are different. let me state them. first with respect to the comprehensive scheme. when congress is regulating -- is enacting a comprehensive scheme that it has the authority to enact that the necessary and proper clause gives it the authority to include regulation, including a regulation of this kind, if it is necessary to counteract risks attributable to the scheme

itself that people engage in economic activity that would undercut the scheme. it's like -- it's very much like wickard in that respect, very much like raich in that respect. with respect to the -- with respect to the -- considering the commerce clause alone and not embedded in the comprehensive scheme, our position is that congress can regulate the method of payment by imposing an insurance requirement in advance of the time in which the -- the service is consumed when the class to which that requirement applies either is or virtually is most certain to be in that market when the timing of one's entry into that market and what you will need when you enter that market is uncertain and when -- when you will get the care in that market, whether you can afford to pay for it or not and shift costs to other market participants.

so those -- those are our views as to -those are the principles we are advocating for and it's, in fact, the conjunction of the two of them here that makes this, we think, a strong case under the commerce clause. >> general, could you turn to the tax clause? >> yes. >> i have to look for a case that involves the issue of whether something denominated by congress as a penalty was nevertheless treated as a tax, except in those situations where the code itself or the statute itself said treat the penalty as a tax. do you know of any case where we've done that? >> well, i think i would point the court to the license tax case, where it was -was denominated a fee and nontax, and the court upheld it as an exercise of the taxing power, in a situation in which the structure of the law was very much the structure of this law, in that there was a separate stand-alone provision that set the predicate and then a

separate provision in closing -- >> but fees, you know, license fees, fees for a hunting license, everybody knows those are taxes. i mean, i don't think there is as much of a difference between a fee and a tax as there is between a penalty and a tax. >> and that, and -- and i think in terms of the tax part, i think it's useful to separate this into two questions. one is a question of characterization. can this be characterized as a tax, and second, is it a constitutional exercise of the power? with respect to the question of characterization, the -- this is -- in the internal revenue code, it is administered by the irs, it is paid on your form 1040 on april 15th, i think -- >> but yesterday you told me -- you listed a number of penalties that are enforced through the tax code that are not taxes and they are not penalties related to taxes. >> they may still be exercise of the tax -- exercises of the taxing power, justice ginsburg, as -- as this is, and i think there isn't a case in which the court has, to my mind, suggested anything that bears this many indicia of a tax can't

be considered as an exercise of the taxing power. in fact, it seems to me the license tax cases point you in the opposite direction. and beyond that your -the -- it seems to me the right way to think about this question is whether it is capable of being understood as an exercise of the tax. >> the president said it wasn't a tax, didn't he? >> well, justice scalia, what the -- two things about that, first, as it seems to me, what matters is what power congress was exercising. and they were -- and i think it's clear that -- that the -- the -- they were exercising the tax power as well as -- >> you're making two arguments. number one, it's a tax, and number two, even if it isn't a tax, it's within the taxing power. i'm just addressing the first. >> if the president said -- >> is it a tax or not a tax? the president didn't think it was. >> the president said it wasn't a tax increase because it ought to be understood as an incentive to get people to have insurance. i don't think it's fair to infer from that anything about whether that is an exercise of the tax power or not. >> a tax is to raise revenue,

tax is a revenue-raising device, and the purpose of this exaction is to get people into the health care risk -- risk pool before they need medical care, and so it will be successful. if it doesn't raise any revenue, if it gets people to buy the insurance, that's -- that's what this penalty is -- this penalty is designed to affect conduct. the conduct is buy health protection, buy health insurance before you have a need for medical care. that's what the penalty is designed to do, not to raise revenue. >> that -- that is true, justice ginsburg. this is also true of the marijuana tax that was withheld in sanchez. that's commonly true of penalties under the code. they do -- if they raise revenue, they are exercises of the taxing power, but their purpose is not to raise revenue.

their purpose is to discourage behavior. i mean, the -- the mortgage deduction works that way. when the mortgage deduction is -- it's clearly an exercise of the taxing power. when it's successful it raises less revenue for the federal government. it's still an exercise of the taxing power. so, i don't -- >> i suppose, though, general, one question is whether the determined efforts of congress not to refer to this as a tax make a difference. i mean, you're suggesting we should just look to the practical operation. we shouldn't look at labels. and that seems right, except that here we have a case in which congress determinedly said this is not a tax, and the question is why should that be irrelevant? >> i don't think that that's a fair characterization of the actions of congress here, justice kagan. on the -- december 23rd, a point of constitutional order was called to, in fact, with respect to this law. the floor sponsor, senator baucus, defended it as an exercise of the taxing power. in his response to the point of order, the senate voted 60 to39 on that proposition.

the legislative history is replete with members of congress explaining that this law is constitutional as an exercise of the taxing power. it was attacked as a tax by its opponents. so i don't think this is a situation where you can say that congress was avoiding any mention of the tax power. it would be one thing if congress explicitly disavowed an exercise of the tax power. but given that it hasn't done so, it seems to me that it's -- not only is it fair to read this as an exercise of the tax power, but this court has got an obligation to construe it as an exercise of the tax power, if it can be upheld on that basis. >> why didn't congress call it a tax, then? >> well -- >> you're telling me they thought of it as a tax, they defended it on the tax power. why didn't they say it was a tax? >> they might have thought, your honor, that calling it a penalty as they did would make it more effective in accomplishing its objective. but it is -- in the internal revenue code it is collected by

the irs on april 15th. i don't think this is a situation in which you can say -- >> well, that's the reason. they thought it might be more effective if they called it a penalty. >> well, i -- you know, i don't -- there is nothing that i know of that -- that illuminates that, but certainly -- >> general, the problem goes back to the limiting principle. is this simply anything that raises revenue that congress can do? >> no. there are certain limiting principles under the -- >> so there has to be a limiting principle -- >> -- taxing power, and they -- and i think, of course, the constitution imposes some, got to be uniform, can't be taxed on exports, if it's a direct tax, it's got to be apportioned. beyond that, the limiting principle, as the court has identified from drexel furniture to kurth ranch, is that it can't be punishment, punitive in the guise of a tax. and there are three factors of court has identified to look at that. the first is the sanction and how disproportionate it is to the conduct, the second is whether there is scienter, and the third is whether there is an -- an -- an administrative apparatus out there to enforce the tax. now in -- in bailey v. drexel furniture, for example,

the tax was 10 percent of the company's profits, even if they had only one child laborer for one day. there was a scienter requirement, and it was enforced by the department of labor. it wasn't just collected by the internal revenue service. here you don't have any of those things. this -- the -- the penalty is calculated to be no more than, at most, the equivalent of what one would have paid for insurance if you forgone. there is no scienter requirement, there is no enforcement apparatus out there. so, certain -- >> can be viewed as tax if it does impose a requirement on people that are not subject to the penalty within the tax? >> i think that it could for the reasons i discussed yesterday. if it is the view of the court that it cannot be, then i think that's the right way to handle this case is to analogy new york

against the united states, in which the court read the ahashal division as setting the predicate and the other divisions were only sanction to to get the predicate met. >> the discussion that we had earlier about this being a uniform scheme, it really does not matter? and this is a tax and the federal government could have said, without the rest of this legislation, that everyone that does not buy health insurance at a certain age will be taxed so much money? right? propofol >> they use their powers together to solve the problem of the market. >> but you did not need that. raising money is enough. >> thank you, general. >> we will take a pause for a

minute or so, mr. clemente. >> all right, let's started again. mr. clemente? >> mr. chief justice, may it please the court, the mandate represents an unprecedented effort in congress to compel individuals to enter congress in order to better regulate commerce. it gives congress the power to regulate existing powers. it does not give congress the far greater power to compel people to enter commerce to created in the first place. when they passed a statute, they made findings about why they thought they could regulate

this. it justified the mandate as a regulation of the economic decision to forgo the purchase of health insurance. that is a theory without any limiting principle. >> here is the general's position that you have proceeded with. that congress could say that if you are going to consume health services, you have to pay by way of service? >> that is right. we say that consistent with jurisprudence, if you regulate the point of sale, you regulate commerce. >> so, what do you do with the impossibility of buying insurance at the point of consumption? virtually in force insurance companies to sell it to you? >> there are two points to make on that. much of these discussions have proceeded on the assumption that the only thing at issue is

emergency room visits and the only thing being imposed is catastrophic care coverage. but much of the insurance being covered is for ordinary preventive care and office visits, things that one can predict. there is a big part of the market regulated here that would not pose the problem you are suggesting. but it would suddenly be possible to regulate at that point. you could certainly say that there is a mandate on the company. and maybe you will have to share amongst yourselves. but people have to agree to sign up at that point and regulate a point of sale. >> now it seems that you're just talking about a matter of timing. that the question is -- when does it make best sense to regulate that transaction? congress certainly has it in its authority to decide that rather than at the point of sale, given an insurance based mechanism, it makes sense to do it earlier.

it is just a matter of timing. >> we do not think it is a matter of timing alone. if congress tried to regulate at the point of sale, the one group that it would not capture at all are the people that do not want to purchase health insurance and have no plans of using those services in the near term. congress very much wanted to capture those people. those people are the golden geese that pay for the entire lowering of the premium. >> maybe i have not stated it accurately. if it is true that the non- insured young adults are an actuarial reality in so far as the way that health insurance companies figure risk, the person sitting at home in their living room is an actuarial

reality that can and must be measured for health service purposes. is that fair? >> there are at least two or three problems with it. as suggested earlier, someone not in the insurance market is not relevant as an actuarial risk. " we find is the relatively young and healthy would have a certain pool of actuarial risk that would lead to lower premiums. the people that would be captured by the rating would presumably have a higher list profile. one of the things they sought to accomplish was to force individuals into the insurance market to subsidize those already in it. that is not my speculation, that is finding i 43a of the brief. >> does that not work -- does that not put weight on what

social security does? congress sought a problem of people needing to have old age and survivors insurance. yes, they did it through a tax. because if we do not have the healthy in it, they are not going to need the money to pay for the ones who become old or disabled, or widowed. there was a big fuss about that in the beginning, because a lot of people said, and maybe some people did today, that they could do much better if they were left alone, and they are forcing me to pay for this show so security that i do not want. so, if congress could see this as a problem, we would need to

have a group that would subsidize the ones who're going to get the benefits. you are saying that the only way that can be done can involve the private markets if they want to do this. is that your position? >> i do not think that it is. i think that there are other options available. the most straightforward would be to figure out what amount of subsidy is necessary to pay for guaranteed issuing. once we calculate the amount of subsidy, we could have a tax that spends generally through everyone to pay for that. that is the way we pay for most subsidies. >> could the government say -- everyone pays their share of

health care responsibility payment? for all the money that we are forced to spend on health care, the government, but everyone who has an insurance policy, could the government do that? >> the government might be able to do that. it might raise issues about whether or not that is a valid exercise of the taxing power. >> under what theory would it not be? we get tax credits for having solar powered homes. we get tax credits for using fuel-efficient cars. why could we not get a tax credit for having health insurance and saving the government from caring for us? >> i think that it would depend on how it was formulated. the constitutional concern would be that it would be a disguised permissible pact.

i think that it is worth realizing that taxing power is limited as a direct tax in the framing generation. there is little doubt that both would agree that a tax on not having a carriage would clearly have been a direct -- a direct tax. if you look at hilton against the united states, that is this court's first directive. >> can i go back a step? some people think it will save a lot of money. some people do not. i am focusing on the commerce clause. i looked back history.

sometimes congress can create commerce out of nothing. that is the national bank, which is created out of nothing to create other commerce out of nothing. i look back into history and it seems clear that there are substantial effects on interstate commerce. congress can act. i look at a person who is growing marijuana, a farmer who is growing wheat for consumption, they seem to have more substantial a facts. is this commerce? seems to me that more commerce than marijuana. is it? is it a regulation? why not? if creating the bank is, but one thing is different? it means you're making someone do something.

can congress not make people drive faster on the road? did they not make that man growing his own wheat allowed into the market to buy other wheat for their cows? if you married someone who had marijuana in her basement, would they not have to go and get rid of it? where does this distinction come from? sounds like sometimes you can, sometimes you cannot. so, what is argue here is that there is a large group -- but what about if we discover that a disease is sweeping the united states? 40 million people are susceptible, 10 million of which will die. can the federal government not just say all of them should get inoculation? 57% of those people who visit emergency care or other care, which we are paying for, 22% of

those pay more than $100,000 for that? congress thinks we are in the middle of this big thing? we just want to rationalize the system we are already in. you have the whole argument. i would like you to tell me, looking at those questions in reverse order -- [laughter] it is one question, looking back at that history. the thing that i can see, if you say to some people -- go by -- why does that make it different in terms of the commerce clause? >> let me start at the beginning of your question. mccullough was not a commerce power. it was not noted. the corporation was not just this -- justified and it was not a case where they said it was ok to conjure up the bank. of course, what the court did not say, and it would have had a

different reaction, is that they would not just have the banks. they would force the citizenry to put all of their money in the bank because they know it would be secure. the framers would have identified the difference and i do not think that the great chief justice would have said that forcing people to put their deposits in the bank of the united states was necessary and proper. looking to the cases that you mentioned, there is no case like this. which is telling. the regulation of the wheat market, all of this effort to address the supply side and what producers can do, congress was trying to support the price of wheat, but it was much more efficient to make everyone by 10 loaves of bread. that would have been much more of a direct effect on the price in the prevailing market, but we did not do that. we did not say, when we had problems with the automobile

industry, we're going to have everyone over $100,000 has to buy a new car. >> the key to the government argument to the contrary is that everyone is in this market. it is all right to regulate because that is a particular market in which the farmer had been participating. everyone is in this market, making it very different from the hypothetical as you came up with and all the regulate is how you come -- how you pay for it. >> with respect, you have to say -- what market are we talking about? the government cannot say everyone is in that market. >> does that not seem like cutting the bologna thin? health insurance seems to exist

only for the purpose of financing health care. they are inextricably linked. we do not get insurance to stare at the certificate. we get it so that we can go and access health care. >> i do not think that is right. i think that what health insurance does is it allows you to diversify risk. it is not just a matter of paying now as opposed to paying later. it guarantees you an up front, locked in payment if you incur much greater expenses. every great -- every market that i know, we let the people make the decision, whether they are risk averse or not. >> we do not -- we tell people to buy our insurance. the states to, although i will ask a question. do you think that some states decided not to impose an insurance requirement, the

federal government would be without power to legislate and require every individual to buy car insurance? >> let me say this, which is to say they you are right in the first point. that goes back -- goes back to the substantive due process question. is it only that the states can do this? it indisputably affects commerce. the federal government will no longer be permitted to legislate in this area? >> you might make a different argument, unless you try to say -- >> i have never gotten into an accident, thankfully, and i hope never. the vast majority of people have never in which they have injured others, yet we pay for it beautifully every year on the

possibility that at some point we must get into that accident. >> there are lots of people in manhattan, for example, without car insurance, because they do not have cars. they have the option to withdraw from out -- from the market. even the car market is different from this market. that is one of the real problems with this. >> the given is that virtually everyone, absent some intervention from above, meaning that someone's life would be cut short in a fadeaway, virtually everyone would all use health care. >> at some point that is right, but all sorts of people will not use health care in the next year, which is relevant for insurance. >> you think you know actual -- better than the actuaries or member of congress -- members of

congress to work on it? look at the people who are not insured and say -- which ones next year will or will not use emergency care? can you do that any better than if we knew that 40 million people were about to suffer a contagious disease and only 10 million would get sick? we do not know which. >> of course not. once congress decides this, they will get all sorts of latitude to make the right judgments on which actuarial to rely on and which ones not to. the question that is a proper question for this court is whether or not for the first time in our history congress has the power to compel people into commerce because it turns out that it would be an efficient thing in terms of the optimal regulation of that market.

cahow>> but, mr. clement, this goes back to the chief justice's question. but, of course, the theory behind, not just the government's case, but the theory behind this law is that people are in this market right now, and they are in this market because people do get sick, and because when people get sick, we provide them with care without making them pay. and it that would be different, you know, if you were up here saying, i represent a class of christian scientists. then you might be able to say, look, you know, why are they bothering me. but absent that, you're in this market. you're an economic actor. >> well, justice kagan, once again, it depends on which market we're talking about. if we're talking about the health care insurance market - >> well, we are talking about the health insurance market, which is designed to access the health care market. >> and with respect to the health insurance market that's designed to have payment in the health care market, everybody is not in the market. and that's the premise of the statute, and that's the problem congress is trying to solve. and if it tried to solve it through incentives, we wouldn't be here; but, it's trying to

solve it in a way that nobody has ever tried to solve an economic problem before, which is saying, you know, it would be so much more efficient if you were just in this market - >> but they are in the market in the sense that they are creating a risk that the market must account for. >> well, justice kennedy, i don't think that's right, certainly in any way that distinguishes this from any other context. when i'm sitting in my house deciding i'm not to buy a car, i am causing the labor market in detroit to go south. i am causing maybe somebody to lose their job, and for everybody to have to pay for it under welfare. so the cost shifting that the government tries to uniquely to associate with this market, it is everywhere. and even more to the point, the rationale that they think ultimately supports this legislation, that look, it's an economic decision, once you make the economic decision, we aggregate the decision, there is a substantial effect on commerce. that argument works here. it works in every single industry. >> of course we do know that there are a few people, more in new york city than there are in wyoming, who never will buy a car. but we also know here, and we

don't like to admit it, that because we are human beings we all suffer from the risk of getting sick. and we also all know that we'll get seriously sick. and we also know that we can't predict when. and we also know that when we do, there will be our fellow taxpayers through the federal government who will pay for this. if we do not buy insurance, we will pay nothing. and that happens with a large number of people in this group of 40 million, none of whom can be picked out in advance. now, that's quite different from a car situation, and it's different in only this respect. it shows there is a national problem, and it shows there is a national problem that involves money, cost insurance. so if congress could do this, should there be a disease that strikes the united states and they want every one inoculated even though ten million will be hurt, it's hard for me to decide why that isn't interstate commerce, even more so where we know it affects everybody.

>> well, justice breyer, there are other markets that affect every one-- transportation, food, burial services, though we don't like to talk about that either. there also are situations where there are many economic effects from somebody's failure to purchase a product. and if i could, if i could talk about the difference between the health insurance market and the health care market, i mean, ultimately i don't want you to leave here with the impression that anything turns on that. because if the government decided tomorrow that they would come up with a great -- some of these -- some private companies come up with a great new wonder drug that would be great for everybody to take, would have huge health benefits for everybody; and by the way, also if everybody had to buy it, it would facilitate economies of scale, and the production would be great, and the price would be cheaper and force everybody in the health care market, the actual health care market to buy the wonder drug, i'd be up here making the same argument. i would be saying that's not a

power that's within the commerce power of the federal government. it is something much greater. and it would have been much more controversial. that's why the important things. in federalist 45, madison says the commerce power. that's a new power, but it's not one anyone has any apprehension about. the reason they didn't have any apprehension about it is because it's a power that only operated once people were already in commerce. you see that from the text of the clause. the first kind of commerce congress gets to regulate is commerce with foreign nations. did anybody think the fledgling republic had the power to compel some other nation into commerce with us? of course not. and in the same way, i think if the framers had understood the commerce power to include the power to compel people to engage in commerce - >> well, once again though, who's in commerce and what are they in commerce? if the effect of all these uninsured people is to raise everybody's premiums, not just when they get sick, if they get sick, but right now in the aggregate, and wickard and raich tell us we should look at the

aggregate, and the aggregate of all these uninsured people are increasing the normal family premium, congress says, by a thousand dollars a year. those people are in commerce. they are making decisions that are affecting the price that everybody pays for this service. >> justice kagan, again, with all due respect, i don't think that's a limiting principle. my unwillingness to buy an electric car is forcing up the price of an electric car. if only more people demanded an electric car there would be economies of scale, and the price would go down. >> not necessarily, mr. clement. and it's different because of the nature of the health care service, that you are entitled to health care when you go to an emergency room, when you go to a doctor, even if you can't pay for it. so the difference between your hypotheticals and the real case is the problem of uncompensated care which - >> justice kagan, first of all, i do think there -- this is not the only place where there's uncompensated care.

if some -- if i don't buy a car and somebody goes on welfare, i'm going to end up paying for that as well. but let me also say that there is a real disconnect then between that focus on what makes this different and statute that congresses passed. if all we were concerned about is the cost sharing that took place because of uncompensated care in emergency rooms, presumably we have before us a statute that only addressed emergency care and catastrophic insurance coverage. but it covers everything, soup to nuts, and all sorts of other things. and that gets at the idea that there is two kinds of cost shifting that are going on here. one is the concern about emergency care and that somehow somebody who gets sick is going to shift costs back to other policy areas -- holders. but there is a much bigger cost shifting going on here, and that's the cost shifting that goes on when you force healthy people into an insurance market precisely because they are healthy, precisely because they are not likely to go to the emergency room, precisely because they are not likely to use the insurance they are forced to buy in the health care insurance.

that creates a huge windfall. it lowers the price of premiums. and again, this is not just some lawyer up here telling you that's what it does and trying to second-guess the congressional economic decisions. this is congress's findings, findings i on page 43 a of the appendix to the government's - >> all that sounds like you're debating the merits of the bill. you ask really for limiting principles so we don't get into a matter that i think has nothing to do with this case-- broccoli, okay? and the limiting principles, you've heard three. first, the solicitor general came up with a couple joined, very narrow ones. you've seen in lopez this court say that we cannot, congress cannot get into purely local affairs, particularly where they are noncommercial. and, of course, the greatest limiting principle of all, which not too many accept, so i'm not going to emphasize that, is the limiting principle derived from the fact that members of congress are elected from states and that 95 percent of the law of the united states is state law.

that is a principle though enforced by the legislature. the other two are principles, one written into lopez and one you just heard. it seems to me all of those eliminate the broccoli possibility, and none of them eliminates the possibility that we are trying to take the 40 million people who do have the medical cost, who do affect interstate commerce and provide a system that you may like or not like. that's where we are in limiting principles. >> well, justice breyer, let me take them in turn. i would encourage this court not to garcia-ize the commerce clause and just simply say it's up to congress to police the commerce clause. so i don't think that is a limiting principle. second of all - >> yes, but that's exactly what justice marshall said in gibbons. he said that it is the power to regulate, the power like all others vested in congress is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations other than those prescribed in the constitution.

but there is no conscription in the, set forth in the constitution with respect to regulating commerce. >> i agree 100 percent, and i think that was the chief justice's point which was once you open the door to compelling people into commerce based on the narrow rationales that exist in this industry, you are not going to be able to stop that process. >> i would like hear you address justice breyer's other, other two principles. >> well, the other two principles are lopez -- and this case really is not -- i mean, you know, lopez is a limit on the affirmative exercise of people who are already in commerce. the question is, is there any other limit to people who aren't in commerce? and so i think this is the case that really asks that question. and then the first point which was i take it to be the solicitor general's point is, with all due respect, simply a

description of the insurance market. it's not a limiting principle, because the justification for why this is a valid regulation of commerce is in no way limited to this market. it simply says, these are economic decisions, they have effect on other people, my failure to purchase in this market has a direct effect on others who are already in the market. that's true of virtually every other market under the sun. >> and now maybe return to justice sotomayor's question. >> i'd be delighted to, which is -- i mean, i -- you are absolutely right. once you're in the commerce power, there is not -- this court is not going to police that subject maybe to the lopez limit. and that's exactly why i think it's very important for this court to think seriously about taking an unprecedented step of saying that the commerce power not only includes the power to regulate, prescribe the rule by which commerce is governed, the rule of gibbons v. ogden. but to go further and say it's not just prescribing the rule for commerce that exists but is the power to compel people to enter into commerce in the first place. i would like to say two very brief things about the taxing

power, if i could. there are lots of reasons why this isn't a tax. it wasn't denominated a tax. it's not structured as a tax. if it's any tax at all, though, it is a direct tax. article i, section 9, clause 4, the framers would have had no doubt that a tax on not having something is not an excise tax but a forbidden direct tax. that's one more reason why this is not proper legislation because it violates that. the second thing is i would urge you to read the license tax case which the solicitor general says is his best case for why you ignore the fact that a tax is denominated into something other. because that is a case where the argument was that because the federal government had passed a license not a tax, that somehow that allowed people to take actions that would have been unlawful under state law, that this was some special federal license to do something that was forbidden by state law. this court looked beyond the label in order to preserve federalism there. what the solicitor general and the government ask you to do here is exactly the opposite, which is to look past labels in order to up-end our basic federalist system. in this - >> would you tell me, do you think the states could pass this mandate. >> i represent 26 states. i do think the states could pass

this mandate, but i - >> is there any other area of commerce, business, where we have held that there is a concurrent power between the state and the federal government to protect the welfare of commerce? >> well, justice sotomayor, i have to resist your premise, because i didn't answer yes, the states can do it because it would be a valid regulation of intrastate commerce. i said yes, the states can do it because they have a police power, and that is the fundamental difference between the states on the one hand and the limited, enumerated federal government on the other. >> thank you, mr. clement. mr. carvin. chief justice, may it please the court--

i'd like to begin with the solicitor general's main premise, which is that they can compel the purchase of health insurance in order to promote commerce in the health market because it will reduce uncompensated care. if you accept that argument, you have to fundamentally alter the text of the constitution and give congress plenary power. it simply doesn't matter whether or not this regulation will promote health care commerce by reducing uncompensated care; all that matters is whether the activity actually being regulated by the act negatively affects congress or negatively affects commerce regulation, so that it's within the commerce power. if you agree with us that this is -- exceeds commerce power, the law doesn't somehow become redeemed because it has beneficial policy effects in the health care market. in other words, congress does not have the power to promote commerce. congress has -- congress has the power to regulate commerce. and if the power exceeds their permissible regulatory authority, then the law is invalid. >> well, surely - >> i'm sorry. >> well, surely regulation includes the power to promote. since the new deal we've said

that regulation in -- there is a market agricultural products; congress has the power to subsidize, to limit production, all sorts of things. >> absolutely, chief justice, and that's the distinction i'm trying to draw. when they are acting within their enumerated power then obviously they are promoting commerce, but the solicitor general wants to turn it into a different power. he wants to say we have the power to promote commerce, to regulate anything to promote commerce, and if they have the power to promote commerce then they have the power to regulate everything, right? because - >> i don't -- i don't think you're addressing their main point, which is that they are not creating commerce in -- in health care. it's already there, and we are all going to need some kind of health care; most of us will at some point. >> i'd -- i'd like to address that in two ways, if i could, mr. chief justice.

in the first place they keep playing mix and match with the statistics. they say 95 percent of us are in the health care market, okay? but that's not the relevant statistic, even from -- as the government frames the issue. no one in congress and the solicitor general is arguing that going to the doctor and fully paying him creates a problem. the problem is uncompensated care, and they say the uncompensated care arises if you have some kind of catastrophe -- hit by a bus, have some prolonged illness. well, what is the percentage of the uninsured that have those sorts of catastrophes? we know it has got to be a relative small fraction. so in other words, the relevant - >> yet we don't know who they are. >> we don't. no, and we don't know in advance, and -- and --but that doesn't change the basic principle, that you are nonetheless forcing people for paternalistic reasons to go into the insurance market to ensure against risk that they have made the voluntary decision that they are not -- have decided not to. but even - >> but the problem is -- the problem is this they are making the reinvent of us pay for it, because as much as they say, well, we are not in the market, we don't know when the -- the timing when they will be. >> which is -

>> and the -- the figures that how much more families are paying for insurance because people get sick, they may have intended to self-insure, they haven't been able to meet the bill for -- for cancer, and the rest of us end up paying because these people are getting cost-free health care, and the only way to prevent that is to have them pay sooner rather than later, pay up front. >> yes, but my point is this. that, with respect, justice ginsburg, conflicts the people who do result in uncompensated care, the free riders. those are people who default on their health care payments. that is an entirely different group of people, an entirely different activity than being uninsured. so the question is whether or not you can regulate activity because it has a statistical connection to an activity that harms congress. and my basic point to you is this-- the constitution only gives congress the power to regulate things that negatively affect commerce or commerce regulation. it doesn't give them the power to regulate things that are statistically connected to things that negatively affect

the commerce - >> well, mr. carvin - >> because -- i'm sorry. >> please. >> i was just going to say, because if they have that power, then they obviously have the power to regulate everything because everything in the aggregate is statistically connected to something that negatively affects commerce, and every compelled purchase promotes commerce. >> in your view, right there -- in your view right there - >> justice breyer - >> can i just - >> i'm sorry. >> i'm just picking on something. i'd like to just -- if it turned out there was some terrible epidemic sweeping the united states, and we couldn't say that more than 40 or 50 percent -- i can make the number as high as i want -- but the -- the -- you'd say the federal government doesn't have the power to get people inoculated, to require them to be inoculated, because that's just statistical. >> well, in all candor, i think morrison must have decided that issue, right?

because people who commit violence against - >> is your answer to that yes or no? >> oh, i'm sorry; my answer is no, they couldn't do it, because morrison - >> no, they could not do it. >> yes. >> they cannot require people even if this disease is sweeping the country to be inoculated. the federal government has no power, and if there's -- okay, fine. go ahead. >> may - >> please turn to justice kagan. >> may i just please explain why? >> yes. >> violence against women obviously creates the same negative impression on fellow citizens as this communicable disease, but the --and it has huge effects on the health care of our country. congress found that it increased health care costs by - >> i agree with you that - >> well, but - >> -- that it had huge negative

effects but the majority thought that was a local matter. >> i think that's his point. (laughter.) >> i -- i don't know why having a disease is any more local than -- that beating up a woman. but -- but -- my basic point is, is that notwithstanding its very profound effect on the health care market, this court said the activity being regulated, i.e., violence against women, is outside the commerce clause power. so regardless of whether it has beneficial downstream effects, we must say no, congress doesn't have that power. why not? because everything has downstream effects on commerce and every compelled purchase promotes commerce. it by definition helps the sellers of existing - >> mr. carvin, isn't there this difference between justice

breyer's hypothetical and the law that we have before us here? in his hypothetical harm to other people from the communicable disease is the result of the disease. it is not the result of something that the government has done, whereas here the reason why there is cost shifting is because the government has mandated that. it has required hospitals to provide emergency treatment, and instead of paying for that through a tax which would be born by everybody, it has required -- it has set up a system in which the cost is surreptitiously shifted to people who have health insurance and who pay their bills when they go to the hospital. >> justice alito, that is exactly the government's argument. extraordinarily illogical argument. >> fine. then if that's so, is -- let me just change my example under pressure - (laughter.) >> -- and say that in fact it

turns out that 90 percent of all automobiles driving interstate without certain equipment put up pollution, which travels interstate -- not 100 percent, maybe only 60 percent. does the epa have the power then to say you've got to have an antipollution device? it's statistical. >> what they can't do -- yes, if you have a car, they can require you to have an anti- pollution - >> then you're not going on statistics; you're going on something else which is what i'd like to know what it is. >> it's this. they can't require you to buy a car with an anti-pollution device. marketu've entered the and made a decision they can

regulate the terms and conditions of the car that you do, and they can do it for all sorts of reasons. what they can't do it compel you to enter the market. >> now we -- now you've changed the ground of argument, which i accept as -- as totally legitimate. and then the question is when you are born, and you don't have insurance, and you will in fact get sick, and you will in fact impose costs, have you perhaps involuntarily -- perhaps simply because you are a human being -- entered this particular market, which is a market for health care? >> if being born is entering the market, then i can't think of a more plenary power congress can have, because that literally means they can regulate every human activity from cradle to grave. thought that's what distinguished the plenary police power from the very limited commerce power. i don't disagree that giving the congress plenary power to mandate property transfers from a to b would be a very efficient way of helping b and of accomplishing congress's objectives. but the framers - >> i see the point. you can go back to, go back to justice kagan. don't forget her question. >> i've forgotten my question. (laughter.) >> i -- i was facing the same dilemma, justice kagan. >> let me -- let me ask a

question i asked mr. clement. it just seems - >> see what it means to be the junior justice? (laughter.) >> it just seems very strange to me that there's no question we can have a social security system besides all the people who say-- i'm being forced to pay for something i don't want. and this it seems to me, to try to get care for the ones who need it by having everyone in the pool, but is also trying to preserve a role for the private sector, for the private insurers. there's something very odd about that, that the government can take over the whole thing and we all say, oh, yes, that's fine, but if the government wants to get -- to preserve private insurers, it can't do that. >> well i don't think the test of a law's constitutionality is whether it more adheres to the libertarian principles of the cato institute or the statist principles of someone else. i think the test of a law's constitutionality is not those policy questions; it's whether or not the law is regulating things that negatively affect commerce or don't. and since obviously the failure to purchase an item doesn't create the kind of effects on supply and demand that the market participants in wickard and raich did and doesn't in any way interfere with regulation of the insurance companies, i don't think it can pass the basic - >> i thought -- i thought that wickard was you must buy; we are not going to let you use the home-grown wheat. you have got to go out in the market and buy that wheat that you don't want. >> oh, but let's be careful about what they were regulating in wickard, justice ginsburg.

what they were regulating was the supply of wheat. it didn't in any way imply that they could require every american to go out and buy wheat. and yes, one of the consequences of regulating local market participants is it'll affect the supply and the demand for the product. that's why you can regulate them, because those local market participants have the same effect on the interstate market that a black market has on a legal market. but none of that is true -- in other words, you can regulate local bootleggers, but that doesn't suggest you can regulate teetotalers, people who stay out of the liquor market, because they don't have any negative effect on the existing market participants or on regulation of those market participants. >> that's why i suggested, mr. carvin, that it might be different if you were raising an as-applied challenge and presenting a class of people whom you could say clearly would not be in the health care market. but you're raising a facial challenge and we can't really know which, which of the many, many, people that this law addresses in fact will not participate in the health care market and in fact will not impose costs on all the rest of us. so the question is can congress respond to those facts, that we have no crystal ball, that we can't tell who is and isn't going to be in the health insurance market, and say most of these people will be and most

of these people will thereby impose costs on the rest of us and that's a problem that we can deal with on a class-wide basis? >> no again. the people who impose the costs on the rest of us are people who engage in a different activity at a different time, which is defaulting on their health care payments. it's not the uninsured. under your theory you could regulate anybody if they have got a statistical connection to a problem. you could say, since we could regulate people who enter into the mortgage market and impose mortgage insurance on them, we can simply impose the requirement to buy private mortgage insurance on everybody before they have entered the market because we are doing it in this prophylactic way before it develops. >> no, no, that's not -- i don't think that's fair, because not everybody is going to enter the mortgage market.

the government's position is that almost everybody is going to enter the health care market. >> two points, one of which mr. clement's already made, which is the health insurance market is different than the health care market. but let me take it on full- stride. i think everybody is in the milk market. i think everybody is in the wheat product market. but that doesn't suggest that the government compel you to buy five gallons of meat or five bushels of wheat because they are not regulating commerce. whether you're a market participant or not, they are still requiring you to make a purchase that you don't want to do, and to get back to your facial example - >> i mean, but that's true of almost every product. >> i've sorry? >> it's true of almost every product, directly or indirectly by government regulation. the government says, borrowing my colleague's example, you can't buy a car without emission control. i don't want a car with emission control. it's less efficient in terms of

the horsepower. but i'm forced to do something i don't want to do by government regulation. >> you are not forced to buy a product you don't want. and i agree with you that since the government regulates all markets there is no limiting principle on their compelled purchase. when they put these environmental controls on the - >> they force me to buy - >> i'm sorry. >> they forced me to buy if i need unpasteurized foods, goods that don't have certain pesticides but have others. there is government compulsion in almost every economic decision because the government regulates so much. it's a condition of life that some may rail against, but - >> let's think about it this way. yes, when you've entered the marketplace they can impose all sorts of restrictions on you, and they can impose, for example, all kinds of restrictions on states after they have enacted laws. they can wipe out the laws. they can condition them. but what can't they do? they can't compel states to enact laws. they can't compel states to carry out federal law. and i am arguing for precisely the same distinction, because everyone intuitively understands that regulating participants after a and b have entered into a contract is

fundamentally less intrusive than requiring the contract. >> we let the government regulate the manufacturing process whether or not the goods will enter into interstate commerce, merely because they might statistically. we -- there is all sorts of government regulation of manufacturing plants, of agricultural farms, of all sorts of activity that will be purely intrastate because it might affect interstate activity. >> i fully agree with you, justice sotomayor. but i think - >> so how is that different from saying you are self- insuring today, you're foregoing insurance? why isn't that a predecessor to the need that you're eventually going to have? >> the cases you referred to i think effectively eliminated the distinction between

participants in the intrastate market vis-à-vis participants in the interstate market. none of those cases suggest that you can regulate people who are outside of the market on both an intrastate and interstate level by compelling them to enter into the market. and that - >> what about -- the simplest counter-example for me to suggest is you've undoubtedly read judge sutton's concurring opinion. he has about two pages, it seemed to me, of examples where everyone accepts the facts that under these kinds of regulations the government can compel people to buy things they don't otherwise want to buy. for example, he gives, even in that farm case, the farmer who was being forced to go out and buy grain to feed to his animals because he couldn't raise it at home. you know and he goes through one example after another. so what -- what is your response to that, which you've read? >> judge sutton is wrong in each and every example.

there was no -- there was no compulsion in raich for him to buy wheat. he could have gotten wheat substitutes or he could have not sold wheat, which is actually what he was doing. there is a huge difference between conditioning regulation, i.e., conditioning access to the health care market and saying you must buy a product, and forcing you to buy a product. and that, that -- i'm sorry. >> i thought it was common ground that the requirement that the insurers -- what was it, the community-based one and they have to insure you despite your health status; they can't refuse because of preexisting conditions. the government tells us and the congress determined that those two won't work unless you have a pool that will include the people who are now healthy. but so -- well, first, do you agree with your colleague that the community-based -- and what's the name that they give to the other?

>> the guaranteed-issue. >> yes. that that is legitimate commerce clause legislation? >> oh, sure. and that's why -but we don't in any way impede that sort of regulation. these nondiscrimination regulations will apply to every insurance company just as congress intended whether or not we buy insurance. >> well then, what about the determination that they can't possibly work if people don't have to buy insurance until they are -- their health status is such that the insurance company just dealt with them on its -- as it will? i won't insure you because you're -- you're already sick. >> it depends what you mean by "work." it'll work just fine in ensuring that no sick people are

discriminated against. what -- what -- but when you do that -- congress - >> but the sick people, why would they insure early if they had to be protected if they get insurance late? >> yes. well, that's -- this is the government's very illogical argument. they seem to be saying look, we couldn't just force people to buy insurance to lower health insurance premiums. that would be no good. but we can do it because we've created the problem. we, congress, have driven up the health insurance premiums, and since we've created that problem, this somehow gives us authority that we wouldn't otherwise have. that can't possibly be right. that would - >> do you think that there's -- what percentage of the american people who took their son or daughter to an emergency room and that child was turned away because the parent didn't have insurance -- do you think there's a large percentage of the american population who would stand for the death of that child - >> one of the most - >> they had an allergic reaction and a simple shot would have saved the child? >> one of the more pernicious, misleading impressions that the government has made is that we

are somehow advocating that people be -- could get thrown out of emergency rooms, or that this alternative that they've hypothesized is going to be enforced by throwing people out of emergency rooms. this alternative; i.e. conditioned access to health care on buying health insurance, is enforced in precisely the same way that the act does. you either buy health insurance or you pay a penalty of $695. you don't have doctors throwing people out on the street. and -- and so the only - >> i'm sorry, did you say the penalty's okay but not the mandate? i'm sorry. maybe i've misheard you. >> no. no. i was -- they create this strawman that says look, the only alternative to doing it the way we've done it, if we condition access to health care on buying health insurance, the only way you can enforce that is making sick people not get care. i'm saying no, no. there's a perfectly legitimate way they could enforce their alternative; i.e. requiring you to buy health insurance when you access health care, which is the same penalty structure that's in the act. there is no moral dilemma between having people have insurance and denying them emergency service. congress has made a perfectly

legitimate value judgment that they want to make sure that people get emergency care. since the founding, whenever congress has imposed that public responsibility on private actors, it has subsidized it from the federal treasury. it has not conscripted a subset of the citizenry and made them subsidize the actors who are being hurt, which is what they're doing here. they're making young healthy people subsidize insurance premiums for the cost that the nondiscrimination provisions have put on insurance premiums and insurance companies. >> so the - >> -- and that -- that is the fundamental problem here. >> so the -- i -- i want to understand the choices you're saying congress has. congress can tax everybody and set up a public health care

system. >> yes. >> that would be okay. >> yes. tax power is - >> okay. >> i would accept that. >> congress can -- you're taking the same position as your colleague, congress can't say we're going to set up a public health system, but you can get a tax credit if you have private health insurance because you won't access the public system. are you taking the same position as your colleague? >> there may have been some confusion in prior colloquy. i fully agree with my brother clement that a direct tax would be unconstitutional. i don't think he means to suggest, nor do i, that a tax credit that incentivizes you to buy insurance creates problems. congress incentivizes all kinds of activities. if they gave us a tax credit for buying insurance, then it would be our choice whether or not that makes economic sense, even though - >> so how is this different than this act which says if a taxpayer fails to meet the requirement of having minimum

coverage, then they are responsible for paying the shared responsibility payment? >> the difference is that the taxpayer is not given a choice. it's the difference between banning cigarettes and saying i'm going to enforce that legal ban through a $5 a pack penalty, and saying look, if you want to sell cigarettes, fine. i'm going to charge you a tax of $5 a pack. and that's - >> i think -- i think that's what's happening, isn't it? >> no. not - >> we're paying -- i thought that everybody was paying, what is it, $10 a pack now? i don't even know the price. it's pretty high. >> right. and everyone understands - >> i think everybody recognizes that it's all taxation for the purposes of dissuading you to buy it. >> that's precisely my point. and everyone intuitively understands that that system is dramatically different than saying cigarettes tomorrow are illegal. it is different. >> it is different. it is different. i agree with that. but you pointed out, and i agree with you on this, that the government set up these emergency room laws. the government set up medicaid. the government set up medicare.

the government set up chip, and there are 40 million people who don't have the private insurance. in that world, the government has set up commerce. it's all over the united states. and in that world, of course, the decision by the 40 million not to buy the insurance affects that commerce, and substantially so. so i thought the issue here is not whether it's a violation of some basic right or something to make people buy things they don't want, but simply whether those decisions of that group of 40 million people substantially affect the interstate commerce that has been set up in part through these other programs. so that's the part of your argument i'm not hearing. >> let me - >> please. >> it is clear that the failure

to buy health insurance doesn't affect anyone. defaulting on your payments to your health care provider does. congress chose for whatever reason not to regulate the harmful activity of defaulting on your health care provider. they used the 20 percent or whoever among the uninsured as a leverage to regulate the 100 percent of the uninsured. >> i agree -- i agree that that's what's happening here. >> okay. >> and the government tells us that's because the insurance market is unique. and in the next case, it'll say the next market is unique. but i think it is true that if most questions in life are matters of degree, in the insurance and health care world, both markets -- stipulate two markets -- the young person who is uninsured is uniquely proximately very close to affecting the rates of insurance and the costs of providing medical care in a way that is not true in other industries.

that's my concern in the case. >> and, your -- i may be misunderstanding you, justice kennedy. i hope i'm not. sure. it would be perfectly fine if they allowed -- you do actuarial risk for young people on the basis of their risk for disease, just like you judge flood insurance on the homeowner's risk of flood. one of the issues here is not only that they're compelling us to enter into the marketplace, they're not -- they're prohibiting us from buying the only economically sensible product that we would want. catastrophic insurance. everyone agrees the only potential problem that a 30- year-old, as he goes from the healthy 70 percent of the population to the unhealthy 5 percent. and yet congress prohibits anyone over 30 from buying any kind of catastrophic health insurance. and the reason they do that is because they needed this massive subsidy. justice alito, it's not our numbers. cbo said that injecting my clients into the risk pool lowers premiums by 15 to 20 percent. so, justice kennedy, even if we were going to create exceptions for people that are outside of commerce and inside of commerce, surely we'd make congress do a closer nexus and

say look, we're really addressing this problem. we want these 30-year-olds to get catastrophic health insurance. and not only did they -- they deprived them of that option. and i think that illustrates the dangers of giving congress these plenary powers, because they can always leverage them. they can always come up with some public policythey can alwah some public policy rationale into the power to promote commerce. >> a large part of this argument has concerned the question of whether certain kinds of people are active participants in the market or not. your test, which is a test on the activities such inactivity distinction would force one to confront the problem all the time. if you look over the history of the commerce clause, you see there are unhappy. periods. --pp

unhappy periods. it seems those things did not work. why would this test work any better? >> is the -- it is exactly the problem you would create. you have to draw distinctions between the insurance industry and the cars. they were dry all of these kinds of distinctions whereas our test is simple. are you buying the product or is congress compelling you to buy the product. again, if congress has the power, then obviously they have the power because any purchase. >> to think drawing a line

between commerce and everything else that is not commerce is drawing an artificial line? it is drawing a line between commerce and manufacturing? >> the words commerce and non- commerce are in the constitution. the framers consciously give congress the ability to regulate commerce because that is not a particularly threatening activity. if you are required -- if your authorized to, you have, as the early cases put it, a monster legislation. everyone intuitively understand that regulating people who voluntarily enter into terms and conditions does not create the possibility of congress creating wealth transfers. that is precisely what the framers did not give them the power. >> thank you. in general, you have four

minutes remaining. >> thank you, mr. chief justice. congress took on a grave problem when they enacted the affordable care act. we agree, i think, everyone are doing this case agrees that commerce could require -- the regulated at the point of sale. that will not work. people will still show up at the hospital or at the physician office seeking care without insurance causing the cost shifting problem. the idea of them in a higher risk pool is utterly unrealistic. think about how much it would cost to get insurance when you're at the hospital or at the doctor. what be unfathomable high. that will never work. congress understood that. it shows the means that will work.

-- it chose the means that will work. that is the kind of choice that he says the constitution leaves the democratically accountable branches of government. there is no temporal legislation in the commerce clause. everyone will be in or in the health care markets. that is exactly the kind of thing that ought to be left to the judgment of commerce -- of congress. and the branches of government. this is a paradigm example of the kind of situation that the chief justice envisioned. that the provisions needed to be interpreted in a manner that would allow them to be affective in addressing the great crisis of human affairs that the framers could not even condition.

if there is any doubt about that in the commerce clause, then i urge this court to uphold the minimum coverage provision as the taxing power. under new york vs. the united states this is a perilous situation. it can be treated as simply the credit to which the tax incentive seeks accomplishments. the court has a solemn obligation to respect the judgments of the democratically accountable branches of government. because the statute can be construed in that way, i respectfully submit that it is their duty to do so. >> thank you, general. >> we will have more supreme

court oral argument on health care as the court examines the question of several ability. whether it could remain intact if it is unconstitutional. the can view it on our web site at c-span.org. it is i expected to be decided until late june or early delight. >> i am appearing here today as one spokesperson for the hundreds of thousands of marines, sailors, their families, and will civilian employes who are unknowingly exposed to horrendous levels of toxins through their drinking water in north carolina. >> the documentary "simplify -- smper fi -- always faithful." he is joined by the film's producer on sunday. >> they have manipulated the

facts so much. they have told some half trees and total lies. now, if they were to sit down with me face-to-face, i could show them with their own documents and counter with they have been saying. they do not want to do that. >> more with them sunday night at 8:00 eastern. >> next, the house budget committee chairman paul ryan in wisconsin and in the committee's ranking member in maryland -- they both spoke at a forum this week hosted by the national journal. chairman ryan. [applause] >> have the budget day,

everybody. [laughter] >> i want to be very brief so we can get to the questions. i will go through the lay of the land with respect to the process. the budget law says the president must propose a budget. the president has followed that proposing a budget. we take issue with his budget. it is not addressed the drive as of our debt. there was a vote last night and i got 414 to 0. it was an attempt to try to show that there's not a lot of support for putting a budget that does not attempt to fix the problem. we had a few budgets substitutes

yesterday. we have the black caucus. we had the same symbols budget. this morning we're going to have the starting budget. then the final passage of our budget. chris van hollen to get credit for proposing the budget. it is always tempting not to put it there. we can step up and make proposals. the senate's has announced for the third year in a row that they're not going to bother doing a budget. budgeting is one of the rudimentary aspects of governing. if you're going to govern, you must budget. we have one of the most predictable crises coming. it is a debt driven crisis. we have an obligation to do something about it to pre into this. this is our attempt to take these core principles and

preempt a debt crisis. we think the key components are to get spending under control, reform our entitlement programs and promises can be kept to seniors, and economic growth. we need policy to grow the economy and get people back to worth. -- to work. i appreciated. why don't we get on it? >> thank you. we're going to be right into questions. i want to leave time for questions as well. how close is the united state? >> we bring a lot of people to be question. they tell us is about -- it is about to to three years. they're going to focus on as quickly. you also have the question about the federal reserve.

because we are the reserve currency, a gift this time and space. high in banking on about two years before this gets really ugly. it means the interest-rate spike. we can have real economic problems. the united states has not seen a decrease in demand. why do you think the markets are simply holding off on it? what do you know that the markets do not? >> what i get from people who are probably the markets, there are a lot of people who are the "bond vigilantes." you americans are not a parliamentary system. you have divided government. they know where the safe haven.

they are waiting for the election. i want to show that one half of our system is getting serious about this. they are putting specific ideas on the table on how to cut spending, not doing some back room deal. there are real ideas taking votes and introducing legislation. what i get for this is america does not start buckling down, we can fix this in 2013. this is the theory that is often given to me. i will leave it at that. >> we can spend a lot of time

about the better bet for america. >> we will get it right. we will fix this problem. we are the safe haven. we have a better labor market and economy and resources. we have everything wired to get back to prosperity and economic freedom. and because of our reserve currency status and because we will get our act together, it is after they exhausted the possibilities. i think we are the safest bets. i think we will fix this thing. >> your plan relies on eliminating tax expenditures. you have been unwilling to talk about which ones. break that mold here. >> we want to have open hearings about which ones are worth keeping and which ones are

not. we should, in addition to talking about what tax expenditures are there, we should talk about who gets them. that is where we should focus on, who gets them. the top ones arm of tax rate payers -- 1% of taxpayers get about [inaudible] the what is important that the who is important. who should be getting the benefit or not. there is fiscal space left with the construct we're talking about. these are things we have consensus on. we will get into the consensus. they have a series.

it to be premature to say what the conclusion of the process will be. to me it is the who. a person in the higher tax bracket can shoulder a lot of their money from taxation through the polls. for every dollar, it is taxed at zero. then they will be taxed at 25%. you get more of their income subject to you lower tax rates. where i come from in wisconsin, at 9 of the 10 businesses bothers taxes as individuals. eight out of him businesses file as individuals. the top rate will go to 48% in january. that is economic suicide. where i come from overseas, lake superior, the canadians it is lower their tax rate to 15%. we're going to raise the tax

rate on are successful small businesses tax we are manufacturers. you compete globally. -- on at our successful small businesses? you compete globally. it is economically inefficient. it means higher tax rates. that's clear this stuff out and lower the tax rates. it is more competitive. >> you do not want to talk about specific items. the loopholes that are generated, it was lost to the federal government. your budget requires more money than that to pay for the reduction of in tax increases. >> i am going to raise the numbers. we raise about $1 trillion. we do not spend it in the first place. this is really inefficient.

we raise about the same amount of money. it is extremely inefficient. most other industrial nations have a different type of tax system than we do. i'm not just talking about corporations. businesses are taxed the same. there are more tax on the individual side of the code rather than the individual. we have to get our minds around it and understand that this system is really uncompetitive. you have to lower the rate. >> let's talk about defense. your increase eliminates the sequester. this is contrary to the guidance from the pentagon.

why did the committee choose to go against the advice of the general? >> we do not think they're giving us the truth advice. we do not believe their budget is the right budget. i believe the president's budget, the number was announced at the same time. we take $300 billion out of the space. if we are using apples to apples, he says we're cutting $400 billion out of the defense but we are cutting $300 billion. we believe money can be taken. any agency that gets 700 billion -- $700 billion a year will have an efficiency. let's not forget we are out where care -- we are where we are.

we have a dangerous planet and world. we do not want to have a budget driven strategy. we keep the defense spending level above for the president's budget is. we have point to five% real growth after that. it is flat funding. >> this is not an obama defense budget. we saw all of the combat commanders stand up and say this is what we need. this will not be the first time.

>> what i believe is that this does hollow out a defense. a goes beyond or react to the do have a strong national defense to keep people safe. there pushing this out to another five-year window. it means it costs more per copy. they are putting their drawdown funds in the supplemental bill. there is a lot of supplemental smoke and mirrors. it is not an accurate budget. when you confront military experts, if they can see these things. we have an honest pentagon budget. this is the first response ability of the federal government. we have a more dangerous world. if we had this new strategy, you have to have a navy and an

air force that can extend this to reach. this budget does not do this. strategy does not match. this is a budget driven strategy not a budget driven strategy. >> the strategy came out before the budget did. what kind of knowledge to you have about the need to counter the future threat? >> they're not going to come anywhere close to that with this budget. the replacement they are pushed out another five years. what was said before this budget was released before and what was said after are two different things. >> let's talk about gdp growth. your plan assumes economic growth.

>> we just use the cbo baseline. >> you need economic growth. your argument is that reducing the tax rate will yield economic growth. what economic growth would you anticipate? >> we use the cbo baseline. our budget is based on the cbo baseline. the official cbo baseline assumes a $4.40 trillion tax increase in january. all the tax cuts go away. a massive tax increase happened in january. cbo think it'll slow down the economy to a 1.1% growth. we have to use that to measure our budget and even though we be killed or do we repealed -- even though we repealed that growth. since we're not putting the policies in the budget that cbo says will hurt the economy, what with the budget look like if we reflected a better

economy because we do not have this tax increases? we consulted experts from all around as to a good role of of what growth would be achieved if we had a fundamental tax reform and in debt reduction which takes pressure off of interest rates. we ran an alternative growth scenario of different versions between 0.5 and others a year. it is a thought exercise. what it shows you is you dramatically balance the budget a lot faster than what the conventional cbo baseline says. it is soon slow growth because of tax increases. there is an explosion of debt. we paid the debt off. we use a measurement that assumes those things. what we're trying to show is you get past the economic growth. with faster economic growth, you get more revenues.

the point i'm trying to make is we need a combination of economic growth policies and spending cuts and entitlement reforms to get this country back on track. we can get the balance. we can pay off the debt faster if we grow the economy and get our spending and debt under control. >> what do you say about the range? >> there are economists that a rule of thumb is 0.5% and one's arm of additional growth. -- 1% of additional growth. there are a range of different cities that show you the additional growth can be achieved if congress enacts the right kind of policies. >> to romney advisers? >> which ones? >> let's go to the audience. >> we have some in the front,

please. >> good morning. watching the house floor yesterday, you heard the buzz word about ending medicare as we know it. how do we educate the public that the real drivers of the debt are not foreign aid but big screen entitlement? >> i have this chart that cbo put up that shows how three programs, medicare, medicaid, social security eventually consume 100% of revenues. uther interest on top ridgy you a thrill interest on top, at -- you throw interest on top, and it goes up.

but parties made a lot of promises that the government cannot keep. promises are being made to today's americans and the government is shy of covering. the sooner we acknowledge that, the better off we will be. this is what we are proposing. the two words you hear are open good balance -- are "balance" and "end medicare as we know it." for people who are younger, 54 and below, convert to a system of support much like the commission recommended, which is you get a list of guaranteed jobs that are guaranteed. he cannot be denied. there's a competitive bidding system that makes sure your but it keeps up with the price of

the insurance. -- benefit keeps up with the price of the insurance. medicare subsidizes your premium based on who you are. as you get sick or, more subsidy. a wealthier person gets more subsidy. doing it this way using choice and competition, having support with competitive bidding, gives us competitiveness. we think it's a smart and

important to do this. it is gradual. you do not end up with a debt crisis where you have disruptions in people's life. if you solve the medicare puzzle, you dramatically improve your chances of averting a debt crisis. people say you need a balanced approach. here's the problem. spending is the problem. our government spending is about 24% right now. it is going to 40% and 80s term or the course of the century. the size of our government goes from 20% to 40% of the economy. the revenues will crash the economy. the spending is the problem. if we try to chase this higher spending line with higher revenues, you will shutdown the american dream and economy and a sign the next generation to and an inferior -- to an inferior standard of living. if we lower the base the ball hard drive creatures and small businesses in the economy which will suffer -- we will hurt the economy, the small businesses, and the economy will suffer. to the best way to get out of the mess is economic growth and spending cuts.

if we define balance as just keep raising tax rates and do not deal with the drivers of the entitlements, we will never balance the budget. we will ruin the economy in the meantime. >> another one? somewhere up front here. >> a good morning. i am with the coalition on human needs. chairmen ryan, your budget at an additional $265,000 annually in tax cuts for the very wealthiest while at the same time cutting domestic human needs programs and entitlements. and how is this not a huge redistribution of wealth up word -- upwards?

>> i've not heard that number before. what i'm trying to say is clear up the tax shelters. they are disproportionately used by higher income taxpayers. so we can lower rates for economic growth. i do not see the tax code as a tool that ought to be used of social engineering and picking winners and losers based on what special interest has the most clout. i see it as being progressive. in maximizes economic growth and gets a businesses primed to hire people. the best welfare program is a drop at the end of the day. taniff grows under this budget. the kinds of criticisms you heard then are the same kind we are hearing now. we believe that the well form -- welfare reform was successful. it help people get back on the line of self-sufficiency.

our approach to these issues is to give back to life of upward mobility and opportunity. it is to have a safety net for people who cannot help themselves and to help people get back on their feet. all the other welfare programs that have not been reformed in 1996. we are proposing another round of well for -- welfare reform. let's customize some of these benefits to the unique needs of the population. we did a great job in wisconsin. we think we should reform the other welfare programs. there to ways of looking at

this. -- there are two ways of looking at this. one is to treat the symptoms of poverty to cope with or is our objective to look at the root causes of poverty to try to eradicate it? we're trying to end a cycle of poverty by going to the root causes. this is not actions 60 to getting people on the lives of up for mobility. we want to reform the programs of people get on their feet and on the liza self-sufficiency. he cannot do that if you do not have a growing economy offering jobs for them to get into. >> we have time for one more. >> good morning. how is your budget treat the

issue of infrastructure in america? what do you see as the end game? >> in about three hours, we will have a vote on a partial extension. i want to get to a longer-term bill. the problem we have is the law, and the actual highway trust fund goes insolvent in 2013. i want to make sure the budget projects a new consensus. this has not been reached yet. our budget reflects the law. nobody wants to see that happen. no one wants to see a massive drop off in funds. we did two things. we have a new form of revenue stream coming into the highway trust fund from oil and gas exploration. that issue revenue takes awhile to kick in. once a kicks in, it'll be far

more than the estimates show. it will show a new stream of revenues coming in. we created a reserve in budget which allows us to change the aggregates once a bipartisan infrastructure bill is agreed to. our budget can adjust to that new agreement. the key is this. the way the highway bill was written, it based the limits on production of gas tax revenues. gas tax revenues came in under the projections. if you have a trust fund, it works like this. revenues come in and you can spend up to the revenues. that is how we think trust funds should work. over the last number of years, $35 billion was rated out of the general funds to go to the highway trust fund. we cannot keep doing that. if you want a real trust fund, you have to operate it like the

real trust funds. if we want to not have this cliff of dropping obligations of contract authority, you have to come up with offsets to pay for smoothing that line out. that is what the reserve fund is therefore, to accommodate a compromise that comes with a pay for to keep the highway trust fund whole insolvent and not have a cliff of obligation limits which could really disrupt our infrastructure. >> i am told that there is time for just one more. >> hi. going after the question, they ran the numbers on your income tax cut. even accounting for removing all the shelters, itemized deductions, the health-care exclusion for employers, and

removing the minimum tax, your rate reduction still provide millionaires with an average tax cut of about $187,000 a year. on top of that, it was the cbpp concluded that 62% of your spending cuts come from support programs for the pork. you are not only balancing the budget on the backs of the poor, you're cutting the programs to pay for tax cuts for the rich. how do you justify it? >> i've always taken issue with their analysis. i will put it to you this way. when we think of millionaires and the tax code, we think of aaron rogers or a movie star. i will go back to the issue. it is mostly small businesses, a successful small businesses. 65% of our net new jobs in not come from big corporations. they come from successful small

businesses. half of the people in the country work for these businesses. it is the business in the in-a park on the side of your time that has 50- -- in the industrial park on a sighted your town that has 50 to 200 workers. it can go up in january. most of our national competitors, china, india, in india, canada, are lowering the tax rates on their businesses. we are looking at raising our tax rate on these businesses to as high as 45% when the international average is 25%. it is not a payer system. no to businesses are the same with respect to the taxes. ge had a lot of income but no tax liability legally. ups paid i think it 34% tax rate while their competitor paid 44%. but make sure everybody pays the same tax rate based upon the amount of money and income

they make whether they are a business or an individual. we think that is fair and better for jobs. with respect to these programs, they are growing at unsustainable rate. poussin's have quadrupled over the last 10 years. -- food stamps have quadrupled over the last 10 years. if we keep the programs on an unsustainable path, they will crash and we will have a debt crisis and not be able to service these people. under a debt crisis, you are cutting indiscriminately across the board in of leeway. you have to cut current people on these programs. as it headed these problems. let's get these programs -- let's get ahead of these problems. let's get these problems.

our states have a better idea on how to help people. subsidiaries, and the idea that the government close the government governs best. i believe we need to get more power to the states. i live in wisconsin. it is different than york city. why should they have the same rule that tells people in my state how to fix these programs and help people like they are in new york city? they are different problems. let's replicate these excesses of the 1996 welfare reform. let's empower local communities to help people. at the end of the day, if we keep growing debt so much you

end of crowding out of those social intermediary institutions, you crowd out civil society. you displace those key common bonds at communities working for the common good like civic organizations. if you're taxing people so much, if your debt is getting so high, you will make it harder for civil society to help people who need it. those are the principles we use in applying this. if we think we can tax people at higher rates, it is at much higher rates than our competitors. we're going to wind up in a debt crisis. these are people who need government the most common the poor, the elderly, and the sick. -- the most, the port, and the elderly, and the sick. >> thank you very much. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]

deborah >> now we will hear from chris van hollen who also spoke at this event. >> he will offer a few brief remarks and then sit down for an interview and then take questions from the audience. he was elected to congress in 2002 rising to become one of the youngest members of the democratic leadership in 2008. in addition to representing the eighth district of maryland, he was elected by his colleagues in 2010 to serve as the top democrat on the house budget committee. into causing 11, he was also appointed to the 12 member bipartisan committee on deficit reduction. welcome. [applause] >> thank you. ellenton sank the national

journal for bringing us all together. you picked exactly the right time to be talking about this issue since we debated the budget on the floor yesterday. we have the votes today. i want to take a moment to thank paul ryan because, as chairman of the budget committee, i think he has conducted the proceedings in the committee and on the floor with professionalism. i am grateful to him for that because we do have very deep differences in approach. i think it is important that we make those differences known in a civil way. how did we have accomplished that objective. let me begin by talking about the reasons we have deep differences over the republican budget and then talk about the democratic alternative. we are here at a very important time in our country. we all know that.

because of the extraordinary actions that we are taking -- that were taken over the last four years as well as the tenacity of the american people and the tenacity of small businesses, we have gone from an economy that was in total collapse to one that is slowly recovering. it is headed in the right direction. and, we certainly do not want to do anything now to miss that up. we do not want to return to some of the economic policies that got us into the miss to begin with. we are concerned that rick -- that the republican budget does that. that it disrupts the fed to recovery and undercuts investments that will be important for the long term economic strength of the united states of america. to give you a couple of

examples, in the area of transportation, which is an area we are debating on the hill right now in addition to the budget, the republican budget proposes to cut transportation funding by 46%. that is what is in their budget right now. we have 17% unemployment in the construction industry. we have lots of roads and bridges and transit way is that need to be modernized. it seems to be a no-brainer -- that needs to be modernized. it seems to be a no-brainer to have a long-term transportation plan. that is proposed in the democratic budget. it is not part of the republican budget. that is just one example of the kind of investments that we should be making. as a result of some of the cuts that the republican budget

proposes in area of transportation, many independent analysts, including some you will hear from on your next panel, have estimated that the republican proposal will lose up to 2 million jobs over the next two years if you combine the kind of cut and investment i'm talking about with the elimination of some of the enhanced tax credits, that would be less spending power from many people on the lower end of the income scale. that is important during a time of economic recovery. they would cut that. that is why you find the analysts have made those projections. rather than taking measures that could slow down and jeopardize this fragile recovery, we believe we need to focus on jobs and getting the economy moving as we put into

place a long-term deficit plan. they are clearly linked. did the congressional budget office estimates that 1/3 of the current deficit for fiscal year 2012 is due to the fact that the economy is at underemployment. this is why it is so important to focus on that component. for our long-term growth and economic soundness, we need to put into place today credible plan to reduce the deficit and the debt. the question is not whether we need to do that. there is agreement on that. the question is how and what choices we make in that process. there are very big differences. if you look at the approach

taken by every bipartisan group that has explore this challenge, you will find that they took a balanced approach, meaning they recognized that we need to reduce our deficit 3 combination of cat and spending and revenue -- through a combination of cuts in spending and revenue. the republican plan does not. there are no new revenues in the republican plan. maybe that is not surprising given the fact that the overwhelming majority, 98% of house republicans have signed this pledged saying they will not close a one single tax loophole, won't eliminate a single tax subsidy for the

purpose of deficit reduction. you hear a lot of talk about tax reform. the difference is the bipartisan groups said let's do tax reform in a way that could run and reduce the rate. let's do revenue generating to reduce the deficit. when you take depositions, -- that position, it means you have to do with the deficit at the expense of everyone and everything else. that is what the republican budget does. that is why it end up slashing medicaid so that by the year 2022 it is cut by a third. medicaid, at 2/3 of that money helps support nursing homes and

disabled individuals. the approach cut the medicare guaranteed. we can have a discussion about exactly how that works, but the reality is that seniors on medicare would be getting the equivalent of a voucher and that voucher would decline and in value relative to the rising cost of health care. at their purchasing power decline significantly. all the cost is put on seniors under that plan. they also dramatically cut our investment in higher education. they cut deeply into the food and nutrition programs. a whole set of cuts that we believe it will make it harder for us to accomplish our goals for the united states of america for about educating and out competing the rest of the world which we have to do in this economy. that is why we take a balanced approach. we make some tough cuts. we adopt all because that were

made as part of the budget control act. we propose additional cuts in area of mandatory spending. we also propose additional revenue. we propose additional revenue from having the tax rates on the very high income earners go back to where they were during the clinton administration. we have revenue from closing a lot of the corporate tax preferences. all told, like the president's budget, we have about $1.50 trillion in revenue. our budget adopts the framework.

it shows the free-market president said in his budget. because we have a revenue component, it means we do not have to decimate important investments in future and education, investment in infrastructure and transportation, investments in scientific research, things that have powered our economy in the past and future. because we have a balanced approach, we do not have to cut the social safety nets as the republican budget does. i will close again by saying the issue here is not whether we reduce the deficit and whether we reduce the debt, we have to do that. the question is what choices we make in the process. we believe the right approach is the approach taken by various bipartisan groups that bring a balance to the equation, of looking at the spending side

and also the revenue side of the equation. with that, i thank you for the invitation. i look forward to any questions you got. [applause] >> we are going to start by fast forwarding a little bit. i want you to bring up the november/december timeframe and tell us how it plays out. >> we have a convergence of three major events. one is the sequester, one is the expiration of the 2001-2003 tax cuts, and then we also have the looming issue of the debt ceiling where we are currently

scheduled to hit the debt ceiling probably sometime at the end of next year. we may be able to manage it into the early months of the following year. did the convergence of those events show possibilities. one is that it is an action forcing event that produces a positive result where you could get an agreement that deals with the question of taxes. the sequester is about $1.20 trillion in deficit reduction. our democratic alternative budget, like the president's budget, eliminate the sequestered and replaces it with $1.20 trillion on could deficit reduction by taking this approach. at the end of this year, under current law, all the tax cut expire. that is about $5 trillion

compared to current policy. you have the ingredients for a deal that could take a balanced approach along the lines of various bipartisan commissions. the question is whether or not during that short time after the election congress would be able to deal with that or whether you would really have to have that spillover into the first couple of months of the new administration. i think if you do not get a longer-term agreement during that period of time, which would be difficult if tax reform will be part of the equation, then you are talking more likely having to address this in the early months of the next administration. just to be clear. we would all like to do this sooner rather than later. that ability to get the balanced approach has so far

escaped us. >> but to wind and talk about the budget center on the floor today -- let's rewind and talk about the budget centered on the floor today. the right plan has been criticized as a not serious approach because of the tax policy that it promotes. the democratic plan has seen a serious approach because it at $6 trillion to the deficit. why did you not take the opportunity to go far enough in addressing the structural problems of the social programs that are really driving the problem? >> it takes us down from a deficit which is over eight% of gdp today to under 3% by 2015 and keeps the deficit of under3% of gdp for the remainder and stabilizes the debt. we stop the rapid increase in the deficit and stabilize that during the end of the. -- the period.

the issue of medicare has been an important part of the debate. i did not bring in a chart. it was a chart that was offered by the chairmen of the committee, paul ryan. what it shows with respect to medicare, which is a driver of future costs, that the plan he laid out and the plan that the president has proposed in the one that is adopted in the alternative have the same costard directory on medicare. those lines are the same. the question is how you get that cost trajectory compared to the

projected health-care costs. how do you deal with that the gap? the republican proposals have said a gives you a voucher and put it on the seniors. we're trying to change the incentives in the medicare program to put more focus on rewarding people who deliver value and quality of care rather than quantity of care. you do not pay the hospital every time someone gets remitted. -- readmitted on the same condition. we have already begun to implement some of those things. but there are backstop provisions to also bring down those costs. we have very different approaches. interestingly, at the chart presented by the chairman shows the costs trajectory was

actually the same under both plans. we do address those issues. we're going to need to do more. these are 10-year budget windows. as we get projections in the future. we are going to have to take this one step at a time. the first up was to stabilize the debt. >> than the budgets we have seen have adequately addressed social security. why is everyone avoiding social security? >> the best approach to social security that we discussed in super committee and in disappointed we did not address some of these issues in that context, you need to take the approach that ronald reagan and tip o'neill did which is a bipartisan approach. i think the model for how you get this done is out there. you are right. that issue is not specifically addressed. i would point out that the

social security trust fund is 100% solvent if congress takes no action between now and 2037. beneficiaries would take about 25% reduction in but if it. it did a significant issue that should be addressed. the sooner we address it the better. i do want to make it clear that the social security trust fund is softened by the trustees 100% until then. >> why should anyone look at any but is that our in plan right now as anything more than political document? >> for the purposes of this year, i think the part of the budget that are going to be potentially acted upon by the

portions that deal with discretionary spending. the budget control act that we passed last year which has a trillion dollars in discretionary savings established these budget levels including for this current fiscal year 1 trillion 47 billion. unfortunately, in the republican budget by late that agreement. they came in at a lower number. that could create complications down the road. the senate is going to stick with the agreed upon levels. we had hoped that by getting this agreement we would have some stability in the process. as for the other big pieces of the budget, taxes, a tax reform, how you are going to move forward on some of the programs that medicare and medicaid, those are issues there to be dealt with in campaign. these are issues for the

presidential election. they are major differences of opinion. after that election is over, are we going to be able to reach a compromise? there are some that say these elections will send such a huge and powerful signal that the public will point the way in one direction or another. it'll be crystal clear. the election, while the issues will be debated, at the end of the day, you are not going to have one answer from the public. he will have to compromise.

at the end of the day, what people have strong feelings about what they believe is the best way forward, you are not going to get a solution without a genuine compromise. people cannot get things 100% their way. that is what we believe the approach we have taken is a step in that direction. >> we will come back to the post election in a minute. but stick with one area of commonality among all the budgets. that is this frenzied popularity of closing loopholes. you do not get a lot of money out of closing loopholes. mr. ryan would not answer the question about what the polls he has in mind that the ways and means can deal with. would you? >> there are a couple of areas we believe on the corporate tax side that we need to address.

there are some instances in the tax code we think provide some incentives for people to move capital and jobs overseas. the fact that you can deduct your interest on investments overseas in real time, even though you're not taxed on the proceeds of those investments. there in the president's budget. we adopted them in our budget that we would do right away. in terms a comprehensive tax reform that lowers rates and broadens the base, that is right. the issue is how you do it. people should not race to declare that they will get these tax rate down to a certain level. we have to see which of the tax expenditures and preferences can be eliminated and in what

way. one of the things i proposed early on is that you begin with higher income individuals and you begin to lower some of their tax preferences. you can use that to lower the rating little bit and take some of that revenue for the purpose of deficit reduction. did you have raised eight really important point. one of the criticisms we made of the republicans is they said they will drop the top tax rate from 35% to 25%. we have asked them to shows how you do that without increasing the burden on middle america. he cannot do that without raising the tax burden on middle income tax payers. when you drop, according to the tax policy center and the joint tax committee attracted this, that is $4.60 trillion in lost revenue.

if you say you're going to make up $4.60 trillion in lost revenue through getting rid of tax preferences, you would wipe out the whole mortgage interest deduction and you still did not get close to $4.60 trillion. you can get rid of all the health exclusions. you add that any still not get close. our view is that if this insane that they will drop it to 25%. there prescribing an increase in tax burden for middle income americans.

companies from 35% to 36%. depending on how you do it. 35%. talking about getting it down to 25%, not only do you reach it will you increase the burden on middle income americans, but you will not have any of that money available to go for the purpose of deficit. -- reduction. everyone who has looked at this has taken a portion of the revenue from tax reform for the purpose of deficit reduction to get a balanced pann -- planned . >> the house budget would require $10 billion and you only get 1.1 out of loopholes. we should be talking about who, not what we are affecting when we are eliminating tax expenditure. let us look at it this way.

the five biggest expenditures are the health insurance, employer pensions, the mortgage interest deductions. medicare. and in capital gains. prepared to negotiate on? >> as part of a comprehensive tax reform plan, i would be willing to look at all those things. the issue is after you deal with the interactions, what is the consequence? one of the principles i would insist on is that we adhere to at least the current tax code. as we deal with these different should not raise the burden on middle income taxpayers relative to high and taxpayers, which is why when our republican colleagues to take capital gains off the table, which mitt romney and the house

republicans have, you are taking off the table one of the major tax preferences that definitely benefits the wealthiest taxpayers. you are been looking at mortgage-interest deductions and help exclusions. those are tax preferences that help middle income taxpayers, which is why, again, we have made the point that by dropping the top rate from 25% to 35%, you are going to squeeze middle income taxpayers. again, i support the notion of looking at ways to get rid of some of the preferences in the tax code. you have to do it carefully. you cannot do everything all at once because that would be a shock to parts of the economy. you do it in phases. the essential principle is also you do not do it in a way that just increases the relevant burden on middle income taxpayers.

>> mortgage interest deduction is one of the most popular parts of the tax code. is that fair game? is it something you are willing to say -- we are talking about tax reform over all and this is on the table? >> two things. number one, you do not want to do any of these things abruptly in a way that would hurt the economy. with respect to the mortgage- interest reduction, if you do anything in this area, you have to make sure you do not shock the very fragile housing industry because a lot of prices built into houses right now take into account the fact that a buyer can get the home owner interest deduction. my view on tax reform is we should look at all these things. i am not saying we do not -- we should look at all of these issues and see if we can do it

in a way that the burden on middle income taxpayers is not increased. that is the underlying principle that i bring to it. whatever we do with respect to tax reform, let's maintain at least the current progressivity of the tax code. the problem i have with their proposal that just says let's drop it 25% is we know, based on everything i have seen, that will do the opposite. the tax policy center also concluded that in addition to an average tax break for millionaires of about $130,000 -- you would get another $250,000 average tax break from this dropped if you are making over $1 million. that would be a big tax break and we think it is totally unjustified. >> one more question before we go to the audience. i want to turn to defense.

the democratic alternative to ryan has more savings for afghanistan than the obama budget does, but it is savings that would not be there anyway because the spending will not be there at that time. why rely on something that is an accounting gimmick? >> if you look at what is happening right now with overseas contingency fund money, they are already being used today are things that are not directly related to the current operations overseas. those monies are already being poached, so to speak, to add to the baseline defense budget. >> beyond the overseas contingency fund. quite a beggar pardon?

>> the savings we are talking about are far beyond the obama plan. >> the reason we decided to take support the idea of the president put forward that all u.s. troops should be out of afghanistan by the end of 2014. we have the full funding for all of the overseas contingency accounts through the year 2014. at the end of 2014, we say our troops are going to be out of afghanistan, we are not going to need those moneys anymore. some people are saying you have to keep those funds there because we may still be engaged in combat operations overseas. that is very different from

saying those are not real savings. what we are saying is if you still have combat operations going on beyond 2014, you have got to find a way to deal with this in your baseline budget. you do not get this extra what would then become an extra fund to dip into. to say those are not real savings when there are people talking right now about using that money beyond 2014, i do not thinking it is right. "let's go to the audience. i cannot really see. i will rely on the microphone of or>> i have a question about the employee exclusion. i heard what you had to say about not increasing the burden on the middle income taxpayers. do you also see the value -- i

am sorry -- do you see the value of providing health care to employees? >> repeat the last part? >> do you see a value of serving art and a role for employers? >> yes, i do see a contingent roll bar employers are providing health care to employees. the affordable care act we actually did address a piece of this issue with what were called the so-called "cadillac" plans -- health plans that were considered to have extra benefits -- above average benefits. they are all provisions of the but affordable care act that in about four-five years will begin to attach a portion of the give employer-provided health benefits. this is an area that you have to be really careful as part of

tax reform because i do not think it should be used as a way to increase the burden on middle-income taxpayers relative to higher-income taxpayers. the exclusion disproportionately benefits the middle income taxpayers. you may want to look at this " hill piece that they part of future and who you have to be very carefulfinally, on the affordable care act, there is a role for employers to continue to provide coverage, but we also create the exchange's four people whose employers do not provide health coverage. that is a very important piece. it is honestly the subject of a

three days in the supreme court. i hope they will uphold the law because if they do not, they undo the individual mandate. that would undermine the exchanges. >> next one? do we have a question back here? >> sunshine press. we have seen the greek model does not work. greece is largely ruled by financial dictates from above telling them how to run their country. the u.s. model with its congress financed by campaign contributions, largely by the

wealthy, approaches a system that does not work given that the wealthy do not want to be taxed. interpreted by the supreme court make it impossible to govern? >> i do not think it makes it impossible to govern. i do believe that if you look at there is a high degree of dysfunction. i would point out that just a few years ago many people were complaining that congress was doing too much, not too little. you love what we did or hated what we did. the affordable care act, the wall street reform bill -- those are major actions taken by congress. it was one of the most productive legislative periods in decade. now these sessions are linked to the budget. we have a lot of gridlock. we talked about how, i hope after the elections, there is

some action-forcing events that could help us resolve some of those issues. with respect to the role of money in campaigns, i do believe significant reform. i am sponsoring many bills to reform the process. a series of supreme court decisions have made the problem worse. we are seeing that every day, not through just super pacs, but the continuation of secret money. one of the things the supreme court has said we can still do is shine a little sunshine on some of the expenditures being made. that is why i introduced the disclose act because much of the money being funneled into these organizations is secret money. it does not have to be disclosed. our view is that voters have a

right to know. it is an important part of the political process that we have transparency, that the transparency helps bring more accountability to the process. we passed the disclose act two years ago in the house. we got 59 votes in the senate. we could not break the filibuster. if senator kennedy had not passed away, the disclosed act would be the law of the land. that would not solve the problem of the huge volume of additional funding flowing into campaigns, but it would address the issue of secret money going into campaigns. i would hope that everybody would support that. republicans used to say they do not like some of the campaign finance reform laws, but they

support disclosure. well, this is an opportunity to support disclosure. it is as simple as that. it is a voter-right-to-no bill. >> no more questions? >> just curious. you're talking about certain ways in which we could find a middle ground. do you see any inroads we could take toward maybe bring these two plants together and steps that would help us form a sort of a middle ground? >> well, if you are going to address the revenue part through tax reform, that is the direction you have to have. you have to head in the direction where you try to either reduce and reign in some of the preferences as part of reducing the rate. then the question is what the income-effect -- the traditional effect -- and the revenue generated as part of a balanced approach. one of the challenges you face

is that when you see these lists of how much revenue -- let me rephrase this -- how much is being accounted for through different tax expenditures, those numbers do not translate dollar for dollar into revenue. this is going to be one of the big challenges of tax reform. we encountered it this year in the super committee. for example -- the capital gains -- on a static basis, you can income not being taxed. capital gains is an example of something people can choose. if you change rates, it changes behavior. that is true on all of these tax expenditures. taking into account the interrelationships of all of them is essential if you are going to figure out how much revenue you are going to generate.

you cannot just add up the different tax expenditures and say "we got that account of money, and dollar for dollar we can produce these rates." it does not take into account the behavior of challenges of individuals. that is why the joint tax committee spent an awful lot of time modeling and has a lot of work to do in this area, but it is why people need to be very careful not to say arbitrarily "we are going to cut the rate to 25%." every model i have seen indicates that doing that would be financing tax breaks for the top by increasing the tax burden on middle income americans. let's keep doing the analysis

and, as i say, a very good analysis was done on all of this. let's approach this in a fact- based way. >> last one from me. we talk a lot in washington about the election -- when we get past the election next year, it will be different. there is almost no one that sees the election generating eight single-party government. in addition to that, we talk about a market that is not putting a lot of pressure on congress to take any real serious action on the debt and the deficit on the spending model. why should anyone be optimistic at all that 2013, legislatively,

will look any different than 2011? >> that is a good question. it is a point i was trying to make earlier. anyone who thinks the outcome of this election will somehow deliver a message to the american people as do the right answer is, i think, deluding themselves. at the end of the day, we will have to reach compromise. now -- why might this be different? the reason it could be different is we have these action forcing events. we have the and of all the tax cuts scheduled. $5 trillion in the mix. you have the sequester, which everybody agrees is the wrong way to reduce spending. then you have the debt-ceiling. it is a very combustible cocktail, but it also has the potential to force people to make the difficult compromises. let's take the revenue piece.

i do not know how the election will turn out, but i believe the president has done a good job. let's assume he wins reelection. he has been very clear that we can no longer afford the tax breaks for the folks at the very top. when we encountered this challenge, not this past december, but one year ago this past december, our republican colleagues said "we are not going to allow you to let the rate on top income earners go from 35% to 39%." they held all the middle income taxes hostage to that. after this election, they may take the same position, but the president, i think, will have a

lot of leverage in this negotiation. you can imagine a scenario where you deal with capturing some of that revenue, whether it is through tax reform or other means dealing with the rates, and as part of that, you get a new discussion about these long-term issues we've talked about -- the kind of conversation going on between the president and the speaker of the house this past summer. again, there is a clash of fiscal forces that could produce a good result. it does not necessarily happen in a lame duck session. i am not saying that. tax reform is part of the equation here -- i think it is hard to get that done right then, but you could begin to set up parameters and outlines of an agreement. that would be the best case

scenario and it is certainly a possible scenario. frankly, if we are going to address the long-term deficit, that provides an opportunity to get the job done. it is an opportunity. >> mr. optimist. thank you very much. >> thank you. [applause] >> today, republican jim jordan talks about why he supports paul ryan's budget which passed the house thursday. >> the policy statements were the have and corporate ideas that have really been a key ideas like welfare reform, medicaid reform, sending it back

to the states -- a lot of good things in there. a tax reform policy is a thousand times better than the president's budget which never balances anything. the difference between his and ours is we get everything balanced a time frame that we believe the american people think is common sense. five years. 20 years for paul ryan's. we think it is important to show the public what we need to do. the fact remains, you cannot get 218 votes. we need to pass something. paul ryan's is a lot better than the president's . >> jim jordan weighs in on campaign 2012 and speaker john boehner's performance. see the interview at 6:00 p.m. eastern on c-span. >> on thursday, the head of the

consumer financial protection bureau outlined a number of new rules and initiatives under consideration. including a plan for universal mortgage servicing standards. the agency first reported to congress and showed it received 13,000 complaints. they were related to mortgages, credit cards, and other products. mr. richard cordray is the ohio attorney -- attorney general. >> the committee will come to order. mr. cordray, as you know, we are going to have some boat -- vote interruptions. i would like members to know, as well as anyone listening, that mr. cordray has agreed to stay until 2:00, which is a very nice accommodation. we very much appreciate that. and we thank you for your