, very big expenditures for social security, particularly medicare and medicaid looming at us. so the solution was fixed the tax system so it's at her and raise revenue and slow growth of health care costs. that was the right thing to do at the time. now, theok at it again same patterns are there. but it looks less scary. the long-term future looks less scary and there are two reasons for that but they may not be sustainable. hasis the political system cut discretionary a lot. military and the domestic side. ,nd when you run those out assuming that isn't permanent,

you get very lower but -- low numbers for discretionary spending. can we run government at a smaller gdp than we had in 1940? i don't think so. but the other thing that has happened that may not be sustainable is that the rate of health care spending has slowed. its slowed dramatically. we are not quite sure why that's true. part of it is the recession and -- we mayowth and low have come to our senses and realize that our health care system is an efficient. true. both are we are working very hard where i am at the bookings institution on how do we keep these reforms sustained so we can produce more

health care for less money. that is a work in progress. not clear. but i think that is where things are. >> do you worry from a messaging of beoint, in a position careful of what you wish for? in another panel, there were a lot of people raising the point, in 2009, 2010, we have to do something about this at -- this debt. we got the opposite of what they were asking for. they wanted larger deficits in the short term. shorter deficits in the long-term. this by wanted to do holding onto discretionary spending because a lot of that is investment in infrastructure and education and they wanted to cut entitlements and the long-term. instead, we got small discretionary spending and

practically no changes to medicare or social security. did we get to the exact opposite of what the toughest of hawks were asking for? >> yes, i think that is a good analysis. talk, andrd offensive i have been accused -- deficit hawk, and i have been accused of i think invest more in long-run growth and that does mean more transportation, more scarce -- more skills. work tohe same time, slow the growth of the entitlements over time. that takes slowing the growth of health care spending. especially inefficient health care spending. and fixing the social security system. and we have to fix the tax system, too.

i think there is some hope for that, but we need a real push to come back to it. i don't think we are going to do a grand bargain, that we might do some of these things. we will have to fix social security because it is such a sensible thing to do. and tax reform. >> thanks. we have time for a question. >> >> dr. edward berger. how do you address the issue of health care financing? -- i think iirm inferred from the remark you made earlier that we had chosen start anew with a new system rather than add-mix or a hybrid system that we are to have. maybe we would have had a better system. do i hear your remarks correctly? >> no, not really. i may have been misleading. i said it is easier conceptually to think blow it all out and

start over. there never was a chance that we could do that. and i'm not even sure that the people who talk about single-payer for the united how hard ita clue is to run a single-payer system in any country. a huge, diverse country with a lot of suspicion of government in our dna. think we are going to do that and i'm not sure we could manage it well if we did. medicare is a single-payer system. >> and a very popular one. >> but it has not moved toward efficiency in the incentives in medicare. why not? because the politics have been against it. ours the politics of provider groups that make it

very difficult to make big changes in the direction of efficiency. i think they are coming around and good things are happening. , if we suddenly -- and it is hard to imagine this -- said we will blow it up and have a single-payer system that we would be really in the soup. we don't know how to do that. >> question. >> in the back here. >> there you are. >> i am curious about your thoughts, about the fact that the pace of technological change continues to improve our productivity and we continue to sort of invent things that eliminate whole job categories. jobsdo you think about point he or 30 years from now? will we have enough jobs in this economy for the population we have? >> yes, we will have enough

jobs. the question is how good will these jobs be and that depends on what we do about it. if we have a really skilled labor force and we invest in making our economy more i think thatnd involves modernizing our infrastructure and upgrading our skills and probably some other things, we will have a higher standard economy than we would otherwise. i am old enough to have lived of the scareycle machines are going to take over everything or computers are going to take over everything and nobody is going to have anything to do. we go through that every once in a while. it's ridiculous. [laughter] >> looks like we have a question back there. >> hi, i am john cummings.

you mentioned wage subsidies of the earned income tax credit. i guess food stamps would fall into that same category. do they not just an trench low wages? do they not help keep wages low by corporate welfare? safety net just as a in general, do you think there should be time limits on how long a safety net is in place? wage -- i may have said well, anyway, what i wanted to say about the eitc is that it is a wage supplement come on like food stamps, which could be -- it is tied to your income. but the thing about the earned income tax credit, you earn those wages and then you get a little more. it is an incentive to work in a

way that the other safety net programs -- and i am not knocking them, but i think we and weme food stamps need housing subsidies for people who can't afford housing -- but they are not the same thing. you are raising a very big question about is the safety net to generous. i don't think so. i think it might be better designed. but if people are hungry and people can't pay for the ordinary decencies of life, then i think we have an obligation to do something about it. >> right over there. >> thank you. thank you very much. i would like to ask you to talk more about trade deficit and the build into that the

benefits of health care reform. i know you have done studies on the fact that if we don't work on the health care reform, our trade deficit will be tremendous. and also, the impact of sequestration, if there is a way that we can suggest congress to sequestration.ng tpp talk about jobs and the agreements with other partners, even china, those who affect our job markets here. and to that extent, where do you think we can suggest the democratic party to agree on the union, the labor law? because there is a lot of problems converging the minimum wage, the labor law, and the tpp

and our markets. >> that is a lot of questions. >> answer them all. [laughter] >> i am pro-trade and i think you heard from firm in a few and he gave a case for moving ahead on trade agreement. i think it is another example of my thesis. there is bipartisan support for moving ahead on trade agreements and we can't do it at the moment because of the polarized politics. i think that is a shame. i don't expect a revolution. i think it is very important not to over sell some of these things. that happened in the clinton administration in the time of nafta and i think it was a good thing. it was i partisan and the president was courageous in

supporting it because he needed a lot of republican votes to get it passed. but i also think we oversold it. cabinets fanned out and said this was the greatest thing since whatever and it will save the economy. and it is very dangerous to do that. i think nafta has been a success. but it has been a modest success and we shouldn't overrate those things. >> one more question. my question is social security. my wife and i are at that stage. andalked to a lot of people it seems like there is a way to maneuver the system to get more and more if you do it right, which doesn't sound right. that i go first and she goes alftime -- there is actually book written on ways to make more money on this.

i would love to hear of this. it just doesn't come right to me. i want to do the best thing, but i don't want to do something that will hurt others because they can't do it. is that understandable? -- yes.rin you can't design any system, whether it is the tax system or the pension system or medicare or whatever it is that someone isn't going to write a book on how to gain the system and probably make money on it. you need to be very careful when you are drafting things so there aren't loose holds that people can sneak through and get money they are not entitled to. stick with the big picture. social security is an extremely successful program. it keeps millions of older people out of party and it keeps

their children from having to support grandma. my children are probably grateful on that. system.very good it is well-designed. it was not quite designed for this huge avalanche of seniors that are entering it now. so we have to adjusted a little. it's a tweaking thing. set of do a particular tweaks, some of which would be slightly lower benefits for people like me who don't really need them. i wouldn't take them away because we need to have a stake in this system. but the top level benefits could be a little less and we could collect more money and we could actually make the system a little more generous at the bottom. and we could fix the way the indexing is done. the president was right about that.

but i think it was insensible to sort of throw it up there out of the context of a total social security reform. it fits their. >> thank you very much. [applause] >> thank you alice. thank you derek. it was terrific. next up, we have the honorable judd gregg, former governor of new hampshire, as well as former chair of the senate committee. please welcome senator greg and michael hirsch. [applause] >> or should i sit? >> how about right here? greg, you have

been known for a long time as a master of the numbers. >> i think you just had the master of the numbers here. >> the other part of the capital, the hill part. peoplece i think these have been getting numbers all day long, i want to start out with a purely political question for you. wrotere one of those who septemberciently last that the republican party was in danger of failing abysmally because of what you call the self-promotional babble of a few in enforcing the government shutdown. we have now been through that and it appears that the leaders of the party at least came to share your view to some extent in terms of resolving those issues. obamacare to defund

and hold government hostage that you opposed. i would like to get your assessment of where you think the party is now heading into these november elections. has some balance been restored? question butgreat let me first thank the atlantic for this opportunity. it is nice to be here with commerce woman harmon who did so much for this country in the area of intelligence and making sure that we had a strong intelligence community. [applause] really -- is is a one that is very current because obviouslyis going to a period in the wilderness and it has to figure out how to get out of the wilderness. i compare it somewhat to the democratic party in the early 1970's when the party lurched to the left and then spent 10 years joint to get back and was led

backed by the democratic president council and clinton and al gore and others who participated in that. we unfortunately have allowed what i call the showers -- the shouters to dominate the playing field for too long as a party. national parties, and we only have two and we should only have 2 -- you don't want to have a multiparty system in a country our side because then it will go to their corners and never leave those corners and it is impossible to get compromised. a national party must be a very big tent. it is the first that in the madisonian government, which is what we have, a checks and balances government, which demands compromise, demands that people governed by reaching agreement across the aisle. the way you reach that sort of agreement is that you start with the parties gathering under their tents, under basic philosophies, and that sort of filters up and becomes the

framework for people going across the aisle when big along, along -- issues, -- issues come along. many peoplewed too who had no interest in governing but had an interest in promoting themselves and the ability to raise money to take center stage and to dominate. the best example was the debt ceiling fight. i served in senate leadership for 16 years as the consiglio very to the leader and we used to have a saying that came from phil gramm. hawkid never take a that you can't shoot. you could and should the debt ceiling or the continuing resolution. you would end up shooting yourself. on a couple of occasions, that has been proven to be true in the last three years. now that we have been through

that exercise and those folks have a sickly been shown to be more concerned with their own personal -- growing their own personal reputation and raising a lot of money have been shown to be ineffective in their ability to lead the party and let us forward as the party that is willing to govern and have started to leave the stage a bit. actparty has gotten its together and understands, if it is going to communicate with the american people, it will have to govern. is the, mitch mcconnell republican leader in the senate who understands us and has been pushing this approach. so i do believe we are starting to see the party getting back to a more realistic need to govern versus simply shout from the corners. what does this translate to politically? , if not to think that this spring, then certainly in the next congress, which i suspect may have a republican

senate, the republican party is going to have to govern. i reached agreements with this president on core issues where things can be reached. the first issues are first immigration, second is gc reform, which is fiscal policy, and third is tax reform. . >> what changes political dynamics? let's say the election does yield a republican senate as well as the house. is the key party gone? is it on the run? i think ted cruz would disagree with your assessment about leaving the stage. >> i don't think that second best that segment of the party should leave the stage. but i think those folks who understand that you cannot speak to the american people unless you explain to them how you intend to do something possible,

you cannot always be fostered in the negative. you have to be postured in the positive that of -- in the issues that affect american everyday lives. i see three issues where we have opportunity to have that type of consensus reached. up yourt have to give philosophical beliefs in order to reach agreement with the other side of the aisle. you can reach agreements across the aisle which are important to making america a stronger and better governed nation without giving up your basic core release -- core beliefs because there is a lot of identity of interest in our nation, most of which comes down to telling people how to process life and pass a better life down to their kids. youou wrote recently that

saw a few lights at the end of the tunnel that orange trains on coming. you said the tax reform plan richmondrepublican, -- camp and you also cited obviously, the ground has shifted a little bit. i think he has gone back on what he said and we now have putin raising his head, raising questions about whether we wanted to tear down the defense budget. >> yes to all three. isst of all, dynamic scoring dangerous ground to step on. defended the right of cbo to be rational which they

are. there is no relationship to common sense or the practical things of doing things are. but on tax policy, some things are very obvious. one of which is, if you ask people to invest or you tell people or you create a tax law which tells people to invest for the purposes of avoiding taxes as their primary goal or you tell people to invest for the purposes of getting better return on their money as their primary goal, you will get a better and stronger economy generating more revenues if you have people moving in the direction of investing for return as opposed to tax reforms. that is my view of the world. the fact that you have a progressive and a conservative viewing things in this context and a lot of other people of those elks, that is good news. that at some point, cbo

on some level will have to acknowledge that. that is important because you can't do a grand bargain on the budget -- you can't even do a mini grand bargain on the budget unless you reform our tax laws, douminate exemptions and something more along the lines of what some symbols was. -- what simpson bowles was. andteps on everybody's toes that is the way you have to start tax reform. i was on the ways and means committee in 1986 when this was done between president reagan and rostenkowski. remember, it did not start with reagan and rostenkowski. it started with bill bradley and jack cap and it took a while to bubble to the surface. majortarted to talk about tax reform in 1982 and 1983 and it was not enacted until 1986.

we are further down the starting point than usual because you have the chairman of the clore committee -- there andortunity is it should be taken. requires quite honestly president of -- presidential leadership. president obama wants a legacy, reforming tax locks may be a good one. hagel did not propose cutting spending. what are the threats and how do you respond to them? i cited, for example, eisenhower's great farewells each where he said the biggest threat to national defense is the defense industrial complex that fights the last war and

certifies the defense community as a result of that. i think they concept of thinking this way is important. the main emphasis should be on the threat and the threat toward us, for our nation, is a terrorist using a open of mass distraction against us and they are not nationstate terrorists. they are asymmetrical. so you have to find them in a different way than you fight another nation. and that requires massive intelligence gathering capability. and he is committed to that. secondly, once you find them, you have to find the ability to deliver lethal force to them. that requires certain types of military structure, certainly caring a task force and delivering force. does russia and crimea change this formula? are we going to fight a land war

in europe? we are not going to engage militarily with the russians on the issue of crime area. the story of crime era goes back to peter the great. -- i thinkt think what secretary hagel has done is opened a discussion on how you approach defense spending in the post-cold war period that has not occurred and should have accord -- should have occurred post 9/11. >> i do want to stay on the ukraine, but what should obama have done? >> he should have gotten the what we union and use have, which is considerable leverage over the european union , to aggressively a search sanctions. i think there should have been a no holds bar sanctions. the european nations are concerned about their gas

supplies, but make it clear to them that they can be concerned about their gas supplies or be concerned about our friendship and we have much more leverage than the russians have in bringing them together to a certain -- what i think should have been very aggressive sanctions. sanctioning 20 people? that's like sanctioning the board of aldermen in chicago. it's absurd. it's embarrassing and i think it was the wrong approach. >> that to the budget, it seems to me that the last time there was a remotely reasonable discussion in this town was the simpson goals commission report december 2010, early 2011, and you approved the work. obama did not really embrace it perhaps enough. design your perfect adjective a one that would be both post to ideal but at the same time passable by both parties in a sort of bipartisan way that you

have proposed. give us the key elements you think would work to address all of these issues -- slow growth, -- deficit, >> the irony of the simpson bowles emission is that both hearties in the senate but their most aggressive fiscal people on it, the three most fiscally conservative republican senators were on it. and we still reached an agreement, which shows it can be done. want20,000 feet, you don't short-term austerity. you don't need it. it would slow the economy. what you want is a glide path that shows in the second and third decades you have been the curve of spending so you got your debt to gdp ratio something lower than 70%. are judged to gdp ratio as a nation up until 2008 was about 35%, a very strong position.

it jumped, doubled in four years by 2012 and it was at 60%. now it is at 74%, heading to 100%. itput that in context, hide -- high debt to gdp ratio, there are only five countries that have worse than we have. one is japan who can self finance because they save so much so it is not a big issue for them. the second is iceland, which has gone bankrupt. the third is greece, which has gone bankrupt. the fourth is italy, which nobody knows what it is an because nobody knows how it keeps its oaks but we are pretty sure it is bankrupt. the fifth is ireland and then comes the united states. so all the countries in front of us have fallen except for japan i'm a which has a unique situation of massive domestic savings. we are on the wrong path. we have breathing room because we are the currency of the world and the world looks at us and

says, you know, the united states solve its rob lowe's. and -- solve its problems. and we do. at some point, someone will wake up and say, i just let the united states $100. 10 years from now, they will not $100 back.pay me someone will have to spike their interest rate significant way. that will come. if wen't get around that continue to borrow money that we cannot pay back without inflating our currency. i think simpson bowles put the template down. i think you need to give credit for what has been done so far. think of it as a three legged stool that you address the deficit issue with. one leg is discretionary spending. the entire discretionary side has been done.

$900 billion of savings in the 2011 agreement. in the sequester, assuming it holds. revenues have been raised $600 billion. that is a big number. it was done incorrectly. it should have been done through tax reform. what is left on the table to do? entitlements and there are only three accounts account. medicare, medicaid, and social security. the united states has gdp.rically spent 20% of and they are still going up because of this massive demographic shift. they are all related to aging. from 35 million to 75 million retired persons. that system does not work. we have to adjust our entire entitlement programs.

not in any draconian or dramatic way that affects resident recipients. 10 years from now, 20 years from now, 30 years from now, you have done the cost curve. simpson bowles suggested raising the retirement rate by two years but we took 60 years to do it so it did not affect anybody over the age of 15. we can handle that as a country. and they president suggested changing the way we captivate cpi and the house did not take it. that was the best offer on the table for fiscal responsibility so far. so there are ways to do this. >> and these are all feasible with the new politics? >> now. unfortunate, i don't see a grand bargain coming down the street and i don't see a mini grand bargain coming down the street. i see bits and pieces.

way,are will be adjusted a moving toward an out-based system. but will it be done by some grand scheme? no. >> i want to open it up to questions. but one last point. i wanted to ask you about financial reform. in thent five months financial industry lobby. what is your assessment of where we are now? do you think the to be to fail problem has been solved or not? we haven't heard from you in several years on this issue. has notfrank accomplished its goals in the sense that it was supposed to stabilize the banking system in a way that allowed more liquidity in the marketplace. it is doing just the opposite. it is contracting liquidity and lending and pushing and a lot of activity into off-balance

sheets, nonregulated entities. has itself to be to fail? i think it probably has. capital requirements are very stiff and good. really, you did not need dodd-frank, which has produced have aion words and we new regulation every 2.6 days or something. and we are only 40% of the way through it. what you needed was tough capital requirements and that would have solved the problem. to a great extent. -- problem that created the the issues that created the problem in 2008 were failure of underwriting, securitization, and as a result of that, lack of capital behind those two activities. one thousand page proposal from an idea that makes sense in concept but cannot be executed in practice.

it is almost impossible to separate market-making from the structure of how a bank works in a way that will be clear enough so that you don't end up with massive regulatory oversight which kills the market for market-making. one of the great american advantages is, which is unique to our nation, is that, if you are a person who has a good idea and you go out and you take a risk and you start to grow that idea and hire people and create economic activity, a whole bunch of people will come along behind you and be willing to give you money to do it. it's called stocks. it is called bonds. in no place else in the world doesn't happen like it does here. you have facebook and twitter and tesla. also cost the economy $50

billion in 2008. >> it has very little relevance in the underlying problem and in the end will produce a lot of problems for our capacity to be as competitive as we were before and be as vibrant as we were before. >> let's open it up to the audience. this lady right here in the black cat. i -- black hat. i think it is black. my question to you, senator -- as far as i am concerned, you are still a good senator. could you address the situation with russia right now where our big is on mobile has a major elephant inat major russia to do major drilling in the arctic. it has become so huge. and what that will do in terms

of affecting us. we might change our tax code so that exxon will do what it has to do. >> russia has massive oil reserves and gas reserves. one of the levers we have to put pressure on them is our technology because they can't hit it without our technology. if you are talking about ways to put pressure on russia, you should talk about putting sanctions on the ability of our technology. but you have to do it on the other nations who have that type of technology to be delivered to russia. that is where this administration has failed. they have not been aggressive enough that we do it in a corrugated way. as for specifics on exxon mobil, i really don't know anything. >> this gentleman right here. john schilling.

you mentioned the importance of providing more tax investments -- tax incentives for investment. things like the capital gains tax is really not by and large promoting new investment but supporting long-term gambling on the stock exchanges as you buy existing assets and carry them forward and sell them or the interest carry forward tax benefits for people who do a lot of active trading with hedge funds. so what are the kinds of incentives you think are important to promote real investment, that generates more productive capacity and jobs? >> i am not a big fan of incentives. i don't believe in industrial policy, whether supporting a group like solyndra or the tax laws. down.the rates way in fact, you bring them down so

far that you really don't need any capital gains differential. under simpson balls, we had 15%, and 30%.0%, when people do that, people invest for the best return in their money. you get the most productive use out of that money and will probably generate more revenues than a tax law that gives a lot of deductions and exactions and has high rates. in fact, i'm sure it will. so that is some answer to you. >> yes, sir, back there. >> thank you for coming today. my name is arnold king and i own king solutions.

how can a person do -- they assist the economy this year and in 2015? -- tod to get back to our talk about the economy. what can we do about the economy onward? help thebusiness do to economy? >> great question. how do we get the economy going? i believe the united states is on the verge of massive economic expansion. probably as large as we have ever had in our history.

it will be driven by four basic factors. the first and is important by far is the new energy paradigm. for the first time in -- time since the 1950's, we will be an energy exporter instead of an importer. we will have an incredible advantage over the other industrialized countries in this world. nothing translates to an economy with more aggressiveness -- we are not just talking about oil and gas. we are talking about everything in the economy being impacted in a positive way by a lower cost of energy. we discovered massive capabilities in energy and this will translate into a huge economic opportunity for us as a country. the second thing we have going for us is that we are still the place where great ideas come from. whether it is twitter or facebook or tesla or, in my part of the country, biomedicine, we

are the creative people and we are creating these ideas. the third thing we have going for us is that there is a massive amount of capital waiting on the sidelines to invest in these ideas. so you have a lot of people who are willing to fall and take risks with their money through pension funds and whatever else on people who have these ideas. and the force they -- the fourth thing we have going for us is that we are inherently entrepreneurial people. we are still the best place to come if you have an idea and you are willing to risk and put your sweat into it and grow your opportunities. that is just our culture. what is holding us back? the only thing holding us back is our fiscal policy, the fact that we are running these deficits and debts that put us at risk on the fiscal side. i happen to think we will straighten those out. incrementally, we will get to it. we will get tax reform and we

will get medicare reform which is really all that there is left to do. so i am pretty positive about america's future and our capacity for economic growth. a lot of it is coming. 90% of it is coming because washington is not involved. >> one more question. right over there, this gentleman here. i am very stern -- i am barry stern. my concern worldwide, we talked big economic stimulus. the world,most of there are too many babies. demographic your meds are

very different -- demographic. meds are very different -- demographic pyramids are very different. the numbers are enormous. do you see any kind of geopolitical threat of lots of young men unemployed in primarily developing countries? are there any u.s. foreign-policy initiatives and defense initiatives that take these things into account? >> well, that is a very legitimate concern but it is not one that we as a nation or our government can do a heck of a lot about. their is no question that a lot of the radicalism in this world is jürgen by the fact that there are large numbers of young people who don't have much else to do but be radical. and that is especially true in some of your countries which are feeding the islamic fundamentalist movements.

what can we do about that? probably very little. we cannot solve the worlds problems of unemployment. but we can have a vibrant national economy and make sure that our economy is vibrant. that does help the world. i saw some statistics somewhere about the locations of walmart to the rest of the world employment is massive. the economy is growing. we bring a lot of people with us. the best way to make our economy grow is to highlight our strengths and our strengths are in numeral. well-positioned as a country, it is staggering to me. i don't see any way that we aren't going to grow and be extra nearly prosperous. the only thing that will stand in our way is our government. and our government will not stand in our way that long because it is full of people who are wanting to do what is right. it just takes them a while and they have to get a few mistakes in.

democracies will get things right after they have tried everything that is wrong. we are in the process of trying a few wrong things but we are still moving in the right in my opinion. biggest and of the most prosperous nation in the world and the best place to live. and as we grow, the world will benefit. >> thank you very much, senator. [applause] >> ladies and gentlemen, another big hand for senator judd gregg and my colleague michael hirsch. [applause] carlson, don'tet you? tell us what you think about margaret carlson. >> she is terrific. lastas the first and female commentary at "time

magazine." i would like to bring scott appeared to show how funny i am in contrast. [laughter] i'm just joking. also to say to both scott and to margaret, this has been a great form. the summit is not nearly over. we have sheila bair coming up. fermin and we will have our festive reception with the specialty cocktails, the lehman deficitini for those of you who have the temerity to stay with us all day. let me invite to the stage cynthia matthews. and margaret carlson, columnist with bloomberg view.

margaret, cynthia. [applause] >> good afternoon. is this humming? am i humming. >> yes. >> all right, excuse the echo. silvio matthews burwell is the person you will see, the only woman in the picture of the financial team of the obama administration for a while. and we exchanged memos this morning and we both decided to wear turquoise. as director of the office of management -- >> give me your cell phone. >> i don't have it. it's not myself on doing it. i am a walking signal, hotspot.

the office of management in theming because the budget, slowest of the obama administration in some anyways. i'm sure you know other things that it has been called, but it is $56 billion over what was agreed to by congress in january. what, if anything, is going to get passed? >> the first thing that is very important -- we present a budget that has line by line what we believe are what are called the ryan murray levels, the levels that were agreed upon the agreement. ed started the day we send the document to the hill because we give them what they need to go forward. however, a budget is a representation of what your vision is.

so the idea behind our budget was to present actually what we believe should happen. we presented what we could to support the process going forward. but in addition to that, we did with $20 billion on the nondiscretionary side which was fully head for. -- fully pay for. we believe and terms of the health of the economy, something that was mentioned in the last session, we believe that is the right approach. that additional investments in the space of infrastructure, innovation, education, and our national security to give examples of the types of things that we would do when fully paid for. and yes, we believe some revenues and other kinds of cuts are a better approach to providing economic growth. so we believe the budget is within the context of the over arching lines that have been set. but we also wanted to make sure we expressed what we believe is

the best fiscal policy for the nation. >> there is a little bit of wishing in their. one of the ways in which you are going to save money or cut spending is closing tax loopholes. how likely does that look now? >> one of the things about the closing of the tax loopholes that i think is important -- i would make two points here. is all ryan's it budget or our budget. there is an agreement that there are inefficiencies in our tax system that we can change. the question of what you do those efficiencies, whether it is lowering rates or applying to deficit, there is agreement -- there is disagreement there. in chairman cans proposal that he presented, his tax proposal on the issue of tax reform, many of the same offsets or loophole closers were used. so it is good to know that there

is a starting point on an overlap on some of these issues and then how do we move forward to get them done. causeddave camp proposal a lot of consternation among republicans. it was not embraced. >> it is fair to say in this town right now, i am not sure that dead on arrival is a phrase that will be used for about anything. so i think the question is, when ideas are put out, when plans are put out in their whole form, that starts the conversation. things ismy favorite the earned income tax credit. you expand this to young they can doo that a people use to do which is, when they are young, gay the job and get married and produce new workers. get a job and get married and produce new workers.

this seems to want to punish the poor. if you give a man a foodstamp, he is going to stop working. creditned income tax debts around that because you have to be working. but there is a grudging philosophy about how the working or will stop -- working poor will stop working or don't really want to work and it runs through all of the room. much of the republican racism of what has been put forward by the obama administration. the earnedxample of income tax credit, that is a program that has been supported by both republican and democrat administrations. it is even mentioned in paul ryan's recent document on poverty. it is work-based. this particular item tends to have a little more bipartisan support which is one of the reasons we are focused on it and emphasize on it.

but i think your broader point is important and true. across our agenda, what we are tried to do is make sure you are encouraging economic growth and jobs but also opportunities. those two things are often related. proposals -- i think the when you are raising is one we hope will get traction because of bipartisan support for it. >> i think it is the scarf. so now we are different. areas -- whate are the areas of compromise. where are you and john boehner going to find common ground? >> one of the things i hope will happen is an appropriations process or the idea that you can move forward the creation of a budget for 2015 so we would not have continuing resolutions or the threat of shutdown or anything. i think that is a place where we can see progress. whenyear, what we did see

chairman ryan and chairman murray came together, we saw an ability to have an agreement and move forward. than in the next step, you saw chairman mikulski and sherman rogers able to do something that has not happened since 1987. that is when all the bills had gotten done in one bill like that. >> the glory days. >> that has not happened in a long time. i think in the appropriations concept of this year, we will see hopefully bills start to move and some of that regular order return. >> so let me move -- is there oh good.doing -- are there enough healthy young people signing up for obamacare? i know you have up to 5 million. we will slow the cost eventually

and premiums will go down because everybody will be in. but that depends on people much younger than me and equally healthy. >> i think the question of the affordable care act and how the riskaction of risk and the pool with premiums is an important one and one that everyone is rightfully focused on in terms of making the numbers work and the system work. i think right now this is something that we are not concerned about where the numbers are with regard to the issues of youth and the total enrollment. i think it should be alright in getting the right risk pool to continue forward and do what the objective of the overall of affordable act is. that is one thing that is pretty important, to take a step back and go what is this about. it is about improving access. it is about improving the quality of health care. so access, 5 million people have joined. it is about improving quality.

we have seen the number of repeat visits to hospitals go down. in certain places. number three, it is about cost. while the congressional budget office from 2014 to 2020, their estimates of health care costs have gone down since the implementation of the affordable billion.by $900 his all of that attribute will he affordable care act? no. as we think about all the pieces, this is when we are concerned about. admit to watching enough tv to be bombarded with ads about obama cutting medicare advantage and seniors being furious about this. everybody wants to cut the care costs, but this one apparently, you have cut and you are not supposed to be doing it. >> it is one of the things that

is important just even in the last conversation about entitlements and the question of how we approach our fiscal challenges in the future that are driven both by health care costs as well as by the demographics of our nation. an administration have done changes to medicare advantage. during that time we have seen medicare advantage enrollment continue to grow, even with the changes we have done, and premiums not being affected. the changes we are proposing we hope are along the same lines and that we need to focus on health care costs and promote certain types of changes that will help us with our long-term fiscal health. >> the gentleman must be really upset to be spending that much money on ads on death panels. death panels disappeared, the good part, which is letting your

doctor, paying your doctor to sit down of you and explain quality of life and end of life issues. there is an effort out there to take away at oh, -- at obamacare and reforms. >> i think that is true. there are two separate issues, and the question of how we create health-care savings. one of the things, as senator gregg was saying, the question of can you get a deal to do a big deal and a long-term deficit reduction? budgets and deals are about choices, and choices imply it is not going to be positive for everyone. yes, there are choices, but we have to stand up and say which are our priorities and how do you think about funding? there is going to be opposition, but we are hopeful in the end the american people, when presented with the facts, will understand and support the

changes we are talking about, especially in terms of reduction of health care costs. >> tell me about getting rid of 500 regulations -- it should be 500 regulations in 500 days? didn't al gore try some of this with that reinventing government? government, an effort to improve the overall management of the government, is something that vice president gore focused on deeply during those years. the 500 that you are referring to in this area is in the regulatory state president obama asked for something that has never been done before, which is a regulatory look back. what he asked all of his departments to do is as they are moving forward on new regulations, can they concurrently or together a list of regulations that may have

been changed by events or overtaken to time. there was a reporting requirement that in this past summer that the department of transportation got rid of that $1.5 billion. that was a regulation that was changed. we looked back and saw it was wrong. regulatory space, and it was something the president did through executive order. now there are a list of 500, we are reviewing. to see if there are opportunities to take regulations off the books. before we go to q and a, you are in the no drama obama administration, and yet there has been nothing but drama since you arrived -- sequestration, government shutdowns. how does it feel to be in the belly of that beast?

you have two children and a husband. >> i do. >> enough drama at home. serve,s an honor to which is part of why my family and i decided to come back. to tryxciting to be able and even in the very challenging situation of shutdowns to contribute to managing through what was an incredibly occult time, but also to work on things. we have seen some progress in terms of working on in the space of the ryan-murray agreement, seeing that we could get a preparations, we do have a "farmville". last year alone the deficit declined by $400 billion in a one-year period. the part that is rewarding -- it is challenging in many ways -- but the part that is rewarding is when you see that progress. >> you are in the other

washington. time for a couple quick questions. yes. good afternoon. , there is the budget a common thread of climate change resiliency. whether it is epa or commerce or other items. how is that paid for? what is the theme behind that? i understand tomorrow the white house will host an event to follow through on that promise. >> the idea and importance of climate resilience -- i am glad you see this flows throughout -- because it is an idea that we think is an important one in terms of getting ahead of some of the challenges that we are facing as a nation in the climate. of the broader piece president's overall climate action plan. this resiliency part is an important part of that. we do things like funds, and

you see in the proposals to fund the states and ocala these in their efforts to create resiliency, because some of this is done at the local level. money,me of the sandy hurricane sandy, that were used for the emergency afterwards, much of that money has been dedicated as people are rebuilding to try to do it in a resilient form. we are hopeful that kind of investment now will have a payoff for us later. as we think about issues like drought or wildfires or many of the things we are going to be facing again and again, they are fiscally very challenging and often expensive. thinking about them ahead of time, that is one of the concepts that this is about, and we are pursuing it through interagency working rooms, funding, trying to work at the state level. >> one more very quick question. siness consultant.

back in 2000, bill clinton left billion surplus. when bush came in in 2000 three, that surplus quickly went away and we have been gaining a lot of debt that the republican party fails to address. the of and that, does present -- given that, and does president obama has an endgame plan to end his second term with a surplus of that he can say specifically that he has accomplished something in his presidency? >> so i would start by saying things that four the nation has seen, i had the opportunity to work on the budget at omb, have worked on budgets in the black, and think they are important things, had the chance to do that. a budget surplus or deficit -- and this question of the balance -- they are not an end in themselves. what i think are much more

important things is how that fiscal policy relates to the health of the economy. is the economy growing? is it creating jobs? are we providing national screen for our nation? and are we appropriately representing the commitments we make? that is the score that the president will be measured on at the end of his term. in the budget we just proposed, you see a declining deficit to gdp measure. right now it is in the threes. you see a stabilizing and declining debt to gdp measure. when one is thinking about how you think about fiscal policy, i'm afraid shorthand balanced budget deficit numbers, one needs to take them into the context of what it means for the economy. right now we have the steepest decline, continued decline, of deficit reductions since world war ii. as an economy, that is growing

at a pace that perhaps is not as fast as it should be, one it needs to think very carefully in the next three years do you want the slope of that line to increase or do you want the slip of that line to remain steady, and a slipped increase in outer years? the question i think we should be judged by are the things that debts and deficits are means to an end, which is economic health and growth. insylvia, i am glad you are washington. thank you for joining us. [applause] thank you, margaret. thank you, sylvia. please come back many more times. is everyone feeling great? you want more? >> yeah! our next googled speaker, sheila bair, the 19th

chair of the fdic. search for hery also search for timothy geithner and henry paulson. have you noticed that, sheila? interesting. here to talk about that, a real story there, and much of the story was written by sheila in a terrific book about the global called "bull by the horns." without further ado, these , and in aeila bair conversation with her, breast solomon, from open -- deborah solomon, of "the wall street journal." >> thank you for coming, and i

bair.germachairman i was reviewing your conference -- your comments last year, and it struck me at that point you said a lot of it dodd frank financial regulatory reform had yet to be completed, that we were not at the endpoint yet. what jumped out at me was many of the things you ticked off at somepoint, leverage ratio, of the things we wanted to put in place to prevent the banks from collapse still had not been were still in the discussion stages. where are we now nearly six years post-financial crisis? how far have we come? but it isetter, taking a long time. -- by the numbers,

we are not finished. increasing bank capital requirements, which simply reflect the risk they will take as opposed to debt. those are great areas of importance. those have not been finalized it. another important requirement to issue is called long-term unsecured debt. after they fail, to make sure there is enough so you do not have to end up access the rest of the industry for a bailout. whereare good examples regulators have been talking for a long time, acknowledging them to get done, but we have not gotten over the finish line. there is more capital in the banking system them. the numbers i have seen, a 2% increase.

there were not nearly enough. if you look at the balance sheets, the capital levels are 4%. at 3% to operating with only 4% equity, would you do business with that company? as your creditor, probably not. it is common sense they need more capital. another problem that suggests the weakening of the financial ratio wasoverage over 100%. now it is down to about 65%, 66% . they have been releasing

earnings to drive earnings. are the goode times, you should be building the reserves up. we have passed the point at which they should be releasing them. of concern. an area there hast safer, but been incremental progress, but not enough, and we need to get this done. suggest there has been a piling on, that regulators are never satisfied, adding morfe layers of regulation. i wonder, what are you going to look for to say that either the problem was solved or the financial system is as protected as it can be? well, i would agree with them to some extent. regulation has been a moving target.

there is a sense of an overarching cohesive policy objective and approach. tougher capital requirements, that at least under the current rules are easy to gain. aggressive regulatory action to make sure that if they do fail that they can be resolved in an orderly way. legaleans simple five structures along business lines come have more stand-alone capital so they cannot be -- that work has barely begun. i would agree with you that on some of the stuff that has been a moving target, but on others there has a big consistent the men. leverage has been one, the reliance on short-term funding. the debt, the industry has

acknowledged we need those minimum rules in place. >> for those of you who have read the book, you will know she was not the biggest fan of one and said citigroup, they were basically mismanaged in the crisis. they were one of the two banks that needed a bailout. were at various points/it's about whether to remove the ceo and at that point he did not go, eventually did. citigroup is back in the news subsidiaryy have a that has run into trouble in mexico for money laundry, questions about whether they're compliant with the law, whether one of their subsidiaries is doing something frog given. -- something pronto and -- fraudulent.

with these operations across the globe, is it too much? not the size, but so much the complexity that is the problem at this point? >> fraud is very difficult, and we do not know the facts whether there should have been discovered earlier or not. fraud has been a perennial problem. even the best of regulators say this. you need to take that into account. citi's management has improved dramatically. they are a much better bank than they were for the crisis. they are a complex organization. i think that creates a lot of problems. i recently joined the board of a spanish-based bank that has worldwide operations. follow thethers ization.rie

yes, you can make mistakes with that model as well. then you are more of a conglomerate, a collection of small regional banks, as opposed to trying to manage everything at the top. it is extremely challenging. as regulators proceed with getting these large tanks into resolvable forms in a way that they can be broken up in an orderly way if they get into trouble, making them subsidiary rise more will make them much more resolvable. this is not a problem -- a has had its problems as well. at wells fargo, they are not perfect either, but they have a more straightforward model. they are starting to get into the activities, so we will see what happens there.

it is simplicity and complexity more than size, and having more boards and managers is the way to tackle that problem. there are some benefits with the global presence. having someis problem and emerging markets are doing well, europe is in better shape than in the u.s.. the management challenges are substantial. known now as the new goldman sachs who have top officials in washington, and fisher,y lew, stan other officials, you have been critical in the past of the revolving door. does it help to have people in washington who have experience on wall street, or does it hurt at this moment when we are trying to figure out how to prevent another crisis? >> it is important to have diversity in your economic team

and among your financial regulators. it is important to have diversity of perspective, background, geography. when you start having a lot of people in similar past experiences, perhaps you are not as strong as you might otherwise might be. all about individuals, and all the people you named are fine individuals. there's not this issue that we need to be sensitive off, since they're so much public criticism after the crisis about government and its relationship with the financial sector and be sensitive to that and make sure there is big diversity. you have people who are 10 of five -- who are identified with public protection as well. at the white house, it is a rime opportunity to have one more vacancy at the fed.

a republican was strongly chairman ofhe vice the fdic, known for his strong opposition of too big to fail, having somebody like that who has a public trust would add diversity to the fed and would bolster public confidence. i hope they look at that they could see as an opportunity to put somebody who is reform minded and associated with protecting the public. >> you mentioned jpmorgan. written a column in which you talked about the resentment of -- going on, on was unfairly blamed for everything going on in his company. everything was sticking to it now, every possible allegations leveled at jpmorgan. thent to know whether regulators sensed weakness and

went after them, or they were just a big bank with a lot of operations? >> they made plenty of mistakes, and plenty of their actions were more than justified. it seemed like there was a particular focus on them, and that struck me, how it struck a ,ot of people, but what i think regulators and others who enforce our rules need to be mindful of the kind of signals they send out. if they say we are worried about one of these guys getting into much trouble, so we will go after the ones with deepest pockets, if that is the thinking, if that is how you define your regulatory approach, it is giving disincentives to banks to be strong, which you do not want either. i think it is something that regulators as well as others are who are charged with enforcing our law need to be mindful of. i do not quibble with that. they had grounds. it was more prior to his asian oritization, that we

are not subject to the same kind of focus, that we need to be mindful of signals, and enforcement actions should be designed to change behavior. if the signals are confused, whether they are being picked on because they are strong, governor mead -- government goingto be careful about after other institutions if there is more than one institution doing it. i was curious to hear your thoughts about why a particular bank, what you hope to bring to the table as an independent director, but you have been a critic in the past of the european tanking system. werehave said their wor concerns about their stress tests. i would like to hear whether you

think they're better capitalize than they were? >> they are making progress, and i am delighted to see that they will be doing the quality review now. they are already seeing results. trying to clean up the balance sheets already. that is all positive. largeare several very complex european institutions that have been operating at very high levels of capital -- of leverage, very low levels of capital. part of that is, yes, the rules need to be strengthened in europe. they do not have leverage issues. still have a lot of space measures. in trading operations, you can - - with your capital to

determine the riskiness of the trading assets. this has been a problem. they are improving. it will drive the european economy. dol-capitalized banks will more lending than well leveraged ones. you look at a bank, it is primarily in the business of making loans as opposed to trading operations, if you look at their capital on a leverage s, they will have much higher levels of capital. perversely, that is the way that capital's work now -- capital rules work now. when you look at the exposure of the u.s. to the european banking system, what do you see? are we better protected now than we were? >> i am supportive of the rules the fed recently finalized.

capitol levels of some of the larger institutions in europe, and you have to question what ability would they have to serve as a source of strength if we got into another situation? point of fact, there are theations in the u.s., money was going that way, was not coming into the u.s.. you can see a stress situation where their assets will be reined in. in trouble bank a is in europe, to think the fed will commit to foreign regulators and that bank to send money here, it is not going to happen. --rring that they have sent requiring that they have standalone capital liquidity,, organized here in the u.s., integrated with a company that has its own board in the u.s., i think that makes for a more stable financial system and

provides an additional level of protection if europe has problems. it can go the other way. if the u.s. subsidiary starts to helpnto trouble, it can prevent those problems to go to europe. bothovides attention -- it provides protection both weights. [indiscernible] optimally, you will. it is not quite explicit. there is a lot of this going on. into a stressed situation, that is what will happen anyway. formal, but ie would like to see the global financial system migrated to that kind of structure. the benefits that that brings, to make them operate through subsidiary aries -- subsidiaries. >> one of the things that

triggered financial reform, an insurer, aig, one of the big theses for dodd frank, large insurers had become more than insurers and no one was policing them. you mentioned last year the conference that aig had not been designated as a systemically important financial institution. it now has. in thes a huge lobbying works by the industry to try to get the fed to go easy on them, to not apply the same kind of rules to ensure basically the same. there is a lot of support for that on the hill. they feel likeid their hands are tied by the law. you wrote a letter saying he stay out of it