ramesh is right on medicaid. the key issue in medicaid is the formula you choose in the block grant and then it isn't thinking corporatization, ending states getting to spend other peoples money. in fact, jon and dan and i argued it's a matter of what form that you sent. be as generous as you what with governors but stopped ago participation in your way ahead. on adjustable-rate mortgages and interest rate only mortgages come what we are because we got to go back, peter and i argue that we have to go back to a kind of regulation that limits contracts by wealth levels. i have no problem with affluent people of any kind of contracting want, but it was ironic that a wealthy person buying an apartment on park avenue in my hometown had a simpler contract than many low income families of subprime mortgages. that's not the way we do anything else in regulation from hedge funds to private equity. not the way we want to do here. on energy the addiction is harmful because of the national security externality. it's not addi

host: ramesh ponnuru?st: right now that may be the case, but in a couple of years, it will start to spend more than it takes in. the growth rate of that shortfall is pretty rapid. if you are looking at it over any kind of time horizon longer than the immediate one, it is a problem. keep in mind, nobody is talking about cutting battle that loss for people who are currently retired, or even those who are near retirement. we are talking about changing the program for future retirees so that it is a more affordable program. host: how do you respond to those who say that medicare is not the problem, it is a health care problem? here is paul ryan on his blog. guest: i would say one of the reasons we have a health care problem is because medicare is structured in a way that it can offload a lot of its costs on the private sector. medicare is governed by a series of the fact of price controls because the government uses its vast pressing -- purchasing power to set prices for the medical industry. that distorts the

ramesh ponnuru is also right on medicaid. the key issue is less the formula you choose and just ending co participation, in the states getting to spend other people's money. and pat, john and dan and i argued it almost doesn't matter what formula he said. stop the co participation in and go away ed. on adjustable-rate mortgages and interest only mortgages what we argue is that we ought to go back. we ought to go back to the kind of regulation that limits contracts. i have no problem with affluent people having any kind of contract award, but it was ironic that a wealthy person buying an apartment on park avenue in my hometown had a simple contract and many low-income families with some prime mortgages. that is not the way we do anything else in regulation. probably not the way we want to do it here. the addiction really is harmful. the national security externality. it is not addiction to things coming out of the oil and ground in taxes. it is coming from places that are trying to harm us. on china there is a difference from

host: ramesh ponnuru? guest: right now that may be the case, but in a couple of years, it will start to spend more than it takes in. the growth rate of that shortfall is pretty rapid. if you are looking at it over any kind of time horizon longer than the immediate one, it is a problem. keep in mind, nobody is talking about cutting battle that loss for people who are currently retired, or even those who are near retirement. we are talking about changing the program for future retirees so that it is a more affordable program. host: how do you respond to those who say that medicare is not the problem, it is a health care problem? here is paul ryan on his blog. guest: i would say one of the reasons we have a health care problem is because medicare is structured in a way that it can offload a lot of its costs on the private sector. medicare is governed by a series of the fact of price controls because the government uses its vast pressing -- purchasing power to set prices for the medical industry. that distorts