 Thank you so much welcome everybody to the to the urging the super committee to go big for trillion and beyond Event that we're hosting today, and thank you to our audience on c-span. I'm Maya McGinnis We turn the lights on I am the president of the committee for a responsible federal budget And as you just heard from that first video are sort of for a into a new era of using video technology in our events There are a lot of voices out there that have been urging this new super committee of 12 men and women that are tasked with finding a 1.2 to 1.5 trillion dollars in savings Over the next decade to go beyond that and to go big so last week early last week there was a letter that was released by 60 leaders from business former Treasury officials CBO OMB Outside well-respected voices all claiming or all urging the super committee to go big Even acknowledging that they had different reasons for why and what a package should look like but that is important That it go beyond its mission and then later last week There were 36 senators by partisan group of senators and it was quite a sight to see 36 senators Standing on a tape a stage together Pushing to do something hard come up with a savings package in the trillions of dollars that included entitlements Revenues all areas of the budget So today what we've done is we have gathered really the leading voices in budget area right and left All different backgrounds to come together and talk a little bit about this whole thinking of why and if they believe and why They believe that the super committee needs to go beyond just its mandate of finding a trillion and a half To finding two or three times as much in savings And I guess the quick reason I would give that I think it's so important and that we at the committee for Responsible federal budget think it's so important is if you're going to do all this hard work And there's no question that what they are tasked with is very very difficult These are all the kinds of policy choices The policymakers have been ducking for the past decade of real spending cuts and real increases in revenues But if you're going to go through all that work and all that political compromise Which it will clearly take you want to actually fix the problem And we're going to need something bigger than what they're looking at to actually stabilize the debt and put it on a downward trajectory We also have been saying that it's very important that they go long that this isn't just a short-term problem In fact in the short term the biggest problem We have really is making sure that the economic recovery takes hold and stays on track But this is a medium and a long-term problem and it's critical that the members of the super committee Look at and are supported for looking at the long-term drivers of the problem So all the areas of the budget that are going faster than sustainable Finally, we've been making the point that they have to go smart So there are ways that you can cut the budget and in some ways This is what we've been doing over the past months where you kind of mindlessly put in caps and push things down But don't pick and choose what programs are working and which programs are outdated or unnecessary or not Well targeted so if you go smart I think you end up looking at the budget and saying for a new era You need a budget that focuses more on public investment and less on consumption and if you go smart on revenues You look at how to overhaul the tax system And if there's one thing that we're probably lucky about when it comes to tax reform is that our tax code is so crummy to begin with We can reform this tax code in so many ways that will improve it Simplify it make it more efficient and raise revenues So at least there's a lot of opportunities there for that heavy lift But I think go big go long go smart needs to be what people are pushing And letting the super committee know that they want to help them succeed in doing So that's the point of the discussion today For those of you who have your packets We have a bios in there a list of truly phenomenal people who are coming with us to speak today What I'd like to do now is invite my co-host of this event Steve Bell from the bipartisan policy center And Bob Bixby from the Concord Coalition to come up and say a couple words before we get started with our first panel Steve Thank you very much Maya and You've been toiling in these fields for a long long time As many of us have but you've done good work Certainly appreciated. I just want to make three points one. We're very glad to co-sponsor this today as you know diminishing the Rivlin of their co-chairs of our task force on Deficit and debt reform and stabilization dr. Rivlin will speak The first panel said a diminishing will speak at the second panel Number two, I would like to tell you that all the work we've done to date the bipartisan Caps the budget control act have not essentially changed the debt trajectory over the next 30 years of this country at all So all the fighting you saw Didn't make much difference and that brings me to the third point that Maya made This group of people the joint select committee has an opportunity to go big It's written into the law that established them in our judgment and they can do the same similar things and if they wish To bring about really big changes in taxes and spending It's their choice and I think only external pressure will make them make that choice Maya. Thank you very much for everything well Maya and Steve pleasure to be with you and You know, let me say I I to have just three things to say on the behalf of the Concord Coalition One is I thoroughly endorse go big. I Thoroughly endorse go long And go smart it wasn't on my list, but I can accept go smart and What I was going to say for it is don't go it alone and By that I mean some of the work that the Concord Coalition does in the field outside of Washington Is a bit of political advice for not just a super committee, but for all members of Congress Because of the political difficulties of these choices don't go it alone Do things like senator Warner and senator Chambliss did and pair up and go to each other's states and try to explain Why this is a bipartisan problem and that they can be bipartisan solutions and Don't go it alone also means bring the public along with you The last thing we want to have happen here is the super committee go and make some deal And nobody knows what's going on and nobody understands the choices and then something comes out on you know the eve of Thanksgiving and Everybody spends December Trying to figure out what it is and arguing about it rather than having a good debate and going towards a vote That might might get consensus so go long go big go smart even But don't go it alone And following my own advice. I'm gonna have to go hit the road and On a trip, so I'm sorry. I won't be able to stick around for the great advice Thank you Anyone who looks at projections of the US federal debt And dangerous ones for our economy but even worse going forward there's quickly going to pass a hundred percent debt to GDP and then Accelerate from there. That's an unsustainable trajectory that will lead to a debt crisis without any question We are almost at a hundred percent of our economy in total debt to GDP And we have tens of trillions of dollars of unfunded obligations that are off the balance sheet We need to start dealing with these issues before we have a debt crisis in the United States 20 or 30 years from now. We're looking at deficits of 16 or more percent of GDP every year And that's just completely and utterly unsustainable No country has ever run deficits like that and actually managed to stay solvent Economists agree on very few things But I think most of them agree The debt to GDP above 60% is not prudent and debt to GDP at 90% Has a very negative effect on growth if the congressional deficit reduction committee fails We're in serious trouble. We'll go into a tailspin almost immediately In fact, we almost went into one this last time around But I think everyone was waiting for what they probably viewed as a dox machine That would just somehow come in place save everybody at the last minute But most people now recognize that that can't happen anymore The consequences are so dramatic That even failure to come up with something now is going to have enormous consequences Economically and otherwise for this country and our standard of living is going to go down immediately But I actually believe the first and indispensable step in a growth and job strategy Is to show to ourselves and show to the markets of the world that the United States does not intend to go bust And so beginning now to scale down the terrifying debt levels we have and deficit levels And and putting in place a long-term measures that show that we're going to deal with the Unfunded obligations that aren't even being counted in these numbers The joint committee needs to go big if they want to provide assurance to the capital markets Especially to our foreign investors that we're serious about putting our financial house in order. I Believe that the super committee needs to achieve at least three trillion dollars in additional deficit reduction Over the next ten years. We have two terrible problems. We have very high unemployment More than 14 million Americans are unemployed and we have a terrible long-run budget problem And the the answer is we just simply have to make progress on both of those things And that's why I feel so strongly that that the right policy is to pair an Aggressive jobs program today which requires more government spending requires tax cuts But pair that with a much more serious Reduction in our long-run deficit that that absolutely is the is the right economic policy For the United States timing. I think is the element. It's not an either or situation But it's when do you start making the cuts and in doing it in a phased approach? I think positions us for growth in the long term think of it as a two-step dance in the short term There are things that need to be done in order to get the economy going But they're not going to affect the long-term deficit issue The question of the long-term deficit is separate from the short-term recovery If we correct long-term deficit if we put in place proposals Which will lead to a fiscally responsible nation to one where we can afford the debt that we're running up to one Where our debt to GDP ratios fall below 60 percent over the next ten years They won't actually help dramatically the short-term recovery because people have confidence in our nation again People have confidence in our currency and they'll be have confidence in our ability to finance our government But if we don't do that then they're not going to have confidence They're not going to make investments and the short-term economy will slow and the long-term economy will be disastrous in order for to give the Economy the business community and the private sector Confidence in order to give the international community confidence We need to balance our budget and bring our debt load down But at the same time we need to When we get that confidence Have invested in the short term in growing jobs and giving business And enterprises and and people want to go in business the opportunity to do so and the encouragement to do So in the economic world with all to do so You know, I think if this super committee came up with a big solution Which put us on a path or at least directed the key committees of Congress to put us on a path Towards solving the long-term fiscal insolvency of this country There would be a huge burst of enthusiasm and energy From the American people and the entrepreneurs in our culture That would cause a major economic expansion and create lots of jobs and make people feel good about the nation again Failure is not an option. I mean we really do Have to deal with our long-run deficit and we have put a lot of weight on the shoulders of this super committee And they just simply they simply have to step up Great. Thank you. If we could have our first panel come up and join us Erskine bowls was the co-chairman of the fiscal commission. No, all of you come up. You don't have to wait for your introduction Senator Mike Crapo Senator from Idaho was also on the fiscal commission Dave Cody the CEO of Honeywell on the fiscal commission and Alice Rivlin former director of CBO OMB vice chair of the Fed on the fiscal commission and co-chair of the Domenici Rivlin Commission So we have a remarkable and experienced group of people who've worked together In different capacities putting together bipartisan deals that in fact did go big and could go big And hopefully in many ways will inform the work of the super committee So I'm going to be joined now by my co-moderator Peter Cook from Bloomberg TV and Peter if you are all ready I'm going to turn this over to you for the first question to our group Maya, thanks very much appreciate the invitation to participate in this all-star panel that you've got here to talk about What is the issue in Washington these days as a reporter covering the super committee and the actions that will be playing out here over The next few weeks This is either say a fascinating topic an important topic for us for our audience at Bloomberg And important for not only this audience here the audience at home the audience around the country to find out Why you all believe going big is the right move because certainly we have heard other voices here in Washington elsewhere That perhaps going small is the better move. So let's hear a little bit about that first convolse you had the the Benefit of being the chairman of the deficit commission Along with with Alan Simpson You all came up with the package that did exceed that four trillion dollar figure Give us a sense from your point of view why going big Make sense for the country and is feasible. It was a great honor to serve on that commission and to And to work on a subject that I think is probably the most important work. I've ever done in my life Why do I feel that way and why do I feel like this? This super committee must go big they got to be bold and they during well better be smart I think if they don't go big if they aren't bold they aren't smart I think we face the most predictable economic crisis in history I Think it's clear that the physical path our country is on is simply not sustainable And if we do nothing If we take the ostrich fury and just stick our heads in the ground I think that of a future of our country Is not very bright What worries me is people who Who go around saying oh gosh? We can simply grow our way out of this problem or we can simply and solely tax our way out Or we can simply cut our way out of this problem. This problem is too big To be solved by any one of those solutions. We've got to grow We've got to raise revenue and we got to cut spending and we got to cut spending wherever we find it whether it's in the tax code Or it's in the entitlement programs defense or non-defense and the reason I think it's got to be at least four trillion dollars Is that isn't a number we made up because the number four bus just passed us on the street? Four trillion is the minimum amount you have to reduce the deficit over ten years in order to stabilize the debt And put it on declining basis as a percent of GDP That's got to be the bogey The reason I think it's got to be smart is this is just not an arithmetic game I think it would be crazy If we did this and we didn't take into account the very fragile economic recovery we have today So in the recommendations that we made we made sure that we didn't have big cuts this year or next year But we did eventually get back to pre-crisis levels of spending But again, we've got to make sure we don't disrupt a very fragile economic recovery We also have a responsibility in this country to take care of a truly disadvantage So we tried to make sure we didn't have cuts that affected the truly disadvantage cuts in things like food stamps or ssi Or workers compensation And thirdly, you know, we've got to invest if we're going to succeed in what is today a knowledge-based global economy Then we have to invest in things like education and infrastructure and high-value added research But we have to do it in a physically responsible manner And lastly, uh, as myra said The tax code we have you couldn't dream up a more any competitive Ineffective inefficient tax code And if we will simply broaden the base simplify of a code eliminate All or most of these tax expenditures, which is just spending in the tax code Then we can reduce rates and apply a significant portion Of the money that we save In order to bring down the deficit by a significant amount. I think that's the kind of thing that makes sense I think it would generate dynamic growth of a country. I think it would create jobs here And I think it would put america back on the road to prosperity Senator crepo, you're a sitting member of congress the only one at this table There are questions about whether congress can go big at anything or they're going smalls the more feasible more realistic option You're here in congress. You sat on the deficit commission. Why is going big feasible? Why is it the right choice? Well, first of all Let me say I agree with everything that my good friend urskine bowls has just said All four of us served on the fiscal commission together along with others I see in the audience here and We did reach those conclusions that urskine just mentioned a four trillion is literally the minimum we can do it is not the ideal and frankly I'm one of those who's a little more aggressive I think we need to do it twice or maybe three times over the next decade to truly get ourselves into the posture That we should be in fiscally Your question was Can we go big does congress have the ability to go big and the short answer to that is that gridlock is no longer an option And one of the my answer to your question is yes And one of the reasons I answer it. Yes Gets back to the fiscal commission and ultimately the gang of six that as you know I worked on the famous or infamous gang of six that was three republicans and three democrats who We're able to come together on a very big option And those the republicans and democrats in that group represented the furthest sides of the philosophical Spectrum in the united states congress the reason we were able to come together is because the crisis is so real and it is so imminent You know, we've had these debates in washington dc and in congress forever over whether we should Tax the rich or not tax the rich or who is the rich and how much do they pay relation to everything else? And what programs are critical and what the safety net should be but the bottom line is as the fiscal commission concluded We need to have at least a four trillion dollar solution and We need to see everything on the table That doesn't mean that there aren't ways to to protect the safety net It doesn't mean that there aren't ways to make sure that in the tax code We have the fairness and the reform that erskine has referenced But it means that we've got to put aside our partisanship and get down to the business of doing it Now having said that it can be done and that people from very broad perspectives can come together I also have to say it's a very tough border right now with the political climate in washington dc It is nothing short of toxic right now in terms of the the nature of the political battles that are taking place But I believe that out of that Comes an opportunity and perhaps one of the greatest opportunities that we have had in the recent past To truly reform our fiscal policy and our tax policy in this country in a way that will put us on a pathway To controlling our spending But also put us on a pathway for developing a pro-growth package for this country That will create the kind of jobs and the kind of economic Explosion that we are capable of if we will just create the proper climate David codie your business experience and all this there's a lot of skeptics out there in the business community That washington get anything done that they can get even one and a half trillion dollars in deficit reduction four trillion dollars tall order For the business community perspective. What's riding on this? Let's let me put a little uh Even overview context on this Honeywell, it's about a 37 billion dollar of company 130 thousand employees more than half our sales Half our employees outside the u.s in over 100 countries Now beyond just making a commercial for honeywell The point is I travel a lot And I get to see a lot of other countries and what they're doing And it's important for us to realize as a country that 20 years ago There were a billion participants in the global economy Today there are about four billion participants in the global economy. We've added china india cis states eastern europe A lot of southeast asia that were not participants before Yet we still act like we did 20 years ago and we brag about winning the olympics 20 years ago As opposed to what do we have to do to win it today? That's a long way of saying we need an american competitiveness agenda And we need to get our competitive mojo back the way it used to be when our parents and grandparents Actually got us into the position that we are today There's a number of things we need to address debt energy policy math and science education Infrastructure these are all things we need to do if we're going to be globally competitive The part that scares me is that we're finding it so difficult to do what is a glaringly obvious problem And which through simpson bowls. I thought we had a glaringly obvious solution And I would agree on the four trillion as being a minimum Because if you look at the baseline that we used in simpson bowls We ended up at 20 trillion in debt in 10 years If we didn't do anything and that already assumed the reduction in the war spending It assumed 4.6 percent a year nominal gdp growth And it assumed that medicare growth would moderate from 10 percent in the last decade to 6 percent in this decade If you said, okay, i'm going to be more realistic about those assumptions that 20 trillion becomes more like 25 or 26 Using a 20 trillion baseline you need for just to get to the point that Erskine and mike were talking about before If you say it could be worse than that because some of these assumptions aren't going to happen Then you're exactly in what senator crepo was talking about what we may have to do this again If we do this in one one and a half trillion dollar bytes It's better than nothing But you have to assume there's a very good chance you're going to have to do it six more times And when you think about the ridiculousness of our situation, I read something the other day that I thought was very helpful Was if you're trying to explain to a family What we're doing as a government When you start talking trillions, I mean it really gets difficult to understand But if you tell an american family, you know, what's happening is we're making 21 000 a year and we're spending 35 And we're going to do it for a long time How long do you think that'll go? I think most american families would say, you know, I think at some point I have to declare bankruptcy and that's not a good thing And we all know This problem will get resolved and it will get resolved one of two ways One is we can do it now Thoughtfully proactively the way grown-ups do things in the way our congress and our president will hopefully do things The other way is you can wait until it gets to a point where the bond market decides They don't trust you anymore And with more than 40 percent of our debt held outside the u.s. Almost a trillion of it held by china There's a point at which they'll say I want more price I'm not going to give you any more money unless you give me more price meaning a higher interest rate And if interest rates go up on government debt There's a tendency to think that's just a wall street problem But the fact is if the long bond the 10-year bond goes to seven percent Good chance home loans then are 10 percent Car loans are 13 percent What happens to the economy what happens to main street then? So we need to do this now and that's why I think go big is the only way to go We have to have at least four trillion dollars to have a chance and I can't assure you That if we do four trillion that we're not going to have to do it again in a few years as senator prepo said because the issue is that big Alice rivlin you've worn about every budget hat in the book here congressional budget office omb been a vice chair at the federal reserve Four trillion dollars. How hard is that really there have been suggestions? It's not that hard We should go even bigger your view on that and and maybe this follow up questions. How much time do we have? Thank you I think we may get our cup come up and fairly soon And in the form of damaging our chances of recovering rapidly Because we do need to spend more or tax less in the near term to Get the recovery back on track. It's worse than we thought it was a few months ago but if we don't solve the deficit problem in Quite fast I think the world is going to look at us and we're going to look at ourselves and say we're not competent This country that we've had so much faith in all these years wanted to buy their bonds Is really not facing up to ordinary problems and its government doesn't work That is very damaging to confidence all around the world including here And to the ability of our own companies to make decisions That will help them invest and for individuals to think well. Yeah, I have a problem with my mortgage But I can begin spending again It makes the whole world very very uncertain. Now this super committee has extraordinary powers You couldn't have written this into the constitution. Nobody would have wanted to give anybody that much power But the ordinary process has haven't worked. So here we are with a committee of 12 people which can write laws which change Uh entitlement programs Tax code get it to the floor get it voted on no amendments No, uh, filibuster know anything that is a huge opportunity And it's an opportunity to do both things to solve the double problem of Revving up the recovery in the near term But folding that into A reform of entitlements and a reform of taxes That brings our debt onto a more stable path But that's going to take compromise and it's going to take courage And I thought we saw that on the simpson bulls group. I became a big fan of senator crepo. He may not know this and his Equally conservative republican colleague senator coburn Because they were willing to think out of their outside their usual box And they came worked through the arithmetic and realized this is going to take some revenue And i've always been a fan of senator durbin, but uh, he uh also Came to the very difficult conclusion that This is going to take reigning in the entitlements. My party doesn't like that. That's not really good for me Uh, but uh, i'm going to have to join with the others And it was a display of courage and compromise that uh, I hope Will spread to the rest of the congress and especially to the select committee One of the One of the points that you all have made or most of you have made is that really four trillion is more Like a minimum than a maximum about what we should be thinking about and if you get to four trillion in savings You stabilize the debt. It's on a downward trajectory But still it's well above our historical averages historically our debt levels were below 40 percent of gdp And if we say four trillion dollars that would put us at closer to the high 60s percent of gdp and moving down And of course you don't want your debt levels to be too high Because you want the fiscal flexibility if you need to borrow again in the future if you're hit with more emergencies Which we will be if you're hit with other wars, which in all likelihood We will be the kinds of things you actually need to be able to borrow for And so I think it's important that people understand as much as as we wish That you could balance the budget in the next couple of years that used to be what we talked about right balancing a budget And we're so far off from that that it really needs It's critically important that at least the debt not be growing faster than the economy And I think also when you think about this one and a half trillion One of the problems with that is that it's probably not enough to reassure credit markets It's probably not enough to avoid another downgrade So to go through that huge political heavy lift and not have the economic benefits of fixing the problem Is kind of a lose lose for an awful lot of work The question I want to put to the panel I'll put it to the whole panel Is in many ways you start seeing people in the discussion Especially as the economic news is getting increasingly worse Sort of falling into one bucket we either need to reduce the deficit or we need to have more stimulus And I think sort of the thoughtful thinkers on this whether it's the International Monetary Fund or the Fed or some of the outside experts Many of you have weighed in how you can think about doing both of them simultaneously And how in fact reducing the debt over a multi-year period in a credible and gradual and thoughtful way is actually part of an economic growth strategy So I wondered if you could talk about how debt reduction Affects economic growth and particularly senator creepo You may weigh in on tax reform because I know you have worked tirelessly on figuring out how to make tax reform That's pro-growth along with this as well So please all of you jump in let me take the first stab at that then Because I think you've hit the nail on the head. We need to remember something this special committee was created As a result of the debt ceiling battle that we had in congress It was a battle over extending the debt ceiling By about two trillion dollars and that's how the two trillion dollar figure was achieved It was not to solve our debt crisis It was to counterbalance the increase in the debt ceiling And it's important for us to realize that because I'm concerned that as americans and as A congress we may think that that two trillion dollar target was the solution to our debt crisis And one of the main reasons that we are here today Is to point out that that is not the case and that we have to move further and before answering your specific question I'll just go one further step a couple of days ago. We had before the finance committee A subcommittee on the finance committee on which I sit five very prominent economic Figures in the united states. I won't go through all of their names with either you at all recognize every one of them And my one of my questions that I asked them the last question I asked them was Given all the differences of opinion about how we should attack this problem What do you think leaving aside the details? What do you think the minimum step should be? Four of the five gave me an answer two of them said a minimum of four two of them said a minimum of six And the point I make the reason I bring that up again Is just to put an exclamation point on the fact that we have a tremendous task ahead of us Two of them actually all five of them agreed it with this also said That one of the problems we have which davis just referenced is that the assumptions we are making about the performance of the economy And the impact of the demands on our economy through our entitlement programs are unrealistic And that we are not even Addressing the full picture of the problem in our analyses and we have to recognize that So given that your question focused on where do we need to head? In terms of the balance here between The austerity that we need in controlling congressional excesses and spending And a growth package for our country And there is a huge impact on growth simply by controlling our spending and controlling the growth of our deficit The cbo has put out some numbers on this that show that there are hundreds of billions of dollars of growth That can occur and will occur Simply as a result of our control of our deficit It's because of the drag that our deficit places on the economy And then add to that the kinds of pro-growth things that this panel has talked about Tax reform energy policy reform regulatory reform litigation reform And the like there are a number of other areas where we know what we need to do And we could create a climate where we have a very powerful pro-growth pro-competition agenda That is accompanied by an austerity program with congress controlling its spending And we could put the united states in a position where the economic impacts of that would be the most phenomenally powerful part of the entire plan Dave Just to build on What senator crepo was saying When we say four trillion would stabilize the debt Again, that assumes 4.6 percent the year nominal GDP growth for 10 years when we're not we're already missing that And it assumes medicare medicaid growth moderates from 10 percent a year to about 6 percent a year So you can very easily get yourself into a position where it doesn't stabilize the debt. It just Slows the the growth of it you can do both the short-term stimulus and the long-term intelligent plan at the same time And it's oftentimes it seems to be teed up when I read things in the press or statements that people make Is that those two are mutually exclusive they are not you can do both And the long-term plan in particular Needs to address medicare and medicare And that's the one that I get the feeling like no politician really wants to discuss But I think the american public needs to have an honest discussion About what the impact of medicare medicaid is going to be And it's as fundamental as there's a demographic time bomb my generation the baby boomers are retiring And we're retiring at a very high rate. We're going to crush the system There isn't enough money going in to be able to support it The longer we wait for my generation to retire the worse it gets because it is extremely difficult to take a benefit away from somebody who's already getting it If you can reduce the program before people enter it then I think you stand a chance But this problem is coming it's been coming for decades people have known it It's just that now it's facing us and if we just look at the next 10 years medicare medicare growth grows from something like 700 billion a year to one and a half trillion a year Even with that reduced growth rate Can't do that can't do that Alice I think it's not only feasible. It's necessary to do the two things at once And the timing is actually good Because as dave just said One of the big things that has to be done to stabilize the debt is to reduce the rate of growth of entitlement programs But they're retirement programs and you can't fix them quickly So not much that you do on the entitlement reform front is going to affect the budget for quite a long time Maybe 10 years or more And then you get the benefits out Further into the future And that has nothing to do with uh right now But it's also true on the tax side if you're going to have a really comprehensive reform Of the tax code Uh that gets rid of a lot of loopholes including very popular ones like Converting the homo mortgage deduction to a credit for example if you're going to do that You can't do it really fast. You have to phase it in over time So the kind of long-term debt stabilization Reforms that we are talking about and which ought to come out of the joint select committee Are not going to damage the economy in the short run On in the short run. We do need More job creation and things that actually will widen the deficit a bit, but they'll help get us on a track to stronger growth Uh, I just want to have a thought because asla you were talking I was thinking christie romer on the video Actually makes a number of the same points about how if you really focus on the long term for the debt reduction That can help so much and free up the fiscal space space in the short run To do more on growth and jobs, uh, and I'll just point out for these videos. They're all going to be posted in their long Full version so everybody will be able to see them on the uh c r f b Dot org website in a couple days give us time to get them posted But they're very interesting because it's a number of thoughtful people weighing in as well peter do you want to take it pick up on uh Something that you all have all touched on but is the the elephant in the room the debate here in washington right now to go big You have to put revenue and entitlement programs on the table spending cuts Senator crepo i'll start with you This is going to be a tough choice for your republican colleagues those sitting on the super committee What happens to revenue? How do you sell your fellow republicans on revenue as a component here? And are you talking the same sort of revenue that the president obama's talking about? You've put your finger right on probably the biggest issue that has to be handled between the two parties If we're going to resolve this issue resolve it i personally think it can be resolved In a number of ways But the most to me the easiest way for us to address it Is to deal with the way that congress scores various proposals and as the bull simpson commission recommended allow us to become more effective and accurate in scoring the impact of various policies What am i talking about? Uh shorthand it's utilizing dynamic scoring rather than static scoring If you do that The impact of various tax proposals can be understood To generate the kind of economic growth that gives you the revenue piece of the equation without raising taxes In fact, uh, what the bull simpson commission did was literally to reduce tax rates flatten the code And uh, you know, some people would pay more taxes under that kind of a system Some people would pay less but the bottom line is That we then were able to debate over whether an increment if any of that should be allocated to debt retirement as opposed to rate reduction And i believe that that's the area Where we can get the most progress but we can't get past that if we assume That there is just a static response of the economy to any of the decisions that are made or the proposals that are put on the table So to me one of the the key things that needs to be done is that we need to Accept the notion of analyzing the impact of various tax proposals With a static or excuse me with a dynamic model and then from that point We can analyze the kinds of revenue impacts that we need to generate for the economy coming from different proposals Mr. Kambos, that's not a conversation that most people are having right now Actually, it's a conversation that i've had any number of times in the last Several weeks with almost all of the members of the super committee. I'm actually Relatively hopeful, uh, I wouldn't say optimistic but hopeful and i am for a couple of reasons First of all, I think since we came out with our plan in december of last year The politics have changed quite a bit I think most people here in town have actually understood the economics in the need to do four trillion Over a 10-year period but the politics gotten away because it was tough And it's politically tough for either side to make these decisions But this whole debt default fiasco That we just went through I think brought the the pain associated with doing nothing To the forefront of the minds of the american people and they got educated on what can happen if we do have a default In this country So I think the politics changed and if you look at the polls A majority republicans a majority of democrats and a majority of independents want to see a sensible deal done They want to see this country move forward Secondly in order to For something uh to pass this this Committee instead of having to get a super majority as we did They can only have to get a simple majority And that's a lot easier task. We actually got a super majority We've got over 60 of the members of our commission to vote for plan as senator crepo said we had six Senators on our committee three republicans three democrats five of those senators voted yes So I think getting a simple majority uh is possible third uh In this case Doing nothing involves a lot of pain because you're going to have Across the board cuts. You're going to have the sequester You'll have 600 billion dollars of additional cuts to the military budget And 600 billion dollars worth of cuts to the non-defense budget. So doing nothing is not without its own Own pain. We can do it a lot smarter. And lastly our experience uh with Uh the commission was that the more comprehensive we made it The more support we got People didn't want to do this if just their own ox was going to be gored But if everybody had skin in the game if everybody was going to make some sacrifice Then by golly everybody was willing to get a board and we got over 60 of the members of that commission a majority republicans A majority democrats vote yes, so i'm hoping Now it's really you want to add to that you've again seen the congressional process here There's not a lot of time for these folks the super committee to reach that 1.5 The limited amount of time between now and thanksgiving this can be a challenge just to do that You all are asking them double down. We really are and uh, I think the 1.5 or the sequester either way the sequester is worse but uh if uh, they uh only do that uh, then uh, they really will have failed Because they will not have stabilized the debt now are shown that we can solve the uh long run problem And they won't have done anything about the short run problem either. So, uh, the only way you do that is to go Go big I wanted to come back to tax reform because I think the potential there is for a real win-win That can you mentioned the president asked senator crepo if his plan was the same as the president's he he wisely didn't answer that but uh, uh, what the president emphasized in his speech, uh, was uh, higher Uh, uh contributions from upper income people Now when you look at a thoroughgoing tax reform of the sort that we did in domenici rivlin or in the uh, simpson bowls Uh, liberals often look at it and say, oh, I don't like that Slowering the tax rates and that's easier on rich people. No, it isn't you have to look at what happens Uh to the deductions and exemptions and exclusions because those benefit upper income people Disproportionately and you can do a tax reform that I believe will Be very pro-growth and no less progressive than our current system You ever thought as to what the breakdown should be between again revenue on one side and and spending reductions on the other What's the right? What's the oh, there's no right mix The big point is we have to do some of each And that's where the our task force and the simpson bowls group and everybody who has studied this problem says You can't get there on the spending side alone. You can't get there on the revenue side alone You want to weigh in? Yeah, uh First of all, I think we got it right on simpson bowls also and I voted for it for that reason and I think ours can set it right is It affected everybody and we tried to Think about things differently, right? Okay, there were the spending reductions, but we tried to do it thoughtfully There were there was additional revenue But again, I think we did that thoughtfully by saying let's take this time to rethink the tax code so that Everybody wins in this even if you pay more There's a way to win in this because you end up with a better economy a simpler system something that everybody understands And I'm a a big advocate of just continuing that path and thinking about it that way I've been asked a number of times after having spent time on this commission and spending more time down here What what are some of the observations? And I've got a couple that I'll share one is I say that every conversation here is ruled by the three h's hysteria histrionics and hyperbole Everything I mean, I've never seen I've said to guys like senator prepo. I don't know how you get your jobs done I can't believe the ridiculousness of the Conversations and to the point where there were meetings where I would actually look at someone and say you can't possibly believe what you just said It's totally illogical And I take a look at the spending reductions that we had in simpson bowls And you hear words like a drastic draconian and destroying pick whatever your favorite group is You're you're destroying them So I did a little math just to get a sense for it and found that okay If you did nothing the average annual growth rate in spending was five percent If you enacted simpson bowls the average annual growth rate in spending was four percent The difference is five and four Yet it's drastic. It's just draconian. You're destroying. I've never seen such ridiculousness of language Put around something that I view as an american competitiveness issue In terms of do I think something can happen? I'm one of the things that My other learnings having spent some time years. I am not a political savant So I I can't I guess predict that one But one of the things that has struck me as I've said growing up in new hampshire And running companies One of the things I always learned is what I thought what I said What I did All had to be the same thing whereas here that's three different decisions So what people are saying Is it necessarily what they're thinking isn't necessarily what they're willing to do and I'd like to think that If everybody can understand the magnitude of the problem that we're dealing with Recognizing the whole system is supposed to be geared up to compromise That we can't accomplish what's going to be an important fundamental for the country's growth And make it easy for all of us to find it I'd say actually that's a fair criticism of what we did. We had a paid staff of exactly two For our commission work, which I consider to be one of the most important endeavors of my life and for my generation So I think from a marketing viewpoint we probably did a pretty Poor job However, the information is there as an example people I always hate when I watch these sunday shows and you ask people well, you're talking about cuts in the defense budget And but what would you cut you know, and they say but you know, they don't have any specifics We we detailed every single cut and by the fact we gave more cuts than we actually had to use In order to meet our recommendations and we were very specific whether it was for defense or non defense or for Entitlement programs and I think that's what you deserve and that is available on our website One thing I learned from Mike Mullen if it takes more than five minutes for him to look at it and understand it He won't look at it. I think it's a lesson. You all need to learn the narrative really matters And I haven't been able to understand your narrative beyond the first layer and I actually care But I don't have time to do the digging you're proposing. We do it's like doing research reports at These think tanks. They're nicely written and they go on a bookshelf Yeah, this is a little bit different though. I think that's not a fair criticism I think if you would actually go and read our report, it's not like a 700 page report There are a lot of appendix to it But the report itself is 67 pages and it's written in very very plain English and I guarantee that you can understand it That's actually one of the improvements I've noticed recently that for years when people were talking about this issue They either were talking about things that would make it worse or if they were talking about improving it They were just talking about principles because principles always sound really nice And one of the things about the fiscal commission and also domenici rivlin commission Is that even when they said sort of this is a framework for how something could work because in discretionary spending For instance, you do it through caps They then proceeded to put illustrative examples of how you would fill in all those savings So you do have to dig somewhat But if you go and you look for the fiscal commission or the domenici rivlin report There are actually so many policies out there that have been fully developed fleshed out I think it's actually one of the advantages the super committee has is that the work has been done They actually have these wonderful starting points of these comprehensive reports with details of reforms That in most cases have been supported in a bipartisan way And so now it's kind of the political discussion of how to to work out the details and come up with a compromise If that's one of the things that gives me comfort that they can actually do this by November 23rd, you know The base work has been done David Well, uh, there's too much agreement here. You must identify yourself David Stockman, uh, I'd like to cause some dissension It's obvious that when you're spent spending 24 percent and you're taking in 15 percent You need a massive new source of revenue. We've had a 30 year referendum on spending We're going to cut a little bit, but not much And that should be either a consumption tax or a Tobin tax on wall street Because after all those robust trade with each other and all boys and girls Brand around wall street are not doing anything that's very important or interesting Uh, uh for the economy right now But, uh, what we hear instead is the great white hope is tax reform And I'd like to suggest to this group and see your reaction That tax reform at the end of tax reform is a massive swamp at the end of Gucci Gulch Which will lead to massive political conflict and result in even worse Polarization than we have today. Why just quickly? There's supposedly a trillion of tax expenditures 200 billion of that is the preference for capital gains and dividends 180 billion of that is the preference for retirement employer plans iris etc etc 170 billion is medical and all is different 120 billion is homeowner in all its different pieces You put that together at 700 billion dollars in which part of that Are you going to blast away? How much revenue are you going to get out of the lower tax rates that you might be able to trade off? I think it's the wrong direction. It will not solve the revenue problem It'll immerse the system in conflict for a long period of time Meanwhile, the red ink will continue to billow the bonds will continue to be issued And will be tempting fate in the global market by the day So I would you know throw that out because there's too much consensus about tax reform It's a great idea, but I don't I don't see it is a productive route to go even though it sounds great Let me take the first stab at that because I'll have to disagree with you. You've got your conflict now You you certainly are right that reforming the tax code is an incredibly difficult task and getting into the weeds of doing that Is a complicated and difficult thing But just to use the both simpson model as one example and and when we were Deliberating as both simpson we had before us Oh a number of different tax proposals that had been very well thought out By a number of very prominent Analysts different kinds ranging from a consumption type tax to income tax But or mixtures of the two And admittedly they didn't get down into the weeds to the kind of detail that you say will cause the political strife But the bulls simpson commission basically did they dealt with each of the examples that you talked about in their illustrative option And in fact did it down to the numbers And by doing so we're able to show on those specific tax expenditures as well as the others which they've proposed to eliminate How you could then compensate by reducing the rates Now many people say to me. Oh, you know this special committee Uh can't deal with tax reform because it's just too complicated to get it done by december Well, it may be true that it's too complicated to write every sentence and dot every t and cross every i by december But it's not too complicated to to statutorily put into place the parameters of a tax reform package and then task congress to do it And and i think they can do it whether it's the simpson bulls model or some different model I think it can get done now one thing I will agree with you on because I and everybody here on the panel have experienced it And that is once you propose it The knives come out Every single special interest group in america, I think was activated when we put our proposal on the table And I felt it from the front and the back And still am So I will admit to you that it is a ferocious fight out there But I will tell you that at the same time I got an equal number if maybe not even more A compliments from people saying you know what we've got to do this And it's time for america to take this opportunity and move forward David we we did Look at a consumption taxes. I think you probably know And we spent a lot of time talking about it And many of us on the commission Prefer a consumption tax to a tax on work or a tax on capital As a better way to finance The operations of the country and you can do a consumption tax So it's not as regressive as it might be if you didn't take that into account However, I thought the uh, there were two reasons we didn't do it one there was a A sense of a senate that passed while we were meeting that I think passed Was it 87 or 93 to nothing and I thought that was a pretty clear signal that we wanted to make progress on a consumption tax But more importantly, I thought the republican members of our commission made a very good argument And that was if unless you're going to eliminate the income tax If you have an income tax and a consumption tax then what you have created is Two engines of revenue and over time those two engines were a barrel ahead And you'll end up having taken too much revenue out of the economy And therefore we we set it aside We we then looked at other alternatives And I was personally amazed to see that we have about one trillion dollars worth of Revenue that comes into the country in corporate and Uh An individual income tax. That's the net number that's after 1.1 trillion dollars of these tax expenditures And all these tax expenditures are Is spending in the tax code. It's just spending by another name So we said in our zero option as an example, which is one of the options we put out there What if we just eliminated all of these tax expenditures? What could we do with rates and what if we used 90 percent of it or around 90 percent of it? We ended up using 92 percent of that money to reduce rates and 8 percent of it to bring down the deficit Under that approach we could reduce the deficit by a trillion dollars over 10 years and we could take income tax rates to 8 percent up to 70 thousand dollars 14 up to 210 thousand have a maximum marginal rate of 23 percent We could take the corporate rate to 26 And we could pay for putting in a territorial system So that that trillion dollars is now captured overseas could be brought back to this country to create jobs Over here. We thought that would create dynamic growth in the country It would bring down the the deficit and it could be done in a very progressive manner We get a distributional analysis on our work And doing this is Alice said earlier and was just as progressive as our current tax code. So we thought this is a viable way to go forward I think the short answer is there's a potential bipartisan coalition For simplifying the tax code of broadening the base and bringing down the rates it appeals to both Democrats and republicans. There is no such A coalition In favor of a consumption tax in the Domenici Rivlin report. We did have a broad based consumption tax but We came to think that was not really feasible because everybody's against it The democrats are against it because they think it's regressive And the republicans are against it because it's a new tax that it might raise too much money So you you have a negative coalition there Wasn't that always that famous larry summer saying where he always said when they realized the opposite then everyone would come to rally around it When the republicans realized it was regressive and democrats realized it raised so much money that's true Dave the Just to build on urskine's point on the bat. I'd have to say I went into this thinking that I should be open-minded about it and take a look at it Read a book about it talk to a number of people and this was kind of one of the other learnings when Urskine explained the Concern about two engines of growth is We were having a conversation one day in one of the committee meetings and I I I Relatively immersed myself in the budget details so understood it, but they started talking about caps triggers sequesters And I was having a really difficult time following all this stuff And I I finally turned to someone and said, you know, this sounds to me like Your congress is trying to protect itself against congress And they said, yeah, that's exactly right And when you start thinking about it that way saying and you throw in this whole new dynamic with the vat I It made me nervous and caused me to start thinking the other way In terms of the conflict I said the conflict's going to be there anyway. You're talking about four to eight trillion dollars over the Uh Next 10 15 years that there's the conflict's going to be there and I thought I was at a meeting with A senator blunt this morning and I thought he gave us a An interesting american history lesson kind of going through over the last 230 years The various points in time where there were major times of controversy Followed by big decisions that put the country on the right path for the next or developed the path for the country over the next 20 or 30 years They pointed out jefferson jackson Lincoln linden johnson teddy roosevelt f dr Reagan being the last one in his view But he said and I thought it was interesting is that given what we're facing right now We're at another one of those times And when you put it in the context of the one billion participants I was talking about and now we have four billion participants in the global economy Like that really for me that really brought that comment home that said I think this is one of those times And we need to have this discussion We can't Avoid it if we really want to be the kind of global economic power that we are today and we want to Have that same kind of position for our kids and grandkids. We need to be having these conversations now We have one thing really really quick if I could senator crepo Mr. Cody says this is the time There are some here in washington suggests the time was actually back in december when you all came out with your plan Now we're too close to a presidential election. There's no way to get a big deal now Well, first of all the closer we get to an election particularly a presidential election the harder it gets that's Just a political fact of life But I refuse to accept the the So-called political wisdom that we just have to wait till after the next election For one thing as pretty much everybody on this panel has said we don't have that long to wait I think that if we wait another 18 months We lose critical time both in terms of being able to create the adequate solutions And in terms of being able to get the political momentum Secondly the detail work has been done not only by the commissions. We've talked about here, but by many others It's not a problem of trying to figure out how to do The different solutions in the discretionary budget or the entitlement budgets or in the tax reform It's a problem of building the political consensus And I personally believe that now is the time and it's it is doable if we will not tell ourselves That we can't do it. We have the capacity to do it. In fact, the reason we're all here today Is to tell the congress, I hope and to tell the american people that we have an incredible opportunity Out of this crisis that we face to build to as as davis said to to put america on the kind of path That we all know we want to be on The people the american people are far better educated about the perils of this debt today than they were back in december Nobody believed back in december that we could get a majority majority to vote yes for our plan And we got a super majority We're going to move on to the next panel, but I just want to close with an observation and one more question for our skin, but So much of this panel ended up focusing on tax reform Which is really interesting because taxes is one of the biggest sort of hot spots in this whole thing Are we going to are we not going to if we do? How are we and I think there are ways to get around that which is pro growth tax reform There is a bipartisan consensus about how that could work how it's good for the economy It simplifies the tax code and it can generate raised revenues to close the deficit But the other piece of that is that really only goes hand in hand with fundamental entitlement reform And I think that's another reason that people have been hesitant to put in a new revenue stream Because what you really want to make sure is that the drivers of the problem our health care and our retirement programs Actually are reformed in a way that are sustainable and that you want that to be paired with the tax reform and I think One of the things urskan when I've listened to you and senator simpson talk on the road and all around about this And your experience on the commission Is that the more you brought all those pieces onto the table and the more in fact that on the commission You went big much to your surprise instead of losing people you kept getting more people coming on So if you wouldn't mind just closing with with that observation Yeah, but simply the more comprehensive we made it The more skin that everybody had in the game the more people were willing to support The answer to this whole question is look the problems the nation faces are real They are big And the solutions are all going to be painful Dick Durbin said when he voted yes to this plan there were things in this plan that he hated more than devil hated holy water But he voted yes because he didn't believe this nation had any other choice The problems are real the solutions are painful and there is no easy way out And we simply have to face up to it and go big or go wrong All right. Thank you. I'd like to thank this panel while the second panel comes up. Thank you so much