[ Silence ]
>> Good afternoon, my name
is Charlie Wheelan
I'm a Dartmouth '88
and a visiting senior lecturer
at the Rockefeller Center.
It's my pleasure to welcome
all of you to the launch
of the 2011 Dartmouth
Lecture Series, Leading Issues
in Politics and Policy.
I am the lead instructor
in a parallel course
that we're offering,
called Contemporary Issues
in America Policy and Politics.
The speakers who are
giving their public talks
in this venue are also sharing
their time with students
in class and the students will
drill down more deeply on some
of the issues that will
come up in these lectures.
The goal of both
the lecture series
and the course is three-fold.
The first is to bring these
policy makers to campus
and help us engage in the world
by sharing their experiences
and their complexities.
The second is to offer an
intense intellectual experience
to our sophomores that
will characterize part
of their academic experience
during this unique time
that they share on campus
with just their class.
And then last, this
year in particular,
is to leverage our role
here in New Hampshire
as the first Presidential
Primary state and at a time
when we have lots of candidates
and other interested folks
coming through the state,
to reach out as an educational
institution and make use
of that unique timing.
So before we get on with the
event, I want to thank a lot
of the people who've
helped make this possible.
So, starting with the team
professors, our course
and these lecture
series are intermediated
by a team of academics.
So, I am one of them,
Andrew Samwick [assumed
spelling] is here today;
Bruce Saserdote [assumed
spelling],
Bruce is in the economics
department and Andrew is head
of the Rockefeller Center.
We also have Deborah
Brooks [assumed spelling]
who will be coming out later,
and Dean Lacey [assumed
spelling], both of whom are
in the government department.
So it is truly an
interdisciplinary
and multi-person affair,
I also would really
like to thank President Kim and
his team for putting resources
and logistics behind this.
It's not an accident
that we have the people
of this caliber coming
to campus;
this was a real concerted effort
on behalf of the President,
to make this an important
part of the summer experience.
And last, I'd like to thank
Jen Murry [assumed spelling]
who is our senior person in
terms of making the trains run
on time, I think without
her we would have a speaker
but probably not a venue, maybe
a venue without a speaker.
She's the person who kind
of brought it all together.
So, I will soon turn the
rostrum over to Deborah Brooks,
who's going to introduce
our speaker
and moderate the
subsequent discussion.
Before I do that, I want
to forward promote some
of the events that we have
coming out this summer.
First and most immediately,
tomorrow at 4:00, in Spalding,
we have Treasury
Secretary Tim Geitner,
so tomorrow 4:00 in Spalding.
On the 14th of July, we have
President Jim Kim speaking
about healthcare challenges in
the United States; on July 25th,
we have John Huntsmen, now
declared Presidential candidate
and former Ambassador to
China and Governor of Utah.
On the 28th of July, we have
Joel Klein, former Chancellor
of the New York City Public
Schools; on August 4th,
we have Robert Rish [assumed
spelling] class of '68;
former Secretary of Labor
and then, on August 11th,
we have his classmate,
Henry Paulson '68
obviously former Secretary
of the Treasury.
On august 18th, we have Jeff
Emelt [assumed spelling] '78,
CEO and member of the Board
of Trustee of GE and member
of the Dartmouth
Board of Trustees
and then we will
conclude, on August 23rd
with Frank Newport [assumed
spelling] who is editor
and Chief of the
Gallop Organizations.
So we will hear from a
number of people talking
about important policy
issues and we will finish
with Gallop telling us
what the public thinks
about a lot of this stuff.
Most likely that
they don't like,
most of the things
that we need to do.
So, let's get on with it, let
me introduce our moderator
for today's talk, my colleague
and teaching Public
Policy 20, Deborah Brooks.
She has just been promoted
to Associate Professor
in the Government Department.
Prior to coming to
Dartmouth she worked
at the Gallop Organization
where she designed
and analyzed polling data.
Her research here at Dartmouth,
revolves around elections,
including issues
such as the influence
of negative advertising,
and whether gender
stereotypes cause voters
to hold female candidates
to different standards
on the campaign trail.
In fact, she's the author of a
book that will soon be coming
out called, He Runs, She
Runs: Gender Stereotypes,
Double Standards and
Political Campaigns .
So please welcome Deb Brooks
who will introduce our speaker
and she will also moderate the
discussion, once we do Q&A,
after Senator Gregg
has given his remarks.
Thank you and welcome.
[ Applause ]
>> Thank you all
for coming today.
We are very fortunate today to
have with us Senator Judd Gregg
to launch this truly
exciting speaker series.
For those of us at Dartmouth
and in the wider community
who are fascinated by politics
and policy and for people
who are just interested in
learning more about the issues
at hand of the day, it is
very clear that this is going
to be an incredible summer.
Senator Judd Gregg
was practically born
into New Hampshire
politics; at the age of five,
his father Hugh Gregg was
elected to be the Governor
of New Hampshire, years
later law degree in hand,
he ran for Congress and
he was a U.S. Congressman
for his district in New
Hampshire for four terms.
He then served two
terms as governor
of New Hampshire before
running for the U.S. Senate
where he served three
terms before deciding
that he wasn't going to run
for his Senate seat again.
In three decades of
electoral politics,
he's never lost an election,
that's really an amazing feat
and that's especially amazing in
a state like ours but especially
in recent election
cycles, has gone back
and forth between red and blue.
Its also amazing given
that at lunch he mentioned
that he's never run a campaign
poll while he was running
for office, is really a
remarkable feat to have
that many wins under his belt.
Among his many other
accomplishments,
Senator Gregg is a leading
national expert on fiscal policy
and the budget and he was
one of the chief negotiators
of the Emergency Economic
Stabilization Act of 2008.
In an era where most politicians
today are all too easy
to categorize, Senator
Gregg is a political leader
who defies easy categorization.
On some issues, he's
been a leader
on pushing a straight
Republican partisan line,
on other issues he's been
at the forefront of pushing
for bi-partisanship and
compromise and is often lauded
for his tendencies
in those areas.
As a testament to that President
Obama moved to nominate him
to the position of secretary of
Commerce in his administration,
he ultimately declined
that position but,
President Obama's
interests in having him
in that role says a great deal
about Senator Gregg's ability
to reach across the
aisle to pass policy.
In short, I'm very pleased to
welcome Senator Judd Gregg here
to speak with us today.
[ Applause ]
>> Thank you Professor Brooks
and its great to be here today,
and President Kim, and
Professor Wheelan and members
of the community, the
Dartmouth community.
I didn't go to Dartmouth
but Cathy and I, my wife,
sent all our money here, as
we had three children go here.
So it's been very much a part
of our lifestyle as a family
and all three of our
children, ironically,
had their reunion this
last weekend I think
or the weekend before,
and so they were wandering
around the campus again
and remembering wonderful
times here.
All of them truly enjoyed
their experience at Dartmouth.
I wanted to talk a little bit
tonight and then take questions
about whatever's on your
mind, but I want to talk
about our fiscal
situation as a nation
because it is rather dire.
I didn't want to depress
you or ruin your day,
but it is a very practical
matter, if we're not honest
and discussing this
issue, we're not going
to be able to solve the issue.
And unfortunately the issue
is acute for us as a nation.
I put up this quote because
I'm a huge fan of Adam Smith,
but he said many things over
200 years ago that made sense,
he obviously defined the
concept of market economy
and comparative advantage.
But he made this comment about
countries and nations, he said,
"Nations weren't
impoverished by their people,
they're impoverished
by their governments,
specifically governments
that don't act well
or don't do the job that
they're supposed to do."
He used the word "prodigally".
I assume there's some
person in this audience
who knows what that means.
I had to look it up, it's an old
Scottish term for mismanagement,
waste, ineffectiveness
as a governance.
And why did I put that up?
[Clearing throat] Well because
are unfortunately on the verge
of being poorly governed
as a nation,
if we don't get our
house in order.
There's clearly a very serious
issue of debt for this nation.
[Coughing] There's some
standards that I want
to refer to, the European
Union set out when it formed,
a set of standards for
admission of clients,
of states into the European
Union, into the Euro Zone.
Now we don't want to
get into European Union
but it was a group of
industrialized states
which had made a decision
on what made sense
for a well run country.
And what they concluded was
that a debt to GDP ratio,
public debt to GDP ratio
shouldn't exceed 60%,
in other words your public
debt shouldn't exceed 60%
of you gross national product.
Secondly, they concluded
that your deficits
to GDP ratio shouldn't exceed
3.3% of gross national product.
So if you had a debt to GDP
ratio that exceeded 60%,
your gross national product
or deficit was exceeding 3%,
you weren't allowed
in the European Union.
The problem we have today
is that we could not get
into the European Union, not
that we want to be there but,
that -- that standard
which is a standard
for industrialized nations,
we have crossed that rubicon,
we have a debt to GDP ration,
this year which is 64%.
Now I want to talk in
specifics about how we got there
and what we need to
do to address it.
This chart and there's
some students here
who I had the good
fortune to participate
in their class earlier,
you're going to have to put
up with this again but if
I say it twice, you know,
I don't know what affect
that'll have, probably none.
But in any event [laughter],
this chart [coughing] shows
industrialized nations debts
to GDP ratio and you'll see
that the first nation Japan,
has a very serious problem, they
have a 250+ % debt to GDP ratio.
But they have a unique
advantage, they saved so much,
the Japanese people
saved so much
that they can finance
that for within.
They don't have to go to
China to borrow the money;
they don't have to go to
Russia or to the oil states
to borrow their money in
order to finance their debt.
Every dollar that we
borrow as a country,
the United States
I'm talking about,
$0.45 of it now is borrowed
from overseas, most of it coming
from China and the
oil industrialized --
and the oil states.
The second country that has a
very serious problem is Iceland,
Iceland has already gone
bankrupt, they went bankrupt.
Greece is the third,
Greece is in the verge
of bankruptcy [background
talking],
who knows how it's
going to be handled
but clearly it is
insolvent as a nation.
Italy is the fourth, nobody
knows what's happening in Italy
because they keep all
these different books
and nobody can figure
it out [laughter].
But as a very practical matter,
we know they have problems.
The fifth is Ireland,
Ireland again, is bankrupt,
it is basically, essentially
declared bankruptcy,
for all intents and purposes.
It hasn't had an insolvency
event but that's only
because the European
Union stepped in.
Belgium's a small nation,
probably not a good
example in here.
What's the seventh country?
To have the largest
debt to GDP ratio?
And therefore a very
significant problem?
It's regrettably
ourselves, the United States.
This chart shows what it costs a
country to roll over that debt,
in other words, we lend money
to countries and to our people
to finance our debt
and then, at some point
that debt obligation has to be
-- ends and has to be paid again
or borrowed again, I
mean borrowed again.
You can see from this chart
that in the maturing debt area,
the United States has the
second biggest problem.
Why is that an issue?
Well, its an issue because as
the United States has to go
into the market, has to go
into the market to borrow money
to replace bonds which are
coming due, it takes money
out of the market which
might be used somewhere else,
presumably in the private sector
for more productive activity.
So the rolling over issue
is a very serious issue
for an economy of our scale.
Unfortunately the debt
to GDP ratio is not something
that's self- correcting,
in fact, it's going in
just the wrong direction.
As [coughing] you can see from
this chart, it's going directly
up and, as I mentioned, 60%
is considered to be a line
that shouldn't be crossed.
When you get to 80%,
you're basically in a spiral
which can't be corrected,
at least that's what
most economists thinks
and you can't catch
your tail, so to say,
in other words you can't
finance your way out of the debt
because your interest
rates are rising faster
than your capacity
to maintain debt.
Unless you had a
massive growth in your --
in the size of the government.
So you can see -- in
the size of the economy.
So you can see here
that [background noise]
unfortunately our debt
projections are going
straight up
and we will pass the 90% level,
debt to GSP ratio,
before the year 2020.
Which is an unsustainable
and disastrous event.
Its driven primarily by the rate
of growth of the government,
you know, some people
say what's lacking
in tax revenues,
I'll get into that.
But primarily this
is a spending event;
the government is
growing much faster
than it has historically grown.
Historically the size
of the United States government
has been about 20% of GDP,
19.8 to be accurate, since
the end of World War II.
That's the green line running
across the -- all
the way across.
As you can see, we
now have a debt to --
we now have a government that's
just crossed the 24% line
and it headed down
for a little while
and then it's headed back up.
We can get into this discussion
but the big spike was caused
in large part by
the Stimulus Package
and you would have thought
that after the Stimulus
Package was completed,
that there would
be a retrenchment
in the size of the government.
I mean that's historically
the way things work,
as you try to come
out of a recession.
McKinsian [assumed spelling]
philosophy is you spend a lot
of money and then after
the recessions over,
government comes back
to a reasonable size,
one-time spending.
But that's not the case now;
it came down a little bit
but its headed right back up.
There are two factors
driving that arrow going up,
the spending; one was the
President's healthcare bill
which increased the
size of government
by $2.5 trillion over 10 years.
The second and much bigger
factor is something I'll get
into here in a second.
Now we can handle
deficits and debt
if it was a temporary
event, in other words,
we're a strong enough
economy so we're resilient,
we can deal with a momentary
event of three, four,
five years where the deficit
spikes, but you can't handle it
if it's an extended event.
And this chart regrettably
shows that we are
in an extraordinary situation,
we never had this before
as a nation, the largest deficit
that we've ever had was $450
billion and that was in 2008.
That was the largest.
Last year, the year before
and next year, we're heading
for deficits which will
exceed $1.3 to $1.5 trillion,
that's about 9% to 10% of
our economy, by the way,
that's way over the 3.3%
standard that I mentioned.
But more importantly,
we could handle this
if it was just an
aberrational event.
More importantly as you can
see, the average deficits
in this country will be
a trillion dollars a year
for as far as the eye can see.
And that is not sustainable,
that's what's adding
to the deficit, that's
what's adding to the debt
and causing it to grow to
these astronomical proportions
in relationship to our economy.
To try to put this in other
terms, we are doubling the debt
in five years; we will
triple the debt in 10 years
under the present
scenario or the way
that the Federal
Government is functioning.
To try to put it in personal
terms, because we have a bunch
of students here, student
today owes about $85,000,
would owe about $85,000 to
pay off the federal debt.
By 2017, that same student
is going to owe $196,000
to pay off the federal debt and
by the way, it is their birth.
I mean, this is -- they're
the ones who are going
to get stuck with this bill.
Now $196,000 is actually
more than the net worth
of almost every -- of most
Americans, that would be
at the high end of the
average American's net worth.
Put it another way, every second
of the day, we add $56,000
to the national debt,
$56,000 every second.
The average income of an
American family is $56,000,
so we're essentially wiping
out the average income
of a family every second.
Interest costs on the
debt are staggering,
now you got to appreciate
what the interest costs me,
interest cost is lost money.
I mean, when you pay interest
costs you get nothing,
nothing for it.
You don't get a new road, you
don't get better education,
you don't get better defense,
you don't get better
environmental protection,
you just send money out to
somebody to pay interest.
And unfortunately,
a large percentage
of that money is going
overseas, it's going to people
for the governments, foreign
governments, primarily China.
And as I said, the oil
producing nations and Russia.
So, we're basically
putting money
out that could have been used
basically make us a stronger
and better nation.
Instead, it's going to something
which has absolutely no return.
Interest on the federal debt
will be the single largest item
in the federal budget and
this has never happened.
The single largest item
in the federal budget
within seven years and it
will exceed, for example,
national defense spending.
What's the primary
sources of this huge swing?
In deficit and debt,
its primarily spending,
primarily spending as this chart
shows although some will argue
it tax cuts, it's really
isn't, spending is the problem.
I'll get into that
more in specifics.
What's driving this?
Well, as I mentioned, there
are two primary factors.
The second primary factor
and by far the largest factor
is the massive demographic shift
that's occurring in this country
which, demands utilization
of our social services
called entitlements.
Social security,
Medicare and Medicaid.
Those three programs
alone will absorb 20%,
20% of the gross
national product
and you remember 20% is what
we've historically spent
as a federal government,
by the year 2030.
That means that if we paid
off those three programs
obligations, we can't spend
anything on education,
on national defense,
on environmental protection,
on laying out roads.
If you're going to maintain the
government at its present size,
if you allow those programs
to grow at that rate.
Try to put this is another
context, this Social Security,
Medicare, Medicaid cost.
It's an $81 trillion,
that's trillion
with a T, unfunded liability.
Eighty one trillion dollars
in those three accounts,
primarily Medicare is
the driver of this.
I don't know what a
trillion dollars is,
so let me try to
put it in context.
If you take all the
money paid in taxes
since the Federal Government
started collecting taxes
in 1789, you get $48
trillion [coughing].
More significantly, if you take
the net worth of this nation,
all the stocks of Americans,
all the bonds of Americans,
all the value in our houses,
all the value in our cars,
all our income, net income,
you have $55 trillion.
So we actually have an
obligation on the books
from these three programs
which exceeds our
national net worth by 50%.
What's that term for that?
It's called bankruptcy.
What's driving this?
It's a massive aging
of population,
it's not just our country
that has this occurring,
Western Europe has
this occurring,
that's why they've
got the demographic,
that's why they've got
their sovereign debt issues.
Japan has it occurring, that's
why it has its demographic --
its sovereign debt issues.
But, basically, we have a
huge explosion in the number
of people who are retiring.
We're going from 35
million retired people
to 70 million retired people
within the next five years
because the baby
boom generation,
which is the dominant
generation,
which produced all this energy
for our country throughout the
'50s, '60s, '70s, '80s, '90s,
2000, is moving into retirement.
And they're all have the
access to entitlement programs,
primarily Medicare and
Social Security [coughing].
See these programs
were conceived --
the reason they worked is
because they were conceived
by Roosevelt and was
one of the geniuses
of Roosevelt, as pyramids.
It was always presumed
that there would be
many more people paying
into these programs than
taking out of these programs
and it worked for a long time.
Social Security for example,
in 1950 had 16.5 people paying
in for every one
person taking out;
it was a very supportable
system, actuarially sound.
Today, however, [clearing
throat]
because of this demographic
shift, we're looking
at 2.2 paying in for every
one person who takes out.
We've gone from a
pyramid to a rectangle
and clearly it isn't
supportable.
I put this chart up because
I find it entertaining
and its sort of gets
to a tangential
but fairly significant point.
On this axis of the count
-- is the debt to GSP ratio;
on that axis is economic
and political freedom.
As determined by the
Heritage Foundation
which is a legitimate
think tank in Washington,
a conservative base
but very legitimate.
You'll notice that the
countries with the highest debt
to GDP ratio have the highest
political and economic freedom.
And the countries, many of
which are market economies
but state run, who have the
lowest political freedom,
have the lowest debt
to GDP ratio.
Well why is that?
[Background noise] The answer
is pretty simple, elections,
elections, which
leads to a basic axiom
which we're confronting
as a nation
and which Western
Europe's confronting
and which Japan is confronted.
Which is that in a
populous government,
in other words a democratically
elected government,
when a populous government meets
a massive demographic shift
in an entitlement society; what
you get is unsustainable debt.
And that's what we're
confronting now.
Now Willy Sutton
[assumed spelling],
who was a bank robber said,
I rob banks because
that's where the money is.
So if you're going to fix
this problem, you got to go
where the money is and
the money is in Medicare.
I put this chart up because I
think it's probably the most
serious statement of our problem
and the most discouraging chart
that I have, I have some
positive ones coming
up by the way [laughter]
believe me I do.
Not many [laugh].
But if you look at this,
you'll see the tax revenues have
been approximately [coughing]
18.2% of GDP for a long time, as
I mentioned a couple of times,
spending ahs been
approximately 19.8% of GDP.
The red line, however, is
spending as it's projected;
the blue line is revenues
as it's projected.
As you will note,
revenues are projected
to exceed our historic norm by
a considerable amount, I mean,
a percent of revenues is a
lot of money in our economy.
But because the spending
is going straight up,
this gap here -- and I'm not
sure this pointer shows it very
well but this gap here,
is the structural
systemic deficit caused
by the massive demographic shift
and the expansion of government,
primarily as a result
of healthcare.
And if it continues that
way, in other words,
if this red line is not brought
down to a sustainable level,
where the blue line can
come up, and have some sort
of reasonable chance of
economic closure here.
Then basically you've got
bankruptcy as a nation.
I mean, there's no two
ways about this, I mean,
these are undeniable
series of numbers.
In fact, you cannot sustain
this kind of debt level
for an extended period of time
and expect a world economy
which you're depending
on, for lending to,
to support your borrowing.
Why? Because someday somebody's
going to wake up and say,
hmm I wonder if they can
pay all that money back.
I'm not sure I want to be in
the dollar as my currency.
And the dollar comes under
pressure, and there's a run
on the dollar, and the debt
becomes very hard to sell,
and the debt becomes
too expensive
and you hit a situation.
In a much larger sense but
not unlike what's happening
with some of our
European neighbors.
And so this is an event waiting
to happen and that's why you see
so much discussion
about this now
because people have
finally faced up to the fact
that it is waiting to happen.
The people who are driving this
event, the baby boom generation,
are retiring and that they
are going to double the number
of people on the
entitlement programs.
And that there's no
way, that we can support
that under our present
government structure.
So, what should we do?
Well, first off, we should
acknowledge the problem
and we should step up
and try to solve it.
I was talking to this
class before and I said,
quoted Winston Churchill
and Winston Churchill said,
"America will do the right thing
after it's tried all
the wrong things."
[Background talking] Well right
now we're trying all the wrong
things, we got to try the
right thing and we got sort
of a simple choice here, the
students weren't old enough
to remember this but there
used to be an oil filter ad,
remember Fram Oil Filters
saying you can pay me now
or you can pay me later.
It can be a reasonable cost now
or it can be an uncontrollable
catastrophic event later
with the cost being much higher.
We have to make some
tough decisions
and primarily they have to come
on the spending side
of the ledger.
President Obama appointed
a commission,
the Simpson-Bowles Commission,
which I had the good fortune
to serve on, they're 18 people.
The Simpson-Bowles Commission
came back with a proposal
to take $4 trillion out
of the deficit and debt
over a 10 year period.
The agreement at the beginning
set out by the terms of Simpson
and Bowles was that the primary
source of reduction in deficit
and debt would come on the
spending side of the ledger
because that's where
the primary problem is,
as is shown by this chart.
But there would also be
revenues on the table.
Mitch McConnell picked the
three most fiscally conservative
people he could find in the
[coughing] Senate, and put them
on the commission, because
he didn't want anything
that was reported by the
commission and wasn't voted
for by his Republican members
on the commission, to come back
to the conference because he
wouldn't have had their support.
So he put myself, he put Tom
Coburn and Mike Crapo from Idaho
and from Oklahoma, respectively.
And ironically, Harry
Reid did the same thing
on the other side; he put
the most progressive people
on the commission including
Dick Durbin from Illinois.
So the commission came
back with its proposal,
now it proposed $4 trillion
of savings or reduction
in the debt, 70% of that came
out of spending reductions,
30% came from revenues.
It had some really
creative ideas in it
like totally re-writing our
tax laws which we need to do
to make them more effective for
collection of revenues and also,
from an investment standpoint.
So people invest in
order to generate revenue
and economic activity and thus
jobs, rather than to avoid taxes
and it reformed Social Security,
made actuarially
solvent for 75 years.
Unfortunately the proposal' of
this commission which were voted
for by the three Republican
members of the Senate
and by Dick Durbin and five of
the President's six appointees
to the commission, were never
followed up on and were left
on the table, which
was a huge mistake.
So I've come up with my list.
Here's six easy things we can do
and they aren't that difficult,
all they take is consensus.
Now, you can't address the issue
of Social Security or Medicare
if you do it in a partisan
way, you just can't do it.
So the American people are
inherently suspicious of people
who try to fix Social
Security and Medicare, I mean,
you don't get the benefit
of the doubt when you step
into that water believe me.
The only way they will accept
changes in those two programs
which affect so many Americans,
is if they believe
they are fair.
And the only way you
can have fairness both
in a perception standpoint and
probably in a substantive way,
in our society politically,
is to have bipartisanship.
So you have to have a bipartisan
agreement on these core issues
of huge public policy like how
you reform Social Security,
how you reform Medicare, and
how you reform the tax laws too.
So, this is my list of what I
think we could do, I'd be happy
to talk about them in specifics
if you want but, right meeting
in Washington are
a group of folks
who hopefully will be willing
to step outside the intensity
of the partisan arena and
reach a bipartisan agreement.
I mean, using Simpson-Bowles
basically as their template.
We had the gang of six in
the Senate, unfortunately,
its now the gang of five
but, you know, they lost one
but in any event, I genuinely
believe that if you look
at the Senate today that if
that group or group like that,
they'd have to be a
bipartisan group made
of conservatives and liberals.
Reach a consensus
around a package,
built off of Simpson-Bowles
which is what they are
working on, you'd have 30
to 40 people sign on
to it immediately.
And with Presidential
leadership,
you'd pass it overwhelmingly, at
[coughing] least in the Senate.
And then you have
the Biden group
which unfortunately
I just learned,
about 15 minutes ago has
broken down, supposedly
but hopefully they can
pull back together.
Because we all understand one
basic rule of American politics
and American life, really this
is more of a cultural rule
than a political
rule and that's this.
Every generation in
America's history has passed
on to the next generation,
a more prosperous
and stronger nation.
But if we, and I'm talking now
about the baby boom generation,
do not address this issue,
made up by this problem,
we will be the first generation
in the history of this nation
to pass on to our
children a less prosperous
and there for less safe world.
And less safe nation, something
we can't do, we can't allow it
to happen and we need
to get some action now
and to get action, we
need some leadership.
Thank you very much.
[Applause] We have to
take questions I guess.
Professor Brooks is coming
up [inaudible] the questions.
[ Applause ]
>> I'm going to pose the
first question and then,
we'll take some questions
from the audience
and we'll have plenty
of time for that.
I would like to set some ground
rules for this talk and also
for future talks, as
well since; hopefully,
we'll see a lot of you there.
First of all, try to keep
your questions concise,
no multi-paragraph questions
and also -- which are common,
you know, in academic settings
especially by professors
and also just one
question per person.
Unfortunately we don't
have time for one person
to do multiple follow ups.
Also, it really needs to be
an actual question as opposed
to a statement, there's
a big difference...
>> Statements are okay, if
they agree with me [laughter].
>> Well the questions
are more interesting
because then we get
to hear from you.
I guess my first question
is, hindsight being 20/20
and with the concerns
that you have
about the deficit and the debt.
If you had it to do over again,
would you still vote in favor
of the Bush tax cuts
in 2001 and 2003?
>> Oh, absolutely.
>> Okay.
>> Absolutely.
First off, I don't
see those tax cuts
as having generated the
problem, in fact if you look
at it statistically
basically, by 2006/2007 period,
we were generating
more revenue --
and we can go back
to that slide,
we were generating more revenue
than historically
had been generated.
And the reason's pretty simple,
it's called human nature.
If you give people a more --
a better incentive to
invest then they're going
to invest their money but,
if you say that you're going
to keep their taxes at a level
where investment becomes
problematic for them,
they're basically going to
invest either to avoid taxes
which is totally inefficient
or they're simply going
to sit on the sidelines.
And so a tax law that encourages
investment in capital formation
as those tax cuts did especially
with the capital gains
and dividends rates,
is very constructive
to getting an economy going
and making it stronger.
Secondly, the statistics
as to the distribution
of those tax cuts is
pretty startling, I mean,
it doesn't get written
about because New York
Times won't write about it.
But as a very practical
matter after the matter,
after the tax cuts
were in place,
the top 20% of income producers
in this country were paying
85.4% of the income tax;
top 20% paid 85.4%
of the income tax.
That was 3% higher
than the top 20% paid
under the Clinton
years and why was that?
Well, it was because there
was more economic activity
and they were willing
to pay more
because they felt
their taxes were fair.
And the bottom 40% of people
with income in this country,
actually were getting more back
from the government then they
got under the Clinton years
because the bottom 40%
don't actually pay taxes,
but many of them benefit from
the earned income tax credit
or other social benefits,
safety net benefits.
So you actually had a law that
ended up being more progressive,
and was generating more revenue
and I think that was a function
of human nature, common
sense and it was good policy.
>> Okay. I'm going to ask one
more question before I take some
from the audience, just
because I think it's important.
I think we're going to come
back to this topic a lot
over the course of this quarter
and in other classes, as well.
You've been on the Hill or close
to it for most of three decades
and that is -- what are the
changes you've seen over time
in the tenor of doing business
on the Hill, and the ability
to get legislation passed?
What have you noticed
has changed
and has it become more
problematic, or...?
>> Well, there have
been a lot of changes.
When I got to the House
of Representatives,
the House had been controlled
by the Democratic Party
for 30 years and Republicans
who were irrelevant
and there was extreme
partisanship.
Tip O'Neil was the Speaker
and he was as tough a person
as I ever came across
in politics
and he was very aggressive
in making sure
that his policies went
through irrelevant
of what the Republican
positions were,
the minority had
very little to say.
So I don't think -- and if
you read the American history,
partisanship has always
been aggressive, I mean,
read the period of
Lincoln's Presidency,
I mean, it was vicious.
What's changed are two things,
the first thing that's changed
is that [coughing] the system,
because of the 24-7 news cycle
and cable television has
basically highlighted
the shouters.
And whether its MSNBC or
Fox News, it's the shouter
on the left or the
shouter on the right,
and there's very little
substantive dialogue
about problems that's
in the middle.
It's all exaggerated statements
because that's the way
you get advertising,
you got to get attention, so
you got to be exaggerated.
And that television or that
media, that 24-7 cable cycle
which is so exaggerated in
its positions on both sides,
has been massively
amplified [clearing throat]
by the blogosphere.
Where people who used
to be at the margin
on the political process now
have a capacity to communicate
with a large number
of people and throw
out anything they want.
And have -- and the
more outrageous it is,
the more likely it
is to get attention
and the more likely it is
to fill up the air space.
And so again, that has
aggravated rational discussion
of issues and I think that's a
real problem for us as a culture
but I don't know how to address
it, I mean, its all freedom
of speech, so it's
just a fact of life.
The second thing that's
happening right now
which I'm very worried about,
is the way the Senate
is functioning.
You know, the Senate was
structured by Randolph
and Madison when they designed
[coughing] this government.
This government was designed
around the concept of checks
and balances, talking before
to the students who came
from England and we were
discussing the difference
between the American government
and the English government.
And the Parliamentary system,
the party of governance governs
because it has absolute control
and it can do whatever it wants.
And that's why you see
Parliamentary systems swing
to the left and swing
to the right.
American governance was
designed by Randolph and Madison
to be a government of checks
and balances and to be played
between the forty yard lines;
it always has been that way.
Now there's been
aberrational periods
like Lyndon Johnson's Presidency
and the first two years
of the Obama Presidency, where
you had a majority that was
so huge, of the governing party
that they did not need the
minority to participate.
And that's why you got a number
of bills in the last two years
which I think were
really unfortunate.
But what's happening in the
Senate now [coughing] is
that its, that the
Senate is starting
to replicate the House
of Representatives.
The House of Representatives is
managed by the majority party
in a very autocratic
way through what's known
as the Rules Committee
and they control --
the Speaker of the House
controls what comes
to the floor, how long
the speeches can be on it,
and what the Amendments are.
And if he doesn't or she
doesn't want any Amendments,
she just has the Rules Committee
send the Rule to the floor
that doesn't have
any Amendments.
It's a very autocratic system.
The Senate was always conceived
and developed as the place
where the minority
always had the voice
and was always protected.
The Senate is where the
minority is protected.
Whether it's Republican
or Democratic,
the minority is always
protected, it took 60 votes
to pass anything and because
legislation when it came
to the floor of the Senate,
was always open to Amendment.
Any Amendment on any subject,
you could bring a bill
out on defense and you
could get an Amendment
on protecting the black
swan in South Dakota.
I mean, anything could come
up on an Amendment
[clearing throat]
on the floor of the Senate.
When I first got there
and I'd manage a bill,
I knew I was going to get
a whole lot of Amendments
that had nothing to do with my
bill but you just lived with it.
You just went through it
and after two or three days
of debate, you passed
the bill, hopefully.
But that was because the
Senate is the cauldron and,
you know, as -- is the saucer.
You know, Washington said
the Senate's the saucer
into which the hot cup
of coffee is poured
and it's supposed
to be that way.
Unfortunately, now the same
is not taking any votes
of any significance,
the majority is trying
to protect the majority members
from having to take tough votes
that the minority might
offer as Amendments.
And they're doing what's
called fill the tree,
which they bring a bill to the
floor and they fill the tree
and there are no Amendments of
any significance to the bill.
Its really I think
undermining the whole concept
of minority rights in our
system and I'm a great believer
in the Senate, its structure
and its purpose which is
to protect the minority.
And if you do not,
in a democracy,
protect the minority you're
not going to have a democracy
for very long anyway,
in my opinion.
>> Okay. Questions
from the audience?
Okay, we've got a
question back here.
[Inaudible audience response].
>> Here's the microphone.
>> You showed the chart
of what can be done
but you didn't talk about it.
>> Yeah because I'm not in
office any longer but I wanted
to show you that there are ways
to do this but it really comes
down to doing four
or five major things.
First is addressing
the entitlement reform
and there are a lot of different
levels of entitlement reform
but we -- you can fix the
Social Security system
in about 10 minutes, if you
had the political will to do it
because there are only
four or five moving parts,
to change the way we calculate
the [inaudible] change,
what's known as the bend points
which is basically
means testing.
And you raise the age over a
long period of time, you know,
in 30 years you raise
it one year,
another 30 years you
raise it another year.
And that becomes solvent.
Medicare's a much more complex
issue but there are lots
of things we can do
in the Medicare arena.
The tax reform issue needs
a fundamental new look,
my view is that Simpson-Bowles
was on the right track.
I guess I believe that
because they basically used
as their template a Bill
called the Wyden-Gregg Bill
which took the tax law
and essentially eliminated all
the deductions, a large number
of deductions and exemptions,
not all of them in our Bill,
Simpson-Bowles eliminated
them all.
And then reduce rates
dramatically,
and by reducing rates
dramatically,
you create a much
greater incentive
for economic activity
and for compliance.
And I believe you'd
get a lot more revenue,
a lot more revenue.
So, there, you know, immigration
policy wasn't on the chart
but we need an immigration
policy in this country
that encourages smart people
to come to our country
and stay here and create jobs.
We have just the opposite
right now, we discourage that.
We need an energy policy
which encourages production
in the United States
and discourages purchasing
overseas [coughing].
So there's a lot of different
things we can do but I'm not
in government so,
[coughing] I can just throw
out a few that I feel like.
>> Other questions?
Okay, we've got a question
over here, in the middle here.
Microphone?
>> Hi. Vice President
Cheney, very recently
in historical terms, was
supposed to have suggested
that deficit -- that
Reagan proved
that deficits don't matter.
Do you think he'd
say that today?
And what did you think at
the time when you heard
that he had said that?
>> Well, I didn't hear
him say that but --
maybe I can go back
to that chart there --
oops, losing my microphone here.
So are we still on these charts?
>> [Inaudible].
>> Okay, good.
This is a good chart to
discuss that issue with,
not that you want a long
discussion of it, but you'll see
in this period, we ran a
large number of deficits
from 1965 right up to 2000
and then again after 2000.
Why were we able to do that?
Because we were a
strong enough country
and we had a national
debt structure
where we could absorb
those deficits.
They were doable deficits, would
be better if we hadn't had them
in many instances, but
they were manageable.
The problem we have
going-forward is
that we no longer have that
see corn available to us,
we've used up -- we weren't
at 60% of GDP back then,
we were at 35% of GDP,
debt to GDP ratio.
Now we are at 60%,
headed to 100%.
[Background noise] Much
different situation now.
I don't think, I think Reagan
probably would have liked
to have had surpluses,
clearly the surpluses
in the late 1990's were great
and from my perspective.
Sometimes you can have --
I don't want to get
into that debate
but sometimes you have too
much surplus because you --
but as a practical matter,
we haven't got that problem,
we're not going to have in a
long time, so we don't have
to worry about that one.
But right now our problem
is, we used up our see corn,
we're not borrowing from
ourselves, we're borrowing
from overseas and we've
got a debt to GDP ratio
which is unsustainable.
Neither of which was happening
when we were running
those deficits earlier,
we were borrowing very little
from overseas, and it was all
within the 35% range
of debt to GDP.
>> Okay. Other questions
from the audience?
We have somebody in the
aisle, right here in red.
>> [Background noise]
[coughing] [laughter].
Up on your slide in the
bottom left hand corner,
it says the source is SBC
Republican Staff, CBO.
>> Right.
>> Can you explain
what that is please?
>> Senate Budget Committee,
Congressional Budget Office.
>> [Inaudible audience response]
>> Well, the Senate Budget
Committee is Republican staff,
but the CBO numbers are the
ones that are scored here.
We all use CBO numbers
in the Budget Committee.
>> Okay. Other questions?
>> CBO is considered [background
talking] to be the fair umpire
of numbers even though they have
arcane scoring systems which,
everybody disagrees with
but they're the baseline.
>> Lets get a microphone
over on this side here.
>> Thank you.
I'm wondering whether
you have attempted
to persuade the Republican
candidates for President
about your six easy
solutions and whether any
of them have adopted any
of those suggestions.
>> I haven't and I'm not
aware that they have.
[Laughter].
>> Okay. Next question?
>> [Inaudible].
>> Okay, I'm sorry; it's hard
to see with these lights.
There's a question
over here on this side.
>> Couple questions here.
>> Hi. You mentioned
the seed corn.
I've heard a lot of
discussion that the reason
that seed corn was
present in the past was
that we had a good
strong manufacturing base
in this country and
that since that time,
we've had manufacturing move
considerably out of the country.
Recently, I've heard that
there is a lot more focus
on bringing manufacturing
back into this country.
I was wondering if that's,
if that's in fact true?
Are there any serious
efforts underway and are any
of them really thought
to work, so?
>> Well, we shifted from a
manufacturing based economy
to an information based economy.
And yes, many manufacturing --
our jobs have moved overseas
because in a comparative
situation going back
to Adam Smith [assumed
spelling],
that's where they're able
to do them more efficiently.
And as a result, we end
up buying those products
at a lower cost so American's
benefit from a higher standard
of living by having a product
paid for at a lower cost.
The key for our economy is
to, however, continue to be
at the cutting edge of
technologies and whether it's
in health or electronics
or information or software.
Where we're basically
headed and that's the world,
and we're selling products
to the rest of the world
that they need and we're able
to have the next
generation be our production
versus coming from
China and India.
Which is our big competitor
in the communication age,
of technology in the
communication age.
And that really is tied
to higher education
and our capacity to keep
and bring smart people
into the United States,
in my opinion.
So I'm not of the view
that you grow the economy
by protecting jobs which
probably can't compete.
I'm of the view; you grow
the economy by creating jobs
which out-compete the
rest of the world.
And New Hampshire's a classic
example of that honestly;
we get about 30% of our states
economy is tied to export
because we export high
value-added things
like electronic and
software primarily.
And we out-compete the rest of
the world with these products.
And then that 30% of our
economy that's export related,
feeds into the rest of
the economy and pays
for the [coughing]
restaurants and the car repairs
and the automobile
dealerships and everything else
that feeds off of those
original equipment events.
So, my view is that the way
we stay ahead of the rest
of the world and the
way we create jobs,
is we create an atmosphere for
entrepreneurs to take risks,
make investments, and
have an educational system
which produces the people
which will give us the
cutting edge advantage.
I don't think we do it
through protectionism.
>> Okay. On -- right
over here in the green.
>> [Coughing] So, while the
major driving force behind our
deficit and our debt
is healthcare costs,
it seems like that's the one
thing we really need to address
and the one thing a
lot of people talk
about is bending the
healthcare curve.
Now Obama tried to do this
through regulation of delivery
in his Affordable Care Act
and we've seen the Republican
response by Paul Ryan,
basically, trying to do it on
individualized voucher system
with elements of
premium support.
While repealing all of
the reforms and regulation
that Obama did to delivery.
Do you think that by
completely turning healthcare
over to basically a free
market under Paul Ryan,
while repealing all that
regulation by Obama.
Would that be superior
to turning it
over to a voucher system?
And keeping the regulation,
given that healthcare is one
of the places where the free
market kind of stumbles?
>> Well, I don't think
there's a simple answer.
I don't think you
can use a broad brush
to address healthcare and
you've got the leading expert
in the world here,
as your President,
and you've got the leading
institute in the United States
on healthcare, compare the costs
of healthcare right
here at Dartmouth.
So, you folks are the people
we're going to look to
but to me it's an
incredibly complex matrix
and there's no simple
answer to it.
But you need a variety of
approaches philosophically
and the first approach is
that you encourage quality
in outcomes over
utilization and repetition
and that drives costs down.
Secondly, is that you
do get the patient
and the patient's families
vested in the interest
of the outcome and cost?
And thirdly, that you don't
try to manage everything
out of Washington, the
most creative activity
in healthcare delivery does not
occur because some bureaucrat
in Washington thinks of it,
it occurs because some doctor,
some hospital, or some state
agency in many instances,
dealing with Medicaid,
thinks of it.
And so you don't straight jacket
your creativity by requiring it
to be subject to a one size
fits all out of Washington.
But those are very broad
brushes but there's --
healthcare can't be -- it's
not like Social Security,
Social Security had four or five
moving parts, you can solve them
and you've corrected
the problem.
Healthcare is a constantly
evolving, mutating event
because of research,
development, aging population,
so many different
factors but what you have
to have is a system that has
someone basic goals and drivers
that I think push better
delivery at a lower cost.
>> Any other questions
on healthcare,
particularly while
we're on that topic?
>> I won't take one from the
President of the college.
[Laughter] I would be
embarrassed because...
>> Or any questions?
>> He would have the answer
and I would not [laughter].
>> Questions?
And down here -- fourth row.
>> You spoke earlier about
how, when the impending doom
that you have spoken about hits,
there will be a lower quality
of life in the United
States, as you said.
>> Lower standard of living.
>>Yeah, sorry, sorry.
My bad [laughter]
but that wouldn't --
would making the budget cuts and
the broad cuts to the programs,
that many people in Washington
are currently suggesting.
Would that not have the
same affect in terms
of lowering people's
standard of living?
>> Only if you believe
government creates prosperity,
something I don't
happen to agree with.
My view is that government
is there to protect people
of lesser ability and means
and to give them a reasonable
lifestyle and to make sure
that we have, we address the
core issues of making sure
that society functions
correctly.
And that people don't act
inappropriately both in business
and in personal lives but
really prosperity doesn't come
from the government, prosperity
comes from individuals
who are willing to go out and
take risks and create jobs.
And if you create an atmosphere
where a person's willing to go
out and take that risk and
create a job, then you're going
to do a lot more
for that community
where that job's created than
to have the government come in
and try to tell you what
the right job is and then,
try to train you or create
the job in the public sector.
That's just a very deep
philosophical view of mine.
>> Okay. Next question,
we have Lawrence up here
in the front and
third row, here.
>> [Background noise] Hi,
you've already mentioned
in your speech today
the need for America is
to continue competing with other
nations to specialize in kind
of technologies and
kind of to make sure
that its worker's
are more educated
and to an extent
more specialized.
Given that, how do you feel
about the current state
of the American education
that's out there?
You know, in areas such as
sciences [coughing], America's,
you know, coming further
down the list of countries
in the world, and
how do you think --
what do you think can be done
to improve that situation?
>> Well, our public education
system is a disaster.
Our university system is
still the best in the world.
But we really have a very --
and we've had for a fair amount
of time now, a very serious
problem with our inability
to educate young
people and bring them
through the [coughing]
school system in a way
that [coughing] makes
them productive citizens
and makes the vast majority
of them productive citizens,
and makes us a competitive
nation,
with the rest of the world.
I, along with Ted Kennedy and
John Boehner, at the time,
and Miller -- I don't know
his first name, George Miller
from California wrote
No Child Left Behind.
The purpose of which was
to try to get transparency
into the public educational
system
so that parents could
make better choices
on [coughing] based off of
clear transparent ascertainable
standards of [coughing]
subjects that could be looked
at subjectively -- objectively
in the third and eighth grade.
It's unfortunately been watered
down because people didn't
like being held to ascertainable
standards and being compared
to each other, school
systems didn't like that.
I was governor in 1990,
when President George H. Bush
called the first conference
of Governors that had been
called since Roosevelt,
Teddy Roosevelt, to
Charlottesville Virginia.
And the whole purpose of the
conference was what do we do
about elementary and secondary
school education and it came
to the same conclusions
you'd come
to if you held the
conference today.
So it's been a reasonably
intractable problem,
there a re a lot of
ways to address it
but when you get
right down to it,
education is a cultural thing.
If people don't value it,
they don't require people
to pursue it and you
have unfortunately,
a lot of parenting
in this country
which doesn't value education.
And [coughing] and further
more, in my opinion,
if you don't create
a competition,
you don't create quality.
I mean, why do you buy
one car over another car?
It's because of competition
and so
when you have a system
that's stratified
and has no competition
within it,
then basically there's
no reason to improve.
And so, I happen to be a
supporter of charter schools
and a public school voucher
and a private school voucher,
for that matter,
and of merit pay and
but its really not the teachers
who are the issue in my opinion.
It's the whole culture that is
under valued education
especially at the secondary
and elementary school level.
And it's a real problem for
us as a nation and we're going
to start to feel
the effects of it.
China graduates 300,000
engineers a year,
we graduate 30,000, maybe
ours are better and brighter,
but they're going to catch
up to us pretty quickly
if they keep going at that rate.
>> Okay. Next question,
we've got somebody up here
in orange [background noise].
>> Going along those
lines, another issue
that you've mentioned especially
in the six proposals you
made was retaining highly
skilled immigrants?
>> Right.
>> [Clearing throat]
I was kind of curious
as to what your thoughts were
on bipartisan legislation
and attaching that to some
aspects of the Dream Act
and whether, that would be a
realistic possibility in terms
of the near-term and maybe
even the longer-term?
>> Well, we should do it,
we should do major
immigration reform.
It's hung up on the issue
of amnesty which is foolish,
not that I think there
should be amnesty, I don't
but I believe there's a
way around that issue.
Immigration reform should have
four or five moving parts.
Number one you should secure the
border, there's no excuse at all
for a nation our size and
ability not to be able
to control our own borders
and determine who comes in.
And we should secure the border
and the American people
won't accept any sort
of substantive immigration
reform
until they believe
the borders secure.
So, politically you
have to do it
but substantively
you should do it.
Second, employers should
be subject to very strict
and enforceable and enforced
regulations on their hiring
so they're not hiring people who
come over the border illegally.
Thirdly, there should be a
guest worker program [coughing]
that works so that if
you're from another country,
most likely Central America
or Mexico and you want to come
to the United States
and work, you can do it
under a guest worker program.
There should be a very
robust worker program.
Fourth, for all the folks
who are here illegally,
and unfortunately there are a
lot and we don't know how many.
But once you secure
the border, hopefully,
there'd be many fewer coming
in, if any hopefully, very,
very few obviously not going
to stop everyone [coughing].
You should have a
pathway to legal status
which requires doing things
which are reflection of the fact
that you're here illegally but,
not a pathway to citizenship.
You shouldn't be able
to come here illegally
and become a citizen but you
should be able to get some sort
of legal status called
a blue card,
so that you're not
being abused by people
who know you're here illegally.
And fifth, and I think this
is probably the most important
but it won't occur until you
do some of the first ones,
you need to have a system that
rewards people that come --
it says we want certain
people here who can bring more
to our culture in the way
of activity that we need.
You know, a physicist, a doctor.
If you try to go into
Canada and move to Canada
and get a green card, you will
be scored on what you bring,
you know, what you're
degrees are
and what whether a
company wants you to come
because you can add
something of value.
Bill Gates testified before
the Committee I chaired,
the Health Committee,
a number of times,
and he would make
the very simple point
that every time you brought in
somebody from India or China
who was a scientist, who
helped him out in his creation
of product at Microsoft,
he added four or five,
15 jobs around that person.
That person became a
job creating center
and he couldn't understand why
we wouldn't bring that person
to the United States rather than
leave them in India or China
where they would be the
job creation center.
And it makes no sense.
So we should have
a green card system
which rewards bringing
people in the country
because they bring
certain skills
which we need as a nation.
We should be willing to say
to the best and the brightest
across this globe, if you want
to come to the United States,
we're willing to
consider having you here.
Instead, we say just
the opposite,
if you get a graduate degree
here at Dartmouth in some sort
of science or something,
you're going
to have trouble staying
in this country.
You're going to find
it very challenging.
>> Okay. More questions,
we've got one up here,
in the rainbow shirt
[background noise].
>> [Inaudible] along
those lines,
in Georgia with the
recent immigration law
that they've passed, it goes
into effect on July 1st.
You know, one of the
stipulations of that law is
that employers are subject to
these sort of strict regulations
that you're talking about just
now, and one of the consequences
of that has been
that a lot of --
because of a lot of
the illegal immigrants
in Georgia have left either to
go to other states or to go back
to their home countries.
Some of the, you
know, [inaudible]
and the other [inaudible]
that sustain a lot
of south Georgia's economy,
you know, they're leaving five
or six of those unpicked because
they simply can't find workers,
because they've all left before
this law goes into affect.
So how do you, you know,
if you do institute these strict
regulations on employers to...
>> That's why you can't do it --
just that, you have to
have a guest worker program
and we have something
called and H2-A Program
which basically allows guest
workers to come in just
for agricultural purposes.
So you need to -- this isn't
-- you can't have one of these,
they're all linked together.
And furthermore, you shouldn't
have the states doing it.
I mean states have to do it now
because the Federal government
is not doing what it should be
doing, which is setting up a
major immigration reform bill.
So places like Arizona
are just so frustrated,
they've acted unilaterally
as states but it's really --
this really should be
done at the national level
through major comprehensive
immigration reform.
It has to be comprehensive,
is the key to turn around.
If you just did an
employer sanction bill
that would create all sorts
of adverse selection problems
for us, like you outlined.
>> Okay. Next question, anything
on international affairs
with a major speech by
President Obama yesterday.
Any questions on that?
>> And there's a bunch
of questions back there.
>> Okay, I'm sorry, right...
>> [Inaudible audience
response].
>> There's some questions
back there [inaudible]...
>> Okay, we'll come
back to you next.
We've got a question over here.
>> You've spoken
[clearing throat] --
you've spoken about
reforming entitlements.
In regards to decreasing
spending,
do you believe we should look at
or reduce our defense
spending commitment in order
to bring balance to the budget?
>> Absolutely.
Simpson-Bowles had a very
significant reduction
in the rate of growth
and actually it acts
as a real reduction
in defense depending.
Most of it will come in
the area of procurement,
strategic weapon procurement and
non-active duty personnel costs.
So yes, we absolutely
have to do that.
>> Okay. Did we have...
>> There are a couple
in the back there.
>> [Inaudible].
>> There's four or five.
>> Back here.
>> Hi. I believe you
mentioned that part
of the reason Japan
has been able
to finance their debt is
their high savings rate?
>> Right.
>> And also it seems that a
deficit isn't always a problem,
if you use the borrowed money
in order to finance new projects
or invest in future development.
So is there any legislation
or policy that could be used
to increase the U.
S. savings rate?
Or is that totally
impractical because we'd have
to kind of consumption?
>> Well, an interesting
phenomenon that's occurred
as a result of this
recent recession
which is the most severe
recession we've seen
since the great depression.
Is that the savings rates have
gone up significantly and one
of the reasons, I think
many people would say
that we haven't seen any type of
recovery you usually get coming
out of recession, is because
our natural consumer nature
as a society has not
returned at robust levels.
And people are saving
and why is this?
It's a very simple, in my
opinion, I'm not an economist
but by looking at it just a
pragmatist what happened here
was in 2008, we were on the
verge of fiscal calamity
like something we'd
[coughing] never seen
since the [coughing]
great depression.
And there was a huge
reduction in the net worth
of a large number of Americans
and most of them were right
on the verge of retirement, this
was the baby boom generation.
So you had [coughing] all these
baby boomers who gone into,
to defined contribution
plans, suddenly find
that what they expected to have
when they retired in three,
four, five, six years
was no longer there.
And so there's been this great
retrenchment by that generation
which once again, is the largest
generation in the country
and has had the most impact
on this nation ever
since it was born.
A great retrenchment in consumer
activity by that generation.
It would have occurred anyway
because they were moving
into retirement and they didn't
have to be as consumer oriented
but it's been I think
multiplied dramatically.
Now there's been
no studies on this
but I think its common
sense that tells you that.
So that's one of the reasons
I think this recovery has been
so anemic is that basically
people are saving more,
and especially the baby boom
generation, is saving a lot more
than it historically did
and it was the driver
of consumer activity
in this country.
That was a good question,
thank you.
All these questions
have been good.
[laughter]
>> They've been great, okay.
We've got a question
in the middle.
>> I'm not even in politics
anymore and I can say that.
[Laughter]
>> [Background talking] Senator,
why don't you run for President?
That's another election
you could win.
[Laughter]
>> That's very nice of
you to say but [applause],
if my wife were here you'd no
the answer, it'd be very brief.
[Laughter]
>> Okay.
>> Thirty years of elected
politics has been fun,
I've greatly enjoyed
and we have,
Cathy and I have greatly
enjoyed the chance
to represent New Hampshire and
we've had a great time doing it.
But at some point you say,
enough's enough, got to move on
and do something else
because its time.
>> Okay, we've got a question
up here, by Professor Wheelan.
>> Thank you for
the comment though.
>> So I have the obligation
of drawing it to a close
but I wanted to finish
with a multi-part question
because I've got [laugh] the
mic and this is [inaudible].
>> I'm not sure I can
do multi-part questions.
Putting a lot of pressure on me.
>> Its really kind of one
question that I can dress
up if I play with
clauses [laughter].
We have -- part of the benefit
of this whole series is we have
lots of people coming through
and we'll get different opinions
and it's almost a continuing
dialogue all summer.
So to that end, we
have Secretary
of Treasury Geitner
coming tomorrow.
Could you talk briefly
about your experience
with the TARP negotiations
and then tell us the question
that you would ask the
Treasury Secretary with regard
to the on-going systemic...
>> They wouldn't answer it...
[Laughter]
>> That's okay, just tell us
why you would ask it [laughter]?
>> The TARP negotiations, for
those of you who aren't familiar
with this, back in 2000 -- well,
you're familiar with the event
but maybe not the specifics.
In 2008, we as a nation and
the world were on the brink
of catastrophe like, that
had never been seen before
in that the entire financial
system was about to come
to a close -- to a
stop, a screeching stop.
And I was asked by
the Republican Leader,
Mitch McConnell, to lead
the Republican effort to try
to address this as Secretary
Paulson, at the time,
sent up a request
for $700 billion,
in order to basically be able
to stand behind America's
financial system.
That had come out of a
Thursday night meeting,
I think it was Thursday night,
when a group of us, myself,
Senator Dodd, Congressman
Franks, I'm trying to think,
there were two or three
other members in the room,
had been called in late
at night, about 9:30,
by our leaders as the designated
folks who were supposed
to manage this issue,
relative to our caucuses.
And we met with Secretary
Paulson, who's going to be here
and you should ask him
to recount this period
because it's fascinating, and
Chairman Bernanke, and they came
up to the capitol in
room 19, I think it was,
just off the Senate floor and
they walked in, they sat down,
and there were probably
eight of us around this table
who had been delegated the
responsibility by our leadership
to address this issue.
And they said that if we
didn't act within 72 hours,
the entire banking system of the
United States would shut down.
And the world would follow it.
It was one of the most startling
meetings I'd ever been in,
obviously [laughter] and
they weren't kidding.
This was not hyperbably, in
fact, just the night before one
of the most profitable
corporations
in this country had been unable
to move funds from one bank
to another bank and was using
hundreds of banks and not able
to move any funds [coughing],
in order to open its
franchises, the next day.
Because the banks
didn't trust each other,
after the Lehman collapse, no
bank trusted any other bank,
anywhere in the world.
And, under the way
our system works,
there has to be confidence
between counterparties.
So what Chairman Paulson --
what Secretary Paulson asked
for was a number
that was so high
that the world would realize
that the United States
government was going
to stand behind the
banking system
and that would settle
things down.
It was not unlike, if
you read the history
of the Great Depression, it was
not unlike what J.P. Morgan --
not the history of
the Great Depression,
but the run on banks back in, I
think it was 1897 or something,
and J.P. Morgan did this, and
-- but he did it individually.
But, basically, he just wanted
a number that was so huge
that nobody in the world
would think we weren't going
to be behind our banking system.
And therefore, the banks could
start to lend with each other.
And the TARP negotiations
went on for 48 straight hours,
all day long and the next two
days, Friday and Saturday.
And Chairman Paulson told us
that if we didn't have a
conclusion by 5:00 on Sunday,
that was firm, that we were
going to have the crisis
because the Asian
markets opened at 6:00.
So at around about
12:30 at night [laugh],
on Saturday night the
negotiations completely broke
down over an issue called
Recoupment and then literally,
off in a corner office,
and the way politics works
in its most interesting
form, Secretary Paulson,
Rahm Emmanuel, myself,
the Speaker of the House
and Barney Frank, said okay
we're going to do this,
we're going to do it this
way, and it was done.
And it was an amazing
experience, government worked.
Government worked and it's
been demonized ever since,
but it did exactly what
it was supposed to do,
stabilize the financial
system of this country
and therefore the world.
and in the process made the
taxpayers about $20 billion
in profit, so it was
a pretty good project.
What would I ask
Secretary Geitner?
It would be a very
blunt question;
it would be why did you walk
away from Simpson-Bowles?
Why didn't you -- why didn't the
President -- the table was set,
it was done by his
own commission,
$4 trillion of savings, it was
there, it was ready to be taken
and run with, all it needed
was Presidential leadership.
Why didn't you folks stand down
on that and walk away from it,
rather than take it up
and make it the cause
versus the solution
of our problems?
>> We will ask that
on your behalf
and then we'll let him ask
Ambassador Huntsmen a question.
We'll do it all summer.
[Laughter] >.
> You can credit it to me.
>> And then the last
guy will call you.
[Laughter]
>> Geitner's never
going to return any
of my calls [laughter],
Secretary Geitner.
But I admire him; I
think he's a great guy.
>> I want to thank you.
All of you have only seen the
tip of the iceberg with respect
to Senator Gregg's generosity.
We started with lunch with
students, we had a class
and throughout that all
he's managed not be not only
interesting but to give us
different perspectives on all
of his various involvements.
So thank you very much.
>> Thank you.
[ Applause ]
>> Thanks to all of you, we hope
to see you back tomorrow at 4:00
in Spalding for Geitner.
We will ask him the question.
[Laughter] ==== Transcribed by
Automatic Sync Technologies ====
