Red Tide Rising: Confronting the Fiscal Crisis

Held Thursday, May 27, 2010

THIRD WAY

RED TIDE RISING: CONFRONTING THE FISCAL CRISIS

WELCOME:
JONATHAN COWAN,
PRESIDENT,
THIRD WAY

MODERATOR:
JACKIE CALMES,
WHITE HOUSE CORRESPONDENT,
THE NEW YORK TIMES

SPEAKERS:
SEN. KENT CONRAD (D-ND)

SEN. GEORGE VOINOVICH (R-OH)

REP. JIM COOPER (D-TN)

THURSDAY, MAY 27, 2010
8:30 A.M.
WASHINGTON, D.C.

Transcript by
Federal News Service
Washington, D.C.

JONATHAN COWAN: I’m Jon Cowan, president of Third Way. Back in the 1990s, I cofounded and ran a Generation X organization that was dedicated to eliminating the deficit and while I was and remain very proud of the work that we did then to mobilize young people, what no doubt truly distinguishes me here this morning is that I am likely the only person ever to have received a check from Ross Perot to buy a new suit.

Yes, in fact he saw me on CNN and mailed be $100 with a note telling me I needed to dress more sharply. So let it not be said that the deficit is not a personal issue. Of course, back then the deficit was $292 billion, a mind-boggling figure.

Today, inflation adjusted, that might be about $500 billion and if the deficit were actually that low, we probably would not even have a fiscal reform commission. Back then, we got the deficit under control. The question is, can we fix the problem again? At Third Way, we argue that we can, but only if we significantly shift the nation’s policy and politics.

For 75 years, we have focused on building an entitlement state, a social safety net to protect Americans against the excesses of the market. The capstone of this project was healthcare and with the passage of reform legislation, we can truly say that this entitlement project is and must be complete. We now need to turn to a new challenge: economic growth, building national and individual wealth.

For most of the 20th century, growth was something we could take for granted. But now we face global competitors in a world wired for change. India and China and many others are nipping at our heels. We cannot take growth for granted anymore and we need a new growth agenda.

One of the most important components of that agenda is getting our fiscal house in order. Without a solid fiscal foundation, we can’t sustain the investments necessary for growth nor can we afford to maintain the safety net we built.

So while most think of deficit reduction as largely an exercise in pain management, we see it as an historic opportunity for achieving growth and ensuring middle class success. But to get real fiscal reform, clearly both sides will have to shed their ideological rigidity and bridge the partisan divide.

So that’s why, as we set out to help lead the deficit reduction conversation, we have assembled the sharpest thinkers on fiscal policy from both parties for this morning’s conversation. We are grateful to have here Sen. Kent Conrad, senator and former governor George Voinovich and Rep. Jim Cooper.

Let me now introduce our moderator, Jackie Combs. Jackie is widely regarded as one of the most respected and influential journalists in Washington. She covers the White House for The New York Times and previously was with The Wall Street Journal. Jackie?

JACKIE CALMES: Thank you. (Applause.)

MS. CALMES: Good morning. This is a great way to have breakfast here, with the glass walls and all. I’m going to date myself but it’s been about a quarter century – actually more than a quarter century – since I first came here.

My first job was at CQ and it was not long afterwards that I started writing for CQ about this looming tsunami and I think Robert Reich was the first one who ever used that term with me.

And it was always off in the distance that we were going to have this demographic time bomb and then what came to be even more important than the demographic shift of the baby boomers retirement was the fact that health-care prices were rising inexorably.

And again, it always seemed to be we wrote about it and wrote about it but nothing ever much happened and then through a combination of good policy and luck, in the ’90s we actually – I never thought in my lifetime I would see a surplus, but I did.

There was a time I never thought I would see a Republican House and I did and now they’re both gone and so we arrive now at this point, this day of reckoning, not only having being in the worst fiscal shape we ever could have imagined back then but we’ve essentially brought the day of reckoning – well we haven’t – but circumstances have brought the day of reckoning roughly by some estimates 10 to 12 years closer than it was by virtue of both the tax losses and the spending, as a result of the recession and the efforts to stoke a recovery.

So I don’t need to tell any of you. I’ve gone down the list of who’s here. You all know what bad shape we’re in. So I’ll just with that move to the people here who also don’t need much of an introduction. So I’m going to blow through that and so they can talk.

Sen. Conrad, it seems like I’ve known and written of forever and former tax commissioner in North Dakota. He’s been associated with budget for as long as I remember.

Sen. Voinovich has held just about every office you can hold in my home state of Ohio and it seems like I’ve known him at least since I was a kid, but having dated myself I can date you.

And Jim Cooper, again, he had – I followed him to Washington. I came in ’84 and he had been elected in the 1982 class and I remember about 1985 or so, after this ’82 class had gotten past their first reelection, doing a cover story for CQ taking note of what seemed to me – I’m wrong about a lot of things but this one I think I was right about – that the ’82 class, it was not only big but it shifted the House Democratic caucus more to the center.

Up to that point there’d been a lot of debate in the Democratic Party that was settled on the premise that we don’t need a balanced budget and that shouldn’t be the Holy Grail. The ’82 class sort of pushed and then ultimately Ross Perot and Bill Clinton sort of pushed the Democratic Party to the point where – and we can talk about this – maybe we don’t have to have a balanced budget but at least that maybe should be the goal.

So he then lost his position in ’94, which he came in with a big wave and he went out with a big wave for the Democrats and now he’s back and at the risk of showing bias, I’ll say we’re glad to have him and with that, I will sit down, shut up and leave it – turn it over to Sen. Charts here to take us through the –

SEN. KENT CONRAD (D-ND): Well, that is the first time I’ve been introduced as Sen. Charts. You know, Sen. Dorgan, my colleague, says after Conrad speaks, we have to give the crowd Prozac. I think that’s very unfair; just the facts and Jackie, thank you for that introduction.

Thanks to Third Way for organizing this event and for putting a focus on this issue because I personally believe it is critically important to the country’s economic future, our economic security, certainly our financial security.

The importance of it all was highlighted by this Newsweek cover which interestingly enough appeared on December 7 of last year and the title was “How Great Powers Fail” and if you go to the inside of the magazine, they described in greater detail what they meant by where this could all lead and let me just read it to you briefly:

“This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the army, navy and air force. If the United States doesn’t come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power.

I think they’ve hit the nail on the head. Yesterday, the debt commission met and we heard the results of research from Carmen Reinhart, Dr. Reinhart, who is just finished an analysis along with a professor from Harvard of 200 years of economic history looking at the 44 leading industrialized counties in the world.

Her conclusion was that those countries that have a gross debt of more than 90 percent of GDP have economic growth rates that are reduced by 1 percent. Since we’re only growing at about 3 percent, a 1 percent reduction would be a big deal over time.

Let’s go to the next slide if we could. If we look at what the president has proposed, I’ve said publicly and privately I give him good marks for the first five years because he’s reducing the deficit dramatically over the first five years. The budget that I put through the budget committee does even somewhat better. We get down to a deficit of 3 percent GDP in the fifth year.

The problem with the president’s budget is after the first five years, it starts going the other way and of course that’s the key reason he’s put in place the debt commission.

Let’s just look at this next slide quickly. Dr. Reinhart indicated countries with a gross debt of over 90 percent of GDP are seen to have less growth going forward and you can see we’re in the danger zone right now. This year we will reach a debt that will be – a gross debt that will be more than 90 percent of our GDP, headed for more than 107 percent by 2015.

Let’s go to the next one quickly if we can. Obviously, that’s the short-term, next five and 10 years; next longer term, far more serious. On the current trend line, we are headed for a debt that will be 400 percent of the gross domestic product of the country and that’s according to CBO’s long-term analysis.

In anybody’s terms that’s unsustainable. People are not going to lend us the money to get to a debt of 400 percent of GDP and so we all know that we’ve got to change course.

Let’s go to the next slide. I just want to bring you up to date on the current status of Social Security and Medicare trust funds. Social Security will be permanently cash negative in 2016. It’s actually cash negative today. It’s going to be permanently cash negative in 2016, insolvent by 2037. Medicare went cash negative in 2008 and it will be insolvent in 2017, two years earlier than forecast just in 2008.

Let’s go to the next slide if we can. How are we floating this boat? Well, we’re doing it increasingly by borrowing from abroad. Last year, 68 percent of the new debt was financed by foreign entities. China’s become our largest creditor and they’re telling us to put our fiscal house in order.

A major leader in the United States just came back from a trip to China, called m up and said top Chinese leaders took him aside and told him they’ve concluded that our political system is so dysfunctional that we don’t have the will to take this problem on, that as a result they have concluded that over time we will become a second-rate power. I hope that we can prove them wrong. Our opportunity to prove them wrong is coming with this debt commission.

Let’s go to that slide and I’ll end on this note. The president’s fiscal commission, which is very closely modeled after what Sen. Gregg and I proposed with a statutory commission, as you may recall we got 53 votes for a statutory commission. But you need 60 votes in the Senate. Unfortunately, seven of our original cosponsors actually voted against the measure on the day the vote was held.

If those original cosponsors would have held in there with us, we would have passed a statutory commission. We knew it was going to be difficult to get the votes. So we negotiated with the White House on an executive order commission and it has these elements.

It’s designed to address the unsustainable long-term fiscal condition of the country. It has a near-term goal of reducing deficits to 3 percent of GDP by 2015, and by the way, if the budget that I have proposed is adopted, we will have that goal in the regular order.

Everything is on the table. There are 18 members, 10 Democrats, eight Republicans, there are bipartisan co-chairs. If 14 of the 18 members can agree, there will be a report to Congress on December 1.

That report will come to a vote not through the statutory means but by commitments that have been obtained from the majority leader and from the speaker, very specific commitments on how they would bring this matter to a vote.

So this is our opportunity. This is our chance. I very much hope that we don’t fluff it. Thank you very much. (Applause.)

MS. CALMES: Next we’ll hear from Sen. Voinovich, who is, as you all know, going to be retiring. So I trust he’ll make his comments in the spirit of the mess that he’s leaving behind for us.

SEN. GEORGE VOINOVICH (R-OH): Good morning. First of all, I’m really honored to be at the same table with Kent Conrad and Jim Cooper. I don’t think there are any two individuals in Congress that have done more to bring to the attention of the American people our unsustainable national debt and budgets that can’t be balanced as far as I can see.

I came to Congress to reduce the debt and balance budgets and a little history that Kent, you remember, maybe Jim, we did balance the budget in ’99, $1 billion and we don’t use Social Security. The next year we balanced it again and we paid debt down about $284 billion and then we went off the cliff and when we reduced the taxes, we said at that time we were going to balance our budgets, we were going to not use Social Security and that we were going to be responsible.

Some of you remember the lockbox. I still have my lockbox behind my desk. It still has the change I threw in it back at that time. But there was a – we’re not going to use Social Security.

We’re going to be responsible and then the ’93 review of where we were in terms of the budget and taxes, as you know, the president came in and asked for almost a trillion dollars in reduction of taxes and maybe some of you may not remember this but I worked with John Breaux and with Max Baucus and with Susan Collins and after an hour-and-a-half at the White House with the president, we basically told him it’s $350 or nothing.

Right now, if I look back, it should have been nothing and with the wars, two wars, we’ve never paid for them. It’s just – and then after that, tax reform, working with Karl Rove to try to get the president to do tax reform. They set up the tax reform commission. I wanted it to be members of the legislature. No, we’ll have John Breaux and Connie Mack do it and they came back with a good program. They really did.

They went all over the country. They listened to people. They cleaned the Treasury out in terms of ideas on how we could really do something. Their report came back to the White House and John Breaux tells the story about how he went in the Oval Office and was looking around and President Bush said, what the hell are you doing, and he said, I’m looking for our report.

But the fact is that nothing happened and then after that we started talking about having the SAFE Commission, Saving America’s Future Economy, worked with Jim Cooper and with Frank Wolf and moved along.

But the fact of the matter is that despite all of that, we are in a crisis situation. I was at the Brussels forum, the German Marshall Fund, and they brought up the issue that we need more help from the United States and I said to them the days of our being Uncle Sugar are over. They’re over.

We can’t do it anymore and I said to them, I want you to understand that last year, we borrowed 41 cents for every dollar that we spent and I’ve got to tell you folks, there was a hush that went over the group of people and I said, if we don’t get our financial situation in order, not only is our quality of life and our competitiveness in the global market in trouble, but world peace is in trouble and that’s how serious this is.

We’ve kept the peace for 60 years and we’re at a position right now, and Kent went into it that we might not be able to do that if we keep going the way we’re going.

Some of the things that I think we’re failing to consider today is Fannie and Freddie. We just ignore it. Something comes along, just ignore it. Kent got into the Social Security; the unfunded liabilities between Social Security and Medicare, $61 trillion, $61 trillion. It’s just – it’s not – the pension plan is not funded and we just seem to go merrily along and everything’s going to work itself out.

The paygo that you did in the House, Jim, four things that you excluded; I think Maya McGuiness put it – she said what you did is you said stop drinking hard liquor but you can drink beer.

The fact is that the budgets, how many of them have we had where we include in the AMT money, which we know damn well we’re not going to get and we use the deductions, the doctor’s fix, which we know we’re not going to get and that – it glosses it over when we know darn well that it’s irresponsible and we just keep doing things that just don’t make sense and the American people – same way with the appropriations.

What an awful situation, what we have. We don’t do our – well, you’ve got a tough time with your budget but we don’t do our appropriations. If I was the – when I was mayor of Cleveland and governor of Ohio, if we didn’t take care of our appropriations, they would run us out of office and we just go on and on.

There was a nice article in one of the papers about the fact that we don’t do our appropriations on time and how it contributes to mismanagement and waste of dollars. We’ve got to get back to some fundamental things in our system if we expect to ever come out of this mess, and I know Kent, one of the things they did is they quoted you.

You’ve been opposed to the two-year budget and you’re saying maybe we ought to start to look at that. I’ve been for the two-year budget since I came to Congress, worked with Pete Domenici on it.

The point I’d like to make is that there are systemic changes that have to be made and I have to say that I believe that this debt commission that Kent’s working on right now and you’ve got Alan Simpson and Erskine Bowles, I think you’ve got some good people on that commission.

I was disappointed it didn’t get done in the Senate and the reason it didn’t is because of the work that we all did. The rug was pulled out from underneath me because of a guy like Grover Norquist and frankly – and if there’s somebody from The Wall Street Journal’s editorial board because he said, well, all they’re going to do is raise – they’re going to raise taxes.

Well, the fact of the matter is we have to raise taxes and we have to cut our costs. I did that when I was mayor. I had to do that when I was governor and we have to do that here. We’ve got to be honest with the American people. We are going to have more taxes and this business about only people making over $250,000 is ridiculous.

We’re killing the goose that laid the golden egg. It’s nuts and if you want to have a socialistic country where the government takes care of people, look to Europe. Everybody pays taxes in Europe, everybody, okay? It’s graduated, yes, but everybody pays. We live in a country where 47 percent of the people don’t pay taxes.

The last thing I’m going to say is I’ve been giving some speeches around Ohio because I want to get the highway bill reauthorized and a question I ask is this and I’ll ask you the question.

How many of you in this room, and there’s a lot of young people here, how many of you in this room have a better standard of living than your parents have? Well, a lot, some of you young people aren’t sure yet and the other question I ask is how many of you believe that your children are going to have a better standard of living than you have and it’s amazing to me the few hands that go up.

There’s a malaise out there. They know we can’t keep going the way we are. They understand that and I’m hoping that that builds and builds so that the work that you do, Kent, can be supported by the American people. Thank you. (Applause.)

MS. CALMES: And now Congressman Cooper.

REP. JIM COOPER (D-TN): Thank you Jackie and to my two colleagues, if everybody were like these two, we wouldn’t have the massive debt and deficit problems we’ve got. I also want to single out Tess Stovall, Anne Kim, David Kendall and some others in the group here who’ve been good friends of mine for a long, long time.

We live here in D.C., in the only accounting free zone left in America. We have a better way to measure things. We refuse to use it and the business mantra is if you can’t measure it, you can’t manage it and a corollary is if you won’t manage it – you won’t measure it, maybe you don’t deserve to manage it and that’s the situation that we’re in.

Historians will be very tough because – and I haven’t been able to persuade any of our media outlets to use real accrual accounting even though their parent organizations have to use real accounting. So in the cash world that we live in here it’s very easy to hide a lot of our problems and we’ve been doing that for a long time.

Another distressing situation is with all the – what is it, 30 or 60 lobbyists for every one of us, every one of those organizations, including the business organizations that complain about the debt, their net lobbying of Congress is to increase the debt and deficit. I took a local group of realtors from Nashville, Tennessee, to the National Association of Realtors this last fall because the folks back home are concerned about these issues.

But unless they’ve changed it very recently, still the top 10 NAR priorities basically would increase the deficit. So how do we curb this organized appetite that is Washington, that is Congress?

It takes more than commissions. It takes courage. But we’re so cowardly today, pretty soon we’ll be afraid to appoint a commission to appoint a commission to address these problems.

Meanwhile, Moody’s, Standard & Poor’s, Fitch, all the rating agencies are actually warning us of a test of our social cohesion because there’s such a vast mismatch between a promise for Medicare that’s tens of trillions of dollars out of whack with what we think we might be able to afford.

So these – for all the bad news there’s a lot of good news. We have a president who cares. We have a commission that’s in place. We have a budget that’s a freeze.

We have paygo restored again, which Alan Greenspan and Ben Bernanke will tell you is the single most important fiscal step that we can take. But much more is needed. The president just came out with an enhanced rescission proposal, essentially a line-item veto.

But nothing will substitute for congressional backbone and restraint and that’s what we need greater awareness of because still on the House floor today and probably on the Senate floor, although I can never presume to speak for the upper body, people think more about the next election than the next generation.

But we can and must solve this problem. If we’re true to our traditions, we will solve this problem. It was only 10 years ago that we had three years of budget surpluses. Alan Greenspan was worried that we might eliminate the anchor to the world’ finial system, the Treasury bond, because America was on a path to eliminate its debt. Well, we solved that problem. We can solve this problem too. Thank you for letting me be here today. (Applause.)

MS CALMES: I’m going to facilitate about a half-hour discussion among the members and then I’ll turn it over to you for your questions. But first I’m going to sit there. So I’m going to get this out of the way if you don’t mind because I can’t see any of you and I’m going to start with some more – a couple more timely questions of things that are on the agenda right now and then move to the cosmic.

But first I’d like – the Congress is going to vote this week on the extenders package. Given the circumstances we call it the jobs bill. But we all know the extenders come whether we’re in good times or bad times to be renewed. But it also becomes the engine in this case for an extension of unemployment and COBRA and for some aid to the states.

I want to know, number one, how you three see this playing out and number two, if you could address just about any economist I talk to will tell you the two most effective things you can do to stimulate the economy and right now there’s a question of to what extent does the economy still need more stimulation since we still have the stimulus in the pipeline.

The two most effective things you can do are unemployment insurance to put cash in people’s pockets that they’ll spend and aid to the states when they’re in sort of the dire straits that these states are in so that they don’t lay off people and they continue to get money into the economy. Those are the two things that Congress seems to like to do least and then there’s the extenders, which they really like to do.

So with that I’ll just – I guess since – do you want to start Congressman Cooper since you have the vote in the House?

REP. COOPER: Well, Jackie, with all due respect, I think you have too much of a governmental perspective on this. The single most important thing we can do to stimulate the economy is to free up the trillion dollars plus that’s currently on the sidelines, on corporate balance sheets waiting to be spent but they are afraid and we don’t know exactly what it will take to get them to invest, to hire, to move.

Essentially they lost their banking system last year. They’ve become their own bankers. They’re supplying their own liquidity needs because they’re unsure of lines of credit or commercial paper or instruments like that. They used to be able to rely on. So restoring confidence is absolutely essential and that’s vastly more than we can do in any single piece of legislation.

The extenders bill, you may have heard last night, was truncated. It was shortened in terms of the time for unemployment benefits and COBRA and things like that. It reduced the cost of the bill by about $50 billion. It’s still about $150 billion net cost.

It’s still full of a lot of emergency things that are not emergencies. There are some essential elements but it seems to me we have a long way to go to trim it down where it would meet the USA Today test. They had an excellent editorial yesterday, memo to Congress, it’s not 2008-2009 anymore. Get your act together.

MS. CALMES: Sen. Voinovich or –

SEN. VOINOVICH: Well, as one that – add Republican – was very uneasy about voting to extend unemployment and the COBRA benefits but finally voted to do it because I know how important that is to so many Americans, as far as I’m concerned probably more important than any stimulus at this time, I went along with it.

MS. CALMES: What is the unemployment rate in Ohio right now?

SEN. VOINOVICH: It’s 11 percent and it’s probably – it’s a lot more than that.

MS. CALMES: Right.

SEN. VOINOVICH: But the problem is that – I made it clear to Max Baucus that I’m not going to support the extenders bill, even though I am concerned about the unemployment and I’m concerned about extending COBRA. It’s just loaded up with a bunch of stuff that shouldn’t be in the bill and I’m just going to not vote for it and we’ll see what comes over from the House.

But a lot of us think that if we put our foot down, then maybe it will put more pressure on the commission to tackle some of these things because we just continually kind of kick the can down the road and it’s time to stop kicking the can down the road.

MS. CALMES: How many Republican votes might it get at this point in time?

SEN. VOINOVICH: I think it’s in big trouble if it comes over the way it was originally put together and I’ll be more than happy to look at what you finally come up with, Jim. But I think there’s a lot of us that – I mean, I want to do this. But I’m just – you’ve got to draw the line some place.

MS. CALMES: Sen. Conrad?

SEN. CONRAD: Well, maybe my perspective is somewhat different. Let me just say before I begin that Jim Cooper and George Voinovich to me are heroes because they have been on the right side of the debt threat for a long time and George Voinovich has been one and Jim Cooper has been one that haven’t just talked about it.

They’ve consistently acted as though they’re serious about it and I will very much miss George Voinovich. I think he is one of the very best members of the United States Senate.

With that said, I told the leadership that the package that was originally put together could not pass based on my contacts with members. I didn’t believe it would pass. I told them I believed that it needed to be cut back. I didn’t think more than two years of a doc fix should be put in the package. I thought that we should actually examine additional pay-fors, not immediately, not at a time of weakness. But in the third, fourth, fifth year of a five-year window.

For example, on FMAP there’s $24 billion of funding for FMAP in this package. I support that. We need to help states that are otherwise going to lay off tens of thousands of people. But why not have a pay-for in years three, four and five? Why not have the states have a requirement to pay back some or all of the money that we extend to them at this moment?

Let me go one step further because I believe in the short term we still do need stimulus and I believe it very strongly. I believe in the short term we actually need more deficits and I say that because we have unemployment at too high a level and as Sen. Voinovich just said, the true unemployment is much higher than what’s advertised.

What’s advertised, 9.7 percent unemployment, we all know there’s an additional at least 7 percent of our people who are underemployed, who are maybe have some work but not as much work as they would like.

So that’s basically one in every six workers in this country doesn’t have the kind of work that they would like to have and are ready to do. That remains a huge drag on this economy.

Number two, with what’s happening in Europe, with Greece, Portugal, Spain, Ireland, we have got to be increasingly concerned about a double dip. That would be a very significant step back for those who are concerned about deficits and debt because if we had a double – a dip, the recovery that is underway would be challenged, would be threatened and deficits and debt would grow.

So my own belief is in the short term, our strategy and plan has to be directly opposite to what I believe strongly in for the long term, that is for the long term, we’re on an unsustainable course. We’ve got to focus like a laser on reducing deficit and debt.

But we’ve got to be very careful about when we pivot. In my judgment it is too soon to pivot. But we can’t wait much longer. So I’m thinking about another two years in which we have deficits that are outsized. But then we have to make dramatic progress at bringing the deficit down.

That’s why if you look at the budget that I offered, it does have significant deficits in the short term but brings the deficit down by 70 percent as measured by a share of our GDP over five years and I think that’s about the right course. But the truth is none of us know for certain what’s the right timing. I believe that it is too soon to pivot. But we can’t wait much longer.

MS. CALMES: I’m going to use that. Do any of you want to add something to that?

SEN. VOINOVICH: Yeah, I – you know, I was opposed to the health-care reform and the reason I was is because we can’t afford the health-care system that we have and I thought that we ought to do some incremental things but not take on the whole watermelon and so there’s a lot of uncertainty about how is that going to play out in the country today. You talk to businesspeople; they’re not really sure how this is going to work.

We just passed the financial regulation – regulatory bill and they’re not sure how that’s going to work out. In fact, there was an article in one of the papers yesterday about the fact that Europeans are wondering what we’re doing in terms of regulating our financial community and how that’s going to ricochet over in Europe.

When I talk with businesspeople, what they’d like – they’re uncertain about the future. One of the reasons why I’m asking for a reauthorization of the surface transportation bill, Kent, and paying for it by increasing the gas tax is we could take a portion of the economy and put it to bed. For certain they know they’re going to be okay for the next five years, and by the way, we pay for it.

And then it’s restoring credit. People are constantly coming and saying that their banks, who they’ve dealing with for 20 or 25 years, have shortened up their line of credit or reduced it and require more from them than they ever had before. The issue of restoring our real estate values, that’s a very important part of getting us back on track.

So I think that these are things that matter and I really believe that you’re talking about a lot of money out there. There’s people that are willing to spend that and there’s people who want to borrow money and there’s a disconnect here.

MS. CALMES: I want to pivot to something based on both of your remarks, to jump ahead on my questions to bring in the fiscal commission because, Sen. Conrad, you said that you don’t think it’s time to pivot to concentrating on deficit reduction, which some might hear as well what do we have a fiscal – what are they going to propose if it’s not time to pivot and I think I know the answer here.

But could you sort of reconcile for people how you – I mean, it presumes that the reductions, if there were to be some proposed, are going to be out-year reductions. But could you reconcile that because it really is something that’s hard. It’s hard for me as a reporter to write and get people to understand because we’re talking on the one hand about stimulating the economy and then reducing the deficit.

SEN. CONRAD: It is. You know, explaining economic policy at a time like this comes across as double talk and I understand that. But this to me is the reality. I have been a deficit hawk all of my life. I believe deficits do matter.

I believe they matter a lot, especially if we’re looking over time. I believe they are especially hurtful depending on what your level of debt is and as I’ve indicated, I believe we’ve reached the danger zone. So then, well Sen. Conrad, why could you possibly be in favor of an end paid for package of extending unemployment insurance, COBRA, the tax extenders, which are in part deficit financed.

Well, I do support them because I believe in our current circumstance that aggregate demand absent additional government intervention would be so weak that we would have unemployment continuing to rise and economic growth even more tepid. Let’s just look at what’s happened here.

One year ago, economic growth in the first quarter was a negative 6.4 percent. The first quarter of this year it was a positive 3.2 percent. On the job front one year ago, the first month we lost 800,000 jobs in one month. In the most recent month, we added 290,000 jobs. Let’s look at the markets. Stock market is up 70 percent trough to peak.

So the plan that is underway is working. The plan was to put tremendous liquidity into the system for the government to prevent a collapse. That had to be done. Europe is doing the same thing. Japan is doing the same thing. Every industrialized country facing this financial crisis is providing liquidity to prevent and avert a collapse and believe me, I believe we were on the brink of a global financial collapse.

None of that is to contradict the long-term circumstance that we face that we are on an unsustainable course. But you’ve got to be careful when you pivot and start to impose tough austerity measures. The right time to do it is not in the midst of a downturn. That is the wrong time to do it. But it must be done.

So what am I saying with respect to the commission? The commission I believe should take steps that begin to take effect in about the third year of this five-year budget. The deficit will be coming down, even before that. The deficit will be coming down because with the economic recovery, revenues are beginning to recover.

Expenses will begin to go down, although that happens more slowly. So deficits will come down. Under the budget plan I’ve produced, 70 percent as measured against the gross domestic product of the country over five years. We’ll go from a debt – a deficit of 10 percent of GDP to 3 percent of GDP. I think that’s about the right path.

Longer term, we’ve got to do better than getting down to a deficit of 3 percent of GDP. Longer term, I actually think we’re going to have to have years in which we have a balanced budget because of the demographics and because of our long-term economic challenge.

MS. CALMES: So what sort of steps should the commission end up with?

SEN. CONRAD: Well, if you’re asking me, I believe it’s got to be a combination of policies that rein in entitlements. What George and Jim have said is exactly right. We are overpromised and the big, the 800-pound gorilla are the health-care accounts. George and I have a different view of this. I thought health-care reform was essential to being to rein in health-care spending. I believe the plan that we passed will do a better job than I think most analysts believe.

I believe it because I asked – Judd Gregg and I asked CBO what are the most important things we could do to rein in health-care costs. They said you’ve got to do something about the tax subsidy to health care, which is over $2 trillion a year.

Number two, you’ve got to reform the delivery system. You’ve got to turn away from paying for procedures and you’ve got to pay for quality outcomes and that is central to this health-care bill. It got almost no attention in the media, by the way, almost no attention.

But there is a national pilot project and that is not just a pilot because if it proves successful, it can be automatically ramped up to a national program to move from paying for procedures to paying for quality outcomes.

MS. CALMES: Sen. Voinovich, I want to hear your ideas but before I leave Sen. Conrad, so you’re saying that the health-care costs, despite just having passed this massive bill which has lots of changes in Medicare and Medicaid, Medicare and Medicaid are on the table for the commission?

SEN. CONRAD: Have to be.

MS. CALMES: Okay, Sen. Voinovich?

SEN. VOINOVICH: Well, you know, how you could pass a health-care reform bill and ignore the doctor’s fix is beyond me. It’s very important. It’s part of the system. Doctors have got to be reimbursed for the services that are rendered and for the last 10 years, six years, we’ve been doing the doctor fix and it should have been included in the cost of this bill to pay for the doctor’s fix. That’s fundamental.

Same way in Medicaid, the doctors that are providing Medicaid services, you’re going to see a situation in this country where a lot of doctors are going to take the position, frankly, that we’ll take care of the patients that we have that go on to Medicare but I’m not taking any more Medicare patients, period.

MS. CALMES: So how do you do this? How do you – what to the fiscal commission?

SEN. VOINOVICH: Well, let’s look at one of them that we should have done and that was these golden health-care plans. You know, the big unions were opposed to it. They wanted – they said that we can’t – the lid is $23,000.

REP. COLLINS: Twenty-seven.

SEN. VOINOVICH: $27,000. Well, my God, a health-care plan in Ohio is $13,000 or $14,000 and we’re saying that we’re going to let them continue to have plans at $27,000 a year. We should have cut that down to $14,000 and said, look, that tax expenditure is just killing us. We’re hemorrhaging too much money. Let’s take that money and use it for something else. But no, it didn’t happen because the unions came in and said, no, you can’t do this.

The same way on the commission; first thing, knock off Social Security and do that. You can do that in one week. Show you’ve got some guts. People then will believe you that you’re going to do it and you know that can be done. We can do that.

That ought to be a lay-up shot and then the tax reform part of this thing. The tax code is unbelievable. Get rid of what parts of the code lend themselves to savings and to the growth of the economy.

For example, one of the sacred cows out there is this mortgage tax reduction. It’s too damned high. I know when I bought my apartment here in Washington they said, borrow the money George because you’re going to be able to figure out how you can take the interest off on your tax return. There’s a lot of stuff in this code that just doesn’t make any sense, doesn’t do anything for the economy and we’ve got to take them out.

MS. CALMES: Why don’t you leave us with a plan before you go, a whole plan? Give the fiscal commission the Voinovich plan since you’re on your way out.

SEN. VOINOVICH: I’ve just given you some of the things.

MS. CALMES: Right, put it all together.

SEN. VOINOVICH: I’d just start out with that and look at what we’re doing and also, we say to the American people, the middle class, you have to admit to people that we’re going to have to pay for this and everyone is. So we’re going to have a tax increase for all of the American people.

MS. CALMES: Well, and it’s the fact that you hold your views you do on taxes, is that why you’re not a member of the commission?

SEN. VOINOVICH: I don’t know why I wasn’t. I don’t think that maybe the leader has as much confidence in me as he has in the other three people that he appointed.

MS. CALMES: We’ll get back to your party and its view on taxes in a second but, Mr. Cooper?

REP. COOPER: A couple of points. One is the time value of money. Every day we wait to address these problems probably costs us between $3 billion and $16 billion a day, because if you look, using real accounting at the magnitude of our overhanging, unfunded obligations and divide it by 365, it is as stunning number. So this would argue for prompt congressional action. Don’t wait for the commission.

Second, on the commission, as Sen. Moynihan said, you’re entitled to your own opinions but not to your own facts. Wouldn’t it be interesting to poll commission members and check their understanding of today’s problems? My guess is that most of them don’t have a clue. Now, maybe they are learning, but the dimensions of these problems are so great that it actually stretches the imagination.

Third, it’s essential that we get 14 votes on that commission. Regardless of how they divvy up their responsibilities or what biases they bring to the process, we must have a conclusion. And I just hope that the commission members, each one of whom is chosen as a pure representative of something – I hope that they’re able to reach a compromise and do the hard work of politics and give us a sustainable solution. In the meantime, we should not be making the problem worse.

One of the commission members came to speak to us the other day saying, a dream scenario is trying to shave a few hundred billion dollars off of this or that. Well, this week’s vote could make this problem almost twice as difficult. So there is a disconnect in all aspects of our politics today, and we’ve got to get real on this, and most people, especially folks in Washington, are not real on these issues.

MS. CALMES: Well, as essential as –

SEN. VOINOVICH: Can I make another –

MS. CALMES: Sure.

SEN. VOINOVICH: We have to do something that’s dramatic. It can’t be dribbling the ball down the court for the next two or three years, Kent. We’ve got to, you know, score some three-pointers. We’ve got to convince the rest of the world that we’re serious about this problem.

And one of the things that we’re failing to realize is that, you know, after the Second World War we owed the debt to ourselves. We bought war bonds. Today we have other people that hold our debt, and if they lose faith in the fact that we’re going to be fiscally responsible, we’re going to pay one hell of a lot of money – a lot of interest to get them to give us the money because they’re not certain about what our future is.

And that’s one of the things you’ve got to calculate is that if – right now we’re – you know, everyone has said, all of you – the last couple of years, haven’t all of you believed that our interest rates were going to start to move up? It hasn’t happened yet, and it’s because there aren’t too many other alternatives around.

But we’re into the Chinese, we’re into the Japanese, we’re into the OPEC nations, and if they decide, you know, what, we’re not going to do that because we’re a little bit worried about where you’re going, and we’re going to charge you a little bit more interest, that interest cost could skyrocket. And if that happens, then we’re going to see money sucked out of the economy that ought to be going to grow the economy, which is so darn important in terms of getting us out of the mess that we’re in today.

MS. CALMES: This will be the last from me before I turn it over to everyone else. I think everyone would agree that, you know, the problem is as great as it is at a time when the political system is as dysfunctional as any time, arguably, since the Civil War. I don’t think we’ll go that far but how – I’m going to be a little provocative here, I guess.

Everyone says we – you know, you can’t blame more one side or the other. I know firsthand just how locked in a lot of Democrats are on the entitlement programs. I would argue, though, that as a body, the Democratic Party is not as locked in as Republicans are locked in about opposing all taxes, and frankly about opposing just about anything this administration does in an election year.

So you know, you have – Sen. Conrad, you said the Chinese officials think we’re too dysfunctional to do anything. You had, you know, I think what will go down in history just about as a bellwether vote when the seven Republicans who used to co-sponsor the Conrad-Gregg provision voted against it, and you said, Sen. Voinovich, that, you know, you have the Grover Norquists of the world and The Wall Street Journal Board working against anything you try to do that’s sort of a balanced, compromised project. Now you can add to that the tea party.

I think another bellwether this year has been the defeat of Robert Bennett in Utah – I mean, that a man can be defeated on the strength of having dared to co-sponsor a bipartisan health bill with Sen. Wyden; that and a bail-out opposer – I won’t even call it a bailout anymore because banks have mostly paid back the money with interest – the financial rescue that was proposed by a Republican president.

With all that verbose lead in, tell me, all of you, how your parties can get out of denial and come together on something before there’s a real crisis that we won’t be able to afford to address like we did the last one.

Sen. Conrad, why don’t you start?

SEN. CONRAD: Well, let me say there’s plenty of denial to go around. There just is. And those who aren’t compelled to face up to these long-term trends – you know, if you’re in politics, the best place to be is for every tax cut and for every spending program. That is a real winning strategy.

The problem is we’re in a circumstance now in which you’ve got to reverse them both, and anybody that tells you it’s popular is not living in the real world. When you start making choices in politics, you’ll find out how popular it is to say, no, we cannot continue with what is planned in Social Security and Medicare and with the tax system. They all have to be reformed, and it is absolutely essential to our long-term security that we do.

So what as to be done? We have to educate people and we have to organize to convince members that this is an imperative. And, you know, we may disagree about the timing of when you pivot – and we do disagree. It’s very clear at this table we disagree. I strongly disagree with the notion that you start austerity measures when you are still in a very – the worst downturn since the Great Depression.

This is not the time to impose austerity, in my judgment. But it must be imposed and it must be imposed in a way that is convincing, not only to our creditors but to the American people. And that means whatever the commission does has to actually become law. These are changes in policy that are going to have to become law.

MS. CALMES: Would your party support a package that reins in future Social Security retirees’ benefits or increases future tax revenues?

SEN. CONRAD: You know, some of my party will not. I mean, I’ve already had –

MS. CALMES: Would enough –

SEN. CONRAD: – members of my party tell me they don’t believe – I have had leaders of my party tell me they do not believe we need to touch Social Security or Medicare. Well, you know, that’s just not real. That is just not reality. If we really care about the people who receive Social Security and Medicare, then we’ve got an obligation to fix it.

Look, the trustees have told us that Medicare is going to go insolvent in eight years. We’re not talking about the sweet by and by here. We’re talking about it going insolvent in eight years. Social Security is on a track being – it’s cash-negative today; it’s going to be permanently cash-negative in six years.

So those who say we don’t have to do anything, they aren’t being square with people and that includes people of my own party. On the other party, to say, people, you don’t have to do anything about the revenue system, hey, the revenue system today, the revenue of the United States, is the lowest it has been as share of a GDP in 60 years. The revenue is the lowest it has been as a share of GDP in 60 years. The spending as a share of GDP is the highest it has been in 60 years.

So if somebody is going to be square with people – Republican, Democrat, independent, tea party, whatever, you’ve got to take on both sides of this equation.

MS. CALMES: Sen. Cooper? Sen. Cooper. (Laughter.) All right, I’ve promoted you. Rep. Cooper.

REP. COOPER: The most important point is that we have to be able to do whatever it takes to save the country. You’ve got to put the country first, and too many people are in denial. They’re not acknowledging the real numbers, and that’s why I said we need to poll commission members right now to find out if they have a clue.

MS. CALMES: What about your party, though?

REP. COOPER: I think, once informed, the party will do the right thing, but right now too many people – the answer I usually get when I go to folks privately on the floor is, well, we’ve always found a way to pay for these wars. Well, that used to be true. The two current wars we haven’t found a way to pay for. There’s a wonderful book on this, “The Price of Liberty,” Roger (sic) Hormats, that points out our history of funding America’s wars.

What I try to do is – all politics is local. It all starts at home. Every visitor to my office, I ask them two things: All right, how much money do you want? Put a price tag on it. And then, where are we going to get it? And it’s amazing the chilling effect that that has on people who come in all hot and bothered – you know, Tess (ph) has seen it – you know, wanting billions, sometimes trillions from the government, and their own trade association has never told them the truth about what they’re asking for, much less where on earth we’re going to get it.

But even in touchy areas like Medicare, where many members are saying, oh, we did that in health-care reform, there is plenty of unexamined space there. The trade association AHIP, for health insurers, commissioned a white paper that points out that in Medigap insurance there is still tens of billions of dollars of savings that are low-hanging fruit, and we don’t have committees in Congress that even have hearings on this topic, even though the trade association is saying, hey, you caught us red-handed. This is amazing. Nothing should be off the table.

MS. CALMES: So the fiscal is doomed?

REP. COOPER: We just need to pressure them in a positive way to, first, learn about the issues they’re tackling, and then achieve a consensus – spend weeks, be locked in a room, whatever it takes, to reach a 14-vote consensus.

MS. CALMES: Sen. Voinovich, I guess I set you up to please sort of talk about – your own party is a lot different party from when you first started running for office in Ohio, and one would argue you’re being left behind in more ways than one, but are Republicans more culpable now or less fiscally conservative than even Democrats are?

SEN. VOINOVICH: I think that a lot of my colleagues have taken the pledge, and what they have to understand is that that pledge is inconsistent with the oath of office that they took when they became members of the United States Senate.

I think there’s a possibility that, as time moves along here, that the American people are going to demand that we act responsibly. When I got started with this business, the issue of debt was way down on the list. Today I think it’s either – it’s for sure two and it’s maybe moving into one. That’s one of the reasons why the president’s numbers are so bad today.

And I think that many people, in their own families, have realized that they’ve been on a binge, spending too much. They’re cutting back. They’re starting to save money. And they’re asking the question, what’s our government doing? Even if you look at Europe and see what they’re doing – you know, the Europeans are cutting back on – I have to tell you something. If we couldn’t cut employment in the federal government by 10 percent, we ought to give up.

I mean, I went through this when I was governor; I went through it when I was mayor. There’s economies that could be made but the American people don’t see us – the oversight, for example. This gets in a big – we don’t have enough time for oversight. We don’t. I mean, that’s the system. We have the one-year budget and we’re spending our time on budgets, we’re spending our time on appropriations. How much real oversight is being done of Congress?

Most senators every day could be in three places at the same time and have to justify, have to do it every day. Which one are you going to go to? And unless someone decides that they’re going to really spend their time on one area and make a difference in that area, there really isn’t the kind of oversight that’s needed.

So the big picture is, in terms of the debt commission, I’m hopeful that as time goes on and the public starts to – you know, some of my Republican friends are saying, oh, boy, you know, look at the president’s numbers and so forth, but they fail to realize, what are your numbers? What are your numbers?

People aren’t turning to the Republican Party; they’re becoming independent. They’re looking for responsible leadership, and maybe responsible leadership may become something that’s popular here in the next six months or so and we might get something out of this commission. But I have to tell you something: If we don’t get something out of that commission, we are over the cliff.

MS. CALMES: Do you think it’s doomed – the commission, the fiscal commission?

SEN. VOINOVICH: Do I what?

MS. CALMES: Do you think it’s doomed this year?

SEN. VOINOVICH: No, I do not. No, I do not. When Mitch McConnell comes to me and said, you know what, George, maybe we can get something done, I think that’s very positive.

MS. CALMES: He said that about the commission?

SEN. VOINOVICH: Yeah, he did. I mean, the truth of the matter is he pulled the rug from under me in the Senate and we had the president’s executive commission. And I have to give the president credit because, as you know, Kent, he was not supportive of that, while you were setting up the executive commission, and I had an opportunity to spend time with him and convinced him that he ought to give us a chance, and he took the hold off and you guys voted, you know, you consciences and Democrats delivered and the Republicans didn’t, so then he had to go forward with it.

But maybe there’s some good that blows in an ill wind, and that is that the president has told me that he has a commitment from – and maybe you’ve heard this – from Pelosi that if the commission comes out with 14 out of 18 votes, she will take it to the floor of the House of Representatives, and Harry has said the same thing, that he’ll bring it to the floor –

MS. CALMES: If the Senate votes first for it.

SEN. VOINOVICH: Well, fine. You know, somebody has got to step forward, and maybe it will be easier in the Senate because there’s less people coming back. (Laughter.)

MS. CALMES: Somewhere out there there’s a mike, and so –

SEN. CONRAD: Can I just say on this point, Jackie, just before –

MS. CALMES: Sure.

SEN. CONRAD: – that Joe Biden deserves a lot of credit for getting this commission in place because he’s the person that we negotiated with. And when we saw that we were not going to get the votes for a statutory commission, then this became the next-best option.

And I agree entirely with George and Jim. I’m actually optimistic in the sense that I think what’s happened in Greece, Portugal, Spain, Ireland has really brought to people’s attention what the consequences – long-term consequences are of a failure to act. And this is our chance. It’s right now. It’s right here. It is absolutely critical that we succeed.

MS. CALMES: Questions? The man in the white shirt back there behind you – behind the flowers.

Q: Good morning. The commission is nothing if not creatures of the status quo, and the status quo over the last 40 years has really destroyed the middle class. We’ve got increasing numbers of poor and increasing numbers of ultra-rich. The status quo has worked out very well for these commission members. That’s how they’ve gotten to be on the commission.

So I’m wondering if it’s even in their ambit to consider truly radical ideas like a new energy economy, like if we’re going to be the world’s policeman, asking the rest of the world to help us out with the cost of being the world’s policeman.

And one specific question I had about Social Security is the refrain last decade was all this excess revenue coming into the government is the people’s money, so we have to give it back, but we all know largely that went to tax cuts for the ultra-wealthy, but it came from working Americans’ Social Security contributions.

So I’m wondering if we can keep Social Security, not even touch it, and just claw back some of those tax benefits that we gave to the ultra-wealthy a while ago.

SEN. CONRAD: Well, I would just say to you that this problem is so big that the notion that it’s just going to be financed by the ultra-wealthy, the numbers don’t work. That’s the hard reality of what we confront now. And you can’t just leave Social Security alone.

You know, I don’t know if we want to take the time of this group to go through how Social Security works, but the bonds are a draw on the United States Treasury. Those bonds that represent the borrowing that has been done by the Gen. Fund of the United States from the Social Security Trust Fund. They have been paid back with bonds that are backed by the full faith and credit of the United States. But the only way those bonds can be redeemed is out of current income. That is the hard reality that we now confront.

I agree with part of your assessment of how we got into this situation, because there was a transfer here going on from middle-class people and lower-middle-class people to the wealthiest among us. But, unfortunately, that has consequences that we now have to deal with going forward.

MS. CALMES: Well, the man talked about clawing back the big tax cuts for the wealthy, which is on schedule to be done, for the most part, as of the end of this year. A quick question: There is some talk that there’s pressure on Democrats, and certainly Republicans would support it, to extend those tax cuts for even a year on the argument that the economy, you don’t want to raise taxes when we’re not on a full recovery.

Might that be done, or can you dispel that notion? But if you can’t dispel the notion, how do you offset the cost of that? Sen. Voinovich?

SEN. VOINOVICH: I’m not suggesting it.

MS. CALMES: Sen. Conrad –

SEN. VOINOVICH: I think that we ought to – you know, here we go again with, you know, the class warfare.

MS. CALMES: Do you hear much talk of that, though, of extending –

SEN. VOINOVICH: Well, I think it’s going to happen.

MS. CALMES: Do you think we’re going to –

SEN. VOINOVICH: I’ll tell you, I told Bush five years ago; I said it’s going to happen automatically and you’re not going to get anything for it, so what you ought to do is have a tax reform and look at the code to see what ought to be done.

MS. CALMES: But you think –

SEN. VOINOVICH: But I think it’s done. It’s over with. So we get nothing in return for it.

You know, capital gains is going up. The marginal rates don’t bother me as much, but tax on dividends – and some of these things are good for the economy. You’ve got to look at – so what I’m saying is that we need more money but we also ought to calculate what portions of our tax code are going to be – as I mentioned before, encourage people to save and have the economy grow.

And so we lost that, but if you’re saying that you’re going to eliminate it for these other people, then why don’t you just take it back to what it was before maybe, and then maybe – the marriage penalty, we got rid of that. There were a couple of other things that were involved.

MS. CALMES: But you think that Congress is going to vote to extend the Bush tax cuts for the wealthy?

SEN. VOINOVICH: No, I do not.

MS. CALMES: Oh, okay. I misheard you then.

SEN. VOINOVICH: No, Congress – that’s done. It’s going to happen.

MS. CALMES: Okay.

SEN. VOINOVICH: But the president now says that, you know, one of the things that aren’t paygo – we’re going to ignore paygo because we’re going to continue the, quote, “middle-class tax reductions,” and that that ought to be all looked at, okay? We need the revenue. And why – you know, I probably would vote against that.

In other words, if you’re going to get rid of them, get rid of them all maybe but for marriage penalty and look at a couple of other things there.

MS. CALMES: Right.

SEN. VOINOVICH: And that’s a way that maybe we would get some more revenue and more people in this country would participate in the tax system and be less likely to be demanding more and more from government. But if I don’t pay any taxes, why not ask for everything? What the heck?

MS. CALMES: Sen. Conrad and Mr. Cooper, yes or no? Do you agree that tax cuts for the wealthy will expire as scheduled?

REP. COOPER: Yes.

SEN. CONRAD: Yeah, I do but, you know, that doesn’t come close to solving the problem. You know, let me just say this: On the left there is this idea that all we have to do is reverse tax cuts for the wealthy and that’s going to take care of the problem. I wish that were true but it is not true.

If you look at our long-term circumstance here, reversing the tax cuts for the wealthy, which will be done, is not sufficient to deal with this problem. It isn’t close. Part of the reason is we have a tax system now that is very inefficient. It is only collecting about 80 percent of what’s actually owed. And the big hemorrhage that’s going on is offshore tax havens.

We’re losing at least a $100 billion a year to offshore tax havens. We’re losing at least 50 billion a year to abusive tax shelters. If any of you doubt these things, just go on the Internet. Put in “offshore tax havens.” See what you get. Offshore tax havens – Google it. See what you get.

Abusive tax shelters. We have a circumstance today where American companies are buying European sewer systems and depreciating it on their books for U.S. tax purposes and then leasing them back to the European cities that built them in the first place. And they’re buying those sewer systems not because they’re in the sewer business but because they want to reduce their U.S. tax liability.

And they’re not doing it just with European sewer systems. They’re doing it with European city halls; they’re doing it with European transit systems. You know, this kind of thing has to stop. It has to stop.

MS. CALMES: Another question? Up here? Wait. The mike will come up. You’re used to that.

Q: Walter Mondale, Ross Perot, Paul Tsongas, George H.W. Bush, Warren Rudman, Phil Graham, Fritz Hollings, Marjorie Margolies-Mezvinsky – it didn’t work for any of them. What’s different now?

SEN. CONRAD: (Chuckles.) Well, Bill, I think what you’re saying is the politics didn’t work for them. I’m not sure it’s going to work for those of us who believe something has got to be done here. And that’s the great test. I’m not certain that the American people fully appreciate how serious the circumstance is that we confront and what the long-term implications are for our country of a failure to act.

But it is as clear as anything could be that a failure to take on this debt means a lower standard of living for the American people in the future, lower rates of economic growth, lower economic opportunity for all of our people – for all of our people. We are in this boat together, and it is imperative that we find a way to reach a result.

Now, some of us may pay with our political lives. Well, that’s, frankly – that’s the way it is. It has to be done. And if that means some of us lose elections, it has to be done.

SEN. VOINOVICH: Well, I go back to the experience I’ve had in asking the questions about, is your standard of living better than your parents’, and they answer, yeah. And do you think that your kids’ standard of living is going to be better than yours, and the answer – I mean, really, there’s a feeling in this country today of the fact that we are in deep, deep trouble and people are really worried.

I mean, I’ve got – you know, I’ve got three kids and I’ve got seven grandchildren, and I could cry right now about how concerned I am about their future. And I think that that’s something that people feel very, very uneasy about and they want something done about it, and they know that what we’re doing isn’t getting the job done. And I’m hoping that that feeling among the American people will be reflected in the attitude of the people that are still here and people that are elected this coming November.

REP. COOPER: Let’s take the flip side of Bill’s examples. Jack Kemp hated “root canal economics.” David Stockman gave us a “Trojan horse” budget. Vice President Dick Cheney said deficits don’t matter. Did it work for them? Maybe temporarily. Is that the side of history you want to be on?

One of our primary problems is in the media age we’re getting sound bites and not information. The amount of economic literacy in this country sometimes approaches zero, even when it comes to people’s own credit cards.

So the great event of the ’60s that hurt the country could have well have been the invention of the credit card, not anything else that happened, because for too many people that’s a mortal temptation that they cannot deal with.

The national credit card is simply not being accounted for, and when we imposed real numbers on the states, the legislatures of Connecticut and Texas went ballistic. They tried to repeal accounting within their borders. That’s like trying to repeal the laws of gravity. But here in D.C. we’ve succeeded in doing it, temporarily, but one day the bills will come due, and hopefully our media friends will help inform the public about the real world.

MS. CALMES: Well, good luck with that. (Laughter.) And that will have to be the last word. Thank you all for coming out today, and a pleasure to have you – pleasure to be here. (Applause.)

(END)