    [Senate Hearing 110-221]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 110-221

    S. 2063, THE BIPARTISAN TASK FORCE FOR RESPONSIBLE FISCAL ACTION ACT OF
                                      2007

    =======================================================================

                                    HEARING

                                   before the

                            COMMITTEE ON THE BUDGET
                              UNITED STATES SENATE

                           ONE HUNDRED TENTH CONGRESS

                                 FIRST SESSION

                                   ----------

     October 31, 2007--S. 2063, THE BIPARTISAN TASK FORCE FOR RESPONSIBLE
                           FISCAL ACTION ACT OF 2007

                  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

               Printed for the use of the Committee on the Budget

                                     ______

                         U.S. GOVERNMENT PRINTING OFFICE

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                            COMMITTEE ON THE BUDGET

                      KENT CONRAD, NORTH DAKOTA, CHAIRMAN

    PATTY MURRAY, WASHINGTON             JUDD GREGG, NEW HAMPSHIRE
    RON WYDEN, OREGON                    PETE V. DOMENICI, NEW MEXICO
    RUSSELL D. FEINGOLD, WISCONSIN       CHARLES E. GRASSLEY, IOWA
    ROBERT C. BYRD, WEST VIRGINIA        WAYNE ALLARD, COLORADO
    BILL NELSON, FLORIDA                 MICHAEL ENZI, WYOMING
    DEBBIE STABENOW, MICHIGAN            JEFF SESSIONS, ALABAMA
    ROBERT MENENDEZ, NEW JERSEY          JIM BUNNING, KENTUCKY
    FRANK R. LAUTENBERG, NEW JERSEY      MIKE CRAPO, IDAHO
    BENJAMIN L. CARDIN, MARYLAND         JOHN ENSIGN, NEVEDA
    BERNARD SANDERS, VERMONT             JOHN CORNYN, TEXAS
    SHELDON WHITEHOUSE, RHODE ISLAND     LINDSEY O. GRAHAM, SOUTH CAROLINA

                    Mary Ann Naylor, Majority Staff Director

                         Scott B. Gudes, Staff Director

                                      (ii)

                                C O N T E N T S

                                   __________

                                    HEARINGS

                                                                       Page
    October 31, 2007--S. 2063, The Bipartisan Task Force for
      Responsible Fiscal Action Act of 2007..........................     1

                        STATEMENTS BY COMMITTEE MEMBERS

    Chairman Conrad..................................................     1
    Ranking Member Gregg.............................................     9
    Senator Byrd.....................................................   106

                                   WITNESSES

    Robert L. Bixby, Executive Director, The Concord Coalition.......80, 83
    Hon. Steny H. Hoyer, Majority Leader, United States House of
      Representatives................................................13, 17
    William D. Novelli, Chief Executive Officer, American Association
      of Retired Persons (AARP)......................................54, 57
    Hon. Leon E. Panetta, Co-Chair, Committee for a Responsible
      Federal Budget, and Director, Panetta Institute for Public
      Policy.........................................................23, 27
    Hon. David M. Walker, Comptroller General of the United States,
      U.S. Government Accountability Office..........................34, 37

    S. 2063, THE BIPARTISAN TASK FORCE FOR RESPONSIBLE FISCAL ACTION ACT OF
                                      2007

                                  ----------

                          WEDNESDAY, OCTOBER 31, 2007

                                           U.S. Senate,
                                       Committee on the Budget,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 9:03 a.m., in
    room SD-608, Dirksen Senate Office Building, Hon. Kent Conrad,
    Chairman of the Committee, presiding.
        Present: Senators Conrad, Nelson, Stabenow, Cardin,
    Whitehouse, Gregg, Domenici, and Graham.
        Also present: Senator Voinovich.
        Staff present: Mary Ann Naylor, Majority Staff Director;
    and Denzel McGuire, Minority Staff Director.

                  OPENING STATEMENT OF CHAIRMAN CONRAD

        Chairman Conrad. The hearing will come to order. I want to
    welcome everyone to today's Budget Committee hearing on the
    Bipartisan Task Force for Responsible Fiscal Action Act, which
    Senator Gregg and I have introduced just last month. This
    hearing is designed to give the Budget Committee feedback on
    the proposal from key leaders and policy experts. I would like
    to welcome especially the distinguished witnesses we have here
    today.
        House Majority Leader Steny Hoyer has done an outstanding
    job in his leadership role in the House, has been a strong
    advocate for PAYGO fiscal discipline and addressing our long-
    term fiscal challenges. We are honored to have him with us
    today.
        In addition, we have former House Budget Committee
    Chairman, OMB Director, and White House Chief of Staff, Leon
    Panetta, who brings an unparalleled level of Government
    experience and knowledge to the table. In his role as Co-
    Chairman of the Committee for a Responsible Federal Budget,
    Leon Panetta continues his commitment to a sound fiscal future
    for the country.
        We also have with us today the Government Accountability
    Office Comptroller General David Walker, who has truly driven
    the national agenda on this issue, and we are indebted to him
    for his leadership. His convening of the Fiscal Wake-Up Tour is
    providing a tremendous public service and is getting a very
    strong response from around the country. We cannot thank him
    enough for his efforts and for being here today.
        The AARP CEO Bill Novelli brings another important voice to
    the table. As the leader of AARP, Bill Novelli represents the
    38 million members of his organization age 50 and older. We
    very much appreciate Bill Novelli and the vision and the
    leadership that he has brought to these issues.
        And we also have with us the Concord Coalition Executive
    Director Bob Bixby. Bob has joined Comptroller General Walker
    and Leon Panetta on the Fiscal Wake-Up Tour and has been
    another leading voice in the fight for fiscal responsibility.
    And I thank all of these witnesses.
        Let me begin by just briefly outlining the problem as we
    see it and the key elements of the legislation Senator Gregg
    and I are proposing. Put up the first slide, if we could.
        We are facing a demographic tidal wave. The number of
    retirees is projected to climb to roughly 80 million people by
    2050.

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        Let's go to the next slide, if we could.
        Rising health care costs are compounding the problem by
    exploding the cost of Federal health programs. By 2050, if
    nothing changes, more than 20 percent of our gross domestic
    product will be spent on Medicare and Medicaid alone. That is
    more than we now spend on the entire Federal Government.

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        Let's go to the next one.
        We do not just have an entitlement spending problem. A lot
    of the emphasis on this hearing today, I have noticed, is about
    entitlements, and clearly, they are at the center of what needs
    to be done. But we also have a larger imbalance between
    revenues and expenditures. If all of the 2001 and 2003 tax cuts
    are made permanent without offset, the costs will explode at
    the same time that the cash surpluses in Social Security and
    Medicare become deficits. In other words, the tax cuts will
    dramatically worsen an already deteriorating, long-term budget
    picture--that is, if they are un-offset either by spending
    reductions or by other revenue.

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        Clearly, we have to act, and we have to act sooner rather
    than later. Here is a quote from the Federal Reserve Chairman
    Mr. Bernanke making exactly this point. He said, ``One might
    look at these projections and say, well, they are about 2030 or
    2040, so we really do not have to start worrying about that
    yet. But, in fact, the longer we wait, the more severe, the
    more draconian, the more difficult the adjustments are going to
    be. I think the right time to start is about 10 years ago. And
    the reality we confront is that whatever option is chosen, we
    must have bipartisan support. These problems are simply too big
    to be tackled by one party alone.''

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        The former Treasury Secretary John Snow made this point
    earlier this year. He was quoted in the Wall Street Journal as
    saying, ``You cannot do health care reform or Social Security
    reform without a bipartisan consensus. If we have made a
    mistake, it was not approaching it in a more bipartisan way.''

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        Now, clearly, we must do this on a bipartisan basis. That
    is why Senator Gregg and I believe our legislation is an
    approach that could work. Here is a summary of how it works.

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        It creates a bipartisan task force designed to address the
    unsustainable long-term imbalance between spending and revenues
    with a special focus on the long-term entitlements. Everything
    will be on the table.
        It will be made up of 16 members--8 Democrats and 8
    Republicans. The Senate Majority Leader and the Speaker of the
    House will select the eight Democratic members; the Senate and
    House Minority Leaders will choose six Republican members. The
    two additional Republicans will include the Secretary of the
    Treasury Henry Paulson, who would chair the group, and another
    administration representative selected by the President.
        All task force members must be currently serving in
    Congress or the administration. The task force would submit its
    report by December 9th of 2008 to be acted upon by the incoming
    111th Congress. This will come after the November election, so
    Presidential politics should not play a part in the outcome.
        To ensure a bipartisan result, three-quarters of the task
    force--12 of the 16--must agree to the report. Each side will
    have to move off their hardened positions to reach an
    agreement. To ensure timely action, the legislative
    recommendations will be given fast-track consideration in the
    Senate and the House. And to again reinforce the bipartisan
    nature of the legislation, final passage will require a
    supermajority--three-fifths of both the House and the Senate. A
    strong bipartisan vote for legislation will help ensure it
    receives wide support from the public and is not overturned by
    a future Congress and administration.
        I believe the stakes are enormously high for this country.
    I believe our Nation's fiscal future is on the line. We simply
    cannot ignore the coming crisis and hope the future will
    somehow solve these problems unaided by congressional and
    administrative action. The longer we wait, the harder the
    choices will become. The time for action is now.
        I know these are difficult subjects. I have had colleagues
    come to me over the last several days and express concern about
    the direction we are taking, concern about what Committee of
    jurisdiction would be affected, concern about one aspect of
    this, the timing of it, the make-up of the group. All of those
    are legitimate concerns, and that is why we are having this
    hearing, to try to get on the table what are serious concerns
    that could be addressed constructively.
        With that, I want to turn to my colleague Senator Gregg,
    who has been such an able partner in this effort. While Senator
    Gregg and I sometimes disagree on matters before this
    Committee, on this we are absolutely joined at the hip. We
    believe strongly that this is an opportunity to address these
    long-term fiscal concerns.
        I also want to welcome our colleague Senator Voinovich, who
    is not a member of the Committee but who has asked to sit in
    today, and we certainly welcome him. He has been a leader on
    these issues in the U.S. Senate, somebody that recognizes the
    long-term dangers of inaction, and we certainly welcome Senator
    Voinovich to be with us today.
        Senator Gregg?

                   OPENING STATEMENT OF SENATOR GREGG

        Senator Gregg. Thank you, Mr. Chairman. Let me once again
    congratulate you for not only putting your toe in this water,
    but jumping in completely on the issue of how we address what I
    consider to be and what you obviously consider to be the single
    biggest domestic issue which we face as a Nation as we move
    into the next 10 to 20 years, and that is, how we deal with the
    retirement of the baby-boom generation, how we continue to
    deliver quality services to that generation as it retires
    without overwhelming the ability of our children and our
    children's children to have a quality of life too.
        I think you framed the question well. In your first chart,
    it was pointed out that we double the retirement age. Let me
    just put up another chart, however, which, of course, we have
    seen before, which reflects the fact that the issue really
    comes down to three basic programs, which are the major
    entitlement programs--Medicare, Social Security, and Medicaid--
    and the fact that those three programs under their present rate
    of growth projections--which are not going to change, by the
    way, because the people who are going to create this issue are
    alive and they are going to retire, and they are my generation
    and your generation. And as a result, the cost of supplying the
    benefits which have been promised to those individuals will
    exceed the amount that is presently spent by the Federal budget
    as a percentage of gross national product by the year 2025 and
    will continue to climb, so that we will end up in the high-20-
    percent range, probably up around 27 or 28 percent of gross
    national product, being required to support those three
    programs alone by the mid-2030 period. And that is simply not
    sustainable.

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        To put it in another context, the median income of the
    American household today is about $56,000. The median home
    price of the American family or the value of their home is
    about $200,000. The unfunded liability--and this is just Social
    Security and Medicare--for every American family today is
    $440,000. That means we have on the books an unfunded liability
    that exceeds by a factor of 2 the value of their home or their
    assets, and obviously by a significant factor the income of the
    American people.

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        Now, you cannot tax your way out of this problem, if we did
    the tax rates would essentially be out of control on the
    American people if you simply tried to address this issue on
    the tax side of the ledger. That does not mean taxes should not
    be on the table. They should be on the table, and this proposal
    puts them on the table.

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        But the problem--go back to the first chart.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The problem is undeniable and it must be addressed, and
    that is why I congratulate the Chairman for holding these
    hearings, but more importantly, I appreciate the Chairman being
    willing to work in a bipartisan way to try to resolve the
    issue.
        And why have we chosen this process? Because we believe
    that when you put policy on the table, it is good, it gets
    debated, but it does not go anywhere because the way this
    system works around here is that, once you put an idea on the
    table, it immediately is confronted with the naysayers, and the
    well gets poisoned before the idea can move down the road. So
    instead of putting the policy on the table first, we have
    concluded that what we need to put in place a procedure which
    will drive policy, good policy, and result in action. And,
    thus, that is why this commission is structured the way it is.
        Second, we believe that any resolution of this issue has to
    be absolutely bipartisan, and it has to be viewed by the
    American public as absolutely fair. These programs affect so
    many Americans that unless they perceive the solution to be
    fairly reached and in a bipartisan way, it is simply not going
    to work. That is why we especially appreciate the AARP
    participating today, because you represent, obviously, a huge
    constituency that is impacted by this.
        And, third, we think, the two of us, and those who are
    sponsoring this bill--and we obviously have people in the House
    here supporting it, and we especially appreciate the Majority
    Leader being here today. His imprimatur is absolutely critical
    to this effort. But we believe that for the procedure to work,
    you have to put in a room the players who have money in the
    game, so to say, the people who are responsible for the
    decision and who understand the policy. And that is why we have
    limited this to Members of Congress and to the executive
    branch. Everybody knows the moving parts here, especially on
    Social Security, and there is no question that you can go to
    the substance of a resolution fairly quickly if you can back
    out the politics. And so by putting the players in the room who
    understand the issue and asking them to work in a bipartisan
    and fair way to reach a conclusion, we believe we set up a
    process which will lead to the right policy. And the key to
    this whole exercise is basically to use fast track. Because we
    have had a lot of commissions, the Chairman has served on them,
    really good commissions which have put out really good ideas.
    But because there has been no action point, nothing has
    happened because the issues are so hot button and so
    radioactive.
        And so the proposal here is that whatever proposal comes
    out of this group--remember, it has to come out with 75 percent
    of the members of the commission agreeing, and then 60 percent
    of the House and the Senate agreeing--it is fast-tracked for a
    vote so the decision is made on whether or not it makes sense.
    Procedure can drive policy, in our opinion, and that is why we
    have structured it this way.
        And so, again, I congratulate the Chairman for his
    extraordinary work in this area. If we are successful, he will
    deserve the majority of the credit, and it will be a
    tremendously appropriate thing to do for the American people.
        Thank you, Mr. Chairman.
        Chairman Conrad. I very much appreciate the Ranking
    Member's kind words, but I was just wondering: In terms of this
    caricature, was this supposed to be my likeness?
        [Laughter.]
        Senator Gregg. When Edvard Munch did that, he was thinking
    of you, even though you had not been born.
        [Laughter.]
        Senator Gregg. I believe the painting was stolen. I am not
    even sure they got it back yet.
        Chairman Conrad. OK. Well----
        Senator Stabenow. Mr. Chairman, on behalf of the Committee,
    I would like to say that does not look at all like you.
        [Laughter.]
        Chairman Conrad. I thank the Senator, the gentlelady from
    Michigan.
        We now want to turn to the Majority Leader of the House of
    Representatives, the Honorable Steny Hoyer, somebody who has a
    sterling reputation on the question of fiscal responsibility.
    Welcome, Majority Leader.

       STATEMENT OF HON. STENY H. HOYER, MAJORITY LEADER, UNITED
                    STATES HOUSE OF REPRESENTATIVES

        Mr. Hoyer. Thank you very much, Mr. Chairman. I am very
    pleased to be here with you and Mr. Gregg, and I want to
    congratulate both of you for your leadership on this critically
    important issue.
        Very frankly, I thought that that picture might be
    depicting our children 25 years from now as they are aghast
    that none of us did what was necessary to do to save them from
    the crisis that will confront them if we do not act. Your
    proposal attempts to achieve that objective.
        I want to say how pleased I am to be here with a number of
    you with whom I have served, including the distinguished
    Ranking Member, Mr. Gregg, for a short period of time before he
    came to the Senate; Debbie Stabenow, my very dear and good
    friend; and, of course, probably my closest friend, one of my
    closest friends in life, and certainly in the Congress of the
    United States, he and I were elected to the General Assembly
    together in 1966----
        [Laughter.]
        Senator Cardin. Can I----
        Chairman Conrad. He now wants personal privilege.
        [Laughter.]
        Mr. Hoyer. Ben Cardin.
        Chairman Conrad. Do you want to deny that he is a friend?
        Senator Cardin. Yes, am I going to be able to correct the
    record here.
        [Laughter.]
        Chairman Conrad. Probably not.
        Mr. Hoyer. And, Senator Whitehouse, good to be here with
    you, sir.
        I am also very pleased to be here with my dear friend with
    whom I served so long in the Congress, and he was, of course, a
    leader in the Clinton administration, Leon Panetta; David
    Walker, who has been a giant in trying to call the attention of
    the American public to the crisis that confronts this; Bill
    Novelli, who, as you pointed out, Judd, represents an
    extraordinarily important constituency in participating in
    solving the problem that confronts us; and Robert Bixby,
    representing the Concord Coalition, who does such great work in
    also calling the American public's attention to this crisis.
        I want to also say that although I did not serve with him
    in the Congress of the United States, he and I have become good
    friends, and I so admire you, Senator Voinovich, for the
    courage that you have shown in speaking out on tough issues.
        Mr. Chairman and Ranking Member Gregg, thank you for
    inviting me to testify at this very important, timely hearing
    on proposals to establish a bipartisan task force to address
    our Nation's long-term challenges. Before I begin, I also want
    to thank two other witnesses here today: Comptroller General
    David Walker, whom I have already referred to; and Robert
    Bixby, the Executive Director of the Concord Coalition; as well
    as Leon and David.
        As Mr. Bixby has stated previously, the basic facts of our
    fiscal challenges are a matter of arithmetic, not ideology. Two
    factors stand out: demographics and health care costs. Analysts
    of diverse ideological perspectives and nonpartisan officials
    at the Congressional Budget Office and the Government
    Accountability Office have all warned that current fiscal
    policy, as both you, Mr. Chairman, and Mr. Gregg have pointed
    out, is unsustainable. Our long term, even under the most
    optimistic projections, is not sustainable.
        The bottom line is this: Turning a blind eye to our long-
    term challenges would not only be irresponsible, it would be
    dangerous to our Nation's continuing success. And I would say
    Mr. Gregg indicated that this was our largest domestic problem.
    In the long term, in my opinion, this will be our Nation's
    critical problem domestically and internationally because it
    will undermine our ability to fund responses in either arena.
        We must consider the consequences that our actions or our
    failure to act will have on our future and the ability of those
    who come after us to meet the challenges we face. Those of us
    who believe that the American people want their Government to
    invest in national security, health care, education,
    infrastructure, scientific research, and other priorities have
    a critical stake in addressing the budgetary pressures that
    will be created by the growth of entitlement spending. If we
    fail to act, future Congresses will find their hands tied in
    meeting new challenges and funding other priorities, and I
    believe that our Nation will be weakened as a result. Thus, we
    must act. We do not have time to waste with the first of 78
    million baby boomers preparing to retire next year.
        And there is plenty of room, of course, for debate over the
    mix of options that should be considered. Recall that in 1983,
    President Reagan and Speaker O'Neill worked together across
    party lines to protect Social Security, setting an example for
    future generations. In fact, that was not particularly
    controversial, notwithstanding the fact we took significant
    actions. It was not because the American people concluded that
    President Reagan and Speaker O'Neill both believed it was
    necessary to do, that as difficult as it might be, perhaps, in
    fact, it was necessary to do. We need to do the same thing now.
        Finding a politically viable, equitable, and financially
    sound solution to our fiscal challenges will require bipartisan
    discussions in which all options must be on the table, as both
    you and Mr. Gregg have pointed out. A solution must be
    bipartisan. Rigid ideology must give way to workable solutions,
    and reasonable sacrifice will be required. None of us, of
    course, like to discuss that.
        I would like to believe that Congress could address these
    issues through the regular legislative process. However, the
    experience of recent years suggests that this is extremely
    difficult in the current political environment, and perhaps in
    political environs in the past. Therefore, as you have and I
    have reluctantly concluded, a task force or commission may be
    the best way to bring us to the place where we can spur action
    on this issue and reach agreement on solutions.
        I agree with those who say that we should act sooner rather
    than later. I think the President is correct on this, and all
    others who make that observation, because left untended, our
    challenges only grow greater and solutions more difficult.
        Nevertheless, I have reservations about the timetable set
    forth in the Conrad-Gregg proposal, which envisions the task
    force putting forward a final plan with legislative
    recommendations in December of 2008. Under this proposal,
    legislative recommendations would be developed by a task force
    that includes members of the current administration, even
    though the recommendations would not be acted on until the new
    administration takes office. I see two problems with this idea.
        First, this administration, which has refused, in my
    opinion, to put all options on the table, would have even less
    of an incentive to make compromises in a process that would not
    culminate until they left office.
        Second, the new administration will have no stake in the
    success of a proposal that has been put together without its
    participation.
        Now, do not misunderstand this observation. These concerns
    did not require us to hold off acting in 2008. Instead, I
    believe we should move forward next year with enabling
    legislation providing for the establishment of the commission,
    as you suggest, or task force, so that work on developing
    recommendations can begin quickly after our new administration
    is sworn into office. The commission could even begin to move
    forward with the process of defining the scope of the problem
    and engaging the American public on the choices, the
    educational efforts we face, thereby building on the work begun
    by Treasury Secretary Hank Paulson.
        As many of you have, I have spent a lot of time with
    Secretary Paulson. I think he came to Washington from an
    extraordinarily lucrative endeavor to give service to his
    Nation to try to accomplish reform on entitlements. I think he
    is, like many of us, discouraged, which has led to this
    proposal.
        For example, the Securing America's Future Economy Act,
    introduced by Congressmen Cooper and Frank Wolf and Senator
    George Voinovich, sets forth a two-part process in which the
    commission spends 6 months engaging the public in a dialog and
    issues an interim report detailing the problems before
    beginning the second stage of putting forward recommendations.
    I am sure that all of you will be discussing, as we will on the
    House side, that alternative.
        However, the process of developing a plan and legislative
    recommendations, in my opinion, should not begin until we have
    a new administration inaugurated on January 20, 2009. That is
    not a criticism of the present administration. It is a
    recognition that the timeframe in which this will be solved
    will not be this administration. A new administration is able
    to provide input into the process, either through direct
    participation of the task force or through appointments to the
    task force.
        I also strongly believe, Mr. Chairman, that the process for
    considering the task force recommendations should be revised to
    allow consideration of alternatives from the administration and
    Congress or other budget-neutral amendments. Those who oppose
    the priorities and tradeoffs recommended by the commission
    should be given, I think, the opportunity to put forward
    constructive alternatives. However, I certainly agree with
    Senator Gregg's observations that we need a process that will
    require consideration. I think you are absolutely right. Having
    a report, having input, having education is a process that has
    already been done. What we need is a process to enforce some
    action.
        This approach, which is included in the SAFE Commission's
    proposal, also would increase the prospects of enacting
    legislation by making it possible to modify the task force
    proposal to deal with the elements of the recommendation that
    proved to be controversial and jeopardize enactment of the
    entire plan.
        A commission, of course, is not a silver bullet. Members of
    Congress and the administration still must be willing to make
    tough choices. However, a commission with credibility and
    bipartisan support could, and hopefully will, provide the
    leadership necessary to ensure that these issues receive the
    attention and serious consideration they deserve.
        Again, I congratulate both of you for your leadership on
    this effort and indicate to you that while I am here as an
    individual--and I do not speak for either my party or the House
    on this issue--I want to assure both of you that I look forward
    to working closely with you and with the administration,
    present and future, addressing this critical issue to our
    Nation and to our people.
        Thank you very much.
        [The prepared statement of Mr. Hoyer follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Conrad. Majority Leader Hoyer, first of all, thank
    you for the very thoughtful suggestions that you have made
    here, and it is, I think, especially helpful to the
    consideration of this proposal that we will give on this side.
    And I would just speak for me. I take very seriously
    suggestions that come from you because you have enormous
    credibility with me, and I deeply appreciate your taking the
    time to think through these issues and give us your thoughts.
        Senator Gregg, any comments?
        Senator Gregg. Well, first off, again, I want to echo what
    the Chairman says. Your credibility on this is critical to the
    process, and so the fact that you have been willing to come
    forward and be so outspoken is just, I think, extraordinarily
    positive for moving something forward.
        You have raised two fundamental issues with the proposal we
    have got, which is the timing and the amendment process, which
    are very legitimate concerns. I guess I have less issues with
    the timing. I think your arguments on timing are probably, as
    we move down the road, probably very legitimate. I do think
    there is some advantage, quite honestly, to having it in the
    divided Government. We have a divided Government now. Whether
    we will have a divided--I hope we will have one Government the
    next time around, and it will be a different Government, and I
    hope it will change the current one we have. But, in any event,
    let's assume that we do not get a divided Government the next
    time around. I think it will be more difficult for the process.
        Mr. Hoyer. I agree.
        Senator Gregg. But I think your timing issue is legitimate
    from the standpoint of that is something that should be able to
    be worked through.
        On the issue of amendment, I just want to make this case,
    which is that the whole concept here is to have the players at
    the table, have those players have to reach an agreement which
    is viewed as fair and bipartisan--that is why we have the
    supermajority. For the commission to report, it takes 75
    percent of the commission; 12 out of 16 have to agree. So
    either side can kill it if they do not like it, and as a
    practical matter, both sides have to like it before it could
    pass. And so the idea is that what they produce should be a
    package that should be able to go through the process and be
    voted up or down. And if you give another shot, bite at the
    apple, so to say, coming out of left field--or right field--you
    immediately activate the naysayers at a level that probably
    kills the whole process. You give them a vehicle to say, well,
    I would do this but I will not do that.
        And so I believe very strongly that a non-amendable vehicle
    along the lines of BRAC is the way to do it, but we can discuss
    that. But I certainly value your thoughts.
        Mr. Hoyer. Senator, if I might, I think you make a good
    argument. I think you can argue it both ways. I think in the
    final analysis, it is going to depend upon a President and a
    congressional leadership that wants to do this, whatever the
    mechanism. I mentioned O'Neill and Reagan. The crisis
    confronting them was real. They perceived it as real, and they
    responded in a bipartisan fashion, and that is why we got it
    done. I think ultimately that is the way we are going to get it
    done, hopefully.
        I want to observe to you that I am disappointed that in the
    construct that is present today, with a Republican President
    and a Democratic Congress, Speaker Pelosi--the to-be-Speaker
    Pelosi and I had lunch with President Bush 2 days after the
    election. I brought up the issue that we had an opportunity
    with a Republican President and a Democratic Congress to
    resolve, hopefully, solutions to these issues. The reason I
    think that works is because the Republican President can blame
    the Democratic Congress or the Republican Congress can blame
    the Democratic President, however you want to perceive it, for
    that which is difficult for their constituents--whether it is
    raising revenues or adjusting benefits. Such a nice word,
    ``adjusting'' benefits. But they can blame the other side for
    doing so, which is why it works. And I frankly think--and I
    think it is unfortunate for our people--we have missed an
    opportunity in this last 12 months. I think Secretary Paulson
    believes that as well, and I share his view. But I think a fact
    of life is, as your commission recognizes, that it does not
    appear that we are going to make any progress in the current
    construct.
        Senator Gregg. I agree with you, and we did miss an
    opportunity, and it was missed in January, and certainly not
    because we did not make an effort to do that. But I think it
    needs to be pointed out here that whether the next President
    understands this or not, the next President's Presidency is
    going to be defined by how they handle this problem, because
    they are going to be 8 years into the retirement of the baby-
    boom generation. The baby-boom generation starts to retire now.
    They are going to be 8 years into that retirement. The wave,
    which is a tsunami type of event, is going to be not over the
    horizon. It is going to be on the horizon, and coming at us and
    starting to break.
        So the next President has to address this issue. There is
    no choice.
        Chairman Conrad. I know, Majority Leader, you have other
    duties that call, and, again, we thank you very, very much for
    your contribution here today. It is very thoughtful as always.
    And I tell you, I think we are approaching a defining moment,
    and the fact that you are an active advocate for proceeding and
    trying on a bipartisan basis to present the country with
    alternatives, solutions, I think is especially important, and
    we thank you for it.
        Mr. Hoyer. Thank you, Mr. Chairman. Thank you.
        Chairman Conrad. The Committee will call the second panel
    led by the Honorable Leon Panetta, the Co-Chair of the
    Committee for a Responsible Federal Budget and Director of the
    Panetta Institute; the Honorable David Walker, the Comptroller
    General of the United States; Bill Novelli, the CEO of AARP;
    and Bob Bixby, the Executive Director of the Concord Coalition.
        I want to thank all the witnesses here. I especially want
    to thank them for being willing to be part of a panel. We are
    trying to accommodate time constraints of some of the witnesses
    here, but we thought this subject is so important and the
    witnesses that are here are such central voices to this debate
    that we wanted to accommodate them in every way possible.
        With that, I want to welcome Leon Panetta, a man with a
    remarkable background: Chairman of the Budget Committee in the
    House of Representatives, the head of the Office of Management
    and Budget, Chief of Staff to the President of the United
    States. I do not know of anybody that has had a broader
    experience or background in trying to actually come up with
    solutions on a bipartisan basis than Leon Panetta.
        So, Leon, our warmest welcome to you.

     STATEMENT OF HON. LEON E. PANETTA, CO-CHAIR, COMMITTEE FOR A
    RESPONSIBLE FEDERAL BUDGET, AND DIRECTOR, PANETTA INSTITUTE FOR
                             PUBLIC POLICY

        Mr. Panetta. Thank you, Mr. Chairman and Senator Gregg and
    my friends and colleagues that I have had the opportunity to
    work with in the past. I really appreciate the opportunity to
    be able to come here and testify on behalf of S. 2063, the
    effort to create a bipartisan task force or commission to try
    to deal with the fiscal problems facing this country.
        I am honored to have this opportunity and appear before you
    as Co-Chair of the Committee for a Responsible Federal Budget.
    It is a group that has been working, as many of you know, over
    25 years to try to promote the effort for fiscal
    responsibility.
        I have come before you a number of times in the past to
    fight for budget priorities and for budget discipline. And in
    the past, I must say, although there were political differences
    with regards to how we approached this issue, I always felt
    there was a fundamental commitment by both parties--by both
    parties--to try to work toward deficit reduction and a balanced
    budget.
        I think you are facing an even greater challenge at the
    present time because although there are concerns about the
    debt, the growing debt that we face, there appears to be a lack
    of will and commitment to make the tough decisions that have to
    be made if you are going to achieve deficit reduction.
        I commend you, Mr. Chairman, Senator Gregg, for the effort
    that you are putting forward here with this legislation because
    it is an effort to try to seek bipartisan cooperation and
    build, frankly, on the lessons of the past. We cannot ignore
    what we have been through in the past, and I think we ought to
    learn from those lessons. And that is what you are trying to do
    with this legislation.
        I am here to try to share with you, I think, some of the
    principles that I learned during the time that I have had the
    honor to deal with this challenge. As Chairman of the House
    Budget Committee, as you pointed out, as Director of OMB, and
    as Chief of Staff to the President, I have participated in
    almost all of the key budget summits that were held during the
    past and the negotiations that were held to try to achieve
    deficit reduction.
        We govern in our democracy either by leadership or by
    crisis. If leadership is there and willing to make the tough
    decisions, then hopefully we can avoid crisis or, in the very
    least, control crisis. But if leadership is not there, then
    ultimately crisis drives policy.
        I think we are living at a time when crisis is largely
    driving policy, whether it is the war, whether it is global
    warming, energy issues, immigration, Social Security, Medicare,
    or runaway deficits. And every one of these issues in some way
    relates to resources and our ability to have resources to
    confront those challenges.
        The failure to have adequate resources to confront each of
    these issues, I think, in large measure guarantees that
    probably for the first time in our history, our children are
    going to have a lower standard of living, because we are
    basically burdening them not only with a huge debt, but we are
    going to fail to invest in their future because we will not
    have the resources to do that. We cannot invest in their future
    by borrowing from their future, and that is essentially what we
    are doing now.
        It is clearly a moral imperative to confront this issue. I
    think it is a fiscal and economic imperative. And I happen to
    believe that, more importantly, this is an issue of national
    security because I do not think we can confront any of the
    major crises that face this country without first confronting
    the challenge of the budget, establishing fiscal discipline,
    and providing the resources necessary to deal with all of those
    crises that we face in the 21st century.
        This failure of leadership combined with exploding
    entitlement programs, as pointed out, changing demographics,
    the rapid growth of health care costs, the slowing of the labor
    force, and growing interest costs places us on an unsustainable
    path to fiscal chaos. What is even more discouraging is that it
    seems to ignore every lesson we should have learned from the
    past.
        Every President, going back to Washington, had to confront
    the challenge of dealing with deficits and dealing with debt,
    and they made it a moral obligation to confront those deficits,
    whether it was Washington, whether it was Lincoln, whether it
    was Franklin Roosevelt, whether it was George H. W. Bush,
    whether it was Ronald Reagan, or whether it was Bill Clinton.
    Every one of them made a moral commitment that you have to
    confront Budget issues and that deficits are not going to solve
    themselves. For many reasons, the Budget Act that we operate
    under basically recognizes the obligation to be fiscally
    responsible. That is why the Budget Act was passed, to create
    that discipline.
        In the 1980's and 1990's, the prospect was that we were
    going to face record deficits going from $250 billion to $500
    billion to $600 billion. I think there was one projection that
    had us at $600 billion going into the 21st century. We faced
    exactly the same gridlock between Republicans and Democrats at
    that time. Republicans did not want to raise taxes, cut
    defense; Democrats did not want to cut domestic spending or
    deal with entitlements. And so there was gridlock.
        With the failure of leadership to confront that challenge,
    what happened was that crisis then became the engine that
    forced change. On the one hand, there was manmade crisis,
    because what we developed with Gramm-Rudman basically cut
    everything across the board, and as a result, Congress did not
    want to face the issue of a drastic cut across the board. That
    was one crisis. But there was also a crisis that took place in
    the markets with the stock market crash in 1987. And there was
    real concern that the markets would continue to weaken if we
    did not exercise fiscal discipline at that time.
        To the credit of President Reagan, he convened the first
    budget summit that was made up of the leadership of both the
    House and the Senate, along with representatives from the
    administration, and we developed at that time a bipartisan
    deficit reduction plan that was put in place. The first summit
    by a President. It was followed, as you all know, in 1990, by a
    second summit that was convened by President Bush. That, too,
    included administration and congressional leaders. We met at
    Andrews Air Force Base for almost 2-1/2 months. We then brought
    the negotiations to the Capitol, and what we developed in the
    end was a deficit reduction package of close to $500 billion
    that included landmark budget enforcement tools that I can tell
    you, as Chairman of the House Budget Committee, were very
    effective tools I had to try to ensure that we stuck to that
    agreement.
        Three years later, President Clinton built on the success
    of those efforts. When I was OMB Director, we put together the
    economic plan, and in many ways that economic plan reflected a
    lot of the same principles included in the 1990 budget
    agreement. We achieved a deficit reduction package of close to
    $500 billion that was evenly divided between spending
    restraints and revenues. While it was not bipartisan,
    ultimately I think those principles were embraced by a
    bipartisan agreement with the Balanced Budget Agreement in
    1997, which was bipartisan, and which basically endorsed a lot
    of what was contained in the economic plan. All of that
    ultimately produced a balanced budget and a surplus that was
    approaching $5.7 trillion.
        As a participant in all of those efforts, the key
    principles are these, and many of them are included in your
    legislation:
        No. 1, it has to be bipartisan. It has to include Congress
    and the executive branch and the President. The key leaders of
    both parties need to be there. The President's key economic
    team needs to be there. It is important that the committees of
    jurisdiction be represented. You need Finance, you need Ways
    and Means, you need Budget, you need Appropriations. Those are
    the key committees that should be at the table in terms of
    negotiating.
        No agreement that provides for serious deficit reduction
    can, frankly, be enforced without the support of those key
    committees and without the support of both Republicans and
    Democrats.
        As pointed out, each party basically provides cover to the
    other party on some of the tough decisions that have to be
    made. That is the only way you can deal with all of the issues
    that face us.
        That takes me to the second point: Everything has to be on
    the table. Everything has to be on the table. If you make
    exceptions, if you try to exclude certain areas from being
    considered, then you are dooming the process from the
    beginning. You have got to put everything on the table. That is
    not to say everything ought to be considered in terms of a
    final package, but everything has to be on the table. You have
    got to work your way through all of the issues.
        Third, nothing is agreed to--this is what I call the Tom
    Foley principle, because he always used to say this at the
    beginning of the summit. Nothing is agreed to until everything
    is agreed to. It allows you the opportunity to consider every
    option, every possibility, but you do not have to necessarily
    include it until you have seen all of these pieces and finally
    put together a negotiated package.
        Fourthly, there has to be enforcement. You cannot have an
    agreement if it cannot be enforced. That means that in the
    final set of policy recommendations you ought to include
    important budget enforcement tools. They have to be there.
    Spending caps and PAYGO have to be considered, as well as an
    expedited process. I think you do need an expedited process.
        I am a little concerned, frankly, about the supermajority
    requirement because if you are going to put together an
    effective deficit reduction package, this is tough. You are
    talking about some very tough choices that have to be there.
    And even with the support of the President, even with the
    support of the leadership, you are going to have a lot of
    members who are going to be very hesitant to support this kind
    of package. So take a look at that. I think it is sufficient to
    have a majority, frankly. On the House side, I think the rules
    will allow for not only an expedited process but for passage.
    On the Senate side, I think if you operate under budget and
    reconciliation rules, frankly you can avoid any barriers to
    trying to get the issue to the floor. I just think you ought to
    think about that, because if you go through a task force, you
    go through a commission, you need to get that passed.
        No press. This thing has to take place in a confidential
    setting. You have got to have an honest exchange. If you are
    going to restore trust, which is the biggest problem you have
    got right now, the only way you are going to do it is if
    everybody can talk with each other honestly, without having it
    play out in public.
        And, last, if you do deficit reduction, I think you ought
    to target it over 5 years. Obviously, entitlement reforms and
    changes will produce savings beyond that, but I think in a 5-
    year timetable, you at least have a realistic target area where
    you can basically try to achieve the goals established in an
    agreement. That is generally what we did in the past, and I
    would recommend it to you as an approach in the future.
        S. 2063 is very important in the sense that it provides the
    same kind of framework for the principles that I just talked
    about, and that is the only way you get this job done.
        I want to compliment you for working to put this together.
    Politically, all of us would like this to pass soon, but I
    think we all understand the politics that you are dealing with
    right now. At the very least, it ought to be the framework that
    a new President and new Congress put in place. And let me tell
    you, if a new President is going to deal with it, it has to be
    done in the first year. You cannot wait. It has to happen
    immediately, and it has to be the first challenge that
    President is willing to take on. Otherwise, it becomes very
    difficult to put it together. So I urge both of you to take
    this kind of proposal to the candidates that are out there and
    hopefully get their support for it.
        We know that a new President and Congress are going to
    confront an unprecedented set of crises at a time of political
    divisiveness and at a time of tremendous distrust. The greatest
    challenge facing our new political leaders will be to establish
    a healing process in which parties can work together and try to
    re-establish a degree of trust. It has to begin with the budget
    because that relates to every other crisis that is going to
    confront the new President.
        As I said, we govern by leadership or crisis. We have
    crisis. It is time for leadership.
        [The prepared statement of Mr. Panetta follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Conrad. Thank you, Leon. A very powerful
    statement. I hope people are listening. I really do. I hope
    colleagues are listening, because the crisis is here. It is a
    slow-moving crisis, so we are not feeling the pain yet. But it
    is coming. And we can choose to kick this can down the road or
    face up to it, and more than anything, I hope we face up to
    this because we can avoid so much pain for this country and so
    strengthen our economic future if we act.
        General Walker, thank you for being here. Thank you for the
    leadership you have provided. You have done so much to put this
    on the national agenda, leading the Fiscal Wake-Up Tour around
    the country and being a constant voice of reminder. The other
    day I spoke to a group downtown. They told me you were coming
    the next day, and I heard that your message and mine closely
    correlated. So we gave them a double dose.
        I very much appreciate your being here today. General
    Walker?

     STATEMENT OF HON. DAVID M. WALKER, COMPTROLLER GENERAL OF THE
          UNITED STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

        Mr. Walker. Thank you, Chairman Conrad, Senator Gregg, and
    other Senators. I appreciate the opportunity to testify. I want
    to thank you for your leadership on this very important issue.
        This is a very important hearing. It should be heard by
    every Member of the Senate and the House of Representatives. It
    is a critically important time.
        My staff has put together a very thorough and professional
    statement, which I would like to be entered into the record.
        Chairman Conrad. Without objection.
        Mr. Walker. And I would like now to speak from the head and
    the heart, and I am going to start and end with the heart, and
    a have a little bit of the head in between.
        My family came to this country in the 1600's. My wife's
    family came to this country before mine did. Both of us have
    relatives that fought and died in the American Revolution, mine
    in South Carolina.
        Senator Graham. Sorry about that.
        Mr. Walker. No, it is all right.
        [Laughter.]
        Mr. Walker. It was for a good cause, and we were on the
    right side, Senator.
        But in all seriousness, I, like all of you, love my country
    very much. I have deep roots in this country. I care for it
    deeply. But I am very concerned about our collective future. We
    have too many people focused on today and not enough people
    trying to help create a better tomorrow.
        America is the only superpower on Earth today, but that is
    temporary. There will be at least one more within the next 20
    years, and possibly as many as three more. Our key challenge is
    to maintain our superpower status and to take steps to make
    sure that our future is better than our past.
        We face a range of key sustainability challenges. Our
    fiscal challenge is the largest and the most overarching one,
    but it is not the only one. Other examples include health care,
    education, energy, environment, immigration, and critical
    infrastructure--just to name a few. Our current policies in
    these areas are unsustainable on the present course, and the
    sooner we recognize that reality, the better off we will be.
        From a fiscal standpoint, we have been diagnosed with
    fiscal cancer. We do not face an immediate heart attack, but
    that cancer is growing within us, and it threatens our Nation's
    economy, our standard of living, and our national security
    unless we begin to treat it now.
        We have a false sense of security about where we stand
    fiscally. It is true that the deficit has come down for 3 years
    in a row, and obviously smaller deficits are better than bigger
    deficits. But it is also true that during that same 3-year
    period of time the total liabilities and unfunded commitments
    for Social Security and Medicare for the United States have
    gone up trillions of dollars in current-dollar terms. For
    example, our deficit this last year was estimated at $163
    billion. You can more than double that because we spend every
    dime of the Social Security surplus. And on top of that, our
    preliminary estimate is the Nation's total fiscal exposures,
    liabilities, and unfunded commitments increased during the last
    year from about $50 trillion to about $53 trillion. By doing
    nothing, they go up $2 to $3 trillion a year because of known
    demographics, rising health care costs, and compounding
    interest costs. And we cannot forget what Albert Einstein, who
    was a pretty bright guy, said: The most powerful force on this
    Earth is not nuclear power, it is the power of compounding. And
    when you are an investor, the power of compounding works for
    you. But when you are a debtor, the power of compounding works
    against you.
        I have been to over 30 States in the last 2 years, 24 of
    which were the Fiscal Wake-Up Tour. I have spoken to thousands,
    if not tens of thousands of people, and in my opinion the
    American people are starved for two things: truth and
    leadership. The biggest deficit our Nation faces today, in my
    opinion--and this is a nonpartisan statement, and it is not
    just the public sector--is a leadership deficit. It is a very
    real problem.
        Our clock is ticking. Time is working against us. The
    commission that you propose--or task force, I should say, and
    other proposals have proposed a commission--I believe is an
    essential step to setting the operating table for the next
    Congress and the next administration in order to get a fast
    start. Presidential leadership is also essential because only
    the President has the bully pulpit, and that President has to
    work on a bipartisan basis in order to achieve meaningful
    change.
        Your task force proposal, your legislation, includes a
    number of key elements that GAO has indentified as being
    essential for success based upon past commissions. As you know,
    you have asked us to take a look at the experiences of other
    countries. We are doing that. And, clearly, we ought to be
    informed by those experiences because some countries, quite
    frankly, are ahead of us in this regard.
        While your commission or your task force includes a number
    of proposals that are laudatory and essential, I would have
    four areas for your consideration.
        The first one is membership. I think the number of
    commission members is reasonable, and while I believe that you
    ought to have a significant majority of sitting members, as you
    do, on it, I would respectfully suggest that you may want to
    think about slightly reducing the number of sitting members and
    potentially adding up to four other key players from key
    stakeholder groups.
        Second, I would respectfully suggest that you consider
    having bipartisan co-chairs, especially given that you have an
    outgoing administration.
        Third, I would respectfully suggest that the commission not
    report before February of 2009 because the commission needs
    time to consult with the next President and key players of the
    next administration in order to try to achieve their buy-in, or
    at least their willingness to take it seriously.
        Fourth, I would suggest that you may want to consider
    allowing consideration of a limited number of substitutes that
    meet certain key criteria that are laid out in advance.
        And, finally, I would suggest that you may want to consider
    that while it is fully appropriate, I believe, to have a
    supermajority requirement for the commission to make
    recommendations, in my opinion, I think a simple majority
    should be required to pass the package. So a supermajority of
    those that are deeply involved, that spend the time, that
    understand the tradeoffs, that do all the homework, is
    appropriate, I think, but I think a simple majority is all that
    you should seek for purposes of passing the package.
        In closing, I commend you for your leadership. I believe
    that it is time that our country exercise its fiduciary and
    stewardship responsibilities. We are not doing it today, in my
    opinion. What is going on today is the Federal Government is
    spending more money than it makes. It is charging the national
    credit card. It is building up compound interest and expecting
    our kids and our grandkids and generations yet unborn to pay it
    off. And that is not just fiscally irresponsible. That is
    immoral.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Walker follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Conrad. Thank you very much for a very powerful
    statement, General Walker.
        Mr. Novelli, thank you very much for agreeing to be here.
    You lead a group, probably the single most powerful, potent
    group with respect to representing people over 50 in this
    country, and so it has special significance for you to be here
    today. Please proceed.

       STATEMENT OF WILLIAM D. NOVELLI, CHIEF EXECUTIVE OFFICER,
             AMERICAN ASSOCIATION OF RETIRED PERSONS (AARP)

        Mr. Novelli. Thank you. Good morning. On behalf of AARP's
    more than 39 million members, I appreciate the opportunity to
    present our views regarding the bipartisan task force for
    responsible fiscal action, and I would like to commend Chairman
    Conrad and Senator Gregg for coming together in a bipartisan
    way to address our country's long-term fiscal problems and to
    help break down the gridlock that is so prevalent in
    Washington.
        Taking on these issues in a bipartisan fashion is truly
    significant. They affect everybody--Republicans, Democrats,
    Independents, and, most importantly, our children and our
    grandchildren, many of whom are not yet old enough to declare
    their allegiance to one party or to another. How we address
    these issues is going to determine what kind of lives they will
    have and what their future will be. And as we just heard, their
    future is not going to be very bright if they are drowning in
    the red ink of budget deficits or if they cannot afford health
    care or cannot attain long-term financial security.
        The majority of Americans today believe that the coming
    generation is going to be less well off than their parents, and
    if that happened, it would be the first time in American
    history, and it would be a major step backward for the American
    dream. And that is why we at AARP appreciate very much your
    willingness to tackle these tough issues. We welcome your
    willingness to consider every aspect of the problem. And to us,
    this means both revenues and expenditures; it means tax
    entitlements as well as spending entitlements; and most of all,
    the health care system and its skyrocketing costs.
        The projected rapid growth in Federal spending for the big
    entitlements--Social Security, Medicare, and Medicaid--over the
    next 30-plus years is frequently attributed to three great
    demographic trends: the retirement of the boomers, increased
    longevity, and low fertility rates. But the primary source of
    our future budget problems is the growth in health care costs
    throughout the system. These costs have grown faster than the
    economy, even in times of prosperity, and well before Medicare
    and Medicaid ever came on the scene.
        As Congressional Budget Director Peter Orszag has said, and
    I am quoting, ``The long-term fiscal problem is fundamentally
    one involving the rate at which health care costs grow and much
    less about the aging of the population.'' So, yes, we have a
    deficit problem in this country, but we have a health care
    crisis. Health care costs are the key fiscal problem for the
    Federal budget. If we do not do something about rising health
    care costs, we will not be able to control the costs of
    Medicare and of Medicaid. And health care costs are also the
    great challenge facing parents and their families, business and
    labor, and State and local government as well. And not only are
    health care costs too high, but we are not getting our money's
    worth in terms of health outcomes from our system.
        At a time when individuals and families are at most risk of
    health and financial insecurity, we urge you to look beyond the
    conventional response of either raising revenues or reducing
    benefits. Some of these both may well be necessary, but they
    are not the only options. Nor are they even the best options
    for American families. They are not going to help families make
    ends meet or when their children get sick or as they get older.
    There is another option that can work for everyone, and that is
    to lower the overall cost of health care to make it affordable
    and sustainable.
        And that is why it is so important to make health care
    reform with cost containment a key element and a central part
    of the task force's mandate. This means shaping a more
    effective delivery system with improved information technology,
    greater coordinated care, and focus on chronic illness, more
    and better use of comparative effectiveness research, and
    greater transparency about the cost and the quality of care.
        Now, how does Social Security fit into this? It is surely
    the most successful domestic Government program in history. It
    keeps millions of people out of poverty, and it creates a
    critical safety net for people as they get older, for people
    with disabilities, and for young people whose parents have
    died. If the proposed task force could muster the
    bipartisanship necessary to fix Social Security's long-term
    solvency problem, that would be a great accomplishment.
        Now, we all know what the options are, but we need to have
    an honest, bipartisan debate, consider all the tradeoffs, and
    reach decisions that are fair and equitable. Strengthening
    Social Security is going to require some tough choices, and our
    members are prepared to make those choices. They want Social
    Security to be there for their kids and their grandkids.
        While we support the mission of the task force, we do have
    some concerns about it. Its work is going to affect everyone in
    every part of this country. This is not like a military base
    closing. This is about what kind of society we are going to
    have and what kind of future our young people can look forward
    to. It is going to require major transformations in public and
    private practices and individual behaviors.
        We believe that the proposed task force should allow for a
    thorough, thoughtful examination of these huge, complex issues.
    The fast-track approach that is proposed seems to us to be a
    bit too fast. It lessens the opportunity to conduct a full
    analysis and debate and to enable interested parties to present
    their views.
        The inability of Congress to amend the task force proposals
    contributes further to these limitations. We would like to see
    these elements considered and changed.
        If the task force is set up in a bipartisan fashion with
    time for discussion of the issues in the task force and in the
    Congress, including revenues and expenditures, with health care
    costs a key element, then AARP will be a constructive partner.
    We believe that we can play a very constructive role, and by
    this I mean that we will take its deliberations and its ideas
    to our members and to their families and to the public of all
    generations, and we will bring their ideas and concerns to you.
    We have the ability to do that in the spirit of engagement and
    education in States and in communities across the country, and
    we will.
        These are critical issues affecting all Americans, and
    their voices and concerns need to be heard. We look forward to
    working with you to assess this and address it in a bipartisan
    way for the benefit of all Americans.
        Thank you.
        [The prepared statement of Mr. Novelli follows:]

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        Chairman Conrad. Thank you, Mr. Novelli, and thank you for
    the leadership that you have shown. Thanks for the willingness
    to engage on these issues and the recognition that we simply
    must act. That is critically important to the process, and
    obviously you are a powerful voice across the country, and your
    willingness to engage your membership and others in a
    constructive dialog about how we begin to solve these problems
    is critically important.
        Mr. Bixby, welcome. The Concord Coalition has been one of
    the most responsible voices, continuing to press Congress and
    the administration for fiscal responsibility, and we appreciate
    your participation in the Fiscal Wake-Up Tour as well. Welcome
    and please proceed.

     STATEMENT OF ROBERT L. BIXBY, EXECUTIVE DIRECTOR, THE CONCORD
                               COALITION

        Mr. Bixby. Thank you, Chairman Conrad and Senator Gregg and
    members of the Committee. Thank you for inviting me to discuss
    S. 2063, the Bipartisan Task Force for Responsible Fiscal
    Action Act. The Concord Coalition is often critical of
    congressional initiatives and things that come out of the
    administration, and it is a pleasure to be coming up to say
    something praiseworthy about an initiative because I think this
    is a very important initiative, and both of you are to be
    congratulated for focusing attention on such a vital subject
    for our Nation's future.
        There is very little dispute that the current fiscal
    policies are unsustainable and that future generations are the
    ones most at risk from inaction. Too few of our elected leaders
    in Washington are willing to acknowledge the seriousness of the
    long-term fiscal problem, and even fewer are willing to put it
    on the political agenda. So by focusing attention on this
    critical issue and insisting that it must be addressed in a
    bipartisan manner, you are certainly setting a very positive
    example.
        The economic and moral case for long-term reform of fiscal
    policy is pretty clear. As has been mentioned often, we have an
    unprecedented demographic transformation taking hold, and it is
    important to realize that this is happening in the backdrop of
    rapidly rising health care costs and steadily falling national
    savings. And all of that is a very dangerous combination for
    the future health of the economy. While it may seem that there
    is no immediate crisis, according to a broad bipartisan
    consensus, current policy is indeed on an unsustainable path.
        People often ask us on the Fiscal Wake-Up Tour, When is a
    crisis going to hit? Can you tell us when a crisis will hit?
    What year? What is it going to look like? Well, nobody can say
    when all of this might end up in a crisis or exactly what it
    might look like. Indeed, there may be no crisis at all--just a
    long, slow erosion in our Nation's standard of living. In
    either case, that is a dismal prospect, and doing nothing now
    to avoid it would be an act of fiscal and generational
    irresponsibility.
        Beyond fiscal imbalance, the policies embedded in today's
    budget process threaten to place ever tighter constraints on
    the ability of future generations to determine their own fiscal
    priorities or to meet the challenges that cannot now be
    foreseen. As the share of Federal resources pledged to
    retirement and health care benefits grows, it will leave
    shrinking amounts for all other purposes.
        So the central problem, as we look at the charts going
    forward, is this: some people can make a good case that we
    should keep revenues at about 18 percent of GDP and spending at
    about 18 percent of GDP, and you could make a case that we
    could let revenues go up to 25 or 30 percent of GDP, if that is
    where we wanted to spend. But no reasonable person would argue
    that you should keep revenues at 18 percent of GDP and spend at
    about 27 or 28 percent of GDP. And, unfortunately, on our
    current path that is where we are headed. Deficits of that size
    would truly be unsustainable.
        So the sooner we get started, the better. Inaction now only
    increases the prospects of more severe choices later.
        In looking at the proposal for a task force, it is logical
    to begin by asking why can't the traditional process handle
    this. I would like to highlight two factors: political
    realities and a budget process that is focused on the short
    term.
        Changing course is obviously going to require substantial
    spending cuts from projected levels or equivalent tax
    increases. Neither party wants to be the first to propose these
    tough choices out of fear that the other side will attack it.
    And, similarly, neither side wants to discuss possible
    compromises of its own priorities out of fear that the other
    side will simply take the concessions and run. Unfortunately,
    these fears are justified.
        Partisan divisions in Washington have now become so wide
    that the Concord Coalition believes that a task force or a
    commission may now be the only way forward on this issue. As
    for the budget process, it is stacked against long-term
    planning. There is nothing in the budget process that requires
    Congress to review the current-law outlook beyond the next 5-
    or 10-year window, much less take corrective action. So without
    some mechanism such as this task force to put the hard choices
    between spending commitments and taxes on the record, everyone
    can continue to ignore the long-term consequences of current
    policy.
        Now, what are the criteria for success? The Concord
    Coalition Co-Chairmen, Bob Kerrey and Warren Rudman, two of
    your former colleagues, wrote an op-ed that we all considered
    at Concord for the Washington Post last year and outlined some
    criteria, which I will go over. And it is repetitive of what a
    lot of others have said, so there seems to be pretty good
    consensus.
        First, it must be truly bipartisan. Any perception that the
    purpose is to facilitate swift enactment of a partisan agenda
    would doom the task force to failure. We, too, believe that it
    should have bipartisan co-chairs and equal representation.
        Second, it must have a broad mandate. While it is critical
    to control the growth of entitlements, particularly Medicare
    and Social Security, the task force should examine all aspects
    of fiscal policy, as your proposal would do.
        Third, there must be no preconditions. If either side sets
    preconditions, the other side will simply not participate. Your
    task force recognizes that and puts everything on the table.
        Fourth, it must engage the public. In Concord's experience
    with the Fiscal Wake-Up Tour, when people are armed with the
    facts and given the opportunity for honest dialog, they are
    willing to set priorities and make some hard choices. And,
    moreover, it seems highly unlikely that the public would react
    well to a reform package for which it was unprepared.
        Fifth, and finally, its recommendations should be voted on
    in Congress. They should be guaranteed some sort of up or down
    vote. Absent this element, the report would simply join many
    others on the shelf.
        I would just make a couple of comments about changes. I
    mentioned bipartisan co-chairs. We do think that would be
    important. There is a lot in a name, such as the Kerrey-
    Danforth Commission or the Hart-Rudman Commission or the
    Breaux-Thomas Commission or the Greenspan Commission. If this
    were called the Paulson Commission, it would look like
    something coming out of the current administration, and you
    might--I think it would be good to have bipartisan co-chairs
    just for that purpose and also because it would establish more
    credibility, I think, across party lines.
        I would also join others in encouraging a slightly more
    flexible amendment process, although I realize when you get
    into that, you know, there is a very tough line as to where to
    stop. But it could be that allowing for amendments might be a
    mechanism for helping the new administration become involved in
    the process, or perhaps even just letting off steam of people
    that wanted to say that they had an alternative to vote for
    before they had to make the hard choice and vote for the tough
    package. But I certainly would not get carried away with
    amendments. It should be limited in some fashion if you did
    them.
        Another recommendation that I would say--and I would end
    with this--is to take advantage of the authority you have
    provided to have some public hearings, and I would agree with
    Mr. Panetta that your negotiations, the dialog between members
    is not something that you want to do in public. But I do think
    there should be some public hearings about the nature of the
    problem and the realistic options for doing this. This is
    really what we do on the Fiscal Wake-Up Tour. We have had a
    very positive response. People love to see folks from Brookings
    and Heritage who acknowledge up front that they do not agree
    with each other on the solutions talk about how they do agree
    on the magnitude of the problem and the nature of the choices
    that must be confronted. So some sort of process for involving
    the public and making the public aware of your activities would
    help, I think, raise the comfort level of members and would
    also help ease passage if people were prepared for the types of
    recommendations that the task force would come up with.
        One thing--and I will close with this--we emphasize on the
    Fiscal Wake-Up Tour, this is not a numbers issue. This really
    is a moral issue. It is about the legacy that we are going to
    leave to future generations. Right now we are building a house
    for them to move into that we know is structurally unsound. We
    would not do that in our personal lives. We should not do it
    with our public policies as well.
        Thank you, Mr. Chairman.
        [The prepared statement of Mr. Bixby follows:]

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        Senator Gregg [presiding]. Thank you, and I thank the
    entire panel. I join with the Chairman in his acknowledgment
    and appreciation of the panel's presentation.
        The Chairman had to take a call dealing with the farm bill,
    talking about problems.
        I will reserve my time, and Senator Graham has been sitting
    through the whole hearing, and then we will come to Senator
    Domenici. Obviously, if the Chairman returns, he will take
    over.
        Senator Graham. Well, thank you, Senator Gregg.
        One, I appreciate everyone coming to the Congress and
    telling us the same thing over and over again.
        [Laughter.]
        Senator Graham. And I do appreciate the Chairman and the
    Ranking Member for actually doing something. We have got
    something we can rally around now. I am not too optimistic that
    we will seize the moment here, but I watched the Democratic
    debate last night, which says a lot about my life. But I
    thought it was interesting about Social Security. They had a
    real confrontation, and I would like to put on the record, I
    appreciate what President Bush tried to do. He really went all
    over the country trying to explain the problem that looms with
    Social Security, and I am going to focus my time on Social
    Security because, Mr. Novelli, I agree with you in this regard:
    A solution to Social Security is probably more achievable than
    health care because literally it is a math problem, and it is
    the gateway to solving every other entitlement.
        So, Mr. Panetta, let's start with Social Security. You are
    someone who has been around the town a long time and in very
    different important positions. Can you imagine solving the
    Social Security problem without somehow adjusting the age for
    retirement?
        Mr. Panetta. Well, I certainly think that has to be one of
    the things on the table, and I personally would have no problem
    adjusting the retirement age with the fact that people are
    growing older at the present time.
        Senator Graham. Can you imagine a bipartisan solution that
    did not include some source of new revenue regarding Social
    Security?
        Mr. Panetta. No. You have to increase the revenue.
        Senator Graham. Can you imagine many Republicans coming on
    board without some new growth potential in Social Security?
        Mr. Panetta. Growth potential?
        Senator Graham. Yes, that people can get better rates of
    return than the current system offers, younger workers. I will
    answer that for you. The answer is no. Now----
        [Laughter.]
        Mr. Panetta. I guess you can answer for me.
        Senator Graham. Yes, yes. I am just trying to--I just do
    not believe there would be a whole lot of Republican support
    for the solution that takes the growth opportunity off the
    table.
        Now, Mr. Novelli, there is an add-on account and there is a
    carve-out account, and I understand the AARP is opposed to a
    carve-out account in terms of achieving new growth. Is that
    correct?
        Mr. Novelli. Yes, it is.
        Senator Graham. Would you be open-minded to an add-on
    account as a way for younger workers to achieve new growth?
        Mr. Novelli. Yes, we would. We promote and welcome the idea
    of add-on accounts. We think it is a very good idea.
        Senator Graham. And, Mr. Panetta, I think President Clinton
    at one time suggested that.
        Mr. Panetta. That is correct.
        Senator Graham. Now, General Walker, can you imagine a
    solution to Social Security that does not have some form of
    recalculating benefits based on income?
        Mr. Walker. No. I think that would be part of a likely
    solution where you provide somewhat lower replacement rates for
    middle- and upper-income individuals and possibly strengthen it
    for people near the poverty level.
        Senator Graham. Because it is virtually impossible to tax
    your way into solvency. Is that correct? You just could not
    raise revenues enough to solve the Social Security problem by
    just raising taxes.
        Mr. Walker. Well, you could, but I do not think that would
    be a desirable way to do it. In fact, I think it is possible to
    exceed the expectations of every generation of Americans
    without raising taxes for Social Security. But you are going to
    have to have additional revenues for health care. There is no
    way you can get away----
        Senator Graham. Right, right. The point I am trying to make
    is that there is no one way to do this. You put a little of
    this, and you put a little of that.
        Now, from the Concord Coalition's point of view, I really
    appreciate your organization's leadership on this. Can you
    imagine a solution to this problem that does not involve all
    the things I have just said?
        Mr. Bixby. Well, I have a vivid imagination, but I think
    what----
        [Laughter.]
        Senator Graham. Well, let it flow.
        Mr. Bixby. I think what you have described is the likely
    solution, with all of those things. I can well imagine a
    solution with all of those elements in it, and I think a
    solution that did not have all of those elements in it would
    not be a complete solution.
        Senator Graham. In the next 52 seconds, really, the problem
    is leadership. Unlike other aspects of entitlement reform,
    Social Security, I believe, is probably the easiest to solve.
    And we have talked about growth, revenue, age adjustment, and
    recalculation of benefits. Those are the four moving parts. And
    I bet if we got in a room, we could do this in about an hour.
    The question for each of you is: Do you believe that together
    you can provide political support to help people on this
    Committee have a breakthrough that we have yet to be able to
    achieve? Will you commit to providing that political support,
    each of you, rallying around a bipartisan document that has all
    these moving parts when it comes to Social Security? And you
    can answer in any order you would like to answer.
        Mr. Panetta. There is no question that we would certainly
    support that effort, but I also have to caution you that I
    really think you have to address the whole deficit issue, and
    it is not just Social Security. It is also health care costs.
    It is also the fact that deficits are increasing rapidly.
    Particularly if you extend the tax cuts, you are going to have
    even greater deficits. So it is all of those issues that have
    to be on the table if you are going to confront the challenge
    that faces us.
        Mr. Walker. Senator Graham, I have already been to over 30
    States outlining possible frameworks for a variety of reforms,
    including Social Security, so I am already there. But I would
    respectfully suggest that one of the reasons that the
    President's effort failed, despite his sincere efforts to try
    to achieve reform, was that the process he employed was
    fundamentally flawed, and process matters. You are not going to
    make tough changes dealing with Social Security, health care,
    tax policy, unless the process has integrity and credibility.
        Mr. Novelli. Senator, I know you are zeroing in just on
    Social Security, but to reiterate what Mr. Panetta said, you
    know, it would be good to look at these things in the broad
    context, as this task force is designed to do. But just on
    Social Security, regarding support, what I want to tell you is
    that we do this all the time. We have had many, many, many
    community-level meetings across the country where we say to our
    members Social Security has a long-term problem. There are a
    variety of ways in which it needs to be addressed. Here are 10
    or 12 of them. Tell us what you think.
        And I can tell you that inevitably they look at both sides
    of the equation. They look at the revenue side, and they look
    at the benefit side. They do not run away from anything. I do
    believe that there is support among the public to make Social
    Security strong for future generations.
        Mr. Bixby. The package that you describe is one that the
    Concord Coalition would certainly support, and I harken back to
    the days of the Clinton initiative in 1998 when Concord worked
    with AARP on organizing forums. And I was talking to Mr.
    Novelli before, and we would certainly be willing to enter into
    some sort of effort like that again on Social Security or
    anything else.
        But I think that those are the elements, and we would be
    happy to support it.
        Senator Graham. Thank you.
        Chairman Conrad [presiding]. Thank you, Senator Graham, and
    thanks for your long-time interest in these subjects and your
    willingness to think outside the box. That is, I think, going
    to be critical to the process, and you have certainly been a
    strong voice for proceeding sooner rather than later, which we
    appreciate as well.
        I have listened very carefully, and that is really what
    this hearing is about. What are the things that we need to do
    or at least take into consideration as we proceed? And I am
    hearing timing. I am hearing alternatives. I think some of you
    have suggested actuarially equivalent alternatives at least
    being a consideration. And I am hearing the question of
    supermajority for the panel, but maybe majority vote in the
    Congress.
        Senator Gregg. Co-chairs.
        Chairman Conrad. Co-chairs. Bipartisan co-chairs. From
    General Walker, the possibility of some outside members.
        Let me ask this question, because I have heard this
    repeatedly: that this should be done through the regular order.
    We should just let the regular legislative process, the
    committees of jurisdiction proceed in the regular order to
    address these issues.
        Mr. Panetta, what would you say to those who suggest that
    alternative?
        Mr. Panetta. It will never happen. The committees of
    jurisdiction will never take on the kind of challenges that are
    involved in this kind of effort. You know, they are committed
    to obviously doing the things that they do best within their
    committees, and the last thing they want to do is to make the
    kind of tough decisions that hurt people in this process. And
    you are going to have to make tough decisions that in one way
    or another are going to require sacrifice by all of the
    American people. And most of these committees, frankly, are not
    going to rise up to that challenge unless they are at a table
    and unless this is the requirement that has to be accomplished.
        Every summit I participated in--and Pete Domenici was there
    at everyone that I was involved with--every one, I have to tell
    you, the Chairmen of those committees were not particularly
    anxious to be there, but the fact was that the President and
    the leadership asked them to be there. And as a result of that,
    they felt a commitment to meeting those requirements. If you
    just leave them under their own jurisdictions, that will never
    happen.
        Chairman Conrad. General Walker, what is your take on that?
        Mr. Walker. Well, as you know, my client is the Congress of
    the United States, so I will say something that is a little bit
    of a risk. I think the regular order is dysfunctional as it
    relates to these types of issues. And it is, quite frankly,
    understandable because you are talking about putting together a
    package that crosses many different jurisdictions. In order for
    this thing to be successful, among other things, not only does
    it have to be bipartisan and everything has to be on the table,
    but you have got to put together a package that makes sense.
    And the idea that that would end up emerging from the regular
    order I think is just totally unrealistic.
        Second, you really need more meaningful and effective
    public engagement and interaction than you get in congressional
    hearings. You just do not get meaningful and effective public
    engagement. Town hall meetings--and I had the privilege to be
    involved in the effort in 1998 between AARP and the Concord
    Coalition on Social Security reform, are just totally different
    than when you get into congressional hearings.
        And, last, I think realistically you are going to need a
    package that will provide political cover to all parties. That
    is going to be essential, because there are going to be things
    in here that some people do not like but they are necessary in
    order to help make sure our future is better than our past.
        Chairman Conrad. Mr. Novelli, what would be your reaction
    to those who say, well, just leave this to the normal process?
        Mr. Novelli. Senator, we have been doing a lot of research
    among the public, among our members, and I think that there are
    two important lessons learned. One is that the public is very
    worried. The average person out there is worried about his or
    her price of health care, whether they can afford it, whether
    they can keep it. They are worried about the fact that they may
    have kids at home and they are caring for aging parents. They
    are worried about their own adult children and the fact that
    they do not have insurance or coverage or the ability to save
    for retirement. So you have got that sense, that high level of
    worry.
        So when we say that the pain is not here yet, actually the
    pain is here. The public is feeling pain. But there is another
    aspect of what the public is feeling, and that is anger. The
    public, if I may say so, is fed up with Washington. The public
    is angry at the Congress and at the administration, and
    basically what they are saying is, ``Enough is enough.''
        And so I think that extraordinary means are necessary. I
    think a task force to do what Mr. Panetta said, which is to
    regain trust, to do the public hearings that General Walker is
    talking about, is in order. Business as usual is not going to
    get it done.
        Chairman Conrad. Thank you.
        Mr. Bixby?
        Mr. Bixby. I agree. I think one of the problems with the
    current budget, with the budget process, is that it does focus
    on the 5- or 10-year budget window or even just the current
    year. And the problems that we are concerned with here on the
    Fiscal Wake-Up Tour and with your task force is the long term,
    things that will have consequences in 20, 30 years. And there
    is nothing in the traditional process that forces any attention
    to that, so I think the task force may well be essential, in
    addition to reasons that others have mentioned, to provide a
    process for looking at the long term.
        Chairman Conrad. All right. Senator Domenici?
        Senator Domenici. Thank you very much----
        Chairman Conrad. Maybe I could just say, Senator Domenici,
    a long-time Chairman of this Committee, has probably
    participated in more of these efforts than all the rest of us
    combined. So he brings a special understanding.
        Senator Gregg. He has his own bill.
        Chairman Conrad. He does. He has his own legislation on
    this as well. Senator Domenici?
        Senator Domenici. Well, thank you very much. I noted this
    on my calendar, this hearing, and I noted that the two of you
    had introduced a resolution, and that prompted me to come up
    here because I am really thrilled with the idea that maybe you
    will pass either your resolution or it modified or whatever it
    would be. And I know that you had a House leader over here,
    which leads me to think that you are really serious. I urge
    that you be serious about getting one. I think the fact that
    Senators are so frightened and House Members so frightened to
    do anything about Social Security and Medicare I do not think
    means that they are too frightened to vote for a resolution of
    creating a commission. I am with you. I have one in. Mine is a
    pretty good one. It took a long time to get it done. Senator
    Feinstein is my cosponsor. It probably ought to be looked at
    when you put yours together. It is different in some respects.
    But it was a prominent Democrat who was feeling how her caucus
    might feel that got on it. Senator Feinstein made me make
    certain changes because of the Democratic input she was
    feeling.
        I think it is time. If we could say, well, maybe we would
    put it off again for this or that, frankly I think you would
    exert the best kind of leadership if you said we want to do it
    as quick as we can, we want to challenge these Senators to say,
    OK, we know we cannot do it, we ought not let America suffer
    the downfall because we cannot do this one. We ought to let a
    commission try. It almost worked with the last commission. You
    remember that, under the previous President, Democratic
    President. It had one person change your mind, or we would have
    had a terrific recommendation. We would have been fighting over
    here, but I think we might have gotten it done. We all know
    what happened, and that was totally political. You have got to
    learn from that and try to prevent it so that it can happen. We
    hope it can.
        And I would say in reading yours I just had a couple of
    concerns. I think you should only be covering entitlements.
    Your language seems to indicate that you are talking about all
    expenditures. I surely would not have this commission work on
    appropriated accounts, and I asked the former Chairman, now
    Ranking Member, when you were out, and he said he did not think
    you all intended to go beyond entitlements.
        I do not know what entitlements beyond Social Security and
    Medicare you ought to do. I mean, should you bring in veterans
    and ask for more problems? I do not know. They are getting--to
    my way of thinking, get the two big ones if you can and get
    going. Maybe there is something else to it.
        I want to say to all of you, we need you because, you know,
    the people do not believe anymore that we will do what we say.
    You must know that, Mr. Novelli, from the seniors that you poll
    frequently. And I honestly believe that the Senate is filled
    with pretty decent, hard-working Senators. This issue is
    impossible politically unless we find a way to do what we are
    talking about.
        I had coined a word once because it was so difficult to
    even ask for a vote on this issue, because the Senators were
    wondering who voted first, to see if they voted or not. So I
    said we have to--this vote has to pass the ``simultaneity''
    test. Everybody has to vote at the same time so that----
        Senator Gregg. Simultaneous combustion.
        Senator Domenici. Yes, simultaneous combustion, because if
    you ask the Democrats to vote, then the Republicans will say
    they did it. I do not know if democracy, acting normally in
    regular order, can meet this kind of challenge. But you better
    do what you have told us and put a resolution together. We hope
    we can get good people. Do you want more Congressmen and less
    lay people? Or, Mr. Chairman, what is your--do you want more
    Congressmen and -women? That is what I did in mine, too. Only
    two laymen, the rest were Congressman and -women. What is
    yours, do you remember?
        Senator Gregg. No. It is all Members.
        Chairman Conrad. All Members.
        Senator Domenici. All Members of Congress.
        Senator Gregg. And the administration.
        Chairman Conrad. Administration and Congress.
        Senator Domenici. That is mine, the same way. That is good.
    Well, yes, sir?
        Mr. Walker. Senator Domenici, for your consideration and
    for Chairman Conrad's and Senator Gregg's, I actually think one
    of the things you ought to think about is taking the best
    portions of your bill, the task force bill, and possibly others
    including that of Senator Feinstein and Senator Domenici
    because in my view we really have two things we have to deal
    with. We need to make a significant downpayment on what now is
    estimated to be a $53 trillion imbalance. And realistically, I
    think that is going to mean budget controls, comprehensive
    Social Security reform, round one of health care reform, and
    round one of tax reform. Realistically, you have got to do at
    least those four.
        I think Senators Domenici and Feinstein have recognized
    that the best you are going to do the first time out is a
    significant downpayment and that we are going to have recurring
    problems on the mandatory side. I would respectfully suggest it
    is not just mandatory spending like entitlements, although that
    is the biggest one, I agree with you, Senator Domenici. We also
    have a lot of mandatory back-door spending that are called
    ``tax preferences,'' $800 to $900 billion a year. And I think
    that one of the things that they recognize in their bill which
    I think has merit is you are going to want to periodically come
    back and make some recommendations beyond the initial
    downpayment because, this $53 trillion hole is going up $2 to
    $3 trillion a year by doing nothing.
        So I would encourage you to think about whether or not you
    might be able to work something that combines the best of both
    proposals.
        Senator Domenici. You are saying ours is permanent.
        Mr. Walker. It is a standing commission that would report,
    at least as I recall, every 5 years, if I recall.
        Senator Domenici. That is correct.
        Mr. Walker. Or it could report--one of the things we have
    talked about during the Fiscal Wake-Up Tour is to have
    mandatory reconsideration triggers for both mandatory spending
    programs and tax preferences that when a trigger is hit, this
    commission could have to come back and, make a recommendation
    in advance of 5 years if some trigger is hit.
        But I think you have to have it apply to both spending and
    tax policy; otherwise, I do not think you will get the
    agreement.
        Chairman Conrad. Let me just say that I am entirely in
    agreement with you. What you just outlined is what has always
    been in my head, that you have got to deal with long-term
    entitlements; you have got to deal with what I would consider
    round one of health care, because we are not going to solve the
    health care issue at one convening. That is not going to
    happen. That is the 800-pound gorilla. Mr. Novelli made it very
    clear. I agree with that entirely. That is the thing that can
    swamp this boat. And it is going to swamp this boat if we fail
    to act. And I think tax reform is critically important as a
    component. You have got to deal on the revenue side, you have
    got to deal on the spending side, and I think increasingly we
    have got to look at what makes our country more competitive.
    The world has fundamentally changed since the pillars of the
    tax agenda of the country was put in place. The world has
    changed fundamentally, and we are going to have to seriously, I
    think, reconsider the way we do the tax business of the
    country.
        I would say Senator Domenici and Senator Nunn a number of
    years ago had a very thoughtful proposal about fundamental tax
    reform looking at making America more competitive. I think we
    have to go back and look at proposals like that one.
        Do you want to go next, Senator Gregg?
        Senator Gregg. Sure.
        Senator Domenici. Thank you for letting me go ahead of you.
    I appreciate it very much.
        Senator Gregg. It is a courtesy. I am happy to do it as a
    courtesy to the former Chairman, the long-time Chairman and
    leader on this issue who has always got good thoughts on these
    points.
        I want to return to the point that the Chairman made and to
    another issue, which is the points which have been raised here
    about how the commission should be set up are very legitimate
    but extremely resolvable. I mean, we can come up with a process
    here. With the exception of the amendability, I think I can be
    in agreement with almost any ideas that have been thrown on the
    table here. The issue is the institutional resistance to
    actually getting a commission passed.
        The Chairman highlighted one, which is the issue of the
    jurisdictional question, other committees being concerned that
    their jurisdiction is being stepped on, and I think your
    answers were right on, that you cannot do this type of a long-
    term policy under the present regular order, regrettably. We
    have proven that over and over again.
        The second institutional impediment to this is I believe a
    lack of public support for the approach, and I am wondering how
    we energize people to be more sensitive. I mean, you are
    obviously doing your tours, which have been extraordinary. But
    is it possible that the AARP should or would be willing to
    participate in calling for this type of an event? Because,
    honestly, if this is not entered into the Presidential debate
    as an element of the debate, if the candidates for the
    nomination or the candidates who are nominated are not willing
    to say when we come to entitlements, Medicare and Social
    Security, it has got to be bipartisan and it has to be fairly
    structured and we probably have to do it this way, we are
    probably not going to make any progress.
        Is there something further that we can do to energize this?
    Because right now we are being sort of slow-walked because some
    of our colleagues--on both sides of the aisle, regrettably--see
    these issues as the bludgeons which get people elected, tax
    policy on our side, Social Security policy on the other side,
    and they do not want to give up that club to use in the next
    election. And we have got to come up with some way to say, hey,
    the American public tells you you cannot use these clubs, we
    have to make progress here.
        Do you have any more thoughts? I mean, I really
    congratulate General Walker and the Concord Coalition for the
    tour. I mean, they have been exceptional. They came to New
    Hampshire and it was great. But I do not think we have gone the
    next step, which is to say to people do not use the club of tax
    policy and use the club of Social Security policy as a way to
    not allow a commission to go forward because you need those
    political tools.
        Does anybody have any thoughts on this?
        Mr. Panetta. You are absolutely right. You have hit on the
    fundamental problem here, which is that members do not want to
    walk into the buzz saw that is going to be involved in making
    the kind of choices we are talking about because those are used
    as clubs on both sides to beat each other up, and, you know,
    you are largely engaged in partisan trench warfare up here, and
    everybody is basically in their trenches, and nobody wants to
    get up and have to deal with it.
        I think you need to look at history here. The only way it
    developed is that, A, there was crisis, and whether or not
    crisis will happen in the markets as a result of this, who
    knows, over what period of time. But, clearly, crisis does
    drive this institution to try to respond. It is a lousy way to
    govern, but it clearly is one of the ways.
        Senator Gregg. But this may be, as Mr. Bixby pointed out, a
    slow developing cancer where crisis is never really identified
    at a public level of intensity.
        Mr. Panetta. You are right. The other thing I was going to
    point to is there was a guy named Ross Perot who made this a
    national issue during a Presidential campaign. And the fact was
    that the public responded to his appeals to try to deal with
    the deficit and what it was causing, and that in large measure,
    I have to tell you, working for President Clinton, it was
    Perot's campaign that produced some of the impetus to move an
    economic plan that dealt with the budget deficit.
        So, clearly, the Presidential candidates have to address
    this issue and make it a priority. If they do, then whoever is
    elected obviously then has at least the political impetus to go
    to the American people and say I am going to do what I said I
    was going to do and try to bring those parties to the table.
        So there has to be that political process of educating the
    public to the need to deal with this issue. I think the public
    is ready for this message. There is the fact that wherever Gen.
    Walker, Bill Novelli, and Bob Bixby go to talk to the public,
    they respond. Every group I talk to responds to this issue. But
    it is going to take a Presidential candidate on both sides to
    be willing to address this issue and the need to take action.
    That ultimately is going to be the only way you are going to
    bring players in this institution to the table.
        Mr. Walker. As I said, Senator Gregg, while I believe that
    a task force or a commission along the lines of what you
    propose is an essential element to achieve sustainable success
    in this area, I also believe that Presidential leadership is
    also essential to be able to attain it as well. And while the
    Fiscal Wake-Up Tour has been very successful, it is but one of
    many things that are going on right now.
        For example, I have spoken with Ross Perot on more than one
    occasion. He is going to fund a website to try to be able to
    get some more visibility in this area.
        Second there is a commercial documentary that is going to
    be released next spring in time for the Presidential general
    election campaign to try to gain more visibility on the issue.
        I think it is absolutely critical that the next President
    make fiscal responsibility and intergenerational equity, which
    includes at least the four things we talked about before, one
    of their top three priorities. If they do, I think we can turn
    this thing around. If they do not, I think it is only a matter
    of time before we will get a crisis. And, you know, so that is
    what we are trying to do. The Fiscal Wake-Up Tour and others,
    we are trying to make this a general election issue through a
    variety of different efforts, and this task force would
    compliment that effort because it would help to set the
    operating table early in the next Congress and the next
    administration to try to be able to make that downpayment and
    get some momentum to improve credibility and confidence.
        Chairman Conrad. General Walker, do you have any idea in
    the movie who will be playing the Chairman of the Senate Budget
    Committee?
        [Laughter.]
        Chairman Conrad. I was hoping for George Clooney.
        Mr. Walker. Believe it or not, since this is a documentary,
    it is going to have real players in it.
        [Laughter.]
        Mr. Walker. Real players.
        Mr. Novelli. Senator Gregg, I think that it is clear that
    the public does want action. I mean, we are at a moment in time
    when we can build on the public concern and demand for action.
        As I think you know, we started Divided We Fail with the
    Business Roundtable and SEIU, and tomorrow we are going to
    announce a major additional partner in this coalition. And we
    have been going around the country. We have got in your State,
    in all the early primary States, caucus States, we have been
    basically training hundreds and hundreds of volunteers to
    essentially ask the candidates what are they going to do about
    Social Security, what is their plan for health care.
        I really believe that we could add to this educational
    effort the idea of this task force. I think there is an up side
    and a down side to it. The down side would be if this does not
    happen--or if it does happen and it becomes another shelf
    document, as Mr. Bixby said--then the public is going to be
    even more angry and more disappointed. The up side is good,
    though. This is a task force that is specific. It is something
    the public can understand. It is something that they can
    actually engage in and support.
        So, yes, I believe we could put this task force into the
    Divided We Fail message, but I think that if we do it,
    something has got to happen.
        Senator Gregg. Well, I would simply state that the task
    force as structured requires that something happen. That is the
    whole point of it. And, obviously, if you folks made it the
    cause du jour, it would have a huge impact in the process.
        I apologize for my phone. It has got to be my children.
        Mr. Bixby. One other thing that I would mention, there
    was--back when Congressman Stenholm and Congressman Kolbe had a
    Social Security bill, they came up with this ``Get Out of Jail
    Free'' card, which was anybody that supported on a bipartisan
    basis the bill, they would agree to rebut negative campaigning
    against that person in their re-election campaign. So as a
    hypothetical, if, you and I were running against each other and
    I started accusing you of wanting to destroy Social Security
    and Medicare, then, Mr. Graham, who may have supported you in
    this effort, would agree to rebut that in your home State and
    say, Bixby does not know what he is talking about, something
    like that.
        So, you know, that is just sort of fighting fire with fire
    politically if people signed up for this.
        Chairman Conrad. OK. Senator Nelson?
        Senator Nelson. I want to encourage you on this task force,
    and you certainly have my support, because it is only by these
    kinds of attempts of building consensus that we are going to
    get any kind of headway in an extremely poisoned, highly
    partisan atmosphere. And I come to these conclusions simply out
    of the experience that I have had.
        Leon and I were in the House at the time, in 1983. Social
    Security was within 6 months of getting to the point that it
    was not going to have sufficient revenues coming in for the
    payouts. And two old Irishmen, bitter enemies, political
    enemies--personal friends, and there is a lesson in that, that
    they could fight like the dickens in the day, but at night they
    had a personal relationship that they could sit down and talk
    to each other. And, of course, you know who I am talking about:
    the President and the Speaker of the House. And they said we
    are going to take Social Security off the table as a political
    issue in the next election, and we are going to use a vehicle
    something like this task force. It was called a commission. And
    they put all the highly visible people on there, including
    Claude Pepper, and they came out extracting a little bit of
    pain from everybody in the process and made Social Security
    actuarially sound for the next 80 years.
        And so when you get to these highly emotional issues, these
    politically radioactive issues, like Social Security,
    Medicare--indeed, the health insurance system of this country,
    which has got to be completely overhauled. But there are so
    many players in it, you just cannot get it done in a normal
    circumstance. I wish I could believe that we could get this
    kind of leadership emerging out of the Presidential election,
    but I do not think it is going to be there because of the
    radioactivity of these issues. So the leadership and the
    bipartisanship is going to have to be built by the next
    administration. And that means that they are also going to have
    to set the table for working together with the parties, like
    the two of you do. We do not get a lot of bipartisanship on
    this Committee on the issues, but we sure get the
    bipartisanship in the way that the two of you can work
    together. And so, too, it has got to be with the next President
    and the Republican leadership in the Congress.
        Now, I am not very optimistic because I see the--I do not
    see the leadership like Tip O'Neill and Bob Michel or Whoever
    was the Democratic leader back then and Bob Dole. And they
    could cut deals. They could work things out. They had a good
    personal relationship. And we have got to get back to that in
    order to be able to hit a consensus on these kind of very
    thorny issues. But what you all are doing is certainly the
    right track: try to build a consensus.
        Now, I have offered--this is a side issue. We have got a
    huge problem of insurance for catastrophe. Nobody paid any
    attention until finally Katrina came along, but it was not
    Katrina in the sense of windstorm insurance., because that did
    what it normally would do, a Category 3 hitting the Mississippi
    coast. It was just because it was an unusual kind of thing,
    which was filling up the canals in New Orleans and the bowl
    filled up that you had this huge economic loss from Katrina.
    But it underscored the problem that we have got a problem that
    no one State and no one insurance company can withstand the big
    one when it hits, and the big one is a $50 billion insurance
    loss storm hitting a major metropolitan area direct from the
    water or an 8-point-plus on the Richter scale earthquake
    hitting San Francisco or Memphis. And it is coming, but we
    cannot build consensus because everybody has got their own
    little selfish interest to protect.
        I have offered to try to build it with this, what we called
    an emergency commission on insurance, on catastrophe insurance,
    and we are having trouble even getting that out of the
    Congress.
        So I commend you, Mr. Chairman, for what you are trying to
    do.
        Chairman Conrad. Well, I thank you, Senator Nelson.
        One thing I have learned is that the Senator from Florida
    is absolutely serious about fiscal responsibility, and he is
    willing to cast tough votes to achieve it, and I respect that
    enormously.
        Senator Gregg, do you have additional comments?
        Senator Gregg. I just want to thank you again for being the
    engine behind this effort and thank the panel, especially the
    Majority Leader of the House, for being willing to step forward
    and make the case, because you have got the credibility and the
    bipartisanship that we need in order to make progress here. We
    thank you for being willing to be advocates.
        Thank you very much.
        Chairman Conrad. Yes, let me just conclude by thanking the
    witnesses here today: Congressman Hoyer, the Majority Leader,
    who led off this hearing.
        Leon Panetta, former Chief of Staff to the President of the
    United States, a former House Budget Committee Chairman, former
    head of the Office of Management and Budget. Nobody has dealt
    with these issues over a long period of time or shown more
    leadership for fiscal responsibility than Leon Panetta, and we
    very much appreciate your being here.
        General Walker, who has really helped put this issue on the
    national agenda by leading the Fiscal Wake-Up Tour. I remember
    your talking to me about this several years ago. I was just
    delighted to see that you have carried through, and you are
    unrelenting, and that is exactly what it takes.
        Bill Novelli, you came to me some months ago and said that
    AARP recognizes fully that we are on an unsustainable course,
    and collectively we have got to find a way to address these
    long-term issues. And for you in your position and with the
    full weight and muscle of your organization behind that stance,
    you can make a big difference here in whether or not we take
    this on or whether this can gets kicked down the road one more
    time. I can say Senator Gregg and I are really struggling to
    find a formula that can put in place a process to lead to the
    beginning of a solution to these problems.
        And, Mr. Bixby, and the Concord Coalition, thank you for
    the leadership you have shown all across the country. Thanks
    for continuing to remind our colleagues that these are issues
    that really matter and really are central to whether the United
    States is going to continue to be a great power, because that
    is really how big this is.
        I hope all of you will remain available for additional
    discussions. I think one thing we need to do is find a way to
    pull together a consensus proposal, and then to have people
    push it aggressively because that is going to take--you know, I
    tell you, I hear from our colleagues on both sides. They would
    just as soon we went away. They really would.
        Senator Gregg. Well, that is just you they are talking
    about.
        [Laughter.]
        Chairman Conrad. I think it is because of the picture. You
    know, maybe not so much that Senator Gregg and I go away on a
    personal basis, but that this issue go away. You know,
    honestly, I really hear from my colleagues--and I get the
    drift. I know what they are saying. They are speaking in code.
    Nobody is so crass as to say, gee, we wish you--well, that is
    not true. I had a Senator yesterday say he really wished we
    would not bring this up and that we would not push it, it is OK
    to have a hearing, but do not do anything more than that.
        But, look, the stakes are enormous for this country, and,
    Leon, you said it so well. You either deal with problems by
    crisis or through leadership. And we sit around here and wait
    for the roof to cave on, or we can act. How much better would
    it be for this country if we acted. We can do this. This
    country has faced up to World War I, World War II, Vietnam,
    Korea, the Great Depression, the flu epidemic. We can certainly
    take this on.
        But it is going to take will. It is going to take will. And
    it would be very helpful if you continue to press and to say to
    our colleagues that kicking the can down the road is no answer.
    That is just going to make eventual solutions far more
    difficult.
        With that, I want to again thank the witnesses and
    especially thank my colleague Senator Gregg for his
    determination to carry on.
        [Whereupon, at 11:02 a.m., the Committee was adjourned.]

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