[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

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           Printed for the use of the Committee on the Budget

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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.


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    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:]

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    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:]

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    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:]

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    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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