Good evening, everyone, and thank you for joining us for this discussion. For those of who are do not know and theres a lot you but i do know im below Senior Vice President here with the bypass and policy center. There are those who work in government and then there are those who make government work. And i James Lockard is is the latter. He has made government just listen to this list of positions. Director of the federal Housing Financing agency its predecessor, the office of federal housing enterprise as oversight chairman of welfare. Also member of the financial oversight board, deputy and principal commissioner and chief operating officer. The Social Security administration. Executive director of the pension benefit guaranty corporation. Out of government and investment banker. Cofounder, a Risk Management company. And he just was talking about it. Chairman recently of the new art museum and Greenwich Bruce Museum just opened up place he says where art meets so i thought im going to go see but most importantly to bpc he was the cochair with former senator kent conrad on one of our in fact one of our best sellers. The report on the commission on Retirement Security and Pension Savings 2016. I can tell you it still being used on capitol hill today by the recommendations in here related to Social Security and thank you to the staff for continuing that work on there. Finally and appropriate think for this and the title of his book jim served his country as a veteran lieutenant j. G. In the navy in the underwater on nuclear submarines. As i recall. And how could i forget . Hes a senior here at bpc. So welcome and our informal steve scully Senior Vice President communications to discuss america underwater sinking. Time to with Lessons Learned so take it away, jim. Steve thank you. And you have teed up. By the welcome. Youre among friends. We appreciate your time up. Bubble down bubble and crush, which is kind of the centerpiece this book. Lets begin with some definitions and then well talk substance. Okay. Yeah, well, my submarine days are a little time a little time ago, but bubbles mean when youre starting surface down, bubbles when youre going down and crush depth is when should not go any farther because youre going to implode. And i would tell a little story in the book about going to test step two, which is the as far as youre supposed to go and i was at the diving officer at the time and relatively junior and somehow i didnt quite stop at that level. And a few feet below, which was a little scary, but at any rate, submarine was really good Training Ground for just really out of college. The you know, you had people working for you were ten years older and much more experienced and but you learned all of things about nuclear power, nuclear weapons. So it was a great. So is america sinking. If you read the latest cbo report, theres no way out to say that it is. It is. I mean, were going to double our debt in the next ten years. If look at the total debt of the u. S. , were like 121 of gdp and well go up to 130 some of gdp in that ten year period. And, you know, the big problem, our entitlement programs, the i think the same cbo report said Something Like 81 of the increase in federal expenditures over the next ten years are Social Security, health care and now interest because interest is going to skyrocket with all the debt. And you on to that defense spending. And then what does that leave us . Well, if you wanted to read those separate and not touch them, you have to cut the rest the budget by like 70 to have a balanced. And i dont think thats going to happen. So you got to touch entitlements. One of the i think in my first chapter of the book, i have a quote from ben and what says is some people call the u. S. Government an Insurance Company with an army and many ways thats what we are. Gao did a report most recently had 150 to Insurance Companies, the u. S. Government, and they Something Like two thirds of all our expenditure. And so if you dont try to fix those, youre in trouble. And unfortunately, many of them were created with unsound insurance principles. I work for several Insurance Companies in the private sector and. They had contradictory missions. You know, you say for bbc example, you want to promote the find benefit plans, but on the same time, you want to make sure that theres enough money there. And the only way to make money there is to charge more for. And so the contradiction in all these programs. Congress, unfortunately ends up setting up programs which were really good intentions, but then never tries to fix them when they need to be fixed. We presented George W Bush with the Patriot Award and he talked Social Security and after he was reelected 2004, he had indicated that he wanted to use his Political Capital to fix Social Security. That was nearly 20 years ago. And what said was startling. He said, we couldnt it done then. And we definitely get it done now. Why . Well, its amazing when we to do it and i was the point person. Social security spent a year on the road doing it. I actually tell a story. About 911 in 2004, i guess was when we went up to camp david. We one 2000. No 2004, it was 911 date in 2004 and he wasnt campaigning because that wasnt a good week. So we were actually cricket over there. My wife and i were invited to camp david for that weekend and his social committee is on his mind. He really wanted to. He it was we needed to fix it. And he was right. And at that point, it was 30 some years away from insolvency today, its ten years away from insolvency. And the insolvency date think then was 2042 and now its 2033. So we, you know, its its a mess. And i think why he says is just no political will and you know, solution at this point is you got to do what president reagan did in 1980 to set up a commission. And the greenspan commission, it was called at the time, and tip oneill and reagan and some others just got together and out a deal. And thats what were going to to do. Hopefully, we dont have to wait peoples. Benefits are going to be cut by 20 if nothing happens. You know, thats thats to me, a problem at this point that we end up not facing reality in this country. Its so easy to demagogue Social Security and say youre going to take benefits from the old people. And yet thats exactly what president trump, President Biden are doing by not to do anything about social, because theres going to be benefit cuts in ten years. You begin your book and this is quote from barack obama that there is no problem cannot solve when we together. So on the issue of Social Security, what has to happen and how do you create that Political Capital to solve the problem beyond 2032 . I mean, as bill was saying, thank you, bill, for leading that for the staff because it was a it was a pretty it took two years for it to come through. We had 19 members leading politicians. The two Public Trustees of Social Security. By the way, there hasnt been a Public Trustee of Social Security since 2015, which is one of our problems. Theres just they dont even appoint a trustees at this point. The to do it is you really have to reach a compromise. And i think it will take a commission and we have. And you know, my thought would be maybe out of this debt ceiling fiasco that congress can get together and say were going to create a commission, a members, maybe to come up with a series of compromises. Our proposal out of a report bill referred to the bestseller is it was about 50 on benefits, about 50 on revenue taxes. We actually increased for the lower income, which i think is important, but we down the growth for higher. We had a somewhat benefit formula. We had a better cola cost of living and and higher very slowly the retirement age and the tax side. We raised the tax max. We also raised that figure. But again it was 1 over ten years and half played by the employer. So id be, you know 0. 05 a year for people. So it can be done now, that was, you know, six years ago. Its going to be tougher now and thats the problem. Every year it gets tougher. It really does. And but, you know, if they dont, it its going to be really very hard on lower income people. I mean, something almost 50 of the people rely on Social Security for most of their income. And americans are not saving enough. Theyre not saving enough. That was part of our recommendations. Actually, i have a report is to increase savings and some of those actually did happen. This cure act one and two have been passed by congress. So we had some action out of that report. But unfortunately, as president bush told you, its really hard to do anything in Social Security. You know, in his book, he said he hugged the third rail and he was toast. So you look at the last 20 years and weve gone from about 8 to 10 trillion to now almost 32 trillion in debt. Weve had 11 war in iraq, war in afghanistan, the Great Recession, the bank bailout covered, 19 tax cuts by a Republican Administration and a Democratic Administration and democrats continuing their spending. So safe to say that everyone is responsible. I think its safe. Say that. Yes. And including the american people, they keep electing them. Yeah, but has this been the perfect storm with all that weve with over the last 20 plus years . Yeah, its been tough. But, you know, talk about the Great Recession the tarp Program Actually made money and certainly, as you know and i see some of the fannie and freddie regulators in the room, they actually, i think at the end they had about 190 billion that they got from the government and they were already giving 300 billion back. So you cant really blame them for this problem. I think you can blame certainly income taxes and the American Rescue plan and all these other things that keep adding on and on. And, you know, its when we had very or no Interest Rates, people thought was really easy to do. And now Interest Rates are going up and its going to be its going to be horrendous because i think, i read a statistic in the next ten years. The interest we pay will be more than we pay for the defense department. So is it a spending problem or revenue problem . Its its both. I mean. Well, its three things. Spending revenue, management and thats what a lot of my book is about, management that we have to manage the government better than we do today. We put people in some of these agencies that have no Management Experience and just want to get in front of television or whatever is really. You wouldnt believe that with you. Shocking and know it ends up that we just keep kicking the can down the road. And so its its all three you know tax cuts for too much theres a quote in this book i get got to read this let me its over here because its my father was a business man wrote a paper 1990, which i gave to president bush 41 policy group and. It was a paper trying to create a successful country. He called it the successful start society. He many people feel the us is downhill. We read or see and hear. Our schools are falling. Our youth is faltering. Our industry is crumbling. Our banking is foundering. Floundering. And our government is fiscally and otherwise. I agree. He wrote that in 1990. And so its not its been long term problem. So i did an interview this morning with a conservative republican member of im not going mention his name, but he that his plan would save 1,000,000,000,000 over the next decade, cutting discretionary spending. And he put on the table 500 areas that he would spending. But it seems to me that you talk about where the spending is, medicare, medicaid, Social Security, other entitlement programs and the pentagon budget that hes about. And now interest on the debt. Its about, what, 75 , hopefully. Yeah. You cant do it outside of this. The Social Security, medicare and medicaid. You just cant do it. I mean, that trillion compares to the 20 trillion that will be over the next ten years. So that, you know, thats percent of the problem. And yet you got to tackle entitlements and you know, it can be done. I mean, we actually had 19 members on this commission and 18 of the 19 signed on and there were some pretty big sacrifices in there. Certainly the income benefits were slowed down and they were taxed. Unfortunately, thats going to be part of the part of the issue that Going Forward now. Again, i think we need to manage it government better. I think, you know, taking such clarity today and you know, it needs better management today, better systems. I probably shouldnt be political, but ill do this. They a commissioner there that was working on system reforms and disability forms and he was fired . Mm hmm. And Vice President biden because the unions didnt like him. So, you know, thats it. Managements an issue, too but its got to be smarter about our programs. We shouldnt be creating sorts of new ones. And we seem to love to new programs. And, you know, without sound finances them, you know take the ptc, i think when it originally started in 1974, the premium was 1 per person. Now its 90 per person, 90 some dollars per person. And for an underfunded plan, thats over 300, you know, and thats we just dont think these and it takes so long to fix. I mean Social Security the last fix was 86, 82, 82. Yeah. So, Kelly Darnell knows this. When were in a meeting with our good friend bill hoagland, we always how long it will take before he brings Government Spending. But one of the issues that he has brought up continuously is who the deficit hawks on capitol . Who are the people trying to rein spending today . Who are they . Well, im not an expert. Politics today, even in those days, it was hard to find a deficit hawk. But today it you know its you know you hear some on the right wing the Republican Party but they dont seem to have realistic proposals out there. You know, got to touch both revenues. And taxes. You got to cut spending. Raise taxes. Yeah. And have to. Sounds like a recipe for success in politics. Thats why im not a politician politician. But can we get there . Well, you know, part of my book is of trying to help people think about how we can do better on that. Yes, we we need to look at a lot of these Government Programs. You know, as i said, 150 to Government Insurance programs. Obviously, the biggies, theyre social, medicare, medicaid and all those. But theres a lot of them that we could, you know, when bush was president. Bush 43, he used to every year send up a list of 20, 30 programs that should be just. Mm hmm. But there was always someone in congress that wanted to keep that program alive. I remember in a Social Security, we had an office in. I cant remember south dakota or north dakota, and had one person in it. A person. And so we wanted to the office. It was impossible, you know, you know, and thats, you know just a little thing. But thats the kind of thing that unfortunately goes in washington, d. C. And was a while ago today its even worse as far as i can tell. Its pretty clear, having read the book that youre not real optimistic about how we managed the government, how we operate the government, the waste the abuse in. Yeah. So you saw that firsthand . Yeah. No, i mean, it certainly Social Security is an example of it. You know, its 1. 25 trillion of by far the biggest Government Program by far. I think on the retirement side, its reasonable to run because you know they set dates and its but when you get into disability becomes a very tough program to run because it you know you have to prove to the disability got to go through a state Determination Office then you have to go through this Social Security and then you appeal it and you go through all these things and once you get on people want to get off. Social security has Program People dont know much about called ssi supplemental security income which is separate Social Security and its funded directly from the government. And that program is so complicated that its hard to manage. We actually i was there. We got it off of high risk list, but its because you had to prove your income. You had to prove, yeah, you couldnt work. You had to have no assets. And it just became very complicated. And we put those rules in place for good purposes so people, you know, there isnt waste and abuse but its still is waste and abuse. Your friends here have some tough questions so you have them bring up the index cards and ill read them. Lets talk about the short term because approaching probably mid to late summer, when we reach the date, when it comes to the debt limit, for arguments sake, assume that both sides come together and they the debt ceiling. Republicans say we need to cut spending. Democrats are saying raise the debt limit first. Then well talk about spending. Youre at the bipartisan policy center. What should we be doing . What should washington be doing to get that date . And then beyond to look at Government Spending and reducing the debt . Well, its going to be tough. I mean, theres people dug in and both sides, you know, on probably on the entitlement programs. We need to go to the Commission Route and have, you know, people from both parties on the commissions and almost have a rule that it has to have open up and down vote in the congress because its going be very, very hard to make those decisions. Obviously, were, you know, republicans want tax increases. Democrats dont want benefit reductions. But both going to have to happen at some point. You know, theres one other program i should mention, because i see some of fannie and freddie friends here. You know fannie and freddie have been in conservatorship for almost 15 years. And again, inaction by congress. Now, maybe its relatively harmless, but we have the most housing system in the now almost 70 of the mortgages in this country are backed by the government. But its off the balance sheet. That was 6 trillion are off our balance sheet. You had that back to balance sheet. We even get worse. I mean, we just need action on the hill. We need people to force action and unfortunately, congress is is not willing to do it. But getting back to the the state, im just hoping, you know, that we can reach some compromise, set up some commissions as the only way i can think of a because, you know, well see you know, the republicans come up with ideas and maybe save 1,000,000,000,000 over ten years. But as i said, thats only 5 of the problem. But when you say a commission, it seems to me that nothing is going to happen until 2025. Were now moving into president ial politics and that seems to be consuming a lot of the political oxygen. No, youre right. I was thinking that maybe it could be more like set up the commission now and the proposal for the new president and, you know, not have to have it be in the politics for two years. I dont know if that would work, but its the only thing i can think because unless people rise up, unless the aarp, so this world decide that they dont want their peoples cut in ten years, were going to get any action. I mean, we were working aarp on Social Security reform. We were actually going to do with them around the country and they got so much grief that they had to back down. And then they about privatization and all that kind of stuff. But we need some of the big Interest Groups to gather together. And, you know, the but also foundations and think tanks on right and left but were just a block from k street so yeah a lot of lobbying that goes on in this town. How does that complicate anything that needs to get done here in. I know you know the first thing i did when we put fannie and freddie in conservatorship we fired a lobbyist. Clearly some of my friends over there like i said, youre among friends. But its tough. I mean, you know thats why it was hard to get fannie and freddie legislation because you know they had very strong lobbyist. Theres a quote in the book from ben bernanke about the us is an Insurance Company with an army. What what does he mean by that really really means that if you look at the Government Programs so many em insurance as i said theres about 150 of them and you know they range from pbc, fdic and all those guarantee programs but theres medicare, medicaid. Fannie and freddie are on that list now as quasi Government Insurance and they really are three quarters of the budget of the united states. And, you know, we had so many different insurance programs. We have you know, i you mentioned bill, i was a chair of a museum. If you borrow art from foreigners you get Government Insurance for the for your museum, for the art that youre bar, you know, its important. But, you know, and theres crop insurance, as you know, Flood Insurance everywhere you turn. Weve created programs. And thats what he man and hes right. Some good questions. How much would it help to raise on the rich and corporations that . Is making Capital Gains the same rate as . What was the i cant read the rest of you as ordinary income. Thank you. Oh, wow. I read your writing, but thank. Well, i mean, i being a moderate republican, i am not a fan of that approach because Capital Gains have a lot of inflation over time in it. But certainly i think theres going to be have to thats going to have to be studied may not be the level but over time that may have to look at raising it somewhat. I mean, there are some proposals out there like, you know, taxing unreal size, Capital Gains, which i think is is is crazy, but thats my way of thinking a Corporate Tax at 28 versus 21 . That the president proposed. What are your thoughts about that bringing it back to where it was in trump era . Well, again, we have a revenue issue. Its i dont like it, but, you know, its the kind of you got to do if you if you you can raise taxes. But only if you do something on the the spending. If you just do the taxes which seems to be what they want do at the moment and do on the spending side, in fact, increase spending. I couldnt agree that Signature Bank and valley bank did. Fdic, the fed, the treasury department, did they do the right thing . Oh, i dont think they had any choice at that point. I actually i was on when i worked at w ross. We rescued probably 15 different banks. And after the crisis and i was on a couple of the bank boards in the us actually virgin money in the uk and it was a failure of the regulators and we had too many regulators and you know, the fed, the fdic, you know cc state regulators in, you know, sometimes they get in the way of each other. But i think it was very much governance failure. I cannot imagine that the boards of those two institutions and actually know the chairman of the Signature Bank pretty well i cant imagine that when the fed and is mainly Silicon Valley started to say that there were problems, that they didnt do anything about it, that that was a big failure on their part, but it got to the point that it there was no other choice. And, you know, that happened in oh eight. You know fannie and freddie and it happened with a lot of banks in 0809 or ten and 1010 2010. You know im a little worried about the banking world. I think, you know, silicon was really, really, you know, basic banking, basic risk of know Interest RateRisk Management and liquidity Risk Management. But what we saw in the crisis, it started out as a subprime crisis. But it turned in the mainly in this Community Banks and we lost many hundreds it was commercial estate and im a little worried that thats going to be the next thing is going to happen to the banking world. And so i we have to be very, very careful at this point. You know, its always looks like its its a bailout. Know, i remember. Way back when it was wall street versus main street and, you know, everybody we couldnt shouldnt have done dark tarp. We shouldnt have gotten fannie and freddie, whatever we should have let everything like lehman failed. But, you know, paulson, secretary paulson, who was very involved and obviously the fannie and freddie conservatorship and tarp was saying, i think when we had the press conference on the conservatorship that if you didnt help wall street, main street would suffer. And that is very true. Now, its its hard politics to explain that to people, you know, bailing out venture capitalists and Silicon Valley is not something that can be very popular. And, you but, you know, at some point you have to do it. But im i think we should raise the efforts fdic guarantee but certainly eliminate it and raise to you know unlimited but its so that was one of the questions should we raise it above the 250 i think it was in dollars probably at this point, but, you know, there are mechanisms and smart people these days, their banks will, if they have a lot of money, just farm it out to another ten, 20, 30 banks to give them to 50. But i think be more efficient if it was like 500. But i dont think it should be unlimited because i remember in one of the interviews i did with president bush, we talked about the bank bailout. He said he could have been Franklin D Roosevelt or herbert hoover, and he chose to be. Yes, he did. So that was the right thing. That was the right thing. Yeah. I mean, the right thing. I mean, you know, the big one was fannie and freddie, actually. I mean, because that happened the weekend before lehman and then, you know, two weeks later that the whole thing was falling apart and tarp was proposed. So lets go back to politics and. This is another question from one of your friends here. Do you think that reelection weighs heavier on the minds of congress than the catastrophe of defaulting on the debt . Well reelection is very important to every congressman and senator and president and and so it weighs very heavy. I dont know whether really understand the implications defaulting on the debt. You just dont know when you listen. Some of the statements they make. But, you know, again, may be just pure politics, but yes, reelection is important. But if we default our debt, theres going to be hell to pay. And many of them might not get reelected. So a final concluding points you did with every great husband. Do you dedicate the book to your wife who is here so he could stand up. I dont want to embarrass, but wheres the name come from . Her name from when she was a baby, she chirped. And so her father called her cricket and she never got over it. So shes had it for just a few years, right. Well, were glad youre with us. But in all seriousness, you dedicate the book to your wife, but also to your grandchildren. And so my question, what will art children and grandchildren inherit and what concerns you the most . And where do you rays of optimism . Well, i theres lot of concerns obviously looking the title of my book but i think the optimism is that we just have to at some point realize that we have to turn our ship we have to get that our bubble, if you will. And it may take another couple of years, another president ial election. I dont know what its going take, but we we we need to look at the fiscal situation in this country. We need to really relook at a lot of our programs and aid, you know, the bali Party Politic has to, you know, sort of meet more the center, i mean the Bipartisan Center is so incredibly important that and theres some other groups like that are trying to pull the center and thats what we need to do. But right now, getting pulled so far apart on the right and the left and it is extremely worrisome. So give us some advice. Can we do how do we bridge that . That seems to be sharp and getting sharper and in our polarized media political environment is, it is really tough. I dont think have all the answers. I its i wish i did i think, you know, we have a country thats built a two party system and the two parties are getting farther and farther apart, which in could leave something in the middle. But, you know, with our electoral college, dont know if that could ever happen that you could have someone because you know i, i come from connecticut its a very democratic state. But you know, theres a lot of moderates on both sides that state that, you know, would coalesce around someone in the middle. But they wont do it because they know its a wasted vote. I wish there was way to get around that. Im not sure. You know, maybe no labels has something up their sleeve that they can do that. But. I it is hard. I mean, when you see the Republican Congress being so pulled so far to the right and you know, i think some of the legislation after over the two years was too far to the left. Well get the job right here. Done. Okay. Its up to a Bipartisan Center, america underwater, and sinking. Thank you for your service, james. Thank you, steve. Pleasure to be with you. Thank you so much appreciate it. It is an honor and a pleasure to be able to introduce dr. Ricardo new ze