owner of the company. i don't really know how many are left. the last-place oil company said it price of gasoline is at the wholesale distribution point, which is known as the rack. i could go on for an hour about this. when the market goes down they move those prices down. it is too competitive at the wholesale level. you can't have too high a price because people will run away. if i am the owner of the station i'm going to keep my price up as long as i can. they are out of that business. the exxon station, the price of gasoline is set by the owner of the station, who has a congrats -- has a contractual agreement. of times pere heat day of the market is volatile. host: you can check it out online. always appreciate your expertise. is going to be our show this morning on the washington journal. take you live to the brookings institution where it held discussion is getting underway on defense technology topics include robotics and 3-d printing. that is beginning now here on c-span. >> we've got a wonderful event here today, talking about defense technology. number ofd to have a members of our national security industrial-based working group from a number of america's greatest companies thinking about technology innovation across defense and nondefense sect is. the panelists represent companies that have been part of our group in an important way for a number of years. i'm going to see a brief word of introduction about the topics. trying to look at a few specific areas of defense technology and innovation. a lot of you have heard about the one we are going to begin with, 3-d printing. we are also going to talk about propulsion technologies, which are a long-standing interest of the u.s. military and an old-fashioned area of technology . and yet one of rapid and ongoing innovation. and we are going to talk about software and the way electronic systems and other kind of systems that have a heavy electronic and i.t. component has to be thought about day, has to be improved. all of this relates to big themes. to what extent is technology need to so fast that we emphasize pursuit of the revolution of military affairs, perhaps even more than we have been. to what extent do we need to make sure adversaries don't do it first? a lot of exciting and important things are happening. we don't need to get overly excited or disruptive about our allegations. this relates to the debate about sequestration or the defense budget. someis going to happen to of the innovations we are trying to facilitate or promote if congress does return in a few weeks? it can't figure out a way to stave off this looming budgetary showdown and the possibility of thingser, which these don't look all that horrible to the average observer, because it typically involves a percent of the defense budget. whether we get to those topics or not, we hope we will raise them in the discussion period. ask the panelists about areas of general technology before we go to your questions. sitting immediately next to me .s brandon hogan she is going to lead off our discussion on 3-d printing. i will ask her to say little bit more to explain what this area of technology is. an area being touted as a remarkable important area of innovation that could change everything. we could produce technologies and manufactured technologies in ways different than ever before. to what extent that is partly hype? to what extent that is real? she will help us understand. as jim joyce, who will speak immediately after her. he has helped a great deal with department of defense. this is not future talk we are going to do. we are trying to think of what the dod can do in the short to medium term. another outstanding defense company. he will talk about software and information technology. he will be the electronics guide. i will be looking to him to help explain how to define areas of innovation, what part of the defense sector he is most focused on. jimmy to my far right. we will talk about engine and proposed technology. we will also {harbor have a chance to say a -- to talk about whatever he thinks is to be done. america still enjoys defense technology. that is the general framing. thank you for your indulgence. i would like to begin with brennan. to help us understand what realistic prospects are in the short to mediate term for the department of defense. m i appreciate all the baseball analogies, i'm sure we can keep those going. >> i appreciate all the baseball analogies, i'm sure we can keep this going. there have been numerous organizations that have been using it. have gone toou build sand castles at the beach echo a few of you. you can build a sand castle two ways, you can fill up the bucket with sand and put it down. you can put sand and water into a bucket and slowly drip it. layer by layer. at the end you have two castles. similar in structure but different makeups. that is what added manufacturing is. the old way of making a sand castle and new way. dod and theirthe supposed -- and there supply chain. just because a new technology can provide a service doesn't mean it necessarily should. we are trying to help the department of defense understand what are the implications of applying this technology. it is not just make sure you have the machines to print the material or actual part. it is not just making sure you have the material that is chemically able to produce the part and make it the strength and heat in to see you need. what are the standards you need to apply echo how are you going to test these parts? do you test some of them? all of them? what are the implications of turning this on its head? you have the parts that are manufactured and then they go on to a piece of machinery. started has already deploying the technology. does that work? what are the skills you need in the workforce that is doing that in the field? another key area is the security piece of it. the department of defense does not own all the data. what is the conversion process? is it worth it? is someone else in between and how does the all fit together? if you have all that data out there that can produce critical parts or pieces of machinery, how do you secure that so doesn't fall into the wrong hands? that is what we are doing and looking at and how we are tried to help the department think through the application of the technology, whether or not it is disruptive and effective. michael: let me ask you a quick question that will be a segue .nto jim we are going to try to connect some of these innovative technology areas. dodme ask how much of the legit to be listed lee wind up in the manufacturing realm by 2020? we'll know the procurement budget is about $100 billion per year. the research development budget is around 70 billion. operations ande maintenance budget involved with spare parts and other things that do involve purchases of hardware. that may be another 30 billion. is manufacturing so revolutionary we are going to see tens of billions of dollars of dod acquisition produced throughout the next few years? is it more moderate and incremental? brennan: i will not venture to guess a number. i think the most effective way of applying technology would be in a modest incremental way. they supply all of the parts to the services. hundreds of thousands of parts every day. some of those are high in demand. you may need to replace the part every 10 or 15 years. mayoriginal manufacturer not have the coin to create that part. there is the need for the potential use of added manufacturing. this is a project we are actually working on now. evaluating which parts can be and still actually have the same functionality they originally had. is the demand signal appropriate? and then do you have the data? then do you have the type of to getl and 3-d process the parts you need at the end? i think our recommendation is it is a modest incremental and more of a 15 year time frame. there are significant parts you can potentially print if you go through the process of evaluating the application of it. -- with with ongoing one article in question in my mind, how big of a deal is? was going to happen in the next 10 to 20 years? jim: i would qualify my qualifications by saying a couple of things to bear in mind, the next hot toy of christmas is going to be added manufacturing. of theocratization ability to manufacture inks, the breaking of the tyranny of scale of capital machinery and people will be the basis of the profound revolution. cheap robotic information technologies could break this scale. what set hurled do we have to get over in added manufacturing before we can unlock this logistical revolution? it is really part certification. can i replicate that process and results on another machine? can i predict what the finite attributes and functional characters of that part of our? code youcrack that unleash this technology. held is because it is a cost saver. it transfers resources from the tail to the team. the industrial revolution essentially tethered units to an industrial base. pretty significant supply chains, roads, etc.. pre-industrial revolution, you look at the way it should operate in the napoleonic navy. at a sense they could stay at picking uptely, material and modifying the ship. when a new captain took over a ship the first thing they did was talk to the carpenter to try to get more speed out of it. dot manufacturing starts to is it breaks the tether to a heavy industrial base. they have a certain envelope of capabilities to manufacture and repair things. it greatly increases that you are, because working with more and more material than you have fabricated imparts. the revolution comes when you results of the added manufacturing on a repetitive basis. it comes because of the logistical pressure. you are likely to see innovation going on in the wave used to be done. with added manufacturing, many of the units will do away with it. they have come up with a number .f innovations field hospitals, unique meant to treat unique wounds. clamps and surgical guides to take care of those as well. you have this logistical component to it, you have this there isn component this notion of hacker. i have been around for a while. -- can warmer being or putting pistol grips on them. not only a much wider capability , butnufacturing options also social media and communication can be spread a lot more quickly. michael: you emphasized in a very vivid and helpful way the benefit for expeditionary units of added manufacturing. are we going to see traditional manufacturers at home move in or is that whole set of changes going to be more gradual and benefit to the expeditionary units? jim: i think the changes going to be more gradual. contrary to a lot of manufacturers calculus in their own economics. you are going to see the rise of individuals and companies that are beginning with obsolete and frankly going into the mainstream parts as we start to sort out what protected. manufacturing becomes a commodity where folks can just get in. they don't need as much money. they can set up a capable machine shop and manufacture things with very large defense companies. i see that as a result of political pressures. michael: i know you're going to now bring to the discussion a little different area of technology. brennan have been talking about how added manufacturing is a broader set of changes. maybe you can help connect what you are going to talk about to what we have been discussing. i know you have the whole a data of software world and subject matter to address. please help us to understand that and how you see the opportunities going forward. the motivations for these cognitive software systems share a similar inspiration. the water cycle times. capability.ide we were able to work through acquisitions. our adversaries are increasing to commercial technologies. they are moving away from exquisite hardware solutions and .riving we are doing similar kinds of things. if you look at radio systems or electronic warfare systems, we are getting digital. we are also investing in modular architectures. that is only going to get us so far. you're getting to the point where we are fueling capabilities that are going to run up against environments that are ill characterized at the time of design. the thought is the architect that draws from a cognitive kind of analogy here, they have the ability to send environment. if you were to take a radio 20 years ago and crack the list, you find and there is circuits, he were to look at the state-of-the-art radios today most of the functionality they provide lives in the software. we have the ability to upgrade them overtime very quickly. when we put one of those out in the field and get exposed to some interference we didn't anticipate, the desire of cognitive learning is to figure out mitigation strategies in real time. explore options within the trade to configure in different ways and be able to mitigate that interference, whether it is just environmental interference. and to learn over time which approaches actually work. this falls broadly under the and some ofautonomy the key areas for investment that the dod is pursuing. the radio example is one example that is real. the idea is we can come to the system that is inherently adaptable. adaptation we see occurring in the software face. you can build systems that characterize the environment. you can think about taking that same design pattern and ask is the limiting factor in algorithm or configuration? if it is the limiting factor then we can look to things like anufacturing, the prototype alternative that we can then integrate into the system and allow the cognitive process and exploit a more tailored version of that. michael: this is a large fraction of dod systems. i'm not trying to simplify by using the amount of dollars at stake is one of my metrics from the conversation. it sounds like you are talking about the wide array of systems that they manufacture. it is in the realm of discussion here. content --nt of there is no magic bullet in the sense that you inherit other how do youallenges, make sure the systems are adapting in the field and provide the kind of performance you want. there are some issues that need to be resolved in the performance, those kinds of things. we are in an environment where our adversaries are able to increase their cycle times or decrease very quickly. michael: one more question that occurs to me, the difficulty of writing good software. you are talking about a partial response or solution to that in -- it sounds like you're talking about an ability to modify and adapt and therefore not be locked into the system you started with. it can also be beneficial if you made mistakes in the original incarnation. if there were some other problems that we could fix more easily as we discover in the field. >> very complex systems would have to be implemented. i don't see this as a technology that is going to make our software better. there is a challenge associated with how often we characterize the objectives or desired performance. that is locked down in a fairly rigid kind of way. i do see this as having the broader ability to a data environments we couldn't have anticipated. >> you folks know as much about engines as anybody. if i could turn that over to you. >> it builds on what we heard already. as an engine manufacturer we use things like software and work on how we improve software and make it more adaptive to we look at technics like additive manufacturing and how we can they jet engines faster. day we alsof the see this adaptability roll up at a higher level. what we are looking at his 2012. the dod released a very new and different defense strategy that called for a smaller more agile and even as we are transitioning to the third offset strategy, we see very consistent scenes there as the department tries to get more and more out of the system's advice and seals. we are seeing the same thing and propulsion, and jet engines for aviation. that is important. if you follow along, i do jet engines because i love the thrill of the roar when the jet engine goes. it is a bedrock of our national military strategy. it is part of how we do power projection around the world. aviation has advanced tremendously over the years. every really significant breakthrough we have had an aviation, especially in tactical military aviation, has been built upon and advancement and propulsion technology. right now, we are on the cusp of another breakthrough with the introduction of adaptive engines. what do i mean by adaptive engines? let me give you an analogy. it is a timely analogy. if you watched the tour de france, you watched cyclists from around the world trying to negotiate a 3300 kilometer course across france. widely varied terrain, sometimes it is fast, sometimes it is hilly, sometimes it is plain old mounds. all of these guys have the same goal to get there first. to get there first, they have to be efficient. they have to sustain themselves and their bikes, 3300 kilometers. how do they do that? ears on theire bicycles. they change the gears. they optimize the performance of to adapt to whatever the terrain offers on the course. that is how they make it work. they do it to a level that we can't, but that is a different discussion. we are trying to effectively do the same thing in jet engines. we are partnered with the air force on a major program called p, adaptive technology program. you have a string that goes through the center of the engine produces a little thrust. its primary focus is to power the rest of the engine. then you have bypassed. that is what produces thrust. when you design an engine, it is a single point design. you ask, what is the most stressing requirement i need to meet? you make sure it can be that. everywhere else, you take a penalty, usually in efficiency. it means payload, fuel-burning. what we are doing in this adaptive engine program is introducing a third stream of air that we can modulate. by modulating it, i can adapt or optimize my performance no matter what the flight conditions are. by doing that, i get tremendous improvements in overall mission capability, flexibility, range, payload, effectiveness overall. it is a big deal. that does not come without challenges as you can imagine. adaptive engines are not new. we have been doing it a long time. in 1958,ed the j 58 the world's first adaptive engine. the reason we do that is so that the plane could take off mock zero starting off and propel to incredible flight speeds and sustainable mock three. more recently, we are filling the f 135 to power the strike fighter. if you are watching that, you know that the marine corps b is ablehe f 35 to operate in conventional flight, as well as transition into short takeoff and vertical landing mode. what happens when you make that transition is you introduce profound changes in how the engine operates. the engine adapts to that. by adapting to that, it is able to seamlessly accommodate those changes in what it is doing. about what is different what we are doing is you look at those two programs -- they were amended -- meant to adapt to specific part of flight where is tp program adapt everywhere. it gives you the full benefit of efficiency throughout. you can maximize the capability of your airplane. it has a lot of technical challenges. we have had design and architecture challenges. we have a constrained invigoration. we have a requirement that it must be three streams and fit in a certain size. by doing that, it forces trade-offs. we are pushing the envelope on temperatures. we have technical challenges in terms of how we work on the andrials and coatings things we do to resist temperatures. we have challenges in software. more complex control systems. challenging and manufacturing. some of the parts are complex. they require new ways to make components. we evaluate those. and the bigger scheme, we advance all sorts of advanced manufacturing techniques, including additive manufacturing. on top of all the technical challenges, we are trying to do this at a time when we have tight budgets and a lot of things going on in terms of policy and procedure. we are successful. the program overall is proceeding well. our design is proceeding well. we are projected to meet all of our performance goals and cost targets. on top of that, we are right now working with the air force to plan the next program, the adaptive engine transition program, aetp. that is a $2 billion investment by the air force with ourselves and ge to develop and mature these designs even further. the reason i mention that is that it underscores the importance of these technologies going forward. as a recognition of the importance of adaptive technology, at the how do i make things work level all the way up to the systems level at -- as part of this overall defense strategy. it is exciting. there are a lot of things going on between additive manufacturing, i software, and how these play into the systems we build. we are in the -- we are on because of some breakthroughs. >> i have one more broad question, maybe a couple smaller derivatives for we go to all of you. i would like to broaden the scope. you have all done a great job of explaining specific technology areas. what i would like you to do is reflect on what it all means in terms of the overall character of the defense innovation today. are we and eight. -- are we in a period of revolutionary change echo in a of domain changes that lead up to rapid revolution? should we think about the defense budget, should we be fundamentally rethinking how we allocate resources? you mentioned the third all set. to explain, this is the idea that in this day and age, we need to think about how to take advantage of our technology areas of excellence, just as we did with nuclear weapons in the , air,cold war period land, and battle precision strike in the desert storm period. the same question can be asked about china and iran and cruise missiles. taking advantage of the things we are hearing about today to give america i note we forward in technology excellence. maybe you would define it differently. like forion i would the panel to work on and ask anybody who wants to venture an opinion, how do you feel about where we are today in 2015 in defense innovation? a broad historical sweep -- is this a period of historical change, or a part of evolutionary change that is continuous with what we have seen in the past? new things are happening, but the pace of change is what has happened in the past. i am not sure if that is an overly philosophical question, but i think it has real-world implications. that is why i put it on the table and turn it over to you. think about this generally the way technology has a lot in the last 10 years, you think of the invention of the telephone and how we have gotten to smartphones. the invention of the cell phone and what we have gone through two handheld computers in our pocket. things are moving at a much quicker pace than a half since the industrial revolution. the other part of it is that there is a recognition that with all of the problems that the defense department is facing with constrained resources, transitioning workforce, a great deal of people who are retiring. there is a knowledge transfer issue. you are faced with new threats abroad, the changing landscape of national security and foreign policy, isis, all of that. you cannot just throw technology at the problem. that is not the solution. you cannot throw money at the problem. think there is the potential for revolutionary change, but in order for it to be most effective, it should be a thoughtful and considered evolution. take into consideration from a philosophical or strategic level all of the potential implications across how you support the war fighter and how you support the mission. whetherw technologies it be jet engines, adaptive software, additive manufacturing, nanotechnology, different ways of securing cyber systems. a way thatw those in is considerate to the mission you are trying to support any new stress you see internally and externally. there is a potential for revolutionary change. in order for it to be considerate, it should be an evolutionary change. >> the evolution maybe what you get when you look in the rearview mirror, but is not the goal you set out initially. you don't try to make a revolution. one of the key factors with additive manufacturing is the innovation aspect of it. when you deploy and additive manufacturing machine in the field and you have the capability at the point of me -- at an outpost, add in a summary, the iss, and you can create things you do not already have because you realize you have a need for them. they did not exist in the supply chain and now you have a new technology to create them and use them right away. that is where the revolution could potentially come from. that is where we see the greatest potential currently. the evolutionary change for things like determining which parts out of the hundreds of thousands of parts d.o.a. provides to the service are the ones they are adding to the facture is part of the evolutionary change. >> same question to you. where do you see the current phase and character of the fence innovation -- of defense innovation in the united states today echo white i would characterize it as part of the evolutionary path, but that we better get on to the revolutionary one. there are structural impediments andhe procurement process the way that we look in r&d that keep us from the speed and scope of innovation whose potential is there. that has been recognized among certain wreck -- certain ge saw that their household products were taking too long to develop. but they did not do what customers want it. they set up what is called a hacker's space. machines playpen of for people to try and innovate. you see these around major cities now. there is a sort of democratization of ideas, manufacturing capabilities, innovation. that is what is driving the next wave of commercial economy. the revolution will come, i believe, on the defense side when they start to tap into that. the best ideas can come from anywhere. one of the ways that i talk about it is i spend a large part of my earlier life disagreeing with people who thought workers who controlled the means of production. now the workers control the means of production. we have to recognize that and unleash them. , the innovation, the adaptability, it isn't coming through traditional organizational structures. it is coming from a bubbling up of these new innovative, very free-flowing ideas. oddly enough, as i work with these hackers, one thing that comes up consistently is a lot of them are former military. usually from some kind of m background so-co where the value of getting stuff done is extremely high. i think we are on a path which is evolutionary. i think we need to get on one which is revolutionary. i believe that comes when we start to relook at the way that we are fairly hierarchical and rigid in the way that we innovate and procure. change if we are going to take advantage of the country's economy. >> is comes on the back of reform which is also on congress is played. we will come back to that and eight -- in a bit. how do you characterize defense innovation today in a historical perspective? >> there is an opportunity and need for us to accelerate. the way we are -- that we need to be more deliberate around the way that we are experimenting with this technology in the hands of the war fighters. any dialogs i have been having with some of the leadership is that a renewed sort of enthusiasm around taking emergent technology and the war fighters, getting together and doing some experiment in. we are trying to figure out what the potential technology is? anticipate how the war fighters want to use it. they have far better ways of employing it than i could ever conceive of. it is the sort of iterative rainstorm in process around a structured set of experiments which allows you to adapt the evolution of the technology, the evolution of the tactics, techniques, and her seizures that you will employ. toabilities that allow you see that back into the acquisition process and tighten up that cycle time. evolution ofnd: technology and war fighters feeding back into each other to drive evolution of the field. >> give an example of the kind of thing you're talking about. this is a practical way of thinking about it. >> what is a good example of that? one of the other areas of technology that we work on is multi sensor fusion of data. data fromeeds of radars, imaging sensors, all kinds of different sensors and bring them together. technologist will want to bring everest -- want to ring every single ounce of information i consider sensors. what we find when we engage with the operators is that first of all, that is an intractable problem to get all that information out of every sensor all the time everywhere. positivea nice sort of feedback when we are working with the operators. they don't think of problems that way. they think of areas where they need more information, less information, tips and choose from one area to the other. it drives the process around how you architect things when you're war fighters are visualizing and content -- conceptualizing things differently than where the technologist would go which everything in the system capability. occurred toe that me is armed drones. armstrongs were something that drones was something the air force did not want to deal with in the 1990's. it took a war environment -- the real-world version of extermination and evaluating war fighter need -- to push first the cia, and then ultimately the air force and the services to overcome that bureaucratic resistance to think creatively and bring together technologists with war fighters. we are hopefully not going to have as much fighting to do, god willing, and the next 5, 10, 15 years. to havegure out a way innovation without the wartime push. is that a fair example? >> that is a fair example. jimmy, one question for you, but let me proceed with one vignette he had in april. and the former secretary of defense, now ceo of an american branch, i asked the, how would you evaluate strength of the american acquisition system today? he said it is pretty good. we make the best weapons in the world. a -- ip plus, maybe a b-. a+, maybe then he said i agree with platforms and engines. he did not say that, but that is the kind of thing he is thinking about. he said, i don't think we do well with electronics wrappers more -- wherever moore's law is relevant. on that front, we need acquisition reform that jim was talking about earlier. i am blending and paraphrasing. to put the question to you, we are hearing a couple different things. we hear some people say this is of rapid innovation in some sectors, and it should be even faster, perhaps area you are talking about ongoing increases and propulsion that your company has been doing for decades. that strikes me as impressive but it is not necessarily more rapid today than it was 10 years ago. is the pace of innovation fast in some areas and slow and others? how should we think about this holistically? that thed argue potential for revolutionary advancement is absolutely there. we have heard that already with some of the things that we have talked about. where we are, though, is that we have a system, and acquisition system that is built to deal with that. why? you can sum it up in one word and that is complexity. all of the things that we talked about this morning introduced complexity. other things introduced complexity. we heard about the various things you can do with additive manufacturing. how do you manage that strategically? that adds complexity to it. everybody would argue that the more software you have, the more complex a system is. therefore, software means complexity. the engines we are talking about are more complex. when you look at all of these ofngs together, and a myriad other technologies and things we are doing, it adds complexity. add to that mobilization of the industrial base. globalization of the supply base. customertion of the base. all of that adds complexity. new threats and things moving at different paces around the world. that has complexity. when you put all of this together -- by the way, with the budget environment we are in and the uncertainty of funding from your two year uncertainty of requirements from year-to-year -- that adds laxity. what happens is that as you add complexity, we have a system that does not handle complexity very well. it is very risk-averse in that since -- in that sense. why? these things cost money. they cost taxpayer money. the department is trying hard to manage it as effectively as it can. what it does is at risk aversion into the acquisition process and makes it hard to introduce some of these more complex but more revolutionary capabilities very rapidly. we have no tolerance for failure. we have a system that is more willing to tolerate a budget increase than eight performance shortfall. we keep adding this and adding this so that things take longer and cost more. as a consequence, instead of a revolution, we take risk-averse approaches, more often research -- off the shelf technologies because they are theoretically less risky. we take incremental approaches because i have more confidence that i will get there. even in that, i take longer and cost more because of the complex of the of what we are dealing with. i have one question derivative of that before we go to all of you. it has to do with the ongoing question of acquisition reform as it is being considered on capitol hill. i will put the question in the following terms. as it has been to me, one way to think about the debate on capitol hill and why the problem is difficult to is that there are at least two competing ways to think about the number one priority of acquisition policy. one is to make sure the taxpayer does not get ripped off and we minimize any potential for the hammers of the 1980's, and we want as much oversight to make sure that doesn't happen. another strand of thinking says that if you overdo that, you will have so much regulation and that weight sitting over corporate america that a lot of companies will not even want to work for dod. those that do will spend most of their creative juices figuring out how to comply with regulations than create new technology. i think you would concur with the school of thought that says we better be careful with over regulating and over monitoring, not that we are trying to encourage a lax environment, but if we over regulate, companies will fail to innovate. i want to make sure i heard you write and give you a chance to say anything you want to about acquisition reform. >> the truth is somewhere in between. if you deregulate too much, you run the risk of the taxpayer getting ripped off. i would like to think on behalf of my own company, but i think most defense contractors are very mindful their responsibility to our ultimate the american people. we take a commitment seriously. by the same token, we don't always agree on a business basis with what our customer wants to do. that is a natural thing that is going to occur in any relationship like that. that being said, you clearly do not want to create -- the government has a responsibility to the taxpayer to be fair and transparent. you have to do that. the question becomes how can you do that but at the same time give industry the flexibility to do what they need to do? i don't know that there is a good answer which is why acquisition reform has been a buzzword for decades. a continues to be something that we strive or and continue to struggle with. i would say that is the hard problem of the century. nevertheless, it is something that we have to strive to get better. there is a balance there. there is a balance between letting industry innovate and take responsibility and put goods into the hands of the war fighters that meet their needs while making sure that the responsibility to the taxpayer is upheld. >> let me follow up with a specific question. is there one word, based on your current understanding of where ongress is what this debate july 31, 2015, is there one word of advice you were given to push this process to the next realistic level? knowing we do not have a silver bullet and for all. one word of advice you would provide? >> one thing i would suggest is to understand the difference between business and government. in understanding the difference between business and government -- understanding you cannot run government as a business and you cannot run business as a government -- if you can understand the difference between the two, that helps to settle that relationship. thank you. >> dave, any thoughts on acquisition reform policy? >> likewise, we take our spontaneity very seriously as most of us are. do. i think it is about balance. at the extremes we get behavior that none of us want. in addition to finding the right balance, we need to step back and reflect a little bit on the kind of acquisition objectives that we want to have as we see the cycle times and technologies coming in. thingsble to acquire that incrementally add capability over time. it is a different kind of acquisition that you do there. that seton to getting point right, we have a joint responsibility with our customers to make that happen, it is also reflecting more on how these iterative, incremental givecements help us capabilities into the hands of war fighters were quickly. there are challenges associated with how you acquire those kinds of systems. >> where does that have to happen? where is the number one roadblock now? is it an existing law? is in the culture of the military services? isn't the nature of the acquisition work first? i am sure you will say all of them. if there is one community, one part of the process that is most in need of fixing today, what would that be in your mind? >> i think it is in all of those areas there. i think that the technology and future capabilities don't necessarily respect the organizational constructs that we have right now. increasingly, technology has been forcing us to think about acquiring things that involve their stakeholders in ways that we have not had to in the past. that is the way it is. part of it is a to medication across folks, both industry and government, that form that stakeholder community that have not been regularly working to acquire those kinds of systems. >> jim, you call for those kind of revolutionary changes. >> i think we just heard a million dollar comment here, which is technology does not respect the current organizational structures and the way that it was adapted. you could have a pretty good what era ourt current system harkens back to. some people would say is the civil war model. resources. mass and we need a procurement system that is not about mass. we need one about adaptability and effectiveness of what we are procuring. we need to look at the procurement system not so much in terms of whether we have enough regulation to protect the or are wer not acquiring the right weapon it ins, we should look at terms of how do we widen the base or the resources being used for developing and using the systems? when i talk to folks in private industry about their technology and how it is being used by the department of defense, they repeatedly say there are a lot of folks out there like the chinese there are much better at taking innovation, wherever it is, and bringing it in. of archaicis one procurement, in some ways. acquiringt programs, large capital expenditures. it is not driven by innovation. or adaptability. if i were to counsel the folks going home on vacation, i might tell them not to come back -- [laughter] also say the game has changed. it is not about massing allocatingnd budgets, it is about accessing the full continuum of innovation and militarizing effectively as required. the responsibility is not around protecting taxpayer money. or executing big programs. it is about winning. a lot of folks in private thestry will stay transition of civilian technology or technology wherever it is into military use, we are losing our lead on that just because of the sheer weight and the wrong model. brenan, one question that occurs to me is if the glass is half-full or half-empty. we have contending themes and our conversation. there are themes of saying making the best stuff in the world, we are doing interesting things across the domains you have been discussing, and yet, notre bureaucratized, we do really innovate, especially in peace, very well. do you have a bottom line view? a perfect that is segue. i was trying to think of one word i would apply. i think it is two words. i would counsel congress on being realistically optimistic. which is a way of life i tried to us out to. you cannot have everything all the time and you cannot think everything will go well all the time, but you can be realistic about the potential. all of the organizations we represent, we have the taxpayer in mind. there seems to be a struggle between those of the current and their understanding of what the industrial base is trying to do. and whether or not they have the war fighters best needs in mind. lmi was started because secretary mcnamara recognize the need that someone outside the pentagon needed to look at logistic issues facing the military 50 years ago and tried to solve those complex problems. we have continued to support that mission. atcontinue to look innovation as a way to support the mission constantly. there is a great spirit, not to get philosophical, of entrepreneurship and innovation in the country. that will drive potential solutions and evolution and revolutionary opportunities that there is. trusting that entrepreneurial and innovative spirit will be ok. if you fail, at least learn from those mistakes. it is an accurate and efficient investment in the technology. it is all worth it. but the process and structure, as the gentleman have recognized , it does not facilitate that process. it ties it up to the port that people who might have the solution do not want to even participate. i would counsel congress to be optimistically realistic about the future and have more trust in the private sector and bringing these technologies to bear on public-sector problems. >> in what way is congress not trusting the public-sector enough? they pushes dod to use the traditional methods of procurement? what is the specific way in which congress gets in the way? ms. hogan: the acquisition process is own -- is so cumbersome and their requirements do not meet the needs of the requirements being proposed. ofif there is a new way solving these problems, there is not a recognition that you have to evaluate it in a . you are trying to apply old policies to new solutions. there is a disconnect on how you do it. also a fear of the unknown. if you do not have all the answers at the beginning or if process is not educated enough for the individual evaluators and they do not answer it, and spent -- instead of answering questions over and over, there is a fear and shutdown of the process. it is just the general bureaucracy. complexity. i would characterize it as read tape. in theunt of complexity acquisition process that prevents new solutions from being applied. host: we have about half an hour left. questions at a time. you can pose the question specifically to one person to help. it is preferred. we will do to at a time. the woman in the fourth row and 90 gentleman in about the seventh row in the aisles. good morning. thank you for your comments. i am an independent consultant. my name is margaret coke. i have a background in lifecycle management in the air force. my question has to do with product manufacturer approval. tore is that with regard this whole process? constraintsk budget , that was an area we were looking significantly at. i would like to know if you have an update. jimmy, you probably know most about that. host: we will get to on the table so we can pick and choose. with the association of american geographers. my question is probably for brennan. we have been advocates for the stem education. as we talk about revolution and evolution, what are the implications for the 24th century war fighter? how has the defense department been thinking about what these were fighters will need to do with the new technologies in mind? host: we start with jim. mr. joyce: pma becomes , especially with additive manufacturing. i can take it apart and figure out how to do it on the field. into, the problem you run especially with aircraft systems, there are certain characteristics of those parts you have to have. material properties as well as qualities like surface finish and dimensionality and things like that. them, thatot have part can fail. when it does, it will be in a not good way. when you go through the pma process, the whole idea is you have proven you can produce that part to have the right quality so you can have the quality part do what it has to do. andou decentralize that take away the authority you are given, things like additive manufacturing can challenge that authority. manufacturers, we stand by the quality of our product. that is our challenge. if you start flying around products that have parts we cannot stand, it makes it difficult for us to stand by our products anymore. where we are on pma is it is a bureaucratic, authoritative process. where you can successfully do it, it can drive competition and cost improvements, but you have to be mindful of the quality issues. as we look at things like additive in you that may become more complex. stemogan: with regard to education, we work closely with universities in our research and development programs. we do internal r&d and academically funded r&d. one thing will look down is how do you provide the workforce that can actually use the technology. and what are the skills and capabilities they need? misconception that when you use new technology, it can throw all the other stuff with the bathwater. that you do not need to know traditional engineering aspects. physics does not change. the technology that will have to withstand those physics when you produce a part and put it on a plane or aircraft carrier or suffering, you have to understand traditional engineering aspects, because you have to know how you produced that part in the past and how you use this new technology to create a new part, whether it is a new part or three parts you can print to become one part. you have to have that background and that capability to understand how to use it. as applies to the war fighter, that question continues to need to be answered. we are working with a training and workforce perspective. if you put additive manufacturing on the field and you have an infantry unit that who inise ,-- 30 guys, that team has the capability to use cad files and 3-d data to print part? these them piece of it continues to be an area where there is a growing need. there will be a need for specialists and generalist who can facilitate the process so the technology can be applied in a deployed or forward setting. host: we take two more. these gentlemen here. thank you. john harbour with national defense magazine. this question is probably for brennan and jim. can you give examples of the way in which the services are using additive manufacturing now and what their plans are to utilize that technology? >> randall doyle from georgetown university. i want to look at this from a different angle. the process of acquisitions, i want to talk about external factors. with the advancement of technology in china, how much pressure is there on you to produce these products for the military and so forth. maybey because -- and they'll be the process of breaking down some of his this red tape you talked about. >> i will add one more so we potentially have a question for everybody. >> thank you. ims he elliott horwitz, former member of the intelligence community and the state department and world bank. for mr. kenyon, i had a question. what is the rate of progress from our major adversaries? chinaople's republic of and the russian federation in terms of adoptive propulsion? host: we begin with jim and work across the panel. characterizewould the use of additive manufacturing amongst the services as islands of experimentation. in many ways driven by either haveiduals or units that an inherent interest in innovation. so these concrete admin -- examples of how it is using -- these concrete examples of how it is being used in the fields would be these machines with so calm. i mentioned the antennas. there have been modifications to weapons so that rather than being mass-produced, are more custom fit to individuals. there is an example of something that was used for a sling underneath a helicopter that was made in the field. i would say that this is not new. when you talk about the navy, it is inherently in the navy's dna to do this. a shift on the ocean will keep going. the machine shop will, with a solution. what this technology does is it widens the possible solutions the machine shop can execute on. path in the past -- services is a function of need and immediate need. there is nothing like having to solve a problem that causes you to propel a technology forward. in the industrial base, the is bion of the technology i-fluctuating. the machines and the material and the price envelope on them is crashing. class, the commoditization is going on for material and machine. there is also a group of machines and materials that are becoming highly specialized and regarded as a competitive advantage. if i were to turn to jimmy and say would you tell me how you have locked down your profits and eliminated their ability, how do you turn to your finite element analysis? he would not tell us because that is the competitive advantage. there are folks with a lot of capital that are truly differentiating themselves in manufacturing. and they have to build the machines themselves. the machines available are not up to snuff. , industrialrcial sector, it is playing out as a is this a commodity type capability with, any materials or is there an opportunity to create a distinct competitive advantage? it takes a so far is lot of money to lock down the processes and create parts. you have an advantage over other companies that a significant and justifies that capital investment. >> you want to add an example or two? ms. hogan: there are two key .xamples that are helpful the navy has been using additive manufacturing a number of years. the naval dental school has been printing bridges for people in their mouths or probably almost 30 years. with the evolution of additive manufacturing, the customization to an individual person's physiology, there is a great opportunity there. medical services continue to provide that. there is a lack of infection with customized prosthetics or skullcaps with traumatic brain injuries. the so calmample is -- socam forces deployed in afghanistan. infantry units were given flashlights. there was an exterior button. they will could be a flashlight in their pocket or on their pack , and every time they walked, it would turn on and off. and said we need a cover for this. cover, cameuced a up with one for the flashlight, and printed them on the field and provided them immediately. that is a key example of the innovative aspect of it. and that it is continuing to go on. services, they are constantly pushing the envelope because they are primarily there to support the war fighter. and sometimes they do not want to put up with the impediments about supporting that mission. they are pushing the technology from a strategic perspective. that is where we are trying to help dod across the services. having a comprehensive strategy on how to apply the technology. that is a little hard to answer directly. here is what i will say. i will touch on both these questions. there has been a lot of investment and work going on in russia and china. that has been fairly public. there have been articles therding china's desire on commercial side. to develop propulsion capability. clearly, that is something that bears watching. if you were to watch secretary kendall's remarks, we have a new billion-dollar investment in propulsion. even while we are struggling in other areas. why is that? recognized as a differentiator for the u.s. it sets us apart. so keeping that technological lead is a reason for that. looking at the bigger question, it is remarkable. in this nation, we have been able to rise to the occasion when we have a national imperative. when you go back to world war ii, we had this thing going on in europe and in japan. the results of that was a tremendous loss coming up the ,efense industrial base particularly in aviation. we produced airplanes. to them on production lines day after day because we needed them. the government and the industrial base found ways to do that. fast forward to that. once sputnik was launched and detected, we took off. werehat long later, we putting people on the moon. that is just one part of what turned into the cold war and the technological advancement that was the cold war because of a compelling national imperative. where are we today when we consider what we see going on in russia and china? and when we look at the defense strategy we hear about? is it a compelling national imperative? when you look at our acquisition system today, you might argue not yet. but are we headed in that direction -- maybe. host: anything you want to add? mr. logan: from additive perspective, i spend a lot my time in the r&d spaces. aboutbeing able -- it is making prototypes quickly and cost-effectively. there was a proposal review a couple weeks ago. we talked about how to modify a system going into phase two. moree experimenting with sophisticated materials beyond aluminum, in that case. pace of ours to the adversaries and what we are doing technology wise and capability wise, i am very optimistic. in the sense of some of the dialogues i think are occurring. you do not have to be more than a few minutes into the conversation with secretary kendall on this kind of topic for he asked are you getting the data you need? are you getting the conversations about where our adversaries are going, where our differences are and what we are doing to potentially overcome those? stokley and the navy. they are keen on making sure those conversations are occurring. operating injust stovepipes either. i have seen good conversations across services. i do not suggest those conversations were not occurring before but now they have an intensity that i can see the difference. host: one more round of questions and then final comments. i will say that we have general campbell coming from afghanistan to be here tuesday at 3:00 to stop about -- to talk about the state of play there. we may or may not have another opportunity later to say thank you to a departing group of military leaders that, as many of you know, are leaving en masse. the chairman and vice chairman of the joint chief of staff, chief of staff of the army, and probably chief of naval operations and a number of others. those four seemed be changing in the coming weeks. the navy part still in transition, i understand. but we want to thank not only the generals and the admirals, but all of the people who have worked with them in this intense period of military activity. when we think the panelists, let's keep a round of applause for all of these wonderful military leaders. it is a historic moment as the u.s. makes this transition out of war. almostthose for leave simultaneously brings it home for me. so let's get three last questions and then a final wrapup. a question at the very back and then you'd two here. i am from boeing company. i want to thank the panelists for a very informative session. to ourtion is related site will aim it at jim. you talked about the application of additive manufacturing to ofistics and other aspects it. do you see evidence of how additive manufacturing is changing design philosophy? our people starting to design for additive manufacturing? host: the gentleman in the fourth row. i am with the cowen group. i want to ask what initiatives dod funding either or potentially other departments, for additive manufacturing? for example, the white house moved to set up these -- this national network for manufacturing. the first center is on additive manufacturing based in ohio. dod kicked in a fair amount of money to fund that initially, i. can you, and on how that is going and are there other initiatives like that coming down the pipeline? host: thank you. over here. sean linkous with federal computer magazine. you mentioned that adversaries are moving away from a hardware-laden approach to more software and having digital things earlier in the cycle. that might be a crude summary of what you said, but can you elaborate on what you mean by that and the implications on how the u.s. does business in that field? host: there was one more hand and i will bring that into the mix and then we will wrap up. >> i am steve berndt, a soldier and defense fellow, though my remarks on my own. i can getke to see if remarks related to 3-d printing and energetic materials. we heard about componentry and parts. if you can look at individual cartridges for soldiers weapons being produced forward. it are dropped munitions so they can be more flexible and adoptable more efficiently placed in the hands of war fighters. so opportunities and efforts, what is going on now that you know of. the merits of this kind of research and effort. and the defense ministry -- the difference and academic partnerships. host: we work from brennan downward and can cover all of these questions. ms. hogan: i can speak to three of them with regards to logistics. in terms ofs we see applying additive manufacturing is you are turning the supply stand on its head. you create the part at a manufacturing base and then it gets put on a component or sent out to the field. supplypush the entire chain forward and put the machine in the field and your printing in the field, you are truncating the entire process and meeting the need exactly where it is. the potential there is great and significant in condensing the whole supply chain. and looking at reduction of inventory, reduction of the money spent on the space where all of these parts are housed. but it has to be a thoughtful process. which of those parts, is there a business case to truncate that, logistics and supply chain. with regards to the question about academic partnerships, a lot of the university's work with organizations like myself. the youngstown, ohio organization, it is an .nitiative born out of the dod it brings together industry, theemia, the services, and apartment of the fence to have these conversations and push technology forward. facilitate the acquisition process. introduce the entrepreneurial spirit you have in the small organizations that focus on 3-d printing and potential implications. they may not have a familiarity with the dod contrasting process like most of us do. there are a number of investments the dod is making directly with schools. penn state and virginia tech are two schools we work with, since the 3-d lab at penn state and big dreams love -- and the dreams lab at virginia tech. and different organizations in the dod are working with them collaboratively to look at the potential implications and what the processes are. what parts or components could be printed. we do a lot of work where we facilitate that conversation. questions and investing our funding and advancing those questions and using the academic expertise. the graduate students in that program still have the traditional engineering and manufacturing background and then are advancing it so they can ask how do you look at a part and put them together and look at how they can be printed. those are some of the things. hopefully i covered all three of those. just --e: i think you address the question around design for additive manufacturing. i characterize it as being an art and not an engineering science. the design software needs to take a jump forward before it catches up with the technology. there is a lot of lack of understanding and knowledge about how you design the digitally optimal part, as it is sometimes referred to. it toy ways, i compare when composites came into metspace and everyone was a al person. there a cycle of getting composite education to engineering schools before it really flourished. that took decades really. there is some of that going on with design for additive manufacturing. there are two interesting things in the design for extreme space. the first is where designs are coming from. we all heard about competitions being run on jet engine brackets. for parts coming from design and art schools used in industrial applications. there is this democratization occurring. where do you go for ideas and solutions to include the actual users of the product? the second thing is that my experience on the design for additive manufacturing paths often gear off and start -- there often start designing for their own supply chains. if they let the economics and the means, they revert back to " i don't want to change the part, i just want to be able to build it at the point of use because of what that does to my logistical requirements, mandatory requirements. what it does for a disappearing source of parts etc.." host: dave? >> maybe i motivate that within a sample of taking back a couple decades or more. there is a set of enthusiasts that have these scanners and they listen to things going on on the radios. if you had one of those 20 years ago when you would do is figure out what you want to listen to. you go down to the local electronics store and you buy crystal. you up in the back of the radio and you put the crystalline there and you had you slots for crystals. could change your mind go back to the store didn't -- get a different crystal. you could use the device to listen to the radio frequencies that were most of interest to you. we take for granted that same kind of product, you enter in the frequency you are interested in and hit enter and you are listening to it. as new formats come out, in large part that new system is able to address and receive and understand those. the reason he can do that is because we are actually converting from the radiofrequency that comes over the air into a format where we do a lot more processing than software. much much earlier. the change to accommodate a new system in this case and a new radio that you want to build a listen to is an upload of software into the system. it is not going down the road in buying a crystal. you can extrapolate from there the systems where we are not listening for communicating. systems where you want to bridge across different radio formats. in the past you might have to have a different sub radio format you want to bridge. that you can ingest all of those in the software to make the connection occur. the real implication is one of efficiency, cost, those kind of things. immy? j >> my son is a huge price of her fan. there are a lot of key ideas here. i think going back to the question on design for additive manufacturing. at the end of the day that is a real opportunity. because it opens a whole new way of making things that can cost less because i need less material. they can take less time because i can eliminate some processes out of my manufacturing line. there are a lot of things i can do with that that frankly just make the product that are. i can take weight out because i don't put things in other places where i cannot remove it later on. i have designed flexible he. right now i have a program where have a major component of a military engine on test. we made parts of it using additive manufacturing. i was able to lay in istrumentation. by doing that don't have to add things to disrupt the aerodynamic performance. it just makes it a lot better. that really is ultimately where we need to go.? what is the catch? it's kind of in our right now. we get used to thinking of physics the way we think of physics. but the way we think about the way we pose our problems and how we do our analysis, we have to rethink not only how we make things but happy design things and how we analyze the physics to take full advantage of that. the opportunity. the america makes initiative. like other initiatives that it happened in manufacturing. america makes was intended to catalyze the industry, to get this started. apparently it is worked because we are here talking about it and company's like my own and others are really heavily engaged in it. we are working on taking it forward very quickly. the part of that -- universities are huge part of that. we have a relationship, we heard about to universities earlier. we have in with the university of connecticut where we are working on additive manufacturing. you go and talk to different companies and you'll hear different stories about the relationship they are forming with their universities specifically for that reason. i think there is a huge opportunity and it is only a matter of time before get the. -- get there. host: please join me in a bit round of thanks and appreciation. [applause] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] [captions copyright national cable satellite corp. 2014] >> coming up at new eastern a conversation from the heritage foundation on alternatives to the public school system and a new law in nevada creating educational savings accounts about the $5,000 in taxpayer money. they can use the money to send children to private schools are spent on school supplies. that discussion coming of a live on c-span at noon eastern. scheduled to get underway at 1:00 p.m. eastern time is today's white house briefing. josh earnest will be joined by energy secretary ernest moneys who helped negotiate -- moniz who helped negotiate thereunder nuclear deal. -- the iran nuclear deal. historynly private in to a font the british navy to a standstill. >> this is unheard of. >> pirates saw the british navy and ran. he stood and fought. >> this sunday night on "q and -- talking-- author about its captain joseph bannister. >> he started off his life but as a pirate but as a noble english sea captain, a gentleman trust of a wealthy shipowners to londoneir ship between and port royal, jamaica. it was known as the wickedest city on d th. spice, sugar, indigo, ye. one day in 1684 someone -- no one can quite determine he stole the golden fleece, his own ship, recruited a pirate crew and went and turned pirate. >> sunday night on q&a. c-span a form with a republican president of candidates. c-span is part three -- partnering with "new hampshire union leader." candidates have been invited to participate. it is live from manchester here on c-span and c-span radio and c-span.org monday at 7:00 p.m. eastern. >> c-span gives you the best access to congress. live coverage of the u.s. house, congressional hearings and news conferences. bringing you events that shape public policy. and every morning, "washington journal" is live with officials, policymakers, and journalists, and your, spy facebook, phone, and twitter. c-span brought to you with the public service by your local cable and settle a provider. -- satellite provider. >> coming up livid about 20 minutes here on c-span, a discussion for the heritage foundation on alternatives to the public school system. until then, conversation from today's "washington journal." douglas aiken is former director of the -- resin of the wreck and action form and he joins us to discuss a report this week that shows at health care spending has jumped back up from the historic lows of recent years. is that jump something that american should be concerned about? guest: absolutely. if you look at the foundation of the federal edge of it -- budget, concerns about wages not rising in the united states. all this leads to health care spending. the big federal projects are medicaid, before double care act. the costst compensationc with health care programs. to see this pending joe baca in a way it has is really concerning. host: was this jump expected as a result of millions of people joining the ranks of the insured through the afford will care act? this is something it was budgeted for the processor unexpected? -- guest: it is the classic horse race. it did things that would and question what cost money. a covered a lot of people and that was the real point. the point of giving people money for health insurance was to give the money to spend for other things. it was enacted at really the bottom of bad recession and inevitably people return to spend more on everything including health care. the architect but some things in there they were hoping would make it less expensive. that would outweigh the expensis. one architect who is now at the university is pennsylvania has had -- said we have to go back and do the job again. journal" "wall street charge. after lows of recent years of health care spending, it jumped in the previous year. what led that jump in health care spending? where the specific areas where people were spending more on? irony isgreat piece of prescription drugs. there are specialty drugs. you care about hepatitis c had thousands of dollars for dose. prescription drug spending is 10% of health care spending now and it was in the 1960's. despite all the sound in fear he, it is not prescription drugs. is the meat and potatoes. a hospital in the doctors and we are spending more on the services. guest: the domestic share the growth the message product spending excited to be upwards 2024, outpacing economic growth. explain why that is a problem. guest: if you look at the horse race between costs and what we spend on health care and income, our resources to do the spending, costs are being resources by about two percentage points a year. that is the projection in this that 2019-2021, we to. are going to percent faster on costs and resources. you can't continually outstrip your budget and expect things to add up. it turns out to be a problem for individuals, their health insurance premiums, and a big problem with the federal budget. host: we are talking about health care spending with douglas holtz aiken, former cbo 2005.or from 2003 two democrats, (202) 748-8000. republicans, (202) 748-8001. independents, (202) 748-8002. i want to go back to the chart that showed health care spending says historic lows in recent it -- was it due to the afford will care act? one, we have the recession. they don't spend money on anything. that but of numbercare spending. two, the phenomenon of employers changing their coverage and pushing onto the employees more the costs. more co-pays and deductibles. people react in a predictable way in spend less. that was going on before the affordable care act in the slowdown happened before the aca. it put into play some additional things, some cuts to providers. cutting the reimbursement to hospitals and other providers. it also put together these organizations known as accountable care organizations. a bunch of doctors and treated them as a single unit that says go take care of people and we will pay a fixed amount. that was the biggest attempt to control costs. i don't think it worked out very well but the bigger pressures came from the employer side of it. host: your thoughts for controlling health care spending going forward? what's the single most effective thing to do in the future? host: start with reforming medicare. it is the big driver of both how we treat patients. the number one thing to do with medicare is put it on a budget. it spends $300 billion more than it takes in and payroll taxes. if you have a program that says you can spend all you one of other people's money, you will have bad outcomes. host: ray is waiting on the line for independents. caller: good morning to both of you. i am trying to understand itut the aca. people call the own affordable care act. -- unaffordable care act. i have for different theories. some people say we take it out of medicare. some people say we have taxes on devices. all these made anhow is the aca hour my tax dollars being used? guest: all the people you are talking to our right to some degree. there are new taxes in the aca. a tax on medical devices and health insurers. there is a tax coming on very high-priced health insurance plans of the cadillac plan. there was a series of taxes ever put in to pay part of the bill. the remainder was to be taken out of spending on medicare in particular. never cuts to medicare advantage, the all-in-one insurance program. that combination of spending less on medicare and adding new taxes was was to cover the bill for insurance subsidies for people to take advantage. host: and with medicaid expansion where are we in that process? how many states? still have to giving -- you don't have to give an exact number of the top your head. at most states picked up the extension? guest: most have. 11 are still contemplating it. the trade-off is simple. for a couple of years the federal government will pick up the whole bill while the states still have administered it costs. after that they have to pick up about 10% of the bill in some states are for political reasons it's not a program they want to support in others are worried about the financial there was ahe road. very healthy skepticism for the federal government will not just change the rules five or six now. without -- from along with former cbo director, he is president of the american action forum. what is that reviewers they don't know it? host: [captions copyright national cable satellite corp. 2015] [no audio] a washington think tank. caller: good morning to both of you. i have one little pet people you put medicare and medicaid in the same sentence. i paid for by medicare for 35 years. medicaid is free basically and i you are cutting medicare benefits and taking the money from medicare when you're expanding medicaid. i live in florida. we spend more on medicaid than we do on the budget. iand florida don't understand with the money is supposed to come from. all the young people that were supposed to join and have not joined. the subsidies the government is . you estimated your income the first year and the irs is handling this. don't they know exactly how much money you make the year before? i don't understand. how shut up and let you answer. guest: so there are a couple of different things going on there. on the medicare front, it is true that individuals have payroll taxes and they pay premiums or medicare. but in the end they don't pay for the pulled -- full cost of medicare. it subsidized 75% of general revenue for the outpatient physicians and part d prescription program. over the lifetime most people would take out about $200,000 more in medicare benefits than they spend -- than they put in. everyone has paid for medicar e. not everyone pays the way to structure right now. medicated split between the federal government and the states. people pay for medicaid but paying taxes. the florida problem is a familiar problem. the costs of medicaid is grown so rapidly a crowding out chunks of state budgets. state budgets really do three things. education, health care, and prisons and there is not room for much else. that is why people are concerned with the resurgence in health care spending. there is a big pressure at the state level as well. the last thing he mentioned was the subsidies in estimating income. that's neither medicaid or medicare. that's the new affordable care act individual purchase of insurance in exchanges. subsidies are geared towards people's income. they had estimate their incomes to start the program. on paper the idea was when you come to tax time the iris with luggage or actual income and compared to what you said if it is higher you got some of your subsidy taken back. i will call that a highly imperfect process. it is really hard to do. and our earned income tax credit, which asks one question, how much did you make? the payment error rate is 25%. host: under or both? guest: both. we made mistakes but there is on net overpayments. in this program, we don't have to ask what c-span page view, we have to get information from c-span about what kind of health insurance they offered, whether it is affordable or not. matching of this information in real-time turns out to be horrifically difficult thing. it is not happening right now. guest: waiting in illinois on our line for independents, good morning. we are talking about health care costs and taking your questions on it. caller: i have two questions. one is regarding malpractice. how does that add to the burden of costs on health care? not just with regard to insurance that people have to carry, the health care providers have to carry, but also how they practice medicine. the other question i had was, are people looking at all of the new rules that are coming into health care and all of the administrative salaries that are having to be paid for people to just become reimbursed? i am talking about on the health care provider site, people are hiring more people, coders, etc., for people to collect. i think that is probably also adding to the burden of health care costs. that may be unanticipated. guest: good questions. on the first most doctors will carry malpractice insurance. a policy against being sued or otherwise being accused of you -- of misusing their expertise. that is an expensive policy. that gets put right into the cost of health care. the bigger piece, as the caller mentioned, it changes the way people practice medicine. defensive medicine, let's use an mri just to make sure. an expensive thing to do. let's get a second opinion on this. it adds to the cost of health care. there is a lot of evidence that tort reform, it can lower the health care bill. different states have added caps on the damages you can impose on doctors. there are alternative mediation approaches where if you follow practices, you are exempt from the prosecution. there are a lot of things to be done. it is a promising area to reduce the cost of health care and still get high-quality medicine. host: talking about the growth of health care spending, some of the numbers from the report that we haven't talking about, health care of a share of the nation's economy has been projected to grow from 17.4% in 2013 to 19.6% in 2024. accounting for nearly one dollar of every five dollars spent spent by 2024. we have seen a lot of stories about mergers and the health care industry. is this growth and health care spending a factor in those mergers of these companies getting together? guest: unquestionably. two thoughts on this. first, the first question is that the numbers are always so big and the economist and he wants to caution everyone -- it is not that we are spending 20% of our gdp. it is that we are not getting our money's worth. it is fine to spend a lot of money on something if you value it and you get it back. but we do not get the quality of care that we should for the money we spend on health care. the issue is not how much we spent, it is a low value system. there is overuse, underuse use, and misuse of these fabulous medical technologies that the u.s. is the world leader in developing. but we are not getting quality health outcomes area that is the challenge. the consolidation has come in two forms. for years now, we have seen the big consolidation in the providers. the hospitals merging, hospitals actually buying up physician groups so that they become art -- become part of the hospital practice. a real concentration of market power in each of the local areas. there has been a concern by many, myself included, that this will lead to them having the ability to jack up their prices and make health care more expensive. recently, we have seen a different kind. -- consolidation. large insurance companies merging. aetna, humana, cigna getting together so that we have three large national insurers. that does not trouble me on the face of it. we still have 800 odd insurance companies across the country. the real competition will be in local areas. in buffalo with hospitals and doctors consolidating and insurers trying to negotiate. if their consolidation helps to negotiate, that could be a good thing. the jury is out on net how this will play out. i think it is worth looking at. it is an important issue and how this will play out. there is no bigger domestic policy issue that how fast the health care spending grows. as i said earlier, it leads you to all of the problems we worry about. wage stagnation, state budgets are under pressure. federal budgets which are politely, i disaster. host: josh isn't us cost, wisconsin -- our squash -- line for democrats, good morning. caller: i wanted to make a few comments. he said that he was working with center-right groups at washington. we know that washington is completely corruped and overpopulated with special interest such as douglas holtz-eakin, who is probably working on behalf of the republican party and koch brothers and the rest of the right-wing organization. host: what it would let him talk about how his group is funded and then he you can ask your guest: we are funded by private individuals who believe in the mission. they are grounded in the facts and not ideology. we take pride in the fact that everything we put out is filled with data on a particular problem. we have a preference for market-oriented solutions. and those efficient government solutions that will now be get -- narrow the gap between the revenue coming in and the spending going out. we are not allied with any of the groups that he mentioned. i started the think tank five years ago. largely because i was unemployed and is what unemployed economists do. i am very proud of it. caller: can i respond to that? the funny thing is that we have been hearing the same dialogue basically coming from vested interests for years. at the same time, these people are telling us they are not increasing wages in this country. they are shipping jobs out of the country. they are gutting the government and trying to make people believe the government is a bad thing. yet people are willing to trust corporations over the government. the government is allegedly us, the american people. what we are doing is seating all of our authority to corporations. they can't pay more taxes to finance all these programs in this country. to me the answer seems logical. the people at the top-tier income have to pay more taxes, corporations have to pay more taxes if they care about this country. host: i will let you respond. guest: i can't speak for the entire business community. i know i have done. i started out with myself and i have 34 employees. we have 15 interns at any one time. we pay them as well as we can. you want to grow your business. you want to make sure you have a working environment that is productive and enjoyable. >> washington journal is live every morning. we leave the recorded portion i'd take a lives of the heritage foundation washington, d.c. for a conversation on alternatives to the public school system. introductions now underway. live coverage on c-span. recently -- researches and writes on federal education issues focusing on two critical reducing the. federal role in education and empowering families with school choice. her commentary, research, and op-ed's have it peer-to-peer is magazines including the washington times, the atlantic, time, and newsweek. she has spoken on education reform issues across the country as well as internationally. she holds her bachelor syrian politics from holland and a masters in teaching and four-legged education from the universe -- foreign-language education from the university of virginia. please welcome me and joining lindsey burke. ms b

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