30 other conservative leaders, which is just about everybody in the fiscal conservative movement, which said we need to look at reducing pentagon spending, and look at defense spending. somebody had said you cannot possibly cut anything out of the defense budget, including the $100 billion per year we spent to occupy afghanistan, a country with a gdp of about $14 billion. i am not sure how we do that, but we do. is that something we intend to do for the next 50 years? $100 billion occupying this country? we are occupying iraq. how long do we intend to do that? at some point, one presumes that amount of resources can be saved out of the budget. the other question you up to look at is, what is the best non-partisans successes in reining in government spending, congressman sharp, democrat, indiana, a republican in texas, they came up with the base reduction realignment. originally, the army said, here are the 20 silliest defense structures in the united states. courts set up to keep boston being invaded from raiding ships. it does did not make any sense anymore. immediately, senators and congressmen in those congressional districts went and traded their boats to defend the wasteful spending on an unnecessary basis for subsidies and other destructive spending. we made negative progress on behalf of waste. they said, the commission will come up with what bases to close. there have been perhaps seven of those, largely successful, once in awhile, someone stepped in and fiddled with it. bush number two stepped in and fiddled with it. i think it is unfortunate. it was done for political purposes. we can avoid politicizing those. that kind of approach was one that was successful when it dealt with not spending additional resources. that can save billions of dollars out of defense. how much defense do we need? that is something we need to look at. if you take it off the table, it is not as defense waste. if you say that has to continue, then people who want to spend money on non-defense spending will hold hostage that wasteful spending. you only get wasteful spending on defense if we get wasteful spending on this program over here. every dollar the pentagon spends cost you two dollars because it is matched by additional spending elsewhere. [laughter] if you care about a serious national defense, you need to be very serious about stripping out waste. we have $600 hammers underlining the case for a natural defense. i am all for keeping an eye on the canadiens. we need a strong national defense to make sure -- that said, we ought not be wasting money anywhere. someone without their sacred cows has to recognize other sacred cows, and nothing gets done. >> we should be aware of the russian phenomenon. the country tried to compete on the basis of defense. it brought it economically internally. i do not like governments with ideologies, like with china. they do not have a fiduciary responsibility. them having this much debt for our country is not good. >> one of the most exciting things coming out of the commissions is a potential for an agreement here on serious reduction in waste in the military. i know a lot of people on my side of the aisle who agree with your remarks. >> if you go to ron paul's website and see some of these speeches, he is very strong on that. >> there's another piece to this. i joined with a group called right on crime. they are right of center activists. we look at the criminal justice system, look at successes from texas, from texas, on how many people want to be in prison. people should be in treated in prison because you're scared at them, -- scared of them, not because you are mad at them. it is expensive to put people in prison. the prison guards union is an expensive union. the cost of putting people in prison is quite high. we need to look at other ways to be serious about crime. i came into politics as an anti- communists. i was very concerned about foreign policy and crime. that does not mean we should be fula set -- foolish and waste money. the legitimate function of government ought to be done with reasonable price and focus on how much they cost. the legitimate functions of government ought to be left to other countries to mess around with. it is not just defense. it is the question of incarceration and the criminal justice system as to how we can effectively have less crime to the extent that people can be rehabilitated, and that we do it at the lowest possible, reasonable cost. >> let's hear from you. back here. we will have a microphone. >> thank you. my name is jeff. i am an independent consultant. i want to talk a little bit about the disconnect lisa mentioned. she mentioned it in the context of social security, which has never can -- contributed a single penny to the deficit. later, today, i believe, just up the street, the president will sign a tax bill, which will be the biggest deficit increase of his administration. i have hardly heard that mentioned that all during this panel. there seems to be a particular disconnect with the members of the deficit commission. there were "representatives who met for months and months, and talk about deficit. now, the majority of them voted for this tax bill, which drastically increases the deficit. i want to know, how do you have plans to kind of bridge that gap between discussions about the deficit and enacting it into policy? >> for my part, i am actually -- i am opposed to that deal. i am very concerned that this is supposed to be a one-year payroll tax holiday, and after that, it reverts to the former level. the trust fund is supposed to be credited. that is unprecedented. i worry whether the democrats in congress and whether obama will stand behind that deal, and say, okay, we bring this tax back, rather than having a permanently lower social security tax, in which you double the long-term shortfall. i am concerned about that. as far as the deficit, i am 0 concerned about the deficit. we have 9.8% unemployment. the reality is if we found the waste, fraud, and abuse come and cut its budget, he would be cutting the economy. no mechanism will bring that into the private sector demand at the moment. there are stories about crowding out interest rates. i am not troubled by the deficit. i will point out that i think the deficit hawks have been disingenuous on this. they're using this economic collapse as a cudgel for beating back programs like social security and medicare, that many of us to value highly. the reality, the debt we incur right now is not a burden on our children. it is coming at the expense of great from employment. in fact, there's no reason why the federal reserve cannot buy the debt, as it is doing, and hold it indefinitely. that means each year, you have the federal reserve board all of the debt, getting interest from the treasury, at the end of the year, it pays it back. they pay back $77 billion last year. there is no reason why we cannot do that when we have to worry about inflation becoming a problem, hopefully not too far in the future. if we need a precedent for this, japan's central bank opened amounts of debt equal to its gdp. that would be about $16 trillion in the united states. they don't have a problem with inflation. >> i think washington makes its best decisions when there is a crisis. we are about to create 1. my senses when we get there, we will see deficit reduction of some sort, whether it is a trigger that was somewhat proposed in the whole simpson plan, where we begin a process where you don't make a plan, things began to happen. the senate orin house, it will happen. >> what is the deadline? >> the second quarter. >> if we have deficit hawks who worry about the deficit -- i think we have had a lot of blame on both sides. part of it has to do with the fact that it is a long-term deficit issue being different from the short-term issue. what do we do in the short run? we think we should stimulate demand. look historically at what happened when we stimulated demand by running deficits. they got followed by times where we started to run surpluses or we reduced the debt quite drastically. it was due to the fact there was discretionary spending that did not have automatic growth in it. the long-term issue is unique in our history. we have a spending curve largely due to the growth in health care, and this rapid growth in number of retired people. the way we have structured some of our retirement programs, the spending curbs is growing faster than the economy. it never comes around. you have got to get to the long- term issue to get the budget in order. where the rubber hits the road is for the first time in u.s. history, in 2009, we were at a point where when congress walked in the door, every dollar of revenue have been spent. we had cut taxes enough and loud this automatic growth to grow enough that the automatic spending, the entitlements, including interest on the debt, was in excess of the revenues. every decision congress made on the discretionary side, to anything it wanted to expand to deal with the deficit, to deal with the recession, had to come out of financing additional deficit. to confuse the long-term and short-term messes up our ability to figure out how to solve these problems. the debt commission has the right focus. it is mainly on the long-term. none of them came back for doing anything in the first year or two at all. their focus was trying to get at this long-term problem, which is very serious. the problem is, because it is long-term, it has been allowed to get so bad, and it has weakened the case of the people who do think we need short-term stimulus. they dodged the long-term issue. by doing that, the debt constantly grows. it is putting additional pressure on the system to solve the long-term problem by doing short-term fixes. it reduces our ability to have stimulus by dodging this long- term issue. >> i have three comments to try to provoke you in throwing things back at me. first comment is, general agreement in the first part of the discussion that you have to talk about fiscal policy, not about budget deficits. we ought to be talking about how to create a gross economy that can compete in a very competitive world, with the appropriate-sized government, tax rates, tax system, appropriately designed programs, appropriate investments, in order the united states is the most competitive country in the world come at a time when there are lot of other competitive -- competitors who also have other advantages in place. that discussion we rarely have. what should our overall fiscal policy be? i fundamentally disagree with all of you in that you then proceeded to take off the table anything you cared about as one of the tools to create that this policy. in each case, if there's going to be a so-called cut, that must be reinvested in my thing. we saw this with the health care bill. many of the items that used to be on the table for deficit reduction went to pay for the vast expansion of our health care system. similarly, social security advocates will say it needs to be reinvested in social security. grover would say it has to be reinvested in bringing down the tax rate. everyone takes off the table the biggest things where you could actually have an impact on fiscal policy. >> let me just say -- the only one i took off the table was investment in investment in children. >> the one thing you learn is there is somebody who loves it all. all of it has flaws. you sit through these reviews. there is someone who loves every piece of the budget, every piece of the tax code has a flaw. every piece of the regulatory system has a flaw. the third point, and this is more admonishment to a fellow democrat, when you reject the markets as a tool for allocating resources, understand what you're doing is appointing washington, our little budget office, the congress, and our regulators, to then do that allocation. when i sit and think about having a national health budget, for example, and we are going to determine whether or not we have enough doctors in sioux falls, south dakota, based on somebody here making that determination, it causes me a great deal of difficulty, because it cannot be done. it is the best way, ultimately, to undermine the authority and prospect of government to ask the government to do something that it nor any other big entity can do. i don't understand how many of our big corporations are able to function with 150,000 employees worldwide. the idea that government can make these decisions is hard to believe. in the health care area in particular, it is so close to people's hearts. i never quite understood why health is more important than food. none of us believe there should be a government farm. none of us believe we should get -- have a government store. there is a system of assistance through vouchers, cold food stamps. if you apply that to health care, we think this bind the government has its own hospitals, its own distribution system, and vouchers there would be a horrible thing. health is somehow different than food. the last point i take on this is the viewpoint about the difference in cost. it turns out we do have some competition in health care. not a lot, but some. it can cost you have as much to get treated for the same disease with the same outcome if you go to rochester, minnesota, as opposed to miami, florida. competition even in this horrible system we have got in health care -- expecting that we really can allocate in an economy like this and do it right really sets itself up to fail, regardless of your philosophy. can it be done? in my experience, when the government was somewhat smaller, and mind you, but it was balanced, is that it cannot be done. we don't have enough people. if we did, it would make a lot of mistakes. that would undermine the authorities and reputation of the government to the extent it could do it. >> i feel somewhat admonish. let me pull pullout, the government already does do a lot of these things. they decide how many people going to meant school. we restrict the number of people in med school. during the clinton and ministrations the number of people brought into the country was cut in half for medical school. i do not imagine micromanaging the health care in this country, but i do envision -- i would love to get rid of patents on prescription drugs and medical equipment. no one should ever be looking at paying $1 million for treatment for your prescription drugs. we set up the question the wrong way. we will get the wrong answer. mind you, -- my view is not one the necessary to "reject necessarily requires more government intervention -- my view is not one that necessarily requires more government intervention. i understand we are lending the money from the trust fund, but under a law that goes back to social security. i would be opposed to cutting social security. if we did cut it, we would say, we should not be taxing people and using it to fund the pentagon. i don't think that is very honest. the last point, again, i was not saying that in jest when talking about europe. it is not my ideal way of forming a health care system. if you have vouchers, it would produce savings. i see no harm in it. sarah palin as saying everyone's grandmother is dying because they don't have health care. people have the option to go to canada, to england, to these places, and put money in their pocket. i think it would give us better perspective about the world. i do not know how many hospitals there are on the canadian side taking in americans coming across the border. >> i direct the economic policy department. the question is for you. there is a handy chart on all of our chairs. it represents a kind of work that has been done over the last 12 to 18 months. they came up with ideas on how to tackle a national problem. to every -- everyone of them has taxes on the table in some form. most of them in some significant form. yet, one has to sign the pledge to make it to the republican primary. it is getting back to the point that the door is closed for discussion about any one of these options once you sign that pledge. my question to you is how in the world can and elected representative give this issue to someone else? that is what republicans do these days. this chart suggest that they cannot be. how do you square that circle? how do you take the pledge seriously trying to square that circle? >> it is a commitment. somehow it was pulled back. he was replaced by a senator who promised the voters of ohio he would not vote for a tax increase. this is a commitment that is misunderstood by the voters and citizens of the state of the senators and congressmen who represent that state. take a look at states like new jersey or the governor is not raising taxes. they took $10 billion. some states say taxes are going down and they can negotiate. i think what is most exciting is not washington, d.c., which will be under gridlock for the next two years -- there will be a disagreement about what direction the government should go in. we have 21 states with republican governors and republican legislators. they are not going to raise taxes. pennsylvania, ohio, wisconsin, texas, florida, south carolina, and georgia. we have some states with democratic governors -- california, illinois, and massachusetts. it is very constructive for people to take a look at those states that are open to tax increases and those states where elected officials say they are not going to raise taxes. that is the difference in the approach. it you have a problem with spending, raising taxes does not solve the problem. you are an enabler, -- taxes off the table are the only time we get spending restraints. it is one of the things that is misunderstood. from 1993 you that the clinton tax increase which passed with only democratic votes. from 1993 until three weeks into the obama administration when he raised taxes on people who earn more than $250,000 a year -- that 16 year. without tax increases. that is the longest time without tax increases. it also had a collapse of the clinton spending plan. they did not spend as much as they planned to bid for the republicans took over the house and senate. >> is that not the point? we did borrow during that time -- we had a surplus when it was over. we went to the decade of george bush and the big deficits under george bush. we had the collapse of the financial market. that turned us back to the era where we only deal with one side of the equation. that is not an answer. you need a plan on both sides of the equation. that there is a spending problem, that should be dealt with. that does not mean we will never again raise revenue. >> i did not at the time and i do not now associate myself with plan. spending >> i do not want to avoid -- divide the government that way. big giveaway between the tax cuts in the spending increases is the other side of the balance sheet. we have gone to a government that has operated since 1997 with spending increases for entitlements and interest on the debt. it has been defense increases and tax cuts. that does not balance the sheet. politically, the dilemma is that what we are into at this point in time is going to the public and asking them to give up something. that includes the middle class. we have not been there for 13 or 14 years. it will be a fundamental problem. it will include taxes. i think the tax you collect is not from the public. by reducing spending or reducing the taxes you have to collect to support that spending, the fact that we spent $30,000 now every $10,000 to be paid by our children does not mean it is not a tax. we -- if you want to cut long running spending, you have to cut taxes. >> i want to thank the aspen institute. >> next, president obama assigns the tax cut and jobless benefits bill into law and then house minority leader john bennett talks about the agenda of the 112th congress and live at