yesterday to talk about the economy, the budget and the national debt. this is an hour. >> look at this crowd. apparently the ryan name some people around here. [laughter] really nice to see you and that was very kind, i appreciate it. i want to tie you for inviting me here. i'm a big packer fan. i assume most of you are bears fans. [laughter] it took a lot for you to invite me here. that does not mean we cannot work together. [laughter] as chairman of the house budget committee, i stand ready to do whatever it takes to help you resign jay cutler. [laughter] what i'm here to talk about today is our economy, about the

need to get four quarters of consistent strong performance. that was not another jay cutler joke, i swear. despite talk of a recovery, the economy is underperforming. the aggressive expansion of the fed's money supply is clearly contributing to major increases in the cost of food and energy. an even bigger threat comes from the rapidly growing cost of health care, a problem made much worse by the health care law enacted last year. most troubling of all, the

unsustainable trajectory of government spending is accelerating our nation toward a ruinous debt crisis. this crisis has been decades in the making. republic and administrations including the last one failed to control spending. democratic administrations including the present one have not been honest about the cost of the tax burden that would be required to fund care expansive vision of government. congress is controlled by both political parties have failed to confront our crisis. there's plenty of blame to go around. years of ignoring these drivers of our debt have left our nation's finances in dismal shape. in the coming years, our debt is projected to grow to more than three times the size of our entire economy. this trajectory is catastrophic.

we see this coming. by the end of the decade, we will be spending 20% of our tax revenue simply paying interest on the debt and that is according to optimistic projections. if a rating agency's move from downgrading our outlook to downgrading our credit, interest rates will rise higher and the debt service will cost trillions of dollars more. this course is unsustainable. that's not an opinion, that is a mathematical certainty. if we continue down our current path, we're walking right into the most preventable crisis in our nation's history. the question is, how we avoid it? but the enters pre simple. we need to make responsible choices today so our children don't have to make really painful choices tomorrow. if you look at what is driving our debt, the explosive growth in spending is the result of health care costs spiralling out of control.

by the time my children are raising their families of their own literally every dollar we raise in revenue would be paying for three major entitlement programs. some of this is demographic. every day, 10,000 baby boomers retire and start collecting medicare and social security. a lot of it is simply due to the fact that health care costs are rising faster than the economy is growing. revenues simply can't keep up. it is basic math. we cannot solve our fiscal or economic challenges on last week get health care costs under control. the budget passed by the house last month takes very credible steps to controlling health care costs. it aims to put our budget on a path to balance and what our economy on a path to prosperity. i am here today to stress the point that these goals go hand in hand with one another. stable government finances are

essential to a growing economy economic. growth is essential to balancing the budget. the name of the budget is the path to prosperity. we are finally having a debate in washington about how to address our fiscal problems but we are still not having the debate we need to have. to alarming degree, the budget debate has degenerated into a game of arithmetic with many in washington demanding we trade a federal trending restraint for a permanent tax increases. this sets up a debate in which we are really just arguing over who to hurt and how best to manage the decline of our nation. it is a framework that except higher taxes and bureaucratic health care as givens. i call this the shared scarcity mentality. the missing ingredient is economic growth. shared scarcity represents a

deeply pessimistic vision for the future of this country, one in which we all pay more and get less. i believe it would leave us with a nation that is less prosperous and less free. to begin with, chasing ever higher spending with ever higher tax rates will decrease the number of makers in society and increase the number of takers. able-bodied americans will be discouraged from working. that is not who we are. worse, when it becomes obvious that taxing the rich does not generate nearly enough revenue to cover all of washington's empty promises, austerity will be the only course left. a debt-fueled economic crisis will more than force massive tax increases on everyone and indiscriminate cuts and current beneficiaries without giving them time to prepare or adjust. given the expense of growth of government, many of these critical decisions will fall to bureaucrats we never elected.

shared scarcity impedes economic growth and resultant harsh austerity and it ends with. lost with in a recent speech, present obama outlined a deficit reduction approach that in my view defined shared scarcity. the president's plan begins with trillions of dollars in higher taxes and it relies -- relies on a plan to control costs in medicare that would give in board of 15 unelected bureaucrats in washington the power to the direction our care. this would disrupt the lives of those currently in retirement and lead the waiting list for today's seniors. i need to emphasize that i am not disputing for a moment that the president in half -- did not inherit a bed fiscal situation. he did. millions of american families have just seen their dreams destroyed by misguided policies and irresponsible leadership that caused the financial

disaster, the crisis squandered our nation's savings and cripple the economy. the emergency actions taken by the government in the fall of 2008 did help arrest the ensuing panic. subsequent interventions such as the president's stimulus law and the fed's unprecedented monetary easing have done much more harm than good in my judgment. in the aftermath of the crisis, we needed government to repair the free market foundations of the american economy as it did under the reagan administration in the early 1980's by restraining spending, keeping taxes low, enforcing reasonable and predictable regulations, and protecting the value of the dollar. instead, leaders in washington embarked on an unprecedented spending spree in an effort to pass a health care law encourages a sharp departure from a rules-based monetary policy which created even more

uncertainty. in the 2010 election, the voters sent a clear message that this is not working. washington needs to try something else. we know what that something else must be. we know what has always made growth possible in america. we need to answer that call for new economic leadership by getting back to the four foundations of economic growth -- first, it is present all -- we have to stop spending money we don't have and weand that means getting costs under control. we have to restore common sense to the regulatory environment so regulations are fair, transparent, and not in place undue uncertainty on america's employers. third, free sample again -- we need to keep taxes low so job creators have certainty to invest in america. fourth, we have to refocus the

federal reserve on price stability instead of using monetary stimulus to build washington failures. businesses and families need sound money. let me deal with each in order -- the first foundation, real spending discipline -- it is pretty simple -- you cannot get real sustainable growth by continuing to pile on to the debt. more debt means more uncertainty and more uncertainty means fewer jobs. the s&p rating agency just downgraded the outlook of u.s. debt from stable to negative which sends a signal to job creators. they are telling us that america is a bad investment and they will not expand and create jobs in america at least not at the rate we need them to do so. mounting debt also threatens the poorest and most vulnerable citizens because those who depend most on government would be hit hardest by a fiscal crisis. we have to repair our social safety net programs of they are there for those who need them most.

this starts by building on the successful bipartisan welfare reforms of the 1990's. our reforms save the social nature -- safety net by giving more powers to governors. we propose to make these programs solvent. as with strength and welfare for those who need it, we also propose to and it for those who don't. we and wasteful corporate welfare for fannie mae and freddie mac and others who have gotten a free ride for too long. all of these debts are necessary to getting spending under control. they are not enough. we cannot cover a debt crisis unless we directly address the rising cost of health care. getting health care costs under control is critical for solving our crystal -- our fiscal mess and promoting growth. health care costs are eating into everyone's paychecks.

a second foundation addresses the growing scourged of what i call crony capitalism in which washington bureaucrats abuse the regulatory process to pick winners and losers is -- winners and losers in the private economy. we advance legislation to stop the epa from unilaterally imposing a job-destroying energy cabs and businesses. we have the best legislation in the dodd-frank law which actually intensified the problem of too big to fill by giving large interconnected firms advantages that small firms do not enjoy today. most important, we have opposed repeal of the new health care law and the new regulations. it is bad enough that the law imposes an unconstitutional mandate on americans. it also imposes new regulations on businesses which are stifling job creation.

let me share with you one figure that serves as a devastating indictment on the new health care law. so far, 1000 businesses and organizations have been granted waivers from the onerous mandates. these waivers may prevent job losses now but they don't guarantee relief in the future nor do they help those firms that lack the connections to lobby for waivers. this is no way to create jobs in america. true bipartisan health care reform starts by repealing this very partisan law. the third foundation, recognizes we cannot get our economy back on track with washington tries to tax our way out of this mess. in the economics profession has been really clear about this one -- higher marginal tax rates creates a drag on economic growth. as university of chicago is john cochran recently wrote -- great school, by the way -- big fan --" no country ever saw --

solved that problem by raising tax rates. countries that raise the tax rates produced lots of tax revenue and countries that did not grow inflated or defaulted." higher taxes are not the answer. fourth, finally, this foundation calls for a rules-based monetary policy to protect working families and seniors from the threat of high inflation. the recent departure of the fed from rules-based monetary policy has increased uncertainty and endangered the central bank's independence. advocates of these aggressive intervention step on the dual mandate of the fed. congress should end the federal mandate and test the central bank with a single goal of price stability. the fed should publish and fall

and monetary role as a means to achieving this goal. these are our four foundations of economic growth. the house budget starts the process of restoring these foundations and building a prosperous future. we lift the crushing burden of debt by cutting spending and informing those programs that are driving our debt to. we reduce the deficit by over 1/3 and our first year, big and bright -- bringing an end to trillion dollar deficit for the budget does not put the budget on a path to balance, it actually pays off our debt over time. we cannot achieve this goal by simply rubber stamping spending increases or raising the increases in the national debt limit without reducing spending in washington. john boehner made this very clear at a recent speech in the economic club in new york. the debt ceiling has to be raised, we've got to cut spending.

the house-passed budget contains $6.20 trillion in spending cuts for every dollar the president wants to raise the debt ceiling, we can show him plenty of ways to cut far more than $8 worth of spending. given the magnitude of our debt burden, the size of the spending cuts should exceed the sides of the president's call for a debt increase. [applause] our budget also gets health care spending under control by empowered americans to fight back against skyrocketing costs. our budget makes no changes for those in or near retirement and offers future generations a strengthened medicare program that they can count on with guaranteed coverage options. less help for the wealthy and more for the sick. there is widespread bipartisan agreement that the open-ended fee for service structure of

medicare is a key driver of health care cost inflation. ask any hospital executive and they will tell you the same thing. jim caqpretta says medicare is not the train being pulled along rising costs, it is the engine. the rest of us are being taken for a ride. this disagreement is not really about the problems. it is about the solution to controlling costs in medicare. if i could sum up the disagreement in a couple of sentences, i would say this -- our plan is to give seniors the power to deny business to in efficient providers. [applause] their plan does the opposite. it gives the government the power to deny care to seniors. we disagree also about how best

to deliver the tax reform that americans have long demanded from washington. here's a quick story about tax policy. 25 years ago in this club, ge ceo jack welch said i represent a company that does not pay taxes. funny, i guess things never change. [laughter] i am trying to say that we need to broaden the tax base of corporations cannot gain the system. a house-passed budget calls for stealing back or eliminating loopholes in the tax code that are distorting economic incentives. tax policy drives economic decisions, not good business decisions. we do this not to raise taxes but to create the space for lower tax rates in a level playing field for innovation and invest. america's corporate tax rate is the highest in the developed world for in our businesses need a tax system that is more competitive, a simpler fare tax code is also needed for the individuals.

they spend over 6 billion hours and over $160 billion each year figuring out how to pay their taxes. it is time to clear out the tangle of credits and deductions and lower tax rates and everyone to promote economic growth and job creation. [applause] [applause] so that's what we proposed. the house-passed budget does this by making the tax code simpler, flatter, fairer, more globally competitive and less burdensome for working families and small businesses. by contrast, the president says he wants to eliminate deductions but he also wants to raise rates. that includes raising the top rate, the one that all those successful small businesses pay, to 44.8%. that would amount to a $1.5 trillion tax increase on families and job creators. when we tax our employers and job creators more than our

foreign competitors tax theirs, they win, we lose. that's not a good idea. the president said that only the richest people in america will be affected by this plan. look, class warfare may be clever politics, but it's terrible economics. redistributing wealth never creates more of it. further, the math is really clear. the government cannot close its enormous fiscal gap by simply taxing the rich. this gap grows by trillions of dollars each year, representing tens of trillions in unfunded promises to future generations that the government has no plans to keep. there's a civics side to this as well. suing social unrest and class envy makes america weaker, not stronger. playing one group against another not only distracts us from the true sources of inequity in this country, corporate welfare and crony capitalism that enriches the

powerful and empty promises that betray the powerless. those committed to the mindset of shared scarcity are telling future generations, sorry, you're going to have to make do with much less. your taxes will go up because washington can't get government spending down. they're telling future generations, you know, there's really not a lot we can do about rising health care costs, government spending on health care is going to keep going up and up and up and when with we can't afford to borrow or tax another dollar, we'll have to give it to a board of unelected bureaucrats, the power to tell you what kind of treatments you can and cannot receive. if we succumb to the view that our problems are bigger than we are, if we surrender more control of our economy over to a governing class then we are choosing shared scarsity over renewed prosperity and managed decline over economic growth. that's the real class warfare that threatens us. a class of governing elites picking winners and losers and

determining our destinies for us. look, we face a choice of two futures. we can continue to go down the path toward shared scarcity or we can choose the path of renewed prosperity. the question before us is really simple, which path will our generation choose? in 1979 my mentor, jack kemp, captured the essence of why we must choose the paggets to prosperity. quote, we can't progress as a society by using government to diminish one another. the only way we can all have more is by producing more, not by bickering over how to share less. economic growth must come first. for when it does, many social problems tend to take care of themselves and the problems that remain become manageable, end quote. you know, there's a question i get a lot from people at town halls, i do lots of town halls.

and when you go around the country showing people these charts, that shows our debt is on track to cripple the economy, people start to ask you whether any plan, even a plan like the house-passed budget, can save america from a diminished hue if you -- future. most people think the country is equally down the wrong track. they say, congressman ryan, i know you have to sound optimistic in public but do you think there's anything we can do to save this country from fiscal ruin or should we be bracing ourselves for the worst? it's a difficult question. it gives me pause. it's one that frankly keeps me up at night. but the honest answer is the one i'm about to give you. nobody ever got rich betting against the united states of america and i am not about to start. [applause] time and again just when it looked like the era of american

exceptionalism was coming to a close, we got back up. we brushed ourselves off and we got back to work, rebuilding our country, advancing our society and moving the boundaries of opportunity ever forward. we can do it again. america was knocked down by a recession, america was threatened and is threatened by a rising tide of debt. but we are not knocked out. we are americans. and it's time to prove the doubters wrong once more. to show them that this exceptional nation is once again up to the challenge. thank you very much for having me today. i appreciate it.

>> thank you, congressman. >> thank you. is this thing on? sn >> yes. first of all, i'd like to say i think it's pretty kin credible that a green bay packer fan gets a standing ovation in chicago. i don't think we've seen that. >> i'll safer that one. >> so, i was going to pick up on a couple of questions, thank you to all the audience who gave a few of these. in today's "chicago tribune," you say that despite washington comes to grips with the fact that the debt threat is real, policymakers are still not having debt bait americans deserve. you can expand on that comment and what what it means for america in your opinion? >> i think what's happening right now is we're into this green eye shade arithmetic dance which is talking about, well, just how much taxes should we raise and how much spending we should cut. knot let's not forget about economic growth and prosperity. we got to make sure that we keep our eye on prosperity and job creation. because the way in which we go into this debt crisis and how we handle it will clearly determine the kind of country we are coming out of it.

and so what we really believe the right mix of policy is spending cuts and controls along with policies that get the economy growing. economic growth. that's the mixture that works and if we try to tax our way out of this problem, if we try to tax our way even part of the way out of this problem, we'll shut down prosperity. again, the 21st century is a very globally competitive century. we can't take it for granted that our businesses can always thrive and survive and compete even when with we tax them a whole lot more than our competitors tax theirs. and so we got to keep our eye on economic growth and the drivers of our debt. taxes are expected to go back to where they historically have been. problem is, spending doubles then triples over the course of the century. when my kids are my age, instead of taking 20 cents out of every dollar to pay for the federal government which we've done for the last 60 years this current federal government is scheduled to take 40 cents out of every dollar when they're my age, just for this government at that time. it literally gets out of our control. >> let's talk about that economic prosperity comment for

a second. obviously the midwest has been hit, many areas, very hard industrialy. your district as well. you can talk about innovative ideas you've thought of or policymakers are thinking about to make us competitive globally across the nation? >> well, again, i think you have to get to the basics. the basic building blocks of economic growth. that's why i talk about these four foundations. sound money, low and predictable competitive tax rates, spending that's under control so our dollar is stable, to our interest rates are low and getting the regulatory stuff under control. right now we have so much government activism that is producing so much uncertainty in our economy and it's just putting a chilling affect on investment. it's also raising the hurdle rate at which people have to clear to be successful. and those basic fundamentals, those foundations, you can't replace them. there can't be some widget or some bill in congress to spend on some new program that fix all of these things. the other thing i would say is that we also embrace in our

budget is you have to have a work force that's educated, that can be there for the high school jobs we need in the future and so we basically are saying, let's prepare our -- repair our social safety net. we don't want it geared to keeping people on welfare but keeping people on their feet. there are 49 different job training programs spread across nine different government agencies in the federal government. we don't even meriwether they work or not. we want to collapse them or consolidate them into career scholarships so that the person when they're out of -- look, we lost four auto plants in the area i represent in just the last couple of years. displaced industries. when a person finds themselves in this situation, you want to have a system where it makes it easy for them to go back to school to get new skills, to get themselves back into a career. life-long learning, getting skills so that we can do this. we want miles white to add jobs up in abbott park, we love abbott park here but we want to have abbott park two up in kenosha and -- yeah, all right.

that was miles, hopefully. but the point i'm trying to make is, we want to have a skill set, a work force, that is there to do these kinds of jobs and so our technical colleges up there are primed and ready to do to develop a curriculum and we want to have a system that works to further those kinds of goals. so education's a key component of this. the federal government has a particular role to play, not a dominant role to play. and the four foundations of economic growth, you can't replace them. >> let's talk about education for a little bit. we'll get into medicare, don't worry, a lot of questions on. that on education you publicly commented that you like some of duncan's comments, he's a chicagoan, many know, you can talk a little bit about what you think the federal government's role is in education, a little bit more on what you just talked about, and where there are some opportunities for both parties to work together collectively to get toward as solution. he's a person that reach as

cross the aisle. the federal government is a junior partner when it comes from k through 12 but the federal government imposes a lot of regulation and unfounded mandates. idea is the biggest unfunded mandate we impose on local school districts. federal and state government have an obligation to finance unfunded mandate to free up local property tax dollars to go towards customizing education reform needed in local school districts. cheart school price, all of those ideas need to be implemented and tested. we should get washington out of the way, which are preventing them from doing those sorts of things. look what mitch daniels did in indiana. it's very impressive. we have similar reforms in milwaukee and wisconsin so we want in the spirit of federalism to expand these laboratories of education reform but at the federal level and postsecondary

education, job training, helping people look, i'm 41, i have a lot of buddies in high school who lost their jobs at the g.m. plant in jamesville. most people in my hometown thought could you go from high school to the g.m. plant to make a good living violent that job for the rest of your life. that was the conventional wisdom. that's not the economy we're in anymore. a lot of my friends find themselfs in their 40's or 50's with nothing. so we had to have an ain't for them to go back to school. one of my buddies is going back to school to learn a new trade and he's so happy to get in the new business. another friend of mine went back to get a degree in hvac. now he's his own contractor with own business, leading a fulfilling life and making jobs, providing for his family. those kinds of things, that kind of job training scholarship that goes with a person so they could go out in society to me is aa smarter way to go. that's where the federal government has a bigger role to

play versus k through 12. we have to stifle that reform in my book. >> thank you. so both parties seem to be worlds apart on the budget debate. are you willing to compromise with the senate democrats and president obama to get a grand bargain? won't republicans need to allow tax revenues to be part of the conversation? >> i don't think we're going to have a big grand global bargain only because i think we're just so far apart on issues like health care. now, we are putting our budget out there as our starting point. we submitted a budget that literally balances the budget and pays off the debt and reforms entitlement programs to make them safe and secure and solvent. we have yet to see anything from the senate or democrat that's comes anywhere from solving this problem. as far as who's putting plans dean tails, we've already done that. we're waiting for our partners on the other side of the aisle to contribute something. do we have to have some compromise in this? of course we do. but the way we look at revenue is if we look at revenues as a source to fix this problem, then

it takes pressure off the problem, which is spending. spending is the problem that is a source of the problem. we need to address that. i am for having higher revenues coming to the federal government. i don't think you get that by raising tax rates. i think you get that through pro growth economic policies and fundamental tax reform that raises economic growth and then you get higher revenues through that way. i subscribe to the gary becker school of thought. i see him here. it's great to see a living ledget in front of us. that to me is the way toin crease revenues and the other problem we have is if we don't -- if we blink in this moment and we show both political parties don't have the courage to actually address this spending crisis we have, then what kind of confidence will the bond markets have in us after that? so i think the biggest mistake we could make is rubber stamping a debt limit increase and showing we don't have any chance of getting anything under control. we've got to have serious down payments on spending controls to

buy ourselves time in the credit market so whatever we don't resolve in this episode is resolved soon. i real bli believe this next election will be the most important election in our lifetimes. it will be the choice of two futures. foyer one we believe we owe it to our constituents, give them an option or choice. what country do you want? historic american idea, limited government economic freedom, you know, opportunities with a safety net or go down the path we're on, which is a path to make us more of a european type social democracy, cradle to grave welfare state. i know those are harsh words but i really believe it is the practical result of the path we are on and least we can do is give all of you a choice so you can pick which one you want going forward. >> you mentioned political courage. i have seen you in the interview tauged about the third rail medicare issue and you looked as if you were a qualia bear grabbing onto this. can you talk about what it means to the political courage and

what it means for others? >> you vb to be willing to lose your jobs to be good at these jobs? you just do. i'm serious. >> [applause] >> the other thing i would say is the public is way ahead of the political class in washington. the problem we have and both parties do this is put something that proposes a change, anything that's bold, the other party uses it as a political weapon against you and that fear of that political weapon paralyzes the political system. we had this political paralysis for a long time. are republicans do it to democrats, democrats do it to republicans. i foreone, what we're trying to do is break through that. put ideas out there and, yes, grab those third rails. a, i think the country is head of us. b, i represent -- my district goes from janesville, long the border to michigan and including seven milwaukee suburbs, and lake geneva, you all know.

you're chicagoans too. it went for dukakis, for clinton, for gore and obama. it's not, you know, a big republican area. i put these ideas out there in 2008, in 2010 and again. i for one believe that people are ready to be talked to like adults, not like children on these issues. when you give people the facts, when you show them what we're trying to do, i think people want to see us fix this problem. so political courage simply means worry more about our economy and the next generation than you are about the next election and it will all make out -- it will be fine at the end of the day. >> great. let's get into the medicare a little bit more. your budget included significant med medicare and medicaid reforms and calls for a full repeal of the health care law. how do you address the uninsured? what about rising health care costs for businesses and are you still committed to replace and not just repeal the health care law? >> yes. for sure the answer is yes on that especially. so what our budget does is we --

given that medicare, medicaid are the greatest drivers of our debt went have charts that show that. those two programs alone are the biggest contributors to t you have to restructure not only how these programs work to save them the bustees gave us a new warning last week medicare is going bankrupt a lot faster than we thought it was. what we're saying is if we do this now, we can do ton our own terms as a country. meaning you don't have to pull the rug out from under people who retired. people who are on medicare, they've organized the retirements around this program. people who are ten years away from retiring are preparing for it. our whole point is don't change their benefits but in order to do that, have you to reform this program for the next generation. for those of us under 54 and you make it a solvent system so you can cash flow the current generation and make good on the promises the government made to them. wait to do that is we believe it's not by giving a panel of 15 bureaucrats the authority to micromanage, rass and price control medicare.

and that is in law now and that is being imposed on current changes. we repeal this. we say let younger people when they become medicare eligible select among a list of medicare guaranteed coverage options medicare provides. it works like a system members of federal congress have. in this case you subsidize the person's insurance f they're poor and sick, subsidize them more. if they're wealthy i. subsidize them a lot less. give support to the people who need it the most and less support to the people who need it the least. doing it this way, according to the budget office, makes the program solvent and secure so my generation can count on it when we retire and helps solve our debt crisis. quet is, can this be done? well, look, i hardly think this is some radical idea. this is the same recommendation president bill clinton's bipartisan commission said to

save medicare in the 1990's. it came out of the brookings institution with the left center think tank. it works like medicare benefits works today. prips drugs, medicare advantage works like this, buying supplemental insurance works like this. private providers competing against each other for our business. that runs to the earlier part of our question. we believe the best way to get at this issue is help inflation is by giving the patient the power, consumer directed system where the providers, hospitals, insurers, doctors, compete against each other for our businesses as consumers. we spent over 2 1/2 times per person on health care in this country nain other industrialized country. we spend a lot of money on health care but we don't spend it very intelligently. and so we need staple like all other market-based sectors of our economy where you have transparency on price, transparency on quality and economic incentive to act on those things so apples to apples metrics to compare so we can shop.

do believe ultimately you need tasme exclusion. have i several legislation to do that. we subsidize people in the higher income brackets a lot more than lower income brackets. i think that's upside doufpblet more importantly, we want a system where the individual is in the driver's seat, not some bureaucrat. and subsidizing pre-existing conditions so they don't get bankrupt when they're stoik have the preventive medicine that i think are risk pools and we bring more competition, more choice to the health care sector. i think we will be fine. not only grow the economy but the point i'm trying to make, we can have insurance for who've doesn't have it and do it without breaking the bank. without taking the entire sector of the commofere by the government. >> and in a speech you gave on january 25, you addressed the house budget committee and you said, our debt is the product of

acts of many presidents and many congresses over many years. no one fern or party spom for it and americans are skeptical of both parties and it's justified. can you expand on the notion on the problem we face here as a product of both parties and how do we get past and move forward collect collectively? >> both parties -- look at what politics rewards. the politician who makes the prom esto the empty voter. it's simple. want to get evicted, promise somebody something. you get elected. we have to stop that. what we're trying to achieve, and we will see if this works, turn the political rewards system away from rewarding the politician that keeps making the empty promise to the political leader that speaks honestly about where we stand as a country and what it will take to get this thing fixed. that's what we have to address. both parties have done this but we're on borrowed time.

the way i look at this, one of the most unpleasant experiences hi was tarp, financial crisis in 2008. i was in the meetings with ben brian: -- bernanke and henne paulson. it was an awful situation. that crisis caught us by surprise. we watched the spreads and money markets meltdown that.s0 caught us by surprise. let me ask you this, what would you think of your member of congress if they knew it was coming, if they knew why it was happening, when it was going to happen and more importantly knew exactly what to do to prevent it from happening and had the time to do it but chose not to because it was just bad politics. what would you think of the person? that's where we are right now. this is the most predictable economic crisis we ever had. the thing that is stopping fruss fully and fixing this thing is

politics. we have to get through that. that's why some of us are pulling these ideas and plans to try to move this conversation to the level it has to go to. we're not there but we're sure going to keep trying. >> you clearly touched a nerve in the nation with the ability to convey this message and you got the respect of the president. you said you respect the president as well. mutual admiration society. can you talk a little bit about what it's like to be the voice that discusses these issues with someone of that stature and how you take that on? >> i don't think about it too much like that. my job, i grew up studying electronics. i wanted to go into the field of electronics and then independent up being a politician. that didn't go so well, i suppose.

i'm joking but i'm chairman of the house budget committee whfment you get a job like this, it is your job to look at the physical finances of the country and they're downright scary. the thing is most people have been involved think of budgets like they thought of at the beginning of the decade or 1990's. because of the financial crisis and recession, the numbers moved up and it's really a scary situation. went don't have a lot of time left before we have a debt crisis on our hands. all of these things with take for granted. world reserve, l.v.o.'s are threatened. i think it's my job, elected by my colleagues to take this post, to do whatever i can to address this issue, to be a paul revere and get this country having this kind of conversation. with respect to the president, we just have very different philosophies. i have a lot of respect for him but i don't respect the political tone that's been injected in this conversation

which i think is counterproductive. not productive. at the end of the day i think we have to make a choice two of theories government or philosophies. one i characterize as the traditional american idea where the goal of our government is to protect our natural rights and promote equal opportunity. we can make the most of our lives where we are defined by the characteristic of equal opportunity, up ward mobility and prosperity. first is a different vision and philosophy. one we have seen on display in many other nations where the goal of the government grows to try to equal lies the results of our lives. that to me is shared scarcity and managed decline where we delegate so much more decisions in power to unelected people in bureaucracies and they try to micromanage these things, busy things in our lives. i don't think it works and fatal conceit. >> you mentioned the debt ceilings.

what what conditions are attached to a raise and if you require a dollar for dollar in each dollar of debt, where do you envision the cuts coming from? >> we put out $6.2 trillion in cuts. we also proposed budget process reforms. there are three reforms that are in our budget what we call statuary caps on discretionary spending. we had it before but got turned off in the last decade. we propose debt targets and limits with enforcement limits meaning your debt rises above a certain level, we call it sa quester that kicks in. we also propose a global spending cab on government as a share of g.d.p. this is often referred to as corporate bipartisan cap in the senate. we are not taking anything off the table but if certain entitlements are taken off -- first i think we should no dot that. i disagree with that.

we also proposed $719 billion in savings from other mandatory programs, farm programs, many other areas that are in dire need of reform. discretionary spending went up 24% the last two years. the government just gave a number of executive agencies triple-digit increases in their budgets. that's totally us sustainable. there are a lot of areas where we believe we should be cutting back sponeding and capping spending going forward. so i think what you're going to see at the end of the day is a mixture spending cuts measured in the trillions and caps on spending to lock in those gains and keep those cuts going into place. then wherever it is, we don't have agreement on, and whatever big issue did may be, we owe it to go to the country with our plan to fix this versus say the president's plan. i think that's what we will end up doing. >> let's get it to defense, just a quick question here. have you been critical to putting war on off budget, as

you scay. emergency supplements have been a poor way to do this. can you talk about your path to prosperity and how it deals with defense? >> we budget for the war. to president obama's credit, does he too. the last obama -- administration didn't do that. we were in the war for a couple years and they kept using emergency funding legislation, outside congress's limits to budget for the war. i didn't agree with that. izz think we have consensus between president obama's budget director and ourselves, it's a tradeoff and call it like that. number one. number two, you can't throw $700 billion at any government agency and not expect there to be a lot of waste. so nothing should be immune from the budget scalpel. we cut $178 billion in defense spending. we dedicate 100 to our troops to modernize equipment we have been burning through and $78 billion for deficit reduction. that's basically what secretary

gates recommended as well. i would love nothing more than fwounlt for a peace dividend. here's the problem -- we don't have peace right now. we have our men and women out there fighting on two, maybe -- argue libya's a third front. we can't put the rut out from under them. we have to back them off. they have to have the resources they need to do their jobs. that doesn't speak to foreign policy decisions or not but they're there. we can't underfund or defund them. we have to go after the waste at the pentagon. propose doing that and yes, that, too, should be a contributor to deficit reduction. >> a couple more questions. some of your critics, "the new york times" columnist paul krugman -- >> never heard of him. exactly. >> i had to bring "the new york times." there's a lot of "the wall street journal." you said you izzwo raise taxes for 95% of the population and produce a $4 trillion revenue loss over ten years. also on "meet the press" newt

gingrich had a few comments on your budget. how do you defend these issues? it's open debate, and some of people have been voicing concerns. >> for off for the tax portion, that's not an accurate statistic. we use c.b.o. numbers, not somebody else's back of the envelope calculations. we're not talking about cutting tax revenues. we're talking about revenue neutral tax form. let me explain it this way -- this is where all of the class warfare gets into it. the people who enjoy the big of the tax deductions are the folk in the twop brackets. you have a dollar of income parked in a tax shelter. that dollar income is taxed at zero. if you think away the tax shelter, lower everybody's tax rates, that dollar is taxed so by broadening the tax base, depriving tax shelters, you're supporting the income two taxation, albeit a lower rate, and here's the key, just like the president's fiscal

commission, which i served on, supported by a majority of democrats, they too agree, you need to lower tax rates to make us competitive globally to create jobs and broaden the tax base. our tax reforms are page taken out of the book of the fiscal commission, broaden tax base, lower the tax rates. again, we are taxing our employers, our job creators at tax rates higher than our foreign competitors are taxing theirs. whether it's a corporation or successful small business. the president has in law, his budget, a plan to raise the top tax rate to 44.8%. don't know what illinois' rate is now. ours is between 7% and 10% and i know yours is higher or just went higher. excuse me. the point is we're going to tax all of these subchapter s corporations, l.l.c.'s, partnerships, over 50%. ohio on earth do we expect them to thrive, survive and compete in the global economy? drive around wisconsin. go to kenosha or racine, el corn

and look at the outskirts of town and there's going to be an industrial park. that industrial park will have a lot of businesses that have 50 to 500 employees. odds are they're paying taxes as individuals. that's where most of our jobs come from. if we keep cranking up their tax rates on the guise of class warfare, we're going to shut down job creation, stifle economic growth. [applause] on the newt thing, i would just say these ideas are the most gradual, sensible thing we can come up with. name me another government program that came in 41% below costs. medicare prescription drug program did. why? because it gives seniors the power. seniors get to choose which among competing private plans did they select from for their drug benefit. and the provider knows that the

senior can fire them if they don't perform. if they don't give them competitive prices, good quality service. next year they can fire them and get somebody else. so they compete for the senior's business. that brought premiums down, saved taxpayers, brought 41% down. what we're seeing is replicate that kind of reform for people 54 bean low when they become medicare eligible. this doesn't take effect for ten years. hardly is this radical in my opinion. what's truly radical is status quo. kicking the can down the road, going tens of trillions of dollars deeper in the hole every year we don't fix this situation, means we record a debt crisis and then awe terty, cutting indiscreme knitly against senior where's you're giving them no time to prepare or adjust and taxing to slow us down, that is the result of the political paralysis if we keep it up, if it happens.

>> let's talk about the kicking the can down the road analogy, and you spoke about the importance of the generation to pass on to the next generation a better america. can you talk a little bit about that and what it means to you as leader in today's economy and nation and political debate on how can you improve that thinking? >> i will talk to you about it as a dad. look, jan and i have three kids that are 6, 7 and 9 years ofmente i ask the c.b.o. to run numbers all the time. i asked the c.b.o. what will the tax rates have to be on my children when they're my age raising their children if we just raise taxes to athleticism this problem? that will take us a while to figure out. we have an intergenration 58 accounting model. we can do that. they got back to me. here's what they said, the lowest income bracket that lower income pay which is 10% goes up to 25%. middle income taxes goes up to 66% and then top tax bracket, one all of the small businesses pay i was talking about goes up to 88%. then in the next sentence the

c.b.o. said this could have negative effects on the economy at that time. they did it there at c.b.o. their model forecast comet going forward. their model a year ago crashed in 2054 because the computer simulation couldn't envision any way in which the economy could continue because of debt. this year the computer crashes in 2037. our government economic estimators conceive of a way in which our economy can continue past that year. when our children are in the midst of the prime of their lives. they're telling us without a shred of doubt that we are giving the next generation an inferior standard of living, lower living standards, less prosperity. we've never done that before. look, you know, like the ryans here, my family came when they stopped growing potatoes in ireland and made a go of it. earth movers in southern wisconsin and northern illinois. and made something of ourselves.

each proceeding generation sacrificed, worked hard, took on challenges whether it was depression, world wars or wa what this is not so the next generation could be better off. that's what we dofment all of the authorities telling us that's not the case anymore. if we don't turn this thing arrange, we will be giving our kids a lower standard of living, less secure, less prosperous america. the point i keep thinking it's not too late to turn this around. we know we can fix it. we want to fix it and that's the whole point. >> last question just to pick up on that point -- [applause] you obviously have a great sense of midwestern ethic and that's why so many people are supportive too. >> it's the packer fan thing. >> the packer fan, we have to work on that part. dog about your political mentors?

you mentioned jack kemp earlier in where you derive a lot of your political thinking and authenticity and how it drives you going forward? >> ideas. i lost my dad when i was a young guy so had mentors in my life. jack kemp and bill bennett were my professional mentors. my mom a big mentor to me. ways a big reader when i was younger. i read a lot of people of chicago. i read gary becker and steegler and all of those guys i grew up on and those ideas. i grew up with aptitude and interest in economics. when you get into public policy, the whole idea to ply to lessons to the problems of the time. it's not as if we have to reinvent the wheel. we know what ideas built this country. freedom, responsibility, limited government, self-determination, all of those things made us great. they will continue to do so.

we just have to reapply those founding principles to the problems of our time. that's what we try to do with this budget and we're going to be fine. that's what makes me sleep soundly at night because i really think americans want america. i don't think they want another country. so it's those mentors and those writers inspired me. i'm a big churchill fan as well. we're in a churchillian moment. it's not a foreign threat. it's an internal threat, it's debt and economic i think we will tu around. i really do. i think this country is not done with exceptionalism. so thanks. >> great, appreciate it. >> thank you.

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