Their spouse has passed away, they are, in general, tougher and financial circumstances. It is not that i would not have some sympathy for changing benefits, but i would like to do is lower the most for those who are most capable of withstanding the reduction. What do you say . I think the most important point to make about the change cb i is it saves you very little in the long run. It raises you very little on the tax side. If thats the only thing we are contemplating, i guess we talked about eligibility for medicare but we were not talking about sufficient reforms to fix the problem we face. While historically, the chain cpi may have gone up by two or three points less than the cpi w use, there is no guarantee. Is just a forecast. That is just a forecast. We could save more or less depending on how things work out in terms of real reform, i would much rather look at something of this sort that bob discussed, some sort of progress of indexing approach to the problem. That would lower the rate of growth with real benefits at the top more than at the bottom. I emphasize or rate of growth because it the look of the bulls since the proposal, all benefits continue to rise in real terms even among the most affluent. We dont have to impose a huge amount of pain to resolve the Social Security question. Lets say the best for last which is medicare. It was remarkable that during the entire fiscal cliff debate, the political system was silent on the issue of medicare. There was all this talk earlier by House Republicans who voted for a dramatic change in the structure of medicare but during the fiscal cliff debate, over the last month or so, i heard almost no words about medicare. Both parties seem to be terrified about even talking about it. What was going on . Are there ways to get sufficient money from medicare to address the fiscal issue without entirely reforming the system that . It was evident what was going on. Social security and medicare must be the two most politically popular programs ever invented. They affect a huge amount of people. It really is hard for politicians to attack those programs. Know what you do to make reform more acceptable. That is what i am so pessimistic for the long run. I think it will take some sort of crisis to get reforms and those popular programs. What do you think . Are there ways to skin the medicare cat out committing political suicide . The president has proposed three 400 billion over 10 years of additional adjustments to medicare, expending on some of the ideas of the Affordable Care act. A liberal organization has put out a plan of equal savings. There are ways to do this that dont constitute reform at large. The fact is that when we look at medicare, the growth of spending on a per beneficiary basis is going to be very low over the next 10 year because of changes that were made in the Affordable Care act. We are talking about growth rates that are half of what they have been historically. It is hard to see how you can squeeze more out of bad in the short run. In the longer run, i think fundamental reforms are possible but the president made this a defining issue in the election. To passe was going preserver medicare it was unrealistic to expect this would be front and center during the fiscal cliff negotiations. The president says he does not favor changing medicare but on the other hand, he says he favors increasing use of managed care. Does that go to the same place from a different direction . As you know, i have a certain track record with premium support which is actually a label that can of an article that henry aaron and i wrote in 1995. It was a very different approach, not moderately different, from what congressman ryan has pursued. I have a lot of sympathy for moving in that direction. In a sensible kind of way and we already have the Medicare Advantage component of medicare. We are about about 1 4 of beneficiaries to to get their benefits through a plan offered by some private entity that agrees to take a riskadjusted payment to cover medicare desk type benefits for people who enroll in its. Motta fighting that program gradually over a decade i think would move you very close to something that congressman ryan would view as premium support. Were not going to get gobs of money out of it. The real issue is not medicare or even medicaid. It is the underlying growth in Health Expenditures per beneficiary in the system at large. Those of us on medicare get their benefits from the same providers and through the same mechanisms that employer sponsored insurance folks do you have to institute reform or changes in incentives that will lower the growth rate for all americans. That is the only way to be successful unless you think you will shift costs on to Medicare Beneficiaries and that has huge limitations because the average Single Person over 65 has Median Income of about 18,000. Over half of the units, a 65 years old and older, are central as opposed to couples. The couples Median Income is only 44,000 so you cannot expect to get huge amounts of money by shifting costs on to them. I will give the audience a chance to ask a few questions. There will be microphones taken around and i would like you to wait until you get a microphone and please introduce yourself and make it a question and not a speech. Right back here i am and dick miller what does anybody up there think about [inaudible] i understand the labels and expectations of having people in both houses of congress trying to work across the aisles, people in more of the middle. There are many bipartisan groups the deployed around. Everyone on this panel has participated in some of them. Do you see any opportunities at all coming from the stacse . Ultimately, it is the only way out what we see in the congress is continued polarization and erosion of the blue dog democrats, the moderate democrats and we see, unfortunately, more polarization on the part of the voters, too. That is exaggerated from the point of view of the house by the fact that we are so clever at drawing district lines that we tend to draw them around conservative and liberal bunches. When some congressperson seems to be acting out of the mainstream, he or she may be from the point of view of the nation as a whole but from the point of view of their constituents, they are just going along with public opinion. It is very difficult to break through that. Gentleman in the back in reading one article, should you die in 2013, it said death taxes went up to 55 . I am very upset with that. I can understand the president fighting with congress because you have Campaign Contributions and lobbyists. Why is the Corporate Tax rate not on the table for discussion . All focuses on working folks and their exemptions and the mortgage and exemptions and also social programs but there is no focus or attacked or evaluation of Corporate Tax rates in this discussion or even with the congress. One question is about the estate tax. Maybe you can clarify what the rules are and the other is about the extenders which got extended. I will pass on the estate tax but i will focus on the corporate park. T. Go back to the president ial campaign. You had one candidate, governor romney, who opposed lowering the Corporate Tax rate from its current 35 some level down to 25 and the other candidate, president obama, the proposed to lower the top corporate racks rate to 25 . It was a strong bipartisan effort in lowering the tax the Corporate Tax rate primarily because of reasons of international competitiveness. The United States is quite out of line with much of the rest of the world about what our tax rate is. On the other hand, we are also out of line on how generous our tax breaks are. What president obama has proposed in broad terms is a rolling back Corporate Tax breaks as a way to help pay for lowering the top rate. Does it is something that dave camp and others have in congress have raised for their role is issues about how far we can go and rolling back tax breaks when companies and businesses know that what you are trying to do and different businesses have different opinions. The political discussion has primarily been a round revenue neutral business or Corporate Tax reform in which rolling back the tax breaks would be a pay for to bring the top rate down. Do you think there is a way we can do corporate reform in this environment . Is extremely difficult but i think one really positive thing that came out of this fiscal debates this time is that for the first time in a long time, the Business Community unified around a concept of getting our deficit under control. They were not as worried about their individual tax breaks that might go as a result of having some reform. I hope that mood continues. That was a one group does not argue over one other or about accelerated depreciation and so forth. I am more hopeful that a more unified view from the Business Community is possible this time. I want to say one thing im not fully knowledgeable about this. I was at a meeting earlier today were in noted tax expert said you cannot do corporate reform and not to individual reform because when we change the parameters, a whole lot of entities shifted from C Corporations to other forms that were taxed on the individual side. If you lower rates on the Corporate Tax and get away with some of the preferences for oil and gas and various things, youll get a huge shift of people out of the individual and into lower rates in the corporate world and you will lose money. This is a very important thing. Watch as politicians talk about this and when they use the word corporate and when they use the word business. There are a lot of businesses that are structured aS Corporations and businesses that are structured as limited Liability Corporations or partnerships or S Corporations and the taxation of their income happens through individual tax returns, not for Corporate Tax returns and some companies have a choice how i want to structure and a base that in part on tax considerations. Theres also this issue that many of the tax breaks that applied to corporations are really business taxes. If you start changing those and make them less favorable as a way to raise money, you may also have the effect of raising taxes on the businesses that are taxed on the individual side that we might get the benefit of a Corporate Tax cuts. You would then run into fundamental Economic Issues if you are distorting how these Companies Choose to set themselves up and you begin to run political challenges that if your goal is to lower the corporate rate and paid for by rolling back business tax breaks, the Bumper Sticker of of what you just did is you have raised taxes on Small Businesses. There is a bunch of things that may not be true in what i just said that that is the Bumper Sticker that you are walking into. That starts to bring the pressure. We have a question from one of our remote of yours. Remote viewers. Lets talk about revenue as a share of gdp. How much could it believably collect in a new tax structure . Can we agree . What is a reasonable number . Oh, dear first of all, i think you have to separate the Revenue Target from how you face it. There are better ways to raise more money which would not be inefficient. I guess i felt pretty good about the kind of thing that bulls simpson was suggesting. As i remember, it initially was 80 billion per year the. Seemed quite reasonable. As we look forward, we will need more revenue than we have collected historical way. As a of gdp because of what the demographics are doing to a large part of government spending. Somewhere around 22 or Something Like that seems a reasonable goal to me. I think that is a reasonable goal in the short term. If i were looking out into 2020, i think it will end up being hired. You tell me what the spending is and the percentage of gdp and i will tell you two Percentage Points less, maybe a little closer but people talk about balanced budgets. To get the debt on a trajectory where it stops growing faster than the economy, Something Like running 2 of gdp deficits on average would be a tremendous accomplishment relative to where we stand today. We will ultimately have to calibrate our tax revenue juxtaposed to spending. Does not necessarily just a matter of rolling back tax breaks and the justing been known pieces of the tax code. Thinking about things like carbon taxes and what not may be essential. They are applying spending in the 25 range . Is that credible . We could design a tax system to support them. It is hard to skill what we have currently has an income tax to accomplish that. You would have to reduce deductions a lot. Internationally, there are a bunch of countries that have larger governments than the United States. That has to do with financing and health care but some has to do with other things. If you compare their tax codes, on average, they choose tax consumption more heavily relative to income than we do. There are a lot of good economic reasons why tax consumption makes more sense than taxing income. It seems the Political Economic pressure is if you want to support a larger government, you have to have a more efficient tax system and that means getting rid of distortions and taxing consumption and relative terms and the u. S. Would have to find a way to attack there. There is value added tax as a way to get there. I am firmly of the belief that we end up in a corbett carbon tax before we get to that. As somebody who designed a consumption tax once, do you think we are reaching the limits of the income tax . Will we have to raise revenues somewhere else . I used to think that politics would push us in that direction. Frankly, as hard as reforming the personal and Corporate Income tax is, coming up with a new tax at this point in time, i think, is totally unthinkable from the Republican Point of view. I cannot imagine doing it within the next 10 years or so. My observation is to not ask the question what percentage of gdp will total spending be what will happen to Health Care Costs in the next decade and a half. If we get it under control, i think our numbers could be significantly lower. What we have seen over the last three or four years is very optimistic in the sense that healthcare cost growth has slowed down. We have been there once before and it did not pan out. I am a believer that there are a number of forces that should make us more optimistic now than we were the last time this happened. Other questions from the audience . I am gruenberg. The whole point of the fiscal cliff and trying to get the deficit down longterm you have not talked about the other obvious thing which is jobs. This is a tax panel but if you put people to work, they earn money, even at government jobs. If they earn money, they pay taxes, if they pay taxes, revenue goes up on the top and the deficit goes down. Talk about jobs. Talk about growing our way out of the deficit . Everything you said is true. Growth is beneficial but the net benefits are much lower than many people realize. The problem is that we have designed a system where we have, for example, indexed initial Social Security benefits to wages. That means that the faster the economy grows, the faster wages grow, the faster the cost of our promises of growth. With health, is more obscure but i think the evidence is fairly clear that people have more income, they demand more health care. As a result of that, if you grow faster, there will probably be more pressure on healthcare costs. While growth has a net benefit, you cannot solve the budget problem with realistic rates of growth. We have to grow at chinese proportions to be able to do that. With what is possible in the United States, it would benefit and i dont want to deny that but we cannot grow our way out of this problem. Another question from the audience . Yes, sir thank you. We talked about how congress and we talked about the white house. What implications does fed policy have far for our Economic Future . Mr. Bernanke . Let me put it this way i cannot believe that the quantitative easing we have had has done all that much good. I think the facts must be trivial on interest rates. And the effects of liquidity i think are pretty trivial given that the Banking System has been using their excess reserves. I dont think it was worth the risk of the exploding the fed Balance Sheet, a Balance Sheet that will have to shrink or the long run or else we do create the risk of more inflation. I wish the fed had not done all of that. I guess i am not as concerned as my people are that they will make a huge mistake as they begin to straighten out their Balance Sheet. It is hard to believe they can do it with precision to come to a perfect outcome. They are bound to make a mistake one way or another. Making a mistake in a more contraction our direction is just as probable as doing it in an inflationary direction. The risks are there and i dont think the risks are high but i dont think it was worth doing what they have been doing. Can lay on the wind it . I am a little bit more charitable. I agree that the impact has not been huge and i would not want to