Enough already. Is that a good headline . I think so. What was the geoff and i who are opposite of people obviously can be. Are annoyed of watching anywhere in washington on anything. And our boys who runs fortune since there wasnt going to be resembling he would commission the people to propose solutions to we sat down and wrote it. Host how did you go about it . Guest it was pretty simple. We decided the smart thing get off the premises. Two of us went a couple of blocks down six avenue new york had lunch by ourselves. We went through the big issues here and we found that, you know even though we dont agree, as alan said, we come from opposite perspectives here. We were able, in a short time to reach general agreement on a few principles that were the biggest and most important ones. You know, the larger point here is that within washington, and look, a lot of people know it. At love people dont. Within washington, theres broad agreement what the financial problems of the country are. Broad agreement on the solutions, and reement thae nothing can be done. Its the most insane situation you can imagine. It seems to be host how do you different . What is your background or thinking . [laughter] guest we may as welcome out here. We didnt do it in the piece you know, its carefully written so you cant tell which one leans one direction. Lets put this way. The way we see is the opposite of the way we are. Im to the left of the and hes not the right me. Host what about on economics . What are your basic thoughts . How do you get your own position . Guest im a recovering english major. I never studied economics. I was cast to the world to write about business and economics by accident. I went out and tried to learn with no preconception, no anything, no courses, no graduate degree and whey can add and subtract. Im not trying to steal a line from clinton. Its not that hard if you do that. And i dont have preseptions. I dont love people or hang people or hang out with the Federal Reserve people. I Wander Around through life try ugh to figure it out. Host are you a follower of hayek . Guest a couple of points here. First of all what economists will tell you is for the most part, they agree on 98 of economics. I think thats correct. Its the 2 they dont agree on where all the you know important policy decisions have to get made. Frankly, you know, im not much of a that. Ill tell you that. Host which mean [inaudible] for the guest for those not paying a lot of attention to economics which is fine. You know, it means im something closer to the monetary what we used to call the monitorrist view. Something closer to the you know, u. S. A. Austrian its not. Host what does it mean . The practical guest it has a strong practical meaning now. The 700 and x billion stimulus product a good idea. They would say absolutely. The other side would say it was not a good idea and just not going work. And so, you know, my view would be i dont think it was a good idea and allan and i would disagree violently on this. I assure you. [laughter] thats the practical meaning of it in todays environment. Host how do you disagree . . Guest i think we needed to do something to stimulate the economy. I dont think we needed to do what we did. If you made me company and given me pown. I would instead of subsidizing Public Employee jobs not that theres anything wrong with that. My friends are Public Employees. It was a big part of the stimulus. I would have started all sorts of construction and tried to finish that tunnel from new jersey where i live within the railroad tunnel to new york which would be a huge value all over the region. I would have done it differently. Again, since i dont have a disagree in economics and dont want one. Wouldnt take it if they gave it to me. I was trying to apply common sense. Common sense we needed to something to shock the system. Which is what i call pragmatic economics. But i dont think we did the right thing. It was better than nothing and geoff probably disagrees. We werent writing about stimulus. Host we a long article on the website so people could let me start out with the first set the mood as you write, americas leaders arent leading and the damage is mounting. Citizens have complained for years about washingtons scabbling children, they would stamp their feet and resolve moment momentous issues. Host momentous issues. The games are child issue but the resulting suffering is serious. Pick it up from there. What did you i named nine things you wanted to change after the election. Guest thats right. We are in a situation we havent been in before. We are facing fiscal disaster. And thats not an overdramatic term. You can look at these charts theyre easy to find online. I encourage people to do a little search. Congressional Budget Office treasury. You dont have to go extremist groups. We are facing fiscal disaster. The debt of the United States, the budget of the United States on the current trajectory is going to bankrupt the country. If we dont do something. Host what is the worst thing that can happen . Guest the worst thing that happened is what happened last summer, the eye yachts, primarily, the republican idiots decided we can have the country default on the debt. Thats fine. If you have ever been a banking reporter which i have and you know how the Banking System works. If theres anything resembling a default on u. S. Debt its a disaster worldwide. And i thought we had learned something from that a year ago but apparently we havent. The worst thing that happens is the u. S. Default on the debt. It would be catastrophic for no reason. Idiotic reason. Host what results from that . Guest i mean first that happens, every bank in the United States with every major bank is bankrupt. I mean because capital is gone because the capital tied up in government security. Host what happens if i got went to the bank and want my money . Guest the fdic might be there. Its not like they would close they wouldnt its the same thing we had four years ago where youre facing massive bank failures, and you know you get your money from the fdic you wouldnt be able to get a loan. Your company, you know your Company Might not have been able to pay you. It couldnt borrow. The soundest companies in the world couldnt borrow. Host theres not enough money in the fdic. Guest of course not. Were talking trillions of dollars. Im not saying for the united defaulted tomorrow bank of america and citi and wells fargo would end and jpmorgan would close the doors and go out of business. It would be a serious hit to commerce and what remains of commerce and lending economic activity. Guest yeah. And the sort of larger problem here is we need to make very substantial changes in the tax and budget regime we have in the united. Very serious changes that are going hurt. And so nobody wants to do it and the worse thing that can happen is we dont do any of them until we have a crisis. The really horrible crisis. And defaulting on the debt would be pretty bad if it were allowed to happen for more than a day or two. But a horrible crisis could happen in other ways as well. For example, this is something we really have to pay more attention to the previous ten the leader of the counsel of economic advisers, maybe it was more than ten, from both parties last year jointly signed a letter and open letter to congress and the administration saying, look if we dont get the situation under control what is going to happen is one day no one knows when its going to be. For sure one day the bond market, all the people in institutions and the world that lend those billions of dollars to the United States are going start demanding a higher interest rate. It will go up and up and up. When it does what they said was we will have a financial crisis that will make the 2008 financial crisis look small and that is the real danger. Host one quick thing. A wack at the republicans. Guest yes. Host is that fair . Guest look in the negotiations you always have to give the impression that youre willing to go right up to the edge and over it. Its the same in labor negotiations or any other kind of negotiations. What youre really willing to do no one ever knows until the finally moment and in this case, of course when it came to the final moment the default was averted. So i tend not to blame either side. Its in negotiation. I blame them both because they couldnt come up with a solution. Host lets go to some of the solutions you have. You proposed a number of changes that could cur after the election. Start off easy. We could restrict the end of life care that medicare will pay for. Guest right. Host how can you restrict the endlife care . Guest thats just what you do. Im not going tell you specifics because i dont know them. I can tell you that i and geoff and i suspect many of the people watching this. Im guessing from your age you have seen what happens host thank you. Guest people you love get old and sick and end up in the hospital using vast amount of money. Its the end of life and theyre not going make it. An enormous amount of money is expended. Its huge. Its the scene Everybody Knows and nobody will talk about. Because who wants to talk about it . Host where do you go for that . Guest same reason. It accounts for a huge proportion of total medicare spending. By the way, one reason is the first thing in our article here is getting medicaid costs under control is the number one priority. Its the most untouchable thing tbhaw is going to cause more trouble than any other problem weve got fiscally in the United States. Getting medicaid cost under control is the number one thing. Host you say we surcharge smokers and the obese for the medicare coverage. Guest right. Host where did that idea come from . Guest it came from us. I mean im the person who put it in the memo. I didnt have to fight very hard for it. I ran in to this its something i ran in the Washington Post instead of calling people obese. I called them mega fatties. I was called out for being insensitive. I probably am. Everybody knows it to be true and someone has to pay for it. Im not saying you should bankrupt people who there should be penalties , i mean im not really a democrat but im certainly democrat compared to him. You have to be responsible for some extent for your personal behavior. Host quite right. We should point out were not the only ones making arguments like this. There are other bipartisan commissions and so forth. The democrat and a Republican Task force also said with regard to medicare we need to do something about the obese and smokers, they also had a proposal which was more complicated than ours for restricting spending on end life care. These are difficult painful decisions, but were going have to face them. Host take the obese thing. Would you say if you weighed x pounds over what the normal weight is for your size medicare would cut off . Guest this is why the lord created experts. Im not an an expert or control the liner. Im skinnier than i was but im not im not going say because i dont know. Guest a way to think about this, Insurance Companies manage to handle this kinds of thing. In other words its feasible you know, they will give you a medical exam before theyll give you certain kind of insurance theyll look at your weight, hart rate and million others to set the rate. We can do it. Its feasible. Host you say Social Security should be a payasyou go wiping out the Social Security trust fund. Guest any time sheer something to keep in mind. Any time anybody mentions the Social Security trust fund unless theyre telling you its meaningless, whichs will theyre probably leading you astray. Host meaning . Guest because the Social Security trust fund by law must be invested in u. S. Treasury securities. So it means that when the Social Security trustees go the treasury to redeem one of their Treasury Bonds they hand that to the treasury say we would like our money please. The treasury gives them the money and goes out to the world to borrow it because otherwise they dont have it. So just more government borrowing. Host what would you do about it . Guest what i would do is what we proposed in there. I have spent years covering Social Security, i have angered any number of people by writing what geoff said. I have written it for ten years. The Social Security trust fund has moral significance but no financial value. What i would do is what we proposed in there. Basically pay out other twenty five years the balance of the trust funds and recipient. In twenty five years you have a system that the money coming in would be about equal to the outgo, which is the way it used to be before 1982 and i dont want to bore you with the details, well lose what remains of the audience. [laughter] but it is a pay as you go system. Its got the trust fund, which is a weird economic thing having to do with Social Securitys rules, but has no economic value and lead people astray. Host right. Lets get rid of it as a diaster. As already a pay as you go system. Lets call it what it is and make it work. Host lets sphee we can get advise from both of you for people who are watching this election. What is absolutely going to happen after november 6th . Absolutely going to happen. No matter who is elected that will have to do with peoples pocketbook and the money. Guest its a great question. Host no matter [inaudible] guest yeah y yeah. Thats a very good question. I think what we can say with confidence is that the winner, whoever he may be is going have to do some sthawf will stuff that will make him very unpopular. The reason i say this, we face a debt and deficit stwhaition is situation that is simply unsustainable. Frankly, next year is the big window weve got right after the election, you know the first year its either going to be romneys first year or obama, you know in the last thing hell never run for reelection again. We wont have to worry about it. This is going to be their window cut the budget in some significant way or at least have an outline for cutting the budget and reform the tax system in some kind of significant way. The question is, will it be the big picture we forms we need or is it going to be a 12month solution . But theyre going to have to do something that is going i hate to say that. Host everybody . Guest darn near. It may be that and, you know, if you up hurt the upper income people . I think so. The only reason i hesitate probably at the bottom of the income scale care will be taken to make sure they are not hurt. Host what would you say to somebody listening to the candidates and promise that you elect me and everything will be fine. Guest yeah. Host that happened, what four years ago . Two years ago . Guest and it happened eight years ago and twelve years ago and fourteen years ago. The answer is everybody isnt going to be fine. What i hope is happen. What ive been calling for 15 years shared sacrifice. Everyone will suck it up and grow up. Weve been yelling enough already and well cut some of these programs or, you know, cut their growth, and well increase the tax revenue to the government, and well act like a Civilized Society was sharing the pain. Instead of this fantasy that i can have what i want and everybody else pay for it. Host let me knock down another one of your idea here. Not knock it down bring it on the table. Guest cross it off. Host the largest element of spending after social insurance is defense. Its budget can and should be cut. Now, youre a conservative. Guest yes. Host and i think ive heard mr. Romney talk about the fact were not going cut. Guest right. Right. Here is the reality again that has to be faced, and, you know, if youre running for office, i guess its one of those things you cant say but it still needs to be said. Yes, the defense Defense Budget is large and needs to come down. Again, if youre not running for office. You can say all of this stuff. Alan simpson, a republican will be happy to tell you it can and must come down. He points out that the u. S. Defense budget is larger than the combined Defense Budget of the next 14 largest countries in the world. What really struck me this year was the house in may passed an appropriation bill for defense. Host okay. Guest were they looking to cut . No, in fact they passed an appropriation that gives 3 or 4 billion to the pentagon more than what the pentagon asked for. The pentagon specifically wanted to cut back or reduce a drone program, a tank program and submarine program the Defense Department said we dont listen, we dont want them. We dont need them. The house put them back. Okay. This is about, frankly sending port back to the district rather than addressing the countrys fiscal needs. So, yeah the Defense Budget can be cut, and frankly the Defense Budget knows that and is ready for it. They just want it done an intelligent plan orderly way. Host allan, the word sequestered. What in the world does the word mean . And people suggest its sequestering the Defense Budget over the next ten years will be a disaster for our national security. Guest again, i dont pretended to know. Showing you some of the dynamic here, the social the cutbacks on Social Security and medicare. Those were things i threw in to the pot the first thing. Geoff is the guy who threw in the Defense Budget. Frankly i wouldnt have thought of because its so untouchable. Host right. Guest what will happen . I dont know. Do you understand how the military works . Do you know where the money goes . I mean i dont know. I dont know about defense except we have to have it. But like geoff,ic we have to be spending too much money for what we have given the what the rest of the world spends. Host let me just take a brief pause and ask you what you think of the elected officials in this country. From your position. What do you think of them . Guest well i think that you know, some of them are wonderful. A lot of them, frankly are trying to do the right thing and wish they