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Press Conference with Senator Judd Gregg (R-NH) and Rep. Paul Ryan (R-WI)

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Location: Washington, DC


PRESS CONFERENCE WITH SENATOR JUDD GREGG (R-NH) AND REP. PAUL RYAN (R-WI)
SUBJECT: THE ADMINISTRATION'S FISCAL YEAR 2010 BUDGET

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SEN. GREGG: First off, I appreciate you folks coming, and I appreciate, obviously, joining with Congressman Ryan to talk a little bit about the president's proposals on the budget, or the outline of the budget that he has sent down.

Let me begin by saying that there is procedurally some good decisions here, in that they, from a standpoint of budgeting, technical budgeting aspects, they've taken actions which were appropriate, such as not including AMT revenues when we know we're not going to get them, and then ending up spending them; such as the doctors fix, accounting for that; such as scoring the war. So those are good things to do. And I think that reflects the fact that Peter Orszag is down there and he's an honest and fair broker of what the baseline should be relative to numbers.

On the other side, though, when we get to substance, I have some very severe reservations about where this budget is taking us. And the issue really comes down to this: Where's the restraint in spending? You know, this budget doubles the debt of the federal government in five years. Triples the debt of the federal government in 10 years. Runs up obviously massive deficits over this period. Never really gets us back to a point where we're on a glide path towards getting control over the costs that we're passing on to the next generation, the costs that our children and our grandchildren are going to have to pay to operate the government.

The problem with this is that it's done in the context of not addressing the true fiscal problems we have as a country, which is the looming fiscal tsunami of the baby-boom generation retiring and the entitlement cost that they're going to incur, and the fact that we're going to end up passing on to our children a government they can't afford and a nation which won't be as strong as we were given by our parents.

There are massive tax increases in this bill, in this proposal, $1.4 trillion by our calculation. It's a big number. Massive new spending in this bill; just in the health care area, approximately $1.4 trillion of new spending.

The representation that the budget is -- the deficit is being cut in half in four years is a nice representation, but it's really not the heavy lifting that's needed here. In fact, if you go to the current law baseline, the deficit would go to about ($)140 -- $150 billion in the fourth year -- or in the fifth year. So actually, just under current law, the deficit would end up being dramatically less than where they're going, which is to a $500-billion-plus deficit in the fifth year.

That's still -- that number, at ($)500 billion, is very, very large, obviously, but more disturbing about it is the fact that it goes on forever. Once they hit that, they plateau at that number. And why is that? Well, it's because there is no fiscal restraint in this budget. There is no attempt to address the spending side of the ledger in any aggressive way. There are representations, but they aren't accomplished.

For example, the representation is that there's $2 trillion of savings. If you look at the $2-trillion number, a trillion dollars or more of that is savings on money which was never going to be spent. It's the war cost being spread out to the 10th year, when we know we're not going to have the war cost to the 10th year, because the president's already told us we're going to basically be out of Iraq next year. And so they're scoring a number as a savings against spending which is never going to occur. So that's an extremely hollow number.

And the other half of the trillion dollars is tax increases. I don't score spending restraint as tax increases. That's a different type of accounting for me.

So that's -- that creates the problem. The problem is that yes, we understand the president wants to move forward aggressively with a health-care initiative. But we're already spending 17.5 percent of gross national product in this country on health care. As has been said by members of his own party, the resources are there. We don't need to add another $1.4 trillion on top of that in order to address health care and do it in a fiscally responsible way.

We have to have some discipline on the spending side of the ledger if we're going to have a reasonable budget, if we're going to get the deficit down to a reasonable number and if we're going to pass on to our kids a country they can afford.

Congressman?

REP. RYAN: Thank you, Senator.

The president gave a great speech on Tuesday night. It was downright inspiring. I thought it was one of the most articulate speeches I've seen given by a president to Congress and the nation. But regrettably, his budget falls far short of his inspiring words.

When you take a look at this budget, this budget, it's a spend, tax and borrow our way into prosperity budget. It proposes bigger government with higher spending, higher taxes and higher debt as a means to produce prosperity in America. When you actually look at this budget, it is a breathtaking budget. This budget is so breathtaking in that not it -- in not that it goes forward. It's not a progressive budget. It's a budget that goes backwards. It's a budget that goes back to old ideas. Tax, borrow and spend is not the way to secure prosperity.

My favorite movie of all time is a Clint Eastwood, Sergio Leone classic, "The Good, the Bad, the Ugly." And I believe it's important, if good things are being done, highlight those. So we broke this budget down into the good, the bad and the ugly.

The good: At least there's an acknowledgement of the entitlement crisis. Senator Gregg and I had a meeting over at the White House on that point. There's an acknowledgement of it -- not a fix for it, not a cure for it, but at least an acknowledgement.

They do budget for the AMT fix. That's good. That's honest budgeting. Budgeting for the AMT fix is the right thing to do, something that should have been done long ago.

It means tests Part D premiums. That's something that we've been supporting for some time that does achieve some savings.

So those are the three nice pieces of information, good stories in the budget.

The bad: It increases domestic -- it increases spending to $3.9 trillion in this year alone, a massive increase in government spending, 27.7 percent of gross domestic product. This is really big government. Increases in domestic discretionary spending by 9.3 percent -- we're increasing spending on domestic government bureaucracies by 9.3 percent. Name me a family budget or a small business budget that gets to have an increase like that.

War funding gimmick -- that's what Senator Gregg talked about. This is pretty insidious. This is baseline politics. They're taking the highest level of spending in the war, the 2008 level, and they're inflating it into the baseline. And then the inevitable drawdown accrues $1.6 trillion in savings that then they take credit for to spend and grow government. That's not real good budgeting. That's not honest budgeting.

The ugly: If there's anything that economists on the left and the right agree on, that supply-siders, classic economists and Keynesians agree on, you don't raise taxes in a recession.

This budget is raising taxes in a recession. This budget is going to have a $1.4-trillion tax increase, a $1.4-trillion tax increase, tax increases on small businesses, on investment that creates jobs, tax increases on energy and tax increases that's going to hurt states that are cold states, where we have to pay for heating our homes, and states that have a lot of manufacturing.

It will put us competitively at a huge disadvantage against our foreign competitors. The deficit this year goes to $1.8 trillion alone. And this doubles the debt by 2,000 within eight years. This doubles the national debt by eight years.

And so if you take a look at all of these numbers, you include the taxes that are going to hit families, you include all the new spending on health care, let's recognize one thing, and Senator Gregg said it very well.

We already spend two-and-a-half times per person, on health care spending, versus all other industrialized countries. Can't we spend what we're spending already more effectively? Why do we have to spend all this additional money?

Let me put it a different way. For the next 10 years, we were already projected to spend $4.5 trillion on spending, for health care, for people under the age of 65.

I would argue, if we reformed our health care system, to put patients and doctors in control of their health care, bring the market back into health care, we could have universal accessibility to coverage, to health care coverage.

Instead we're going down the path of having the government run health care, of having us raise taxes, borrow more money and spend even more money, on top of this, to do this.

I want to work with the president in a bipartisan way to move this country forward. We want to have bipartisanship. But that requires collaboration.

But in good conscience, we can't work with the other side, if they insist on dramatically growing government, on dramatically increasing taxes and dramatically borrowing more money, because that will give our kids and the next generation a dramatically more expensive government, much higher taxes and an inferior standard of living.

And that, I fear, is the trajectory we are on. This puts us on the path to much higher, much bigger government permanently. And that's not the right direction.

SEN. GREGG: He's Clint Eastwood; I'm Eli Wallach. (Laughter.)

Q (Off mike) -- another financial rescue package, $250 billion. What's your reaction to that? Is more needed?

SEN. GREGG: Well, first off, that's TARP 3, I suppose, you want to call it. I'm sure they'll have a different name for it by the time it gets here. I'm not sure what that number means, because TARP 1 and 2 were scored at 250. So if they've got a 250 number in there, and TARP 1 and 2 were 700 billion but scored at 250, maybe it's a $700- billion number really.

I'm willing to give them the benefit of the doubt on that one though. You know, we're in such a difficult fiscal situation that if they come to us and make a legitimate case that in order to stabilize this economy and specifically the financial sector, and they need more TARP dollars or whatever they want to put the title, the new title on it as, I'm certainly going to be listening.

And that's a reflection of my willingness to be bipartisan and recognize that we're in a pretty deep hole here and we've got to -- we're in a pretty rough sea and we all need to be in the boat riding, rowing towards shore.

And the initiatives to try to stabilize the financial industry have to be done in a bipartisan way.

Q Yes, I guess for the both of you. I asked Director Orszag about that an hour ago, about the contingency -- (off mike) -- this 750, which is the number that he acknowledged. And I asked him if he was able to -- if he had a formula for coming up with that number, versus Henry Paulson, who admitted that he just kind of thought it up. And he wasn't able to give me one.

And the second question I asked him was, if 634 billion (dollars) is a down payment in health care spending, what's the final total? And he wasn't able to give me one either, and I'd like to get your reaction to --

MR. GREGG: Well, on the issue of financial stability, until they probably completed this stress test exercise, of going through the major banking system and deciding where their capital needs are and what sort of reconstruction has occurred as a result of the initial efforts here, and as the TALF money kicks in, which will relieve significantly, I believe, some of the pressure on the financial industry, they're not going to know the number. So I think it's legitimate that they don't know the number.

On the issue of health care, it looks to me like they're talking over a trillion dollars. The 636 (billion dollars) is really what they could figure out how to gin up the answers to how they were going to cover it, but they're really talking a trillion or more.

I don't know if --

REP. RYAN: Yeah, I agree with the financial crisis stuff. The TALF is going to start in a couple of days, so we'll see how successful it is. I think the TALF is the right way to go, combining the TARP and the TALF I think is the right policy. And it's just too soon to tell. So you have to give them time, because they themselves don't know the extent of it.

On the Health Care Reserve Fund, I assume this is designed to create space in the budget resolution for reconciliation protection of the health care bill we're told they want to pass by the August recess. And I think the 600 number is just a small down payment. I assume this is going to be more than a trillion dollars.

SEN. GREGG: Well, they did say it was a down payment, so we know that much. We don't know what the number is.

Q Senator, on the limitations, the itemized deductions that are in the budget, President Bush had a tax reform panel that basically came up with idea of limiting the mortgage interest deduction and for charitable contributions. Those were roundly rejected by Congress. Do you expect a similar reaction if these are brought forward, if they do actually try to limit the itemized deductions?

SEN. GREGG: I hope they will be rejected, but you got to remember the president's panel, which was chaired by Senator -- one of the co-chairs was Senator Mack, was doing a comprehensive reform. Comprehensive reform. And they basically suggested that a lot of deductions be eliminated in exchange for a significant rate cut.

REP. RYAN: That's right.

SEN. GREGG: Rate cut. This has the practical effect of being a major rate increase. Not only are they taking the top rate from 35 to 39 percent, then with this language relative to deductibility of itemized deductions, you're essentially kicking it up well over 40 percent, probably 40, 41 percent. We haven't scored it yet. But you're basically taking the top rate up in the 40 range.

Now, who does that effect? You know, most people say, well, somebody else is paying that, I don't really care. It's basically small-business people in this country who pay that type of rate because they are sole proprietorships or they're subchaper S corporations.

So if you've got a restaurant or you have a small business, a small software company that's growing, or you have a garage, or you've got an automobile dealership, or you're a realtor, you're a sole proprietor and you're getting hit now with a tax rate that's going to jump from 35 percent up to 41 percent.

Well, where do you pay for that? You lay people off. You don't hire people, you don't expand. I think it's extremely dampening on the economy to have that type of tax increase, specially when we're in a slowdown.

REP. RYAN: So get this. Seventy percent of our jobs in America, on average, come from small businesses. The majority of people who file at that top rate are those small businesses. And we're saying, going in this recession, we're going to raise taxes on the engines of economic growth and job creation in America? That's what's so galling about this budget: the notion that you raise taxes on the people who are most likely to create jobs in a recession. It just boggles our mind that they would actually try and pursue this sort of an economic agenda at this very time.

We understand they want higher taxes, but we know one thing always works the wrong way: raising taxes in a recession causes job loss and extends and prolongs recessions.

SEN. GREGG: And remember, there's another tax increase in here. This will translate into a -- this will affect average Americans, because it will mean less economic activity, as Congressman Ryan has pointed out.

But you've got a tax on people's electric bills in here. This carbon tax isn't going to be paid by corporate America. It's going to be passed to the consumer. And so everybody who gets an electric bill in this country who happens to be in a region which has coal-fired plants or other plants which are subject to a carbon limitation tax, they're going to end up paying a big tax on their energy bills.

Well, if you're going to do that for the sake of addressing global climate change because you want to reduce emissions, that should be immediately returned to the taxpayers, dollar for dollar. That carbon tax should go directly back to help support the people who are paying their electric bills. It shouldn't be used to expand government willy-nilly on somebody's special project, and that's the way it's structured here. They're taking the tax, expanding government. Some of it goes back to taxpayers, but the vast majority of it's going to be used to expand government. That's wrong.

Steve?

Q Well, they say that most of it goes back to the taxpayers by the completion of the --

REP. RYAN: Make Work Pay credit, yes.

Q (Off mike) -- permanent $400 a worker as a tax cut for 95 percent of the -- (off mike). On this tax question, I mean, how do you really say, okay, this is raising taxes in a recession, when these tax increases will not take effect for almost two years? They say by that point we'll be back into a recovery. It would be perfect timing, wouldn't it?

REP. RYAN: So let's see if we get this straight. We're telling small businesses around America, if you're thinking of investing, if you're thinking of hiring, if you want to get out of this recession, just know this: Your taxes are going to go up.

You know, and businesses don't turn around on a dime. They plan for the future. They think about what's the after-tax rate of return on capital? What's my investment horizon look like? So what we're saying to business is: You know what? Your money's going to cost more, we're going to have higher taxes on pensions, higher taxes on 401(k)s, because we're going to tax the equities that go into those things.

And we're going to say to every new small business, every small business out there that is hoping to hang on in this recession: If we get out of this recession, we're going to hit you with higher taxes. That's going to hurt investment. That's going to hurt job creation.

And on the whole cap-and-trade thing, we are not giving 95 percent of the people a tax cut, when we're raising their energy prices. We are going to say it's going to cost you more, because of government, to heat your home, to fill gas in your car, to take your kids to school, to do the -- to manufacture things.

And so when you take a look at the Make Work Pay credit, that's about 13 bucks a week. We're going to be raising dramatically the energy prices for consumers, for families, for manufacturers, small businesses, for the elderly. And I think it's probably going to cost more than the $13 a week they're going to get in a rebate.

SEN. GREGG: Well, they actually state in their documents, I believe -- I may be wrong about this -- that they're going to use a portion of this other --

REP. RYAN: For spending.

SEN. GREGG: For spending, yes.

Q Senator, can you -- aside from the philosophical disagreements with what's in the president's budget, can you talk about his numbers? Do you believe that his numbers add up the way he wants them to? And if not, can you tell us where you think the budget's actually going to be by the end of his first term, or how do they delineate and just where the deficit will be, and where tax revenues will be?

SEN. GREGG: Well, to a large extent, it depends on the economy, obviously, and a recovery occurring. I happen to believe, myself, that if we were to step forward jointly as a Congress, in a bipartisan way, and take on some of the big issues -- and start with Social Security, because we know how to solve it, and put in place a plan that solves Social Security and makes it fiscally solvent for the next 50 years, and follow that with something substantive in the area of Medicare -- that if we did those two things, jointly, in a bipartisan way, we would create a massive amount of confidence in the American people, and in the world community which is buying our debt and stabilizing our currency, in our economy. And we would see a much faster economic recovery.

But neither of those issues are taken on in this bill -- or this proposal. And it's regrettable, because the opportunity is there. And really, until we address this looming fiscal tsunami -- and I'm sorry to keep using the term, but that's what it is -- which is going to wipe out our children's chances of having a successful future, we aren't going to be able to say that we're going to be able to stabilize the federal government as a portion of the economy. It's just going to grow dramatically, to a point where it can't be afforded any longer.

REP. RYAN: I completely agree with that. The most frustrating thing about this budget is the fact that it's a missed opportunity to work bipartisanly to fix our financial fiscal crisis, our entitlement crisis. If we all got together and fixed the financial -- the fiscal crisis, the entitlement crisis, imagine the confidence that would bring to the markets. Imagine the confidence it would bring to our currency and to the future projections of our economy.

I think you could probably come up with a good argument that the inflation assumptions and the economic growth assumption in this are a little more rosy than the blue chip consensus forecast. We're going to look more into that, but I think there is something that you ought to look at the inflation numbers here.

You ought to look at the GDP forecast. They're off from the blue chips, but they're within the realm of reasonability. But if the blue chips are right and if this forecast is wrong, then the budget's going to look much worse than they're projecting.

Q Do you believe that the president can pay for this with raising taxes simply where he proposed? I mean, is that -- you may disagree with doing that. You may not like how -- where he's going to use the money --

REP. RYAN: Pay for what? We still have a huge deficit at the end of the window. We --

Q That's kind of my point --

REP. RYAN: We're -- we still --

Q Do you see a -- do you see a different outcome?

REP. RYAN: The Congressional Budget Office January baseline shows that the baseline deficit on its own goes down by three- quarters. So claiming credit for cutting the deficit in half over four years is kind of the equivalent of standing outside at 5:30 in the morning and claiming credit for the sun that's about to rise. I mean --

SEN. GREGG: No, it's worse than that. (Laughter.) It's like we take four steps back and then only take two steps forward.

REP. RYAN: That's right.

SEN. GREGG: I mean, basically that's what's happening here, taking four steps back in the deficit fight and then we're only taking two steps forward in the deficit fight, when the -- when if you were just to stay on the basic course you are, you would take three steps forward.

REP. RYAN: That's right. If we did nothing, the deficit would improve much better. If we did nothing, the deficit would drop faster than it is in this budget. They're simply presiding over the baseline -- a baseline they're inflating with this war-cost gimmick and a baseline that has higher taxes and higher spending.

And saying that you're cutting the deficit in half over four years sounds fiscally conservative, but when you actually look at the math, it's fiscally irresponsible.

SEN. GREGG: Well, that's because if you're quadrupling the budget deficit and then you cut it in half, you're not getting very far. I mean, it's that's simple.

Q But Senator, for all of this talk --

SEN. GREGG: Now, I would say this, because in fairness, it's not -- a lot of this deficit that they're getting this year is a function of an economy that's in a difficult, difficult situation. So I have not in any way said that the deficit they're projecting this year is an outrageous event. You know, I mean, you could -- you could make all sorts of comparison, you could -- and they've been suggested to me.

But that's not the issue here. The issue is five years out, why aren't we doing something more constructive about this? Why aren't we getting our hands around this? Instead, five years out, we're exploding tax burden, we're exploding costs.

Right now they got a big problem. I recognize that. We all recognize it.

REP. RYAN: Yep.

Q Senator, for all this talk about the deficit and where blame lies, I mean, it isn't just because of a Democratic Congress or a Democratic president. I mean, doesn't it --

SEN. GREGG: Absolutely.

Q -- have to do as well with a lot of recent Republican spending?

SEN. GREGG: Well, I don't think it was Republican spending I voted for. But, yes, we were -- we did not do a good job of managing spending when we were in charge. But this deficit is primarily a function -- the immediate deficit is primarily a function of an economy that's gone into a tailspin and the dropping revenues is dramatic.

The deficit in the fourth, fifth, sixth, seventh year of this budget is a function of the fact that this proposal has a massive expansion in spending. So that's the difference.

Q Can you guys give us some idea on some of the -- some of their proposed cuts and the political viability of some of them? The farm payment seems to be a perennial issue.

SEN. GREGG: Brilliant idea.

REP. RYAN: I'm for it too.

Q Part D.

SEN. GREGG: Bipartisan support.

Q Farm payments, Part D, and --

SEN. GREGG: Another good --

REP. RYAN: You just identified two things that we're in favor of.

SEN. GREGG: (Chuckles.)

REP. RYAN: We want to work with them on the farm payments -- I know the two of us do -- and on the Part D stuff.

SEN. GREGG: Interestingly, if you'll remember, we offered the Part D as an amendment two or three times last year. Senator Ensign offered it in the Senate, and it was always voted down, not by the Senate Republicans.

Q More likely this year, don't you think, or --

SEN. GREGG: It'll be offered again, I assure you.

Q Program integrity also -- do you think they can save as much as they think they can?

SEN. GREGG: I think it's a great opportunity. They're working off some really good studies done at Dartmouth, which is a small college, but some people love it. (Soft laughter.) It's in a great state.

And those -- there is clearly massive savings there. If the -- if it's done and it works, we will certainly -- I will certain give them kudos for it.

Q Besides the farm payments and the Part D, do you see any other areas in the budget where there could be broad bipartisan agreement, or do you see this mostly as Democratic votes?

REP. RYAN: Well, there aren't things in this budget that go in great directions, other than the two or three items we mentioned. But I believe -- I think we believe -- we could work together on Social Security and get that fixed. We could take that as a trust-building, confidence-building exercise and move into the health care areas.

But they got to -- we got to check ideology at the door. If it's a plan to nationalize the health care system, then obviously we're not going to want to participate in that.

But hopefully we can start tackling our entitlement problems. We had a nice talk on Monday. It's got to follow with action. And there's not much action on that in this budget.

SEN. GREGG: One area that I think we could do something on -- but it's clearly not going to occur under the budget as proposed -- is budget enforcement mechanisms. Interestingly enough, if we went back to the statutory PAYGO that they're talking about, which has sequester, this budget would be subject to $5.4 trillion of sequester.

REP. RYAN: But what is also interesting is they're shoving all this money into the baseline and then turning on PAYGO. It's like commit all these fiscal crimes, and after the crimes have been committed, then outlaw the crimes afterwards. And that's basically what is happening here with respect to PAYGO.

Q Senator, how do you -- (off mike) -- issues of health care, energy and -- (off mike)?

SEN. GREGG: Well, there are a lot of ways to do that, and I guess maybe that's where our philosophical differences lie.

On the issue of energy, drill more in the United States, create more incentive for production. At the price of oil today, there's a tremendous incentive for production, and I think it can be quite profitable as long as you allow people to pursue it. The problem is that we're not allowed to drill in the places where there's energy in this country. That's just sort of unfortunate. Build nuclear plants. They're quite cost effective and they're clean. But there's a disincentive to build a nuclear plant in this country.

In the area of health care, there are a lot of different things you can do that don't necessarily call for increasing the cost. When you're spending 17.5 percent of GDP on health care, which is about 6 percent more than the closest industrialized country -- maybe it's 5 -- you've got a lot of money in the system. And that money should just be allocated in a more efficient way, which is what -- why I hope they're successful on this initiative that will basically try to do that.

What was your third area, sir?

Q Education.

SEN. GREGG: Education. Well, we funded education in a pretty robust way from the federal level. And I think you're going to find it may be difficult for the Education Department to spend all the money they got right now.

REP. RYAN: We'll do one more.

Q Following up on that, how would you fix the budget, short term and long term? (Inaudible) -- do nothing in the short term? You've also said -- in the long term you talk about entitlements. Like, on top of that, is there more -- how would you -- what would you do?

REP. RYAN: Wait till we bring our budget to the floor. We will bring a full budget alternative to the floor when it's scheduled for the floor time. So we will -- just stay tuned, and we will show you what we believe in and how we would do things differently.

Q Just to follow up, will you -- (off mike) --

SEN. GREGG: Well, let me quote a sage -- let me answer your question. Let me quote a sage, Willie Sutton, "You go where the money is." The money is in entitlements. So don't discount it as something that's not there.

Almost all the cost of the growth of the federal government is driven by entitlement spending. And until we face up to that fact and the fact that that -- those accounts -- Medicare, Social Security, Medicaid -- are going to be absorbing 31 percent of the Gross National Product of this country when the baby boom generation is in full retirement, and we'll basically wipe out -- wipe out the capacity of our children to have a decent lifestyle and live the way we lived.

Till we face up to that -- and you have to face up to it on the spending side. Sure, there'll have to be revenues in there, but you've got to face up to it primarily on the spending side, you are not going to get the federal budget under control, the deficit under control or give this country a chance for prosperity.

REP. RYAN: And this budget --

SEN. GREGG: And that's what this issue is about. It basically fails to address spending restraint in the core areas that are at the essence of the problem we have as a country relative to our future.

And it's not as if this administration can pass on it. Sure, other administrations passed on it. The prior administration took a run at it and got killed. But at that time, it was over the horizon. Senior -- the baby boom generation hadn't retired. By the time this administration completes its second term, should it be reelected, the baby boom generation will essentially be fully retired. It's not over the horizon. It's on the horizon.

It's closing fast and it's going to run right over our country. And we need to take it on.

REP. RYAN: And this budget increases entitlement spending net by $1 trillion.

SEN. GREGG: Last question.

Q Director Orszag claims that he can kind of, in this budget and with other measures, they can carve out, I guess, $700 billion over the next 10 years, in what they call unnecessary treatments in the health care area. And he characterizes that and he did on Monday as entitlement reform, as a form of entitlement reform.

First off, is he right? Is that a form of entitlement reform? And two, are those measures health care rationing by another name?

SEN. GREGG: First off, if he can do it, I congratulate him. I hope he does it. I hope they set up structures to do it. But it's part of comprehensive health care reform. And it shouldn't lead to rationing.

I mean, under the studies that we see, and I'll just use this as an example, if you go to a hospital in Los Angeles, which is a teaching hospital, and have, let's say, an appendectomy, and you go to a hospital in Minnesota, which is a teaching hospital, and have an appendectomy, you'll have worse outcomes in Los Angeles at a much higher cost than you'll have at the one in Minnesota.

You'll have better outcomes at a lower cost. And that's what we know. It's just a question of how we get a handle around that. And I don't know that he's going to be able to, but I sure hope he does.

REP. RYAN: Obviously there's a lot of waste. Obviously there's a big, huge mismatch, utilization, all of those things. It's pretty tough to quantify that. And if you're going to quantify it with certainty, that means you feel you're going to ration with certainty.

And so the concern that I have is, how do they propose to go about doing this? Do they propose to set up a system where the government is the nucleus of our health care system, where the government is telling providers, physicians how to practice medicine, how to ration care?

We don't want to replicate these rationing systems that other countries have used. Because you know what? People don't get the health care when they need it. You stifle innovation.

We want to have a system where the patients and the doctor are the driving decision-makers, not a bureaucrat at an HMO or a bureaucrat at HHS. That's the system we want. And under that system, we believe you can wrench out these inefficiencies, get these savings.

But fearfully it looks like they're going down the path of having the government make these decisions and rationing care. And I'm worried that that is the trajectory here. If you're so certain those savings are going to be achieved, then you must be certain you're going to ration the care.

SEN. GREGG: Thank you.

END.


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