Ge Infrastreucture Energy

BUSINESS ROUNDTABLE

Moderator: John Engler

1-16-13/1:00 pm CT

Confirmation # 4134125

Page 1

BUSINESS ROUNDTABLE

Moderator: John Engler

January 16, 2013

1:00 pm CT

Coordinator:Welcome and thank you for standing by.I’d like to remind all parties that today’s conference is being recorded.If you have any objections, you may disconnect at this time.Now I’d like to go ahead and turn the call over to your host for today to Mr. John Engler, President of Business Roundtable.Sir, you may begin.

John Engler:Thank you (unintelligible).Good afternoon everyone.Thank you for joining us.We’ve got a number of people on the phone and quite a few people right here in the BRT offices so.

As was indicated, I’m John Engler, President of this roundtable.And Gary Loveman, President and CEO and President of Caesars Entertainment of Corporation is right beside me.On the phone Randall Stephenson, Chairman and CEO of AT&T.And Professor Lovemanchairs our Health and Retirement Committee and Randall is the Vice Chair of that committee.

And also close at hand here is Maria Ghazal, our Vice President who has been the leader on the healthcare issues here for a long time and one of our outside counsel (unintelligible). So I think (Randy Davis) is here as well so we’ve got a good group.

The roundtable just to refresh everyone in case there’s anybody that may have - may not be up to date - 210 CEOs of America’s leading companies representing all sectors of the economy manufacturing, retail, financial services, technology, hospitality, construction services and they comprise nearly a third of the value of the US stock market employ millions of US workers.

And the top priority of this roundtable is economic growth and job creation.And the topic that we’re going to discuss today modernizing and protecting our social (unintelligible) is critical to economic growth.We want to ensure that Social Security and Medicare are available to our employees today and to future generations and I think it’s important that we act with a sense of urgency.

We believe that the current discussion on spending and the deficit affords a timely opportunity.And over the past year led by Gary Loveman and Randall Stephenson, the BRT CEOs have engaged in a rigorous analysis of these programs, a lot of discussions and always with the goal of preserving the system for those who have retired or are nearing retirement even as we make certain that the program survives for future generations.

We believe that the Business Roundtable purpose and our world public policy debates is to help solve problems.So we want to put forth thoughtful solutions and some of the nation’s greatest challenges and glad to hear about today from these two outstanding CEOs.And Randall and Gary are going to give you a brief overview of the CEO recommendations for entitlement of modernization and we’re going to open it up pretty quickly for some questions.

So I think without further delay, you know, I should turn it over to Gary.I should also mention that I sort of made reference that Gary has a Ph.D. in economicsfrom MIT and was a professor of economics at the HarvardBusinessSchool.

So he is a deep analytical thinker and focused very intently on the legalities of our Social Security and Medicare finance systems and he found this to be a challenging problem.But he's got some ideas.Gary?

Gary Loveman:Thank you for joining us and (governor) for the introduction.I am encouraged by what I found as I returned to the state of issues defined by the committee that Randall and I lead.

The BRT needs to help inform policymakers on a way to address three fundamental issues facing the American economy.The first of course is to recognize that the economy remains weak.The pace of recovery is disappointing to all of us.

The second is that long-term fiscal reform is necessary if the economy’s rate of growth is to trend to a level sufficient to generatenet employment at a level we’d all like to see.

And third, all decision makers in the economy certainly need a higher level of stability (unintelligible) (than) we’ve experienced recently.So if you didn’t decompose that problem, it’s that some of it’s most important constituent elements you find that the growth of entitlement is the largest presenting problem by far with entitlements constituting 42% of the federal budget is projected to be the majority of the federal budget by 2021.

So Randall’s committee and I, we have looked at what must be done to try to make pragmatic changes that occur slowly and predictable to those who are recipients or prospective recipients of both Social Security and Medicare that would sustain the security they provide to the recipients who need the programs most, reduce the trend rate of growth in the programs, and rationalize some of the things that have occurred since these programs were instituted a long time ago in a way that supports the broader fiscal effort that I’ve just described.

I would argue having come to this in the last year and a half or so that the news is generally quite positive.That is Americans are living longer and in better health than was true at the time these programs were constituted and I think we all agree to that.

No one would ever have imagined when these programs were instituted that they would come to occupy such a large portion of the recipient’s lifetime.My father who was an employee of AT&T for more than 40 years retired at age 61 and lived to be 95.He was a 34-year recipient of Social Security benefits.Something that near his death he noted to me with great pride that he had been on both Randall’s payroll and the federal government’s payroll for much longer than anyone could possibly have anticipated.

That’s of course generally speaking good news, but it’s a problem the country simply can’t afford over a sustained period of time.So working with our committee that includes the CEOs of healthcare providers, healthcare insurers, healthcare technology companies, and the broader membership of the BRT, Randall and I put forward a set of recommendations on behalf of the BRT that we think speak to the central elements that need modification for these programs to continue to deliver what all of us would like them to deliver.

The first is that their fundamental demographic criteria need to be modernized.Today Social Security begins to kick in over time when one reaches 67 years of age.Medicare begins when one reaches 65 years of age.

As we all live longer healthier lives, the burden of the government faces looking after people for (unintelligible) very same period of time increases and I think we ought to recognize that that was never its intention and we need to gradually increase the age in which we all become eligible for these benefits.

This would happen very gradually.It would not affect anyone who is today 55 years of age or older.It would give everyone a very long horizon for planning and I think it is generally quite a sensible approach to a predictable demographic problem.

Second we would argue that the rising trend rate of cost in the Medicare system can be addressed by the introduction of competition in Medicare.But as you know Medicare is a fee for service product.In certain portions of Medicare particularly Part B, there is today competition that has helped direct the trend rate of growth in that category.

We would argue that there ought to be available for seniors wide choices both existing Medicare and private alternatives and seniors (unintelligible) would be able to make your own choices to which program that suits them.The benefit of private competition for large numbers of seniors who would make a selection we believe would lead to a more sufficient allocation of medical resources, better outcomes, and a lower trend rate of growth in medical cost.

Third, the current Social Security system today has a cost of living escalator built into it that modestly overstates the rate of inflation that seniors experience.We would argue that that escalator ought to be modified and I emphasize again very modestly from the current CPI index that’s used that looks at a fixed basket of goods to what’s called the chain weighted CPI that allows the index to reflect the fact that if all of us make decisions to modify our purchases when we see relative prices change.

And then fourth and finally we argue that there ought to be greater (needs) testing for recipients of benefits in both programs.So to the degree one is a higher income earner, a wealthier recipient when one reaches the ages of eligibility the benefits available for higher income for wealthier recipients ought to be relatively lower than would be the case (unintelligible).

When you provide these four categories of modifications to the program again all of them occurring very gradually over a long period of time, you arrest a large portion of the rate of increase in Medicare expense therefore putting much less burden on the federal budget circumstance and you make the Social Security system solvent for the next 75 years.So let me pause there and turn to my colleague Randall and let him add a few words to this description.Randall?

Randall Stephenson:Okay thank you Gary.And I’ll be very brief so we can get to the question-and-answer session.But before doing that, I do want to just commend and thank Gary for the leadership he’s shown on this issue.He’s brought an incredible amount of intellectual firepower and energy and coalescing 200 CEOs at the BRT around these sensible proposals was no easy task.

There are not a lot of wallflowers in the BRT and then bringing us to a place of a cohesive and comprehensive proposal like this was an impressive feat and I thank Gary for that effort.

As John and Gary have said, we believe very strongly that our modernization recommendations must be included in any budget deal that’s agreed to by the President and Congress.There is a sense of urgency around this.We’ve said all along that Congress and the administration are going to have to take some very real and meaningful steps to reform entitlements if we’re going to reign in federal spending.

And modernizing Medicare and Social Security to meet both the current fiscal as well as a demographic realities that you heard Gary describe will go an incredibly long way towards getting America’s fiscal house back in order while preserving a basic safety net for both future generations as well as future retirees.And so we believe now is the time for America’s leaders to step up and act and it needs to be done for the good of the country as a whole.

And if we fail to stabilize our federal debt and get a control on spending, the implications to markets in terms of market disruption and economic growth it’s not a question of if it happens, it’s just a question of when it happens.And so we believe that this must be avoided.And as Gary pointed out with some very rational and sensible actions, it can be avoided.And so with that, I’ll turn it back to you John.

John Engler:Oh thank you very much Randall and Gary.A very good overview.The CEOs of the roundtable are fully commended to the recommendations and we’re going to press Congress and the administration to understand what these roundtable recommendations are for action on the recommendations.And so with that let’s open it up and get into the conversation here.So who wants to go first?Jim?

Jim Spencer:You guys have talked about raising the debt limit...

John Engler:Since Randall can’t see you, I’ll just maybe Jim Spencer ofMinneapolis StarTribune and everybody can introduce themselves in the future.

Jim Spencer:You talked about raising the debt limit and I think in the conversation we had you talked about preferring to have it raised as much as 5 years so you could get that behind you.The President’s already said he doesn’t want to tie anything to raising the debt limit.Do you think that this proposal -do you all see this proposal as needing to be tied to the debt limit negotiations?

John Engler:No.I mean we’re not - we don’t even enact as much as we might like to enact laws over here at the Roundtable.We try to put out solid policy recommendations.So we don’t (unintelligible) anything else, but I would say that the debt ceiling is going to have to be addressed.

I think that this is much more irrelevant to the whole budget conversation and long-term debts at issue.This is something that we think when you look long-term at the United States fiscal health it’s as Gary said unavoidable.You have to deal with these questions.

And so we’re not putting these forward to gain leverage, we’re putting these forward to get this conversation going here.We need to act and this is part of growth strategy.When we get some certainty on our fiscal affairs in this country, I think it’s a stronger better climate for jobs and growth.

Damian Paletta:Damian Paletta with The Wall Street Journal.For Gary and Randall, were there any lessons learned during the fiscal cliff negotiations?Obviously you guys tried to be more vocal and at the end it seemed like the CEOs were kind of ignored at the end of the day.How do you think you can be more relevant in the next six months as Washingtondebates the budget deficit.

Gary Loveman:I hesitate to even try to answer that because it’s hard for me to gauge how relevant we were or weren’t.I would only argue that you see in these recommendations and the tone that Randall and I and our colleagues make, we are fundamentally programmatic.

We approach these not in the gain period of the politics that seems to have captured everyone’s attention, but rather around the concrete nature of the problems we have to address and how we can find solutions that seem to be constructive when there’s a set of constraints around how those decisions have to be made.

In this case the preservation of security for seniors, the need to address the federal budget problem demographic reality portraying the problem we try to have a solution.And what I think we did prior to the fiscal cliff discussion was just simply step to our leaders that nothing was off the table as far as the CEOs were concerned whether that was revenue generation or the spending reductions until all these things we thought needed to be debated professionally and some resolution reached.

And we put a great priority on the need to reach some resolution so that we didn’t experience this tremendous economic disruption associated with (unintelligible).Randall would you add anything to that?

Randall Stephenson:No, I think it’s very well said.I mean at the end of the day, you know, we all - all we can do as CEOs is present data, present information, and present arguments saying that’s what we’re here doing this afternoon and laying out for both Congress as well as the American people a plan that quite frankly as Gary keeps saying that it’s implemented over a long period of time.It would give people plenty of time to plan around it and would significantly go a long way towards addressing the fiscal situation in this country.

And so, you know, I don’t have any grandiose expectations for how this will be received.All we can do is put it out and continue to have the dialog and the conversation with Congress.

John Engler:I think that’s our obligation.I don’t even necessarily, you know, was CEOs ignored, was everybody ignored.I mean this went down to the last day of the year or the first day of the New Year.A pretty unappealing process I think no matter where you’re positioned along the ideological spectrum or whether you’re positioned along the economic spectrum.

So I just think that I currently head an organization here with 210 CEO leaders who in their own companies time and time again have faced tough vexing challenges and they’ve had to make hard decisions.But you make them and you move on.

And I think the frustration that the CEOs have with Washington is that the people in charge of our own government have got to be able to work together and get these decisions made.

Lori Montgomery:I’m Lori Montgomery with The Washington Post.I’m curious, you appear to have rejected the idea of increasing revenues for Social Security.I’m wondering why and did you have specific ideas for increasing private savings?

Gary Loveman:Let me take the first part of (that) and John and Randall take the second.We don’t necessarily reject anything.The argument about Social Security is that it’s intended to be a supplement to individual retirement planning that is primarily not an income redistribution vehicle.

Now we did say in this set of recommendations that we would advocate some level of (needs) testing on the level of benefits and higher income people experience.You would have to raise the dates upon which the taxes are applied very substantially to draw a sufficient level of revenue to address the long-term (problems) of the program.And when compared to the kinds of issues that we proposed that would be far more damaging to economic growth than what we’re asking people to consider.