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  • 1. P2JW329024-0-R00100-1--------XA 11/24/2008 AZ,EE,MW,SC,SW,WE C M Y K Composite P2JW329024-0-R00100-1--------XA 7 Shaping the New Agenda 7 THE JOURNAL REPORT s 2008 Dow Jones & Company. All Rights Reserved. THE WALL STREET JOURNAL. Monday, November 24, 2008 R1 CEO COUNCIL What should President Obama do? As he prepares to take office, The Wall Street Journal convened some of the country’s top CEOs and policy makers to come up with their priorities for the new administration and Congress. Inside, you’ll find what they think should be on that to-do list—and why. Finance & America in the The U.S. Economy Global Economy TOP PRIORITY: TOP PRIORITY: A QUICK STIMULUS PACKAGE A NEW TRADE AGENDA R5 R6 Energy & Health The Environment Care TOP PRIORITY: TOP PRIORITY: A BROAD ENERGY AND ENVIRONMENT POLICY FIGHTING OBESITY R6 R7 PLUS: Interviews with Henry Paulson, Robert Rubin and Lawrence Summers on the economy, and James Comer, Joel Klein and Louis Gerstner Jr. on education, R8 & R9 I L L U S T R A T I O N S B Y L L O Y D M I L L E R Composite CYAN MAGENTA YELLOW BLACK P2JW329024-0-R00100-1--------XA 6065780
  • 2. P2JW329025-0-R00200-1--------XA 11/24/2008 AZ,EE,MW,SC,SW,WE BLACK P2JW329025-0-R00200-1--------XA R2 Monday, November 24, 2008 THE WALL STREET JOURNAL. UPFRONT Editor’s Note HERE’S ADVICE, and then there’s advice. This report falls into the lat- What Are You T ter category. The Wall Street Journal last week convened its CEO Council, bring- ing together some 100 top CEOs and influential policy makers to discuss what the new administration’s priorities should be. The attendees were some of the biggest names in corporate America. And, as you’ll see, some of the most thoughtful. Worried About? By Melissa Korn War, peace and terrorism: 7% n GERALD FORD: 1974 Participants were divided into task forces in four areas: the U.S. economy, Poverty and homelessness/ Inflation and cost of living: 23% When Americans are asked to- Social Security: 2% each Crime and violence: 14% energy and the environment, the U.S. in the global economy, and health care. day to name the country’s big- Dissatisfaction with Each task force came up with what it thinks should be President Obama’s— gest problem, 77% of them say Although war had been at government: 12% and Congress’s—top five priorities. Then the full council voted to identify it’s the economy. But how did the top of people’s minds when people answer that same ques- President Truman took office in Amid economic distress, Wa- the overall top five. tion in the past, as other new April 1945, after the death of tergate and divisive social con- In these pages, you can find the CEOs’ arguments for why these actions presidents headed to the Oval Of- Franklin Roosevelt, this Octo- cerns, the “top problem” was sev- should be on the president’s to-do list. You’ll also hear how senators who at- fice? Here’s a look back at the ber 1945 poll showed how eral. Inflation was in double dig- concerns that faced presidents- quickly things had changed. its, and the Arab oil embargo tended the conference reacted to the list. elect or new presidents, based Once peace was declared, the na- pushed oil prices up fourfold to Clearly, the new administration is going to have no shortage of sugges- on Gallup polls and interviews tion turned inward, focusing on $10-$12 a barrel. tions on what they should tackle. Still, I think it’s fair to say there’s advice. with historians. where returning GIs fit into the The country was looking for work force. help everywhere. “They were And then there’s advice. n HARRY TRUMAN: 1945 “There was a great deal of pub- weary of the ’60s, of Nixon’s lies —Lawrence Rout Unemployment and jobs: 77% lic concern about the end of the and Johnson’s lies and streets on war, what the world was going to fire and napalm,” says Douglas The Journal Report welcomes your comments—by mail, fax or electronic mail. Letters should be like when it was over, particu- Brinkley, a history professor at Ms. Korn is a copy editor for larly whether the Depression Rice University. “There was a fa- be addressed to Lawrence Rout, The Wall Street Journal, 4300 Rt. 1 North, South Brunswick, Dow Jones Newswires in Jersey was going to come back or not,” tigue of the era.” N.J. 08852. The fax number is 609-520-7767, and the email address is City, N.J. She can be reached at says Alonzo Hamby, an Ohio Uni- versity history professor. n JIMMY CARTER: 1976 Significantly, by the time the Inflation and cost of living: 44% election rolled around three Unemployment and jobs: 34% years later, as relations with the Dissatisfaction with government: Soviet Union deteriorated, 12% things had reversed again: Inter- national issues and foreign aid Americans were still smart- were back on top, with 48% identi- ing from Watergate but were fying those as the No. 1. problem. even more concerned about their wallets. A long period of high in- n DWIGHT EISENHOWER: 1952 flation and unemployment and War, peace and terrorism: 55% scant productivity growth frus- General economy: 20% trated people. Little wonder that International issues and foreign President Carter’s message that aid: 12% Gerald Ford had done nothing right for the previous two years The Korean War was front resonated with voters. and center, having reached a stalemate. Communism was a n RONALD REAGAN: 1980 concern at home, too. Inflation and cost of living: 53% At the same time, a steel-mill Unemployment and jobs: 11% strike in the summer of 1952 led International issues and foreign to a short-term panic in the auto aid: 8% and other manufacturing indus- tries, resulting in far-ranging Money was at the top again, price increases, production halts with inflation at a staggering and massive layoffs. 13.3% in 1979. (It slowed to 12.5% in 1980.) n JOHN KENNEDY: 1960 The country was also weary International issues and foreign from world events such as the So- aid: 36% viet invasion of Afghanistan and Unemployment and jobs: 26% the Iran hostage situation. After War, peace and terrorism: 19% 444 days in captivity, the hos- tages were freed on the day of As the Cold War heated up, President Reagan’s inauguration. “the public was asking not just ‘Are we weak?’ but ‘Are we about to get n GEORGE H.W. BUSH: 1988 annihilated?’ ” says David Cole- Drugs: 27% man of the University of Virginia’s General economy: 16% Miller Center of Public Affairs. Poverty and homelessness: 10% “This is a period of existential threat.” He adds that foreign pol- The Soviet Union had lost icy “just about anywhere was cast much of its strength and the econ- in this mantle of the Cold War.” omy was relatively stable, leaving Meanwhile, unemployment the public to worry about other topped 8% in early 1961 as the problems. In particular, while late Eisenhower-era recession marijuana and other drugs saw deepened. During his cam- their highs fade by 1985, the more paign, Sen. Kennedy often violent crack cocaine took hold in promised to “get this country the later part of the decade. moving again.” n BILL CLINTON: 1992 n LYNDON JOHNSON: 1963 General economy: 35% Racism: 52% Unemployment and jobs: 22% International issues and foreign Health care: 18% aid: 26% Unemployment and jobs: 7% “One of the things that had al- most always been a factor in elec- President Johnson inherited tions since really before World much of the social unrest that had War II was pretty much off the begun to stir under John plate,” says Russell Riley of the Kennedy. Martin Luther King Jr. Miller Center of Public Affairs. and other civil rights leaders held With the end of the Cold War, “peo- rallies and organized boycotts ple weren’t interested in foreign throughout 1962 and 1963, and de- policy.” Instead the paramount segregation efforts were met concerns were unemployment, with violence. the potential impact of globaliza- Then there was Vietnam: tion and large federal deficits. Though U.S. combat troops weren’t being deployed quite n GEORGE W. BUSH: 2000 yet, the number of American mili- Ethics, moral decline, tary advisers was on the rise. lack of integrity: 13% Education: 12% n RICHARD NIXON: 1968 Crime and violence/Government, Vietnam: 41% Congress and politicians: 9% each Racism: 8% Inflation and cost of living: 8% The country was peaceful and, despite the bursting of the Racial issues were overshad- dot-com bubble in March 2000, owed by the war in Vietnam, still relatively prosperous. where more than 500,000 U.S. But the public had been troops were now deployed. Ini- bruised by the Monica Lewinsky tial setbacks during the Tet Of- scandal and impeachment pro- fensive in early 1968 led more of ceedings. And the election sea- the country to put the war, and a son brought new ethical ques- hope for its rapid conclusion, at tions about fund raising and the top of their list of concerns. hanging chads. y THE NEXT JOURNAL REPORT REPRINTS AVAILABLE FULL PAPER: The entire Wall Street Journal INVESTING issue that includes the Shaping the New Agenda Journal Report is now available and IN FUNDS can be obtained for $5 per copy. 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  • 3. P2JW329026-0-R00300-1--------XA 11/24/2008 AZ,EE,MW,SC,SW,WE C M Y K Composite P2JW329026-0-R00300-1--------XA THE WALL STREET JOURNAL. Monday, November 24, 2008 R3 Composite CYAN MAGENTA YELLOW BLACK P2JW329026-0-R00300-1--------XA 6065782
  • 4. P2JW329027-0-R00400-1--------XA 11/24/2008 AZ,EE,MW,SC,SW,WE C M Y K Composite P2JW329027-0-R00400-1--------XA R4 Monday, November 24, 2008 THE WALL STREET JOURNAL. THE PARTICIPANTS These business leaders attended the THE CEOS’ TOP PRIORITIES meeting of theCEO Council(chief exec- utives except as noted) Fernando Aguirre, Chiquita Brands International Inc. José Maria Alapont, Federal- Mogul Corp. Brad Anderson, Best Buy Co. 3 Last week, The Wall Street Journal assembled nearly 100 CEOs ECONOMIC VISION Jeffrey L. Bewkes, Time Warner of large companies for a day and a half to discuss the policy choices President-elect Obama should Inc. facing the incoming Obama administration, and the effects those announce his economic team Lloyd C. Blankfein, Goldman Sachs Group Inc. choices may have on business and the economy. soon and convene a conference Angela F. Braly, WellPoint Inc. The CEOs divided into four task forces and debated priorities in with broad representation to recommend Kevin Burke, Consolidated both immediate priorities and long-term Edison Inc. the areas of health care, energy and the environment, finance and the Stephanie A. Burns, Dow Corning policy direction. He should communicate a U.S. economy, and international eco- clear message about the direction of pol- Corp. nomic affairs. Using an electronic rank- Charles Butt, H-E-B icy, including a program for long-term fis- Morris Chang, Chairman, Taiwan ing system devised by the Journal, cal responsibility. Semiconductor Manufacturing Co. they chose five top priorities in each Jeff Clarke, Travelport subject area. Marcelo Claure, Brightstar Corp. Bill Cobb, J.M. Smith Corp. 4 Each task force then reported its COMPREHENSIVE Howard S. Cohen, Chairman, priorities back to the full council. Four ENERGY AND BlueLinx Holdings Inc. senior members of the U.S. Senate ENVIRONMENT POLICY Denis A. Cortese, Mayo Clinic David Crane, NRG Energy Inc. joined in the subsequent discussions. Put national legislation in Michael T. Dan, Brink’s Co. At the end of the conference, the chief executives revised and then place that starts us on the road to decar- Scott Davis, United Parcel ranked all the priorities from the four task forces, in order of their rel- bonize our economy and to create the Service Inc. most energy-efficient economy in the Paul Diaz, Kindred Healthcare Inc. ative urgency and importance. Craig S. Donohue, CME Group Inc. world. Level with the American people The CEOs who attended the session were from a diverse range of in- that ensuring an adequate and diverse en- Brian Duperreault, Marsh & McLennan Cos. dustries; as a group, they employ more than six million people and rep- ergy supply in a low-carbon world will not Lynn Laverty Elsenhans, Sunoco resent roughly $2 trillion in annual sales. That should give their views be cheap or easy. But make the case that Inc. on these issues some added weight in the months ahead. the transition must be transparent and Thomas F. Farrell II, Dominion Resources Inc. fair to all Americans, and that linking the Here’s a look at their top five priorities. economy, the environment and energy pol- J. Brian Ferguson, Eastman Chemical Co. icy bolsters security for all three. Roger W. Ferguson Jr., 1 2 FISCAL STIMULUS EDUCATED TIAA-CREF Quickly craft fiscal stimulus for WORK FORCE Christopher T. Fey, U.S. Preventive Medicine the U.S., in cooperation with parallel 5 President-elect Obama should TAX POLICY Paul D. Finkelstein, Regis Corp. efforts by G20 countries, particu- ask businesses to lead in the ac- Jay S. Fishman, Travelers Cos. larly cash-rich economies with capacity to Change the tax code to encour- tions necessary to build a competitive Douglas L. Foshee, El Paso Corp. increase domestic demand. For the U.S., a age employment, job creation work force for the immediate and long Russell P. Fradin, Hewitt stimulus package should exceed $300 bil- and investment and enhance glo- Associates term. Emphasis should be placed on im- bal competitiveness in the short term. Con- Carlos Ghosn, Nissan Motor Co., lion. It also should emphasize investment proved K-12 education and intellectual-cap- sider raising taxes on gasoline and broad- Renault SA in infrastructure, including environmental, Larry A. Goldstone, Thornburg education and low-carbon energy, but ital creation. Enact national education ening the corporate tax base to lower Mortgage Inc. should not worsen the long-term budget standards and assessments, devote funds rates. William D. Green, Accenture Ltd. deficit. Avoid tax rebates and rely on more to teacher excellence and improve teacher Evan G. Greenberg, ACE Ltd. permanent tax cuts, and use state and lo- education. James W. Griffith, Timken Co. cal government as a channel. James Hagedorn, Scotts Miracle-Gro Co. John H. Hammergren, McKesson Corp. Ed Harbach, BearingPoint Inc. Lewis Hay III, FPL Group Inc. Paul Hermelin, Cap Gemini SA Les Hinton, Dow Jones & Co. Michael J. Jackson, AutoNation Inc. William D. Johnson, Progress Energy Inc. Richard C. Kelly, Xcel Energy Inc. Jeffrey B. Kindler, Pfizer Inc. Klaus Kleinfeld, Alcoa Inc. Robert W. Lane, Deere & Co. Steven F. Leer, Arch Coal Inc. 7 Stephen P. MacMillan, Stryker Corp. THANK YOU Murray D. Martin, Pitney Bowes Inc. Scott A. McGregor, Broadcom Corp. Michael G. Morris, American Electric Power Co. Rupert Murdoch, News Corp. Susan R. Nowakowski, AMN Healthcare Services Inc. Steve Odland, Office Depot Inc. Rodney O’Neal, Delphi Corp. Paul S. Otellini, Intel Corp. James W. Owens, Caterpillar Inc. W. Douglas Parker, US Airways Group Inc. Antonio M. Perez, Eastman Kodak Co. Nicholas T. Pinchuk, Snap-On Inc. Thomas J. Quinlan, R.R. Donnel- The Wall Street Journal would like to thank ley & Sons Inc. S. Ramadorai, Tata Consultancy Services David M. Ratcliffe, Southern Co. the 2008 CEO Council sponsors Stuart H. Reese, Massachusetts Mutual Life Insurance Co. for their generous support of the program. James E. Rogers, Duke Energy Corp. Eric Schmidt, Google Inc. Stephen A. Schwarzman, Blackstone Group LP Gregg M. Sherrill, Tenneco Inc. Ralph W. Shrader, Booz Allen Hamilton Inc. Henrik C. Slipsager, ABM Industries Inc. Frederick W. Smith, FedEx Corp. Sir Martin Sorrell, WPP Group PLC PROUDLY SUPPORTED BY: Robert K. Steel, Wachovia Corp. Douglas M. Steenland, former CEO, Northwest Airlines Corp. Shivan Subramaniam, FM Global Fredric J. Tomczyk, TD Ameritrade Holding Corp. James Turley, Ernst & Young Myron E. Ullman, J.C. Penney Co. Daniel C. Ustian, Navistar International Corp. PARTNER Joe Uva, Univision Communications Inc Daniel L. Vasella, Novartis AG David M. Walker, Peter G. Peterson Foundation Timothy R. Wallace, Trinity Industries Inc. William C. Weldon, Johnson & For more information about The Wall Street Journal CEO Council, please visit Johnson Thomas J. Wilson, Allstate Corp. Yang Yuanqing, Chairman, Lenovo Group Ltd. ©2008 Dow Jones & Company, Inc. All Rights Reserved #4AO712 William D. Zollars, YRC Worldwide Inc. Composite CYAN MAGENTA YELLOW BLACK P2JW329027-0-R00400-1--------XA 6065783
  • 5. P2JW329028-0-R00500-1--------XA 11/24/2008 AZ,EE,MW,SC,SW,WE C M Y K Composite P2JW329028-0-R00500-1--------XA THE WALL STREET JOURNAL. Monday, November 24, 2008 R5 Finance & the The Top Five Recommendations 1. FISCAL STIMULUS Quickly implement fiscal stimulus to should clearly communicate clear mes- sage about the direction of policy, includ- U.S. Economy The president-elect confronts a recession that some forecasters predict address short-term weakness and stabi- lize employment without worsening long- term budget deficit. Emphasize invest- ment in infrastructure and other pro- grams with long-term benefits, including environmental. Avoid tax rebates and ex- pedite more permanent tax cuts. Consider ing a program for long-term fiscal respon- sibility. 4. TAX POLICY Change tax code to encourage employ- ment, job creation, investment, and enhance global competitiveness. Consider raising using state and local government as a taxes on gasoline and broadening corporate will be as bad as or worse than the deep one of the early 1980s. Unem- channel. tax base to lower rates. ployment is rising, financial markets are fragile, the stock market is fall- 2. BUY ILLIQUID ASSETS 5. REGULATORY OVERHAUL Use remaining money in Treasury’s Appoint blue-ribbon panel to spend a ing, the Federal Reserve is nearly out of interest-rate ammunition, and Troubled Asset Relief Program (TARP) year considering changes to financial regu- criticism of the Bush administration’s response to the credit crisis is inten- and possible additional funding to buy il- lation and supervision aimed at (a) improv- liquid assets from financial institutions to ing safety, transparency and accountabil- sifying. The chief executives gathered by The Wall Street Journal agreed provide a light at the end of the tunnel and ity, (b) avoiding overreaction to maintain encourage renewed risk-taking and lend- U.S. competitiveness in global economy that even before President-elect Obama takes office, he needs to shore up ing. and (c) reducing procyclicality of current regulatory and accounting regime. Imple- confidence and prepare a major dose of fiscal stimulus. 3. ECONOMIC VISION ment recommendations in first term of new David Wessel, the Journal’s economics editor, moderated the task- President-elect Obama should an- administration while Treasury, Fed and nounce economic team soon and convene other regulators focus on providing liquid- force discussion on finance and the U.S. economy. Here are edited ex- conference with broad representation to ity, recapitalizing banking system, return- recommend both immediate priorities and ing financial markets to normal function- cerpts of the presentation of their priorities to the CEO Council. long-term policy direction. President ing and improving credit conditions. DAVID WESSEL: Far and away the so, the idea of using some of the most popular recommendation TARP [Troubled Asset Relief Pro- to President-elect Obama was a gram] money focused on this. fiscal-stimulus plan, and we’re The next point is the idea of going to start with Roger Fergu- economic vision. President- son discussing that. elect Obama has been ROGER FERGUSON: There are quite clear three or four points that I’d like that we have to focus on [about a stimulus]. one presi- First, you can see we say “quickly dent at a implement.” There is some con- time, and cern that as soon as you start to that he’s not get into fiscal stimulus, which in- the presi- volves both the executive branch dent. But putting forth a proposal and the that doesn’t legislative branch deciding on it, preclude and then the implementation, him from re- that the risk is that things will go ally getting Robert Steel much too slowly. to work. The second point to make is Let’s get the economic leaders the need to stabilize employ- working today, outlining the is- ment. We sues, talking about the chal- recognize lenges in a bipartisan way, and that employ- beginning to lay out the plans ment cre- that they’re going to hit the ates a num- ground running with on Jan. 20. ber of addi- tional bene- MR. WESSEL: A feature of that fits. One is was that he convene a conference that people with a broad set of people, biparti- who are less san and business leaders, to help worried recommend priorities, to help about their build consensus. We also talked jobs will about longer-term tax policy. Roger Ferguson have much JEFFREY BEWKES: There was a lot more confi- of discussion about incentives for dence in terms of consumption— individuals versus incentives for and two-thirds of the U.S. GDP is corporations and business. We driven by household consump- recognize that over the next sev- tion. Second, a number of other eral years, we’re going to need to pressures have hit households, figure out, given the long-term fis- including declining asset valua- cal problems, how to create indi- tions, and so focusing on stabiliz- vidual tax designs that don’t yield ing employment could have nu- lower taxes, but probably will merous benefits. need to yield some higher taxes, The third major topic was in terms of individual taxation. wanting to do this without signif- But if you then move to the corpo- icant damage to the budget defi- rate side, if we don’t figure out a cit. We decided that the most we way to make corporate taxes could hope for is to do so without more effective and competitive, worsening long-term budget def- in terms of incentives and invest- icits. Clearly, one can improve ment, we will have trouble com- long-term budget deficits with peting with other countries. the kind of stimulus that one is On the question of gas taxes, likely to need here. we decided not to self-censor. We Infrastructure, we thought, had a lot of discussion where we was important for two reasons. knew or One is it’s a great way to generate thought that jobs, if done appropriately. Sec- neither ond, we would hope for infrastruc- party would ture to create a number of long- support such term benefits: elements of produc- a thing. It’s tivity, for example, investments been talked in newer technologies—those about and were all included in our concept not done for of the right kind of infrastructure years. But that we wanted, infrastructure we thought that will help us become a much that maybe more competitive economy. this is a time We clearly focused on avoiding Jeffrey Bewkes when this tax rebates, and a stronger look at could be the more permanent tax cuts. This raised, and certainly, I think it was builds off basic economic thinking generally agreed that gas or car- that individuals and businesses bon taxes would be likely to be are forward-looking. If they see a more direct and effective, unless temporary tax cut, then the ten- compromised, than what may dency is that it does not get spent, come out of a carbon caps-and- and what we’re looking for is stim- trading scheme, just because even ulus. And finally, we did recognize though you can design it, it’s hard that state and local governments to pass it in recognizable form. have potentially a very important role to play as a channel for the fis- Regulatory Overhaul cal stimulus. They are, in many cases, the engines that drive at MR. WESSEL: Then, the final one least the early decisions about in- Mr. Ferguson is going to present frastructure investment, obvi- is regulatory overhaul. ously working through private- MR. FERGUSON: I think we all rec- sector business. ognize, both domestically and probably also internationally, Unlocking Illiquid Assets that the regulatory structure and ROBERT STEEL: The second point schemes that existed before this is to buy illiquid assets. If these crisis have proved to be inade- assets, which are really stuck in quate for dealing with the modern the system, can begin to move, it world of finance. There have been will affect both confidence and numerous efforts to modernize capital. In particular, it frees up regulation and regulatory struc- this capital that’s now being ture in the U.S. But still, one would locked in, where people just Please turn to page R7 don’t feel like they can recognize and then realize the losses. And FINANCE AND THE U.S. ONLINE TODAY: Go to ECONOMY CO-CHAIRS: for the Journal’s jeffrey l. bewkes President CEO Council blog, including: and CEO, Time Warner Inc. n Videos: See excerpts from the four lloyd c. blankfein Chairman task-force policy discussions; a Henry and CEO, Goldman Sachs Paulson-Robert Rubin-Lawrence Group Inc. Summers debate on the financial roger w. ferguson jr. crisis; CEO interviews; and more. President and CEO, n Podcasts: Hear the Journal’s TIAA-CREF Jerry Seib and Erin White on robert k. steel President and highlights and surprises of the CEO, Wachovia Corp. meeting, and incoming White SENATOR: House Chief of Staff Rahm maria cantwell (D., Emanuel’s remarks to the gathering. n News and analysis about the Washington) conference from Journal reporters. Composite CYAN MAGENTA YELLOW BLACK P2JW329028-0-R00500-1--------XA 6065784
  • 6. P2JW329029-0-R00600-1--------XA 11/24/2008 AZ,EE,MW,SC,SW,WE BLACK P2JW329029-0-R00600-1--------XA R6 Monday, November 24, 2008 THE WALL STREET JOURNAL. America in the The Top Five Recommendations 1. NEW TRADE AGENDA A new trade agenda will require enhancing U.S. competitiveness Global Economy The new administration preparing to take power in Washington faces not only a through investment in basic R&D, health care and education, a better social safety net at home, and a focus in negotiations on the fastest-growing sec- tors. President-elect Obama should embrace and complete the Doha Round. That would counter fears of protectionism and display U.S. leader- ship, and completion is more feasible under a new administration. As a next step, lead the World Trade Organization to move on to sector-by-sec- tor agreements. domestic economic mess but a global one as well. The world’s economies now are 2. SHORT-TERM TAX CHANGES Enact short-term, pro-competitive tax changes that will have immedi- so intertwined that the problems in the U.S. have dragged down other nations, and ate stimulative impact. Make a temporary reduction or elimination of the tax on earnings that companies repatriate to the U.S., which will stimulate there’s little chance a new American president can oversee a full recovery at home the economy here. Expense capital expenditures immediately. without a parallel recovery abroad. 3. INTERNATIONAL STIMULUS PLAN The members of the Journal’s CEO Council task force on the global economy saw The U.S. can’t recover economically without a global recovery. This will require crafting an international effort to provide liquidity, coordinate in this situation some immediate needs. Above all, they called for a quick interna- stimulus plans. President-elect Obama should use the April G20 meeting to promote global stimulus in which capital-rich countries stimulate domes- tional economic stimulus plan, marked by efforts by cash-rich countries to pump tic demand. Unilateral elimination of U.S. tariffs on products from develop- up demand, as well as moves by the new leaders in Washington to embrace free ing countries. and open trade practices. But they also called, with equal urgency, for long-term 4. EDUCATED WORKFORCE President-elect Obama should ask businesses to lead in the actions neces- steps to keep the U.S. competitive as the world recovers, especially a significantly sary to build a competitive work force for the immediate and long term. Em- phasis should be on improved K-12 education, intellectual capital creation. better education system. Gerald F. Seib, the Journal’s executive Washington editor, moderated the task 5. CORPORATE TAX RATE Over the long term, lower the corporate tax rate to increase American force’s discussion. Here are edited excerpts of the discussion of their priorities. competitiveness. Avoid double-taxing money coming into the U.S. from American firms bringing earning back into the country. These steps would GERALD SEIB: Let’s start with the item Free trade is helping relieve the pain So we looked at three things. First, level the playing field. Do not extend the corporate tax to offshore earnings. that was clearly at the top of our of the crisis now. do not extend the corporate tax to off- agenda, which is trade. Even though we are facing this severe shore earnings. Number two, create a economic crisis, we could not stop the temporary tax reduction for repatria- scenario that we thought about, but the there are significant national-security YANG YUANQING: I believe most of us in trend of free trade. tion of earnings. This is very similar to idea was that we do not want to be dis- issues, like Pakistan. this room are in favor of free trade and So our group sug- what was done during 2004, I believe, advantaged with anybody in any place globalization. Actually, free trade is MR. SEIB: And then, finally, a lot of con- gested that the and it brought more than $300 billion where we’re competing. still one of the foundations of today’s cern about an educated work force. Obama administra- into the country. global economy. tion embrace and Obviously, that Global Stimulus STEPHANIE BURNS: This was the fourth Lenovo and very few other Chinese try to close the amount of money FREDERICK SMITH: The group felt priority from our group, and I link an ed- companies are in the U.S. market but Doha Round as would create, in strongly that the U.S. could not recover ucated work force to our global compet- you see U.S. brands in China every- soon as possible. our view, a very unless there was a global recovery. And itiveness and to our economic prosper- where—IBM, Intel, Google, Starbucks We also dis- healthy stimulus that the president-elect at the G20 in ity. It is so crucial for innovation, for and McDonald’s. cussed competi- to the economy. April should promote global stimulus economic growth and for ultimate com- For those global companies it is tiveness. Decide And then third, in the cash-rich countries in order to petition on a global basis. very difficult to see growth here in the what skills you expense the capi- stimulate their domestic demand. There were U.S. market, but they still could keep Yang Yuanqing need to develop. tal expenditures Now a lot of that is already under two major compo- growing in other markets, especially Then establish a immediately. way. China has a major stimulus pack- nents around an emerging markets. So I think that is better educational training system to The combina- age, Russia has one and so forth. But educated work very important for the U.S. economy. ensure long-term competitiveness. tion of those Antonio Perez that would be an imperative to get the force. One cen- three, we think, is U.S. economy back on track. tered around re- MR. SEIB: So trade was at the top of the going to create a very fast and large At the same time, there was a lot of training and re-ed- AMERICA IN THE GLOBAL ECONOMY list. Antonio is going to talk about some stimulus to the economy and will make thought along the lines suggested by ucating people CO-CHAIRS: discussions we had on taxes, which have American companies more competi- Ambassador Charlene Barshefsky who are displaced, stephanie a. burns Chairman, both short-term and long-term effects. tive. And those things should be easy to [the former U.S. trade representative, whether it be due President and CEO, Dow Corning ANTONIO PEREZ: With regard to taxes, implement. who spoke in an earlier session] that to productivity or Corp. we talked about corporate taxes and we Then we moved into the long term. the U.S. should consider unilateral other actions. We antonio m. perez Chairman and looked at them in two ways, short term What should be the corporate tax rate elimination of tariffs on products need a mecha- CEO, Eastman Kodak Co. and long term. for American companies? The ultimate from developing countries. And I Frederick Smith nism, and we feel frederick w. smith Chairman, When we looked at the short term, objective for the group was wherever would reiterate what she said: the that the private President and CEO, FedEx Corp. we were looking for something that we have to compete, we want to com- country collects in total about $26 bil- sector should take a strong lead in part- yang yuanqing Chairman, Lenovo would create an immediate stimulus to pete in a way that would level the play- lion in tariffs. nering in that mechanism to retrain the economy. Something that, in our ing field, whether it is in the U.S. or out- About half—$13 billion—comes on and re-educate the work force. SENATOR: view, will be easier to implement and side of the U.S. 5% of the imports. And those 5% come And then second, the priority on ed- charles e. schumer (D., New York) will make most of the American compa- Obviously, the words “lower the cor- from the most impoverished countries ucation itself. We felt so strongly nies more competitive. porate rate tax” appeared in almost any in the world, including countries where Please turn to page R9 Energy & The Top Five Recommendations 1. COMPREHENSIVE ENERGY AND ENVIRONMENT POLICY Put national legislation in place that starts us on the road to decarbon- ize our economy and to create the most energy-efficient economy in the The Environment America faces an energy crisis, one the economic crisis makes harder to fix. world. Level with the American people that ensuring an adequate and di- verse energy supply in a low-carbon world will not be cheap or easy. But make the case that the transition must be transparent and fair to all Ameri- cans, and that linking the economy, the environment and energy policy bol- sters security for all three. 2. DECARBONIZE THE POWER SECTOR Launch a coordinated strategy to curb emissions from electricity pro- The recent drop in oil prices and the broader economic slump threaten to divert at- duction that recognizes the need for a variety of energy sources. To facili- tate renewable energy, allow the use of federal eminent domain to site tention from the need to find more fossil fuel and to develop more alternative-energy transmission lines, and increase federal spending to improve energy-stor- age technology. To allow the continued use of coal, promote carbon capture sources. But the members of The Wall Street Journal’s CEO Council want the new and sequestration technology by boosting federal R&D spending and by president and Congress to stay focused on energy and the environment, because they streamlining procedures for the licensing and siting of facilities to store the carbon dioxide underground. To expand the use of nuclear energy, re- believe the underlying problems are only getting worse. solve storage issues. To promote all these technologies, create a cap-and- trade system for carbon emissions. They want policy makers to level with Americans that finding new energy solutions 3. ENERGY EFFICIENCY won’t be cheap or easy. They want the government to pursue a comprehensive strat- Change current regulations to allow utilities to capitalize investments egy promoting a variety of technologies: cars that run on electricity, and power in energy efficiency rather than just adding generation capacity. Increase consumer incentives for purchasing energy-efficient technology. Create a plants than run on everything from nuclear energy to “clean coal” to wind and solar federal building-efficiency code. Toughen federal appliance-efficiency stan- dards. power. They want the government to promote, and mandate, improvements in energy 4. INVEST IN INFRASTRUCTURE efficiency. All of this, they believe, will require a modernized electrical grid. And all of Broad federal investment in new infrastructure—including roads and this will require more federal authority and assertiveness. bridges, which would decrease traffic congestion. Include particularly in- frastructure to promote low-carbon energy. Ensure business participation Jeffrey Ball, The Wall Street Journal’s environmental news editor, moderated the in deciding how money is spent. task force’s discussion. Here are edited excerpts of the group’s discussion of priorities. 5. ELECTRIC CARS Aim for electric cars to represent 10% of total car sales in 2020 and up to JEFFREY BALL: We had what seemed a re- So, why don’t we start with Jim Rog- country to decarbonize, we have the ca- 50% in 2030. Provide long-term federal financing to facilitate the transi- ally interesting microcosm of the fed- ers, who will talk first about comprehen- pability to do that over the next 40 plus tion, with a particular eye to two technological tasks: improving battery eral energy debate. sive energy policy. years. But what’s important to recog- technology and developing lighter-weight materials. The discussions started out talking nize is that there are only so many ways JAMES ROGERS: We really focused on de- to generate electricity. We can’t take about going from technology to technol- veloping the first notion of a compre- any off the table. plied to do this, which we won’t review, ogy. So, do we want electric cars? No, gives us power 24/7 with zero green- we want natural-gas cars. No, we want hensive energy and environmental pol- For instance, renewables are impor- house-gas emissions. But we have yet but they’re all very compelling. biodiesel cars. Do we want nuclear? No, icy. Because we recognize that energy tant, but it’s intermittent power and to solve the storage issue. So how do we make it happen at we want wind and solar. No, we want and environmental policy are inextrica- they’re not often close to where the load And lastly, as we turn increasingly to scale? In fact, utilities—especially in the clean coal. And at the end of the discus- bly linked, and inextricably linked to is. And to build the natural gas—and every time we ban a two-thirds of the states which have de- sion, there seemed to develop a pretty the economy. And the whole notion transmission lines, coal plant or we ban a nuclear plant, we coupled regulations where the utilities clear consensus that that was the here is we’re on a road, and President- we need federal em- build a gas plant, because it’s an easy are managed to efficiency goals rather wrong approach, that what was neces- elect Obama should put us on a road, to inent domain to thing to build—at the end of the day it than revenue goals—already have en- sary was a more comprehensive sort of decarbonizing our economy, as well as build it to where still has a pretty significant carbon foot- ergy-efficiency programs. But often they top-down view of strategy, as opposed on the road to creating the most energy- the load is. And it’s print, 50% of that of coal. So natural gas don’t quite have it right. So an idea that I to a bottom-up view of incentivizing efficient economy in the world. Be- not a product that is not a complete answer. thought was particularly compelling particular technologies. cause that is the way we really grow our we can count on None of these in and of themselves that came out of the group was to allow GDP per capita long term, particularly 24/7. But it needs is a complete answer. Each plays an im- utilities to think of the efficiency that as the rest of the world grows. to be part of the portant role, and each can contribute in they cause in their customers, to treat it ENERGY AND THE ENVIRONMENT As James Schlesinger once said equation, both a low-carbon world. All require further in the same way as the capitalization that CO-CHAIRS: about energy policy, “We swing be- wind and solar. research and development, dollars they do of a new plant. So from their per- carlos ghosn President and CEO, tween panic and complacency.” And as Also coal: 50% of spective it’s a good choice. It’s cheaper, James Rogers spent and new technologies developed Nissan Motor Co. / President and oil prices went up, we panicked; as the electricity in it’s more effective, they get a better rate to use them in a low-carbon world. CEO, Renault SA they’ve come down, we’re slipping into this country comes of return, and it makes their internal busi- paul s. otellini President and CEO, complacency. But the fact of the matter from coal today. We need to look for ways Energy Efficiency ness logic make a lot of sense. Intel Corp. is we need a consistent policy to allow to make coal clean, and we need to invest In a situation where utilities can cap- in carbon capture and sequestration. MR. BALL: Thank you. Eric Schmidt, en- james e. rogers Chairman, us to plan for the future. italize their investments, they’ll do it That’s a technology that probably is a de- ergy efficiency? President and CEO, Duke Energy I think the second area, and I say this more quickly. It’s also stimulative, go- Corp. as someone who’s in the power sector, cade to 15 years off before it will be com- ERIC SCHMIDT: As part of a comprehen- ing back to the stimulus question, be- eric schmidt Chairman and CEO, is that job one for the power sector is to mercially available, but it needs to be part sive energy policy, the first thing really cause it’s something that’s done by all Google Inc. provide affordable, reliable, clean elec- of the equation as we look at decarboniza- has to be efficiency. Maybe the most bor- those out-of-work construction people tricity 24/7. But one of the aha’s that we tion by 2050, which most of the carbon ing, but in fact the highest-return thing and so forth who are not building SENATOR: have is that virtually every power plant legislation calls for today in Washington. that we can possibly do: just make the houses right now. So all of a sudden, jeff bingaman (D., New Mexico) in our sector will be retired or replaced Nuclear also has to be a key part. In current stuff more efficient. There are whether it’s federal buildings, state by 2050. And so if it’s the policy of our fact, it’s the only technology today that many, many technologies that can be ap- Please turn to page R8 BLACK P2JW329029-0-R00600-1--------XA 6065785
  • 7. P2JW32902A-0-R00700-1--------XA 11/24/2008 AZ,EE,MW,SC,SW,WE BLACK P2JW32902A-0-R00700-1--------XA THE WALL STREET JOURNAL. Monday, November 24, 2008 R7 Health Care never going to get anywhere. Unless we The Top Five Recommendations 1. FIGHT OBESITY Use the presidential office to drive home the prevention message. Make reducing the obesity epidemic the top priority for the new surgeon general The U.S. spends $2.3 trillion per year on health care— can define that value, understand what and the Centers for Disease Control and Prevention, while addressing race- based health disparities in obesity and other health problems. almost twice as much per person as other industrialized it is, look at it on a somewhat longer- term basis and then recognize what we 2. TORT REFORM nations—but we aren’t getting what we pay for. Studies are getting for our investment rather Reform malpractice, using the National Vaccine Injury Compensation than our cost, we will constantly be up Program as a model. Create an environment that protects patients while al- show that fully a third of spending is wasted on treat- against this pressure to cut short-term lowing physicians to practice in high-risk specialties without facing prohib- costs, which is the exact opposite of ments, drugs, and tests that don’t improve Americans’ what we should be doing. We should be itively expensive insurance premiums. health outcomes and that adults receive recommended investing. We should obviously not 3. DEFINE VALUE, REFORM PAYMENT spend money on wasteful things, but Change the reimbursement system to reward preventive care and evi- treatments for many illnesses only 55% of the time. Econ- where we can invest in prevention, we dence-based care, and extend government efforts to no longer reimburse must be doing so because we believe in inappropriate, unsafe or wasted care. Move Medicare to a pay-for-value omists warn that unless we can eliminate excess spend- the long run it will pay for itself. If we model. Define and measure desirable outcomes for most common diseases. can’t measure that and define it, we Include costs to government, private sector. Redistribute Medicare pay- ing and put health-care dollars to better use, rising won’t get anywhere. ments to favor physicians who perform well. To collect data, wire the na- health-care costs will present a growing threat to our MS. LANDRO: Right, which is why the IT tion’s hospitals and doctor’s offices, with government-set standards for in- thing comes into all of this, but really in teroperability. global competitiveness and long-term fiscal security. the payment-reform space. Angela, can you explain that to the group? 4. BUILD HEALTH-CARE WORK FORCE Laura Landro, an assistant managing editor at The Wall Focus on primary care. Include registered nurses, nurse practitioners MS. BRALY: We’ve been talking a lot and allied professions, as well as M.D.s. Make sure there are enough profes- Street Journal, moderated the task-force discussion on about value, and the issue is the way sionals to support increased access to care. that we pay for health care now doesn’t health. Here are edited excerpts of the presentation of enhance and encourage value. Specifi- 5. UNIVERSAL HEALTH INSURANCE their priorities to the CEO Council. cally, we need to focus on paying for pre- Enact comprehensive health-care reform, including universal access to vention. We’re going to have to trans- affordable, quality insurance plans for those not covered by employer- LAURA LANDRO: We actually had a very, for people to say we’re not getting what form the reimbursement system to fo- based programs. Require individuals to buy insurance. very tight race in health care and I think we’re paying for, which implies you cus on paying for even some of us were a little surprised know what quality is. Somebody knows prevention. We at the way things came out. I’ll first ask it somewhere. So why don’t we begin to want to make sure what’s not on the list of your top five, the system cannot be repaired without Denis Cortese to start with what came measure the elements of quality, and there are mecha- universal health-care coverage, some- universal coverage. I’m not saying sin- out No. 1 on our list, which was to fight those elements are actually quite mea- nisms in the reim- thing that’s talked about a lot. Could gle-payer system. I’m saying a uniquely obesity. surable. They’re the outcomes that you bursement system one of you talk about why you think that American system which combines pub- desire, particularly around a particular to do that. priority did not rise to the top five? [Edi- lic and private coverage by expanding DENIS CORTESE: This was an interesting We also need to disease. You can measure those. tor’s note: In subsequent discussions slightly Medicare, Medicaid, CHIP [Chil- discussion. It came up in the realm of make sure we’re re- We would propose that you might the task force combined two priorities dren’s Health Insurance Program], but prevention, but the obesity component warding the deliv- start with maybe the top five diseases and made universal health care No. 5 on also making sure that health insurance so highly reso- ery of evidence- in the country. Those top five diseases its list.] is available for everybody. nated with the based care, and we probably account for roughly 60% to We have an employer-based system group that it rose think government MS. BRALY: I want to say this is a pun, 70% of all the spending, especially in Angela Braly in our country. That’s the American sys- as a point all by it- has a role to focus but fighting obesity is like motherhood the Medicare environment. tem. Some suggest scrapping it. I don’t. self. The issue of on not paying for and apple pie. You know we all love the You begin to measure the outcomes. I think we build on it. education, the is- what’s inappropriate or unnecessary or idea that we can do something as sim- Safety is another numerator element. We probably sue of physical ex- wasteful, and we encourage Medicare ple as deal with obesity, make sure Safety is easy. It should be zeros. The should go look at ercise, the issue of to continue to focus on a pay-for-value we’re eating right and our kids are exer- third is service: access for care, patient the employer-pro- having physical ex- model. Without doing that, we think cising, and we’re going to avoid dis- satisfaction, etc. These are all measur- vided exclusion in ercise as part of we’re going to be unable to address the ease. That had a unique appeal and one able. So making it an effort to really mea- the tax law be- the school activi- value equation of cost and quality. that we could all get easily behind. sure, define and measure value is crucial cause it’s regres- ties all became im- As part of that, too, we think the re- because we’re going to propose that pay MR. KINDLER: I think all of us believed sive. It’s a little in- portant compo- gional variation of health-care delivery Denis Cortese be related to the out- that there needs to be universal access efficient. But we nents of this dis- and the cost associated with that actu- comes of those mea- to affordable and quality medicine. And also need to give cussion, because ally helps us in that define and measure surements. we took a vote and we did not really incentives to small the estimates of unfunded liabilities category, so we can see that there are Information tech- identify a way to pay for it. So that’s businesses and in- that we have into the future, particu- places where health care is being deliv- nology is listed in where I think that became an issue. dividuals so they larly for Medicare, do not include the ered with higher value and we ought to here as one of the Max Baucus get health insur- impact of obesity. No one’s really esti- strive for the models that produce The Senator’s Perspective tools to help cap- ance, too. mated that just yet. those results. ture that. And all of MR. MURRAY: Senator Baucus, would We need big incentives in changing MS. LANDRO: The second one that came you in your busi- MS. LANDRO: And finally, building the you like to respond to what you’ve the delivery system, and through Medi- up on the list—again, we were all a little nesses, you actually health-care work force, the concern heard? care rewarding quality, working surprised at this—was tort reform. Dan make value-based about the shortage of all kinds of medi- through the National Quality Council, Vasella is going to explain in more de- purchases all the MAX BAUCUS: I believe strongly that the working with evidence-based out- cal experts. tail about the vaccine model to reform time and you are be- Jeffrey Kindler opportunity is here for us in America to comes, moving to again reward provid- malpractice. ing advised on how MR. KINDLER: We have a serious, serious finally have a health-care system that ers, hospitals and physicians based to do that. So if we potential shortage of primary physi- we can really be proud of. But it’s got to more on quality. DANIEL VASELLA: The vaccine [busi- cians in this country because of the can move Medicare to an environment be one where everybody is involved. Ev- We all have to keep an open mind on ness] has completely changed because way medicine has evolved into being where they start paying for value, that erybody: consumers, employers, pro- all this stuff, figure out how to get to of litigation. Companies left the indus- more specialty-focused. We need to in- would begin to drive the system. Medi- viders, health-insurance companies, ev- yes. Everything is on the table. The only try, and only with the bird flu did peo- vest in creating more jobs and more in- care is starting to pay based on value, erybody. My judgment is that we’ve thing that’s not on the table is a single- ple start to ask, why aren’t more compa- centives for primary care—be it from and there are many sources of those spent way too much time with patch- payer system. That’s going nowhere in nies in the vaccine business? And it physicians, nurse practitioners or oth- value-equation numbers. work, fixing this part here and that this country. turns out that the whole litigation issue ers. part there, push on the balloon, it bub- I know the problem of obesity. I got around vaccines was a big deterrent for JEFFREY KINDLER: There are a lot of If we want to stimulate jobs in this bles up someplace else, and we just are to tell you, I think that’s tepid. I just any pharmaceutical company to be in ideas and discussions that cost money. country, one of our great opportunities getting nowhere and we have what we don’t think the bully pulpit is going to that field, and only We’re in a serious deficit environment. and one of our great distinctions as a have—namely 40-some million people be enough to sufficiently fight obesity. when tort reform How are we going to pay for all this? country is in the sciences, in medicine, who don’t have health insurance, 25 We’re going to have to have incentives happened—[when One of the reasons I believe we have to in well-paying jobs, and we can actu- million underinsured, a reimburse- in here. We’re going to have to have what people could measure value is because if we actually ally strike a blow here for two of the ment system that is out of whack. It re- teeth in here. get] was capped and believe that investing in prevention things we’re trying to accomplish. We wards volume, not quality. We also are it was made more dif- and wellness is going to improve pro- can stimulate jobs and education and MR. MURRAY: Senator, where does the not addressing costs, because costs are ficult—that really ductivity, is going to help with jobs, is training, but focus on an area where we money come from? You’re talking about going up so much in our country. Costs changed. Now more going to support innovation, and every- have a huge unmet need of primary- universal health care. Depending on players are inter- to individuals, costs to businesses. And thing else we’ve talked about, we better care providers. how you do it, you’re talking about ested than they also the cost to the federal government be able to measure that and prove that what, a trillion-dollar program over a with the Medicare trust fund going were before. we’re doing it. Universal Coverage through the roof. number of years? We have to be We will not be able to do comprehen- ALAN MURRAY: This is a very interesting So my judgment is that first of all SEN. BAUCUS: Oh, no, no, no, no, no. aware that the tort sive health-care reform without some panel both for what floated up to the you have to have universal coverage. Much, much, much less than that. Much system is estimated Daniel Vasella to cost about $246 approach to the scoring of the bill that top—fighting obesity—which I think it’s It’s a disgrace that the United States is less than that. Much less than that. Or- billion a year in the U.S. In the health- recognizes that these are investments fair to say none of you would have pre- the only industrialized country in the ders of magnitude less than that. rather than costs. Otherwise we’re dicted. But it’s also interesting for world without universal coverage. And Please turn to page R10 care arena, PriceWaterhouseCoopers estimated that it’s about $124 billion a year. So it’s not something you can lightly disregard. I would also add from my own per- spective and learning of the U.S. system that it was extremely frustrating for me I think there are many people on the ties for the economy? The sooner that And second, if we could achieve the when we were told by the lawyers you have to settle, even if we thought that we have done nothing wrong, because it was less expensive and less cumber- Finance Hill that are thinking of the same items that you are thinking about when you say infrastructure. We do think of it in that can be in the marketplace, the bet- ter. And so, I loved your idea about get- ting industries and individual groups to kind of stimulus that we’re talking about in a way that would have the pro- ductivity increases that we’re discuss- Continued from page R5 very broad terms. We think of it as tech- help assure that the president is commu- ing, it will eventually have some amelio- some. have to say that we, in the U.S., have nology. I see people here from the en- nicating a clear long-term message. rating effect. But I think we recognize So basically we have a judiciary sys- ended up with quite a hodgepodge of fed- ergy sector. And we certainly do view As a policy maker, I will tell you the from a fundamental sense that the tem which I think is not really doing jus- eral and state regulation that no longer re- the states as our partner in the distribu- one thing that I think that the business short term is exactly that, short term. tice in this regard. flects the reality of financial institutions tion of these funds. community could be more direct on is the MR. MURRAY: I think what was interest- ANGELA BRALY: One of the other things and the growing complexity of financial Anything that specificity of your proposals. When peo- ing is that long-term tax policy seemed to that you’re going to hear from us is markets and financial instruments. you all can do, in be- ple say they support more investment in rise above long-term deficit policy in this about the concern that this litigation or Consequently, we know that there is ing more specific job training, it doesn’t mean as much as if particular group as a long-term priority. going to be some change in the way regu- about the stimulus you say I think the current budget that is the threat of litigation stifles the qual- lation of financial services is done in the package, size and flat, or the current budget that’s only 10% MR. STEEL: I think that there’s no reason ity discussion, because we’re in an envi- U.S. And so the first goal, in the face of particular areas of more, is not enough. We support this why long-term fiscal responsibility ronment where we cannot as clearly dis- the inevitable rethinking of regulation, investment, I think level of spending. That is what it’s going couldn’t be part of the economic vision, cuss errors and address them in a high- is to try to make sure that the pendulum will help get us that to take to get the priorities through in and so the idea that when the president- quality way. doesn’t swing too far. Our tactics on this package as soon as this tough fiscal time. elect’s economic team lays out their pri- What Is Quality? were as follows: One, appoint a blue-rib- possible. We, even On the long-term tax policy, I orities, this is what we’re going to do on bon panel, bring some experts inside with a Democratic couldn’t agree with you more that we Jan. 20 and this is what we’re going to MS. LANDRO: Defining and measuring and outside to focus on it. Second, give majority growing in obviously have to encourage job cre- do longer term, that there is no reason value seems like a vague term. But for that panel an entire year to really think the Senate, are still Maria Cantwell ation and investment, and specifically, why a raise-your-right-hand-and- the way we’ve defined it, we’re going to about what needs to be done—frankly, a not going to have a the global competitiveness. I think pledge commitment to that can’t be turn to Denis Cortese. little bit of a cooling-off period. But not filibuster-proof Senate, so having good those are very good goals, and my col- part of the economic vision also. MR. CORTESE: When we talk about the postpone much beyond that. And so, we bipartisan support means good input leagues would be very responsive to did suggest very clearly that the new ap- from the private sector about its priori- MR. MURRAY: Changing the tax code, to No. 1 problem with regard to health those from a tax-policy perspective. proach to regulation that comes from ties in stimulus. So the more that you encourage employment, job creation care, most people would say we’re not The gasoline issue is something that I the panel be implemented in the first can come with real specific numbers and investment and enhance global getting what we pay for. And by saying applaud you for your boldness. Depend- term of the new administration. that you support, the better that is. competitiveness is fine. What are we that, you’re really saying the value equa- ing on what’s happening on Capitol Hill, I On the illiquid-assets suggestion: Ev- talking about here? Are we talking tion, and the question becomes what is ALAN MURRAY [deputy managing editor think many of my colleagues are sold on erybody knows now that the program about cutting corporate taxes, or we in the numerator? We can measure the of The Wall Street Journal]: Senator cap-and-trade. I’m a little more with you of $700 billion is being divvied up in var- talking about changing the balance on cost pretty well. But what’s in the nu- Cantwell, would you like to respond to on the concept of how difficult that sys- ious ways. Obviously, some people taxes between consumption and sav- merator? What is the quality equation? what you’ve heard? tem is, and how a more clear-cut process want it to be used for housing. Some ings? Can somebody put a little meat on Most people stumble and they say, how might play out more for the country. MARIA CANTWELL: On the points raised people want it to be used for the bail- the bones of this new tax policy? do you really measure quality? What I have quite a few views on regula- about fiscal stimulus, and obviously, the out. And I’m sure there are some that tory reform, but I will summarize them MR. BEWKES: We didn’t really debate and can you really do? would still support the buying of illiq- quick implementation: I do think it’s a in a few words: transparency, transpar- get to any agreement on what the ele- It is very interesting. It’s real easy very good point. Unfortunately, I think uid assets. Just my personal opinion, if ency, transparency, transparency. And ments would be, but I think that there the structure of the Senate that we have that’s really a priority of the individuals if you don’t work hard on transparency, was an acknowledgment that, on the per- HEALTH CARE CO-CHAIRS: today and the decisions that are being that are here today as a key strategy for you’ll get another Sarbanes-Oxley. sonal-tax side, this is long term, rates angela f. braly President and CEO, made on the Hill will probably leave us solution, you have a lot of work to do to That’s all I have to say. would probably have to be a little higher WellPoint Inc. with a very small package—unemploy- getting people to buy into that. than they have been. We didn’t discuss denis a. cortese, m.d. President ment benefits and maybe one or two On the economic vision, I couldn’t What About the Deficit? progressivity within that. We didn’t get and CEO, Mayo Clinic other items, but not a large stimulus pack- agree more. Having been in business, my- into income tax versus other sources. MR. MURRAY: Does one of you want to ex- jeffrey b. kindler Chairman and age. Again, the new Congress is coming self, for five years, and running a divi- That’s why we threw in the gas tax. And plain what happened to that long-term CEO, Pfizer Inc. into place. Many of those people are com- sion of about 100 people and $40 million we were hoping that we could make the deficit in the group discussion? daniel vasella, m.d. Chairman and ing to the Hill for the first time today, and in revenue, predictability, predictability, corporate tax more competitive. It would CEO, Novartis AG just like President-elect Obama, they’re predictability, predictability. And right MR. FERGUSON: It didn’t make the top be somewhat lower, and more broadly trying to figure out these policies. But it now, obviously, with a new administra- five. We did, I think, observe that we’d based, and wouldn’t, therefore, discrimi- SENATOR: doesn’t mean that you can’t work very dil- tion coming on board, where is the pre- like to have stimulus in a way that cer- nate as much as it does now on which in- max baucus (D., Montana) igently in the month of December to hit dictability about the new administra- tainly didn’t worsen that. That’s admit- dustries end up paying it. That’s about as the ground running in January. tion’s policies, as it relates to its priori- tedly a low hurdle, but a recognition. far as we got. y BLACK P2JW32902A-0-R00700-1--------XA 6065786
  • 8. P2JW32902B-0-R00800-1--------XA 11/24/2008 AZ,EE,MW,SC,SW,WE BLACK P2JW32902B-0-R00800-1--------XA R8 Monday, November 24, 2008 THE WALL STREET JOURNAL. on an incredibly elaborate vacation, I TARP [bailout fund]. Talking to Treasury don’t have that money anymore. If I spend the same amount of money on a house, then I have a house. I am only poorer to the extent that I overpaid for the house. So I think it is very important to distinguish debt issued to finance gov- When the Fed looked at AIG, they again had operating businesses that they felt that they could make a bridge loan against and they had the security. Fiscal Discipline Henry Paulson, Robert Rubin and Lawrence Summers ernment spending of one kind or an- other from debt issued to finance gov- MR. MURRAY: Let’s open this up. David Walker [president and CEO of the Peter ernment acquisitions of financial assets G. Peterson Foundation], you have been discuss how far we’ve come—and how far we have to go of one kind or another, and to focus in ef- fect on the net debt of the federal govern- talking a lot about a subject that is close to your heart, and that is the fiscal situa- ment. And I think that could become a tion of the U.S. Do you have a comment Put two former Treasury secretaries MR. MURRAY: Within a reasonable pe- MR. PAULSON: One of the strongest rec- critical concern at some point, and or a question for the panel on how this and one current Treasury secretary to- riod of time: weeks, months? ommendations we made was the Fed that’s why I put the emphasis I did on period we are going through is going to gether, and you’re bound to get plenty needed to play the role of a macro stabil- long-term fiscal sustainability. affect our fiscal situation? MR. RUBIN: Reasonable period of time At the same time, I think it is impor- of agreement—and disagreement. ity regulator, being able to look across would be a period of time that is reason- tant to recognize what the market is tell- DAVID WALKER: My question is that for Current Treasury Secretary Henry the whole economy and look at risks it able. But I think even after that is gone, if ing us today. And what the market is tell- the first time in history the total liabili- M. Paulson Jr., and two of his predeces- might pose and then have the authority you go back to the period of, say, six ing us today is that there is an extraordi- ties of unfunded obligations of the U.S. sors—Robert E. Rubin and Lawrence H. to intervene if necessary. And as part of months ago or eight months ago or 10 narily wide spread [in yields] between now exceed the net worth of all Ameri- Summers—talked to The Wall Street that program we would believe that the months ago, before it became a psycho- Treasurys and anything else. Some of can households. And the hole is grow- Journal’s Alan Murray about the short- hedge funds that are big enough to be term financial crisis and the country’s logical crisis of confidence, we were still systemically important to have a char- that is because they are worried about ing deeper, faster than the net worth is long-term economic needs. having very difficult times. And I think ter, and that be the hook for the Fed to what anything else is, but some of it is be- improving. So my question is, when and Here are edited excerpts of their con- once we get past this psychological cri- be back to engage with them as a macro cause there is a rather large flight to how we will start dealing with the fed- versation: sis, we will still have difficult times. We stability regulator. quality that is running into Treasurys. eral government’s financial problem? will have to work our way through that, That is why there was one moment— All of you have talked about the need to How Far We’ve Come and I don’t know how long that will take MR. MURRAY: So Bob Rubin, how far deal with the short term, but to recog- and this illustrates when it becomes or how deep it will go, but clearly a lot of does this swing of the pendulum go? nize that we have got a structural prob- ALAN MURRAY: On a scale from zero to pathological—when over a couple of damage has been done, and it is going to How much more regulation are we talk- lem over the long term that we need to 10, where zero is we haven’t done any- month period the interest rate on Trea- take some time to get through that, cer- ing about? At what point does the regu- come to grips with. There never seems thing yet to deal with the problem and surys was actually negative, and that tainly well into next year. lation become a problem? to be a convenient time to deal with it. 10 is we have done everything we possi- was because the mattress was kind of in- bly could to deal with the problem, MR. MURRAY: Are you saying the focus MR. RUBIN: I actually wrote a book that convenient and there was no other place MR. SUMMERS: There is no question that where do you think you sit right now? now can be on the fiscal stimulus, that came out in November of ’03, in which I to store your money so people were actu- we have got a long-run fiscal problem. the financial system has been dealt with? said that I thought that these revenues ally paying the government to store A decade ago, people would have HENRY PAULSON: Well, I don’t like to deal and these products of financial engi- their money with safety. Fortunately, in said it had many elements but they with 1 to 10 scales. But I will say this: If MR. RUBIN: No, I am certainly not saying neering could serve very useful pur- part thanks to the various steps that would have put at the center the retire- the issue was to stabilize the financial that. I think the financial system is in poses, and did serve useful purposes un- Hank took, that is no longer the case. ment of the baby-boom generation. The system and pre- better shape today than it was before der normal circumstance, but could cre- retirement of the baby-boom genera- vent a collapse, Hank and the people at the Fed acted in ate systemic risk under stress circum- Lehman, in Hindsight tion continues to be a critical issue. But and get by the the various ways they acted. Certainly stances, which is clearly what we have MR. MURRAY: Secretary Paulson, in retro- I think most people who analyze the point where the there are many issues lying ahead in had in the last number of months or long-term problem today would put pri- spect, given everything you have seen market is rattled the financial system. I think the single the last year. And what I said is that we mary emphasis on the fact that the gov- over the past 60 days, was it a mistake wondering which most important thing we can do right should have higher, substantially ernment buys a to let Lehman Brothers fail? big institution will now is a very large fiscal stimulus mar- higher actually, capital and margin re- lot of health care, go down next, I ried with a commitment once the econ- quirements with respect to derivatives MR. PAULSON: The reason I believe it was and that health- think on a scale of omy is healthy again to put in place a and other products of financial engi- not a mistake is we didn’t have an option. care costs grow one to 10 we are multiyear program to get back to a neering. And I would guess that what- People have a hard time understanding 4% or 5% faster very close to 10. sound fiscal regime. ever else is done in the reform area, this, because they think you are the gov- than GNP, and But in terms of that will be one item. ernment, you can do anything. I can just taxes grow at where we need to The Need for Stimulus say to you the Constitution doesn’t give I think there is an overall principle about the same Henry Paulson be, we have a lot of MR. MURRAY: Let’s talk about the fiscal that should be applied, and it goes to Treasury the authority to do anything. rate as GNP and so work to do to re- stimulus. Larry Summers, I should your question about the pendulum, and We worked with Fed powers to make a the gap widens. store the financial system, and restor- make it clear that you are here to speak that is the objective ought to be in- loan that is secured to the satisfaction of I think the cru- ing the financial system will go a long on your own behalf. You are not speak- creased protection against systemic the board of the Fed. cial question is go- way in helping the economy recover. ing on behalf of the Obama team or the risk, and in- People often ask me to differentiate ing to be how we There is still a good bit to be done be- Obama transition. You wrote a column creased protec- between Bear Stearns, Lehman Brothers Lawrence can bring some cause the economy is turned down. in which you argued that we don’t need tion for consum- and AIG, and to me it was very clear. At Summers greater efficiency Housing prices are still declining. The to be mindful of the deficit in the short ers. But we also the time of Bear Stearns, we had a buyer. to that system, positive is we have got the major na- term, but we shouldn’t do anything in have a market- At the end of the day the buyer wouldn’t and the government as a coordinator, tions and G20 [nations] working to- the short term that is going to make the based financial take all the assets but they weren’t ad- the government as the largest buyer, gether to address the problem, but it is deficit problem worse in the longer system, and I think versely selected. The New York Fed has, I think, a very large role to play. one that we are going to be working term. Can I get you to elaborate a little that is the most-ef- looked at that and was quite confident with for a long time. There is going to bit on that? Does that, for instance, fective way for our that that was adequately secured and Tax Cuts and the Stimulus be stress in the capital markets for a mean that we don’t want to do any tax economy and for they were going to get paid back. PAUL GIGOT [Editor of the editorial number of months here because hous- increases in the short term? the American peo- After Bear Stearns went, I gave vari- pages of The Wall Street Journal]: ing prices are still declining, and now I ple to have the fi- ous speeches, [Federal Reserve Chair- LAWRENCE SUMMERS: I suggested in Jan- Given the need, Secretary Summers, for think it has moved beyond housing. nancial system or- man] Ben Bernanke gave speeches. We uary—and I think it was a reasonable substantial stimulus, we have some tax Robert Rubin ganized. said we do not have the powers and au- MR. MURRAY: Bob Rubin, let me try you. suggestion at that time—that fiscal cuts that are expiring, as you know in So it seems to thorities we need to wind down a non- stimulus should be timely, targeted and 2010. I think you called for a substan- On a scale of 1 to 10, how close are we to me that you have to find the optimum bal- bank and keep them out of bankruptcy. temporary. I frankly think the situation tial and sustained stimulus maybe for a having done what needs to be done ance between increasing protections We don’t have it. We testified as such to has deteriorated very substantially two or three year period. Where would from the government’s standpoint to against risk and maintaining the benefits Congress. At Lehman, after they an- from that point, and so I would go for tax increases fit into that stimulus cal- deal with this crisis? of market-based systems, as opposed to nounced their second-quarter earn- speedy, substantial and sustained over culation, and would it contradict the the objective of minimizing or even elimi- ings, it was really clear that the market ROBERT RUBIN: I will respond to the a several-year interval. I think we are kind of stimulus you are talking about? nating risk. And it is finding that opti- did not have confidence. I believe the question in my own way, which is the going to need some impetus to the econ- management tried very hard to pursue MR. SUMMERS: What matters for stimu- way I think about it. Take all of the pub- mum balance that is going to be the great omy for two to three years. other things, look for buyers. Not only lus at this point is the total level of de- challenge not only substantively but po- lic policy that has been put in place, and did we not have a buyer at the end, but mand in the economy, and that goes to More Regulation litically. then you take what will happen— the potential transactions we looked the total size of the fiscal impulse, which whether it is now or when Sen. Obama MR. MURRAY: There was a hearing last Funding the Deficit at, buyers came in and said these are is about what the net deficit is, adjusted becomes president—which is a large fis- week where five big hedge-fund man- the assets we would need to leave be- for cyclical conditions. That really is the cal stimulus. You put all that together, I MR. MURRAY: Even in the short term, you agers appeared before Congress, and a hind and we value them as X and they issue, not the particular composition of think that there is a strong probability face the prospect of the U.S. government member of Congress said, do hedge funds are on the books for Y. The difference be- taxes. It won’t surprise you if I share the that the crisis piece of this—the psycho- having to borrow phenomenal amounts need more regulation? Four of the five an- tween X and Y was substantial and so I view that the stimulative benefits of the of money to fund these programs. logical crisis, the pervasive anxiety swered yes. We are clearly moving into a think it would have been impossible un- tax cuts as they were designed in 2001 that we are in right now—will abate period where the regulatory role in the MR. SUMMERS: One way I have put this to der any law I have seen for the Fed to and 2003 was in most respects very lim- within a reasonable period of time. economy is going to increase. people is to say if I spend a lot of money make that loan. We did not have the Please turn to page R9 stimulus plan. And this addresses the engines, flex-fuel, ethanol, and con- lars in transforming your car into zero been endorsed by our president-elect, Energy supply side of renewables: What can we do to really encourage a buildout, per- haps even slightly ahead of demand, on tinue to develop technology of the fu- ture that may be ready after the electric car is being mass-marketed, like the emission, and you have to invest in bat- teries”—well, they have practically no accessible financing. I can tell you all and I think is going to be seriously con- sidered in this Congress. And I think it will have an impact on carbon usage Continued from page R6 renewable energy sources to ensure that fuel cell, using hydrogen as a fuel and the car makers today have a problem throughout the economy, and it will buildings, city buildings or homes, becomes one of the five key elements of then you emit water. with credit. overlay in many ways the regulatory you’ve got this huge, huge market. the decarbonization process? So the electric car is a very specific is- That’s why I think ensuring long- changes that are being discussed here. Along the way, you also need to do And then the last comment on this sue. Obviously, there are going to be dif- term financing—and again, it’s not only MR. ROGERS: Senator Bingaman remem- things like raising consumer incentives was obviously self-serving: Let’s en- ferent generations of technology com- a U.S. problem—is absolutely fundamen- bers how difficult it was just to get the for pursuing energy-efficient technol- sure that there’s business participation ing, but the present technology ready to tal if you want these things to happen. type of legislation we have today in ogy, a federal building code and federal in deliberating how the stimulus plan be mass-marketed in 2010 is already suf- MR. ROGERS: I want to underscore what terms of building transmission lines standards around energy efficiency. And would be spent. ficient to fulfill the basic needs of the Jeff said: It’s not going to be cheap, it’s and interstate commerce. It’s a huge the reason you American consumer, the European con- Electric Cars not going to be easy. Many environmen- pushback at the want this form of sumer and the Japanese consumer. talists and many political leaders are state level with re- regulation is that MR. BALL: Now on electric cars, Carlos leaving the impression with the Ameri- MR. BALL: Two other quick things. If you spect to that. the consumer and Ghosn. can people that you can snap a finger remember back to this morning, the num- I do think you the manufacturer and there we are. But I think it’s going CARLOS GHOSN: We started with a very ber we started out with for electric cars canhave some over- and that whole to be expensive, it’s going to take invest- general topic: decarbonize the transpo- was 5% of sales in 2020. We’re now at arching principles, transaction cycle ment and it’s going to take a consistent ration sector—try to eliminate as much 10%. There was an impassioned discus- but the implemen- don’t bear the full policy in this country—something that CO2, try to eliminate as much as possi- sion in the room about what the right tation is going to cost of it. we haven’t had, and we’ve been talking ble dependency on number was, but a general sense that 5% have to be at the So the sum of about energy independence and energy oil. was not being ambitious enough. state level. This is that is, energy effi- policies since the 1970s. But we have And we took Lastly on the numbers, there was a going to take a col- ciency is clearly yet to actually implement a consistent the electric car as sense that we did not want to have just laborative effort be- the first place you policy. Eric Schmidt a very specific and a 2030 or a 2050 goal, that there are too tween the federal put your money. maybe eye-catch- many long-term goals that are not able Jeff Bingaman government with It’s relatively MR. MURRAY: Let’s go to Senator Binga- ing example of to be sort of grabbed onto. And so it’s im- overarching princi- straightforward, but with some clever man and let him respond to what he’s where the evolu- portant to have a goal that’s in a much ples and state commissions actually im- regulation, we can build something heard here. tion of technology shorter time frame. plementing them. that we’ll sustain independent of the JEFF BINGAMAN: The point that seemed panic. leads us to some- ALAN MURRAY: I think it’s great you have thing which was to me to be unsaid is that all of these A Sense of Urgency those specific goals in the electric car recommendations involve a substan- MR. BALL: One quick thing that strikes unthinkable a few MR. OTELLINI: I think there also has to be item. But in the decarbonize power sec- tial accretion of more authority at the me: There’s been talk about a federal years ago: We tor item there are no specific goals, al- a sense of urgency built into it. When building code for years and it hasn’t ought to have very Paul Otellini federal level. A lot of what is currently one thinks of federal regulation or though Jim Rogers mentioned zero done with regard gone anywhere. It’ll be fascinating to specific goals of emissions by 2050. And the second more power accreting to the federal see whether the energy situation we saying by 2020, and if possible before to energy effi- thing is, it’s not clear how you get there. government, one doesn’t usually think find ourselves in leads to getting that, 10% of total car sales should be ciency, with re- Can you get there without putting a of things moving faster. So there has to through that gridlock. zero emission—which means electric gard to the power price on carbon emissions? Can you get be implicit in this a sense of urgency, OK, Paul Otellini on infrastructure? cars—reaching up to 50% of car sales in sector, with re- there without a cap-and-trade system? gard to the infra- and a sense of to some extent relief to 2030. be able to do things more rapidly. Like Return on Infrastructure Now, by electric cars, I’m not talking MR. ROGERS: It would be my judgment structure, those decisions are building a nuclear plant. about hybrid electric; I’m talking about that you need a cap-and-trade system. PAUL OTELLINI: This had to do with how made by state reg- cars with zero emissions, however you You need a cap on emissions to decline MR. SCHMIDT: There are many, many in- the stimulus-plan money would be ulatory agencies. use them. It’s not a car with a small en- over time. You need a price on carbon teresting technology projects just wait- spent. Our idea was to focus on infra- for long-term planning. But quite And that’s got to gine to reinforce the battery. We’re talk- ing for infrastructure that are hung up structure. And one comment was, let’s frankly, to quote the Pentagon, which of- change in order to ing about the fact the consumer cannot in local and state governments. As we make sure the stimulus plan is not just a ten says, “A vision without resources is a put in place the emit any CO2 while he’s driving this car. all know, the states have no money for payout, that it rather is an investment. If And it’s a real car, it’s not a golf cart. hallucination,” I believe a carbon policy Carlos Ghosn kinds of long-term the next year or two, and may not for a you think about ROI, return on infrastruc- So, this technology today is about without technology is a hallucination. policies that I long time. The only place where both ture ought to be something we look at as ready to be launched. In 2010, 100,000 think are being advocated. MR. BALL: There was, I think, a pretty the authority and the financing will be part of deciding of how this gets spent. cars will be on the market. I think the If you’re going to have federal siting strong consensus in the group that possible will be at the federal level, and There were two big areas. The first U.S. is going to receive the first lot of of transmission lines, if you are going to where a lot of this needs to start is with it needs to happen quickly. The reason was, focus on roads, bridges, airports— them. In 2012 many markets in the do the decarbonizing that you’re talk- some political honesty and leveling it has to happen quickly is it’s a com- allowing us to put people back to work world—we have counted about 40 coun- ing about, if you’re going to have decou- with the American people about the de- pounding effect. If you don’t get started but also to decrease things like conges- tries—are going to have an important pling of profits from improved effi- gree of pain and money and sacrifice now you’ll lose those years forever. tion. As the arteries are expanded, it al- amount of electric cars. ciency, all of that is going to have to be lows us to be able to get cars, even as that’s going to be required. done federally if it’s going to have the SEN. BINGAMAN: I think implicit in my But it’s not only about electric cars, they get more efficient, to be able to because if you have 10% of cars being MR. GHOSN: Today coming to the car in- impact that we’re talking about. concept of a comprehensive national en- move more rapidly and therefore waste electric in 2020, it doesn’t solve the dustry—not only the Big Three but also So, I don’t disagree with the main ergy policy is the authority at the na- less energy. problem. In the meantime, you still the Japanese and Europe and every- thrust of what’s being discussed. I do tional level to make energy policy. And A second big part of that had to do have to go through the continuous im- body—and telling them, “You guys are think that an integral part of it is the that doesn’t exist in many parts of what with something that Jim coined, a green provement on gasoline engines, diesel going to have to invest billions of dol- cap-and-trade proposal, which has we call energy policy today. y BLACK P2JW32902B-0-R00800-1--------XA 6065787
  • 9. P2JW32902C-0-R00900-1--------XA 11/24/2008 AZ,EE,MW,SC,SW,WE BLACK P2JW32902C-0-R00900-1--------XA THE WALL STREET JOURNAL. Monday, November 24, 2008 R9 ent and actually allow people to bring MR. BUSSEY: Do you buy this idea of Failing Our Children the house down on us. Because you put a letter F or a letter D on a school, and even middle-class schools that think, because they have a lot of bright kids there, they’re doing a great job, but they’re not remotely doing a great job. shrinking the number of school dis- tricts so that you can standardize the 50 state districts and maybe 10 or 20 of the big cities— MR. KLEIN: It may be a good idea, but that Three education experts on what needs to be done Our kids in Ohio are not going to com- pete differently in a global economy seems to me the least politically feasible right now. On the other hand, national standards, done with governors, done than our kids in New York. It’s sort of in our schools, and why we haven’t done it silly to have all of these different stan- dards and assessments. And also, it with experts, benchmarking against what’s going on, that will set the frame- work. If you don’t have the right horizon- makes the attack on assessments easier tal and the right vertical axis, it’s very Most people agree: Our education free up our people to go and deliver, and ing that’s necessary to be successful in because by having 50 different ones, system isn’t working. Too many of our hard to do the measurement. if they don’t deliver we change them. school and in life. And the kind that em- you’re not really investing in getting the kids aren’t getting through high school. ployers keep calling for—the education economies of scale. Why Teachers Leave Our students score poorly on interna- Those Who Can’t that will give them imagination, curios- The magic in- tional standardized tests. The teaching ity, personal discipline, responsibility, gredient in the MR. BUSSEY: Dr. Comer, back to the MR. BUSSEY: Dr. Comer, it’s a business profession does not attract—or retain— all of those things need to be built into game I play is high- teachers for a second. Why is it that model for the school systems, you see enough of our brightest minds. the curriculum and instruction. quality teaching. 46% of teachers parachute out of the economies of scale, standardization, re- The trick is getting a consensus on We don’t remotely plane before five years? ducing the profit centers. Does this work? MR. BUSSEY: Does standardization work how to fix it. To talk about solutions, have enough of it MR. COMER: Well, the No. 1 reason that JAMES COMER: I agree with much of with this process? John Bussey, the Washington bureau because we don’t they give is that the administration of chief of The Wall Street Journal, sat what was said. What’s missing, I think, is MR. COMER: Sure it does. But in addition reward it properly, the programs and schools that they’re down with three people who have spent a focus on preparing teachers and ad- to standards, you have to focus on pre- we backload the in, there are problems there. And sec- a lifetime thinking about education: ministrators to be able to support the de- paring teachers and administrators to pay scale. The real ond is that they have no ability to influ- James Comer, a professor of child psychi- velopment of students, to create the cul- be able to help the kids grow, so that money goes into ence what goes on in their buildings. atry at the Yale School of Medicine Child ture that allows them to support the de- they can meet standards. the people who are James Comer velopment of students. That’s not what But the third reason is that they Study Center; Joel Klein, Chancellor of in the system a weren’t really prepared to work with the New York City Department of Educa- they’re prepared to do right now. I don’t The Federal Role long time, gets rolled up in a defined- children. And that is the one that I’m tion; and Louis Gerstner Jr., former chair- think we will reduce or improve the grad- MR. BUSSEY: Joel Klein, what can the benefit pension plan, makes it very hard most concerned about. Learning really man and CEO of IBM Corp. Here are ed- uation rate in inner cities and in difficult feds do to help? to attract new talent. We don’t reward takes place in that interaction between ited excerpts of that discussion. environments unless teachers and ad- excellence, we don’t give hardship pay, JOEL KLEIN: There’s a reason why we’re the teacher and the child. And we can do ministrators are able to do that. we pay the same thing for a science JOHN BUSSEY: Lou Gerstner, we have a still stuck in the same ditch. That all we want beyond that. If we don’t We don’t prepare them to support teacher and a math teacher that we do multitude of school districts spread out doesn’t happen by accident. There are make it possible for that teacher to influ- the development of children in part be- for a physical-education teacher. If any over counties, cities, states, over diverse strong and powerful forces that main- ence the development, promote the cause we have a model that is inappropri- university did that, they’d go under. demographies. The federal government tain the system, because it works well learning, then it doesn’t take place. ate. We’re using what is essentially a I would repurpose almost all of the doesn’t have a lot of levers that it can for lots of people, just not the kids. The teacher and administrators business model in schools, a manufactur- federal dollars that are now in it. That’s pull. What should President Obama do? And if the presi- have to be able to create the culture that ing model. That works well if you’re deal- a lot of money, $30 billion to $40 bil- What would you recommend? dent were to ask will support the development of chil- ing with inanimate objects, but when lion. I would repurpose that to teacher me, I would tell dren. Last month, I was in a school, a LOUIS GERSTNER JR.: The first thing I you’re dealing with children, young peo- excellence. him there are two high school in Virginia, that had had five want to ask the president-elect to do is ple, who are immature, underdeveloped, things that he MR. BUSSEY: Is the system that exists principals in seven years. Total failure. to ask the important question: Why? who must be moved from that underde- ought to focus on, now too cumbersome to remove teach- The last principal has now been there Why have we failed to reform the public veloped state to well-functioning adults both mentioned ers who are underperforming? Is that is- four years and has a terrific school. So schools after all this time? capable of learning, applying that knowl- by Lou. The first is sue high on your list? when we talked about what went on, The first possi- edge at work, family members, citizen- national stan- this was someone who believed in devel- bility is that we ship, it’s a more complicated process. MR. KLEIN: I don’t think you’re going to dards and national opment, who brought in a staff that be- don’t know what get that until you have meaningful, MR. BUSSEY: How is it done? Is it through assessments. The lieved in development, and they created to do. Well, let me widely accepted accountabilities. And the training of teachers? tragedy is not sim- interactions among the teachers and assure you, we then you tie it to teacher value added. ply how many kids the students that helped them grow. know exactly what MR. COMER: To get systemic change, Joel Klein But you can’t do everything from Wash- aren’t graduating. And because of that, they were moti- to do to fix the pub- you’re going to have to change the way ington. There are massive collective- The tragedy is how vated to learn and they were able to lic schools. We teachers and administrators are trained bargaining agreements out there. But many kids are graduating wholly unpre- achieve at a higher level. need high, rigor- in schools of education. And wherever what you can do is make transparent ous standards, we they’re prepared, they will have to know pared for anything that follows. The eas- how underperforming the system is. MR. GERSTNER: I think there’s some- need great teach- how to support development, and how iest way to improve the graduation rate And then let the cities, let the states, thing very important to understand ers supported by to create cultures where you can sup- in America is to lower the standards. whoever’s going to be responsible, do here. Up until 1960-65, we had a captive And lots of people have done that, and Louis Gerstner Jr. high compensa- port development and help children the innovation, partner with the people labor force in our schools. Any bright, tion for the very grow. And how you embed the academic as long as we keep doing that, we’ll de- that Jim is talking about, and others. And ambitious woman who wanted a career best teachers. We need more time on learning and material in the activities lude ourselves into thinking we have a don’t try to micromanage from, much went into teaching or nursing. We had task, we need a longer school day, we that you create to support their develop- decent graduation rate, but in fact our less from D.C., but not even from a large this incredible group of people that we need a longer school year, and we need ment; and simultaneously improve aca- kids will be wholly unprepared. central school district. Give the people underpaid and they taught our kids. accountability and measurement in the demic learning, to the point that they In New York City, and this is highly the accountabilities, make it based on What have we done since then? We system so we can constantly adjust can meet the standards that we’re talk- controversial, we put a letter grade on progress. Don’t base it on what ZIP Code have to compete now to get teachers. what’s going on. That’s it, it’s all we ing about. And at the same time im- every school, based on progress. And you’re in because those kids may start at And what’s it like to be a teacher? Well, need. So, the problem isn’t that we prove the kind of non-academic learn- we do that to make the system transpar- a different level. Base it on progress. Please turn to page R10 don’t know what to do. Next possibility is, Well, maybe we didn’t work hard enough on it. Well, my God, have we worked hard enough on it. We have had millions of pages of re- ports, thousands of task forces, they just come out like the spring flowers. of the ideas is able to capture more of The typical math teacher in America We have every kind of report, and we’ve studied it to death. And by the way, along the way we’ve Global the income. And so how do we deal with this? Take Henry Ford’s great idea, the is the English teacher who has taught for 12 years and the geometry teacher who is 60, probably a woman or a per- Treasury had some great successes. We’ve had Continued from page R6 car. He needed lots of people to make son who went into teaching because Continued from page R8 some great heroes. People like Joel about it that we added it to our own the cars, sell the cars, service the cars. they wanted to avoid the draft. And ited. We could have a general argument Klein are heroes in our country. The priority here around an educated He became very wealthy, and he should they say, OK, English teacher, read the about the relative merits of supply-side woman who’s running the public- work force. have. And then, he created a million peo- geometry book over the summer. You and demand-side approaches, but for school system in Washington— And that translates into enacting, ple who made $10,000. are teaching geometry. She hates geom- the duration of the recession the es- through this education priority, stan- The bookend of that would be Bill etry. She does not know geometry and sence of what we mean is that the econ- MR. BUSSEY: Michelle Rhee. dards for assessing performance within the students think Gates and Microsoft. They also mass omy is demand-constrained: con- MR. GERSTNER: —is a great hero. The the schools, standards for student per- produced something, a computer plat- it is terrible. strained by how much demand there is. guy running the school system in New formance, clear accountabilities for per- form. Because it was fundamentally an So Lamar Alex- And for that purpose tax cuts that are fo- Orleans is a great hero today. We’ve had formance and funds for teaching excel- intangible, he created 10,000 people ander, Republican cused on middle-income families are al- lots of things that show that when we lence, pay for performance. who made a million dollars. Senator from Ten- For this group, a priority on math Both are equally important to soci- nessee, and I most certain to have a larger impact on do it right, it works, but systemically, and science education was critical. I ety. Both created wealth. That is our passed a bill. It is spending, and therefore on demand and the system continues to fail. lead a chemical company. The chemical problem. It is technology that has cre- now law. It is an au- the economy, than tax cuts that are fo- Change the Model industry employs 80,000 chemists and ated the global economy and global thorization that cused on those at the high end. MR. BUSSEY: How would you alter that engineers in the U.S. We struggle to get competitiveness. And in a democratic says, if you get out MR. PAULSON: I would just simply say look- system? the talent out of the universities that society, if middle-class incomes are go- of school and you ing forward I don’t think we are going to we need here in America. ing to continue to decline, you are not have majored in MR. GERSTNER: I’m going to say to the find tax increases helpful here. More gen- And many of the Ph.D. students com- going to have people buy into the pro- Charles Schumer math or science, president-elect that the fundamental ing out of the U.S. school system are for- the federal govern- erally the part of the tax code that con- gram. They are going to want some thing we have to do is change the gover- eign nationals. They have difficulty get- kind of change. ment will pay for a nine-month course cerned me the most in my time at Trea- nance model and accountability and ex- ting green cards. They go back to their So how do you create constructive to teach you how to teach. You have to sury was corporate taxation, because as I ecution model for education in this home countries. We have difficulty at- change? Barack Obama realizes that, of pass two tests. A knowledge test of the think about taxes, we obviously need country. And what I’m going to suggest tracting and retaining that talent. course, we have to trade in the global subject—math, biology, whatever— taxes. We need to be fiscally responsible. is that he convene the 50 governors, So a clear prior- world and it should be to our advan- and a pedagogical test. So I think about them and say now what and the first thing they do is they abol- ity on education. tage. We are an innovative society. And if you pass both those tests ev- percentage of GDP should be consumed ish the 16,000 school districts we have We believe that a But to make the changes, you need ery year, the federal government aug- by taxes? And then when you come to in the United States. Sixteen thousand partnership to help to cushion the blow. We need business ments your salary by $20,000 a year. that optimum amount, then say what school districts are what we’re trying deliver on that pri- to join in with us much more on cushion- And it is law. And guess who sup- form of taxes should you have to put the to cram this reform through. ority in the private ing the blow. There is no money for ported it? The AFT [American Federa- smallest drag on the economy? What Now, when I took over IBM I found I sector is worth our trade-adjustment assistance. None. tion of Teachers]. One of the two teach- form of taxes will give you the most jobs had 81 profit centers. Oh my God: How time, worth our in- Three hundred steelworkers lost their ers’ unions. Because they were willing, and growth? All the work that we did con- am I going to create change with 81 vestment and jobs in Syracuse. They have waited four for a significant increase in money, to cerned me that among the most expen- profit centers? How’d you like to create worth our engage- years and they are still waiting. get rid of their old shibboleth that a sive taxes we raised in terms of the im- change with 16,000 profit centers? ment. And we rec- Dealing with some of these short- gym teacher and a math teacher should These organizations stand in the way of ommend that the be paid the same. pact on the economy are corporate taxes. term tax changes, certainly I would be what we want to do. When I take a look at what is happening Stephanie Burns new President and for, and I think you will find most of We desperately need your help be- Now, the governors could decide, the new adminis- the Senate and the House, Democrats cause frankly, education is not a federal around the world and I look at how in the we’ll keep them as advisory, we can keep tration take this on in full force. and Republicans, being for cutting the issue right now. And it will not get the global marketplace others are taxing them as community support, but they We need a work force that is skilled short-term tax rate on investment and priority that it needs unless you really their corporations, that’s something else will not be involved in the fundamental in delivering trade talent that is 21st innovation, and that is probably a get involved. that gives me pause. direction of public education in Amer- century and beyond so that talent can very profitable area to pursue early MS. BURNS: We’ve got a heck of a lot of MR. SUMMERS: We have all been talking ica. Second, this group of governors will operate equipment, can do the kinds of next year. people retiring. And I am just wonder- about the deficit. We have got substantial then select 50 school districts, plus I’d things that are required in our facilities For the long term, the only real an- ing if there is not a way to engage needs for the financial sector. We have 50 say 20 major cities, so we got 70 school that are very different than what was swer is education. And if I had one ma- these retirees more, get them in the million people without health insurance. districts. Seventy instead of 16,000. needed 50 years ago, in terms of trades jor criticism of the business commu- classroom until the system catches up There are clear needs around health cov- They will within one year develop a and talent. nity, we do not hear from you enough with talented teachers who have ma- erage, there are clear needs around the national set of standards for math, sci- And then there was a fair amount of on education, which is our future. It is jored in their field, who are ade- energy sector. As you said, the financial ence, reading and social studies. discussion around immigration policies not just our future in terms of skilled quately paid. programs are going to cost a lot more. Twelve months after that they will de- and the need to open those policies to jobs, which is important. If we have the velop a national testing regime, so that bring foreign nationals into our school best education, we will stay No. 1 and SEN. SCHUMER: That is a very good idea. There are many people that feel that as there’ll be one day in America where ev- systems, as well as give companies the there will be lots of jobs that pay a lot The No. 1 thing that influences how well the unemployment rate has gone up that ery third, sixth, ninth and twelfth flexibility to move employees around and incomes will go up. a student does in school is their fami- we are going to need to substantially put grader will take a national test against the world, whether that be short-term If you want to say teachers should be lies and the values the families teach revenue into unemployment insurance. a national curriculum. or long-term assignments. held to higher standards, you are going them. Number two is quality, not quan- Schools in America are on four-day Third, these governors and mayors We are all bogged down in the bu- to have to pay them more. When you tity, of teachers. Bill Clinton was wrong. weeks. Would it be your view that a prior- will come together and develop a pro- reaucracy and the inability to bring say you are going to have tough stan- He said, reduce class size. The unions ity use of federal resources right now gram of national certification for teach- our work force to the countries that dards and we are going to have to fire like that. But I would much rather have, should be corporate rate reductions? ers. Teachers must have the capacity to we need them to work in on a very flex- you and here is a 3% raise, forget it. and I think the educators who study teach, they must prove that they can ible basis. If you were to really raise the sala- this would much rather have, a really MR. PAULSON: I didn’t say that. I did say, teach, they must be tested that they can ries and tie it to standards, you could good teacher of 23 kids than a mediocre though, when we were talking about teach, and then we’re going to put a pro- The Senator’s Response have a grand compromise and really teacher of 18. taxes, I think the right way to look at this gram in to pay the best teachers incredi- help improve our education. is to say, how big should taxes be? How CHARLES SCHUMER: What has created MR. SEIB: My perception here is of ships bly higher salaries—$40,000 to And that would be my plea to you be- much can our economy support? Because the change in this election is declining passing in the night. This morning the $50,000 more than they currently can cause education in this campaign did at some level no matter where you are on middle-class incomes. The average discussion of education started with make for the very best teachers. not get the priority it deserves for the the spectrum, you are going to say that American, the median, from 2001 to someone saying, ‘I wish the new admin- And finally, we’re going to then al- future of America. 2007 went down from $48,000 to istration would involve us in improving the taxation is too much of a burden. And low all the school systems in the U.S. to $46,000. That is before the recession ALAN MURRAY [deputy managing editor education.’ You come and you say, you, whenever you get to whatever that level innovate, to go out and figure out how and all the economic problems. of The Wall Street Journal]: Senator, fed- in the business community, need to get is, then I think you need to say what is the to get it done. Let those principals and The country was prosperous, but in eral dollars in education are a fairly more involved in improving education. right form of taxes. The only point I made teachers in those schools figure out all this global economy that is technologi- small part of the pie. There was a sugges- Why is this not happening? was I do believe that since fiscal disci- the possible ways that they think they cally driven, the prosperity does not tion that we take what there is in federal pline is going to be so important, and we can meet those standards, and stop SEN. SCHUMER: Well, all I can tell you is, I trickle its way down the way it used to. dollars and devote that to teacher excel- are all going to have more taxes than we choking them with regulations and re- see lots of businesses. And they come in lence. Would you be in favor of that? quirements. And so, we will do what we That is because probably we deal in in- and lobby on everything. And rare is would like, we need to look at not only the would do if we were trying to create a tangibles. The same kind of wealth is SEN. SCHUMER: I would. But I would be the business that comes in and lobbies level but the composition of those taxes. I change in an organization. We would created and good ideas matter as for greatly increasing the pot. Schools on education. And here is what we re- want to make sure that our companies set very clear goals, and then we would much as they ever did but the creator now are funded by property taxes. ally need. y have what it takes to be competitive. y BLACK P2JW32902C-0-R00900-1--------XA 6065788
  • 10. P2JW32902D-0-R01000-1--------XA 11/24/2008 AZ,EE,MW,SC,SW,WE C M Y K Composite P2JW32902D-0-R01000-1--------XA R10 Monday, November 24, 2008 THE WALL STREET JOURNAL. uitable share. So, I have middle- we’re going to be able to do this America. We’re not a single- prove the data, the resources class schools that find it quite for nothing upfront, it’s not go- payer system like the UK, which that you’ve got, the informa- easy for every vacancy to attract ing to happen. That was the can say, you hospitals, you have tion and ultimately the knowl- Education lots and lots of talent to those schools. And we have some of the best middle-class schools in Health point I was making earlier. We have to really put our monies where our mouth is. If we be- to put this in because we’re pay- ing your bills. But we’re America. We’re go- edge distribution that is re- quired to develop that very best product. You begin to find ways Continued from page R9 the country in New York. Continued from page R7 lieve that by investing in preven- ing to find our solution. We need to simplify the administrative first of all, you go to a teachers col- On the other hand, I’ve got MR. MURRAY: How much is it go- tion and wellness we will ulti- to work with appropriate bodies activities. lege, which are the backwaters of high-poverty schools where each ing to cost and where is the mately save money, increase pro- to develop interoperable stan- You begin to create some- a collegiate place. They are awful. year I’m sending in 15-20 new money going to come from? ductivity, increase jobs, im- dards, then give incentives to thing this country needs. It is out- If you don’t get into any other people, and it starts this down- prove the economy, then the providers so they can put the IT rageous in this country that we SEN. BAUCUS: Orders of magni- things, you go to the teachers col- ward cycle that Lou is describing, Congressional Budget Office systems in. do not have a safety reporting tude less than that. We’re going lege, where they teach you teach- and that’s another reason people ought to be able to find a way to board that is similar to what hap- to have to make some upfront in- MR. MURRAY: And that is one of ing math. You don’t get math from leave, because they find it demor- support that. pens in airline traffic. We crash vestment here if this is going to the priorities of this group. Gov- the math department in the uni- alizing. People want to be part of the equivalent of a 747 every day work. MR. MURRAY: Questions, com- ernment sets standards for in- versity, you get teachers math. a successful culture. and a half in this country from ments? Anyone? teroperability. Denis Cortese. And they don’t get the support, MR. MURRAY: Which will cost you health-care mistakes and errors. they don’t get the kind of training MR. COMER: I want to make one money in the short term, but save PAUL DIAZ [president and CEO of MR. CORTESE: If we say the vision And we don’t report any of that that Dr. Comer’s talking about. more point about when we start you money in the long term. Kindred Healthcare Inc.]: I just of what we’re trying to create is in any central location where sys- And then what do they look for- trying to weed out the unsuccess- want to underscore something: value—better outcomes, better tems engineers analyze it, try to ful teachers: I don’t think we SEN. BAUCUS: Yes, that’s the goal, ward to? They look forward to, on the importance of IT as a means safety, better service with the understand where the common should wait until they’re teach- and we’re going to have an awful average, 20 years later they’re go- by which to reduce costs, im- long-term cost in mind—then faults are, and deliver it back out lot of oversight here and aggres- ing to make $46,500 in the United ing. We should be eliminating prove access and measure the the individuals who are provid- so people can act on that. sively do the best we can to make States. And that’s the good news. people who aren’t good teachers, value. But the importance of it, ing that care will have to do These tools that we’re talking sure we get those savings. The Because the bad news is, they’re or don’t have the potential to be as we talked about, is to link it to some fundamental changes in about will fundamentally start figure you used is— going to make $46,500 regardless good teachers, long before they the payment reforms, because the way they do business. They’ll to be demanded by the providers of whether they’re good or bad, ever get to the school. I’ve al- MR. MURRAY: Do you want to give otherwise it won’t come to- have to start thinking about how and the patients when you re- because everybody’s going to get ways said that about a third of us a number or you’re not there gether and we won’t be able to ex- do we engineer. Where’s the lean quire a pay for value and you re- the same. So which half do you the people are prepared to be yet? ecute on it. And it’s something management? Where are the sys- quire the patient to focus on think leaves in that first five teachers; about a third could, tem engineers that you will be- value also, which is the behavior SEN. BAUCUS: No. that touches on all five of the years? The half that has choices. with better training, be teachers; gin to bring into the system to issue. You require it on both things that we talked about. And so, we have got to start but about a third should sell used MR. KINDLER: I just want to under- help provide that better product sides, so this value is a very pow- what Dr. Comer said, to change cars, maybe, or something. But score the point Chairman Bau- SEN. BAUCUS: Everybody talks that we’re talking about? erful concept I think that busi- the way we train teachers. We’ve they just shouldn’t get in there in cus just made. We have to face about health IT. We all know we You will then instantly start nesspeople intrinsically know, got to make the profession one the first place, because they the music on this. If we try to de- need it. It hasn’t happened. to rely on information technol- and we need to infuse that in that’s respected again. We’ve got don’t relate to children well. y lude ourselves that somehow Why? Partly because we’re ogy. It becomes a tool to im- health care. y to pay them, the best ones, a lot more money. And then we’ve got to hold them accountable so that the teachers that are not perform- ing get moved out of the system. MR. KLEIN: The countries that suc- ceed, they tend to draw their teachers from the top quarter, top third of their graduating col- lege classes. These are people who have been academically suc- cessful, who believe in assess- ment, because they’ve lived un- der it and it’s served them well. In the United States, we draw teachers from the bottom quar- ter of our college graduates, and our kids in high-poverty neigh- borhoods get the bottom quar- ter of the bottom quarter. And all the incentives are mis- aligned. You wait for the 20 years, because then it’s actually when it starts to get good, because you’re getting across-the-board pay hikes. So whenever I pay a three- year, 10%, across-the-board pay hike, the people who are locked into the system are getting $8,000 and $10,000 and $12,000 raises, all rolled up in a defined benefit, which means that I’m not getting any return on that money. Whereas the people I’m trying to attract, the young kids who I want to stay in the earliest years, they’re getting the same 10% on $40,000 or $38,000. So, in effect, we’re rewarding the wrong things. That’s why I think if the federal government were to come in, tied to a real ac- countability system and said, “This is what we want to reward in teacher performance, we’ll use federal dollars, and if you go to our most challenging schools, it’ll be 1.5X; and if you do it in math and science, it’ll be 2X.” And if it were to use the federal billions in a way that started to create excellence, you’d attract different people, they would be incentivized in dif- ferent ways, and you would begin to create a culture of excellence. MR. BUSSEY: You mentioned Michelle Rhee. She’s the chancel- lor of the Washington, D.C., school system. And she has ap- proached the union with an idea of virtually doubling the pay of those excellent teachers, so long as the union was more willing to allow for firing of those teachers who fell below standards. And the union reaction to that was, “Look, you know, is it really fair to judge teachers who are performing poorly without considering the lack of resources that the school system provides them? And the lack of training?” So, there was immediate resistance there, and a kind of a regression to the status quo. Wouldn’t you run into that same problem with a broader—? MR. KLEIN: Sure, sure. But in the end, the same two teachers with the same kid get entirely differ- ent results. It’s no different at IBM, it’s no different at Yale, it’s no different in the New York City public-school system. I will show you the same kids in two different schools, the very same kids, getting entirely differ- ent outcomes. The key feature of that is the quality of the teach- ing, the engagement with the stu- dents, the personalization, all of those things. And what we need to do is start rewarding that. So what Lou says, which half do you think is leaving: We want the peo- ple who are hitting the ball out of the park to play for our team. MR. GERSTNER: We’ve got to do it. Thirty-eight percent of middle- school students in the United States, in urban settings, are taught a subject by a teacher that hasn’t even minored in the subject, let alone majored in the subject. Can you imagine? The American people go to an air- port, and over the PA system comes an announcement, “Well, we don’t have any qualified pi- lots today, but we found these guys out here who have agreed to fly the airplane.” That’s what we do to our kids every day. MR. KLEIN: And make no mistake, that’s directly correlated to pov- erty. The kids with the greatest needs don’t remotely get their eq- Composite CYAN MAGENTA YELLOW BLACK P2JW32902D-0-R01000-1--------XA 6065789