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Moderator:
Amy Resnick, Editor-in-Chief, The Bond Buyer

President Obama's massive stimulus package rolled out a number of important measures intended to reinvigorate the struggling U.S. economy. One provision created the Build America Bonds program (BAB), allowing state and local governments to sell an unlimited amount of taxable Build America Bonds in 2009 and 2010.

The program offers municipalities a 35 percent direct subsidy from the federal government on the sale of these bonds, creating a potential windfall that can shore up strained local budgets. This session came at a moment when state and local governments are still poring over the terms of BABs to assess their overall benefits, feasibility and implementation.

Scott Minerd of Guggenheim Partners and Kathleen Brown of Goldman Sachs explained the value of these vehicles from an investor perspective: BABs allow investors the opportunity to diversify their investments into a very stable asset class that offers a much more secure and profitable return than current options in corporate debt. Tax credits further enhance their appeal. Since these bonds are not liquid, they are primarily meant to be long-term investments, something that is particularly attractive in an unstable economy.

From the state and municipal perspective, there are a number of factors to consider. As moderator Amy Resnick of The Bond Buyer pointed out, the history of this program goes back a painfully short two and a half weeks. Because they have no track record and the possible unintended consequences are unknown, Nancy Kopp, state treasurer of Maryland, noted that issuing these bonds will prove to be a major undertaking for many governments. However, the obvious reason still resonates: The 35% refundable credit frees up significant capacity for the issuer.

Nevada's state treasurer, Kate Marshall, brought up the question of revenues. As state and local governments are beginning to analyze the benefits of BABs, they are forced to assess their revenue streams and project ahead. Affordability is an issue for states such as Nevada, where a great deal of revenue came from property taxes but the real estate market is still suffering. Furthermore, the prescribed timeline indicates that these bonds must be issued within the next two years, but many states can't act without voter approval, thereby adding to the hurdles.

From both sides of the equation, the panelists ultimately conceded that each bond is different and it is vital to understand the various tax credits and terms. They urged state and local governments to undertake careful analysis before launching their own programs.

Moderator:
Michael Milken, Chairman, Milken Institute

It is no surprise that states are suffering as a result of the current economic downturn. California, for example, is straining under a $42 billion deficit. Yet according to three governors, the economic crisis may have an upside: From crisis comes the resolve to tackle long-ignored problems.

All three governors have made education, infrastructure and the environment priorities in their respective states, moderator Michael Milken said. Pennsylvania Gov. Edward Rendell said the United States is "in a race to develop alternative forms of energy" and isn't doing well in the international competition. Rendell is optimistic, however, because "the president gets it and most of Congress gets it." The U.S. simply needs to do more.

Utah Gov. Jon Huntsman Jr. said his constituents' priorities are health care and increasing energy security. These priorities do not vary by party. "They don't care if you're red or blue; they just want you to get it done." To meet these needs, Utah is preparing to unveil a personalized health-care initiative in the next month or two while also working to create "the first natural gas corridor." This highway would stretch from Utah to California and would be reserved for vehicles that run on natural gas.

In the session's most comedic moment, Huntsman joked, "If you could tap the wind coming out of the legislative sessions, you'd have energy for years."

California Gov. Arnold Schwarzenegger called the crisis an opportunity to help reform that state′s budget system. For six decades, California lacked a rainy-day fund, so in good times the state is flush and in hard times the state is broke. "It is time to fix the budget system, which is a broken system," Schwarzenegger said.

Each state's individual difficulties aside, there have been partnerships across state and party lines to drive progress toward common goals. Schwarzenegger and Rendell have joined forces with New York Mayor Mike Bloomberg to push the federal government to increase the money allocated for upgrading the nation′s infrastructure.

The trio self-selected to include a Republican, a Democrat and an independent to highlight that "infrastructure is the most bipartisan of ideas," Rendell said. Added Schwarzenegger, "There is no reason that the U.S. should have a train system that is 100 years old while in China their train goes 250 or 300 mph."

Moderator:
Nancy McFadden, Senior Vice President, Public Affairs, PG&E Corp.

A new relationship between government and business appears to be shifting business's center of gravity from New York City to Washington, D.C. The big questions are whether this shift is temporary; whether Congress can proceed in a bipartisan manner; and whether President Obama is trying to solve too many problems at once when a lot of things will fix themselves if left alone.

When those asking the questions are men like John Ensign, Thomas "Mack" McLarty and Rupert Murdoch, respectively, people take notice.

The government is clearly more active and is directly engaging business, and McLarty said Obama had no choice but to act like Franklin D. Roosevelt to stimulate the economy. The issues are maintaining fiscal responsibility and addressing how these government actions will eventually ensure a strong America.

Murdoch said: "There is much hyperactivity going on right now. The government′s ad-hoc approach to banking during the financial crisis is introducing permanent programs with little forethought and some risk of the Europeanization of our (American) economy. As we come out of this, we have to be careful not to over-regulate."

Ensign was more direct: The federal government caused many of today′s problems when it ignored human nature in pursuit of homeownership. The government is not capable of spending the country out of the downturn, he said. The solutions rests with small businesses and incentives to create jobs. It also requires sound business policies like tax structures that return capital to the U.S. so it is available to build America, Ensign said.

Bipartisanship is critical to success, the panel agreed. Only through bipartisan effort can Congress craft good legislation on complex, important issues like health care, education, climate change and energy. Congress also needs businesses and lobbyists to help sort through the abundance of good ideas.

"In this regard it remains business as usual in Washington, D.C.," Norman Brownstein said. "It takes a sponsor to champion the issue, preferably on both sides of the aisle, and appears best to start with the Senate, where the processes are more deliberate."

Moderator:
Kevin Klowden, Managing Economist, Milken Institute

The federal stimulus package will fund infrastructure and create an estimated 378,000 jobs, but it doesn't go far enough to meet the needs of modernization, panelists agreed. A significant gap exists between the number of projects needed and the amount of money available.

Infrastructure spending has a multiplier effect of $1.80 for every $1 the government spends, Doug Elmendorf said. A recent Congressional Budget Office report determined that, while additional spending of tens of billions of dollars could be justified, the returns on project investment varied widely. For that reason, Elmendorf said it is important to pick projects carefully and apply cost-benefit analysis.

The panel focused on several areas where the current infrastructure funding will not keep up with demand. There are infrastructure needs that are highly visible, such as highways and railways, and needs that emerge from catastrophe, such as Minnesota′s bridge collapse and New Orleans′ failed levees. Nancy Kopp argued for prioritizing sewers, clean water systems and other water infrastructure. Over the next 30 years, 50 percent of water infrastructure will need replacing, she said.

Norman Mineta pointed to the underfunding of the highway trust fund through a gas tax that hasn′t increased since 1993. He predicts alternative fuels and electric vehicles will further decrease money for federal highways.

Too often funding of infrastructure is uncertain. Martin Koffel said it is important to develop infrastructure spending for a boom or bust economy. He favored developing effective public-private partnerships in which private organizations aren′t just buying outmoded infrastructure but are able to invest in infrastructure projects that can be improved.

Some panelists suggested ways to improve the allocation of funding. Mineta said discretionary programs are laden with earmarks, prohibiting progress. Kinton said it is important to get creative in securing money through user fees and the congressional process.

Elmendorf agreed that user fees are a logical solution. Water fees and congestion pricing would effectively reduce consumption, increase efficiency and generate revenue, he said.

Thomas Kinton cited the passenger facility fees that Boston′s Logan International Airport charges passengers who travel through that airport. The $4.50 fee has no impact on budgets but generates significant revenue for airport improvement projects.

Moderator:
Lowell Milken, Chairman and Co-Founder, Milken Family Foundation; Co-Founder, Knowledge Universe Education; Founder, Teacher Advancement Program (TAP)

The American Recovery and Reinvestment Act of 2009 has targeted $77 billion for the U.S. K-12 education system, funding that is to be invested quickly, productively and transparently. Such a massive injection holds the potential to fund a generation of education reforms. But it could also fund many of the same programs that have produced little improvement in public education over the past several decades. Some of America's leading education experts came together to identify priorities for education spending, define strategies that could improve student performance and close the minority achievement gap, and suggest practical reforms that will make U.S. education more competitive with other nations.

Moderator:
Tom Unterman, Managing Partner, Rustic Canyon Partners

You know California is in trouble when state Treasurer Bill Lockyer gives out his home number and asks anyone with ideas to call him.

Lockyer said California's operating shortfall is projected to grow dramatically in coming years, and outcomes from the May 19 election could increase the deficit by $6 billion. To make matters worse, the state routinely borrows in the summer to meet short-term cash needs. This summer it needs $13 billion to 16 billion, but financial institutions and banks the state used to deal with either don't exist anymore or can't lend the money. Because Lockyer sees no possibility of a tax increase, the only apparent solution is to cut the budget.

California has been at the forefront of the economic downturn in many ways, Kevin Klowden said. The state was one of the first to feel the downturn; it's among the national leaders of property devaluation and unemployment; it has one of the lowest credit ratings; and its economy is closely tied to the global economy. Furthermore, according to Lockyer, California has been subsidizing other states by sending more money to Washington, D.C., than it gets back.

The state faces particular challenges because so much of its budget is determined by voters, Klowden said. Such direct democracy is both a blessing and a curse because it's hard for voters to authorize giving up things, he said.

Richard Hartnack spoke for businesses when he said it's hard to make the argument to open locations in California because it's more expensive on every possible level. Shareholders, he said, don′t care about sunshine and good weather.

Dale Bonner emphasized, however, that California is not racing to the bottom for certain types of jobs. He argued that California should draw on its strengths, including its universities, national research centers and ability to attract innovators and entrepreneurs.

Bonner stressed that there must be an interagency process to ensure that the state maximizes the stimulus money′s impact. He said agencies need to align strategies so that one project doesn′t slow down another, to screen for "shovel-ready" projects, and to understand the best distribution of money across the state. It's important, he said, to focus not just on where the money is going but on how it's being spent.

The stimulus money is preventing things from getting worse, Klowden said, but much of what the state needs to do must come from within. Bonner, at least, was cautiously optimistic that California will use the current crisis as an opportunity.

Moderator:
Frank Luntz, President, The Word Doctors.com

Our annual Tuesday night political debate featured prominent voices left, right and center discussing their prescriptions for today's most pressing policy challenges — from the economy to health-care reform.

Moderator:
Marcia Stepanek, Founding Editor-in-Chief and President, News and Information, Contribute Media

"Organized minorities are always going to be more powerful than disorganized majorities," panelist Andrew Rasiej said. That makes social media an important path to power.

Because of social media, minority groups and others are represented in a more comprehensive way, panelists said. The Internet generally — and social media specifically — has become a transformative force in how everything in the world is done, including and especially politics.

As the panelists reflected on the use of social media during the 2008 presidential campaign, Jason Calacanis pointed out that Barack Obama was the candidate best -suited to use the medium because of his willingness to interact with and engage all people. Rasiej noted that Obama used the word "we" 10 times more frequently than the other candidates in both the primary and general elections and used the word in a way that resonated with the public.

Mindy Finn suggested that the Republicans lost not because of the Internet per se but because they were perceived as being out of touch. She added that people today are most interested in collaborative and socially engaging platforms online.

The audience was shown two viral videos from the 2008 presidential campaign. Rasiej introduced the term "videocracy," referring to the new wave of individuals creating online videos to convey their unique message to the world. In the next few years, he said, online videos will become a more important medium of communication, even shrinking the space available for pure text.

Scott Goodstein said companies and political campaigns can no longer simply put out a press release and launch ads on radio and television and then assume they are finished. Engagement with people via social media is an essential component of any communications strategy, he said. Goodstein, who worked on the Obama campaign, spent lots time answering questions from individuals and responding to friend requests from Obama supporters on social networking sites.

In addition to large presidential campaigns, social media has the potential to provide a successful platform for other areas. With regards to smaller, local campaigns, the panelists agreed that social media can empower groups that otherwise would be at a disadvantage. Finn said private-sector companies can learn from the experience of successful political campaigns and invest the resources necessary to use social media effectively. Most companies have been slow to adopt social media and actively use online tools, Finn said.

Although social media has become a lucrative venture for many, Rasiej pointed out that Facebook founder Mark Zuckerberg sees his social networking site as a tool to create a new social dynamic, facilitating collaboration and relationships.

Moderator:
Margaret Anderson, Chief Operating Officer, FasterCures / The Center for Accelerating Medical Solutions

Panelists from across the health-care industry favor universal access to care for all Americans, and decreasing costs will be big part of the equation.

The experts discussed the current and future impact of universal coverage and decreasing health-care costs by changing the delivery and prevention systems for chronic care. All panelists — representing insurance companies, advocacy groups and academics — supported universal coverage for the currently 46 million uninsured Americans.

Kenneth Thorpe of the Partnership to Fight Chronic Disease said the average cost of coverage for a family is about $12,000. The fundamental challenge of requiring everyone to have health insurance is affordability, he said. The estimated cost of covering the uninsured for the next 10 years is $1.5 trillion to $1.8 trillion.

Private insurance companies generally are not in favor of a public plan for the uninsured. Samuel Nussbaum of Wellpoint Inc. said such a plan likely would be based on current Medicare reimbursement rates, which are 20 percent less than those of private insurance. Today, the cost of Medicare's underpayments is passed on through private insurance.

Nussbaum, who leads one of the largest insurance companies at more than 35 million members, said 5 percent of Wellpoint′s members are responsible for 55 percent of reimbursement costs, so addressing those high-risk members is key to lowering costs. Nussbaum said the focus should be on prevention and wellness, better management of chronic care and promoting evidence-based medicine.

Wellpoint has achieved cost reductions by actively engaging consumers at home and working to prevent chronic illnesses, Nussbaum said. This includes encouraging inexpensive or free access to preventive measures such as blood pressure drugs and glucose testing for diabetes.

Commenting on high readmission rates of Medicare patients and the inefficiencies of the health-care system, Nussbaum said, "(Currently) someone′s inefficiencies are someone else's revenues." Addressing those issues requires aligning payments with outcome and changing the incentives of the health-care system, he said.

Chris Singer of the Pharmaceutical Research and Manufacturers of America said employers — large ones especially — should get behind the effort to reduce chronic diseases, which account for the bulk of health-care costs. The indirect costs of chronic illnesses to employers dwarf the direct costs to the health-care system, Singer said. These savings flow directly to the bottom line of the company, which benefits from increased worker productivity.

Moderator:
William Bennett, Former U.S. Secretary of Education; Author, America: The Last Best Hope

Obama Derangement Syndrome is a real thing. Just ask moderator William Bennett, author of America: The Last Best Hope, or any of the other panelists assembled to discuss the future of the Republican Party.

Kathryn Lopez of the National Review Online called it "Obama Chaos Syndrome." Not only do Obama's personal talent and charisma obscure his liberal agenda, but he also has enacted so many liberal policies that the conservatives have not yet figured out what to focus on.

Byron York of the Washington Examiner said some of Obama's critics had discredited themselves by calling him a fascist and a socialist and misusing these terms.

Political analyst Amy Holmes blamed conservatives for being "hyper respectful of the president" and the media for "over-cheerleading the president." But Jonah Goldberg of the Los Angeles Times saw a clear rationale for this. Obama "was the clear winner, which gives him a legitimacy that Bush and Clinton didn't have with their opposition."

Andrew Breitbart of Breitbart.com and the Washington Times saw a larger liberal conspiracy at work. "The left declared war on George Bush and marketed Obama as the magic pill." Then once in office, they put conservatives on the defensive by going after Rush Limbaugh.

So what is the GOP to do? Holmes stressed the need for Republicans "to nurture new and diverse voices." Lopez suggested the party "look at the state level and look in business" to find new faces.

Beyond people, are there issues the GOP should focus on? Asked Bennett, "Do you double down on the economy?" "Yes," said York, "that is the only bet." "If the Republicans can't win back the economy issue, they might as well be a Star Trek convention or a Civil War reenactment group," Goldberg said.

There was division among the panelists as to where to place to the blame for the GOP's poor electoral results in 2006 and 2008. York blamed the Republicans themselves. Referencing the Iraq War and the poor response to Hurricane Katrina, he predicted that "the Republican Party made some enormous mistakes and they may have to pay for them for a while."

But Breinhart blamed liberals. "They control ABC, NBC, CBS, Oprah and Ellen . . . They turned Sarah Palin into the next George Bush . . . They can demonize anyone."

Speaker:
Frank Luntz, President, The Word Doctors.com

The single best political ad of 2008, according to Frank Luntz, president of The Word Doctors.com, was an Obama campaign ad offering voters the possibility of changing the world. "You′re 19 years old, you can′t even save coins, and Obama is telling you that you can change the planet," Luntz says. The ad is "not a promise, but an offer. … Promises are meant to be broken."

Language is about building an emotional connection. Presidents Clinton and Obama share this indispensible skill. Obama is going as far as using behavioral scientists to help him craft his message.

At the other end of the spectrum, Republican candidate Rudy Giuliani aired an ad that used the word "results" three times in six seconds. The message was clear: The Democrats offered change; the Republicans offered results. Luntz, author of Words That Work: It′s Not What You Say, It′s What People Hear and a leading consultant to political candidates and Fortune 100 companies, advises political and business leaders to retain their authenticity.

"If it′s not real to that state, that city, or that product, then don′t do it," he said. In a tough economic environment, companies must realize that "you don′t sell the product, you sell the experience." The experience is emotional, not purely intellectual. Business is becoming increasingly unpopular, and business leaders need to become much more personal in their approach, he said.

Language is key. Luntz examined several instances in which changing the language changed public perception. Most people do not support welfare, for example, but they support assistance to the poor. "We don′t believe in the program, but we believe in the mission," Luntz said.

The same is true of "school vouchers" vs. "opportunity scholarships" and "development" vs. "revitalization." Scholarships are a "ticket to the future," but a voucher is nothing more than a piece of paper, he said. In the same vein, "development" sounds mechanical and impersonal, but "revitalization" is about bringing back life to a community, Luntz said.

To regain credibility, business leaders should change their language and their approach. Americans are demanding accountability, responsibility and efficiency. If corporate America needs further affirmation that change is needed, its leaders should reflect on a recent survey that found 23 percent of Americans believe socialism is a better economic system than capitalism, while just 53 percent chose capitalism.

Moving forward, the goal should be to individualize, personalize and humanize one′s message. President Clinton was a master of this talent, Luntz said. He regularly got up from his chair, looked a voter straight in the eyes, bit his lower lip, and proved that he felt your pain.