s 2009 Dow Jones & Company, All Rights Reserved. THE WALL STREET JOURNAL. Monday, November 23, 2009 R1

I L L U S T R A T I O N S B Y P E T E R & M A R I A H O E Y

HealthCare

TOP PRIORITY:REFORM HEALTH-PAYMENT SYSTEM

R6

Energy&TheEnvironment

TOP PRIORITY:DIVERSIFY U.S. ENERGY

R4

TheU.S. Economy&Finance

TOP PRIORITY:SUSTAINABLE JOB CREATION

R8

How toRebuildGlobal Prosperity

PLUS: Interviews withRahmEmanuel on the president’s agenda,RupertMurdoch, Carlos SlimHelú andRatanN. Tata on the economy,

andPaul Ryan andAndy Stern on business and labor,R10&R11

AnEducatedWork Force

TOP PRIORITY:EDUCATION AS A NATIONAL PRIORITY

R9

For the second year, TheWall Street Journal invited topCEOsand policymakers to come upwith ideas for dealing with

four of themost crucial issues confronting the world today.Inside, you’ll find the debates they had, the argumentstheymade—andwhat they agreed needs to be done.

The journal reportCEO Council

A year ago, when The Wall StreetJournal’s CEO Council gatheredin Washington, the world was on

the precipice of the worst economicdownturn since World War II. The assem-bled global CEOs called on then Presi-dent-elect Obama to enact a massive fis-cal stimulus. And they got their wish—ifnot as carefully targeted as some wouldhave liked.

This year, with the economy showinghints of recovery, the CEOs had some-thing else on their minds—concernsabout too much government.

During a day and a half of delibera-tions, the group adopted as their top pri-ority a call for “sustainable job creation.”But they made clear that they weren’ttalking about public employment, a jobstax credit or any other sort of quick fix.Rather, they called on the White House toevaluate all its regulatory policies—in-cluding the sweeping changes being con-templated in health, finance, energy andtaxes—with an eye on how those changeswould affect private-sector employment.The implication was that many of thosepolicies, as now envisioned, could dis-courage job growth.

The CEOs were visited by a parade oftop Obama administration officials, all ofwhom vowed that they were listening tobusiness concerns. Yet in their questionsand comments, as well as in their hallwayconversations, the CEOs expressed con-tinued concern that the current U.S. gov-ernment, more than any in recent de-cades, was not attuned to the needs ofthe businesses that create the lion’sshare of employment in this country.

The purpose of the CEO Council is toencourage dialogue between the privateand public sectors. We urged the nearly100 CEOs who participated to put asidethe narrow concerns of their particularbusinesses and use their knowledge andexperience to suggest actions that wouldensure sustained and widely shared pros-perity.

The results of that exercise can befound in this Journal Report. We hope itwill help close the gap between businessand government, and move us all towardshared goals.

—Alan Murray

R2 Monday, November 23, 2009 THE WALL STREET JOURNAL.

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LAST WEEK, THE WALL STREET JOURNAL assembled nearly 100CEOs of large companies for a day and a half to discuss the pol-icy choices facing the nation, and the effects those choices mayhave on business and the economy.The CEOs divided into four task forces and debated priorities

in the areas of health care, energy and the environment, financeand the U.S. economy, and education. Using an electronic ranking

system devised by the Journal, theychose five top priorities in eachsubject area.Each task force then reported its

priorities back to the full council. Atthe end of the conference, the chief

executives revised and then ranked all the priorities from thefour task forces, in order of their relative urgency and impor-tance.The CEOs who attended the session were from a diverse range

of industries; as a group, they employ more than six million peo-ple and represent roughly $2 trillion in market capitalization.That should give their views on these issues some added weightin the months ahead.Here’s a look at their top five priorities.

1 SUSTAINABLE JOB CREATIONGovernment should focus on poli-

cies that stimulate sustainable jobgrowth by identifying national competi-tive strengths, encouraging innovation,reforming tax policy and avoiding regula-tory disincentives. Policies should em-phasize small and medium-sized enter-prises and ensure the flow of credit tobusiness. Government should avoidshort-term efforts to create jobs that areunsustainable.

2 EDUCATION IS A TOP NATIONALPRIORITY

Education is an urgent nationalpriority—well ahead of health care, cli-mate change and financial regulatory re-form—and government and business pol-icies need to reflect that. If we don’taddress this, we endanger our children,

economy, businesses and national secu-rity.

3 TAX REFORMChange the tax code, in revenue-

neutral fashion, to encourage sav-ings and investment and discourage con-sumption and debt over the long term.

4 DIVERSIFY U.S. ENERGY SUPPLYThe U.S. should encourage all

domestic energy supplies, includingcoal, expanded access to oil and gas fromboth conventional and unconventionalsources, nuclear power and all renew-ables. Government shouldn’t pick win-ners; let the markets decide.

5 REFORM MEDICAL MALPRACTICECap awards and legal fees, and

create health courts.

The CEOs’ Top Priorities CEO COUNCIL MEMBERS(Chief executives except asnoted)

JOSÉ MARIA ALAPONT Federal-Mogul Corp.

MUKESH D. AMBANI Chairmanand Managing Director,Reliance Industries Ltd.

GEORGE BARRETT CardinalHealth Inc.

JEFFREY L. BEWKESTime Warner Inc.

LEON BLACK Founding Partner,Apollo Management

ANGELA F. BRALY WellPoint Inc.DAVID R. BRENNAN AstraZeneca

PLCGARY C. BUTLER Automatic Data

Processing Inc.DAVID R. CARLUCCI IMS HealthJOHN T. CHAMBERS

Cisco Systems Inc.MORRIS CHANG Taiwan

SemiconductorManufacturing Co.

KENNETH I. CHENAULTAmerican Express Co.

LOUIS R. CHÊNEVERT UnitedTechnologies Corp.

RICHARD T. CLARK Merck & Co.JEFF CLARKE TravelportMARCELO CLAURE Brightstar Corp.WILLIAM COBB J.M. Smith Corp.FULVIO CONTI Enel SpADELOS M. COSGROVE Cleveland

ClinicDAVID CRANE NRG Energy Inc.PHILIPPE P. DAUMAN Viacom Inc.PAUL J. DIAZ Kindred

Healthcare Inc.DANIEL R. DIMICCO Nucor Corp.CRAIG S. DONOHUE

CME Group Inc.RICHARD W. DREILING Dollar

General Corp.FRANCISCO D’SOUZA Cognizant

Technology SolutionsBRIAN J. DUNN Best Buy Co.BRIAN DUPERREAULT Marsh &

McLennan Cos.LYNN L. ELSENHANS Sunoco Inc.THOMAS F. FARRELL II Dominion

ResourcesROGER W. FERGUSON JR.

TIAA-CREFJAY S. FISHMAN Travelers Cos.DOUGLAS L. FOSHEE El Paso Corp.ERIC J. FOSS Pepsi Bottling

Group Inc.

RUSSELL P. FRADIN HewittAssociates

LEW FRANKFORT Coach Inc.JACK A. FUSCO Calpine Corp.CARLOS GHOSN Renault SA, Nissan

Motor Co.THOMAS H. GLOCER Thomson

Reuters PLCSENAPATHY GOPALAKRISHNAN

Infosys Technologies Ltd.WILLIAM D. GREEN AccentureROBERT GREIFELD Nasdaq OMX

Group Inc.JAMES W. GRIFFITH Timken Co.JAMES HAGEDORN Scotts

Miracle-Gro Co.LEWIS HAY III FPL Group Inc.PAUL HERMELIN Cap Gemini SALES HINTON Dow Jones & Co.JOSEPH M. HOGAN ABB Ltd.GLENN HUTCHINS Co-CEO,

Silver LakeMICHAEL J. JACKSON

AutoNationWILLIAM D. JOHNSON Progress

Energy Inc.HUBERT JOLY CarlsonGAIL P. KELLY Westpac Banking

Corp.RICHARD C. KELLY Xcel Energy Inc.WARD M. KLEIN Energizer

Holdings Inc.KLAUS KLEINFELD Alcoa Inc.NEIL KURTZ Golden LivingHOWARD L. LANCE Harris Corp.DONALD H. LAYTON E*Trade

Financial Corp.ANDREW N. LIVERIS

Dow Chemical Co.GARY W. LOVEMAN Harrah’s

Entertainment Inc.PETER S. LOWY Group Managing

Director, Westfield GroupGREGORY T. LUCIER

Life Technologies Corp.STEPHEN P. MACMILLAN Stryker

Corp.KATHRYN V. MARINELLO Ceridian

Corp.J.W. MARRIOTT JR. Marriott

International Inc.SCOTT A. MCGREGOR Broadcom

Corp.LEE A. MCINTIRE CH2M Hill Cos.ANTONIO MEXIA EDP-Energias de

Portugal SATHOMAS V. MILROY BMO Capital

MarketsSURYA N. MOHAPATRA

Quest Diagnostics Inc.MICHAEL G. MORRIS American

Electric Power Co.RUPERT MURDOCH News Corp.DAVID W. NELMS Discover

Financial ServicesJ. LARRY NICHOLS Devon Energy

Corp.SUSAN R. NOWAKOWSKI

AMN Healthcare Services Inc.RODNEY O’NEAL Delphi Corp.DINESH C. PALIWAL Harman

International Industries Inc.ANTONIO M. PEREZ Eastman

Kodak Co.NICHOLAS T. PINCHUK Snap-on Inc.DAVID E. I. PYOTT Allergan Inc.THOMAS J. QUINLAN III

R.R. Donnelley & Sons Co.DAVID M. RATCLIFFE Southern Co.KEITH O. RATTIE Questar Corp.STUART H. REESE Massachusetts

Mutual Life Insurance Co.GARY M. RODKIN ConAgra FoodsJAMES E. ROGERS Duke Energy

Corp.

JAMES E. ROHR PNC FinancialServices Group

STEPHEN A. SCHWARZMANBlackstone Group

STEVEN A. SHAW VoltInformation Sciences Inc.

GREGG SHERRILL Tenneco Inc.RALPH W. SHRADER Booz Allen

Hamilton Inc.BARRY E. SILBERT

SecondMarket Inc.CARLOS SLIM HELÚ Lifetime

Honorary Chairman,Telefonos de Mexico

HENRIK C. SLIPSAGERABM Industries Inc.

FREDERICK W. SMITH FedEx Corp.MICHAEL R. SPLINTER Applied

Materials Inc.RANDALL L. STEPHENSON AT&T Inc.SHIVAN S. SUBRAMANIAM

FM GlobalMICHAEL E. SZYMANCZYK

Altria Group Inc.RATAN N. TATA Chairman,

Tata GroupFREDRIC J. TOMCZYK TD

Ameritrade Holding Corp.JAMES TURLEY Ernst & YoungMYRON E. ULLMAN III

J.C. Penney Co.DANIEL C. USTIAN Navistar

International Corp.JOSEPH UVA Univision

Communications Inc.DANIEL VASELLA Novartis AGTIMOTHY R. WALLACE Trinity

Industries Inc.RONALD A. WILLIAMS Aetna Inc.THOMAS J. WILSON Allstate

Corp.YANG YUANQING LenovoELLEN ZIMILES Daylight Forensic

& Advisory LLCPARTICIPATING GUESTS

BYRON AUGUSTE Director,McKinsey & Co.

CAROL M. BROWNER Assistant tothe President for Energyand Climate Change

JIM COOPER U.S.Representative (D., Tenn.)

RAHM EMANUEL White HouseChief of Staff

EDWARD J. MARKEY U.S.Representative (D., Mass.)

JOHN MCCAIN U.S. Senator(R., Ariz.)

ADM. MIKE MULLEN Chairman ofthe Joint Chiefs of Staff

PETER R. ORSZAG Director, Officeof Management and Budget

MICHAEL PORTER Bishop WilliamLawrence UniversityProfessor, Harvard BusinessSchool

MICHELLE RHEE Chancellor,District of Columbia PublicSchools

CHRISTINA ROMER Chair, Councilof Economic Advisers

PAUL RYAN U.S. Representative(R., Wis.)

KATHLEEN SEBELIUS Secretary ofHealth and Human Services

JOE SESTAK U.S. Representative(D., Penn.)

PHIL SHARP President,Resources for the Future

MATTHEW SLAUGHTER AssociateDean for of the M.B.A.Program and Signal Cos.Professor of Management,Tuck School of Business atDartmouth

ANDY STERN President, ServiceEmployees InternationalUnion

THE PARTICIPANTS

The Journal Report welcomes your comments—by mail, fax oremail. Letters should be addressed to Lawrence Rout, The WallStreet Journal, 4300 Route 1 North, South Brunswick, N.J.08852. The fax number is 609-520-7767, and the email addressis reports@wsj.com.

WSJ.com

ONLINE TODAY: Go toWSJ.com/Reports for morecoverage of the Journal’s CEOCouncil, including:� Videos: See excerpts frominterviews with leaders oncritical issues, including budgetdirector Peter Orszag and U.S.Secretary of Health and HumanServices Kathleen Sebelius onhealth-care reform. Plus,excerpts of CEO commentsfrom the task-force panels.� Podcasts: Hear the Journal’sJerry Seib and Erin Whitediscuss highlights and surprisesof the meeting.� Plus, additional news andanalysis about the conferencein the CEO Council blog.

THANK YOUThe Wall Street JournalThe Wall Street JournalThe Wall Street JournalThe Wall Street Journalwould like to thankwould like to thankwould like to thankwould like to thank

the 2009 CEO Council sponsorsthe 2009 CEO Council sponsorsthe 2009 CEO Council sponsorsthe 2009 CEO Council sponsors

for their generous support of the program.for their generous support of the program.for their generous support of the program.for their generous support of the program.

MEMBERS’ PENS PROVIDED BY:MEMBERS’ PENS PROVIDED BY:MEMBERS’ PENS PROVIDED BY:MEMBERS’ PENS PROVIDED BY:

For more information about The Wall Street Journal CEO Council, please visit CEOCouncil.wsj.com.For more information about The Wall Street Journal CEO Council, please visit CEOCouncil.wsj.com.For more information about The Wall Street Journal CEO Council, please visit CEOCouncil.wsj.com.For more information about The Wall Street Journal CEO Council, please visit CEOCouncil.wsj.com.

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THE WALL STREET JOURNAL. Monday, November 23, 2009 R3

Health Care

Kathleen SebeliusSecretary of Health and

Human Services

COST CONTAINMENT: I think ev-erybody is focused on cost con-tainment. And it’s fair to saythat you have to start with whathappens if we do nothing.

[A recent] Business Round-table report indicates that ab-sent any legislation, absent anychange in the trend line, by2019 costs will increase 166%per employee per health plan.And they have estimated theHouse bill alone would changethat trend line to the point that[in] 2019, costs would actuallybe $3,000 per employee lessthan they are now. So not onlywould you change the upwardtrajectory, you would actuallyhave lower costs in 10 yearsthan we have right now, whichis a fairly significant difference.

We continue to pay—and Iwould suggest overpay—for lotsof medical procedures thatdon’t add to health value and infact just add costs to the sys-tem. And there are lots of fea-tures of the House bill thatchange that: beginning to moveaway from the traditional fee-for-service system—which notonly causes redundancy, butalso doesn’t encourage innova-tive, high-quality, low-cost prac-tices—and moving toward asystem that exists in [somehealth-care systems around theU.S.].

FOCUS ON QUALITY: Costcontainment doesn’t mean a lotunless we also have a corollaryof increasing quality. We notonly pay twice as much as ev-erybody in the world, but ourhealth outcomes look like we’rea developing nation.

PREVENTIVE CARE: There area number of initiatives in thehealth-reform bill that deal withhealth and wellness: eliminationof a lot of the co-pays on pre-ventive care, so hopefully en-couraging more upfront preven-tion; incentives that can beoffered for all kinds of strate-gies, from weight reduction tosmoking cessation, probably thetwo leading cost drivers of theunderlying health conditionswhich now account for about 75cents of [every] health dollar.

CHILD OBESITY: If we look at

the situation involving kids,which is really one of the mostterrifying health crises inAmerica today, one out of everythree children in America is ei-ther obese or overweight. Andour trend line on diabetes inchildren is such that if we don’tchange that line very quickly,we will have the first genera-tion of American children aliveright now who will have shorterlife spans than their parents.

So we have a crisis. It’s gotto be solved in school cafete-rias; putting physical educationback in classrooms; making surethat we have greens avail-able—in lots of neighborhoodsyou can’t buy fruits and vegeta-bles—and strategies that in-volve parents taking some re-sponsibility and helping peopleget to that end goal.

LEARNING FROM OTHERCOUNTRIES: We need to emulatethe health results in othercountries. And you can pick anyEuropean nation, Canada, Aus-tralia, New Zealand, and look atinfant mortality rates, heart at-tacks, hospital infections, pre-ventable deaths under 75, whichis often a marker of health andwellness strategies.

The most recent study I sawlooked at 19 nations. We were

19th out of 19 countries interms of our health resultscompared to everybody else.And we spend twice as muchas any nation on earth on percapita costs on health care.

So we have to figure outhow to do a better job withchronic disease, which ac-counts for about 75% of ourhealth costs, and preventingchronic disease. A lot of pro-viders feel prevention is amuch more cost-effective strat-egy than just treating chronicdisease once someone getsvery ill.

DELIVERING BETTER HEALTHCARE: If someone goes to thehospital, they get a lot of in-tensive treatment, but oncethey leave the hospital theydisappear from a lot of screensuntil they re-enter the hospital.

A number of New Englandstates now pay primary-carephysicians an enhanced ratefor doing follow-up; having anurse practitioner go visit;making a follow-up phone call;monitoring a patient post-re-lease. It has decreased, by al-most half, the number of read-missions, which is good for thepatient, it saves costs, it argu-ably keeps that patient health-ier.

The Economy andFinance

Christina RomerChair of the Council of

Economic Advisers

HOPEFUL SIGNS: If you go backto the first quarter, where GDPwas contracting at 6.4% at anannual rate, the fact that we’reactually growing again at apretty moderate 3.5% is, atsome level, very good news. Ithink the best estimate is for2% to 3% real growth [in 2010].So that is steady growth.

PERSISTENT UNEMPLOY-MENT: Typically, job growth re-sponds three to six months af-ter GDP starts to grow. We doknow that businesses havebeen through a shock like nonethey’ve seen since the GreatDepression. And so certainlythere is some sense of hesi-tancy.

My hope and expectation is,as GDP grows, as people get alittle more confidence that thisrecovery has taken hold, they’llrealize they need workers.

SPURRING JOB CREATION:The president announced thatwe were going to have a jobsforum. The idea is to bring inpeople like business leaders,economists and communitygroups, and talk about ourideas, see if they have someother ideas. And one of thesessions will be on business taxincentives on everything frominvestment to hiring to innova-tion—all things that we thinkcould help spur jobs.

HOSTILITY TO BUSINESS: Thepresident has often said he hasnothing against making money.We know that the market sys-tem has served this country in-credibly well for its entire his-tory. And that is the Americanway, and we all love the suc-cess story. The only caveat tothat is when there seem to beabusive practices, or when peo-ple seem to be benefiting fromthe taxpayers’ dollar and thennot carrying through on theirpart of the bargain. I thinkthat’s the only time whenthere’s any hostility.

DEALING WITH THE DEFICIT:It is important to realize whereour current problems are com-ing from. If you look at thebest studies, the things that

were passed in the previous ad-ministration that weren’t paidfor—the prescription-drug bene-fit, the tax cuts and the war inIraq—are probably addingsomething like $700 billion tothe deficit every year.

In the end, no matter whocaused it, it’s our problem, andwhat the president has said isabsolutely right: He is commit-ted to cutting this thing in half.

TAX ON HIGH-PRICED HEALTH-INSURANCE PLANS: I think thatthe crucial insight is it maychange behavior. And that iswhat we’re all looking for,right? Your HR department’s go-ing to negotiate harder with in-surance companies; it’s going tolook harder for reasonable priceplans; it’s going to encourageworkers to put pressure on theirHR departments to make surethey have cost-effective plans.

I think that is exactly whatwe’re looking for as a way toencourage people to do cost-ef-fective things that will slow thegrowth rate of costs. It is theone item that I think you wouldfind people across the ideologi-cal spectrum say that’s reallygoing to work.

REGULATORY PRIORITIES: Ithink the main one—and it re-ally encompasses a lot of

things—is to make sure thatthere is systemic risk regula-tion. To make sure that there isone institution—and we thinkthe Fed is the place to dothis—with the resources and thehistory of independence to bewatching every large, intercon-nected institution whose failurecould threaten the whole sys-tem. I think that is crucial.

Going along with that, mak-ing sure that someone is watch-ing not just each individual in-stitution but the entire systembecause I do feel that the crisiswe’ve just been through hasshown a hole in our regulatorystructure. And then resolutionauthority so that we have anoption when we do get intotrouble that’s not just eithercatastrophic failure or a tax-payer bailout.

LACK OF PEOPLE WITH BUSI-NESS EXPERIENCE IN THE OBAMAADMINISTRATION: I think that’smuch less important than atti-tude. I have taught introductoryeconomics for 20 years, and Ithink my students will tell you,sometimes I sound like the edi-torial page of The Wall StreetJournal because part of what Itry to do in that course is to ex-plain the wonders of the marketsystem.

Energy andthe Environment

Carol M. BrownerAssistant to the

President for Energy andClimate Change

COPENHAGEN CLIMATE TALKS: Ithink there will be importantsteps taken in Copenhagen. TheDanish prime minister realizedat the end of September that itwas difficult. We’re a new ad-ministration; other countriesare still sorting things through.And so he started putting outan idea which is now being re-ferred to as the “prompt startaccord,” which means countrieswould make commitments tohonor their domestic legisla-tion, their domestic laws, andwe’d actually jump-start activi-ties towards mitigation and ad-aptation.

And it’s not everything thateverybody wanted, but it cer-tainly is an important step, get-ting these kinds of commit-ments. And then we can use thenext six to 12 months to final-ize a binding internationalagreement.

CHINA’S COMMITMENTS: TheChinese have stepped forwardand agreed to significant miti-gation actions; they’ve agreedto work on adaptation, thetechnology, the financing. All ofthat indicates that Copenhagenwill actually be an importantstep in the process of findingan agreement on how to dealwith a very serious problem.

CARBON TARIFFS: I don’tknow where the legislative pro-cess is going to go at this point.I think the House went in onedirection; I don’t know that theSenate will go in the absolutesimilar direction.

The House did not leave anydiscretion for the president interms of when some sort of tar-iffs may attach. I think we obvi-ously believe the presidentshould retain jurisdiction overmaking those kinds of deci-sions.

FINANCIAL TRANSFERS TODEVELOPING COUNTRIES: I thinkin Copenhagen there will besome commitment to some sortof financing. I don’t think any-body knows what that dollaramount will be. But in terms of1% of GDP, it’s not going to bethat.

What we want is to make

sure that we are taking steps toreduce the dangerous pollut-ants that contribute to green-house-gas emissions. We wantto make sure that it is in keep-ing with what we are doinghere domestically. We haven’tsecured legislation yet, and wewant the legislative process toplay out.

ENERGY LEGISLATION: It’sencouraging that there’s a bi-partisan conversation going onright now in the Senate.

There is a growing under-standing that we need to takeaction, in part because many inthe business community havesaid that we need some cer-tainty and predictability.

NUCLEAR POWER AND MOREDRILLING: We absolutely agree[that nuclear power] needs tobe an important part of our en-ergy future when we thinkabout the issues of globalwarming. And so I think it ishighly likely that you willsee—whether it’s this or thatarea for drilling or it’s othertypes of opportunities for en-hanced domestic production, aswell as nuclear—those will be apart of the final bill.

COSTS OF INACTION: Theconsequences of inaction andthe cost associated with thoseconsequences are significant.

Do we really want to live in

a world where our fresh wateris, now, increasingly threat-ened and we have to makehuge investments in desaliniza-tion and other technologies topreserve that fresh water?

I’m the first to admit, thisis difficult. It is difficult for thefollowing reason: Heretofore,when we have looked at tryingto address an environmentalproblem, we could see it, wecould feel it, we could touch it.The Cuyahoga River catches onfire in the ’70s and the modernClean Water Act comes into ex-istence. We have these blackskies and the modern Clean AirAct comes into existence. Here,we are making a set of deci-sions—a set of very importantdecisions, and they have to bedone thoughtfully—to preventa problem. But if you wait, itwill be too late.

GLOBAL-WARMING SKEPTICS:There will always be skeptics;there will always be naysayers;there will always be those whodon’t believe in American inno-vation and ingenuity—that wecan find a solution once we seta goal. That is certainly thehistory of environmental pro-tection in this country. Thereare 2,500 of the world’s lead-ing scientists and a few skep-tics. I’m going to cast my lotwith the scientists.

An EducatedWork Force

Michelle RheeChancellor, District ofColumbia Public Schools

HOW TO LEAD: I often get introuble for saying this, but Iactually think it’s true—thatcollaboration and consensus-building and all those thingsare, quite frankly, overrated.None of you CEOs run yourcompanies by committee. Sowhy should we run a schooldistrict by committee? Thebottom line is that in order torun an effective organization,you need one leader who has avery clear vision for whatneeds to happen and the au-thority to make that happen.

FIRING EMPLOYEES: We hadto conduct a reduction in forceof about 500 employees in thedistrict. And that includedabout 250 or so teachers. Wemade the decision that wewere going to conduct the [lay-offs] by quality, not by senior-ity. It caused this firestorm.

From a managerial stand-point, it would make no senseto do a layoff by seniority only.In a school district that isstruggling as hard as ours is,we have to be able to look atthe quality and the value thatdifferent employees are adding.

MONEY FOR NOTHING: Wespend more money per child inthis city than almost any otherurban jurisdiction in the coun-try, and our results are at theabsolute bottom. So it goesagainst the idea that you haveto put more money into educa-tion and that’s how you’re go-ing to fix it.

It comes down to two basicthings about why we spend somuch money and the resultsaren’t as good. First is a com-plete and utter lack of account-ability in this system. And thesecond is a lack of politicalcourage on the part of most ofthe people who are running cit-ies and school districts.

We have a system in whichyou can have been teaching for25, 30 years. Every year, youcould actually take your chil-dren backward—not just notimprove their learning as muchas you should, but your kidscan move backward in yourclassroom every year—and youwill continue to have a job. You

will continue to get your stepraise. You will continue to getyour negotiated union in-creases. Where else can thathappen, except in public educa-tion? So that lack of account-ability is a significant problem.

And then on the couragepart, I think that when you’retalking about making the diffi-cult decisions that are neces-sary in this climate—closingschools, firing teachers, remov-ing principals, et cetera—thoseare the things that make mostpoliticians run for the hills be-cause it makes your phone ringoff the hook and people are say-ing oh, don’t close this school,don’t fire this person.

OUT-OF-CONTROL SPENDING:When I came on board, peopletold me to find out where themoney is going, and so I sentpeople out. One of my assis-tants came back to me and said,“Did you know that we spend$80 million a year in this citytransporting a few thousandkids to special-education place-ments across the city?” And Idid the quick back-of-the-enve-lope math and it turned out tobe $18,000 per kid, per year.

And I thought, that’s crazy. Isaid, well, I don’t know any-thing about running bus routes,but I’m pretty sure I can do itfor cheaper than $18,000. With

$18,000 a year, you could buythe kid a Saturn the first yearand a driver for the Saturn ev-ery year after that!

So I said, this is going to bea good one. We save the money;we’re more efficient; we pushthe money down to the class-room. And what people saidwas, no, you can’t do that be-cause for decades, the districthad done such a poor job oftransporting these kids to theirplacements that now it’s undera court order.

There’s a court-appointedspecial master who now runsthe bus system, and he’s al-lowed to spend as much moneyas he wants to as long as hegets the kids to school on time.All we can do is pay the bill. Wehave no ability to control costs.It’s an insane system that’sbeen set up over time becauseof the dysfunction of the schooldistrict.

VOUCHERS AND CHARTERSCHOOLS: We have a very strongchoice dynamic in this city.About a third of the school-agechildren go to charter schools.We have the traditional publicschools, and then we also haveabout 2,000 kids who attendprivate schools through the useof vouchers. We call it the tri-sector approach. I think itworks extraordinarily well. y

Laying the GroundworkWe asked four policy makers to give us their thoughts on the four critical issues: health care, the economy and finance,energy and the environment, and an educated work force. Here are some highlights.

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After decades of drifting, the U.S. is moving toward a more-coherent energy policy.For the energy industry, that is both a boon and a threat. The broad goals of any newlegislation and regulation are clear enough: to cushion the volatility of energy pricesand curb greenhouse-gas emissions. But the details are fuzzy, and those details willdetermine whom the energy transformation helps and hurts. Figuring that federal lim-its on greenhouse-gas emissions are inevitable, for instance, the industry wants therules to come from Congress rather than from the Environmental Protection Agency.The reason: It thinks it can lobby Congress to cushion the blow more easily than it canlobby the EPA.

Jeffrey Ball, the Journal’s environment editor, moderated the task-force discussionon energy and the environment. Here are edited excerpts of the presentation of theirpriorities to the CEO Council.

JEFFREY BALL: There were a cou-ple of broad pieces that I thinkare important to reflect—areasthat the group thought were un-derappreciated. One is that peo-ple tend not to understand thescales that are the reality in theenergy industry, that differentareas of energy supply getthrown around without an ap-preciation of what really powers

this world of ours.Second to that point, is that

the vast majority of global en-ergy comes from fossil fuels, andis predicted to continue to staythat way for several decades.And third, in terms of using en-ergy more efficiently, it’s proba-

bly not prudent to suggest thatpeople are going to change theirbehavior of their own volition.And so there are going to haveto be more structural reforms inthe economic setup of the energyindustry.

Let me just ask Lynn Elsen-hans to talk about the first pri-ority, which has to do with do-mestic energy supply.

LYNN ELSENHANS: To put this incontext, the EIA [Energy Infor-mation Administration] forecaststhat energy demand globally ofall types will grow more than50% in 20 years, and that in theU.S. it will grow as much as 30%.And further, petroleum will be60% of total demand, and, if youput all fossil fuels in there, it’sprobably over 80% of the de-mand.

So anything that doesn’t ad-dress that is really going to ig-nore some fundamental prob-lems if we’re going to keepenergy both secure and afford-able, along with clean.

The key concepts that wereput forward on this point were,one, the concept of diversifica-tion. We need it all. We have alot of demand out there. To keepit secure, affordable, we need todevelop it all. The second pointis more of an emphasis on do-mestic resources and the devel-opment of domestic resources.

Most countries in the world dotake the resources they have andmake the most of them, and theU.S. should do the same.

We have vast resources ofcoal. We now have, through newtechnologies, vast resources ofnatural gas. If we had more ac-cess, we could have additionaloil and gas from both conven-tional and unconventional

sources. And yes, if we’re goingto have clean energy and zeroemissions, we have to vastly ex-pand the amount of nuclear en-ergy in this country, and weshould embrace all forms of re-newable energy.

Pursuing EfficiencyMR. BALL: The second priorityhad to do with efficiency broadlydefined.LOUIS CHÊNEVERT: We had a dis-cussion that suggests that at alllevels in the supply chain, aswell as in the consumer end,there’s opportunities to substan-tially improve efficiency, as wellas emissions.

We had discussions on whatcan be done with coal powerplants or traditional plants toimprove their emissions. Tech-nology is available today. It’s aquestion, sometimes, of returnon investment and having a levelplaying field and knowing thatyou can get return for the in-

vestments that you’ll put in.The same is true, whether it’s

residential or commercial build-ings.

There’s a lot of technologyavailable today that could reduceenergy consumption substan-tially, and there’s a need for la-beling, for regulation that wouldforce, basically, the adoption ofsome of these technologies thatwould have substantial impacton energy and the environment.In the discussion, I noted thefact that for large buildings, therecipe is there today to reduceconsumption by 70%. Thirty per-cent is available easily—it’sprobably got less than a five-year payback.

The Need to StoreCARLOS GHOSN: If I can add onepoint to what has been saidabout energy efficiency, the abil-ity to store energy is absolutelyimportant.

Today, we know that we don’thave any system allowing you tostore energy, which means thatwhen you invest in capacity, youinvest in function of the peakconsumption. Because if youdon’t invest in function of thepeak consumption, you’re goingto create a situation of black-outs, which are very damaging.

So I think focusing and devel-oping capacity to store energyfor individuals, for facilities, forpublic services, for plants is ab-solutely fundamental to have amuch higher efficiency in termsof use of energy.

MR. BALL: There was an interest-ing discussion about what poli-cies would be necessary to in-duce moves toward efficiency.And one of the discussions waswhether there ought to be a callfor higher energy prices—that is,a direct call as opposed to a sortof less-direct call in the form ofa cap-and-trade policy. Therewas a feeling that this group didnot want to call for higher en-ergy taxes, but that cap-and-trade was going to do that.

So why don’t we move intothat—the third priority. Therewere those in the group whodidn’t want to recommend any-thing on carbon regulation, andindeed, who thought that thebest policy would be no govern-ment action to restrict carbonemissions.

There was a larger groupthat felt it didn’t really matterwhat the group wanted in thatregard, because carbon regula-tions are coming, and so thegroup ought to make some sug-gestion as to what is the lesserof two evils.

There were a few points ofagreement here.

First of all, that the EPAshould not be regulating carbonemissions—that this ought to beup to Congress to act.

Second, that remembering inthe design of any cap-and-tradesystem that fossil fuels provideabout 80% of global energy to-day, and are likely to continue todo that. And so to the degreethat a cap-and-trade programincentivizes a diversity of energyresources, it needs to keep thatreality in mind.

And third and really impor-tant, the point of global competi-tiveness—that the U.S. shouldnot do anything on carbon regu-lations in the absence of actionby other countries, particularlycountries in the developingworld.

Frustration With the GridMR. CHÊNEVERT: With regard toupgrading the electrical grid,there are so many roadblocks toovercome that eventually, it getsfrustrating and it’s always sub-optimized. If we’re going to re-ally succeed at energy efficiency,and the introduction of renew-ables, without an efficient gridit’s not going to happen. So thisis something that’s a very highpriority for the group and it’ssomething that needs to be ad-dressed fairly quickly if we’regoing to make substantialchanges in the efficiency of thewhole system.

MR. BALL: This was one area inwhich there was really no dis-agreement on the desire for in-creased federal control. It wasvery interesting that if the gov-ernment is going to essentiallydemand that energy resources bediversified, it has to give busi-ness the tools to make that hap-pen.MR. GHOSN: On the fifth recom-mendation, the main point abouttransportation is the fact thattoday in the U.S, and in practi-cally all the developed or devel-oping countries, we’re all net im-porters of oil.

Second, it is the only fuel fortransportation. That means thatif there is a problem with oil, thewhole transportation system isparalyzed. And we came to theconclusion that oil is not the en-emy, but too much dependenceon oil becomes something that isvery precarious.

So by saying diversify thetransport system, we’re saying,because it’s a strategic consider-

ation and also an economic con-sideration, a lot of effort shouldbe made—partnerships betweengovernments, states, municipali-ties, companies, car companies,utility companies—in order tofind the best system adapted tothe country or adapted to a spe-cific city to bring electricity as adiversification from oil for trans-portation.

MR. BALL: There was a sense inthe group that this was a partic-ularly interesting area for actualbusiness-government coopera-tion.MR. GHOSN: Exactly. This issomething that cannot happenbecause one company wants itor because one municipality orone government wants it. Youneed the technology, so you needthe technology of the battery,you need technology from carmakers, you need utilities tostep in.

In fact, you know, we’re sign-ing a lot of agreements with theutility companies across theglobe who are saying, well, thisis an opportunity for us to in-crease our market share or in-crease our presence.

You need governments to beinterested in putting their actsbehind their will of being lessdependent on oil or creating anenvironment where you haveless emissions. And in fact, we’reseeing today very clearly whichare the governments and themunicipalities standing up andsaying OK, what do you need forthis to become a reality? Whatkind of infrastructure, what kindof partner do you need? Withoutpartnership, it can’t work.

Agreement From MarkeyALAN MURRAY: Ed Markey is thechairman of the special selectcommittee that the House ofRepresentatives established todeal with climate-change issues.You’ve had a chance to look overthe recommendations; you’veheard some of what they had tosay.EDWARD MARKEY: I agree withyour plan. I think that the priori-ties that you have selected arethe most important ones, whichis why each one of them is in-cluded inside of the Waxman-Markey legislation.

We have a broad array of in-centives for all energy sources.On promoting energy, we includethe largest single increase infunding for energy efficiency inany legislation in the history ofour country.

We include a requirementthat all new buildings have to be50% more efficient in their en-ergy consumption by the year2016—dramatic increases in ap-pliance efficiency. We give $10billion each year to the states toincentivize efficiency withintheir states.

We have passed a cap-and-trade bill. I think many of the ex-ecutives who are representedhere feel comfortable with thatbecause they’re already doingbusiness in Europe, which has asystem in place.

I think there’s a higher com-fort level, the larger the com-pany, in terms of moving in thiscap-and-trade direction.

We built billions of dollars offunding into Waxman-Markeyfor the smart grid, as we didinto the stimulus package inFebruary to telescope the timeframe it will take for our nationto lay this out.

And finally, diversifying thetransportation system: Wemoved, with incentives as well,more toward using natural gasas a source of energy, especiallyin the bus and the large truckfleet.

Winners and LosersMS. ELSENHANS: Congressman,I’m a refiner and one of the prin-ciples that was put forward iswhat the task force said was alevel playing field and not pick-ing winners and losers.

There are many very goodfeatures about the bill, and I ap-plaud those, but you’ve clearlypicked refiners as a loser.

And you talk about Europeand being like Europe—well, it’snot like Europe at all, becausethe Europeans got all the allow-ances for nothing and the Euro-pean refiners were not responsi-ble for the emissions of theircustomers. They were only re-sponsible for their stationaryemissions.

I fear that what we’re doingis, we’re basically going to dis-advantage all U.S. refiners, allU.S. heavy industry—energy-in-tensive industries—and forcethose industries overseas. Andso what we’re going to do is endup trading off importing oil forimporting products, and in themeantime, transportingjobs—good-paying jobs—fromthe U.S.,overseas.

I will only speak for my com-pany. I’m very willing to have mystationary emissions be part ofcap-and-trade and learn how tobe more energy efficient.

But asking us to also handlethe emissions of our customersputs us in great peril. And basi-cally, our ability to cap-and-trade is going to be more impor-tant than our ability to trans-form crude oil into products anddeliver those products to ourcustomers.

REP. MARKEY: We put about $2.5billion per year in the deal withthe additional cost for the refin-ing industry, but that’s still sub-ject to negotiation as the billmoves through the Senate.

In addition, we actually putin a border tariff that is trig-gered in 2020 that will protectenergy-intensive, trade-vulnera-ble industries from exploitationby China or India or other coun-tries who are not engaging inthe same kind of reduction ingreenhouse-gas emissions thatwe are, so that there’s a real sig-nal being sent to the rest of theworld.

We’re not going to stand byand watch our steel, aluminum,cement and other energy-inten-sive industries get exploited byus moving along with the Euro-peans.

I think we have to be realistichere as we’re going forward sothat we are building in the pro-tections for those energy-inten-sive industries.

Challenges of the GridMR. CHÊNEVERT: Congressman,how do you see overcomingsome of the challenges on thiselectrical grid, because there aremunicipalities involved, thereare people who don’t like to seea hydro tower in the back oftheir homes, and you’ve got theFederal Energy Regulatory Com-mission that’s involved?

That was the debate that wewere having this morning on thedifficulty of actually siting andimplementing the electrical grid,and do you see anything that canbe done to accelerate that pro-cess and, therefore, welcome therenewables, for example, intothe communities?

REP. MARKEY: The Obama admin-istration has put together an in-teragency task force for the firsttime so that there’s coordinationin the siting of these energy fa-cilities. They clearly are intend-ing on unleashing this renewableenergy agenda. y

Energy and the EnvironmentThe Top Five Recommendations1. DIVERSIFY U.S. ENERGY

The U.S. should encourage all domestic energy supplies,including coal, expanded access to oil and gas coming fromboth conventional and unconventional sources, nuclearpower and all renewables. Government shouldn’t pick win-ners; let the markets decide.

2. PROMOTE ENERGY EFFICIENCYEstablish a holistic approach, supported by business,

that produces energy efficiencies, from production to con-sumption. Policies should include tax credits, accelerateddepreciation, altered building codes and performance stan-dards. Change utility regulatory structure so utilities canrecover cost of investments. Educate consumers about en-ergy-efficiency methods.

3. CAP-AND-TRADE BILLInstead of the EPA regulating greenhouse-gas emissions,

Congress should set a cap on carbon emissions that pro-tects the U.S. economy. The cap should recognize that mostenergy will continue to come from fossil fuels. The U.S.should not act alone on global warming. There should be atrigger requiring a global framework.

4. FEDERAL PLAN FOR ELECTRIC GRIDCongress should enact federal authority to deploy a

more efficient electric grid that enables the diversificationof U.S. energy supplies, gives the federal government moreauthority to site transmission lines through eminent do-main and gives the Federal Energy Regulatory Commissionthe power to allocate costs.

5. DIVERSIFY TRANSPORTATION SYSTEMSIn its tax, regulatory, and investment policies, the gov-

ernment should stimulate transportation systems consis-tent with the broad goals of diversifying energy sourcesand reducing greenhouse-gas emissions.

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From top: Lynn L. Elsenhans, Louis R. Chênevert and Carlos Ghosn

ENERGY AND THE ENVIRONMENTCO-CHAIRS:

LOUIS R. CHÊNEVERTPresident and CEO,United Technologies Corp.

LYNN L. ELSENHANSChairman, Presidentand CEO,Sunoco Inc.

CARLOS GHOSNCEO, Renault SA and Nissan

Motor Co.

POLICY PERSPECTIVE:

EDWARD J. MARKEYU.S. Representative(D., Mass.)

THE WALL STREET JOURNAL. Monday, November 23, 2009 R5

The natural gas industry supports 2.8 million jobs in 49 states. That provides a lot of tax revenue across the country. And a recently unlocked 100-year supply,that continues to grow, promises high-paying, family-sustaining jobs into the future. It’s America’s economic power. America’s cleaner energy alternative.

THE WALL STREET JOURNAL.R6 Monday, November 23, 2009 THEWALL STREET JOURNAL. Monday, November 23, 2009 R7

As Congress wrestles with health-care legislation, doctors, hospitals, insurers andemployers face the challenges of providing quality care to the greatest number of peo-ple—at an affordable cost. Professor Michael E. Porter of Harvard University launchedthe discussion with three critical ideas for restructuring the delivery of care aroundvalue for patients, starting with the creation of a national system for measurement ofhealth outcomes. He also recommended changing the reimbursement system that re-wards doctors for treating illnesses rather than preventing disease, by moving from afee-for-service model to one that bundles payments for the full range of care for a sin-gle patient among many providers, as well as removing legal obstacles that preventdoctors and hospitals from working together to offer integrated care. Task-force mem-bers came up with priorities of their own, including holding patients accountable fortheir own behavior, in the face of an alarming rise in obesity, coupled with high smok-ing rates. And dealing with medical-malpractice costs and tort reform was once againon the CEO agenda.

Laura Landro, an assistant managing editor at The Wall Street Journal, moderatedthe task-force discussion, joined by the Journal’s Alan Murray. Here are edited ex-cerpts of the presentation of their priorities to the CEO Council.

LAURA LANDRO: We’re going tostart out with Ron Williams, whois going to talk about reformingthe health-payment system.RONALD A. WILLIAMS: In healthcare today, our payment systemis what’s referred to as a fee-for-service system. You have an of-fice procedure and that physi-cian is paid. And if there aremore office visits, there is morepayment.

A huge part of reformingpayment is to look at what’scalled bundle payments. If a phy-sician is treating a patient whohas asthma, that physician mightbe paid a rate for the year thatrepresents a reasonable and ap-propriate payment to incentthem to do things that might notbe office-visit-based. So, thephysician might take those re-sources and have someone visitthe patient’s home and look at

what the patient has in theirhome and how their home is or-ganized, because there may bethings going on there that actu-ally are influencing the officevisits.

And I think the same thingcan be said for hospitals, so thata hospital doesn’t simply admita patient, perform a series ofprocedures or activities and dis-charge that patient—and if thepatient comes back, there is an-

other bill and another set ofcharges. So, the hospital mightvery well receive a bundled pay-ment that might include thework-up on the front end, thecare that’s delivered and antici-pate whatever follow-up caremight be necessary.

MS. LANDRO: We’re going to askDr. Cosgrove to do two prioritiesthat were related to each other,which were to measure health

outcomes and to promote inte-grated care, the idea that wewould all have care on a contin-uum without 17 different unaffil-iated doctors doing things.DELOS M. COSGROVE: What we’dlike to do is get you value foryour health-care dollar. And inorder to measure quality, youhave to measure outcomes. Thesecond aspect of this is that theyhave to be widely transparentand then compared with nationalstandards.

The first thing you have to dois develop the standards thatyou’re going to measure to mea-sure quality. It’s easy to measurequality in cardiac surgery be-cause you’re either dead or alive.It’s quite different to measurequality in dermatology or rheu-matology, which are much moresubtle. So, those quality out-comes need to be defined, mea-sured, and it’s going to requirethe electronic medical record asthe tool that’s going to facilitatethat.

The second of those issueswhich we raised is promoting in-tegrated care. By integratedcare, you need to begin to havethe physician become integratedwith the hospital; you have tohave hospitals integrated withhospitals. And you have to re-move the barriers that there areto those sorts of things happen-ing. And that includes goingacross state lines, which wouldcurrently inhibit health-care or-ganizations and doctors frompracticing in multiple locations.And you truly don’t get a na-

tional ability to integrate carealong those lines.

Taking ResponsibilityMS. LANDRO: Next we’re going toturn to Dr. Vasella, who is goingto talk about two other issues,one of which is holding patientsaccountable; we can’t just blamethe system if we’re smoking andobese. The other is to reformmedical malpractice, which issomething that comes up overand over and over again.DANIEL VASELLA: [For malprac-tice], it’s a huge cost that we arebearing, and we were discussinghow we could diminish that cost.One was the idea of cap. Wehave heard the enthusiasm ofthe president for that this morn-ing; namely, none. And the sec-ond was to have more profes-sional tribunals looking at thewhole question of tort.

The second topic was holdingpatients accountable. We had ex-amples that were discussed ofsmoking-cessation programs atcompanies, and then giving pen-alties for people who smoke. Onobesity, it is estimated today,has direct and indirect costs inthe U.S. of $500 billion. We arelooking forward to a generationwho may live shorter than we dounless action is taken. The ques-tion is also, what do we do ascompanies to address this prob-lem and make it easier for ouremployees to live a healthy life-style?

MS. LANDRO: What can the gov-ernment do to help these thingshappen so that their health-re-

form legislation ends up beingsuccessful and delivering themost cost-effective care to thegreatest number of people?DR. COSGROVE: Let me just stepin for a second and say I thinkthat this group has an enormousopportunity in terms of puttingthe incentives right for employ-ees in terms of wellness. And Ithink all of you can see the fi-nancial returns coming back toyour corporation, reducing thecost of health care.MR. WILLIAMS: My experience isthat when the whole question ofprevention and wellness be-comes a C-suite issue, just assafety or profitability, companiesmake enormous improvements interms of engagement and collab-orating with their employees onthese issues.

I think in terms of reformingthe payment system, I think oneof the things that’s important isto have a legislative and regula-tory framework that determinesand sanctions what types ofchanges we can make.DR. VASELLA: On the obesityfight, just to hit on one topic, wewould like to know what is bestpractice, so we have experiencesharing of what works and whatdoesn’t work. In the end, thegovernment has to do somethingin the school system; we need toknow, do we want as a country, alabeling, for example, of the cal-ories on menus and so forth?There has been quite some prog-ress shown in these various ac-tions. So it’s a shared responsi-bility we have, which I think

would have a big impact, be-cause if you take all the conse-quences of obesity, diabetes,heart disease, and so forth, hy-pertension, the costs are mindboggling.DR. COSGROVE: Can I just enterin? I think again, the evidencethat you, as corporate leaderscan really change this is veryclear. We’ve done a number ofthings at the Cleveland Clinicamongst our employees. So far,since we started our program,we’ve lost 120,000 pounds.

MS. LANDRO: A collective newclothes-purchasing opportunity,basically. That’s what we haveto think of it as.DR. COSGROVE: Save moneywhere the carpet’s wearing out.

View From the CapitolALAN MURRAY: Jim Cooper is amoderate Democratic congress-man from Tennessee who foundhimself at the middle of thehealth-care-reform debate backin 1994, had the good sense toleave Congress for a decade inbetween, then came back—andnow once again is in the middleof a health-care-reform debate.So, he has a unique perspectiveon these issues, and I think is

uniquely thoughtful on these is-sues.JIM COOPER: I want to congrat-ulate you on putting togetherfive very sound principles. That’sthe good news. The bad news is,you’re a little late to the party.The Senate is within weeks of

voting on major legislation; theHouse has already done it. Andalso, the brevity of your princi-ples makes them a little bit lon-ger than a bumper sticker.

As you well know, the devil isusually in the details. Now, wedo need to reform the paymentsystem. But one of the core is-sues is left untouched: an exist-ing $250 billion tax subsidy thatpromotes a regressive systemand sometimes irresponsible be-havior. So, it’s very difficult toreform the system without ad-dressing that.

The second point, on out-comes—we do need to measureoutcomes. What was fascinatingto me, in your principles, yousay, let’s measure hospitals anddoctors. And what did you leaveout? You’re not going to mea-sure drugs or nursing homes,things like that. Those are thenext largest recipients—payerdollars.

Other principles—very im-portant. We do need to hold pa-tients accountable. We do needmalpractice reform. I’ve had thebill in Congress for a long timeon health courts—long overdue.We can do some of these things.We need to make sure that wehave integrated health-deliverysystems. Now, changing provider

behavior is very tough. Thewhite coat usually only listens tothe white coat. But you all, asmajor payers in your community,have a real opportunity to helpdoctors see that fee-for-servicemedicine is not the right way.

I think that we should all lis-

ten to the Business Roundtablereport of last week, which said,the status quo is not an option.In previous health-care reformdebates, we could put this off,wait for a better bill, but now,when Medicare alone is $34 tril-lion in the hole, and S&P andMoody’s have already projectedthat the U.S. Treasury Bondcould lose its Triple-A rating assoon as 2012, as a result prima-rily of Medicare and Medicaid,we don’t have the option to waitvery long.MR. MURRAY: So let me ask thethree of you. You had the diffi-cult task of talking about princi-ples at a time when there is mas-sive legislation moving throughCongress. Do you want to re-spond to anything that Con-gressman Cooper had to say?DR. VASELLA: Not necessarily di-rectly respond, but one concernI have, looking at the health-carebill—and I would be very inter-ested in your view and explana-tion—is, where is really qualitycontrol built in? Because wewere unanimously of the opinionthat focusing on cost, as every-body right now does, will not fixthe quality. And as long as youdon’t fix the quality, you don’tfix the cost. That’s at least ourexperience in our companies.

REP. COOPER: Which was whyyou had the focus on measuringhealth-care outcomes.DR. VASELLA: Yes, absolutely.REP. COOPER: Everyone wantstop-quality care for themselvesand for their family. Sometimestop quality care is viewed as

more expensive. But when youtake a proper view, sometimestop-quality care is actually moreaffordable, because you’re nothaving botched operations,you’re not doing repeat proce-dures, you’re getting it right thefirst time. And above all, as thispanel quite rightly pointed out,you use prevention to promotewellness in advance so you canavoid some of the very expensiveillnesses.

But cost control is a problemwhen our nation is facing suchfiscal constraints. And the esti-mate among experts is thatwe’re probably wasting $700 bil-lion a year in health-care spend-ing annually. We probably can’tcapture all that, but if we couldcapture 5% or 10%, we could payfor all of health reform. So whycan’t we do more to capture it?

Well, a lot of the high-costareas, like Miami, are unwillingto admit it, that they’re triplewhat it is in Minnesota and Min-neapolis. In fact, the discrepancyis now so great that one authorhas said that it’s now worth itfor the federal government topay patients in Miami to fly toMinnesota for care. And we cangive them a free Lexus automo-bile because we would save somuch money in the process.DR. COSGROVE: I think you haveto look at the problem of cost asessentially two buckets. The firstbucket is prevention. We have tokeep people from getting sick.And if figure that 10% of the costof health care in the UnitedStates is secondary to obesity,

we have to attack that. I thinkthe second thing is, we have tolook at the delivery system, andwe have to get the incentives ap-propriate for the physicians sothey don’t order more tests, etc.,and get the integration in thesystem. And the way I thinkyou’re going to do that is bybundling, and we have to push itharder and faster.

It’s coming up as a demon-stration project, but that’s—aswe all know—a long, slow pro-cess, and it needs to be pushed ifwe’re going to control that as-pect of the cost of deliveringhealth care.

Closing ThoughtsMR. MURRAY: Anybody have com-ments, questions?AUDIENCE MEMBER: One questionon holding the patient account-able. One problem normally withthe insurance companies is evenif the patient has quit smoking,they still get banged when theyapply for a policy because onceyou’ve smoked, I guess you’ve al-ways smoked. And I was won-dering, with your accountabilityhere, and having someone quit,is there a length of time thatthey will time out, they would become a nonsmoker, or is thereany benefit at all to quitting?MR. WILLIAMS: There are twoseparate issues that you’re rais-ing: One is principally in the in-surance market, where there’sbeen something called medicalunderwriting or use of yourhealth status. And I think one ofthe things that we think is posi-

tive in the legislation is creatingan environment in which the in-dividual insurance market wouldeliminate the use of a member’shealth status. So that would beout the window.

The only that works finan-cially is if you can bring almosteverybody into the system, be-cause if you can buy insuranceonly when you need it, as we seein states like New Jersey, peopletend to wait until they need itand they buy it at that point intime. So we’re big supporters ofeliminating the use of health sta-tus; we just need a mechanismto find a way to bring almost ev-eryone into the system.

In our own company, in thegroup setting, for example, wegive our employees a discount ifthey are a nonsmoker on theirpremium that they pay as a per-centage of their health insur-ance. We also will pay all thesmoking-cessation costs, and ifyou quit during the year, thenwe will give you the nonsmokingrate. So I think the objective inthese things has to be to not bepunitive; it has to be to helppeople get to a state where theyreally are doing things that aresupportive of good health.DR. COSGROVE: And I might say,there’s one other reason thatyou want to not have smokersworking for you: The averagesmoker takes two weeks ofsmoking breaks during thecourse of the year.MS. LANDRO: Right, and pollutesthe front of the building, as weall know. y

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HEALTH CARE CO-CHAIRS:

DELOS M. COSGROVE, M.D.President and CEO,Cleveland Clinic

DANIEL VASELLA, M.D.Chairman and CEO,Novartis AG

RONALD A. WILLIAMSChairman and CEO,Aetna Inc.

POLICY PERSPECTIVE:

JIM COOPERU.S. Representative(D., Tenn.)

The Top Five Recommendations1. REFORM HEALTH-PAYMENT SYSTEM

Move away from fee-for-service and toward bundledpayments for the full cycle of health care. Pay higher ratesfor sicker patients. Tie payments to outcomes.

2. MEASURE HEALTH OUTCOMESRequire doctors and hospitals to publicly report patient

outcomes based on national standards. Link payments torisk-adjusted outcomes. Use electronic medical records formeasurement.

3. HOLD PATIENTS ACCOUNTABLEEmployers and insurers should reward healthful behav-

iors and penalize unhealthful behaviors. Employers shouldprohibit smoking among their employees and provide un-limited cessation help.

4. REFORM MEDICAL MALPRACTICECap awards and legal fees, and create health courts.

5. PROMOTE INTEGRATED CAREChange regulations to allow doctors and hospitals to

work together. Remove obstacles such as the Stark lawsand corporate practice of medicine laws.

Daniel Vasella

Delos M. Cosgrove

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Continued on next page

Continued from previous page

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R8 Monday, November 23, 2009 THE WALL STREET JOURNAL.

The discussion of the economy and finance drew more than two dozen chief execu-tives, more than the other three task-force topics, in a conversation that rangedwidely from the urgency of creating a climate in which employers will hire again andthe persistent problems in getting credit to businesses and consumers to the policies,attitudes and spirit required to assure widely shared prosperity in the future.

David Wessel, the Journal’s economics editor, moderated the discussion. Here areedited excerpts of the presentation of their priorities to the CEO Council.

DAVID WESSEL: The group askedme to explain that when wethought about things, wethought about three buckets: thethings that need to be done now,the things that need to be donein the medium term and thethings that need to be done inthe long term. And so the rangeof options you see up here spansthat horizon. Some things youwouldn’t want to do now, andsome things you wouldn’t wantto wait for.

There was no item that rosehigher on our thermometer than

the need to create jobs, I think amirror of what we’ve seen in thepublic. And Ken Chenault ofAmerican Express is going todiscuss the group’s thinking onwhat ought to be done to stimu-late employment.KENNETH I. CHENAULT: As welook at sustainable job creation,I think one of the things as abusiness community is we havenot galvanized around this issue.When we interact with govern-ment, what we do is we givethem a laundry list of issues thataffect our particular sector, and

then what happens is, we are al-ways on the defensive trying toprevent things from happeningto us.

I think we also need to bevery focused on the political re-alities: What is going to be theone thing that is going to stoppeople from, in fact, being re-elected? And that’s going to bein 12 months if there is not anincrease in jobs. People will havemajor problems and from theWhite House on down there willbe an issue.

This is an opportunity forbusiness to really seek out aclarion call to say we’re going tobe unified, we’re going to focuson sustainable job creation, andin fact, we’re going to lookthrough the job-creation lens forevery policy. Taxes, we’re goingto look at it through that job-creation lens. Regulation, we’regoing to look at it through thatjob lens.

So some of you might ask,

there are longer-term issues outthere—that’s why we said weneed to categorize short term,moderate term, long term. But in12 months, if there is not an im-provement in jobs, those politi-cians will have an issue and wewill have an issue. And those ofyou who are in the nonfinancialsector who think you will be ex-empted: It’s coming to you, be-cause you will be viewed as notreally having made a major ef-fort to create jobs.

Second, small business andthe middle market is critical. Wethink it is important to stimulatethe economy, but also from a po-litical standpoint, it will demon-strate that big corporations arenot just focused on themselves;they’re focused on driving theeconomy for small and medium-size businesses.

A Winning SpiritMR. WESSEL: There was also asense that we needed to enunci-

ate a vision for the U.S. economyand bring back the kind of win-ning spirit. Gail Kelly?GAIL P. KELLY: At its essence, thiswas about a vision: encouragingentrepreneurship, building confi-dence and building pride. Defi-nitely, avoiding protectionist-type policies—we absolutely,wholeheartedly endorse that.And really remembering whatAmerica stands for.

And, in that vein, not demon-izing success. And, certainly, notoverpenalizing failure. There’sbeen a sense that there’s been alittle bit more of that than is de-sirable. Because at the end ofthe day, success is part of win-ning, and failure is part of play-ing the game in a free-marketenvironment.

MR. WESSEL: A third theme wasthat there’s too much uncer-tainty out there, particularlyabout government policy, andthat it’s hurting business and it’shurting consumers and it’s con-tributing to an economy thatisn’t performing as well as thegroup would like.J.W. MARRIOTT: We all recognizethat small business is really a

Pleaseturntopage

The Economy and Finance

From top: Kenneth I. Chenault, Gail P. Kelly, J.W. Marriott Jr. andSen. John McCain

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The Top Five Recommendations1. SUSTAINABLE JOB CREATION

Government should focus on policies that stimulate sus-tainable job growth by identifying national competitivestrengths, encouraging innovation, reforming tax policyand avoiding regulatory disincentives. Policies should em-phasize small and medium-sized enterprises and ensurethe flow of credit to business. Government should avoidshort-term efforts to create jobs that are unsustainable.

2. BRING BACK WINNING SPIRIT IN U.S.Enunciate a vision for the U.S. economy. Encourage en-

trepreneurship. Be blunt about U.S. competitive strengthsand weaknesses. Remove the risk of protectionism. Reduceuncertainty. Don’t demonize success or overpenalize fail-ure. Avoid divisiveness in government and business rheto-ric. Promote the American dream of social mobility.

3. BUILD GREATER CERTAINTYReduce uncertainty for consumers and businesses over

energy, tax, health and other policies to encourage hiringand capital investment. Articulate clear objectives. Enhanceglobal cooperation through G20 leadership. Strengthen theAmerican retirement system. Make sure there is creditavailable for growth.

4. ENACT GLOBAL TRADE PACTSign and ratify by the end of 2010 a global free-trade

agreement with all willing countries to encourage greaterworld growth.

5. TAX REFORMChange tax code, in revenue-neutral fashion, to encour-

age savings and investment and discourage consumptionand debt over the long term.

THE ECONOMY AND FINANCECO-CHAIRS:KENNETH I. CHENAULT Chairman

and CEO, American ExpressCo.

GAIL P. KELLY Managing Directorand CEO, Westpac BankingCorp.

J.W. MARRIOTT, JR. Chairmanand CEO, MarriottInternational Inc.

POLICY PERSPECTIVE:JOHN MCCAIN U.S. Senator

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THE WALL STREET JOURNAL. Monday, November 23, 2009 R9

If an educated work force is the nation’s human capital, business is seeing a lot ofsubprime these days.

Graduation rates are dismal in many school districts. Teachers are bailing out ofthe profession. Parents are frantic at the lack of options. Chancellors are clashing withunions. And student performance pales next to the competition abroad. Business oftencan’t find the talent it needs in the work force that our education system produces.

The CEO Council considered a range of remedies. John Bussey, chief of the Journal’sWashington bureau, moderated discussions by the education task-force as it consid-ered what five priorities to recommend. Here are edited excerpts of those discussions.

JOHN BUSSEY: Our first item re-ceived by far the most votes: Ed-ucation is our top priority. Thisis less a call to specific actionand more of a statement of prin-ciple or purpose, with an expec-tation of a broad set of actionsby government and business.This was passionately felt by ourgroup. And I’m going to askJohn Chambers to explain why.JOHN CHAMBERS: Each of us dur-ing our tenure as CEOs has satin an “education-is-your-top-pri-ority” type of discussion everyyear. And each year, you walkout a little bit frustrated. Yousay the timing’s not right, we’renot really serious about it, etc.But as we went through the dis-cussion today, it was a unani-mous vote that it needs to be thetop national priority—way abovethe economy, health care, energyor the environment.

There was unanimous agree-ment, as businesses, that wewould fall into line. It should bean issue that brings Republicansand Democrats together during ayear where they’re not going toagree on much. And I believeyou identify tipping points.When you identify those tippingpoints is when you should move.And so if you think about it,what should we change in termsof our government structure togo after this? What should wechange in terms of our teachersand how we compensate themand how we reward them? Whatshould we change in terms ofthe parents? We think it’s aonce-in-a-lifetime opportunity.Business knows more than any-one how much better othercountries are preparing theirwork forces—never mind thattheir costs are half or a thirdwhat ours are here in labor.

So we think this should beour top priority as a country. Wethink we CEOs ought to back itup, and business ought to back itup, and we think governmentpolicy should as well.

Start With a CouncilMR. BUSSEY: I’m going to ask BillGreen to talk a little bit aboutthe second item: setting up acouncil for an educated workforce. This is probably the onlytime that I’ve seen business actu-ally ask for more government.WILLIAM GREEN: We weren’t ask-ing for more government; wewere asking for more effectiveleadership on this issue.

If you stand back and look atit, everyone talks a good gameon education and we continue tolose ground. A lot more smokethan fire.

There were advocates in ourroom for pre-K, right up throughbuilding more world-class insti-tutions. But we need to connectthe dots. I think we need a na-tional agenda that focuses on anoutcome. There’s a theme thatruns through there about creat-ing talent.

Even within the government,we need to connect the dots be-tween our Education, Labor and

Commerce departments. Andhow do we get business to alignwith that to make sure we’rebuilding the talent we need tocompete, as opposed to what weget today?

Right now, on every measure,we’re slipping. There are a lot ofimportant initiatives and agen-das and pockets of success, [but]if we don’t have a nationalagenda to be tops in the world interms of education and a tal-ented work force, we aren’t go-ing to get there. Things we needto be doing include rethinkingthe whole distribution and deliv-ery system for how we educatetalent in this country.

Our most important priorityis about the education system inthis country and we need to,both business and government,treat it as our most importantpriority. It’s lost a little lusterand a little visibility with all theother issues that we seem tohave on the table these days.

Aim for Top FiveMR. CHAMBERS: We agreed it hadhurt us to say we ought to be inthe top five, because when havewe in America said we’ll behappy in the top five? But weought to put a council togetherto bring us to the top five, andbusinesses must be willing toput our dollars and our own re-sources behind carrying our partof this policy approach. It re-quires an ownership, and anownership by both political par-ties, but especially by the Obamaadministration.

MR. BUSSEY: Our third recom-mendation—reward effectiveteaching—gets more into theguts of how our schools are op-erating. Government, school dis-tricts and unions should devise atransparent method of recogniz-ing and financially rewardinggood teaching, and teachersdeemed ineffective should be de-nied tenure and removed.RANDALL STEPHENSON: The firstthing we have to be able to do isperformance manage. And youcannot performance manage ifyou don’t have the ability to hireand fire and to compensate forthe kind of performance andoutcomes that you’re looking for.

With the right leadership andthe right performance manage-ment criteria, you can move theneedle. And you can do itthrough unionized or nonunion-ized work forces.

MR. BUSSEY: Why don’t you ex-plain the group’s reasoning be-hind advocating a world-classteaching corps. In many success-ful economies, the teaching corpsis recruited out of the top 10%,15%, 20% of college graduates,but in our country, it’s the re-verse; a disproportionate num-ber of teachers are coming outof, roughly, the bottom quartileof our graduating classes.MR. STEPHENSON: In our society,if you don’t compensate for it,you’re not going to get the best.So we think you’re going to haveto address this compensation is-sue and be prepared to pay thebest and the brightest to get thetop echelons out of the bestschools to come and teach. AndI don’t think you move the nee-dle absent that.MR. GREEN: I think, some of us,we lump teachers all together.The fact is, there’s a great differ-ence in the people, and we needto make sure we have a profes-sion that’s at the top of the foodchain—one that is respected.MR. CHAMBERS: One of the most

hard-hitting comments duringour session was when one of ourcolleagues said, “I just attendedone of the education sessionswith a group of developing coun-tries and they were all focusedon how their work force cancompete versus India and Chinaand other major, emerging coun-tries. They neither consideredthe U.S. as somebody theywanted to learn from or some-body they considered a threat.”And that really says it all.

This is a problem that causespeople not to have jobs today,because we haven’t trained ouryoung people to learn and tolearn on the job in new capabili-ties. And if we don’t do it for thenext generation, we’ll miss ourwindow forever.

Role of ParentsMR. BUSSEY: Our fifth item: Mo-bilize parents for change. Therewas a sense in the group thatparents just aren’t getting it, andthat the dire state of educationwill affect their children’s futurein ways that they, perhaps, arenot considering.MR. CHAMBERS: We won’t makeit happen without the parentsbeing mobilized to say, “It’s un-acceptable for my child to havethe education we do, which willnot allow them to have a higherstandard of living than I have.”We must give them access to thedata that first shows why this isoccurring, that lets them com-pare their own schools to otherschools in the vicinity, the na-tion and around the world, andthat helps them to intervenewhen progress isn’t occurring.MR. GREEN: When we look atother countries—emerging mar-kets, if you will—what’s differentabout their education systems?Personal responsibility and fam-ily values toward education.

How do we make the valueproposition clear? How do wemake people understand thatthey not only need to getthrough the system, but theyneed post-secondary education?How do we get parents to advo-cate and be more demanding ofwhat the system produces in or-der so their children have oppor-tunities? Parents and individualresponsibility have an importantrole to play.MR. STEPHENSON: At AT&T, wehire a lot of people that are justhigh-school educated. We can’t[outsource] people who climbwireless towers and hang anten-nas, right? That has to be donehere in the United States by hig-h-school-educated talent. Andthe reality is, the talent is get-ting more and more dilutedthat’s coming out of high schoolright now.

Parents have to realize thattheir kids are falling behind, andthat this just results in lower op-portunities and income for them.

View From the CapitolALAN MURRAY: Congressman JoeSestak is a member of the HouseCommittee on Education and La-bor. He is a Pennsylvania Demo-crat, a former U.S. Navy admiral,a Harvard Ph.D. and is runningfor the Senate. We asked him torespond to the priorities set byour CEO panel.JOE SESTAK: I am on the educa-tion committee because of myexperience in the Navy. I thinkthis is important, because theNavy and the other services aretrying to address this issuemuch better than our nation as awhole. You cannot be promotedin the Navy today unless you’veearned an associate’s college de-

gree in a technology.There has to be a continuum

of learning, which is one of yourrecommendations. No longer canyou just learn a trade; that tradeis going to change over time.And it has to.

Early intervention is abso-lutely critical, too. We all knowthe facts; you put $1 into pre-Kor Head Start and you get $7 af-terwards, after high school. Any-body who has gone to pre-K onaverage makes 33% more duringtheir lifetime.

Today, only 3% of all busi-nesses that have revenues over$1 million are owned by a personwho’s a minority. And yet, by2050, they will be 50% of ourpopulation. Only one out of 17Hispanics or African-Americanscan actually open up a newspa-per, go into a specialized section,pull out information and discussit. Probably about 1 out of every12 African Americans can dofractions at the age of 17. Thatcompares to about 7 or 8 out ofevery 10 of whites. This is a na-tional security issue.

Someone said this was yourNo. 1 topic; it is. I think Presi-dent Bush had it absolutelyright—and I’m a Demo-crat—when he tried to do NoChild Left Behind, and tried toinstill accountability into oursystems. Today, 69% of eighth-grade math teachers are neithercertified nor have a degree inmathematics; 93% of all teachers

in fifth through eighth gradewho teach science are neithercertified nor have a degree inscience.

Think tanks tell us that thegreat American promise for thevery first time in our history hasbeen broken. That is, that yourchildren will have an opportu-

nity, just an opportunity, basedupon their God-given talents, todo better than their parents.

Those in their 30s today arethe very first generation thatstatistically has done worse thantheir parents. And I honestly be-lieve that the long pole in thistent is education. y

big engine when it comes to em-ployment. And small busi-ness—and all of us—are suffer-ing from, what’s going to happento us? What’s going to happen intaxation? How much more taxare we going to have to pay?What’s going to happen withcap-and-trade? How much isthat going to cost us? What’s go-ing to happen with health care?

And when you see a smallbusinessman who employs 12 or15 people, and he starts addingup all these uncertainties, he be-comes very risk-averse. And thenhe goes into the market andtries to borrow money, and capi-tal availability for a small busi-ness is not there.

So therefore, really, this un-certainty is a big, big concern.And there’s not a lot of easy an-swers to it because there’s anawful lot on the agenda of theadministration and Congressthat is adding to that uncer-tainty and it continues to pileonto the uncertainty.

MR. WESSEL: Ken Chenault, doyou want to speak about trade?MR. CHENAULT: I think it’s obvi-ous why we need a global tradepact. I think another point thatwe need to emphasize, though, isthe more trade we can do out-side the U.S., we actually do cre-ate jobs in the U.S. And that’s amessage that needs to get outthere. But trade is critical forthe future.

MR. WESSEL: And Gail Kelly?MS. KELLY: Tax reform as a keypriority—certainly it’s a priorityin my own country, Australia, aswell. It will help to reduce un-certainty and build confidence,build a growth agenda. And Ithink the key theme here for uswas one of encouraging savingsand investment.

The Role of BankersMR. WESSEL: Could I ask you totalk a little bit about how Amer-ica looks to the rest of the worldright now?MS. KELLY: One of the keythemes for us is a need for all ofus to rebuild trust. That seems,to me, to be something that weshould take very seriously. And

ContinuedfrompageR8

as a bank and a financier myself,it’s certainly something that wetake seriously in my country, aswell.

What that needs, obviously, isa clear regulation, not overregu-lation, and understanding theconsequences and timing aroundthat. It needs global cooperation.It certainly needs transparency.And it needs bankers and finan-ciers, and others no doubt, to betalking a very clear, clear lan-guage that people understand.We tend to, as bankers, talk inquite arcane language about be-ing intermediaries and transmis-sion of credit and all these sortsof things that no one actuallyunderstands.

And I think it’s important forus to describe what our role isand how we, in fact, facilitategrowth within the economy, andthen stand behind our actionsand through our conduct, andactually rebuild trust in the com-munities that we serve.

From Here to ThereMR. WESSEL: Mr. Chenault, itseemed that there was a sub-stantial agreement in the groupabout the objectives of all this,and not necessarily agreementon the best means to get there.Some people were in favor ofmore targeted tax credits forjobs than others; some peoplewere in favor of different ap-proaches to the financial system.

How do you think that Ameri-can companies can best engagethe administration and movethings in what you feel is a fa-vorable direction without endingup with, as you pointed out, ev-ery industry coming forwardwith, here’s my five “wants?”MR. CHENAULT: I think we’ve gotto create a pathway. And so forus, the pathway is jobs. Then weneed to understand, what arethe programs? If we’re talkingabout putting in a regulation,what will be the impact on jobcreation? Don’t tell me thatyou’re going to put in a regula-tion here and it is unrelated, be-cause that’s part of the issue, isthat the dots don’t get con-nected.

If I can be parochial for asecond, on the credit-card bill,one of the reasons why credit isnot available is because youcan’t do risk-based pricing any-more. So the reality is that peo-ple are not going to extend

credit if they can’t price for it.And that is related to jobs. But ifyou argue on a separate issue,you lose.

The Senator’s ResponseJOHN McCAIN: I’d like to tell youwhat I think is happening in Ari-zona and across America.

I have never seen anythinglike I am seeing in America to-day. My home state of Arizona isthe second hardest-hit state. Wehave real unemployment around17%. The level of anger and frus-tration and the anger is directedat what we do in Washingtonand what you do on Wall Street.

Every day, I encounter some-body who is a small-businessperson who not only can’t get aline of credit but they’re losing aline of credit.

Now, you may say that you’retrying to get credit to smallbusiness; you may say you’retrying to help small business.I’m telling you, they don’t be-lieve that. They don’t believethat at all.

They’re angry and they’re fedup and they’re going to electpeople in 2010—mostly Republi-cans because it’s a Democrat ad-ministration—and they’re goingto be protectionist and they’regoing to be anti-capitalist andthey’re going to want changeand they’re going to want regu-lation and they’re going to enactlegislation that is going to beharmful to you.

Our community banks are go-ing under and continue to go un-der, and people are losing theirhomes, their jobs.

I had a town hall meeting theday before yesterday in King-man, Ariz. A young womanstands up, tears streaming downher face. She has two kids; sheand her husband lost their job;they’re moving out of theirhouse that day.

I have never seen anythinglike it. And all I can tell you isthat unless something changespretty quick, you will see anelection in 2010, the likes ofwhich we have not seen proba-bly since 1982 or 1994, whenthere were bigger changes. Andthis will be bigger than that. Somy urgent plea to you is, thinkof the small-business personwho is the engine of the econ-omy, who creates jobs in Amer-ica, who is literally unable to geta line of credit anywhere. y

Economy

John T. Chambers

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AnEducatedWork ForceRandall L. Stephenson

AN EDUCATED WORK FORCECO-CHAIRS:

JOHN T. CHAMBERS Chairmanand CEO, Cisco Systems Inc.

WILLIAM D. GREEN Chairmanand CEO, Accenture

RANDALL L. STEPHENSONChairman, President andCEO, AT&T Inc.

POLICY PERSPECTIVE:

JOE SESTAK U.S. Representative(D., Pa.)

The Top Five Recommendations1. EDUCATION IS OUR TOP PRIORITY

Education is our top national priority—well ahead ofhealth care, climate change and financial regulatory re-form—and government and business policies need to re-flect that. If we don’t address this, we endanger our chil-dren, economy, businesses and national security.

2. COUNCIL FOR EDUCATED WORK FORCECreate a national council for an educated work force

comprised of the secretaries of education, labor and com-merce, to coordinate government activity with business toput the U.S. in the top five countries in the world for edu-cation.

3. REWARD EFFECTIVE TEACHINGGovernment should devise, with the school districts and

unions, a transparent method of recognizing and finan-cially rewarding good teaching. Teachers deemed ineffec-tive should be denied tenure and removed.

4. WORLD-CLASS TEACHER CORPSAttract and retain the best and the brightest to be our

teachers. We need a world-class teacher corps in the publicschools with top credentials. We need to increase the stat-ure of teachers, which isn’t possible without addressingthe issue of pay.

5. MOBILIZE PARENTS FOR CHANGEEducate parents about the consequences of the dire

state of the education system for their children’s future.Mobilize them to invest their time in their children and inthe system. Parents and the school system should havereal-time data and insight into their child’s progressagainst standards and their global peers, to allow parentsto intervene quickly.

R10 Monday, November 23, 2009 THE WALL STREET JOURNAL.

I f there’s any place wherepretty much every issuefacing Washington comestogether, it’s the budget.Whatever the sub-

ject—education, health care,trade, energy, whatever—thebudget is front and center.

Peter Orszag, director of theWhite House Office of Manage-ment and Budget, talked to TheWall Street Journal’s David Wes-sel about where the budget defi-cit is now, where he wants it togo, and how he hopes to getthere. Here are edited excerptsof that discussion.DAVID WESSEL: I told Peter thatthere were a lot of skeptics inthe audience, and that I was go-ing to talk about, in the Chinesestyle, the three skeptics. And thefirst skeptic, Peter, is that thereare a lot of people who are notconvinced that anything they seein health bills pending on the Hillwill actually, in your word,“bend” the cost curve. So whatmakes you so sure that this pro-cess is going to produce some-thing that will slow the growthof health-care costs?PETER ORSZAG: The way I look atit is that there are four key un-derpinnings of a fiscally respon-sible health bill. The first is thatit has to be deficit-neutral overthe first decade of its existence,and then deficit-reducing there-after, under scoring from theCongressional Budget Office.

Second, that it include someincentive for more efficiency inthe private sector. For example,the Senate finance bill has an ex-cise tax on high-cost insuranceplans, which would create an in-centive for more efficient privateplans.

Third, that it include a Medi-care commission so that there isa continuous improvement loop,or cycle, and we have a built-inprocess where it’s clear that costcontainment and quality im-provement do not end with the

legislation.And then, finally, a set of de-

livery-system reforms so that westart moving toward paying forhigher-quality care rather thanmore care. And the legislationincludes a variety ofthings—testing out accountable-care organizations, bundled pay-ments, penalties for high read-missions rates, and so on.

But with those four key con-ditions, this represents, perhaps,the most important piece of leg-islation and more cost contain-ment than has ever been con-tained in legislation before.

Lessons LearnedMR. WESSEL: Let me ask youabout two of them. The first is,we’re all familiar with pieces oflegislation that promise things,like we’re going to have account-able-care organizations or we’regoing to have penalties for hos-pitals that fail to successfullytreat their patients and they’rereadmitted.

And then when the billpasses, it’s a pilot program thatwill be tried in three congres-sional districts and 40 yearsfrom now, after the Rand Corpo-ration gets done studying it,we’ll think about maybe puttingit in legislation. So is there somemechanism by which lessonslearned can be implementedwithout a vote of Congress?MR. ORSZAG: Well, I think that’sone of the reasons why theMedicare commission is so im-portant. Let’s step back. We havea huge amount of variation inhow medicine is practiced in theU.S. Even at our leading medicalcenters, costs at some of themare twice as high as at others,and the results are no better. Sowe are practicing medicine indramatically different ways.

And there are huge opportu-nities to capture some combina-tion of higher quality and lowercost. To do that, we need to digi-

tize the system. We need to beaggressively examining whatworks and what doesn’t. Andthen we need to be doing otherthings—moving toward account-able-care organizations, whathave you.

The whole point of a Medi-care commission is to provide away as you learn things to getthem implemented into Medicarepolicy and then spread through-out the rest of the health systemin a much more facile and adeptway.

MR. WESSEL: Without the politi-cal system having to ratify them.MR. ORSZAG: The political sys-tem would have an opportunityto ratify them but the key thingis if it didn’t act, they wouldtake effect.

MR. WESSEL: And the tax on Ca-dillac health plans: If it works,and you’ve discouraged peoplefrom having Cadillac plans, willyou get any revenue from it?MR. ORSZAG: Yes. And in fact,this is something that I think hasbeen underappreciated. The ma-jority of the revenue will comenot from insurance companies,but because insurance compa-nies and employers will be ableto redesign plans in a more effi-cient way, which will then—ac-cording to not only economictheory but all the evidence thatwe have—raise take-home pay.The Joint Committee on Taxa-tion estimates that the versionthat was in the Senate FinanceCommittee bill would raisewages by $300 billion over thenext decade. And the federalgovernment then collects somerevenue on that piece.

The Deficit’s DirectionMR. WESSEL: The second skepticis deficit reduction. We have a10%-of-GDP deficit now. You’vesaid that we ought to be, in thefuture, somewhere around 3%.

But let’s talk about the next cou-ple of years. How much deficitreduction would you consider asuccess in the next two or threeyears?MR. ORSZAG: We have, over thenext couple of years, a difficultline to walk. Again, step back.We have to realize what an ex-ceptional period we are living in.Normally, as I’ve written aboutextensively, deficits raise inter-est rates and/or encourage bor-rowing from abroad. Right now,that is not what’s happening be-cause private borrowing has im-ploded.

MR. WESSEL: And we hope thiscondition does not last.MR. ORSZAG: And we do notwant this condition to last be-cause it reflects the extraordi-nary weakness that we’ve beenexperiencing in the economy. Butfor right now, the Treasury De-partment, effectively, is the lastborrower left standing.

As the economy picks upagain and borrowing from theprivate sector picks up—bothhousehold firm and, frankly, fi-nancial firm borrowing—that sit-uation will reverse. And what wewant to do is continue the assis-tance that has been provided tohelp move the economy backfrom the brink.

We don’t want to repeat theexperience of 1937 where wewithdraw fiscal assistance tooquickly but we have these out-year deficits which are too high.And as the situation flips, defi-cits become problematic; theycrowd out private investment;they encourage borrowing fromabroad. We need to get ahead ofthat problem, but that’s a diffi-cult line to walk.

MR. WESSEL: So is it reasonableto say we will cut the deficit byone percentage point of GDP ayear over the next five years? Isthat too aggressive? What would

you consider success?MR. ORSZAG: Well, you havemapped out the right path,which is—last year, the deficitwas 10% of GDP; in the mediumterm out in 2015, 2016, 2017, weneed to get to something around3% of the economy.

MR. WESSEL: How are you goingto reduce the deficit if you’ve al-ready done health-care costs,you may already do taxes on therich, you’re not going to do reve-nues from cap-and-trade, andthe president says he won’t taxpeople under $250,000 a year.What’s the business plan to re-duce the deficit in the mediumterm if you don’t do thosethings? What’s left?MR. ORSZAG: That is exactlywhat the fiscal year 2011 budgetis all about.

MR. WESSEL: So in the next bud-get, you will show us a path toget the deficit down to 3% ofGDP.MR. ORSZAG: Yes.

MR. WESSEL: And you’re not go-ing to touch people who makeunder $250,000?MR. ORSZAG: I’m not going tofast-forward to exactly what theconfiguration is, but we havebeen clear that we need to get tothis sustainable level.

Walking the WalkMR. WESSEL: The third skepticsays the administration says itappreciates markets and the pri-vate sector but doesn’t walk thewalk. There’s nobody in the ad-ministration who’s met a payrollat a senior position, and the un-certainty created by dealing withtaxes, energy, health care all atonce has actually led people tobelieve that maybe you don’tcare so much about the role thatbusiness plays in creating jobs.You’re not sensitive to the ani-mal spirits that you are dampingby your actions. What say you?MR. ORSZAG: Well, I wouldn’t behere if I didn’t care about yourviews. I think there’s active dis-cussion. I look around the roomand I’ve met with many of youand I think other administrationofficials have.

So I think there’s an activedesire for input from corporateAmerica. It’s clearly where thelocus of job activity will have tocome from. And frankly, it alsoprovides not just guidance onpolicy questions, but also a sortof supplement to the economicdata that we’re getting in be-cause the views that are ex-pressed in all of your operationsare very useful, and, frankly,feed into our policy discussions,whether it’s on discussions thatare occurring about how tospark job growth or the outlookfor 2010, and what have you.

MR. WESSEL: Sen. McCain spokesomewhat alarmingly about akind of hostility—he mentionedWall Street, in particular. Hepredicted that without some re-duction in the unemploymentrate that the next election mightbring a whole cast of protection-ist members of Congress, someof them from the protectionistwing of the Republican Party.What do you tell businessmenthat they should do in order toprevent a backlash that leads topressure on you to do thingsthat, if you were left to your owndevices, you wouldn’t do?MR. ORSZAG: There are a few

things. One is that, clearly, someof the excesses of the past needto be avoided. And that may be alittle awkward to say, but it’s thetruth. I think you do risk back-lash by just returning to whatwere the norms of the late 1990sand early 2000s.

Beyond that, the long-termfundamentals of the economyare going to be driven by thingsthat corporate leaders have longemphasized: a functioning andviable education system; ahealth-care system that is nolonger imposing excessive costson the American economy; a dy-namic labor market—all thethings that we’re very interest-ing in doing. And I think busi-nesses pointing the way in manyof those areas is the most con-structive step that could betaken.

Blaming CompensationMR. WESSEL: Do you think thatcorporate compensation was acause of the crisis we had, orwas the response to corporatecompensation a political reac-tion that is necessary becausethe public’s angry, rather thanactually a driver of the crisis?MR. ORSZAG: If you look espe-cially in the financial sector,there are legitimate questionsthat have been raised about thestructure of compensation andwhether it led to excessive risk-taking and excessive pressure onfirms’ risk-management systems.And I think those are very im-portant questions that are feed-ing into the discussion over fi-nancial regulatory reform.

MR. WESSEL: So compensationwas one of the causes because itrewarded—MR. ORSZAG: I think the struc-ture of compensation was oneof—I’m not saying it was theonly—but was a contributingcause. The incentives were suchthat there was an incentive formore risk-taking than the riskmanagement systems could han-dle.

MR. WESSEL: Finally, I think thatthere are a lot of people in thisroom who wonder if our politicalsystem is so dysfunctional that itcan never deal with anythingshort of a crisis; that we have asituation where—this is to quoteyour successor at the Congres-sional Budget Office—the coun-try faces “a fundamental discon-nect between the services peopleexpect the government to pro-vide, particularly in the form ofbenefits for older Americans,and the tax revenues that peopleare willing to send to the govern-ment to finance those benefits.”

What confidence do you havethat the political system, with allthe warts, the campaign finance,the cable TV and everything, cangrapple with these kinds of is-sues? Why should we be optimis-tic—if we should be?MR. ORSZAG: I’m not going todiscount the difficulties in-volved. They’re there. But takethose four pillars that I had putforward for a fiscally responsiblehealth reform. I think we arecloser to achieving that thanever before, and the argumentthat the political system couldn’ttackle something that big wouldbe belied by that achievement.So I’m not going to discount thedifficulties involved in the sys-tem that we have. They’re there,but that’s not to say that prog-ress isn’t possible. y

Bigger and BiggerPeter Orszag on the budget deficit—and what to do about it

A t last year’s CEOCouncil, PresidentBarack Obama’s chiefof staff, Rahm Eman-uel, said you should

“never let a serious crisis go towaste.” Mr. Emanuel talked toThe Wall Street Journal’s GeraldF. Seib about how the adminis-tration has fared since then, andhow the agenda looks movingforward. Here are edited ex-cerpts of that discussion:

What Will Pass?GERALD SEIB: Let’s talk about theagenda. You’ve got three giantdomestic legislative priorities:health care, climate change/en-ergy, and financial regulatoryreform.RAHM EMANUEL: And I wouldadd education reform.

MR. SEIB: Which of those will getdone this year, which will getdone next year and which willhave to wait until after the 2010midterm elections?MR. EMANUEL: Let’s just go withthe overwhelming priority:health care. We’ve gotten thatout of the House. Seven presi-dents have tried this. Nobodyhas accomplished what we’vejust accomplished. The Senatewill now take it up. I feel confi-dent we’ll get it done.

I think if I sit here and makepredictions on timing, then allanybody has to do is sit thereand try to stop you from doing

the timing. That becomes themeasure of success or failure.

The key component, will thehealth-care bill have major cost-control containment in it? Will ithave the ability to expand cover-age to those who are uninsuredwho are driving up the cost ofthe system? Will it have key re-forms in the system as it relatesto how we deliver [health care].That’s what’s important, andwe’re going to take the time toget it right.

MR. SEIB: And financial regula-tory reform?MR. EMANUEL: I think in the nexttwo weeks, the House will take itto the floor. And so we will getthat done, as well.

The Question of TenorMR. SEIB: I would guess a ques-tion that’s on the minds of a lotof people out there has to dowith the tenor of the rhetoric inthis administration toward thebusiness community and towardfree enterprise. And there aredoubts about that, there’s con-cern about it, there may even befear about it.MR. EMANUEL: First of all, anumber of CEOs have talked tothe president, as well as me, andsaid that the improved image ofthe U.S. abroad has been essen-tial to their business.

Number two, I think the pres-ident talked about the impor-tance of trade today in the Far

East.And three, as you know, he’s

had a series of meetings with in-dividual CEOs, groups of CEOs inthe sense of industry cross-sec-tion, but also about the impor-tance of sense of responsibility.

The president believes firmlythat the capacity of the Ameri-can economy grows and willgrow because of what the pri-vate sector does. He did notcome into office to be an inves-tor in banks, to be an investor inthe auto industry. That is notwhy I got into office; it’s notwhy he ran for president. No-body wanted to do that. So restassured, the capacity of theUnited States’ economy to growand to be what it can be is goingto come from the private sector,not from government.

The role of the government iswhat he would describe as some-what set conditions: Help havean educated and trained workforce; help give you clarity of theregulatory environment you’reworking in; invest in basic re-search and development; setconditions so you can grow yourbusinesses; and then get out ofthe way. That is, I think, thephilosophical approach.

I understand it from the busi-ness side, which is you thoughtthere may have been some hos-tility. Understand it from theother side, of people who arerepresenting the American peo-ple who are being asked to pay

for something that they had notake on, no responsibility to.

Deficit ReductionMR. SEIB: What can you tell peo-ple in this audience that thepresident will say in January ofnext year in a State of the Unionaddress that will make anybodyfeel any better about the deficit?MR. EMANUEL: Well, first of all,I’m not going to steal his thun-der. Number two, it is foremoston his mind and the mind of theeconomic team in the sense ofdealing with the long-term fiscalhealth of the country. It’ll be akey component of the joint ses-sion of the State of the Union.

We’ll have differences amongus on health care. That’s whathealthy public-policy debates areabout. You cannot control thedeficit in this country withoutdealing with health-care costs.You can’t control what happensin your company without gettinghealth-care costs under control.And that’s true for the UnitedStates government.

And while we are dealingwith coverage, every debate byevery president going back toTeddy Roosevelt who dealt withhealth care dealt with the issueof coverage.

This is the first presidentwho’s put the issue of cost andcost containment on par withthe expansion of coverage. Andany bill that he signs will haveto be deficit-neutral. y

The President’s AgendaRahm Emanuel discusses what he expect to pass. (Everything.)

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U nemployment is highand likely to remainso for some timeeven as the economystarts to recover. In

the wake of the recession, realwages will have been stagnantfor years. In this challenging en-vironment, what is the outlookfor the business-labor relation-ship? How can unions and work-ers expect to fare in the work-place, and in Washington?

The Wall Street Journal’sPaul Gigot moderated a discus-sion on these topics. Joining himwere Andy Stern, president ofthe Service Employees Interna-tional Union, and Rep. Paul Ryanof Wisconsin, the ranking Re-publican on the House BudgetCommittee.

‘In a Mess’PAUL GIGOT: Andy, let me startwith you. You invested quite abit—the union movement did—insupporting President Obama andthe Congress. And right now wehave an unemployment rate of10.2%; the public option would

seem to be hanging in the bal-ance as part of health-care re-form; card check [making it eas-ier for unions to organizeworkers] has not even had avote yet. Is this what you ex-pected from the administration?Do you want more on behalf oflabor from this administration?ANDY STERN: What I’d say I wantmore for is America right now,and we have a president who hassaid and done a number of im-portant things. One is that we’renot going to measure the econ-omy by GDP growth alone, butalso by wage growth and jobgrowth, which obviously is ahuge problem right now. Two,he’s made a series of decisionsabout investments in things thatare in the long term important.

Having said that, I think thecountry’s in a mess. As Ameri-cans we have not yet graspedthat we’re really in the midst ofa third economic revolution, andthis is a different economy thanmy father’s and grandfather’s.

MR. GIGOT: What do you do right

now? Do we need another stimu-lus?MR. STERN: Yes, we need to findjobs. I don’t think we can have a$500 billion stimulus that wecan’t pay for in some particularway.

But the question really is, be-sides trying to dig ourselves outof a crisis, what is the plan forAmerica? And I don’t think it’sgoing further into debt, printingmore money, and I don’t thinkit’s about competing amongstourselves; it’s about loving thiscountry and trying to figure outa different way forward.

MR. GIGOT: So what would beyour two or three big priorities?I assume one of them would beuniversal health care.MR. STERN: Absolutely. I don’tthink we can compete againstcountries around the worldwhen we’re the only industrialnation that puts the price ofhealth care on the cost of ourproducts. We need to get startedon bending the cost curve, and Ido think this bill does that.

MR. GIGOT: You’ve said Europedoes a better job by its workersthan the U.S. has done. But oneof the consequences of the waythey structure their economy is ahigh structural unemploymentrate—7%, 8%, even in goodtimes. Is that something you’rewilling to live with?MR. STERN: If we look at Ger-many right now, they’ve donepretty well coming out of thissituation with jobs. They’ve keptunemployment lower than wehave, and are on a faster re-bound than we are.

The question in any countryis, where is the floor? China hasno floor—they’ve just put in aminimum wage. Is the floor $7.75an hour? Is it the ability to get apublic education, go to college,make a certain minimum wage,have health care and figure out away to retire? I think the U.S.has way too low of a floor, waytoo high of a ceiling, and that weshould compress things andraise the floor. People will com-pete, it won’t be equal outcomes,but there will be much more

equal opportunity and a strongersafety net.

Clash of PhilosophiesMR. GIGOT: Paul, do you think thecountry is willing to live withthat kind of an unemploymentrate? Is that what we’re going toget if we end up with the health-care bill passing?PAUL RYAN: If you pile all of thisthat’s being pushed throughCongress—health care, cap-and-trade, everything else—what youwill basically have accomplishedis, this completes the vision ofthe New Deal. So what I see usdoing is, we’re practicing 1930seconomics right now. We’relearning all of the wrong lessonsfrom that.

We’re making a decision,consciously or not, as towhether or not we’re going tohave a European-style social-welfare state versus what Iwould call the American idea.The idea of America is that weembrace the principles of liberty,freedom, free enterprise, self-de-termination, and so there’s twophilosophies that are at warwith one another here.

We believe you should have asafety net in this country to helppeople who cannot help them-selves, to help people whenthey’re down on their luck. Butwe don’t want to have a systemwhere you convert that safetynet into a hammock that lullspeople into lives of complacencyand dependency upon the state;that drains their ability andtheir will to make the most oftheir lives, to reach their poten-tial. And I fear that is the culmi-nation of all of these efforts.

The Reagan revolution endedin 2008; a new realignment isoccurring in America. The ques-tion is, which way will it go?

How to Boost WagesMR. GIGOT: Paul, we’ve seenwages that have not grownacross the last decade. Republi-cans were in office for eightyears of that time. What do youdo to make sure that not just thepeople in this room but the aver-age American has a rising stan-dard of living?REP. RYAN: The big mistake ofour majority in the past was, we

didn’t do all the domestic thingswe needed to do. We didn’ttackle health-care reform like weshould have; we didn’t take onthe entitlements.

What should we do to getwages growing? Pro-growth eco-nomics means: Recognize global-ization is here. Our tax system isvery uncompetitive. Let’s get asystem that recognizes the needto compete internationally, sowe can build more things here,export things overseas.MR. STERN: This whole idea thatwe’re going to let the U.S. mar-ket, in a global marketplace,somehow produce wage distribu-tion has not worked. We hadproductivity gains for 30 years;we decoupled them from wageincreases. Alan Greenspan—Iguess the new American revolu-tionary—said the gap betweenthe rich and the rest of the pop-ulation is growing so wide andso fast it threatens democraticcapitalism. Bill Clinton said hecreated 20 million jobs, and hewas right—most of my membershad two or three of them.REP. RYAN: People who work forcompanies that export make 15%higher wages on average. Thequestion is, what are we doingto make our companies, ourworkers, our producers, morecompetitive? And do we havethe incentive structure so thenext Google, the next Microsoft,the next Harley-Davidson can becreated? Do you have an entre-preneurial culture, open entry tothe marketplace, for investorsand entrepreneurs to create jobs,which then can give us the in-come lift that we need in thiscountry and compete in the glo-bal economy?

MR. GIGOT: In all the time I’vebeen covering politics andwatching the business commu-nity, I’ve never seen a single is-sue on which there is moreunited opposition, from smallbusiness to big business, as cardcheck. They view it as somethingthat simply makes it muchharder for them to compete. Thisis one of your priorities; tellthem why they’re wrong.MR. STERN: Because Americanworkers haven’t gotten a raise ina very long time. We’ve decou-pled productivity from wages.And unions happen to be, de-spite what you think about themideologically, a way to distributewealth that doesn’t cost the gov-ernment a dime. So if you’relooking for a disaggregated, non-governmental way, conservativesshould be for it. y

The Business-Labor DivideAndy Stern and Rep. Paul Ryan on how unions will fare in the current environment

T he U.S. economic sys-tem has been testedto a degree unseen inmany years. How hasthe model fared? And

what are the challenges movingforward?

To talk about these and otherissues, The Wall Street Journal’sAlan Murray sat down withthree corporate titans: RupertMurdoch, chairman and chief ex-ecutive of News Corp., whichowns Dow Jones & Co, publisherof this newspaper; Carlos SlimHelú, who owns a majority stakein Telefonos de Mexico S.A.B deC.V.; and Ratan N. Tata, chairmanof Tata Motors Ltd. and TataGroup, India’s largest conglom-erate. Here are edited excerptsof that conversation:

An Economic Revival?ALAN MURRAY: We’ve beenthrough the worst year for oureconomy since the Great Depres-sion. The stock market seems tohave decided that it’s over and iscelebrating a revival. Fromwhere you sit, do you see aneconomy that’s reviving?RUPERT MURDOCH: Yes, a little. Ithink that if we can judge itfrom advertising and the mood,there’s a slight revival. I don’treally think it’s a big one. I thinkit’s an L-shaped revival. You’vegot a huge number of unem-ployed here in the U.S. today,and we won’t get that cured orthose people re-employed until

we get the formation of smallbusiness on a big scale.

And at the moment, themood in this country is clearlyan anti-business climate, and areal suspicion that we have apresident who doesn’t believe inthe market system. It’s not anoverstatement to say that per-ception exists—it may be awrong one, but it’s a very dam-aging one.

And while you havethat—and we know we’ve gotmore taxes coming, we knowwe’ve got more health chargescoming—the small man who’sabout to risk and start some-thing with some friends, or starta business, and employ 20 or100 people, is going to sit on hishands and just wait.

MR. MURRAY: But there’s an anti-business climate or perhaps anti-free market climate in part be-cause people have a sense thatthe system failed them. Is thereanything about this crisis thatwe’ve been through that shakesyour confidence as a great de-fender of the free-market sys-tem?MR. MURDOCH: No, not in theleast.

MR. MURRAY: Mr. Slim, when youlook at what’s happened in theU.S. over the course of the pasttwo years, do you see anythingthat makes you question Ameri-can-style capitalism?

MR. SLIM: No. And there aremany clear things that are hap-pening that are not changing.There will not be a change to themarket economy—innovation,technology, trade; globalizationis forever. And one of the big-gest successes in the world isChina; China is having successbecause they moved to this kindof economy.

MR. MURRAY: Mr. Tata, Indiaseems to have done compara-tively well during this year.Why?RATAN TATA: The situation in In-dia has been very different fromwhat it has been in the West.You had a collapse of the finan-cial system, banks holding toxicpaper, subprime investments.Due to overregulation, which allof us complain about in India,the banks in India were unableor did not have any of thesetainted instruments.

MR. MURRAY: But do you think itwas overregulation, or was it…MR. TATA: The banks are over-regulated. It has nothing to dowith what happened; I’m justsaying, as a result, the bankswere devoid of these types of in-struments.

Fears on the HorizonMR. MURRAY: If you had to citeone thing that worries you onthe economic horizon as we at-tempt to get back to where we

were a year and a half ago,what would that one thing be?MR. MURDOCH: I think the ad-ministration is in a terrible jamwith the deficit. They’re really ina pretty bad jam. But all we’regoing to hear—as soon as theyget this health-care bill through,if they get something throughthe Senate before the end of theyear—next year, it’s all going tobe jobs, jobs, deficit, deficit:What do we do about it? Andthat’s what they’re going to beconcentrating on.

MR. MURRAY: Mr. Tata, do youagree with that?MR. TATA: I think that that is areal concern. The way I wouldlook at the problems before us,is that as we have the difficultyof job losses, stagnation, etc.,protectionism will start toemerge as a factor. And theworld around us—which has be-come quite connected—we willstart to see barriers established.It’ll be a new order, bilateralismrather than global trade agree-ments, and that would botherme because it would be movingus back maybe 20, 30 years.

MR. MURRAY: And how do youprevent that?MR. TATA: I think prosperity andunemployment being dimin-ished, I don’t have a solution forthat, but obviously those wouldtend to be drivers in an oppositedirection.

MR. MURRAY: If you had a cer-tain amount of money to investin one part of the world, andyour choices were Mexico, India,the U.S., China, right now, look-ing at the situation that you seeout there, which of those fourwould you choose to invest in,and why?MR. SLIM: Latin America. Be-cause we have everything to do.We have to grow the market,most of the people are in pov-erty, or are not incorporated inthe market. You have there thepotential market, the potentialfor growth.

MR. MURRAY: Mr. Murdoch.Which of those countries wouldyou invest in right now?MR. MURDOCH: Oh, number onewould be India. As againstChina, it has a rule of law, it’s aninfinitely complicated country,but it has a huge advantage overother developing countries, inthat there is a rule of law, and itdoes work.

MR. MURRAY: China?MR. MURDOCH: China, which isremarkable, the wealththere—the disparities of wealthare incredible, incredible. Butyou never know. You know, ifsomeone doesn’t like you some-where, your partner is in jail onMonday morning or somethingand you’ve got no business. Forsafety, every time India, and foropportunity, India.

MR. MURRAY: Mr. Tata, which ofthose countries would you investin?MR. TATA: You know, as an In-dian, obviously, I would feel verycomfortable about putting themoney into India, but if youasked me where I would, in a to-tally free situation, want to in-vest, I would still invest in theU.S. I think the U.S. is a countrythat has repeatedly shown itsability to be entrepreneurial. Ithas faced several crises fromwhich it has emerged. And Ihave enormous faith in what theU.S. would do for the investorand for a person looking for op-portunities.

Enduring StrengthMR. MURRAY: And what aboutthe anti-business attitudes thatMr. Murdoch referred to? Is thatsomething that troubles you?MR. TATA: I really believe thatthere is a great strength inAmerican capitalism that cannotbe destroyed.

It exists in every single per-son. It exists in the ability ofanybody to be successful if theyhave the tenacity to do so. And Ithink that will, in fact, rule theday.MR. MURDOCH: Can I just chipin? I think those feelings willpass. I don’t think they’ll passsuddenly, but yes, there’s still ahuge entrepreneurial spirit inthis country ready to be letloose. y

WhereWe’re HeadingRupert Murdoch, Carlos Slim and Ratan Tata on the challenges facing the U.S. economy

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Rep. Paul Ryan

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Rupert Murdoch Carlos Slim Helú Ratan Tata

Andy Stern

R12 Monday, November 23, 2009 THE WALL STREET JOURNAL.

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