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© 2015 Dow Jones & Company. All Rights Reserved. THEWALL STREET JOURNAL. Tuesday, November 24, 2015 | R1

The world of business has greatly improved since The Wall Street Journal’s CEO Council first con-vened in 2008. Back then, uncertainty was so high it was unclear whether the lights would come onthe next day. The mood at this year’s gathering: upbeat.But hold the fiesta. The tragedy of the Paris terror attacks weighed on the gathering, though the

full implications weren’t clear. And there was the matter of growth. Fred Smith, chief executive of bell-wether FedEx Corp., described a world landscape beset by continued slow growth. When the CEOsat the conference were asked how many plan to increase investment in 2016, just a smattering ofhands went up.Here’s what the CEOs heard, and had to say, about growth, security and the coming leadership

change in Washington.—John Bussey

The Mood in the Corner OfficeAt the annual gathering of The Wall Street Journal’s

CEO Council, the talk was of Paris, growth,security and next year’s elections

JOURNAL REPORT

PAUL MORSE & RALPH ALSWANG/DOW JONES

“Youcannot

accuratelydo a

backgroundcheck on

10,000people.”MARCO RUBIO

“We wantto scrub thistrade agreementto make surethat it reachesand meets thestandards thatwe call for.”PAUL RYAN

“What we’vedone since

Dodd-Frankhas made

the systema lot safer.”

MARY JO WHITE

“I both loveinequalityand amterrifiedof it.”ANGUS DEATON

“The mostimmediatedanger we

face ismore of the

lone-wolfkind.”

ASH CARTER

“It’s just toooversimplifiedto say largecompaniescan’t innovate.”ARATI PRABHAKAR

Sen. Marco Rubio discusseshis agenda for immigration,refugees, tax policy and

the battle againstterrorism

R4

John Podesta of the Clintoncampaign and Neera Tandenof the Center for American

Progress give the Democraticperspective on ISIS,wages, taxes and

tradeR4

House Speaker Paul Ryanoffers his vision of what theRepublican Party should be

offering the electorateR5

Nobel laureate Angus Deatonsays he finds income inequal-ity both terrific and terrifying

R6

SEC Chairman Mary Jo Whitedelves into the agency’s

new rulesR7

Council of Economic AdvisersChairman Jason Furman andDouglas Holtz-Eakin of theAmerican Action Forumdiscuss how to spureconomic growth in

the U.S.R8

Education Secretary ArneDuncan tells how the U.S.

education system is failing togive students the skills the

economy needsR8

Strobe Talbott of Brookingsand Danielle Pletka of the

American Enterprise Instituteexplore the intricacies ofthe battle against ISIS

R10

Defense Secretary Ash Carteron how to defeat ISIS

R11

Pollsters Peter Hart and BillMcInturff discuss how theelectorate has changed

R12

Gen. Joseph F. Dunford Jr.tells what his career has

taught him about leadershipR12

Former Notre Dame coachLou Holtz stresses visionand values in leadership

R12

Leslie Dach, counselor to theHealth and Human Serviceschief, on the next phaseof the Affordable Care Act

R13

Sen. John Thune saysRepublican alternatives would

do a better job than theAffordable Care Act

R13

Darpa director Arati Prabhakaron what big companies

can do to innovateR13

Plus: The CEO Counciltask forces’ recommendations

in six key areasR10

INSIDE

R2 | Tuesday, November 24, 2015 THEWALL STREET JOURNAL.

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JOURNAL REPORT | CEO COUNCIL

(Chief executive officersexcept as noted)

Nicholas K. Akins,American Electric Power

Joel T. Allison, Baylor Scott& White Health

Mukesh Dhirubhai Ambani,Chairman, and ManagingDirector, RelianceIndustries Ltd.

Johan C. Aurik, ManagingPartner and Chairman,A.T. Kearney

Richard A. Barasch,Universal American Corp.

Mitch Barns, NielsenGeorge S. Barrett, Cardinal

Health Inc.John F. Barrett, Western &

Southern Financial GroupDominic Barton, Global

Managing Director,McKinsey & Co.

Josh Bayliss, Virgin GroupJeffrey L. Bewkes, Time

Warner Inc.Aneel Bhusri, Workday Inc.John P. Bilbrey, Hershey Co.Jean-Laurent Bonnafé, BNP

ParibasAna Botín, Executive Chair-

man, Banco SantanderBenjamin A. Breier, Kindred

HealthcareSamir Y. Brikho, Amec

Foster Wheeler PLCSteven A. Cahillane, NBTYGregory W. Cappelli, Apollo

Education Group Inc.Gregory C. Case, Aon PLCDominic Casserley, Willis

Group HoldingsTerrence W. Cavanaugh,

Erie Insurance GroupSteven H. Collis,

AmerisourceBergen Corp.Roger W. Crandall,

Massachusetts MutualLife Insurance Co.

Theodore F. Craver Jr.,Edison International

Fred Crawford, Co-CEO,AlixPartners LLP

Bal Das, Chairman, BGDHoldings LLC

Doug DeVos, President,Amway

Craig Donohue, ExecutiveChairman, OptionsClearing Corp.

Dean Douglas, Unify Inc.Francisco D’Souza,

Cognizant TechnologySolutions

Jim DuCharme, PrimeTherapeutics LLC

Rupert Duchesne, GroupChief Executive, Aimia

Colin Dyer, Jones LangLaSalle Inc.

Wolfgang Eder, voestalpineMatthew J. Espe,

Armstrong WorldIndustries Inc.

Thomas A. Fanning,Southern Co.

Scott D. Farmer, CintasThomas F. Farrell II,

Dominion Resources Inc.John Ferriola, Nucor Corp.Trevor Fetter, Tenet

Healthcare Corp.Andreas Fibig, International

Flavors & Fragrances Inc.Mark Fields, Ford Motor Co.Eric Foss, AramarkRobert C. Garrett,

Hackensack UniversityHealth Network

Richard Gelfond, IMAXPat Gelsinger, VMware Inc.Seifi Ghasemi, Air Products

& Chemicals Inc.Lynn J. Good, Duke EnergyRobert Greifeld, NasdaqJames Hagedorn, Scotts

Miracle-Gro Co.James B. Hebenstreit,

Bartlett & Co.Patricia A. Hemingway Hall,

Health Care Service Corp.Paul Hermelin, Group Chief

Executive, Capgemini SAThad Hill, Calpine Corp.Jacqueline Hinman, CH2M

HILL Cos.Lance Hockridge, AurizonDavid Holmberg, Highmark

HealthRobert J. Hugin, CelgeneDonald L. Jernigan,

Adventist Health SystemJohn D. Johns, Protective

Life Corp.Alex Karp, Palantir

TechnologiesDeclan Kelly,

Teneo Holdings

Christopher J. Klein,Fortune Brands Home &Security Inc.

Herbert V. Kohler Jr., Exec-utive Chairman, Kohler

Roger Krone, LeidosT K Kurien, Wipro Ltd.Thomas Lawson, FM GlobalDonald H. Layton,

Freddie MacJames Lentz, Toyota Motor

North AmericaRichard I. Lesser, Boston

Consulting GroupWilliam Lewis,

Dow Jones & Co.George Logothetis, Libra

GroupPeter S. Lowy, Co-CEO,

Westfield Corp.Tamara L. Lundgren,

Schnitzer Steel IndustriesStephen P. MacMillan,

Hologic Inc.Timothy J. Mayopoulos,

Fannie MaeLowell McAdam, Verizon

Communications Inc.John McAvoy, Consolidated

Edison Inc.Bill McDermott, SAP SEJim McGrann, VSP GlobalMichael M. McNamara, FlexLarry J. Merlo, CVS HealthJames S. Metcalf, USGAlex Molinaroli, Johnson

Controls Inc.Deanna Mulligan, Guardian

Life Insurance Co. ofAmerica

Rupert Murdoch, ExecutiveChairman, 21st CenturyFox and News Corp

Dennis Nally,Global Chairman,PricewaterhouseCoopersInternational Ltd.

Pierre Nanterme, AccentureShantanu Narayen, Adobe

Systems Inc.Indra K. Nooyi, PepsiCoGary Norcross, Fidelity

National InformationServices

John H. Noseworthy,Mayo Clinic

James F. O’Neil, QuantaServices Inc.

Dinesh C. Paliwal, HarmanInternational Industries

Gavin Patterson, BT GroupNeal Patterson, CernerStefano Pessina, Walgreens

Boots AllianceDouglas L. Peterson,

McGraw Hill FinancialC. Michael Petters, Hunting-

ton Ingalls Industries Inc.Nicholas T. Pinchuk, Snap-

On Inc.Thomas M. Priselac,

Cedars-Sinai HealthSystem

Thomas J. Quinlan III, R.R.Donnelley & Sons Co.

Rami Rahim, JuniperNetworks Inc.

Stephen S. Rasmussen,Nationwide MutualInsurance Co.

Martin H. Richenhagen,AGCO Corp.

Timothy M. Ring,C.R. Bard Inc.

Dan Rosensweig, Chegg Inc.Horacio Rozanski, Booz

Allen Hamilton Inc.Gisbert Rühl, Klöckner & Co.Stephen H. Rusckowski,

Quest DiagnosticsThomas L. Ryan, Service

Corp. InternationalScott Salmirs,

ABM Industries Inc.Kenneth A. Samet, MedStar

HealthDavid T. Seaton, Fluor Corp.Gregg M. Sherrill, TennecoKeith Skeoch, Standard Life

InvestmentsFrederick W. Smith, FedExSir Martin S. Sorrell, Group

CEO, WPP Group PLCKR Sridhar, Bloom EnergyTodd A. Stevens, California

Resources Corp.Jeff Storey, Level 3

Communications Inc.Christopher Swift, Hartford

Financial Services Group

Anthony R. Tersigni,Ascension

Mark Thierer, OptumRxRobert Thomson,

News CorpAdewale Tinubu, Group

Chief Executive, OandoFredric J. Tomczyk,

TD Ameritrade HoldingN.V. Tyagarajan, GenpactBernard J. Tyson, Kaiser

PermanenteMyron E. Ullman III,

Executive Chairman,J.C. Penney Co.

Erez Vigodman, Teva Phar-maceutical Industries Ltd.

Timothy R. Wallace, TrinityIndustries Inc.

Mark Weinberger, GlobalCEO, Ernst & Young

John D. Williams, DomtarJeffery W. Yabuki, FiservYang Yuanqing, LenovoHarold L. Yoh III, Day &

Zimmermann

PARTICIPATING GUESTSMartin Baily, Senior Fellow,

Brookings Institution;former Chairman, Councilof Economic Advisers

Ash Carter, U.S. Secretaryof Defense

Leslie Dach, Senior Coun-selor, U.S. Department ofHealth and HumanServices

Angus Deaton, 2015 NobelLaureate in Economics;Professor of Economicsand International Affairs,Princeton University

Arne Duncan, U.S. Secretaryof Education

Gen. Joseph F. Dunford Jr.,Chairman, Joint Chiefsof Staff

Jason Furman, Chairman,White House Council ofEconomic Advisers

Peter D. Hart, Founder,Hart Research Associates

Lou Holtz, former HeadFootball Coach,University of Notre Dame

Douglas Holtz-Eakin,President, AmericanAction Forum; formerDirector, CongressionalBudget Office

Chris Inglis, former DeputyDirector, NationalSecurity Agency

Michelle Johnson, Founder,StudentsFirst; formerChancellor, District ofColumbia Public Schools

Bill McInturff, Co-Founder,Public Opinion Strategies

Doris Meissner,Senior Fellow, MigrationPolicy Institute;former Commissioner,U.S. Immigration andNaturalization Service

Stephen A. Orlins, Presi-dent, National Committeeon U.S.-China Relations

Danielle Pletka, Senior VP,Foreign and DefensePolicy Studies, AmericanEnterprise Institute

John Podesta, Chairman,Hillary for AmericaCampaign Committee;former White House Chiefof Staff

Arati Prabhakar, Director,Defense AdvancedResearch Projects Agency

Marco Rubio, U.S. Senator(R., Fla.); RepublicanPresidential Candidate

Paul Ryan, U.S. Representa-tive (R., Wisc.); Speakerof the House

Matthew J. Slaughter, Dean,Tuck School of Business,Dartmouth College

Strobe Talbott, President,Brookings Institution

Neera Tanden, President,Center for AmericanProgress Action Fund

John Thune, U.S. Senator(R., S.D.)

Mary Jo White, Chairman,U.S. Securities andExchange Commission

CEO COUNCIL MEMBERS

CEO COUNCIL VIDEOSTo see CEO Council video excerpts of interviewswith Republican presidential candidate Sen. MarcoRubio, House Speaker Paul Ryan, SEC ChairmanMary Jo White, Education Secretary Arne Duncanand others, go to wsj.com/LeadershipReport.

WSJ.COM

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THEWALL STREET JOURNAL. Tuesday, November 24, 2015 | R3



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JONES

‘My problem withthe migrants isnot that we don’twant to acceptmigrants. It’sthat I’m not surewe can.’

of earners in this country dur-ing the recovery. They haveroom to pay more, to makethose investments, to makethe overall economy better.

MR. BAKER: Everybody agreesthe U.S. corporate tax systemis a mess. There are variousplans to fix it. The presidentand the Republicans have triedto work together on this overthe last couple of years andlargely failed.

Can I just ask you first ofall about the simple issue ofthe territorial reach of the U.S.tax code? Is that somethingthat needs to be ended? Every-body agrees that would help torepatriate some of the profitsthat are left overseas becausecompanies can’t bring it backfor tax purposes.MS. TANDEN: At the end of theday we need a system that’s alot less complex, that’s a lotfairer. We have a system thattruthfully is more reliant onthe ability of particular sec-tors to lobby Washington fordeals than it is to have a fairand clean tax code.

So I think we need to strikethe balance of having a long-

term deficit plan that createsa cleaner tax code, more fair-ness among companies, morecompetitiveness between theU.S. and other countries. Butalso has a corporate side con-tributing some to deficit re-duction.

MR. BAKER: The president hasjust signed the Trans-PacificPartnership, a potentially verysignificant trade deal. But Sec-retary Clinton has said shedoesn’t support it. She’s nowaligned herself with DonaldTrump and a couple of otherRepublicans in the anti-free-trade camp. How did thatcome about?MR. PODESTA: Earlier this year,when she was a United Statessenator, she said that shewants to see trade deals. Shesupports exports. She sup-ports an open system.

But she said also that she’lljudge trade deals on three cri-teria. Will they create goodAmerican jobs? Will they raisewages? And will they improvethe national security? Whenthe deal was finally done, shesaid that the TPP didn’t meetthat standard for her.

PAULMORS

E/DOW

JONES

(2)

After two terms holding thereins of the executive branch,the Democratic Party is tryingfor a hat trick in an increas-ingly uncertain environment.The attacks in France havepushed foreign policy to thetop of the agenda, but thereare also big questions on eco-nomic growth and trade.

For a Democratic perspec-tive, The Wall Street Journal’sGerard Baker spoke with JohnPodesta, former White Housechief of staff and currentlychairman of the Hillary forAmerica Campaign Committee,and Neera Tanden, presidentof the Center for AmericanProgress Action Fund. Here areedited excerpts of their discus-sion.

Foreign affairsMR. BAKER: At the Democraticdebate on Saturday, SecretaryClinton said that a policy ofcontainment of ISIS was notenough. Could you tell us whata Clinton administrationwould be doing in order to domore than contain the threat?MR. PODESTA: It’s a multi-pronged strategy. The contin-ued use and acceleration of airpower. The support and equip-ping of the fighters who areon the ground there. Ulti-mately, I think it’s going totake an application of diplo-macy to find stability going

forward in this region. Butthere’s no containing ISIS.They have to be defeated.

MR. BAKER: President Hollandeof France has said that Franceis at war with ISIS. Do youthink the United States is nowat war?MS. TANDEN: The real issuehere is not the words we use.But if it means to have a strat-egy to defeat an enemy is tobe at war, then we’re at war.The challenge now is whetherthe world can unite, whetherthe Russians and the U.S. canactually unite, behind a strat-egy of defeating ISIS.

MR. BAKER: If Secretary Clin-ton wins the Democratic nomi-nation, will she be campaign-ing on President Obama’seconomic record? Is that aneconomic record over the lasteight years that she will behappy to promote and sayeight more years?MR. PODESTA: What she hasbeen saying and she will say isthat it’s a record of success,taking an economy that was infree fall. But the problemswere different. We’re at a dif-ferent stage. She can build ona success that he’s had. Butthere’s plenty more to do toensure that wages are growingfor the middle and for workingpeople in America. She’s laid

out specific ideas to do that.

MR. BAKER: One centerpiece ofthe plan is a significant in-crease in the minimum wage.We have a lot of CEOs here forwhom that isn’t music to theirears. Explain to them why put-ting up the minimum wage forso many workers would besuch an important contribu-tion to their business.MS. TANDEN: When we talkabout wages, it’s really impor-tant that we get incomegrowth up. It also connects todemand. When wages aredown, that’s a big challengefor economic growth at large,because they also provide in-come to workers who thenconsume. Obviously, there arelevels at which you can raisethe minimum wage that wouldbe counterproductive. But Ithink moderate increases is anappropriate strategy to ad-dress the challenges we haveat the bottom.

MR. BAKER: A lot of the CEOshere would say that just legis-lating for higher wages is re-ally not the way to tackle theproblem. The fundamentalproblem is that we face an in-creasingly global and openeconomy, a lot of competitionfrom cheap labor overseas.How do you address the fun-damental problem of competi-

tiveness?MS. TANDEN: Corporate profitsare at record highs, which is agood thing. We want corporateprofits to be at record highs.It’s better than the alternative.

But corporate profits beingat record highs is a good signof U.S. competitiveness. Gen-erally, those things arematched together. So competi-tiveness does not seem to methe biggest challenge we faceat the moment.MR. PODESTA: You’re suggest-ing that raising the minimumwage is the economic pro-gram. It’s not that. It’s one el-ement of it. It has to be ac-companied by investments ininnovation and infrastructureand science and technology. Ithas to be accompanied by bet-ter skill training for humancapital, by getting people intocollege and out of college in acondition in which they’re notstruggling with a mountain ofdebt, reducing the debt ofpeople who have already beenthrough some advancedschooling.

It has to be accompanied bytrying to raise wages throughother mechanisms like equalpay, like more profit-sharingand ultimately through creat-ing a better work-life balanceso that women get back intothe workforce.

Tax and tradeMR. BAKER: What will be theeffect of a Hillary Clinton ad-ministration on the tax code?It sounds like you still thinkthere’s more room there for re-distribution?MR. PODESTA: A principle thatshe’s carrying into this cam-paign is we need an aggressiveinvestment agenda. But wecan do it without raising taxeson the middle class and onworking people.

MR. BAKER: Is there an incomelevel that you’re thinking? No-body under $250,000 wouldpay higher taxes?MR. PODESTA: In terms of thetax pledge, $250,000 is a num-ber that the president em-braced. And I think it is thenumber that she has em-braced. Look, 90% of the in-come gains went to the top 1%

Where the Democrats StandJohn Podesta and Neera Tanden on Hillary Clinton’s prescriptions

problem on your hands.A better approach is to cre-

ate havens within the MiddleEast, where some of thesecommunities that have been inthe region for over 2,000years are being driven fromtheir ancestral homelands. Itwould be much better to leavethem in their regions in safety.

The immigration issueMR. BAKER: You were part ofthe so-called Gang of Eight,who came up with a plan toallow a path to citizenship forthe 11 million or so illegal im-migrants here. You’ve changedyour view to some extent. Andyou’ve been attacked by thelikes of Sen. Cruz for havingessentially supported amnestyin the past and now changedyour position.SEN. RUBIO: The American peo-ple have zero trust in the fed-eral government to enforce thelaw. We need to fix what wehave. But they’re not willingto do it unless they can be as-sured that this is never goingto happen again.

The only thing I’ve changedis to say, the only way we’regoing to be able to move for-ward on this begins by prov-ing to the American peoplethat illegal immigration is un-der control. Not just morephysical security on the bor-der, but an employment-verifi-cation system that’s cost-ef-fective. An entry-exit trackingsystem. The second step wouldbe modernizing our legal im-migration system, so it’s moreefficient, but more important,merit-based. Once we’ve donethose two things, I think theAmerican people will be veryreasonable about what do youdo with someone who’s beenhere for 10 years, who has nototherwise violated the law.

MR. BAKER: All of the Republi-can candidates are offeringsignificant tax reform and in-deed tax reductions. You’re alloffering plans that would, inthe short term, increase thedeficit. Your particular planwould bring the top rate downto 35%. But you emphasize amassive expansion in child tax

credits. Isn’t this just anotherbig entitlement program?SEN. RUBIO: Tax policy’s not anentitlement, because a tax pol-icy can be reformed andchanged, as we’re advocatingthat we do now. I would arguea couple points in this regard.

The first is, you can’t justlook at the top rate in a vac-uum, because for example, wetake all business income andwe lower all business incometo a flat rate of 25%. We allowfor immediate and full expens-ing of all investment in a busi-ness, which does away withthe need for all these extend-ers and loopholes that now ex-ist in the tax code. We moveto a territorial system of taxa-tion. These are all dramaticchanges on the growth side.

The tax credit I propose isnot just pro-family, it’s pro-work. Because you can’t getthe tax credit if you don’twork. You have to pay payrolltax in order to qualify.

On the issue of the debt,our goal is to bring the debtdown to a sustainable level, asa percentage of the overallsize of our economy. Therewill always be some level of

government debt, but it has tobe a manageable level.

How do you do that? Num-ber one, you dramaticallygrow your economy throughrobust growth, which is whatthe business side of the plantries to do in taxes, along withregulatory reform.

And the second thing is youmust tackle entitlement pro-grams. I’m from Florida. Thereare a lot of people on Medi-care and Social Security inFlorida. My mother is one ofthem.

I don’t want anything that’sbad for her. We still have timeto save these programs, in away that brings their long-term spending trends undercontrol, without disruptinganything for current beneficia-ries.

But we need a presidentand we need public officialsthat are going to be honestwith people like me. I’m 44years old. My Medicare andSocial Security is going to lookdifferent than my mother’s,one way or the other. It willeither be a program that’s fac-ing a crisis, or it will bechanged.The 2016 presidential con-

test is coalescing around anumber of tough issues—fromimmigration to the Syrian con-flict to domestic terror, in thewake of the attacks in Paris.

The Wall Street Journal’sGerard Baker spoke with Re-publican presidential hopefulSen. Marco Rubio about theseissues, as well as his plans tomanage the debt and imple-ment changes to the tax sys-tem. Here are edited excerptsof the discussion.

In the wake of terrorMR. BAKER: Does what hap-pened in France on Friday re-quire a fundamental change inwhat we’re doing?SEN. RUBIO: It does require afundamental change, and it re-quired it before the attack onFriday. I think the problem thepresident finds himself in isone of domestic politics. Veryclearly part of his mandate, hefelt, was to extract the UnitedStates from further entangle-ment in the Middle East. But

of course, global affairs andhistory don’t stop. As this is-sue’s gotten worse and worse,it will take a more robust U.S.engagement.

You’ve seen some tacticalchanges over the last fewweeks that have borne somefruit. But by and large, the U.S.does not have a well-definedstrategy. In the absence of anAmerican strategy towardsISIS and jihadism in general,you won’t be able to pull to-gether a global coalition.

MR. BAKER: What would youdo specifically?SEN. RUBIO: ISIS can only bedefeated by Sunnis them-selves. But I believe that willonly have a success if theUnited States pulls togetherthe coalition. In the shortterm, I think it would requirehigh-profile American specialoperations that target keynodes in the ISIS network thatquite frankly videotape all ofthis and publicize it. Becausemuch of what ISIS is doing

now is a propaganda war.They conduct attacks, theyconduct operations, and theyuse the propaganda to createan image of themselves as anunstoppable force.

MR. BAKER: The president hassaid the U.S. will accept10,000 Syrian migrants. Asmany as 11 state governorshave come out and said theywon’t accept migrants. Wheredo you stand on that?SEN. RUBIO: My problem withthe migrants is not that wedon’t want to accept migrants.It’s that I’m not sure we can.You cannot accurately do abackground check on 10,000people. It’s not like you canpick up the phone and call theSyrian government and findout who somebody is. It’s notas if the documents people arebringing are reliable.

You allow 10,000 in; 9,999of them are innocent peoplefleeing oppression, and one ofthem is a well-trained ISISfighter. You’ve got a huge

TheRubioAgendaSen. Marco Rubio on immigration, refugees,tax policy—and the battle against terrorism

Any Ideas?

Source: Pew Research Center telephone survey of 1,136 registered voters conducted Sept.22-27, 2015; margin of error: +/-3.3 percentage points for all registered voters, +/-4.7percentage points for Republican or Republican-leaning independent voters.

THEWALL STREET JOURNAL.

Economy83%

Percentage of Republican orRepublican-leaning independentvoters who say each of thefollowing is more importantfor a candidate to have

Percentage of voters sayingeach of these issues will be veryimportant to their vote forpresident in 2016

Health care73%

Terrorism71%

Federal budget deficit68%

Foreign policy64%

Immigration59%

Environment55%

New ideas and a differentapproach

Experience and a proven record

Both/Don't know

65%

29%

6%

Great deal Fair amountNot very much None at all

Restoration ProjectWith the 2016 national elections on the horizon, fewer than half of Americans surveyed express evena fair amount of trust and confidence in the federal government, with Congress faring worst amongthe three branches

Trust and confidence in the federal government when it comes to: Trust and confidence in:

DOMESTIC PROBLEMS INTERNATIONAL PROBLEMS

Great deal4%

Fairamount

Fairamount

Great deal

Not verymuch

Not verymuch

None at allNone at all

No opinion1%

29 27 28%

Executive branch

3

29 45 23%

Legislative branch

11 42 31 16%

Judicial branch

Source: Gallup Inc. telephone survey of 1,025 adults in the U.S., conducted Sept. 9-13, 2015;margin of error: +/-4 percentage points at the 95% confidence level THEWALL STREET JOURNAL.

34%

42%

19%

16

37%

8%

37%

18%

Neera Tanden

John Podesta


decessor worked out with theWhite House, but the detailsneed to be worked out.

And there’s some discussionthat maybe we’re going tohave another shutdown orshowdown over fundingPlanned Parenthood; now wehave the Syrian refugee issue.Are you going to avoid that?REP. RYAN: We’re going to havea debate and negotiations onwhat we call riders. There areother provisions we care agreat deal about. For instance,there are a number of regula-tions being churned out of thisadministration that we thinkare killing jobs, holding backsmall businesses, making itharder for working families toget ahead. So there are a lot ofpriorities we have in this billdealing with executive agen-cies. Those negotiations areongoing.

The refugee issue, we don’twant to wait. I think Paris is awake-up call. We believe thatwe ought to have a pause inthe refugee program with ref-ugees from Syria and Iraq.What we’re worried about aremembers of ISIS trying to in-filtrate the refugee population.

The trade issueMR. GIGOT: Another priority ofthe president, the Pacific tradepact. Do you think you canhave a vote on the Pacifictrade deal this Congress?REP. RYAN: I think we can. Idon’t know when that will be.We’re still unpacking theagreement itself. We still havea lot of analysis we’re stillconducting.

Getting it right matters.The goal here and the reasonwhy we passed TPA, tradepromotion authority, is be-cause we need to be writingthe rules of the global econ-

ANewHouseSpeaker IsSet for aNewApproachPaul Ryan talks about his vision for what hisparty should be offering the electorate

Paul Ryan takes over asspeaker of the House at a criti-cal moment for the RepublicanParty.

A new budget is coming up,the ISIS question is loomingever larger and the presiden-tial front-runners seem to besteering the GOP away fromits traditional positions.

The Wall Street Journal’sPaul Gigot spoke with Rep.Ryan about his plans and hisvision for the future of theparty. Here are edited excerptsof the discussion.

Turning the tideMR. GIGOT: What do you needto do in the next 14 months tomake the Congress a more re-spected body?REP. RYAN: Stand for some-thing. Do something. Offer so-lutions. We need to take ourprinciples, apply them to theproblems of the day and showthe country a very coherentand clear vision for how we fix

our country’s problems.

MR. GIGOT: Does that mean ac-tually passing bills that get tothe president’s desk or justlaying out proposals?REP. RYAN: I don’t know if itmeans passing bills that get tothe president’s desk, becausewe know we won’t get themsigned into law, because wedon’t agree with the president.

We owe the country achoice. Let the people of thiscountry decide where theywant the country to go, andwe should give them the op-tion, the opportunity, the al-ternative. So, if we are giventhe ability to lead, having thepresidency, having the Con-gress, this is what it will looklike, so that we can have amandate election.

MR. GIGOT: You still have thebudget coming up. You havethe budget outline already laidout by the deal that your pre-

One Big IssueHow views of immigration differ by political affiliation in the U.S.Do immigrants make American society better or worsein the long run?

Should immigration in the U.S. be kept at its present level,increased or decreased?

Source: Pew Research Center American Trends Panel online survey of 3,147 adults in the U.S.,conducted March 10 to April 6, 2015; margin of error:+/-2.4 percentage points at the 95% confidence level THEWALL STREET JOURNAL.

Republican 31% 53% 12%

Democrat 55% 24% 18%

Independent 45% 37% 16%

Better Worse Not much effect

Republican 25% 7% 67%

Democrat 43% 20% 33%

Independent 32% 17% 49%

Kept at present level Increased Decreased


omy instead of adversaries orcountries like China. Thatmeans intellectual-propertyprotection. That means therule of law, enforceable con-tracts. That means opening upmarkets so that we’re invitingcountries to play by our setsof rules so that we have freeenterprise, not crony capital-ism but free enterprise, as theway that the global economyworks.

We want to scrub this tradeagreement to make sure thatit reaches and meets the stan-dards that we call for.

MR. GIGOT: For my lifetime andyours, the Republican Partyhas stood as a free-tradeparty. And while there’s been adebate about immigration, formost of that time it was opento legal immigration.

Now you have a front-run-ner who says, “I’m going toslap a 30% tariff on China.”You have a ferocious debateover immigration. You havethree or four candidates whohave said they won’t vote forthe Pacific trade deal sight un-seen. Is the Republican Partychanging in fundamentalways?REP. RYAN: I don’t think so. It’s

a big-tent party. You and Ihave been involved in thesepolicy disputes and debatesfor a long time. I recall I usedto work for Jack Kemp doinghis economic work fighting forfree trade, for legal immigra-tion, debating Pat Buchanan atthe time on these issues.

So these fights aren’t new.This is not a new schism thatjust all of a sudden popped upon the front. So this is a big-tent party. I subscribe to thepro-growth wing of the party,which is basically another wayof saying maximize economicgrowth, upward mobility. Andlegal immigration’s good forthis country.

Legal immigration is whatthis country is. But legal im-migration also means havingsecure borders, enforcing therule of law, not rewarding peo-ple with amnesty, while pro-moting and fixing the brokensystem of legal immigration.So I think that comports withour principles quite well. Andpromoting trade is absolutelyessential.

If we want to have higher-quality jobs, faster economicgrowth, we have to realizethat the vast majority of theworld’s population, they don’t

live in this country. They livein other countries. We need tobe able to make things and sellthem to them if we’re going tohave high living standards andhave more jobs with betterwages.

And the question is, are weconfident in looking forward?Are we a pro-growth nationleading the world? Or are wegoing to reduce ourselves intoa cocoon trying to retreat andisolate ourselves?

That won’t work. And Ithink the view I just describedcaptures the general main-stream of our party.

MR. GIGOT: Running on a pro-tectionist platform, is that awinning proposition for Re-publicans?REP. RYAN: No, I think weshould be a pro-growth party.I think Ronald Reagan had itright in 1980.

I’m hoping that we have a1980-like election where weunify, where we appeal, wherewe inspire, where we talkabout growth, talk about op-portunity and what it takes,and we put America in a posi-tion to be the leading countrylike it ought to be, like itshould be again.

PAULMORSE/DOW

JONES

‘We owe the country achoice. Let the peopleof this country decidewhere they want thecountry to go.’



are sort of sailing away, andthat’s got a huge amount of at-tention. But when you look atit there’s different inequalities,and different parts of the dis-tribution of income.

I both love inequality andam terrified of it. Inequality ispartly a marker of success, sothat if someone thinks ofsomething, some new innova-tion that benefits us all, andthe market works properly,they get richly rewarded forthat.

And that’s just terrific. Andthat creates inequality. Sosome of the greatest inequali-ties in the world have comefrom the greatest successes.

The terror part is—well,there are several differentthings. One that I worry aboutis that some of the enormousriches we’re seeing at the topin the United States today arecoming from activities whosesocial value is in doubt. Sosome of the activities that aregoing on in Wall Street thatare occupying some of thesmartest of our young minds,it’s not entirely clear thattheir society really wantsthem to be doing that as op-posed to innovating in the pri-vate sector, or curing cancer.

The other thing that Iworry about is the politicalpower that comes with ex-treme wealth. [Justice Louis]Brandeis said a long time agothat you can’t have an extremedistribution of income and de-mocracy at the same time. Idon’t think we’ve become aplutocracy. But I really worryabout the enormous influencethat money has in a democ-racy such as ours.

MR. BUSSEY: One of the rea-sons that you won the Nobelwas your work on measure-

Is Income InequalityGood or Bad?Both.Economist Angus Deaton talks about the workhe is doing, and what it all means

One topic that has capti-vated economics, politics andbusiness in recent years is in-come inequality. Some argueit’s an incentive, others that, inthe extreme, it’s a danger todemocracy. To get a handle onthe topic, The Wall StreetJournal’s John Bussey spokewith Angus Deaton, winner ofthe 2015 economics NobelPrize, who has spent his careeron issues of measurement,poverty, welfare and incomeinequality. Here are edited ex-cerpts of the discussion.

Defining inequalityMR. BUSSEY: Inequality is hardto measure, and to define.What exactly is it?MR. DEATON: It means differ-ent things to different people.There’s a much broader con-cept, which involves thingslike health inequality, inequali-ties in access, inequalities inall sorts of other things. I

think today maybe we’re talk-ing more about income in-equality, which is what I’velooked at most. The way Iwould technically think of it isthere’s a huge distribution ofincomes throughout the soci-ety.

MR. BUSSEY: It’s not just richand poor. It could be rich andnot so rich.MR. DEATON: Or it could bepeople at the bottom versuspeople in the middle. One ofthe things that has happenedis that at the very bottomthere may actually be somesqueezing up of those gapspartly because people in themiddle may be being replacedby offshoring and so on.Whereas people at the bottomwho are mainly in service jobsreally can’t be, so they’re do-ing relatively well.

On the other hand you’vegot people at the very top who

8 times greater

0

2

4

6

19921989 1995 1998 2001 2004 2007 2010 2013

A Growing GapThe wealth gap between upper-income and middle-incomehouseholds in the U.S. has widened significantly since the lastrecession, according to a Pew Research Center analysis

Howmany times greater the median net worth of upper-incomefamilies is than that of middle-income families*

*Minimum 2013 household income to qualify as upper-income ranged from $66,000 for a singleperson to $147,600 for a family of five; for middle-income the range was $22,000 to $49,200

Source: Pew Research Center tabulations of the FederalReserve's Survey of Consumer Finances public-use data THEWALL STREET JOURNAL.

ment in economics. Tell us alittle bit about that, and wherethat work was applied.MR. DEATON: A lot of oursources for income-inequalitymeasures come from house-hold surveys in which peoplereport how much they earnedin the last year, how much in-come they have, and so on.Those are not as well fundedas they should be. We need tohave those numbers.

So I’ve done a lot of workon trying to improve surveys,to look at survey inconsisten-cies. We have separate sys-tems of national accounts,which is where our GDP num-bers come from.

Those are often inconsis-tent with what we see in ourhousehold surveys. And there’sa large industry in trying tofind out why.

The mortality questionMR. BUSSEY: You just pub-lished a study with Anne Case,your wife, that gets at the in-come and equality question:Middle-class whites are expe-riencing a higher mortalityrate from issues such as alco-holism, suicide and drug over-dose. Can you tell us about thefindings and why you thinkthat this is happening?MR. DEATON: I’ve written

about how mortality is a won-derful indicator of societalprogress. We’ve seen mortalityrates falling for the best partof 100 years, maybe even lon-ger. When we looked at the to-tal mortality rates for thismiddle-aged group from 45 to55 and we saw they were ris-ing—I mean, this is somethingthat’s been falling forever.

And then about 1998 it justturns and starts going theother way. So, there’s this in-crease in mortality. And it’s al-most entirely for white non-Hispanics. Black morality ratesare falling even faster thanthey’d ever been, Hispanicrates are falling on track.

The rates in middle age forall European countries are fall-ing exactly as they have been,as they were in the U.S. up un-til 1998. But for this group,this middle-aged, white non-Hispanics, this mortality rateis going up. If you look at thecauses of death that are mostrapidly rising, it’s suicides, thebiggest one is poisonings.When we first looked to poi-sonings we thought, “Whatcould poisonings be? Are peo-ple mistaking Drano for milkor something?”

And of course that’s whatthey’d call accidental over-doses. A lot of it is from pre-

scription painkillers and a lotof it is from illegal drugs, andthen a lot of it’s from alcohol.

If the mortality rates hadgone on falling at the ratethey did up until 1998 there’dbe about half a million middle-aged people alive today whoare dead because of it.

MR. BUSSEY: Is this a group ofpeople who are confronted byexpectations that have notbeen met?MR. DEATON: This is muchworse among those who havea high-school education orless. These are the people whojust have not benefited fromthe positive changes that havehappened in the economy as awhole. There used to be goodjobs, there used to be facto-ries. The factories are now inChina. The factories are inThailand. Those people arecertainly being left behind.

That doesn’t explain every-thing, because there are peo-ple being left behind in Eu-rope, too. The twoexplanations that have beenfloated are that Europe has amore elaborate safety net thanwe have. And most Europeancountries do not allow over-prescription of heavy-duty,dangerous painkillers the waywe do here.

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‘Some of theenormous richeswe’re seeing at thetop in the U.S. todayare coming fromactivities whosesocial value is indoubt.’

Based on a Workday survey of the executive sponsor of each of its customers in 2015. Workday and the Workday logo are registered trademarks of Workday, Inc. ©2015 Workday, Inc. All rights reserved.

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2JW328000-0-R00600-1--------XA


As chairman of the U.S. Se-curities and Exchange Com-mission, Mary Jo White isWall Street’s top cop.

In an interview with WallStreet Journal Financial EditorDennis K. Berman, the formerfederal prosecutor weighed inon a new CEO-pay rule, in-creased scrutiny of exchange-traded funds and criticism ofthe agency’s in-house courtsystem, among other things.Here are edited excerpts.

Executive-pay ruleMR. BERMAN: Let’s get toDodd-Frank first, almost fiveyears since its passage. Is it ingood shape?MS. WHITE: We at the SEC areessentially finished with mostof the mandated rule-makings.I don’t think there’s any ques-tion that collectively whatwe’ve done since Dodd-Frankhas made the system a lotsafer.

In the SEC space, whatwe’ve done in the securitiza-tion area, what we’ve donewith credit-ratings firms—those really hit at kind of the[heart of the] issues in the fi-nancial crisis. So, all of thathas been reformed and bol-stered, which is a very goodthing.

MR. BERMAN: A new rule com-ing out in 2017 will requirepublic companies to disclosethe ratio of the compensationof their CEO to the mediancompensation of their employ-ees. What will the effects ofthat be?MS. WHITE: To say that it wasa controversial rule-making isa gross understatement. Therewere very strong views onboth sides of it.

What our staff did—and Ithink did a very good job of—

Wall Street’s Top CopExplains the New RulesThe SEC’s Mary Jo White says regulatorychanges have made the financial system safer

was really trying to carry outthe statutory requirements ofthe mandate in the most work-able, cost-effective way wecan.

MR. BERMAN: Do you think thestandard you finally arrived atis OK?MS. WHITE: I think we did avery good job with the man-date we were given. There is alot of flexibility in it for com-panies. That isn’t to under-state that there are changesthat will have to be made andcosts that will be incurred.

ETF scrutinyMR. BERMAN: On Aug. 24, ETFswent crazy, right? Sharp de-clines in the stock marketstriggered extreme movement intheir prices. Would you agreethat the ETF ecosystem is anarea that requires a lot moreexamination?MS. WHITE: All of the commis-sioners are very focused onETFs, among other products.Obviously, we didn’t seek outthat sort of mini stress test,but in many ways it shows

how truly resilient our mar-kets were.

We are studying issues likehow the ETFs operate and howour limit up/limit down ruleoperated particularly with re-spect to ETFs. Should there besome adjustment in that set ofpilot rules? You will see usboring into that, and I thinkyou’ll probably see some ini-tial results coming out of ourstaff’s review of Aug. 24. Itwill be quite interesting.

MR. BERMAN: Your view of fi-nancial-reporting fraud? Itseems like 10 years ago it waskind of an issue, maybe not asmuch lately?MS. WHITE: I think that Sar-banes-Oxley reforms raisedthe bar on financial reportingin a good way, but there is noquestion that there is still fi-nancial-reporting fraud. Ithink this past year we actu-ally brought 134 cases, whichis double the number webrought in fiscal 2013.

MR. BERMAN: I think the non-GAAP earnings numbers for

Making Them PayThe number of enforcement actions by the Securities and ExchangeCommission continues to grow

Source: U.S. Securities and Exchange Commission THEWALL STREET JOURNAL.

FY2013 FY2014 FY2015

132

203

341

110

232

413

132

168

507

Actions against issuers delinquent inmaking required filings with the SEC

Administrative proceedings seekingbars against individuals based oncriminal convictions, civil injunctionsor other orders

Independent enforcement actionsfor violations of federal securitieslaws

Total actions | Disgorgement andpenalties ordered (in billions)

676 |$3.40

755 |$4.16

807 |$4.19


the third quarter were down1%. On a GAAP basis, theywere down 14%. It seems thatcompanies are getting a littlemore aggressive in describingperhaps nonstandard metricsto the investing communities.MS. WHITE: You’re allowed touse non-GAAP measures.They’re subject to variousrules, obviously. You can neveruse a non-GAAP measure in amisleading way. One of thethings that we get reports onthat causes us some concern iswhether some analysts aredistinguishing as they shouldbe between the GAAP and thenon-GAAP measures.

MR. BERMAN: They aren’t.They’re focusing on non-GAAPmeasures.MS. WHITE: So if you see amistake out there you ought torespond to it, obviously. Butthe staff gives comments onnon-GAAP measures, andwe’re going to continue tolook very closely at that.

MR. BERMAN: Can you explainthe equal-prominence require-ment?MS. WHITE: If you use a non-GAAP measure, you have tohave the most comparableGAAP measure there, too, and[the figures] have to be givenat least equal prominence. Youalso have to disclose why it’suseful to use the non-GAAP

measures. That’s a placewhere we’re focusing onwhether the disclosure is re-ally adequate.

Move to modernizeMR. BERMAN: Tell us about thedevelopments on the SEC ad-ministrative court.MS. WHITE: Like many otherfederal agencies, Congress hasauthorized the SEC to bringenforcement actions either indistrict court or in administra-tive proceedings before ad-ministrative law judges. Wecontinue to do that.

MR. BERMAN: But it seems thatthe number of cases going be-fore administrative law judgeshas come down.MS. WHITE: It’s cyclical, de-pending upon the nature ofthe cases in a given period.

One of the things that Ithink was a good thing for usto do was put out publicguidelines as to what factorsare considered in choosing theforum [in which to bring acase]. The commission, by theway, has to approve the choiceof venue in every single case.It isn’t up to the enforcementdivision.

There have been questionsraised. For example, I think inone year, if you look at the winrates in administrative pro-ceedings versus district court,you’ll see a higher win rate.

But again, it’s cyclical tosome degree. If you look atthis past year, we have anearly 100% win in districtcourt, and a lesser successrate in administrative pro-ceedings, which have uniquedue-process rights. For exam-ple, you have to turn overwhat’s called Jencks and Bradymaterial in administrative pro-ceedings, which is essentiallyexculpatory information, tothe respondent, the defendant.You don’t have that require-ment in district court.

Recently we’ve put out forcomment [proposed rules] tomodernize our administrativeproceedings. Should there bemore discovery? Should therebe more time provided beforethere’s a hearing?

MR. BERMAN: So it’s your be-lief then that the system doesneed some refinement?MS. WHITE: The rules haven’tbeen modernized for almost 10years, so yes.

MR. BERMAN: The criticismwas the proceedings were [bi-ased toward the agency].MS. WHITE: I think they’re veryfair proceedings. But you al-ways want to critically exam-ine what you’re doing so thatyou’re conveying not only inreality the fairness of a partic-ular forum, but the appear-ance of it, too.

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‘All of thecommissionersare very focusedon ETFs, amongother products.’

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Arne Duncan has beenpushing the cause of educationall his career. And as he pre-pares to step down as educa-tion secretary after sevenyears, he is asking CEOs tojoin him in the fight.

In today’s global market-place, it’s critical for the U.S.to develop in young people theskills that will keep Americacompetitive. But across the na-tion, says Mr. Duncan, busi-nesses continue having troublefinding enough college gradu-ates with those skills.

Mr. Duncan, in discussingthe successes and setbacks ofhis tenure, asked CEOs for helpto improve education from topto bottom, and discussed otherchallenges in an interview with

Wall Street Journal DeputyEditor in Chief Matt Murray.Edited excerpts follow.

MR. MURRAY: What skills doemployers want and how wellprepared is our education sys-tem to give them people withthose skills?MR. DUNCAN: People who canthink critically, work in di-verse teams, and who can takecomplex information, come toa conclusion and make a rec-ommendation.

I can’t tell you how manyCEOs I’ve met who say theycan’t find young people withthe skills they’re looking for.

So my request and my chal-lenge is: We have lots of whatI call phony debates about

silly stuff. Could CEOs lendtheir considerable voice to,“Do we need high standards ornot? Do we want to continueto reduce the dropout rate ornot? Do we want to make sureour high-school graduates aretruly college-ready? Do wewant to lead the world in col-lege-completion rates or not?”

These issues aren’t left orright or Democratic or Repub-lican. This is in our nation’sbest interest.

‘A better economy’MR. MURRAY: What is the big-gest undone item to better alignthe education system with theneeds of the labor market?MR. DUNCAN: Unfortunately,there are lots. I’m a huge be-

Where the Schools Fail UsArne Duncan on why the education system failsto give students the skills the economy needs

liever in early childhood edu-cation. The return on invest-ment is remarkable. But wehave so many kids enteringkindergarten a year, year-and-a-half behind. We often don’tcatch them up.

The majority of our public-school students are African-American, Latino. We have tomake sure we’re fighting the eq-uity battle, we’re fighting forcivil rights, we’re making surethat every young person has ac-cess to a great education. Andwe need folks at every level whoare willing to fight not on small-ball stuff, not on sound bites,but on, “Are we educating ourway to a better economy?”

MR. MURRAY: Sen. Bernie Sand-ers wants to make college free.How do we make college acces-sible and affordable?MR. DUNCAN: These thingsshould not be reduced to soundbites. Is college too expensivefor many people? Yes, and wehave to find ways to continueto reduce debt. We’ve talkedabout free community colleges.If we reduce costs and stillhave these same outcomes, it’snot good enough. The worstdebt is the debt you get whenyou don’t complete your de-gree. The vast majority ofyoung people who graduatefrom college get good jobs andpay back their debt.

With college completionrates so low, when you havedebt and no diploma to showfor it, that’s the conversationwe need to be having.

MR. MURRAY: College debt hasroughly tripled in the past de-cade. How do we fix this?MR. DUNCAN: Again, to be veryclear, the vast majority offolks who are defaulting arefolks who didn’t completetheir degree. Yes, we can con-tain costs. That takes federalinvestment. It takes state in-vestment. It takes universities

containing their own costs. Weput $40 billion into Pell grantswithout going back to taxpay-ers for a nickel. The goal hasto be not just access. The goalhas to be completion. It’s gotto be around outcomes. Thatconversation around outcomesI’m not hearing on either sideof the political spectrum.

College scorecardsMR. MURRAY: One of the big is-sues you’ve been involved in iscollege scorecards. You raninto opposition from the col-leges on that front.MR. DUNCAN: When you chal-lenge the status quo, you getpushed back. That’s totallyfine. We’re pushing very hardfor transparency.

It’s a very difficult processto navigate. Young peopleshould know, “What are thegraduation rates,” not whatthe one-year cost is. “What’sthe four-year cost? What arepeople like me making oncethey graduate from college?”

It’s interesting: 7,000 insti-tutions of higher education,best system in the world, butit’s a broken marketplace. It’sabsolutely inefficient. The vastmajority of young people fillout the financial-aid form—they apply to one school.

I’m a believer in choice andcompetition. We think we allhave this great choice. We re-ally don’t. So we’re trying toexpand more options, get thatout there, and get more youngpeople good information.

MR. MURRAY: Do you see roomfor the next secretary of edu-cation or president to advancethis? You’ve run headfirst intoopposition on that front a lotfrom all the higher educationalinstitutions.MR. DUNCAN: No worries.

MR. MURRAY: Can we make ithappen?MR. DUNCAN: It is happening.We’ve put unprecedented in-formation out there to em-power young people, their par-ents and college counselors tomake good choices.

MR. MURRAY: Where does vo-cational training come in?MR. DUNCAN: I’m a huge fan.Department of Labor has put$2 billion behind communitycolleges where real training isleading to real jobs. There areso many good jobs out therewith a two-year community-

college degree. We want to domore career and technical edin the high-school space.

MR. MURRAY: The No Child LeftBehind renewal, that may becoming out of committee?MR. DUNCAN: This law’s beenbroken for seven, eight years.Folks are trying to work nowin a bipartisan way to get to agood place.

MR. MURRAY: Are you happywith where it’s at?MR. DUNCAN: I’m happy thatfolks are working in a bipartisanway. And education should bethe ultimate bipartisan issue. Ifwe’re going to find consensusand common ground aroundanything, it’s got to be aboutgiving every child in this coun-try a chance to contribute to so-ciety, a chance to participate.

Truth about testingMR. MURRAY: What is the rightamount of testing?MR. DUNCAN: Folks have spenttoo much time teaching to thetest. What we want is a com-mon-sense approach. Get ridof the fill-in-the-bubble tests.[Focus on] more critical-think-ing skills, more writing. Assessstudents every year. Knowwho’s growing. Know who’sgetting better. Know whichteachers and schools are help-ing students learn.

MR. MURRAY: “Common sense”as defined by ... ?MR. DUNCAN: This is always de-fined at the state level. The realgoal is that young people grad-uate high school and college ca-reer-ready. And a simple defini-tion of that is not having totake remedial classes. So yes,graduation rates are going up.We are thrilled with that. Butlet me be clear. Massachusettsby every measure is our high-est-performing state education-ally. In Massachusetts, 30% oftheir high-school graduates aretaking remedial classes in two-and four-year [colleges]. That’sour No. 1 state. Think about 2through 50. So we have pushedunapologetically very hard forhigher standards.

I would love the businesscommunity to say: “Yes, wewant high standards. Yes, wewant to make sure whenyoung people graduate fromhigh school, they can walk intofreshman year of college andnot have to take high-schoolclasses again.”

Concerns about the globaleconomy were on the rise evenbefore the Paris attacks. For in-sights, the CEO Council askedtwo leading economists fromopposite sides of the politicalfence, Jason Furman, chairmanof the White House Council ofEconomic Advisers, and Doug-las Holtz-Eakin, president ofthe American Action Forum, tosit down for a chat with NeilKing, global economics editor ofThe Wall Street Journal. Editedexcerpts follow.

Impact of ParisMR. KING: Will the attacks dentglobal economic growth?MR. FURMAN: If you’re askingabout the outlook for growthin 2016, look at American con-sumers, American businesses,and what they’re going to do.

MR. KING: So the leading worldeconomic indicators are howthe U.S. consumer and the U.S.economy do?MR. FURMAN: If you’re askinghow the U.S. is going to do,we’re 86% domestic. Theworld has an impact on us,and it’s important. And we’reengaging at the G-20 on eco-nomic issues, at the same timethat we’re engaging on secu-rity issues.

But when you see consum-ers who are optimistic, whoare getting real wage in-creases relative to inflation,that have paid down a lot oftheir debt—that’s going to bethe most important factorover the next year.MR. HOLTZ-EAKIN: That’s basi-cally right. The things thathappen fast to consumer con-fidence, business confidence—financial-market fragility anddisruption—we haven’t seen alot of that yet. There are lon-ger-term impacts where all oftransactions and trade getmore expensive. You have toinspect things at borders andtrade gets more expensive.

You have to harden businessesagainst terrorism. Those arecostly regulations and thingslike that.

If you’re going to get along-term global impact out of[the Paris attacks], that’swhere it’s going to show up.

MR. KING: When you look atthe world, are there thingsthat concern you, that couldspill into the U.S. next year?MR. FURMAN: We’re seeing theglobal economic situation sub-tract half a point to a pointfrom U.S. growth.

The determinant of howmuch we can export is howmuch the rest of world isgrowing. And we saw thatgrowth slow again this year,relative to last year, and thelast year relative to the yearbefore. The slowdown is mostapparent in emerging markets,where every year for fiveyears in a row has been slowerthan the year before. But [theU.S. has] a lot of domestic mo-mentum. We can make ourway through that.

MR. KING: If you had to pickone thing that bothers youabout what’s happening over-seas when it comes to oureconomy, what would that be?MR. HOLTZ-EAKIN: China. It’sbeen such an important driverof commodity prices, globalgrowth in general. To see itslow down so dramaticallywith a lot of uncertainty abouthow they’ll manage some oftheir transitions, that’s a con-cern.

But Jason is by and largecorrect that you want to lookat the U.S. economy if youwant to see our outlook in2016. We’ve already incurredthe big impacts of the globalslowdown.

GDP conundrumMR. KING: We’re now well intoone of the longer expansions

since World War II. But GDPhas been inferior to the expan-sion before, and the one beforethat. Are we doomed to beinga 2% growth economy?MR. HOLTZ-EAKIN: I don’t thinkwe need to be.

There’s no question thatthere’s going to be someratcheting down of long-termgrowth potential. That’s justpure demographics, where wesee slower labor-force growthwith the retiring of the babyboom.

Past that, it’s about produc-tivity growth and pro-work,labor-force-participation kindof policies. We need to havesome deep structural changesto grow more rapidly. We’vegot big debt overhang, entitle-ment problems. A tax codethat’s antigrowth, anticompet-itive. A regulatory burden thatis very significant and needsto be dealt with, and we coulddo immigration reform. Weworry about skills.

There’s a whole list ofstructural permanent changesI think would help the U.S. tre-mendously.

MR. KING: Will those occur inthe near term?MR. HOLTZ-EAKIN: We’ve seenthe pace at which deep struc-tural changes have been made.No, I’m not confident. This is aconcern.MR. FURMAN: A bunch of theproductivity slowdown we’veseen is probably cyclical. I don’tthink it’s a coincidence that yousee the largest aggregate de-mand shortfall in the wake ofthe recession that we’ve had innearly a century at the sametime that you see this slow-down in productivity. The linkbetween the two is business in-vestment, which last year was25% below what the IMF hadexpected prior to the crisis. Themain determinant to businessinvestment is demand and con-sumer demand.

As you come out of the re-cession, as you recover, de-mand strengthens, investmentstrengthens, productivitystrengthens. So I don’t extrap-olate from the last coupleyears forward.

That being said, I think Iagree with about three-quar-ters of the list Doug put for-ward. There’s a whole bunchof things that we can do.

How much longer?MR. KING: How long is this ex-pansion is going to last?MR. FURMAN: Economists havelooked at this, and expansionsdon’t die of old age. The prob-ability in any given year isroughly the same.MR. HOLTZ-EAKIN: If you aregrowing too slowly, bad thingshappen all the time, and thenyou get knocked down. You hitzero. People get nervous, andyou get a recession that comesout of the fact that you reallyweren’t taking care of busi-ness to begin with.

I think we need to really fo-cus on growth. I’m less sympa-thetic to the demand-sidestrategy. We are a long wayout of the trough of this reces-sion. And I don’t think we’vetaken enough attention to[questions such as] why newbusiness formation is so slow.Why is it we have insufficientincentives for business invest-ment?

I think those are character-istics of this recovery that aredeeply troubling.

MR. KING: Will it matter if theFed raises rates next month?MR. HOLTZ-EAKIN: It doesn’tmatter. It’s 25 basis points.They should have moved beforethis.

They have consistentlyoverestimated their impact onthe economy. As they raiserates, they’re not going tohave the negative impact ongrowth they believe they will.

Where the Economy IsHeadingJason Furman and Doug Holtz-Eakin on strengths and concerns

PAULMORS

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Slow GoingWorld Bank forecasts for real GDP growth in the world economy andin selected industrial and emerging economies

Note: Data for India are on a fiscal-year basis.Source: World Bank THEWALL STREET JOURNAL.

2014 2015 2016 2017–4

–2

0

2

4

6

8

10

0

World U.S. Euro area JapanChina India Russia Brazil

Estimate Forecast

0.1

Jason Furman

Douglas Holtz-Eakin

Something's MissingThe Gallup-Purdue Index identified six college experiences that make it much more likely graduates will be engaged in their work, an indicator ofproductivity— and found that few students are having those experiences. Just 3% of surveyed graduates had all six, while 25% had none of them.

EXCITEMENT

63%Had at leastone professor

who made themexcited about

learning

PROJECTS

32%Worked on a

project that took asemester or more

to complete

INTERNSHIP

29%Had an internship orjob that allowed

them to apply whatthey were learning in

the classroom

CARING

27%Had professorswho cared

about them asa person

ENCOURAGEMENT

22%Had a mentor

who encouragedthem to pursuetheir goals and

dreams

ACTIVITIES

20%Were extremely

active inextracurricularactivities andorganizations

Source: Gallup Inc. online survey of more than 31,000 college graduates in the U.S., conducted Feb. 4 to March 7, 2014 THEWALL STREET JOURNAL.

‘The goal has tobe not just access.The goal has to becompletion.’


15th Century Shirt ofMail and Plate

One of two known and identified

Qaytbay shirts of plate andmail

Qaytbay Mamluk SultanQ tb M l k S lt

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Historic Colt Company

A No. 126Walker Model

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66RIA2061-11-129543-1



THE TASK FORCES’ PRIORITIESCEO Council executives split up into six groups to debate priorities in the following areas. Here are their top recommendations.

BUILDING A STRONGER ECONOMY

1 Return to Investment-Led Economy

Build a pro-investment econ-omy. Streamline regulation toreduce duplication and re-quire regulators to focus ondriving investment. Empha-size long-run infrastructureinvestment through userfees.

2 Make Tax CodeGlobally Competitive

Make the U.S. corporate taxrate competitive and move toa territorial system, consis-tent with OECD countries.

3 Rethink ImmigrationReform

Refashion immigration policyto draw and retain immi-grants to prioritize economiccontributions. The approachshould emphasize highly ed-ucated workers.

4 Upgrade Educationand Training

Enhance interaction betweenthe education system andthe private sector. Employersshould develop and helpshape the curriculum fortechnical education in highschools and community

colleges.

CO-CHAIRSDean Douglas, CEO,Unify Inc.Tamara L. Lundgren,President and CEO, SchnitzerSteel Industries Inc.Todd A. Stevens, Presidentand CEO, CaliforniaResources Corp.

SUBJECT EXPERTMartin Baily, Senior Fellow,Brookings Institution; formerChairman, White HouseCouncil of Economic Advisers

GETTING IMMIGRATION RIGHT

1 Create ImmigrationCommission

Congress creates a commis-sion that implements immi-gration policy and oversees amarket-driven system forallocating visas, based ondemonstrated job openings.Commission regularly setsand adjusts levels based onmarket evidence.

2 Secure the SystemFocus on ports of entry

in addition to U.S.-Mexicoborder enforcement. Run anefficient immigration system.Invest in automation andbackground checks. Usetechnology to track visa

holders.

3 Create Path to LegalStatus

Give 11 million undocumentedimmigrants a chance for legalstatus. Give them a workpermit unless they’ve brokenthe law. Create a path topermanent status and poten-tial citizenship. Ensure em-ployers comply with the law.

4 Reassert RefugeePolicy

Maintain historic leadershipin refugee protection andresettlement. Educate thenation on how refugees arecurrently vetted for resettle-

ment and how these immi-grants enhance economicvitality and foreign policy.

CO-CHAIRSRobert Greifeld, CEO,Nasdaq Inc.Christopher J. Klein, CEO,Fortune Brands Home &Security Inc.Peter S. Lowy, Co-CEO,Westfield Corp.

SUBJECT EXPERTDoris Meissner, SeniorFellow, Migration PolicyInstitute; former Commis-sioner, U.S. Immigration andNaturalization Service

FOSTERING INNOVATION AND COMPETITIVENESS

1 Reform TaxesComprehensively

Business tax reform shouldenhance, not reduce, the at-tractiveness of the U.S. forcreating and deploying newideas. It is also vital to moveto a territorial tax regime, toencourage the return of capi-tal to the U.S. Provide intel-lectual-property creators withthe same incentives that theU.S. tax code offers to agri-cultural and manufacturingfirms. Don’t penalize differentforms of capital or invest-ment.

2 Fix High-SkilledImmigration

The U.S. faces an ongoingdecline in the rate of new-business startups, and immi-gration can help fix this.

Ensure that foreign studentsin engineering and technol-ogy aren’t forced to returnhome after attendingresearch universities. Providefor more H-1B visas. Createother incentives to keep thebrightest students here.Expand the EB-5 immigra-tion-visa program (withappropriate oversight).

3 Rebuild InfrastructureU.S. airports, roads,

ports are an embarrassment.Fund the highway trust fund.Boost public-private partner-ships for infrastructure. Moreprivate-sector participation inairports, roads, etc.

4 Provide RegulatoryCertainty

U.S. businesses will hesitate

to make investments if theydon’t know how regulatorswill respond. Decision delayschill investment. Reduceregulation while providingcompanies with multiyearvisibility about regulation andtimely decision making onpermits once rules have beenpromulgated.

CO-CHAIRSDouglas L. Peterson,President and CEO, McGrawHill Financial Inc.Harold L. Yoh III,Chairman and CEO, Day &Zimmermann

SUBJECT EXPERTMatthew J. Slaughter,Dean, Tuck School ofBusiness, Dartmouth College

MAKING THE WORLD SAFER TO DO BUSINESS

1 A Call for ActionDemand government

provide leadership, includingincreasing cooperation withRussia, to provide a moresecure environment for busi-ness, and advocate on behalfof free markets. Businessshould also take necessarysteps.

2 Support Global Tradeand Entrepreneurship

International trade and entre-preneurship remain a power-ful force for creating a safeenvironment for business.Support frameworks (TPP,TTIP, TSA) and economic

engagement in tipping-pointregions.

3 Establish Best-Prac-tice Cyber Standards

Establish corporate gover-nance best-practice stan-dards (developed with NIST)to educate and hold usersaccountable and avoid cyberthreats. Make compliancewith these standards a pre-requisite for cyber insurance.

4 Improve CyberDefense

CEOs must shape thegovernment’s strategy forimproving cyber defense.

Push for statutory liabilityrelief, sharing of government-unique data, enhancingprotections for intellectualproperty and improved real-time collaboration to counterongoing threats.

CO-CHAIRSGregory C. Case, Presidentand CEO, Aon PLCPierre Nanterme, Chairmanand CEO, Accenture PLC

SUBJECT EXPERTChris Inglis, former DeputyDirector, National SecurityAgency

The debate over whatshould be done to counter Is-lamic State, which holds wideswaths of territory in Syriaand Iraq, moved front andcenter following the recent ter-ror attacks in Paris.

Danielle Pletka, senior vicepresident for foreign and de-fense policy studies at theAmerican Enterprise Institute,and Strobe Talbott, presidentof the Brookings Institution,sat down with Wall StreetJournal Washington BureauChief Gerald Seib to discusswhat, if anything, has changedin the wake of Paris.

Edited excerpts follow.

Elephant in the roomMR. SEIB: How have the Parisattacks changed the interna-tional climate as the worldlooks at the terror threat andtries to determine how to dealwith it?MS. PLETKA: I’m going to giveyou what I suspect may be abit of a disappointing answer.I don’t think it’s going tochange the world. In the emo-tional wake of something likewhat happened in Paris, peo-ple come together. We all lightup our buildings. I changed mynail polish. But I don’t think ithas altered the fundamentalcalculus. The president of theU.S. gave a press conference inwhich he basically said, “Yeah,I think things are actually go-ing OK and I’m basically notgoing to change my strategy.”He said it more attractivelythan that, but not much. Now,yes, we’re looking at Frenchairstrikes and we’re looking ata motion of unity for Euro-pean Union defense, thoughnone of us actually know whatthat means. It was interesting

that [French President Fran-çois] Hollande didn’t go toNATO.

MR. SEIB: Not yet at least.MS. PLETKA: That was achoice. I mean, we’ll see andthat could happen. The onlyreal question is whether we’regoing to turn much more tothe Russians, which I think isa terrible idea.

MR. SEIB: Strobe?MR. TALBOTT: We didn’t evenknow ISIL or ISIS existed orwhat it meant as recently asfour years ago. And when itbegan to assert itself it wasvery much in its own neigh-borhood, unlike al Qaeda,which of course struck at theU.S. on 9/11.

ISIS is now going truly in-ternational. They attacked amajor capital of Western Eu-rope. There are claims thatcan’t be ruled out that ISILwill be trying to attack theU.S. So that’s No. 1.

Second, there is the crisisfacing Europe, which is actu-

ally multiple crises. And thetsunami of refugees comingfrom the Middle East, primar-ily from Syria, was alreadyputting huge pressure on theestablishments and govern-ments of Europe. And now wecan see it in the political dy-namics of Europe, that crisis isgoing to be ratcheted up con-siderably, and I think it’s reallycalling into question whetherthe European Union is evengoing to survive.

And then coming to [Dan-ielle’s] point, I can assure youthat Secretary of State JohnKerry hopes that there will bea change in both the substanceand the consequences of thediplomacy that he’s trying todo with his Russian counter-part, namely to convince theRussians that maybe theyshould recalculate whethertheir principal goal in Syria isto keep [Syrian PresidentBashar] al-Assad in powerrather than, if possible, de-stroy ISIS since it was verylikely behind the downing ofthe Russian plane in Egypt.

MR. SEIB: Russia is the ele-phant in this room. The Rus-sians are in Syria to saveAssad. We’re there to get ridof ISIS. Can those two thingsbe reconciled? And if they can,is it still a terrible idea towork with the Russians?MS. PLETKA: I’m a Middle Eastperson, so that’s the perspec-tive that I come at it from.And we need to rememberthat [ISIS] isn’t just in Syria.It’s in Syria. It’s in Iraq.

The problem is if we areable to come to some sort ofcompromise, which is whatI’ve seen suggested, that putsin place a process where thereis an Alawite leadership thatmaybe only for a little whilehas Mr. Assad at the head ofit, this remains an Iranianpuppet regime.

That means that the entireraison d’être of the fight con-tinues. It also means that allof the crimes that have beencommitted by the Assad gov-ernment go unaddressed be-cause it is he and his govern-ment who have been

responsible for the deaths of200,000-plus people in Syria.

The Gulf states have a dogin this fight, too. They are ab-solutely opposed to any notionof an Alawite leadership re-maining because they viewthat as an Iranian proxy gov-ernment and they view Iran aspublic enemy No. 1.

Problem or solution?MR. SEIB: So you can’t dealwith the ISIS threat unless youdeal with the existence of thecaliphate. You can’t eliminatethe caliphate unless you canfind a way to create some in-ternational action in Syria.You can’t do that if you’re atcross-purposes with the Rus-sians and the Iranians. So howdo you get from here to there?MR. TALBOTT: Well, let’s putanother can’t do. You can’thave even a cease-fire, not tomention a peace settlement inSyria. It’s called a civil war butit’s much more than that. It’spart of a regional sectarianwar, Shia versus Sunni. TheRussians are now behind a co-

alition that is entirely Shia:Iran, Hezbollah, the Alawitesthemselves. And that isn’teven half of the puzzle thatyou have to put together ifthere is going to be some kindof end of the violence there.

There is another thing. Wedon’t think of Russia as a Mus-lim country. It does, however,have a fairly significant part ofits population, somewhere be-tween 20% and 25%, that areat least culturally, historically,ethnically as it were fromMuslim cultures. And they’reall basically Sunni insofar asthey are getting religion.

So to have the Russian gov-ernment going hammer andtongs against Sunnis and lead-ing a Shia coalition in Syriameans that Putin doesn’t wantto stay in that position for toolong. He has got a caliphateproclaimed in his own country,in the Caucasus, in Chechnyaand Ingushetia and Dagestan.So Russia does have an inter-est in getting this thingsmoothed out.

MR. SEIB: I was talking to aMiddle East leader who saidPutin has told people that,“My interest is in simply mak-ing sure that ISIS fighters,people who leave Syria don’tcome to Russia.” So it suggeststo me that he’s got the sameinterests we do in making surethe threat is contained.MR. TALBOTT: Well, he may besaying that, but Russiansources have admitted thatthere are thousands of Russiancitizens fighting for ISIS. Butbecause Russia is more a partof the problem than the solu-tion in Syria, he’s going tohave a lot more ISIS fighters,recruits coming into Russia.

The Complicated Calculus in the Battle Against ISISDanielle Pletka and Strobe Talbott on the difficult combination of players and policies

THE U.S.-CHINA RELATIONSHIP

1 China Membershipin TPP

TPP and RCEP trade pactsrisk creating two competingregimes with resulting tradediversion and supply-chainchanges. U.S. should lay outa path for how China can be-come a member of the TPP.

2 CEOs Speak Outon China

There is no accountability forlegislation and statements onChina. CEOs should lobbyagainst counterproductivelegislation and oppose state-ments that defy factual anal-ysis. CEOs should create acouncil with their Chinesecounterparts.

3 Change U.S.Pivot Policy

The U.S. should abandon orrestructure its pivot/rebalancepolicy because China believesit is directed against Chinaand our friends and allies inEast Asia need reassurancethrough actions, not words.The U.S. and China shouldfocus on cooperative strate-gic initiatives, such as searchand rescue and humanitarianissues.

4 IP and CybersecurityCompanies should con-

tinue to press China on com-plying with intellectual-prop-erty laws. TPP could provideone mechanism for such

compliance. U.S. should seekclear implementing rules tofollow up on agreement withChina on cybersecurity.

CO-CHAIRSJames S. Metcalf,Chairman, President andCEO, USG Corp.Martin H. Richenhagen,Chairman, President andCEO, AGCO Corp.Thomas L. Ryan, Presidentand CEO, Service Corp.International

SUBJECT EXPERTStephen A. Orlins,President, NationalCommittee on U.S.-ChinaRelations

EDUCATING A GLOBAL WORKFORCE

1 Reward ResultsInstill greater accountabil-

ity at all levels, rewarded byhigher pay based on mea-sured outcomes, and counterthe power of vested intereststhat impede reform.

2 Expand School ChoiceExpand school choice at

all levels, including charter,vocational, public and privateoptions. Vouchers can be onemechanism.

3 Learn by DoingEmphasize experience-

based learning over knowl-

edge-based learning. Reintro-duce vocational education atthe high-school level andfoster apprenticeship pro-grams that meet interna-tional benchmarks.

4 Grow STEM WorkersThe U.S. faces a critical

shortage of qualified STEM-educated workers. Starting atthe earliest stages of theeducation pipeline, encouragestudents to study STEMsubjects and then pursueSTEM careers.

CO-CHAIRSCraig Donohue, ExecutiveChairman, Options ClearingCorp.Jacqueline Hinman, Chair-man and CEO, CH2M HILLCos. Ltd.

SUBJECT EXPERTMichelle Johnson, Founder,StudentsFirst; formerChancellor, District ofColumbia Public Schools

Danielle Pletka

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The terrorist attacks inParis have changed the secu-rity picture not only for Eu-rope but for the world. U.S.Secretary of Defense AshCarter spoke with Wall StreetJournal Washington BureauChief Gerald Seib on Nov. 17about the new security chal-lenges. Edited excerpts follow:

MR. SEIB: What have youlearned about ISIS in the pastthree or four days that youdidn’t know a week ago?MR. CARTER: I wouldn’t saythat anything that happenedover the last few days is sur-prising to me. Shouldn’t reallybe surprising to anyone.

This is an enemy that needsto be defeated, will be de-feated, that stands for the op-posite of everything that westand for and civilized peoplestand for.

We’re looking to do more.We’re looking for every oppor-tunity we can to get in thereand go at ISIL. We can helpthose who help themselves.We need others to get in thegame as well. So I’m hopingthat this tragedy has the effectof galvanizing others, as it hasgalvanized the French.

Europe has been participat-ing in part in operationsagainst ISIL, but not notablymost of them in Syria so far.Relatedly, [Europe is] not inmy judgment spending enoughin general on their defense.And that’s important. Theyneed to get in the game also.

Ground forcesMR. SEIB: Defeating IslamicState ultimately means defeat-ing them on the ground, andthe ground forces that youhave to work with now seemweak and problematic. Howdo you create a ground force

of Sunnis who have a stake inthe outcome here, and whocan effectively, as you say, de-feat ISIS or ISIL, and keepthem down in the long run?MR. CARTER: Iraq remains anintegral state. It’s multisectar-ian, and testily so. Prime Min-ister Abadi is trying to do theright thing. But Baghdad’s acomplicated place, and wehave not gotten from the Iraqigovernment to date all of theauthorizations for Sunniforces there that we need.

It’s the Sunni areas whereISIL is. So those communitiesand those people need to par-ticipate in this fight and thenhold that territory. We canhelp them. They need the willto fight. We can’t substitutefor that. Because otherwisewe’ll be there forever.

So we need to enable them.That’s basically our strategy.To destroy ISIL in its heart ofIraq and Syria, while also pro-tecting our people. Protectingour borders, working their fi-nances, foreign fighters, lonewolves. The whole deal.

We have to not only destroyit in its heart, we need to doeverything around the worldalso.

Threat trajectoryMR. SEIB: Gauge for us thelevel and the trajectory of theIslamic State threat here.MR. CARTER: Their capability[in the U.S.] is not what it is inEurope. There isn’t that muchease, geographically, in move-ment of people. We don’t havesome of the population thathas long-standing terrorist in-clinations that are in some ofthe European countries.

The most immediate dangerwe face is more of the lone-wolfkind. I was in Chattanooga,Tenn., two months ago. You all

remember that incident [ayoung U.S. citizen, a Muslim,killed five U.S. service mem-bers]. We can’t have that.

Some of what we need isthe kind of urban protectionyou do against aberrant peo-ple all of the time anyway. Butwe need to show that [ISIL] isnot a successful cause, thatcivilized people are deter-mined to defeat it.

It has to be a multiprongedthing. We also have to do thesurveillance and intelligencework that I know has beencontroversial. But we’re tryingto protect our country and ourpeople and we need to be rea-sonable about that.

The use of social media bythese guys, the use of encryp-tion—we need to find a waythat is consistent with a freeand open Internet but whichalso allows us to protect ourpeople.

We need to watch our bor-ders for the foreign fighterflow. We have to pay attentionto the financing that theseguys are getting. We need toget others around the world tojoin in.

MR. SEIB: Did we underesti-mate the reach and the abilityof ISIS, and whether they arebetter at avoiding detection byWestern intelligence agenciesthan we thought?MR. CARTER: There’s no ques-tion about the second part. Asfar as the first part, they rep-resent a new phenomenon. AlQaeda was the first Internetterrorist group. These are thefirst social-media Internetgroup.

This is turning out to be avery ugly capability for peoplelike this to have. There’s noquestion that represents a newphenomenon. And organized,

What theWorldNeedsToDo toDefeat ISISDefense Secretary Ash Carter says theU.S. can help those who help themselves


civilized society has to figureout how to protect itself fromthis kind of stuff.

Russian challengeMR. SEIB: There’s a sense thata challenge [from Russia] isunder way. Part of it is politi-cal, but part of it is military.How do you respond?MR. CARTER: We are makingadjustments in our own in-

vestments, in our own posture,to take into account Russianmoves, and make sure we stayahead. And we’re also workingwith NATO to strengthen itsposture. We’re positioningheavy equipment in NATO al-lies, working on new schemesof defense, both of territoryand against the “little greenmen” phenomenon, so-called“hybrid warfare.”

MR. SEIB: Hybrid warfare beingproxy forces, misdirectionplays, propaganda. A differentway of exerting power.MR. CARTER: Exactly right. Andwe need to counter that too,and fortify our European alliesto counter that.

We’ve got a lot to do. That’sanother way of saying that weneed to continue to be innova-tive.

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Source: Institute for Economics and Peace THEWALL STREET JOURNAL.

The Cost of ConflictThe global economic impact of violence in 2014 was equivalent to 13.4% of world GDP, by one estimate

Global economic impact of violence Countries with the highest cost of violencecontainment in 2014, internal and external,in billions of dollars$15 trillion dollars

0

5

10

’092008 ’10 ’11 ’12 ’13 ’14 United Kingdom

Iraq

Saudi Arabia

Germany

Mexico

Brazil

India

Russia

China

U.S. $2,028

$897

$354

$342

$255

$221

$171

$165

$150

$140

‘We need othersto get in thegame as well.’

On July 4, 2026, Americawill celebrate its 250thbirthday. What kindof nation will it be?

Today, America is at an inflectionpoint. The choices we make nowwill shape America@250.

Join the conversationAmericAt250.com#america250


It’s EightYearsLater:Meet aNewElectoratePollsters Peter Hart and BillMcInturff on what has changed


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Few people would seemqualified to give a pep talk to aroomful of chief executives. LouHoltz, one of the most success-ful college football coaches inhistory, owned the room at theCEO Council conference as hetalked about success, failureand leadership with Wall StreetJournal Bureau Chief GeraldSeib. Edited excerpts follow.

MR. SEIB: This is a room full ofCEOs. They do 1,000 things inany given week. But the onething they do every day is theylead people. It’s what you didfor all those years coachingfootball. What’s the secret toleadership that you learnedover those years?MR. HOLTZ: What Father Hes-burgh said to me before thepress conference at NotreDame. He said, “I’m going toannounce to the world that LouHoltz is head coach at NotreDame.” And he said, “What Icannot do is, I cannot name youthe leader. The players will de-termine if you’re a leader.”

We talked about leadership,and this is what I believe: Youhave to have a vision whereyou want to go. Without a vi-sion you have nothing. Youhave to have a plan of howyou’re going to get there. Andyou have to lead by example.

What holds a country to-gether, what holds a family to-gether, what holds a businesstogether are core values. Andcore values are something youwould not compromise.

We had three core values,and I had three rules. Do theright thing, because if every-body would do the right thing,you’d generate trust amongthe team. Two, we’re going todo everything to the very bestof our ability with the time al-lotted. Not because some-body’s looking. It’s just theway we lived. And doing thebest we can means you do lit-tle things. I see more peopleoverlook little things, and lit-tle things make the difference.And the third thing, we’re go-ing to care about one another.We’re going to be able to trustone another, be committed toexcellence, and care about one

another. That’s what makes ateam, and that’s what providesleadership.

MR. SEIB: What mistakes haveyou seen people make in tryingto lead?MR. HOLTZ: The biggest mis-take I see: You have so muchsuccess, the expectations getso great that winning is a re-lief. Losing is a disaster. Andso, because of that, they fail toraise the standards.

I went to Notre Dame. Itook a program on the bottom,we took it to the very top. Fornine straight years we went toa Jan. 1 bowl, the Sugar, theCotton, the Orange, or the Fi-esta. We took it on top and wemaintained it.

There’s a rule of life thatsays you’re either growing oryou’re dying. Doesn’t have athing to do with age. But youget on top, you say, “This ispretty good. Let’s not risk it.Let’s not jeopardize it, let’snot change anything. Let’smaintain.” We finished secondin the country. You know whatthey called me? An idiot. Youknow what they call a guy whofinishes last at medicalschool? Doctor. That doesn’tseem real fair. But you’re ontop and you say let’s not riskanything. Any time you’re nottrying to get somewhere,you’re not trying to improve,you never have a reason tocelebrate, you never come upwith any new ideas.

When I left Notre Dame Inever thought I’d coach again.

Then I went to live in a townwhere the average age was de-ceased. And what I found out,I wasn’t tired of coaching, Iwas tired of maintaining.

I don’t care whether you’retalking about your marriage,your business, or you as an in-dividual. You need four thingsin your life or you have a tre-mendous void. Everybodyneeds something to do. Every-body needs someone to love.Everybody needs someone tobelieve in. But everybodyneeds something to hope for.And the more successful youare, you try to protect whatyou have instead of looking athow can we keep getting bet-ter? How can we grow?

When you set goals anddreams, you’ve got to answersome questions honestly. Whatsacrifices am I willing to maketo do that? What skills andtalents do I have to acquire inorder to do that? Who do Ihave to work with in order toget that done? And whoeveryou have to work with, theyhave to understand howthey’re going to benefit whenyou reach your goal. Lastly,identify the problems you haveto overcome to get there.Leadership is being able tosolve problems, but also antic-ipate problems. Eliminate mis-takes before they happen.

Your job is to make peoplethe very best they can be. Andthat is when you get them outof their comfort zone. ’Be-cause most people don’t knowhow good they can be.

A Coach’s View of LeadershipLou Holtz on what holds a business together

The presidential hopefulsface a world that has changeddrastically since BarackObama’s first victory. To makesense of issues from the rise ofthe millennials to the growingdissatisfaction with elites, TheWall Street Journal’s Kimber-ley A. Strassel spoke with twopollsters from different sidesof the aisle—Peter D. Hart ofHart Research Associates andBill McInturff of Public Opin-ion Strategies. Here are editedexcerpts of the conversation.

A changing worldMS. STRASSEL: The world looks

a lot different than it did justeight years ago. Why don’t youtalk about some of the biggestchanges or trends you haveseen since that 2008 election?MR. MCINTURFF: Number one isthe changing religiosity of thecountry. Very quickly the num-ber of people who say they goto church once or more a weekhas dropped six or sevenpoints after being stable for avery long time. The secondthing is, the millennial genera-tion is now important. Theirviews are becoming dominantviews. And our country is nowat its highest point since the

1880s with people in our coun-try born out of the country.

MS. STRASSEL: When you talkabout the millennials, whatare they thinking? How arethey voting?MR. MCINTURFF: It’s not mono-lithic. When you look at 18- to29-year-olds, everyone knowsthey voted for the presidentby 25 to 35 points. But part ofthat reason is because 18- to29-year-olds are 45% African-American, Latino and Asian.

They’re mirroring what’s hap-pening below them, which is amajority of our new births areAfrican-American, Asian andLatino. White 18- to 29-year-olds voted for Romney.

What makes [millennials]different is there are these at-titudes about gay marriageand social tolerance that areradically different than previ-ous generations. They are re-structuring our views.MR. HART: Instead of picking itup demographically, I’m goingto talk about the psychologicalchanges that we’re goingthrough, the electorate. One ofthem is what I call amateurprofessionals. On the air, ev-erybody says, “You can beyour own fantasy sports teamowner.” So no experienceneeded, bet your money, youcan be the expert. Take a lookat bloggers. They’re the newreporters. No experienceneeded. In our field, hey, any-body can be a pollster.

What’s happening on thepresidential level? DonaldTrump? Ben Carson? CarlyFiorina? No experienceneeded, just come on in, runthe country. Then you take theopposite side, you take themost experienced people,goodbye to Scott Walker,goodbye to Rick Perry, JebBush in deep, deep trouble.

It is the sense that havingthe experience, having thebackground doesn’t necessar-ily count. That’s one element.The second element I see outthere is the GOP is talking toyesterday. They’re not talking

to tomorrow. The third ele-ment is what I call the end ofcompromise. What the countrysays is, “I want compromise.”But what they’re telling theirindividual congressperson is,“Vote my way, I want you torepresent my views.”

MS. STRASSEL: You talkedabout Trump, Fiorina and Car-son, and a lot of people saywhat is driving them is angeramong the Republican base.What do you attribute it to?MR. HART: The public is un-happy with the way things aregoing. We ask a question oneconomic dislocation and un-happiness with the powerelite. You’ve got a majority ofAmericans agreeing with thestatement, and it was almostequal between Republicans, in-dependents and Democrats.

The outsider influenceMS. STRASSEL: You believe it’sunlikely Donald Trump be-comes the nominee, unlikelyBernie Sanders becomes thenominee. Aren’t both of themhaving an enormous influence?MR. HART: If you look at Hil-lary Clinton, she has movedleft. She reacted to the pollsthat she saw in August andSeptember and she said, “Uhoh, Bernie Sanders is comingup and what I have to do islook at that.” Obviously, Ithink it makes her tasks in thelong run much more difficult.You’re talking to the base.Who’s going to talk to the in-dependents? Who’s going totalk to moderate Republicans?

MS. STRASSEL: Talk aboutwhat you heard in your focusgroup last night.MR. HART: I was in Columbus,Ohio, and we had two focusgroups. We talked about theterrorist attacks. I foundamong these people, as upsetand unhappy as they were, itseemed like another schoolkilling. We’ve almost becomeinured. Of course, it kicks upimmigration as an issue. Italso hurts President Obama.

I try and understand behindthe numbers, what are peoplethinking? I ask people as it re-lates to Donald Trump, let’ssuppose that he were a mem-ber of your family. Who wouldhe be?

What they said to me is,“He’s the crazy uncle. He’s thedrunk uncle. He’s the smart-al-eck teenager.” And I said,“How about Hillary Clinton?”“She’s the stepmom, alwayshaving to prove herself, thehostess, always trying toserve.” I said, “What about JebBush?” “He’s a weird cousin,trying hard. Or he’s the step-child or younger brother.”

And finally I said, “Howabout Ben Carson?” “He’s agrandpa, sort of a sweetgrandpa, or he’s the stepdad.”

So I said, “What’s theirbackbone made of?”

Trump is steel, iron, gold,artificial turf. Clinton cameout as steel, iron, titanium,and there’s a sense of a steeli-ness to her. Carson comes outas wood, dinosaur bones, etc.Bush came out as Jell-O, yarn,Play-Doh, straw, marshmallow.

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20152045

Change Is ComingThe U.S. population is expected to grow more than 20% over the next 30 years, with non-Hispanicwhites becoming a minority

400 million

0

100

200

300

’202015 ’25 ’30 ’35 ’40 ’45

Not Hispanic

Hispanic

Native Hawaiian andother Pacific islander

American Indianand Alaska native

Two or more races

Asian

Black orAfrican-American

White

Population by race and Hispanic* originTotal population

Non-Hispanic white

Non-Hispanic white

*Hispanic origin is considered an ethnicity, not a race

Source: U.S. Census Bureau 2014 National Population Projections THEWALL STREET JOURNAL.

77.3%

71.4%

61.7%

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13.213.9

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third day that I was in the job.We brought them all to Quan-tico, Va., and we spent aboutthree days really talking aboutwhere the organization neededto go. And then I said, “Withinthe next six weeks I want youto come back and give me onepage on what you think I justsaid. First of all, give me acomment on whether or notyou agree with what we’re do-ing, what didn’t I say that weshould have said, what are theareas that we need to clarify?”

And I told them, “Your op-portunity to have dissent is onthe front end here. Once youbuy in to this vision then weneed to close ranks and thenexecute the vision.” Obviously,you’re going to make courseand speed corrections. Youdon’t want rigidity in a plan.

So in my mind it’s all aboutcommand climate. It’s allabout your leading with posi-tive persuasion. And you’reapproachable. Frankly, some-times, if somebody has an ideaabout 80% as good as mine,and at the end of the day itdoesn’t really matter, I’ll takethe 80% idea just so that per-son then has a stake in whatwe’re doing. And it’s actuallygoing to effect change in theorganization.

MR. SEIB: What mistakes doyou see people make as theyattempt to lead?GEN. DUNFORD: As I thinkabout leaders that I’ve re-moved, less than a couple forbeing incompetent; severalmore than that for being abu-sive; and for a cancerous com-mand climate. Where you seea bad command climate iswhen people make the transi-tion from direct to indirectleadership and yet still feelcompelled to try to control ev-erything. The more controllingthey become, the worse thecommand climate becomes.

MR. SEIB: How do you identifywho you can trust as subordi-nates? As deputies?GEN. DUNFORD: Characterwould probably be one of thefirst things you’d be lookingfor. I have a tendency to trustsubordinates who don’t askvery many questions. We callit mission orders, where youtell somebody what to do, nothow to do it. That’s the qualityI most look for in leadership.

Who outranks a roomful ofCEOs? How about the nation’shighest-ranking military offi-cer, the new chairman of theJoint Chiefs of Staff, Gen. Jo-seph F. Dunford Jr. Gen. Dun-ford shared insights aboutleadership with Wall StreetJournal Washington BureauChief Gerald Seib. Edited ex-cerpts follow.

MR. SEIB: What’s the principallesson, if you could distill it, ofleadership?GEN. DUNFORD: You have a vi-sion, you set the example, andyou communicate that, bothpersonally and through yoursubordinates.

MR. SEIB: How do you convey avision when your organizationis giant?GEN. DUNFORD: There is a bigdifference in my mind betweendirect and indirect leadership.In my case, that transitiontook place at about the 20-year mark. Typically up till the20-year mark in service—I waslieutenant colonel, battalioncommander—you can get theentire organization in a schoolcircle. You can look them inthe eyes, you can talk to them,and you can do that routinely.Frankly, you actually can knowthem personally.

Then you make the transi-

tion to indirect leadership.That’s where you have to leadthrough others and empowerothers. The key is to commu-nicate through subordinates.But an important part of thatis what we call intent. It oughtto be clear what your intent is.We used to say that inside anorganization people need tounderstand the commander’sintent two levels up.

So in other words, two ech-elons above where they are,they ought to understand whatthe boss’s boss’s boss actuallythinks is important, and theirvision of the organization.

I’ve increasingly becomeconvinced that every person inthe organization needs to havethe boss’s vision.

MR. SEIB: How do you brookdissent, in the sense that youwant people to disagree withyou or challenge you, whilestill making sure that you’vegot, at the end of the day, obe-dience?GEN. DUNFORD: I had my lastjob for about 11 months. Icame into that job with anidea of being there for fouryears and crafted what Ithought was the way ahead forthe organization. I very con-sciously issued my initial guid-ance verbally. I got all theleadership together about the

Leadership,Military StyleGen. Joseph F. Dunford Jr. oncommunicating a vision

Bill McInturffPeter Hart



Some of the most innova-tive thinking in science comesout of the Defense AdvancedResearch Projects Agency,that part of the U.S. DefenseDepartment tasked with think-ing outside the box when itcomes to technologies for im-proving national security.Darpa Director Arati Prabha-kar met with Wall Street Jour-nal Financial Editor Dennis K.Berman to discuss heragency’s recipe for innovation.Edited excerpts follow.

MR. BERMAN: Can large com-panies innovate? What’s yourbest advice for them?MS. PRABHAKAR: It’s just toooversimplified to say largecompanies can’t innovate. Thehalf of my professional lifethat I spent in the private sec-tor was spent in Silicon Valley,most of that in venture capi-tal. And certainly the ethicthere is that innovation hap-pens in small companies.That’s a hugely important partof the ecosystem.

There are things large or-ganizations can do that no oneelse can do, and playing tothose advantages is key. Wecould not do what we do atDarpa if we weren’t part of alarge organization. The De-fense Department investsabout $70 billion a year, plusor minus, on research and de-velopment, test and evalua-tion. A small slice of that isscience and technology, or ba-sic research. Darpa is even a

smaller slice of that. But thatsmall slice amounts to $2.9billion a year from which wecan continually build a robustportfolio of, at any moment intime, a couple of hundredprojects, each of which has thepotential to do something offthe scale in terms of national-security outcomes. So there’sleverage sometimes in size, ifyou can figure out how to givethat innovation organizationthe kind of room it needs.

MR. BERMAN: What could aCEO say to a shareholder ac-tivist who says, “I don’t likethis Darpa thing you’ve got go-ing on in your company?”MS. PRABHAKAR: The firstthing I learned when I workedin a public company was Ithought I worked for the CEO.It seemed a lot of the timesthat we all worked for the an-alysts. And they were very un-comfortable with anythingthat wasn’t visibly on thetrack. So that is exactly thekind of room that you some-how have to create.

We were created out of theshock of Sputnik and the factthat the U.S. was horribly sur-prised that the Soviets were inorbit before we were. Our pre-decessors at Darpa quickly real-ized the way you prevent sur-prise is you drive themomentum by creating yourown surprises. And that ethic ofalways being outside and aheadof where everyone else is think-ing is still what drives all of my

people today. The Defense De-partment has been very, veryconscious and deliberate aboutgiving us room to do that.

MR. BERMAN: So does it makesense for a company to have aDarpa-like group of people in-side it?MS. PRABHAKAR: I think it can.My agency is about 200 gov-ernment employees. We haveoff-scale impact with some ofthe things we do because we’releveraging this much vastertechnology ecosystem, includ-ing companies, universities andother parts of the Defense De-partment.

So I don’t see it as a substi-tute for product development,or any of the other functions ofa company. But if you have theresources and the scale, and thecommitment to think longerterm and outside the box, andgive that organization room torun, the potential for muchmore disruptive thinking isthere.

MR. BERMAN: What’s your bestadvice for people thinkingabout innovation every day?How can they get more out oftheir organizations?MS. PRABHAKAR: Tolerate fail-ure. For any of us who are lead-ing organizations, we’re bettingon our people more than any-thing. But if you can createroom for people to try things,and fail, and get up and tryagain, that’s an important partof any large enterprise.

In Defense of InnovationLessons from Darpa’s Arati Prabhakar

hard time finding quality careat an affordable cost becausethey’re up against deductiblesof $3,000 in some cases. Whatabout that aspect?MR. DACH: Well, this is a diffi-cult system and it’s going totake a lot of complex solutionsworking together.

We fully agree that it’s veryimportant for people to have afull understanding of the costof their health care beforethey pick coverage. Health-care.gov this year has a lot ofnew tools to help people dothat. We don’t want surprises.We want a satisfied customer.

In terms of quality and get-ting more bang for our health-care buck, both in quality andin cost savings, that’s really animportant frontier. We’reworking hard to move fromthe way we pay.

MS. LANDRO: Away from fee-for-service and toward qualityrather than quantity?MR. DACH: Correct.

MS. LANDRO: There are differ-ent approaches to that. You’vegot bundles of care and ac-countable care organizations.Tell us about the hip-and-kneereplacement initiative.MR. DACH: All of these variousmodels have a common con-cept, which is we want to in-centivize the system to pay forquality and not quantity. Wewant to incentivize care to beintegrated and organized.

The hip-and-joint bundle isa perfect one announced in fi-nal form yesterday. Billions ofdollars are spent every year inAmerica under Medicare andprivate insurance on hip andjoint [replacement]. These areoperations that can be quitepainful. Recovery takes time.Under the old system, wewould reimburse for the oper-ation. The concept here is toask the provider to be respon-sible for a 90-day period, anepisode of care, so that theyintegrate the care downthrough rehab. If they do thatwell, they make more money.If they don’t do it as well, theyhave an economic risk. Andthat’s been welcome, frankly,by the hospital system andothers.

Leslie Dach, a former Wal-Mart Stores Inc. executive, hasbeen a senior counselor toHealth and Human ServicesSecretary Sylvia Mathews Bur-well for more than a year.

With the Affordable CareAct’s third open-enrollmentseason under way, Mr. Dachsat down with Wall StreetJournal Assistant ManagingEditor Laura Landro to discusshow health-care policy isevolving.

Edited excerpts follow.

MS. LANDRO: I think we cansay that the Affordable CareAct is among the most contro-versial and sweeping pieces oflegislation in recent memory.Five years in, with another en-rollment period under way,how are you going to stabilizethings in the coming year?MR. DACH: As most peopleknow, we’ve seen a historic re-duction in the uninsured inthis country since the lawwent into effect, 17.6 millionpeople now with coverage, a45% drop in the uninsuredrate. When it comes to quality,we’ve seen everybody’s cover-age really improve, whetheryou’re on the Affordable Care

Act or not. People are no lon-ger discriminated against forexisting conditions. They keeptheir kids on until 26. There ismuch less chance of medicalbankruptcy. From an afford-ability standpoint, not onlycan people on the marketplaceget coverage, seven in 10 ofthem for less than $75 amonth in premiums, we’veseen hundreds of billions ofdollars in savings in Medicareand reduction in annualgrowth of health care to aplace we haven’t seen before.

We have more to do. Interms of enrollment, we’ve seta goal of 10 million, what’scalled, effectuated enrollees,paying their premiums at theend of 2015. What’s importantabout that is that there are,we believe, about 10.5 millionpeople who are uninsured andqualified for insurance. So toachieve that objective, wehave to get one in four ofthose people to sign up, anambitious goal.

MS. LANDRO: We’ve increasedaccess. We’ve increased cover-age. Yet millions remain unin-sured, and those who do havecoverage are still having a

Affordable CareAct’sNext PhaseLeslie Dach says it has to beabout quality, not quantity

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Republican Sen. John Thuneof South Dakota has been avery vocal critic of the Afford-able Care Act.

He sat down with LauraLandro, an assistant manag-ing editor of The Wall StreetJournal, to discuss why hethinks the law is flawed andwhat Republicans are offeringas an alternative.

Here are edited excerpts.

Skin in the gameMS. LANDRO: Since the very be-ginning, you have arguedstrongly that we need to re-peal and replace the Afford-able Care Act. But what doyou replace it with?SEN. THUNE: What we foundwith Obamacare, as if wedidn’t know it already, is thatthe federal governmentdoesn’t do big things well. Itstarted with the website, therollout of that. This is clearlyan attempt to get the govern-ment more involved in thehealth-care economy. And ifyou think about it, there are acouple of fundamental issueswith our health-care system,which this didn’t address.

One is that there is a costshift that goes on. In the gov-ernment health-care market,they say this is what the reim-bursement rate is going to befor this particular service.This is what you’re going to bepaid. And if it doesn’t coverthe provider’s cost, the pro-vider, of course, shifts over tothe private payer. So the pri-vate payer’s rates keep goingup. [The ACA] exacerbatedthat because you’ve got morepeople now shifted into a gov-ernment program with theMedicaid expansion.

The other thing is, there re-ally weren’t any incentives inthere, with the exception ofthe Cadillac tax, to reduce uti-lization. If you have cradle-to-grave coverage, you’re goingto use the most expensivehealth care there is.

What Obamacare did do, ofcourse, is it’s a $1.3 trillioncost to the budget, paid forwith a trillion dollars in newtaxes. Well, what’s happened?Today there are 35 millionpeople who don’t have healthinsurance. And 10 years fromnow, according to the Con-gressional Budget Office, thereare still going to be 27 millionpeople who don’t have cover-age. It is an incredible amountof disruption to have thatmany people still uncovered.

We believe there’s a muchbetter way to do this that in-volves market forces and com-petition. Most of the Republi-can plans are out there, and ofcourse our presidential candi-dates are going to drive this. Aplan in the Senate that hasbeen introduced by Sens. [Or-rin] Hatch and [Richard] Burrand Congressman [Fred] Up-ton on the House side, basi-cally tries to get people moreinvolved in making decisionsfor their own health care. Re-fundable tax credits and insur-ance-market reforms and reg-ulations. It does away withsome of the mandates. It cre-ates interstate competition forhealth insurance and incen-tives for people to group andcreate small-business healthplans. [It offers] expansion ofhealth savings accounts and

more involvement for thestates on the regulatory side,as well as with programs likeMedicaid.

Tailored approachMS. LANDRO: But what aboutthose with existing conditions?The poor? You would still re-quire some sort of subsidies,wouldn’t you? Health care stillcosts money.SEN. THUNE: If you look at thevarious Republican plans, theyall protect and maintain cover-age for people with existingconditions.And the way that you woulddo that, [is to give] states anopportunity—and yes, it mightbe with some assistance fromthe federal government—todesign plans for that high-riskpool that works best for them.I also think that with respectto health care generally, one ofthe things you look at is theexpansion of Medicaid.

That is a program that ifyou had some sort of evensmall amount of cost sharing,something that would givepeople more of an incentivenot to use emergency care,there are things you could do,particularly if states had morecontrol, to tailor these pro-grams and make them moreeffective, efficient and perhapsless costly to the taxpayer.

A Critic Assails the ACASen. John Thune says Republican alternativesdo a better job by relying on market forces

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JOURNAL REPORT - images.conferences.wsj.netimages.conferences.wsj.net/.../11/CEOC_2015_JournalReport_lorez.pdf · journal report paul morse & ralph alswang/dow jones “you ... dow