first of all.

(applause)

My name is Barack Obama, and I'm the guy who got Mark to wear a

jacket and tie.

(applause)

Thank you.

(laughter)

I'm very proud of that.

(laughter)

Mr. Zuckerberg: Second time.

The President: I know.

(laughter)

I will say -- and I hate to tell stories on Mark,

but the first time we had dinner together and he wore this jacket

and tie, I'd say halfway through dinner he's starting to sweat a

little bit.

It's really uncomfortable for him.

So I helped him out of his jacket.

(laughter)

And in fact, if you'd like, Mark,

we can take our jackets off.

Mr. Zuckerberg: That's good.

(applause)

The President: Woo, that's better, isn't it?

Mr. Zuckerberg: Yes, but you're a lot better at this stuff than me.

(laughter)

The President: So, first of all, I just want to say thank you to all of you for

taking the time -- not only people who are here in the

audience, but also folks all over the country and some around

the world who are watching this town hall.

The main reason we wanted to do this is, first of all,

because more and more people, especially young people,

are getting their information through different media.

And obviously what all of you have built together is helping

to revolutionize how people get information,

how they process information, how they're connecting with each other.

And historically, part of what makes for a healthy democracy,

what is a good politics, is when you've got citizens who are

informed, who are engaged.

And what Facebook allows us to do is make sure this isn't just

a one-way conversation; makes sure that not only am I speaking

to you but you're also speaking back and we're in a

conversation, we're in a dialogue.

So I love doing town hall meetings.

This format and this company I think is an ideal means for us

to be able to carry on this conversation.

And as Mark mentioned, obviously we're having a very serious

debate right now about the future direction of our country.

We are living through as tumultuous a time as certainly

I've seen in my lifetime.

Admittedly, my lifetime is a lot longer than most of yours so far.

This is a pretty young crowd.

But we're seeing, domestically, a whole series of challenges,

starting with the worst recession we've had since the

Great Depression.

We're just now coming out of it.

We've got all sorts of disruptions,

technological disruptions that are taking place,

most of which hold the promise of making our lives a lot

better, but also mean that there are a lot of adjustments that

people are having to make throughout the economy.

We still have a very high unemployment rate that is

starting to come down, but there are an awful lot of people who

are being challenged out there, day in, day out,

worrying about whether they can pay the bills,

whether they can keep their home.

Internationally, we're seeing the sorts of changes that we

haven't seen in a generation.

We've got certain challenges like energy and climate change

that no one nation can solve but we're going to have to solve together.

And we don't yet have all the institutions that are in place

in order to do that.

But what makes me incredibly optimistic -- and that's why

being here at Facebook is so exciting for me -- is that at

every juncture in our history, whenever we face challenges like

this, whether it's been the shift from a agricultural age to

a industrial age, or whether it was facing the challenges of the

Cold War, or trying to figure out how we make this country

more fair and more inclusive, at every juncture we've always been

able to adapt.

We've been able to change and we've been able to get ahead of the curve.

And that's true today as well, and you guys are at the cutting

edge of what's happening.

And so I'm going to be interested in talking to all of

you about why this debate that we're having around debt and our

deficits is so important, because it's going to help

determine whether we can invest in our future and basic research

and innovation and infrastructure that will allow

us to compete in the 21st century and still preserve a

safety net for the most vulnerable among us.

But I'm also going to want to share ideas with you about how

we can make our democracy work better and our politics work

better -- because I don't think there's a problem out there that

we can't solve if we decide that we're going to solve it together.

And for that, I'm grateful for the opportunity to speak to you.

And instead of just giving a lot of long speeches I want to make

sure that we've got time for as many questions as possible.

So, Mark, I understand you got the first one.

Mr. Zuckerberg: Yes, let's start off.

So let's start off with the conversation about the debt.

So I understand that yesterday morning you had a town hall in

Virginia where you talked about your framework not only for

resolving the short-term budget issues,

but the longer-term debt.

And you spent some time talking about tax reform and some cost

cutting, but you also spent a lot of time talking about things

that you didn't think that we could cut -- in education,

infrastructure and clean energy.

So my question to kind of start off is: What specifically do you

think we should do, and what specifically do you think we can

cut in order to make this all add up?

The President: Well, let me, first of all, Mark, share with you sort

of the nature of the problem, because I think a lot of folks

understand that it's a problem but aren't sure how it came about.

In 2000, at the end of the Clinton administration,

we not only had a balanced budget but we actually had a surplus.

And that was in part because of some tough decisions that had

been made by President Clinton, Republican Congresses,

Democratic Congresses, and President George H. W. Bush.

And what they had said was let's make sure that we're spending

wisely on the things that matter;

let's spend less on things that don't matter;

and let's make sure that we're living within our means,

that we're taking in enough revenue to pay for some of these

basic obligations.

What happened then was we went through 10 years where we forgot

what had created the surplus in the first place.

So we had a massive tax cut that wasn't offset by cuts in spending.

We had two wars that weren't paid for.

And this was the first time in history where we had gone to war

and not asked for additional sacrifice from American citizens.

We had a huge prescription drug plan that wasn't paid for.

And so by the time I started office we already had about a

trillion-dollar annual deficit and we had massive accumulated

debt with interest payments to boot.

Then you have this huge recession.

And so what happens is less revenue is coming in -- because

company sales are lower, individuals are making less

money -- at the same time there's more need out there.

So we're having to help states and we're having to help local governments.

And that -- a lot of what the recovery was about was us making

sure that the economy didn't tilt over into a depression by

making sure that teachers weren't laid off and

firefighters weren't laid off, and there was still construction

for roads and so forth -- all of which was expensive.

I mean, that added about another trillion dollars worth of debt.

So now what we've got is a situation not only do we have

this accumulated debt, but the baby boomers are just now

starting to retire.

And what's scary is not only that the baby boomers are

retiring at a greater rate, which means they're making

greater demands on Social Security,

but primarily Medicare and Medicaid,

but health care costs go up a lot faster than inflation and

older populations use more health care costs.

You put that all together, and we have an unsustainable situation.

So right now we face a critical time where we're going to have

to make some decisions how do we bring down the debt in the short

term, and how do we bring down the debt over the long term.

In the short term, Democrats and Republicans now agree we've got

to reduce the debt by about $4 trillion over the next 10 years.

And I know that sounds like a lot of money -- it is.

But it's doable if we do it in a balanced way.

What I proposed was that about $2 trillion over 10 to 12 years

is reduction in spending.

Government wastes, just like every other major institution

does, and so there are things that we do that we can afford

not to do.

Now, there are some things that I'd like to do, are fun to do,

but we just can't afford them right now.

So we've made cuts in every area.

A good example is Pentagon spending,

where Congress oftentimes stuffs weapons systems in the Pentagon

budget that the Pentagon itself says we don't need.

But special interests and constituencies helped to bloat

the Pentagon budget.

So we've already reduced the Pentagon budget by about $400 billion.

We think we can do about another $400 billion.

So we've got to look at spending both on non-security issues as

well as defense spending.

And then what we've said is let's take another trillion of

that that we raise through a reform in the tax system that

allows people like me -- and, frankly, you,

Mark -- for paying a little more in taxes.

(laughter)

Mr. Zuckerberg: I'm cool with that.

The President: I know you're okay with that.

(laughter)

Keep in mind, what we're talking about is going

back to the rates that existed when Bill Clinton was President.

Now, a lot of you were --

(laughter)

-- I'm trying to say this delicately --

still in diapers at that time.

(laughter)

But for those of you who recall, the economy was booming,

and wealthy people were getting wealthier.

There wasn't a problem at that time.

If we go back to those rates alone,

that by itself would do a lot in terms of us reducing our overall spending.

And if we can get a trillion dollars on the revenue side,

$2 trillion in cutting spending, we can still make investments in

basic research.

We can still invest in something we call ARPA-E,

which is like DARPA except just focused on energy,

so that we can figure out what are the next breakthrough

technologies that can help us reduce our reliance on fossil fuels.

We can still make investments in education,

so we've already expanded the Pell Grant program so that more

young people can go to college.

We're investing more in STEM education -- math and science

and technology education.

We can still make those investments.

We can still rebuild our roads and our bridges,

and invest in high-speed rail, and invest in the next

generation of broadband and wireless,

and make sure everybody has access to the Internet.

We can do all those things while still bringing down the deficit

medium term.

Now, there's one last component of this -- and I know this is a

long answer but I wanted to make sure everybody had the basic

foundations for it.

Even if we get this $4 trillion, we do still have a long-term

problem with Medicare and Medicaid,

because health care costs, the inflation goes up so much faster

than wages and salaries.

And this is where there's another big philosophical debate

with the Republicans, because what I've said is the best way

for us to change it is to build on the health reform we had last

year and start getting a better bang for our health care dollar.

We waste so much on health care.

We spend about 20% more than any other country on Earth,

and we have worse outcomes because we end up having

multiple tests when we could just do one test and have it

shared among physicians on Facebook, for example.

We could focus on the chronically ill;

20% of the patients account for 80% of the costs.

So doing something simple like reimbursing hospitals and

doctors for reducing their readmissions