BUFFETT: (From town hall meeting) Every line in the tax code is important to some constituency. I'm not sure every line in the Bible is, though. The--and actually, you know, you've got thousands of lobbyists there protecting each line in the tax code and I'm--again, I'm not sure about whether the Bible has an equal army of people in--on K Street.

QUICK: All right, that was Warren Buffett answering a question on taxes during our town hall right here in Omaha last night. Again, this was a town hall that was celebrating and looking into the opening of "I.O.U.S.A.," that's a new documentary that opened and premiered last night in theaters across the country. That question that came was from someone who wrote in asking why the tax code is longer than the Bible. Well, it's something we got to talk about with plenty of our participants last night. In fact, we're joined right now by some of the other participants in that conversation. Pete Peterson is here with us this morning. Also David Walker and Bill Novelli, the CEO of the AARP. And gentlemen, thank you for being here once again this morning on the same stage where we were last night. I'm guessing everybody is working on adrenaline at this point, practically all-nighters for everybody involved. Pete, let's start out with you. The movie last night, "I.O.U.S.A.," is something that the Peter G. Peter--Peter G. Peterson Foundation did put some financial backing into. Why did you get interested in it? What's important that you think in the message?

PETE PETERSON (Peter G. Peterson Foundation): Well, Dave and I have concluded unanimously, the two of us, that the country faces some long-term challenges that if we don't address them are undeniable, at least in our opinion, unsustainable, and yet they're, politically speaking, not touchable.

QUICK: Mm-hmm.

Dave Grogan / CNBC

PETERSON: And our job, we think, in a democracy like ours is to use every means we can, and this film is only part of a much broader program to educate the American public and to activate them and motivate them to do something about it. And the doing something about it is essentially to let our elected representatives know that this is serious and they want action.  At the present time they feel--that is, our representatives feel that if they confront some of these long-term problems, since all of them involve somebody either giving up something or paying more for something, that it will result--not only being politically incorrect, but politically terminal.

QUICK: Mm-hmm.

PETERSON: And we've got to change that around so that they feel that if they don't do anything, then they're going to be in re-election trouble.

QUICK: David Walker, we spoke with you earlier this morning. Again, David Walker who's the former comptroller general of the United States. If you have to look and put your finger on one issue that you think is the most pressing thing, what is it?

DAVID WALKER (Peter G. Peterson Foundation): Health care costs are totally out of control. Health care costs represent 34 trillion, just Medicare alone, 34 trillion of our $53 trillion hole. The United States is the only country on the face of the earth that's dumb enough not to have a budget for health care. Every other country does. We need to engage in fundamental reform of health care to achieve universal coverage for basic and essential health care, have a budget for health care. We need universal practice standards, evidence-based practice standards, and we need to enhance personal responsibility and accountability.

QUICK: All right. Bill, you represent the AARP, and some people have said in the past that seniors get very concerned when you start taking away benefits or changing things that have been set up. What are--what does your constituency think about the plan presented here?

WILLIAM NOVELLI (AARP CEO): Well, we've done a tremendous amount of research among our 40 million members and the rest of the public down to 18 years old, and we're pretty sure that the public is ahead of the politicians. People do want change. The generations in this country are very closely connected to each other and they have one thing in common, they want this country to be strong for the future, for their children and their grandchildren. And so what we have here is a big opportunity. This video that has been done here is a good kind of wake-up call, and from an AARP standpoint we can do town hall meetings across the country, thousands of them. So this is an opportunity to make change.

QUICK: Warren, you're not convinced that things are quite as dire.

BUFFETT: No, I--the short-term outlook is not. But we've had a number of recessions in this country; in fact, we had a Great Depression, we had--we've got world wars. And throughout, the genius of the American economy, our emphasis on a meritocracy and a market system and a rule of law has enabled generation after generation to live better than their parents did. And, I mean, most of the people in this room, practically all of them last night, lived better than John D. Rockefeller lived. I mean, all kinds of things have happened. And in the 20th century alone, the standard of living of the average American went up seven for one. There's never been a period like it in history. And that's not an accident. It's because we unleash human potential and will continue to do that in the future. And we'll always have challenges and we'll always have disputes between different demographic groups and income groups. The rich don't want to pay their share of the taxes. The poor probably, you know, they--in the last 20 years, the net worth of the Forbes 400 has gone from 220 billion to a trillion five hundred and forty billion. So you'll always have fights within the family about who gets what of the pie, but the pie will grow.

QUICK: But there are points that all four of you agree on. What's the closest point where, I mean, you say, `Yes, this is something the American people need to hear?'

BUFFETT: Well, I think you should always be thinking about the future. I mean, I think you're crazy if you're not--if you're not planning out where you'll be in 10 and 20 or 30 years. You'll get surprises in those plans.

QUICK: Mm-hmm.

BUFFETT: And frankly, American ingenuity will tend to surprise on the upside much of the time. I also think that it's dangerous politically over time. It doesn't endanger the economy in a huge way, but it's dangerous politically over time to run very large current account deficits whereby there's a massive transfer of assets or IOUs to the rest of the world from America. I think that will cause a lot of demagoguery and potentially some real problems 20 years down the road. We'd still have a more prosperous society.

QUICK: Mm-hmm.

BUFFETT: But it wouldn't be--wouldn't be as good as if we didn't do it.

QUICK: David?

WALKER: I think we agree on two things. I believe all four of us do, based on listening last night and talking this morning. Number one, we need to focus on the future.

QUICK: Hm.

WALKER: We're a great country, we need to do a number of things to make sure we stay great. And secondly, we support a capable, credible and bipartisan commission to be able to make recommendations to the next president and the next Congress to deal with some of these challenges so we can start making a down payment on our big hole and try to increase the likelihood that our future will be better than our past.

QUICK: You've had conversations with both campaigns, with the McCain and the Obama campaigns. What's been your takeaway from those conversations?

WALKER: Well, the takeaway is there's a difference between getting elected and governing, and there's a tendency for people not to want to talk with too much specificity with regard to some of these challenges in order to get elected.

QUICK: Mm-hmm. Right.

WALKER: The challenge is this: If they don't at least acknowledge the problem and figure a--figure a path for it, like a commission, then you don't have a mandate to be able to do something after you're elected. And so that's why I think acknowledging the problem, endorsing a capable, credible and bipartisan commission is the right thing to do for them and the right thing for the country.

QUICK: Mr. Peterson, you put some financing into this film. Would you consider doing a debate with the two political candidates that focuses specifically on the economic issues out there?

PETERSON: I'm just the aging founder of this. We have the CEO sitting here. We're exploring all kinds of possibilities.

BUFFETT: The one thing you won't find, Becky, you won't--you won't find either candidate telling you that if we're going to spend $3.1 trillion next year, the federal government will tell you how they're going to raise 3.1 trillion. They just aren't going to come up with it. They...

QUICK: Long on promises, short on ways on how to do it right now.

WALKER: Maybe if you invited them, they'd come. But they would have some trepidation, I think. And I think we'd find some ways to come up with some funding for it if it was necessary.

QUICK: But...

PETERSON: The other big audience that we're going to focus on are the young people. And I'm one of these old fogies that doesn't even do e-mail, so I'm hardly the person to plan it. But we've got a bunch of young people who are experts looking at Facebook and MySpace and MTV and so forth, because it's going to be very important to get these young people aware of their future, incidentally, not mine. Buffett and I'll do pretty well, if we don't live...

BUFFETT: I hope so.

PETERSON: If we don't live too long.

BUFFETT: Yeah.

QUICK: David, if you had, again, to take a look and go out to Congress, do you think this is a message that plays back? You're in an election season, it's a tricky time. But what's been the push back? What's been the...

WALKER: Well, I agree with what Bill Novelli said.

QUICK: Mm-hmm.

WALKER: I mean, the American people are ahead of the politicians.

QUICK: Hm.

WALKER: They're not accustomed to hearing the truth from the politicians and they're looking for two things. They want truth and they want leadership.

QUICK: Mm-hmm.

WALKER: And they need--we need more of both right now. So I think that if we can get the American people engaged, involved, if we can get the presidential candidates to acknowledge the problem, to be able to endorse the type of commission we're talking about as a way forward, there's hope.

QUICK: OK.

NOVELLI: Becky, you got a question last night from a woman who said, `I'm a boomer and I'm worried about my adult daughter.'

QUICK: Yeah. Mm-hmm.

NOVELLI: This is true all over the country. You know, the majority of adults in this country think that their children are going to be worse off than they were. This would be the American dream going backwards. We can't let this happen.

QUICK: All right, gentlemen, I want to thank you all for joining us this morning. It's a topic we'll be discussing through this morning as well. But also coming up, this is something you've never heard Warren Buffett talk about ever before. We're going to be back in two minutes. I'm as intrigued as you are.

BUFFETT: (Unintelligible)

QUICK: So is he, you should see his face. We're going to be spending the morning with the world's most famous investor and we have much more SQUAWK right after this.

CLICK HERE FOR PART FOUR

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