>> this month, signing that agreement, the chinese government to start doing that in china. our first work would be in two provinces. when is sichuan and mongolia. that is why that begins and we will expand to other provinces. very interested. ..

because when with china needs people, they will need lots and lots of people, so i said get ready to start learning chinese. >> thank you so much. >> we love you. >> thank you. [applause] >> well, we've reached the one hour mark, which is the normal time for a news maker, so i want to thank each of you again for spending part of your morning with us here at the national press club and i want to thank professor yunus as well. it was a pleasure to have you here, and have fun at the white house this afternoon. >> thank you. [applause]

>> and there are new press releases on the sign-in table out front if you want to take those with you when you leave. thank you all. snod [inaudible conversations] >> next, former house speaker news beginning and former indianapolis -- newt gingrich and former indianapolis mayor are speakers on the federal, state and local budget process. live coverage from the federal institute in washington. should get underway momentarily. >> let me thank all of you for being here this morning. we're going to spend a good deal of time today. steve goldsmith, the very, very innovative mayor of

indianapolis, and a professor of innovation and government at harvard and are going to be outlining a wave thinking about government and where we are today. i want you to know that all the handouts and things we'll put up on the screen are going to be available at www.aei.org. in addition, there's more materials that back this up at american solutions.com. and help transformation.net. to set the stage for this, let me just say in background, that 150 years ago, former president -- illinois representative abraham lincoln went to council bluffs and look across the missouri river, and suggested that "there's nothing more important before the nation than the building of the railroad to the pacific coast." this was in august of 1859. now, lincoln had a long

tradition of being interested in railroads, which i'll come back to later on, but i want to put in context how he thought and what he was doing. lincoln first campaigned for the state legislature at 23 years of age with building a railroad in illinois as one of his platform planks at a time when he had never seen a railroad but he had read about it and he knew that it was integral to the future of liberating illinois formers and enabling them to have -- farmers and enabling them to have transportation. lincoln spent his entire career thinking up to 1854 largely about economics. he was a classic wig politician who believed in economic growth and in government helping shape prosperity and develop a strong economy and then after 1854, and thinking increasingly about freedom versus slavery.

in any case, his most powerful argument, which is the heart what we're going to try to talk about today, in a message to congress in december of 1861, lincoln said, as our case is new, so we must think anew and act anew. we must disenthrall ourselves and then we will save our country. i want to repeat this because i think everywhere you look today, you see governments which are outgrowths of a mid 20t 20th century industrial bureaucracy. they are incapable of meeting the challenge of the 21s 21st century and yet we keep trying to find 20th century bureaucratic political models to solve problems that cannot solved inside those models, so i think we're once again at a point as lincoln was in 1861 when he said, as you're case is new, we must think anew and act anew, we must disenthrall

ourselves and then we will of is a our country. this is dedicated to the vision of those who think anew and i think of this course as how to rethink budgets by rethinking government. the core structure will be four part, one, why we need a new model, the crisis and economy, government and budgets. part two, designing back from a successful society and economy to a successful government and then a successful budget. part three, the discipline of enforcing real change in state and local government and budget. and that part will be taught by steve goldsmith. and part four, key areas of solutions, health, energy, education, transportation, infrastructure, and the economy. let me just say, and i'm going to introduce steve in a second, but i want to start by saying, i think 2009 is different. i think we have entered a different world, i think the crisis is real, and i think it requires fundamental change. now, the alternative and the way most politicians are trying to

govern right now is to argue that it's a transitory problem, that if we just get through this year, we'll be ok. we don't have to really rethink things, we just have to pay for them. our answer is that this is a different world. the crisis is real, and the solutions will require real change. and it's interesting, if you ask the american people as opposed to their politicians, are we at a point where we need fundamental change, when american solutions ask that question and you can see it at american solutions.com, platform of the american people, in a poll conducted in november of 2007, 92% of americans said our goal should be to provide long-term solutions instead of short-term fixes. so actually, it's ironic that it's the american people who understand how big the need is for change and the political class and the news media class, which covers the political class, which does not understand this. i'm going to argue that the most important governing equation for the next 11 years is 2 plus 2,

and i'm going to start with how many of you think you can answer this equation? and i know it's bold. it's early in the morning. seriously, how many of you think you could get the right answer? it's very important. i think this is the most important question of the next 10 years in american politics in government. now, as moves you know, 2 plus 2 equals 4. now, let me give you an american equation that grows out of this. i want you to give me the second half of this. if you cannot afford a home, what's the second half of the equation? don't buy one. how many of you if you can't afford a home, don't buy one? now, this is a fundamental break with 25 years of lying to ourselves. for 25 years, we've said if you can't afford to buy a home, let me give i one at below market

price with below market interest rates and no money down and allow you to move in and after you move in, you'll find out you can't afford the maintenance, you can't afford the taxes, and when the interest rates go up, you can't make your mortgage and one person goes broke and if one person does it, it's a tragedy inspired by bad government policy. if a million people do it, it's a national economic crisis and the crisis we're living through is a cultural crisis, with political and financial manifestations. it's not a financial crisis. it's a crisis which grew out of a culture which had lied to itself for generations. so to get america on track, we have to start with basic honesty. when the polish people began rebelling against the communist dictatorship after pope john paul's visit, they used 2 plus 2 equals 4 as a slogan. a communist era joke in poland expressed this in a way that

everyone could grasp. party boss, how much is 2 plus 2? polish worker, how much would you like it to be. the political meaning of the realist assumption of the catholic university of will you be lynn philosopher was later expressed in the famous solidarity poster, for poland to be poland, 2 plus 2 must always equal 4. human beings can only be free in the truth and the measure of truth is reality. now, i think this is very, very important and you'll see how it comes back in sacramento, in albany, in washington, d.c., again and again. we have a l politics and government of fundamental dishonesty, in which we refuse to face the facts because the facts are too frightening. in orwell's 1984, citizens are told, when the state says 2 plus 2 equals 5 it does and with the state says 2 plus 2 equals 3, it does. but the citizens says what if it really is 2 plus 2 equals 4?

ironically, i was attacked the other day in u.s. news by somebody who completely misunderstood the point of this, and who said i was somehow trying to bring naziism or communityism into the political debate. they then went on to quote orwell, which i thought was a sign that the reporter had not read his own column. orwell says, 1984 is not intended as an attack on socialism or on the british labor party of which i am a supporter, but as a showup of the perversions to which a centralized economy is liable and which have already been partly realized in communism and fascism. so it seemed to me, orwell was supporting our point. once you 0 move into centralized political systems, they inherently start lying, because they can't adjust to the facts so they prefer to adjust the facts to their political

imparities. so what orwell says in the paragraph, refutes what the guy was saying, which i found strange. frederick hyak had picked up the same pattern in the road to serfdom. when he said the effect of the people agreeing that there must be central planning will be rather if a group of people were to commit themselves to take a journey together without agreeing where they want to go, with the result they may all have to make a journey, which most of them do 0 not want at all. that may apply to the current health care debate. he went on to say, the more the state plans, the more difficult planning backs for the -- becomes for the individual, because of course the bureaucrat begins to decide your faith, your few, your life. wherever the state undertakes to control and detail, the economic activities of its citizens, wherever that is, detailed centralized planning reins,

there ordinary citizens are in political at the timers, have a low standard of power and have little power to control their own destiny. that is the fundamental thing wrong with the energy bill in the house recently and with the current health policies, that they all fit precisely this challenge. now you will hear very powerful people saying it's not right to attack these ideas, it's not -- anything which at the disagree with, they call misinformation. well, albert kamou in the play captured that political environment. he said, but again and again, there comes a time in history when the man who dares to say that 2 plus 2 makes 4 is punished with death and the question is not one of knowing what punishment or reward attends the making of this calculation. the question is that of knowing whether 2 plus 2 makes 4 and you'll see in the next few minutes how directly relevant this is to every government in

history. in the book, the destroyer of the public, here are some action i don't means of which you have some idea. 2 and 2 makes 4. a straight line is the shortest distance between 2 points. the whole is greater than the part. now make 7.5 million votes declare 2 plus 2 makes 5 declare that the voigt line is the longest distance, make 8 million declare it, 10 million, 100 million, you have not advanced one accept. -- one step and i think one of the reasons you had this instinctive, dramatic public opposition to spending, is the instinctive belief that the spending plans we're now seeing, the deficits we're now seeing, the scale of government spending we're now seeing are literally unsustainable. and it's fascinating that as a general rule, the highest disapproval of the president's plan right now is on the scale of spending with no regard to the details. just a general assumption that

somehow you can't sustain that level of spending and that level of debt, which i would suggest fits both kamu and hugo. all too often, politicians can't afford to do something, or are afraid to reform. all too often, they just lie about the outcome and the consequence. in fact, they often lie to themselves. it's not that they're lying to you, it's that they have concluded something that makes it impossible for them to think about reality, because it would be too frightening to confront reality. the facts in fact become too frightening to be faced. if a school system is failing like detroit's, simply pretend that 2 plus 2 equals 11 is fine. if business tax cuts would create jobs, that the lobbyist and bureaucrats want more money, declare 2 plus 2 equals 29. when the president's spews facts

about american physicians, stating that a surgeon's decision to remove a child's tonsils is based on the desire to make a lot money and that surgeons get paid $50,000 per leg amputation, actually it's about $1,000, to advance his own agenda, we might as well pretend that 2 plus 2 qualities 97, and the statements from the american college of surgeons regarding recent comments from president obama issued on august 12. our argument is that much of what we consider greatness is a simple ability to be honest about honest facts. two examples. president ronald reagan, speech to national association of evangelicals, march 8, 1983. i urge you to be aware of the temptation, to ignore the facts of history and the aggressive impulses of an evil empire, to simply call the arms race a giant misunderstanding and thereby remove yourself from the struggle between right and wrong and good and evil.

and it was reagan's willingness to describe an evil empire as evil, which was at the heart of the collapse of the soviet union. he was the first western politician other than thatcher willing to do that. margaret thatcher similarly says, "we need a free economy, not only for the renewed material prosperity will bring, but because it is indispensable to individual freedom, human dignity and to a more just, more honest society." so the argument between collectivism and freedom is in fact in the end a moral conflict. conflict about the dignity of human beings, and the right of human beings, or as we say in our declaration of independence, the fact that we are endowed by our creator with certain unalienable rights which are life, liberty and the pursuit of happiness and the inherent planning is a violation of our individual liberties. that is why for the next 10 to 15 years the central question in america must be, if we don't

want america to fail, what do we have to do to succeed? and i want to build on that, but i first want to introduce steve to talk briefly about the approach he'll be describing and the way if you use sound things that already working in some places and you goff them across the country. we can have remarkable break-throughs. steve goldsmith. >> thank you, mr. speaker. appreciate being cited after camus, orwell, hyak. i get my hour a little bit later, so let me make three or four minutes of quick comments. but to follow the tone of the morning, let me start with a quick anecdote. i was talking to rudy giuliani right after he got elected, trying to change the way new york city worked and i came in from la guardia and stopped in a cab stopped at a stoplight, in the day of the squeaky guys and they came out to wash the windshield and the taxi driver turned on the windshield really

fast and the the light changed and the guy reached into get the money and it struck they me that is what government does. doing a service that you don't really want and charging when they're finished. we're trying to break that dynamic today and i studied state and local governments, just to echo a couple comments of the speaker and go forward later. one, government is whether intentionally or unintentionally, whether because folks lie to themselves or because of the way they're set up, government is not designed to succeed, it's designed to fail. we have created centralized autocratic systems. we have a world of horizontal problems and a government of the vertical solutions and they don't fit and people bound in the very arrogant systems. somebody at the top can order a solution for folks tiebout testimony and it willit shall at the bottom and it will fit in the applicable agency and it doesn't need. so we need to transform the way government works, the way it

transforms the spirit of the american people, the way folks out to have responsibility to solve some of their problems. the role of government, how it's set up, how it operates needs to change. secondly, increasingly, we see government for better or for worse actually involved in creating responses through the way it operates in a for-profit or influences the for-profit communities or the non-profit communities. government no longer is a group folks that are just delivering services through their own narrow bureaucracies, they're actually influencing a wide percentages of the economy, and the month profit sector and we need to think about the rules for that engagement and what it means. we're actually in a situation now i think, mr. speaker, where the average, even professional bureaucrat cannot imagine the consequences of his or her act, because they ripple across areas that are just outside of their vision, and thus create both the problems that we've seen whether in the economy or katrina or whatever it may be. finally, and at the local and state level, this is just as

much a problem as the federal level. we have developed as a political economy, where it is very difficult for the general interests of the average taxpayer to break through the legislative or special interests of the political economy. there is a group that's entrenched around every one of these issues and when i went to change indianapolis government, the people who were against change were very organized, very intense, and very focused and the people who would benefit, either didn't believe they would benefit or would benefit in much smaller amounts than the people who would be adversely affected, so i see what the speaker and the american solutions, aei and others are doing as an effort to kind of rally the public so that the general interest again will rebam against the special interests and at the same time transform the way government works, and to me, it's not all that difficult once you solve the political problems to get the government that can operate better, faster, and cheaper. we've seen it across america and it can be done even in washington i think. thank you very much, mr. speaker.

>> thank you, stephen. and during the third hour, steve is going to walk through faster, better, cheaper and very practical ways and one of the reasons we're doing this program as a short course is to enable any city council in the country, any county commissioner in the country, any school board, any state legislator who wants top find ways to do things better, faster, cheaper and wants to find a new way of thinking about how you would frame the budget to be able to do so, an our model is going to be very direct. i believe you frame the budget last. i think you think about the society you want first and the economy you want first, then you think about the rules and the government that would shape that society and that economy, and then you think about the budget appropriate to that government in order to achieve those goals in the society at large. and i think it's very important too that we fundamentally change how we approach budget debates.

and understand that budgets in the end are about the very core nature of government, and to the degree you reduce budgets to being about numbers, you have missed the entire point of the process. the numbers come last, they don't come first. now, the framework of this question, we don't want america to fail, what do we have to do to succeed. i want to suggest to you that general motors is actually a pretty good warning for the whole country. in 1960, g.m. had 60% market share. 60 years later, g.m. has gone bankrupt and will be lucky enough to have 6% market share. g.m. is a mold for what has happened in albany, sacramento and detroit. these are structures that are unsustainable and they require a scale change that no one today knows how to do. now why is this different? the scale of change that we need in government is so large, that we have to fundamentally rethink what we are trying to accomplish. this change cannot be handled within the current system of budgeting and the current system of government. i think one of the great

indicators of this is the california referendum of may 19. forget polling day. we can have all sorts of arguments about is the poll accurately weighted, is the sample correct, did the questions get right. on a particular date in may this year, the citizens of california were asked, do you want to vote for higher taxes and more spending? by 64% -- i'm sorry, 65.4%, they said no. now here's the largest state in the country, and two out of every three californians said no. in fact, in all -- i'm amazed that the california congressional delegation has not noticed this election. in all 53 congressional districts, they said no. now, remember, california is a state in which six months earlier, barack obama carried the state by 61-37. so a 61% obama state becomes a

65% anti-spending state in six months. look at some of the examples. the biggest swing was in pete stark's district, which had a -- which had a 30-point swing from the obama vote to the referendum. the second biggest was in george miller's, which was 30.9. i'm sorry, the swing in stark's was a 30 and miller, 30.9. nancy pelosi's district had a swing of 38.5. in speaker pelosi's district, 63% voted no. in henry waxman's district, 68 pass voted no. 70% voted for obama. in barbara lee's district, which is oakland, 60% voted no. 88% voted for obama. howard we are ma's district in los angeles, 69% voted no. in maxine water's district, 68% voted no.

84% voted for obama. 63% swing if maxine water's district. now the point i want to make is very simple and straightforward. there's a huge disconnect between the popular will as expressed in the referendum, and the power structure in strength. -- if sacramento and one of the reasons for that disconnect is the failure of the republican party as an instrument of expressing the popular will. so that you have districts that have 68% against spending, they'll probably have 12% republican vote. and so they elect somebody who is for spending, even though they're against spending, because they can't figure out how to nominate somebody who is anti-spending, because the party that is anti-spending is unthinkable to the people who want to spend, so they have to spend, even though they don't want to spend. now this is a very deep political problem in this country and it expresses it's sein the deadlock in california. now, we're passing out to all of you today a registered warrant

issued by the state of california, when they were issuing vouchers for money, because they had no money. this is a promise to pay in the future, and i think this is the first time since the great depression that beef seen the widespread use of warrants. by a state government, which is just collapsing. now, california is not an isolated example. this is what makes it amazing that washington has not noticed us. the rasmussen poll if january showed that 67% of americans think tax cuts are effective if helping the economy. a cbs poll, i thought this was amazing, because the language is so stark, when given a choice, americans believe tax cuts for business are more likely to create jobs than more government spending by 59% to 21%. now, that's almost 3-1. and the phrase was, business tax cuts are more effective, not that people want to cut taxes for business. people want to get jobs.

people believe the way you get i don't believe so is you cut taxes for -- jobs is you cut taxes for business. therefore they're willing to cut taxes for business to get jobs. fundamentally different model than washington believes. ironically, despite the polls against spending and for-tax cuts and despite the massive california vote against taxes an spending, here in washington, people continue to push tax increases. the health care bills have a variety of proposals, which can impose taxes on families, ranging from 1200 to $9,000 a year, depending on the family's income. and yet, as stan greenburg pointed out in a recent article, they the support for tax -- for government-based health is lower than it was in 1993. it's an article that greenburg wrote in early july and i think it's fascinating, because greenburg is a liberal who feels bad about this fact, and he said, i found in most of these

health reform questions, that the desire for change and support for reform was slightly stronger 16 years ago. so there's actually less support. why is that? i think it's because the very failures of government which led the republicans to lose the elections of 2006 and 2008 were seen not only as failures of president bush or failures of republicans, they were seen as failures of government. so if you've lived through a washington government failure like katrina and you've lived through a washington government that failed to control the border and you lived through as somebody recently said stay town hall meeting, washing the cash for clunkers totally mishandled and you've lived through watching the government totally mishandle in general and the president, i don't understand why he said this, the president said two days ago, i mean, if you think about it, u.p.s. and fedex are doing just fine, right? no, they are. it's the post office that's always having problems. now i found that a very strange

quote for somebody who is advocating government-run health care, and i frankly can't understand what he meant. i mean, why we would want to have the post office of health care when the president himself mentioned the post office as having problems, but he doesn't trust u.p.s. and fedex of health care. it will be interesting if he does do another town hall meeting and they actually allow an open question. but the thing i wanted to ask him, what did you mean? and how -- and what does it have to do with the health debate? notice that the energy tax which passed the house will cost each family of four nearly $3,000 a year. the national debt will rise $12,000 per person above the baseline projection by 2035, under the energy tax legislation alone. accord to a recent study by the national association of manufacturers, and the american council for capital formation, there will be 2.4 million jobs lost you understand the new energy tax legislation. and remember, that there are legislative tax increases

effective in 2011. unless there's a major change in law, you're going to have a massive increase in taxes that's already legislatured in, which -- legislated in, which includes taxing americans who make over $200,000. on married couples that make over $250,000. these are the base of small business, which is the place that creates three out of every four new jobs, so we're going to raise taxes and the people we're counting on to create the next cycle of new jobs, it's a very significant thing. all of this is occurring at a time of unemployment, the job loss in june was 274,000. but there's a fascinating subtext to this. there were 630,000 people in june who are no longer looking for jobs. in july, 209,000 people saw their unemployment benefits run out. that number is estimated to be 486,000 in september.

now, we're recommending that there should be a second unemployment figure. that reflects those who could not get a full-time job and gave up, took early retirement, or took a part-time position. if you calculated unemployment against those numbers, that is counting in the people who are no longer even looking for a job because they're so discouraged or counting in the people who have a part-time job because they can't find a full-time job, unemployment would be closer to 16.3%. the reason, and i didn't frankly realize this, the reason this -- you no longer count those who are out of the job market, is because in 1994, under president clinton, there were two changes, an we don't know, i'm not saying this is clinton's doing, we don't know whether this was a technical bureaucratic decision at the department of labor or why it happened, but part-time unemployment for economic reasons, was dropped. it was narrowed dramatically, the result is, that workers who are not currently actively looking for work don't count.

and by current standards, the official department of labor unemployment statistic underestimates the economic crisis. the numbers are called u3 and u6. there was an older number which has disappeared, which would have been dramatically different, and they eliminated in 1994. there are estimates if we still had the u7 number, unemployment today would be 27% or higher. on a state level, the current real unemployment figures, michigan is 19.2%, oregon is 18.9%, california is 17.7%. these are much worse numbers than people realize and suggest an economic challenge, much deeper and much greater. now, one of the themes we want to build on is that policies matter. and this is one of the hardest things to get across in congress, it's one of the hardest things to get across in state legislatures. if you adopt high tax policies,

you kill jobs. if you adopt big bureaucracy singlies,you kill jobs. policies matter. if you look at detroit and grand rapids, both in michigan, so this is not an auto problem, this is a policy problem, in 1950, detroit had 1.849 million people. today, detroit is 912,000. they have continue to shrink. they're the first american city to drop below a municipal. in 1950, grand rapids was at sunday 76,000, today they're at 193,000. grand rapids has the right policies. low taxes, lean bureaucracy, very pro business and pro jobs. detroit has decayed, even when general motors and chrysler and ford were doing well. detroit was decaying. result is beings if you look at

taxation, detroit is in the top 10 highest taxed cities in the country, and has about twice the tax rate per individual as grand rapids. if you look at education, in detroit, 11% have a bachelor's degree or higher. in grand rapids, 27% have a bachelor's degree or higher, so you have a larger pool of people that can create jobs, found businesses and produce wealth. in detroit, one third of the population is below the poverty level. in grand rapids, it's one-fifth. in detroit, you have the the highest violent crime rate of any major city according to the f.b.i., 44 murders for everyone thousand people. which by the way, nobody invests. you're a potential investor, you want to build your next factory, open your next store, you tell your staff, go look where i should be. they don't come back and say let's go to detroit and risk getting killed. and crime is -- this is what giuliani understood. crime is an enormous disincentive to economic growth and being physically safe is the

first rule of getting capital. by con con -- contrast, grand rs as one-fourth the murder rate of detroit. so you're four times safer in grand rapids. housing, detroit ranks in the most distressed housing market. the average home is $189,000. when i was testifying in lansing at the state senate, the day before they had sold 2,000 houses, for under $10,000 apiece. i mean, just staggererring. which means of course, you impoverish everybody who is in detroit. if they were elsewhere, they'd be building up capital, the number one way to build up capital, if you're middle class, is housing, and in fact, they've seen their capital shrunk because their housing prices have collapsed so badly. grand rapids is $124,000 per house, so you basically have 50% higher average housing prices in grand rapids than in detroit.

now, policies matter. the current deficit is projected to the united states this year to be $1,000,000,700,000. about 12% of the gross domestic product. other than world war ii i can't remember any time we ran -- the congressional budgets office pree tickets a 10 trillion-dollar deficit over the next 10 years. this is the largest share of the deficit economy since we were engaged if world war ii. in 2000, by contrast, we had a surplus for the third year in a row. the surplus was an all-time high. $236 billion or 2.4% of the gross domestic product. one of the things i'm proudest of, the house republicans led the effort in the mid 1990's, to get to a balanced budget at a time when no one thought it was possible. and we went straight uphill. the news mood i can't thought it was impossible, the clinton administration was opposed to. the house and senate democrats deeply opposed it. the fact is that for four

consecutive years, we kept the spending at 2.9% a year increase, which is the lowest rate for four years, since calvin coolidge and because of that and because we passed the first tax cut in 16 years and that tax cut accelerated economic growth, we balanced the budget for four consecutive years and paid off a total $405 billion in federal debt. so policies really matter. you don't inevitably have huge deficits. you don't inevitably have high taxes. you don't inevitably kill jobs. you make policy choices that lead to that. richard ryan has put together a pretty good financial statement. he points out that in the reagan years, which liberals have attacked as having too much deficit spending, in 1987, we had 3.2% of the gross domestic product as deficit. this year it's 11.9. so 3 1/2 times the reagan deficit. spending in 1987 was -- one out

of every four dollars in the u.s. economy is federal spending. which is a very dangerous number for a free society. remember, you have state and local spending on top of that, we are very close to half the economy beginning to be government spending. debt in 1987 was 40% of the gross domestic product, it was a total federal debt. it actually dropped all through the last decade, being 37%. it's now up to 54.5%. remember, it's rising the so the numbers, when you go out, is pretty amazing. the last time we were at 54.8% was in 1955 as we were paying down the world war ii and korean war debt. so we have not had this scale of debt in 55 years. as a share of the economy. now, the state level is worse,

although i shouldn't say that. states are required to have balanced budgets, so they have a different level of paying, but the state level is pretty sobering. two-thirds of the states are projecting budget gaps for 2011. the cumulative state budget deficit is $113 billion for fiscal 2009. 2010 will be worse and nobody is looking at this. everybody thinks this has been a hard year in the state capitals. next year is worse. the current projection is you go from $113 billion deficit to $142 billion deficit. eight states failed to meet their july 1 budget deadline. 12 states saw revenue declines in excess of 5 percentage points from 2008. the only states with budget surpluses were alaska, north dakota, texas, oklahoma, montana and west virginia. all of whom have natural resources and energy income. and i think by the way, texas is the most understudied success story in the country. if you really want to look at

stunning economic capability, texas is remarkable. as i said earlier, we had sustained very low growth, and we did it selectively, because we actually doubled the budget of the national institute of health, while controlling spending. now, policies do matter, and texas is a good place to study that. texas was responsible for 70% of net new jobs in 2008. in the entire country, 70% of the net new jobs were in the state of texas. their unemployment rate is about 2 percentage points below the national average. one reason is, their legislature only meets every other year. this is very important. of the rise of professional legislators has led to the rise of powerful interest groups who basically sustain those legislators and the result is you get much too much government, much too much bus -- bureaucracy, and much too much special interest. when you elect people from the

general population to serve in the legislature or to serve on the city council, they make much broader decisions than when they become full-time professional politicians who are indebted to interest groups for their survival. and texas has been very fortunate. in 2009, texas was one of only sex states that did not run a budget deficit. since 1988, they've main tandy a rainy day fund, paid for by taxes and oil and gas companies. they currently have $6.7 billion. in their rainy day fund. it can only be used if two-thirds of both houses of legislature approve and governor perry has vowed not to touch it, so it will keep growing. compare that attitude of fiscal prudence and pro detectiving the -- protecting the citizens from what you get if state capitals. it's a remarkable case study that it can be done but it requires a very disciplined, very different approach. the texas legislature has refused to implement an income

tax or a capital gains tax and capital gains taxes are particularly dangerous for states, because in good years, they give you too much revenue, which the states promptly spend, giving them too big a government, so in bad years, when the capital gains tax collapses, they have no ability to retrench and to cut back on government. and california is the classic case study, because silicon valley generated so much capital gain during the boom years for information technology, that they dramatically expanded government in sacramento, and it's now unsustainable. and yet they don't have the political will to figure out how to shrink the government. so it's a pretty powerful argument against capital gains tax, just as a matter of fiscal policy. there's another difference. texas actually likes business, texas likes jobs. texas as a bureaucracy job is to make things better. they created the texas emerging technology fund. they provide incentives and subsidies for new and

transplanted businesses. they literally cheerfully go to california and say to people, with you're tired of paying too much and having too much red tape and being harassed by the state bureaucracy, call us, we'll be glad to create a place for you to earn a living in texas with less hassle and lower taxes and it has had a huge impact on californians moving to texas. texas is now home to 64 fortune 500 companies, the most of any state in the country. the legislature also allows texas city governments wide lee wave in designing incentives to learn new businesses. they include free land, cheap electricity, subsidies toward the wages of higher paid workers, funds for training and long tax holidays, so the result is a continuing pattern of consciously favoring the next cycle of businesses, leading to the next cycle of jobs, leading to the next cycle of people who are paying taxes because they're working, leading to an ability to get the next cycle of business and this has been going on now for 20 years and fascinatingly in the academic world, very few people want to study it.

they're not big on studying success. they're big on studying failure and then explaining how we could have more of it. another example of this is milwaukee, wisconsin, in terms of policies mattering. under county executive scott walker, debt was reduced by 20%, he led the way in steering private funding to milwaukee's general mitchell international airport, which provided for $199 million worth of capital improvement. the milwaukee county transit system has the lowest expense per passenger and the highest ridership per capita in the country. they've had seven straight budgets with another action increase. they cut the debt 10% since 2002. reduced the work force more than 20% since 2002. stabilized the status of bond rating, they have park system which is one of the four finalists for the best in the country. a partnership with the zoological society which raised more than $30 million for the too. let me just say,s as a fan of zoos, everywhere you go in the

country, where there are first rate zoos, there are public-private partnerships and one of the things the national zoo ought to do is look seriously at the public-private model, because the entrepreneurial drive and the private sector resources you get from that partnership is dramatically better than a bureaucratic system. the airport went from 10 million passengers from 6 million passengers and they're in the sixth year of military freedom. now by contrast with success stories, let's look at california. their budget gap for fiscal 2010 is on top of an unresolved $14.8 billion gap for fiscal year 2009. the voters rejected five ballot measures which would have covered $5.8 billion of the gap. >> now, if a family came to you and said we're having this problem, we currently spend 35%

more than our income, you would probably have a serious counseling session. up know, if a small business came if and said, i've got this challenge, it looks like our budget this year is going to be 35% more spending than we're going to get in revenue, you'd have a serious conversation. sacramento just close its up because the pain level is immediately so hard, and this is part of why i wanted to spend today talking about how to budget, because i don't think you can budget inside the box of fixing bureaucratic government with special interest domination. i think you have to fundamentally get out of that box, create a new vision of government, in order to succeed. give you an example. governor schwarzenegger, who i think since the vote has become much tougher since may, and has been much more aggressive in being fiscally prudent, he made a $656 million last-minute budgets cut on july 20 aivmen aivment -- july 28. that's 2% of the cumulative gap.

and yet here's what he said. those are ugly cuts and i'm the only one that is really responsible for those cuts, because the legislature left, they didn't want to make those cuts. now, if covering 2% of the gap is this painful, and the cuts are this ugly, you can see why psychologically there has been no ability in sacramento to think about bold new solutions. because everything they try to do leads to such intense resistance, from the interest groups who dominate the city. yet, governor schwarzenegger himself i think began to create the framework for solution, in a radio address on january 7, 2006, when he said, now some would say, how can we plan for 20 or 30 years, when we can't even meet our needs today? well, the answer is we will never catch up unless we know where we're going. and he was exactly right, on january 27, 2006. the key to breaking out of the currents deadlock in new york, in california, in washington, is to think long term, come back and then reshape the system to

fit the long-term goals. it is not to get meyer -- mired down in the current system, trying to micromanage very painful solutions and yet in california, the crisis is being compounded. in august, a panel of federal judges ordered california to release 40,000 inmates prematurely in the next two years. now, my personal view is, in these kind of orders, all the inmates should be relocated to the judges's neighborhoods. i think the level of irresponsibility of federal junction air gating to themselves the power to say 40,000 people whom the society judges dangerous will now be released is just breathtaking and fundamentally wrong and a violation of the system of self-government. the problem they have is the system's prison system was built to hold 84,000 inmates. it currently houses 171,000. and government schwarzenegger himself had called for a less size of prisons, but the prison

guards union opposes any effort to go to less expensive prisons. so you have -- you're trapped into a high cost system, with limited capacity. in a way which is frankly going to put a bunch of dangerous people back on the street. and that's an example of how the current -- being locked in the current mind set inevitably produces very bad outcomes. look at new york state from an example of policies that really matter t. state and loam taxes in new york are -- local taxes in new york are 50% higher than the national average. spending and debt are out of control. public employee pension and health pen fits are staggering. to cut the current budget gap, the state cut programs and then raised taxes and fees $17 billion. albany faced another $2.1 billion deficit, three months into fiscal year 2010. the legislature has to raise taxes or make more cuts this months. even in the midst of the financial downturn, new york's $131 billion budget adopted in

april included a nearly 9% spending increase. spending in okay o new york state has increased by 30%. over the past five years. new york hiked taxes 31% for the top bracket of earners, and at the same time you're faced with the fact, the manhattan institute estimates this year's tax hike will destroy 22,000 private sector jobs, so in the middle he will of a deep recession, the state legislature of new york kills 22,000 more jobs and unemployment in new york is expected to be double digit in fiscal year 2010. and even with all this crisis, they can't find any ability to have fiscal discipline. for example, they failed to enact a public section tore pay freeze, so if you're the taxpayer in a private sector business, you're not getting a pay raise. you may have in fact be laying people o. you may in fact be if danger of going broke. your taxes are going up.

so that public sector employees actually get an automatic increase in pay, which is $2 billion more this year. 160,000 of new york's public sector employees received a 3% raise, although other states were freezing pay. the national household income only increased 1.7%, so you actually see state employees in new york rising faster than the inflation rate by a big margin, given the current inflation rates. the deficit projected for the next fiscal year in new york has already doubled to $4.6 billion. if the legislature does not reform budget lawsuits, the deficit may grow to 13.3 he billion dollars in the year beginning 2011, once stimulus money stops flowing. remember, the stimulus bill was basically a politician's protection act. the greatest virtue of the stimulus from the standpoints of politicians, it allowed them to make are hard decisions by getting federal money that they could spend to avoid having to change state government or

having to change local government. but what's really amazing on new york state is, as in detroit, they don't get much more for the money. new york had the highest per pupil spending, 65% above the national average, but they ranked 22nd in the country in the actual production of their schools. according to the u.s. chamber of commerce. and both parties in albany have been hesitant to reform the state's unsustainable public section tore pension plan. new york is a bipartisan failure. i have happen to be a republican, but the fact is, the republican party of new york has failed at least as thoroughly as the democratic party of new york. i mean, there has been no leadership at trying to reform albany, because albany is a city controlled by interest groups and unions, and all the legislators -- almost all the legislators -- most of the legislators in both parties are unwilling to take on the power structure in albany. give you some other examples. the legislature passed a bill that allowed certain police and

firefighters to be eligible to collect two pensions, one from its uniformed service, an one from a public -- from a civil public position. they also allow new york city -- to collect the pension and to work in other civil service jobs. this is by the way also was for a long time a problem in california, which they actually fixed in california. when they found a number of people on disability who were working full time. including some people who were working as physical trainers. while they were on disability. when you look at the medicaid program in new york, it's the case study in bad government. per capita spending on medicaid in new york state is 79% above the national average. new york's cost per person enrolled in the program is $7,927 annually. almost twice the national average of $4,500, nearly three times the california average of $2,700. albany created a budgets based on rosy economic conditions, which have not come true.

this year's state budget officials estimate that income tax revenues will be down more than a billion dollars from earlier budget estimates. sales tax revenues are also grim, dropping at rates far worse than after the september 11 attacks, or during recessions going back to the 1980's. left me reinforce the medicaid example, because at the center for health transformation, we have a new book out called "stop paying the crooks." new york is one of the case studies of corrupt medicaid programs, in which 10% of the money goes to people who are just plain crooks. in california, there's $2,700 spent per enrollee. in new york, it's 7900. in text ago, it's 3300. so if you simply reduce new york to the national average, which is $5,200, they would save $15 billion. since the federal map match multiplier is 50%, the federal government done tributed

$22 billion to new york for medicaid spending in fiscal 2007. that means the federal government sent to new york for medicaid, as much as it sent to 18 states. so in effect, the way the federal government match works, it encourages states to spend more money, because they say half of it comes from the feds, so why not get all you can, which is exactly the opposite of a sound fiscal policy. now, the scale of change we're going to require for successful america with successful state and local governments is clearly enormous. i think it requires us to develop principles for change. i wanted to spend this time, just showing i, this is unsustainable. and i think we have to have a national dialogue about whether in fact, we're going to become an enormously taxed country, with an enormous debt with very high payments on interest. which will crush the economy, reduce the number of jobs, weaken the businesses, guarantee

that china and india will outcompete us in of the world market and the only alternative to that is real change. you're not going to be able to get cleverly from here to a better future, as long as the system, whether it's at the state level or the federal level is dominated by structures of special interest, whose entire future is a function of bigger bureaucracies, more spending and higher taxes, so i hope i've at least made 18 nibble case that what we need is a dramatic level of change. what i would like to do is take a five minute break and come back for c-span, but i appreciate you giving us this much time to outline the initials, and then we'll start with questions right after the break. [applause] [inaudible conversations]

[inaudible conversations] >> our liver coverage of this forum on the government budget process will continue in a moment. former house speaker newt gingrich will take questions from the audience an we'll

continue our live coverage in just a moment. in the meantime, here's a conversation about the choice of pittsburgh as the convention location for the liberal bloggers group, note work nation. >> of the both liberal and conservative groups that are coming to pittsburgh, pennsylvania, over this week and beginning tonight. : what is happening with pittsburgh? leader of the economic summit will be there in pittsburgh. it seems that the city is within the political limelight these days. guest: there are plenty of those who like to take credit. senator bob casey was joined by the head of the u.s. steel workers union in a conference call. he claimed that pittsburgh has snagged these big events because of its excellent record in labor and business relations, public/private partnerships --

the whole ack over the story of our renaissance that began and is actually in the '50s and said that it's all led up to today. you know, frankly, there are probably other reasons why we got picked to be the sight of the g-20 summit. and i still haven't figured them out yet, but i'm assuming that we're attractive because we're perceived as a green city. we have a convention center which i believe was the first lead certified convention center in the world. i'm not -- i think i'm right on that. and a lot of buildings around town have been greened in that regard. so they're impressed with those efforts by a rust belt city to

raise its environmental profile. also, i think barack obama has some pretty fond memories of pittsburgh in the pennsylvania primary. he spent a lot of time here last spring in the state. and came to the city a few times. and also we do have a fairly strong labor presence here and maybe he just felt -- and i'm just speculating here, maybe he just felt he owed it to supporters in labor to do this. >> it opens tonight with a net root convention which is a gathering of liberal, left of center, progressive bloggers. how many people are expected in town for that convention? >> guest: well, the folks who signed up for the convention will be from -- about 1800 to 2,000 bloggers. and various interest groups in their wake who want their messages to be blogged about.

it will lead off with a keynote speech by president bill clinton tonight at around 9:20 which means 10:30 or 11:00, who knows given his scheduling. but there's also a conservative counter-convention in town. i believe they did this last year as well. americans for prosperity. about 600 people are expected at that. and the headliners are mainly journalists, political pundits like michelle mallkin, joe the plumber is here. >> host: it sounds like you're going to have an interesting couple days. how are you going to cover it all. >> guest: i've done a couple of preview stories. >> host: you're on the front page today. >> guest: about some of the individual bloggers who use this

community mostly daily cough which is the biggest of the community blogs to, you know, build little mini communities of their own, talking about that. we will be covering some of the bigger panels including -- howard dean is having a town hall meeting on healthcare tomorrow. there will be -- in addition to bill clinton, there will be -- valerie jarrett --. >> host: from the white house. >> guest: obama's close advisor is going to be appearing on saturday. and we will be blogging the bloggers as well. so i expect we're going to give it a lot of coverage. >> host: well, thank you so much. we'll be looking to the post gazette's coverage over the next few days. we appreciate you setting the stage and congratulations on your front page billing this morning as the net root's nation descends on pittsburgh for its annual meeting. >> guest: and be sure to tell everybody what that website is -- www.postgazette.com. >> host: thanks. we'll look for it in your by line.

>> and again, we'll have remarks by former president clinton at the net root nation at 8:00 eastern on c-span. we're at the enterprise institute where former house speaker newt gingrich is making comments on the government's budget process. in a couple of moments he'll be taking questions from the audience and we'll have live coverage it here on c-span. just to let you know over on c-span this morning, the brookings institution is about to get underway with a discussion on the impact of stimulus spending after six months. live coverage of that again on c-span. starting at 1:00, the white house briefing underway. at 2:00, robert gates and president clinton at net root nation's convention. here on c-span2, we will -- we are expecting remarks once again by former house speaker newt gingrich at the american enterprise institute on the budget process.

[inaudible conversations] [inaudible conversations] [inaudible conversations]

>> what i'd like to do -- and i don't know what the structure is here. do we have microphones? okay. if we don't have microphones, i'll just repeat the questions. okay. but i thought i would take a couple minutes and just stop and any questions about that first fairly overwhelming amount of material. >> you mentioned social security. >> well, i think social security is a subtext. i don't think it's the immediate crisis but clearly you would want to have the children of the baby boomers and their children you'd want a system which used the power of compound interest to allow them to save for their own retirement and have genuine savings rather than transferring money because as the number of people who are retiring and living longer goes up, a transfer of wealth systems frankly breaks down.

but i didn't try to cover that in this particular thing because i was trying to figure out how to focus for congress, state legislatures, city councils, how do you think of budgeting and the scale of change has to be to get at three to four years at a budget level but it's an important topic. other questions? yes. arnie? >> congress where they are right now. you've been speaking when people come back from a bad august recess. can you give us a sense of how members of congress come back rattled and how that might impact the next 12 months in congress. >> i actually don't know. and the reason i don't know is that the -- the left has developed a narrative that says the only reason these town hall meetings are going bad is because evil people are

organizing minorities to shout down the vast majority who agree with us. and the secondary story is in all of rasmussen's polling is wrong anyway. [laughter] >> so what will matter will be when they come back and they have david winston who you know well -- the pollster, thank you, said to me the other week that the most important meeting of the year may be the first house democratic caucus whether they get back and what story do they tell each other? and the question then will be, do they learn the lesson i think they should learn which is you'd better go to the senator and you better rethinking on energy and healthcare spending or will they, in fact, say just the opposite? we had better ram through these things because if we don't pass them this year, we'll never pass them in an election year. and i don't think we know which one they're going to do. i mean, we know what pelosi would do 'cause she's from san francisco and she's relatively safe and she doesn't have to go to town hall meetings.

but whether or not all of their swing members come back and say, this is a suicide mission, then you'll see real change. i don't have an answer which way -- i don't know how they're going to process the information. you'll notice that the president has been repudiating opposition. so instead of listening to opposition, he's basically saying if you oppose to us, you do not understand the bill, you've been misinformed. you really represent some evil interest group and you're probably lying. well, it's pretty hard to have a discussion at that point. and so we'll see whether or not the white house learns anything either. there is a possibility when he goes on vacation -- i mean, you know, six or seven months into your first term you sit there and you suddenly think -- you decompress. you get away from the daily business and you think to yourself, well, that wasn't very smart. as you'll remember we went through several things i did that were not all that clever, and we had to really learn from them in order to survive and we'll see whether or not they reach that conclusion. one or two last questions.

yes, ma'am. he's now going to bring you the microphone. >> both of the network news and the newspapers losing audience -- greatly losing audiences, would you not think they would see beyond their political bias what's happening and recognize that maybe there's a reason they're losing audience and it's not because people are using computers? >> no. i think -- i mean, you raise a really good question. the people who would be most interesting to talk to would be the folks at ge who own nbc. because msnbc, has had a very clear stay on the hard left,

aggressive anti-republican and anticonservative -- you know, pick fights with bill o'reilly. i mean, it's been a very clear model and it's been a disaster. i mean, fox news has a bigger audience every hour of the day, 24 hours a day, than msnbc and cnn combined. but i think it's amazing how people can -- there's a book called "cognitive dissosence" which argues that you can believe something so different that you can repudiate the facts because, you know, you don't want to believe it. i own a share of green bay stock. arnie's from minnesota. for a number of years it's very hard to believe that green bay was good time. it's impossible for me to believe that the vikings are a good team. i mean, i don't care what their record is. i assume it's a fluke. i think corporate institutions, universities, faculties -- to go through a similar thing. they cling to their culture despite data.

you know, and the "new york times" has decayed in the last 10 or 15 years. it's steadily decayed and there seems to be no ability at the top to recognize it. it's a phenomenon. yes, sir, you get to be the last question for this round. >> yeah, i was just wondering what you thought the prospects of the success for implementing this -- you mentioned that when you were in charge of the house republicans, it was an uphill battle but now it seems like you're facing a brick wall. >> look, i'm an optimist. i believe one of two things will happen because i think the american people are ultimately sovereign and good customers and i think they'll not accept bad products for high prices. they'll walk away from it. at some point you're going to see a very substantial change. you're either going to see it because the current politicians learn and then part of the purpose of this kind of course is to try to lay out a way of

thinking so people currently in office and their staffs can learn or you're going to see it because a new generation emerges that beats it. and we've had a whole series of those waves starting with the revolutionary generation and then the founding fathers, the federalists who wrote the constitution and then the jeffersonians who literally wrote out the federalists and the jacksonions who broke the national established and the lincoln republicans who led to a civil war and the progressives which occurred in both parties and then the new deal democrats and then the reagan revolution and the contract with america, which was really part of the same process. these are -- now, they take a while but they build huge momentum. we reinvent ourselves as a country i think better than any country in the world and the question in my mind is whether the current political structure can figure that out. or whether, in fact, you see a period of real creativity and real change and people emerge to fundamentally change things. but i'll give you an example. if you look at the job that

mitch daniels is doing as governor of indiana, there's no question in my mind -- and steve knows better than i do. there's no question he represents the future. if you look at bobby jindel in louisiana, there's no question they represent the future. in gin -- he carried 40% of the african-american vote with senator obama at the head of the other ticket last year. so -- i mean, daniels is a very good case study in fundamental change. one of the fascinating case studies will be california. you have one of the smartest politicians in america running as the attorney general, former governor, jerry brown, who learns as rapidly as anybody in america. you have on the republican side, two very interesting candidates and steve posner and meg from

ebay. one of those -- my prediction is one of those three will figure out how to communicate with the 64% who voted no. and whoever does it has a real chance of winning the election next year and i think that the mayor of san francisco who also is running has a real challenge because he a came from the area who gave the weakest vote against spending and he represents the most liberal part of the state and so i think it's very hard for him to convince people that he somehow has come to understand the scale of change we need. so i think he actually is that weaker position than brown in the democratic primary just because of that. but i think you'll end up in a race next fall in which if brown is the nominee, brown will be clinging to the i am for real change, let's change sacramento. he'll be doing it as aggressively as a republican and for the challenge for the republican to be, to be more believable than brown. now, the question will be can

they carry that through in the legislature because you can elect governors forever and if you don't start changing the legislature in sacramento, nothing matters. and the question is, can the 64% who are clearly pretty -- 65% who are clearly pretty angry, can they start organizing insurgencies in the state legislative races to really fundamentally change the state? if they can, sacramento will be a different place in two or three years. in fact, you really sort of get us into the second part 'cause what i want to talk about is the values envisioned for a successful america 'cause unless you start with a vision of success and then work to government and then work to the budget, you miss the whole point of how to think about this. we operate -- this comes out of the center for health transformation. where we begin to start for the center of change. albert einstein said doing the same of what you're doing and

expecting change is a sign of insanity. in any legislative body in the united states, that's what you're getting every day. that they get up inside the old order trying to find a way to fix things, cannot possibly do so and can't imagine breaking out of the rules of the old order. eisenhower said in world war ii, when i can't solve a problem i always make it bigger. i never seem to solve it by trying to make it smaller but if i can make it big enough i can often find a solution. i really think that's where we are. that unless you think big enough to arouse a level of public energy to overwhelm the old order, you cannot fix the current problems. all you're going to do is raise taxes, increase spending and have a bigger bureaucracy, a weaker economy and gradually watch the country decay. we translated that -- it became a title of a book i wrote real change requires real change. in that context, all i ask you to do is go through these options and think yes rather than no because. the first reaction of people when you start outlining new big

ideas is no we can't do that because. we discovered when we were balancing the budget in the 1990s and when we were creating the contract before that and then electing the first majority in 40 years and getting it reelected for the first time in 68 years, since 1928, that if you could convince people to say, we could do that if, they could tell you exactly the same problem that we're going to tell you when they said no, we can't do that because. the difference in energy in creatity is very, very drama. finally, this is all hard. i worked for 16 years to create a majority in the house. it took us three years after we were sworn in to get to a balanced budget. i mean, these things are hard. and unless you're prepared to have cheerful persistence, you're not going to get them down and if you go back and look at the progressive movement, there are an amazing number of leaders, from theodore roosevelt to norris and johnson on down -- all across the country, all

moving in the same direction, all representing a generation of reform. and from 1896 to 1916, they invented modern government. our problem is we now have the fossilized remnants of that system, and we now have to go through a similar generation of invention. so to re-enforce, budgets are a function of government. government should be a function of the society you're trying to create. so successful budgeting starts by defining a successful society. if you start budget talks by talking about the budget, you're making a fundamental mistake. i think decisions have to be made in a deep, mid and near order. so if you want to know what budget do we need next year, i started to say tell me about america 15 to 25 years from now. now tell me about america five years from now. all right. now, let's talk about the budget. but unless you start deep, you cannot understand what you're doing. think about it. if you don't know where you're

going, how do you make today's decisions. people say to me, i'm too busy to plan. my question is you're too busy doing what? if you don't know where you're going, why are you running? and this is a fundamental challenge because what happened people go in and the urgent drives out the important. they spend all day doing trivia but it's really hard trivia. they're really exhausted at the end of the day and they don't understand why they aren't solving anything. you have to be prepared to think about where you're going and how you're going to get there and then think about what kind of government that takes and then think about the budget in that order. i would also argue you always plan back from success. if you really want every child this detroit to learn and you want every adult who has been failed to learn, you'd better think about what would it be like to have a fully educated detroit and then redesign the school system? don't start by trying to redesign the current school system. so you got to literally think about what a success would be and then come back. i mentioned earlier about

lincoln. notice the sequence. 1829 george stephenson launches the first train which is called the rocket in great britain. 1832, lincoln at age 4 campaigns for a seat in the illinois assembly on a platform for building railroads. the first train arrived in the u.s. from great britain in 1831. lincoln read an article about it. he had never seen a train. 1858, he rides trains routinely in order to debate douglas for the illinois senate seat. 1859, as we started this session earlier, he calls for a transcontinental railroad in council bluff iowa. 1862 he signs the pacific railroad act in may of 1869. they build -- they complete the transcontinental railroad. now, there's an example of large scale vision. when he first conceptualized the transcontinental railroad we did not have the capacity to make

rails strong enough to carry locomotives big enough to get across the sierra nevada. all that is a process of invention. and it's a remarkable story. the point i'm making is that visionary leaders see deep and live their lives working towards getting the deep to happen. and if you study people like roosevelt, reagan, margaret thatcher, again and again you see this pattern that they somehow have seen a potential future and they very comfortably work to create it. we believe there's a model for doing this. it's very explicit. it's one i recommend all the time. you start by describing the values you believe in, then you describe a vision in one page or less that would make that value -- those values come alive. then you develop metrics which tell you whether or not in the real world you're achieving your vision. and only then do you design strategies to achieve your metrics. you first have to have described

values, vision and metrics so you don't know why you have strategies. at the fourth level -- i mean, after strategies you build projects which are methods of implementing it. and finally, you have task every day. i also argue that leadership -- what i just showed you is a planning model. any of you could sit down in private and do values, vision, metrics, strategies projects and tasks and write it out in a laptop and have a pretty good document. to get it done, you have to recruit other people to recruit other people you have to lead and our argument is leadership is actually a function of four years, listen, learn, help and lead. we also believe that the -- the correct models for you to go out -- and this is why i say to state legislators which is why canceling the town hall meetings. you need to hear what people are saying. if they have the wrong information, give them the right information. if they're hostile, let them be hostile. the rest of the audience is going to figure out that they're hostile. if it turns out the whole

audience is hostile, maybe you need to change. i mean, the imagery yesterday morning on "good morning america" and "the today show" saying don't you trust me and having people boo and yell no -- [laughter] >> i mean, there's actually something very profound in that conversation. so i always tell potential elected officials you've got to learn how to listen and you've got to listen for real and ask good questions so you learn. and if you listen and learn, people will feel you're helping them. because they're ventilating and they're getting it off their chest. they feel better and it's out in the open. the act of telling things they may figure out a solution on their own, you might have good questions and good information. if people know you'll listen to them and learn from them they'll ask to you lead. when you ask them to lead, you'll say these are my values and this is my vision, these are my metrics and these are my strategies and these are my projects and tasks and you then notice how it works. you go back to each one saying what do you think. if president obama would calm

down and slow down, go to the country and genuinely listen, he could introduce a new bill by october 1st that would be fundamentally radically better than the current bill. the country would have a renewed faith in his leadership and it would be a dramatically smarter bill than the current bills. but it requires slowing down and genuinely listening. in order to learn. not just transacting and engaging in debates and attacking people for disagreeing you but asking fundamental questions and i think this is a very important difference in how you try to govern a free society. it's a measure of reality and responding to it in virtually real time. the three best books in metrics are giuliani's leadership about how he turned around new york, chief bratton's turn-around. he was the police chief who actually turned around the crime-fighting in new york. and michael lewis' money ball

which is a study of the use of metrics by the oakland athletics which is both funny and very, very revealing. those three books will give you a sense by what i mean by metrics but metrics are vital because unless you know what you're measuring, you don't whether or not, in fact, you're achieving your vision. for example, it's very clear from a metrics base that the purpose of the detroit school system is to pay people money. that the detroit school system has almost nothing to do with education. but that it's a jobs program. and that every effort to try to to analyze the detroit school system as an educational center misses the point of the exercise. all you got to do is measure the metrics and say what are they actually achieving? they get paid every week. it's a great success story. now, if you want to measure education, that's a totally different conversation. but that's not a metric they value. and i think it's very important to understand the role of metrics in designing a system because that then tells you what you're trying to achieve. that tells you what your

strategies are. that tells you how to shape your government, and that starts to tell you about your budget. but you can't start with the budget. you can't start with the existing bureaucracy. if you have to go back out and say, what are the values we're trying to achieve? what's our vision of success? this is true whether you're at school board, county commission, sheriff's office, city council, state legislature, governor or the u.s. congress or the president. the challenge for us in america today is that we have two sets of values and two sets of i guess haves. one set wants a strong centralized government that defines society. the other set, which i belong to, wants a society that defines government. these are fundamentally antithetical. as my daughter who's a syndicated columnist wrote recently we thought we were voting for change we could believe in and we found we had voted for people who want to change what we believe. two fundamentally different models. we believe the key values are safety, prosperity and freedom.

i think if you don't have safety, the society can't function. if you don't have prosperity you can't sustain your national security. and your freedom is dependent on a prosperous and a safe society but that your values -- when you reach a situation, one of the key ways to test public policy is, does it increase freedom or decrease freedom? does it meet the hayek friedman test or does it meet orwell's warnings? that means that we want to have a robust, healthy society and productive, creative, prosperous entrepreneurial economy, a limited effective government. i do want to make a point here. i am not antigovernment. i am for effective, limited government. and i think it's a failure to try to build an antigovernment coalition because then you can't govern. 'cause then you have no model of what you're trying to accomplish. i say it to all my conservative friends. you want to control the border, that is not nongovernment. you want to have a stable dollar

with no inflation? that is not nongovernment. it's a limited effective government, but it's government. and so i think we actually need a conservative doctrine for a limited effective government in the 21st century, not an antigovernment doctrine. now, i think because we've had two world views -- and the dominate world view in our academic and intellectual elites ìc% bureaucratic world view. the dominant world view in our culture has been individual liberty, work ethic, small business, decentralized view. they're fundamentally view which is why you get votes like you do in california where two-thirds of the state is against the establishment. there's actually three stages. the first one which i worked on for a long time and reagan was brilliant at and thatcher was brilliant. is winning the argument. is there a proposition that we can make that people will say yes to? what do we need to implement that proposition? and will they give us permission

to do it? that's really historically what we most of the time study in terms of great political leadership. however, if you are trying to fundamentally change an existing system, whether it's a school board, city or county government, state government, or federal government, you're probably dealing with staffs that have been trained in the old order. so when you come in and you say we're -- it's a little bit like deciding you're going to run a very inexpensive restaurant like mcdonald's with a team which has been trained to run a gourmet restaurant. if you don't fundamentally retrain them they don't understand why it's okay to have an hour and 35-minute service. and they don't understand why you've given up on the white table cloths and the crystal. and so there's a constant reversion to what they believe the norm is. this is an enormous challenge for republicans and for conservatives because almost --

so somebody says to me, i have a masters in public administration. the odds are very high they've learned exactly the wrong things. because they've learned all the things that the old order has taught us about how you run bureaucratic systems in a 20th century model. and there are very few places today that create any kind of real learning in a 21st century model. and something that steve will pick up a little bit. finally, there are some people who you can't win the argument with. i mean, the president's guard unit in california has a simple answer, it's no. they have no interest in giving up their power. they have no interest in giving that up their pay or competitive prisons they have no interest in keeping priorses at a reasonable cost. they have a interest in maximizing their ability to get money out of the taxpayer. similarly, in new york state. albany is a conspiracy against the rest of the state. dedicated to paying off interest groups who own the city.

and they have zero interest in the model we're describing. in fact, they're antithetical to it. you have a challenge of how do you discredit, isolate and shrink those who are absolutely reactionary and who are totally committed to the old order. now, because i think society is more important than government, i actually think there are four roles of a leader and the order is really important because all too often what happens is, somebody gets elected to a government job. they promptly narrow their vision to managing the bureaucracy and they become a captive of the bureaucracy. this happens over and over. it's a major problem with cabinet appointees in every administration. it's a major problem with the committee structure in congress and in the state legislature and steve may comment on it later about the same thing at the city council level. they become captive of the very thing they are supposed to be organizing. i think the first job of an elected official is to be a visionary definer. you set the agenda.

you articulate values for the community. i think that's the most important job and when you look at great presidents they do a remarkable job of defining the future, articulating values and retailing the nation to a general agenda. the second job to be a symbol of the economy. where you go matters, what you do matters. you have a power of standing. you sends signal of legitimacy. you use your office to honor, power and strengthen those who are doing what you believe is important. i think that governors, presidents and mayors dramatically underestimate their potential to arouse and organize their community by using the power -- the prestige of their office. third, you recruit talent and energy. this is a huge crisis in the federal government right now and in state governments because we've adopted such complicated laws about ethics and about disclosure and the process has become so gruesome that many of the best people in this country

refuse to take government jobs anymore. if you go back and look at who franklin delano roosevelt could recruit for world war ii and how easily they came into the government and how grateful people were that they were citizens and you look at what you go through today to serve in the federal government, it is an extraordinary self-imposed wound which has dramatically limited our ability to arouse talent and it's an area we're going to have to have fundamental change on, on a bipartisan basis. because one of the most important jobs of a leader is to recruit talent and energy. the last thing you're the administrator and manager of government. but that's your last job not your first job. and you should only get to it after you've done the first three jobs every day. it's important to remember that the urgent drives out the important. so you get up every day and lots of small things come in that you've got to solve immediately, none of which matter. and that can drown you to such a point of exhaustion you never get around to the things that are important.

and the trick on leadership is to force the important ahead of the urgent. now, i think you can see the collapse of 20th century bureaucratic government. if you just look at recent examples. katrina where the federal government clearly failed dramatically controlling the border where the government is failing today, road-building in afghanistan, which has been, i think, an extraordinarily disappointing project. the detroit schools i mentioned earlier. i once heard mayor reardon tell me about los angeles red tape and it's by a book by the author who discovered economies of the third world and almost every major american city has the same problem as third world cities which is the bureaucracies are actually a bigger problem in job creation than the tax rate because the bureaucracies take so much time and are so inhibiting that they drive business out of the cities and they drive -- they stop small businesses from creating honest opportunities.

and mayor reardon told me after the rights as a mayor he was very, very wealthy. he had a friend who said i want to help you out. i'm going to put a factory in the poorest part of los angeles. and a year later the guy called him and said i can't. he said we have spent a year trying to work with the city bureaucracy. and we cannot get through the red tape to get permission to build a factory. here is one of the poorest neighborhoods in los angeles. they desperately needed the jobs and they needed the tax base and the bureaucracy just couldn't function. and any of you have watched the various stories about the collapse of the dc bureaucracy over the last 20 years, you know you can go through dc government and find example after example where systems just collapse. they don't function. well, somebody who's going to invest their own money and their own time in order to make a living looks at that and leaves. they don't say let me sit down for the bureaucracy. let me find a city or a country

that wants me and they fundamentally change their attitude. and finally, remember that outright fraud -- i mean, when you're told that medicaid and medicare may have as is pointed out in the book stop paying the crooks and yet 13 experts helped him write this book at the center for health transformation. their estimate is that between $70 billion and $120 billion a year of fraud in medicare and medicaid. now, when i say fraud, a doctor who -- or a dentist who charged 982 procedures a day or a dental office in brooklyn had somebody stand out front who said if you loan us your medicaid card for 30 seconds we will give you a free dvd player. or five pizza parlors in miami that were certified by medicaid

as hiv-aids transfusion centers. this is real fraud and what you have is is a paper-based bureaucracy competing with an information age, internet-based cell phone and blackberry crook. so the crook is always operating in a tempo totally out of the pace of the paper-based bureaucracy. that's how fundamentally different the two models are. and in a comparison, a member for the center of health transformation is a credit card back room operation. they get very worried if they have more than two-tenths of 1% of fraud in credit card transactions. the estimate is that medicare and medicaid are 10% fraud. so compare two-tenths -- 50 times as much fraud in government health programs. i think the current effort underway in washington has not changed. it's an attempt to create new layers of the same bureaucracies. what they describe as new is

actually more of the same. now, there are principles for thinking about a successful 21st century america. the first one -- and this is one i have not really been as successful as getting across as i'd like to be so i'm very open for ideas later on. i think there will be four to seven times more scientific growth in technological change in the next 25 years. i think two-thirds of it will come outside of the united states. to give you a sense of scale -- if you're looking out 25 years and you're asking for, say, 2035, if we have four times as much scientific and technological change, it would be as though a planning group in 1880 was trying to understand this meeting. now, 1880 is preautomobile, pretruck preairplane prelong distance twelelephone, precompu. i mean, how would you explain

this meeting. how would you explain c-span. if it's seven times as much you're back as sir isaac newton trying to understand calculus. i met with the air force chief scientist, for example, and talked -- i met in a variety of settings. no one that i know of have even begun to think about how would you design a system that maximized our ability to use the new science and the new technology and that maximized our ability to take advantage of it to create jobs and create national security and create better health outcomes faster than anybody else in the world. that would be a fundamentally different way of designing where we're going in every government -- every state government, every city and county government, every school board and the u.s. government should be trying -- should have a working group of scientists and technologists thinking in fundamental ways about how we -- how we really become a

continuously evolving, a continuously adapting system because that scale requires constant improvement. you'll never know enough to make big jumps. so you've constantly got to rethink it. the second that china and india are going to be powerful competitors. they are not a threat. they're a fact. you know, what we do about it is the challenge. they have every right to pursue happiness. i mean, they are as endowed by  the creator. so they have every right to do this. and if you have a billion 300 chinese and a billion indians rolling up their sleeves, if you want this country to remain the most successful in the world, then you've got to be prepared to meet this competition. this will be one of the major debates in the next 10 years. are americans prepared to think through what it takes to compete with china and india or would we rather decay elegantly? because there's no middle ground. you're either deciding you're going to be in the competition and that's going to require a continuance change or you're deciding change is too hard.

let's just give up and let them become the leaders of the world because it's too difficult for us to do it. but there's no middle ground about this. i recommend to all of you bob compton's movie "2 million minutes" you can access it at 2mminutes.com. compton is a health entrepreneur. it's a study of two chinese students, who american students and two indian students. 2 million minutes is for years of high school. when you see that move, you'll realize we're a country aggressively preparing for the 1956 olympics. we are totally out of sequence with the chinese and indian education systems. and this is as true of suburban schools as it is of bad inner city schools. people think they're going to good schools. compton put the tenth grade indian exit exam on his website. he's had 4,000 americans take it

none of whom have passed it. at the end of the tenth grade on the academic track on india you've had four years of physics taught by a physics major. and you have to pass that to go to the eleventh grade. for america to be our -- our argument is that for america to be successful, we have to continue to be the most inventive, most productive, and most prosperous economy in the planet. the question you have to ask if what we inherited is a 20th century bureaucracy and a 20th government what is the characteristics of a 20th century government? let me go back to the general motors example. numi in 1986 was a joint venture of toyota and general motors. it was a factory in southern california taken over by toyota. toyota actually retained most of the workers and almost none of the managers. they retrained them into the toyota production system. they implemented the toyota production system, which is actually a modification of

edward demings teach who was in western electric in the 1920s and in 1951, went to japan and taught most of the senior japanese ceos the concept of continuous improvement and quality. there's an emphasis in cooperation, training, teamwork, responsibility and putting safety and quality first. now, it's fascinating because the first year they had 150,000 recommendations from the workers for improvement. this is one of the things that people find the hardest to understand about -- if you believe in bureaucratic centralized government. you can't get a demming toyota system in a bureaucracy because each change is too hard. these are systems that are constantly modifying themselves. and their focus in the toyota

system is reducing muda or waste, japanese for waste. thousands of small steps. it's fascinating because when general motors learned that there were 150,000 recommendations for improving the plant, from the workers who used to work at general motors in the same plant, their reaction was to break the relationships on the grounds that any factory that had so many things wrong was something that general motors should be associated about. there's a book by komac "the machine that changed the world." it's part of the mit studies written in 1989 or 1990 that lays all of this out. this is not magic. it's an enormously power of productivity absolutely impossible to sustain in a bureaucratic model. what we have to do then is establish procreativy, proproductivity and

proentrepreneurial policies. i think there are principles for doing that. the first is transparency. you have to have the data, whether it's the right to know cost and quality in healthcare or the right to know in cost and quality in education, you have to have the data. the second is you've got to establish and use metrics. you have to be able to say this is what we're trying to accomplish. this is how we'll know we're accomplishing it in there in the computer statistics the system that giuliani and bratton created is an amazing case study. they reduced crime in new york by 75%. it is the most successful policing system in history. bratton took it to los angeles. new york is today the safest big city in america. los angeles is the second safety city.y+ñ -- safest city. it's fundamentally different. it's not just more. it's different. the third is you got to constantly scan science and technology to find new breakthroughs new opportunities. the fourth is you have to look for better systems everywhere.

very simple model. whatever you're doing, somewhere on the planet somebody is doing it better. and so you constantly want to be looking for every possible improvement. and you'll be amazed how many smart people are inventing -- let me give you a modest example. how many of you twitter? how many of you are on facebook? how many of you use a blackberry or pda of some kind? how many of you have a cell phone with a camera? think of all these changes. yet, we don't have government structures that say, gosh, if we have all these kinds of capabilities how would we evolve to take advantage of them? so you first want to understand the opportunities available and then you want to design strategies to achieve the desired metrics. and you want to do a lot of that through public/private partnerships which again is a different model. there are lots of examples -- we can have a public/private partnership in getting things done.

now, what i'd like to do -- let me take questions for a couple minutes and then i'm going to take a brief break and then steve is going to share ideas with you. but let me start and take questions for just a few minutes. yes, sir. i think they're going to bring you a microphone. >> my name is henry. i'm a researcher. i found it interesting you mentioned abe lincoln furthered the railroad as a new means of transportation and we will soon have the electric automobile courtesy of detroit. and i wonder is there any need to further this in some manner, say like the cash for clunkers program. >> there's a tax credit for buying electric cars now but i think it comes to something like

$7,000. actually, one of the most interesting electric car i saw last year was the tesla which is built in san jose and not detroit. it's built by a information technology entrepreneur. it uses a fundamentally different kind of battery approach which has lowered the price of the batteries radically. and it was a sports car, which was from 0 to 60 faster than any internal combustion car except the most expensive ferrari. it's a very interesting design. about 103, $110,000. and i think tesla is getting some money -- i mean, i don't particularly like the government loan programs but i will say the one good thing is they made them available to start-up companies, not just to the old companies and i think that's actually probably a good sign. but there are things you can do to simulate that kind of development. and very much -- i mean, i always suggest to people, if you want to see the legitimate

shaping of markets, read alexander hamilton's first report on manufactures and you'll see an argument for adopting the right policies in order to maximize the growth of the future. but my bias is i want to incentivize the future. i don't want to punish the past. we had very substantial incentives to build the transcontinental road. we did not try to tax stage coaches out of existence. we had substantial incentives to invent commercial airlines. we did not try to tax the transcontinental railroad train out of existence. and a fundamentally different approach and i find all too many of my friends on the left have a need to punish the present rather than reward the future. and i think it comes out of their antibusiness background. they want to raise taxes and attack those that they currently disagree with when all you have to really do is let the technologies -- if you subsidize the rise of new technologies, the internet was a government subsidy. the jet airplane was a byproduct

of building bombers and tankers for the air force. the interstate highway system created all modern middle class transportation in this country. you can have government projects that are infrastructure which i'll get to in the fourth hour but even there i would argue when possible you want it to be a public/private partnership and you want it to be done as effectively and efficiently as possible. yes, sir. >> thank you, mr. speaker. my question is, with all these changes and all the challenges and the money and the issues for the last 45 years that i voted and been somewhat involved in politics, it seems that both sides are so ingrained in a particular issue or their policies. and with these changes that have -- apparently, from everything that you've talked about have to happen so quickly

so for financial reasons and everything else, my question is, wouldn't this be able to be more effectively done using the model of -- use anything is available with a third-party, where we break away from the traditional molds and some 40% on some cases indicate -- >> i think third parties are very, very hard to create. the last successful third-party was in 1856 with the founding of republican party which crowded out the whigs. and actually was a byproduct of the collapse of the whigs. i think it's extraordinary difficult to create a successful third-party. you can create a temporary third-party to send a signal of change. that's what perot did. and perot in that sense was a successful example. but it's very hard to create a third-party that has any hope of crowding out one of the two major parties. i do think what you want to do is design policies that are

tripartisan. one of the things that we did at american solutions is we found 115 issues which we listed under the platform of the american people in which you have a majority of democrats, a majority of republicans and a majority of independents in agreement. and when you go back to the progressive movement it was clearly across the country. in fact, in the election of 1912, the candidates of change -- there were three of them got 76% of the vote and the incumbent president got 24%. i mean, so there was a huge repudiation of the old order in 1912. but i think that's building -- i mean, my goal would be to build across partisan lines with where everybody agrees with certain fundamental premiums because the 65% in california who voted against more taxes and spending. when 53% of nancy pelosi's

district is voting no, there are a lot of democrats voting no. and so i think that it's possible to reach out and create a tripartisan movement. i think it's very hard to then translate that into a single part. way in the back. >> my name is andrew. i'm a political activist. thank you very much, mr. speaker. county counsel -- [inaudible] >> got run into the dirt. [inaudible] >> what we're dealing with was both the problems and potential solutions. [inaudible] >> they chose to ignore them. this is like dying on me. >> i think you're in a spot where it doesn't get picked up very well. >> okay. now, one of the problems that we

were dealing with, other than the fact of where more tax money was going to come from, again, they were going from the point of trying to divvy up a pot that they didn't have as opposed to -- [inaudible] >> income. this is crazy. now, one of the main problems was 52% of the budget was dedicated to just the salaries and benefits for public service employees. and i'm thinking as opposed to the racial of public -- i mean, public service employees in a county cannot constitute over -- it should not constitute over $2 billion, how are we ever going to be able to, especially, in a world -- in a country now where we have expanding government role take control of budgets and the economic models when the government keeps growing largely? >> that is such a great lead-in. i'm going to recommend a

five-minute break because the entire next hour will be answering your question because steve, in fact -- both as a mayor and the work he's done at harvard i think is quite prepared to answer that. so why don't we take a five-minute break and then mayor goldsmith will pick up from there. [applause] [inaudible conversations]

[inaudible conversations] [inaudible conversations]!go [inaudible conversations]s3y >> our live coverage of this forum with former house speaker newt gingrich will continue in just a moment. topics in ways to change government in the budget process and case studies for key

budgeting sector such as health, education and infrastructure. in the meantime, with congress in recess, lawmakers across the country are meeting with constituents this month to discuss healthcare. c-span cameras are out covering many of these healthcare events. we'll show one with texas congressman kevin brady today at 3:00 pm eastern. that'll be on c-span. and lots of interest groups are running ads. here's a look at a couple of them. >> they won't pay for my surgery. what are we going to do? >> but honey, you can't live this way. >> and to think that planned parenthood is included in the government-run healthcare plan and spending tax dollars on abortions. they won't pay for my surgery but we're forced to pay for abortions. >> our greatest generation denied care. our future generation denied life. call your senator. stop the government's run healthcare. >> why do the health insurance companies and republicans want

to kill president obama's health insurance reform? because they like things the way they are now. ed hanway of cigna makes $12.2 million a year. that's $5,883 an hour. ed makes more than one day than the average works all yearlong. now ed's retiring with a $73 million golden parachute. the republican prescription for the healthcare crisis be as rich as ed. you'll be happy, too. >> president obama is preparing to head west to hold town hall meetings on healthcare. one tomorrow in belgrade, montana. and saturday in grand junction, colorado. earlier saturday the president and his family will visit yellowstone national park. they also plan to see the grand canyon. white house officials say the trip is partly aimed at encouraging visits to national parks. ..

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[inaudible conversations] >> the government budget process is the topic of this forum on this morning here at the american enterprise institute. we have heard from newt gingrich, the former house speaker. in just a moment stephen goldsmith, a former mayor of indianapolis will continue the conversation. we expect this to get underway in just a moment here on c-span2. quickly a couple of news stories. the obama administration is sending a team to inspect a maximum-security prison that could be used to hold a terrorism suspects. some local residents are

expressly concerned about having suspected terrorists in their small relative liberal town. that from the associated press. the president is planning to squeeze in a visit to yellowstone national park. he will be in montana for the first meeting and then he and his family will try to spend part of saturday at yellowstone national park. after that air force one will depart for west yellowstone airport bound for another health care forum in colorado. [inaudible conversations] [inaudible conversations]

[inaudible conversations] >> okay. if we could get started please.

my sign in from the speaker. look at this just briefly from the local level and apply some of the principles that he has mentioned in the last couple of hours. why don't we just go back both as a point of comparison and also maybe slightly of optimism. the big city mayors -- indianapolis, by the way, where i was mayor has many same problems as the older cities in the country. but let's just kind of go back. i took office as mayor in 1991. the 30 years leading up to that, big cities in the u.s. went through the following. folks the elected as mayor. they get elected generally because they want to do good things. cities are disproportionately poor which means that in that 30 year time frame previous 1099s you basically had to raise taxes because you or redistributing wealth from those who had it to the suit didn't.

as he raised taxes people who had money moved, which means it and to the right to raise more taxes. a higher density of poverty, critics and tropical forest. i used to say on a very bright sunny day when i got elected i could actually see dollar bills flowed across the county line and land in the suburbs. the schools were better and the crime which were less. obviously that maillot doesn't work. well, along the way those large city mayors came up with the following idea. since our cities aren't working well that means we should go to washington. we need your bailout. if we get back clearly you would say that is not clear that it made any difference or maybe made the situation a little bit worse. i get elected and promise to reduce taxes. i took office on january 1. the chamber of commerce says

thank you so much. and so please you agreed to reduce taxes. we need a billion dollars in infrastructure. please do both. this is like a bad way to get started. we went through of the bit of a shock. this presentation is not just about indianapolis. a kind of looked around and found. i'm going to go to a vision of change. there was a billboard at the suburbs of our city. the wealthiest -- left the outskirts of the city and went into a wealthy suburb. the billboard said move to blank the city where your property tax rates will be 205% less. capet that billboard and pass at out. the future has to require dramatic change. we are granted to a billion dollars of infrastructure or expand our job base if we don't do the infrastructure. are not going to extend jobs. it's opportunity. that can't be the main reason exists. well, this vision that the

speaker talks about is one of an effective government, and effective government that provides the basis of opportunity. and for those of us who even believe in efficiency of privatization or similar words that is not going to motivate sufficient numbers of voters to supportñ fundamental change. the goal of fundamental changes opportunity, and opportunity drives efficiency. and the billboard became by calling card war, you want to be a competitive city or a decaying city. this is kind of go through a few things. to me, i have been in government of little bit. private-sector of the bed. better, faster, cheaper government. i actually think it does work. now, the challenge we are going to talk about begins with a little bit how do you create public value? with the declining resources. the demand for public service already exceeds capacity, and the incremental improvements are not going to keep us anywhere

close to what we need to do. we need to have a baseline of total transformation. we need to totally transform the way that we conduct government and our expectations from it. better, faster, cheaper focuses on results, and the better, faster, cheaper model i'm talking about is a two-step process that can apply to any form of public service. social services, roads, crimefighting, and roads and the like. step one, and i think this stuff often gets ignored this. we need to reexamine the fundamental purposes of every government agency, every government go. privatize a lot of stuff. i look around and say to the folks working for me, it appears to me we actually are not doing more efficiently that which we should not be doing at all. and there is a tendency to think about efficiency improvements as successes. perhaps, they're not. then begin. the operational improvement.

this definition of public value, what is the public value that we are trying to create? that me just run through a a couple of really quick examples. this is an easier slide. so new york city for years thought it was in the business of providing shelter beds for the homeless. this seems like the function of government. you can figure this one out. the more shelters they provided the more folks who wanted the shelter beds. the public value was to help address people who are homeless. it was and to provide seltzers. and yet for a decade or more. it's a thought it was in the shelter care business. and when it reoriented itself around the homeless it actually stops the growth of homelessness. tony williams public hospitals.

public hospitals serve those who are uninsured. you lose less money. you never quite get there. mayor williams said to his staff and the voters, what is the public value we are trying to create? trying to create a highly boxing public hospital. no, we are not. trying to create public health, not public hospitals. if we are trying to create public health what is the role of the public has put? up, very low. in some cities it's just an emergency room. in some cities it's not a hostile at all. a series of clinics that intervene in the roads in tough neighborhoods and reduce the long-term health care costs and distributed over public-private partnerships. so those definitions, and the definitions of public value effect the financing's of these programs, as a harvard case study. very interesting case study. all summarize three weeks of that part of the course in two minutes. oklahoma disability programs used to pay folks to they called

job coaches to help individuals who were disabled. the job cuts is attached to the people who were disabled and tried to cut some. well, you can figure this out. the well intentioned job coaches thought that the person never tried to help could not succeed without the help. since they get paid on how many disabled folks they were coaching they tended to prolong an internally with the best of intentions those coachings. so oklahoma said to its disability nonprofit partners what is it we're trying to accomplish tonight trying to get people a job, not a job cuts. let's pay for a program that produces long-term jobs for the disabled. convulsian and the non-profit system, convulsion in the payment system, but a realignment of what public value. so let's just kind of consistent with the presentation the last couple of hours. many, many of our government agencies, city, state, and

local, or more efficiently producing public activities that don't actually need to the public value. and the way to create stress formative change is to start with what is the public value? now, the speaker of specialized much more in health the transformation than i do, but you can see this very classically, medicaid program where much of the program is designed to pay for activities. how much of this, how much of that. very little is oriented around health. we now know in state government if he wanted in transforming to flee there is massive amounts of digital information that will allow the intervention in a family in a way that produces better health and saves money. several years ago an example. in georgia they identified that 10 percent of the kids that were admitted 90 percent of the times in hospital emergency rooms for asthma. so instead of just waiting for them to show up in the emergency room they went to the homes of

that 10 percent, found out what the health conditions were that were causing that and saw bit. so we have digital tools. we say that our goal is better health, as long as we say our goal is better medicaid we apply the tools in an illogical way. true transformation requires us to understand what we are trying to do in terms. i'm not going to go through this one. run an exercise in your mind sometime about what is the public maillot we are trying to produce. it will show you that the ability to demonstrates the irony. now i'm going to do this quickly. the process is a very complicated one. i used to get tested desk depending upon how you count. 10,000 employees. not that many compared to the federal government. i wonder around and ask employees what they're trying to do. invariably they would announce

to me in the activity that they were doing better and not connect that to the public value. once they identify that there are a series of techniques that we can do that will help us get there. and better, faster, cheaper is kind of a blank slate. what is the value? how are we going to get to the value? let's focus on results and relentlessly measure and create innovation. now, there are a lot of problems here. this is disruptive for government, including the media operation to be hostile to change. i used to say as mayor if i continue to do the same mediocre service every day no one would ever pay attention. the press would never cover it as a story. if i said we are going to really transform this area than the risks go up dramatically. as a public, as a critical issue here. you have to evacuate the public-private partnerships said is the opportunity of taking a

risk. indianapolis -- of politics is global to me, all politics is local. many of my anecdotes' here are indianapolis. we started with this kind a billboard. mentioned indianapolis where indianapolis has had before me relatively a very good mares. relatively low cost city. and yet over the next about six years every time we touch the public service, as the public value question, computed at the services, we say 25 percent every single time. at the end of this time the public work force was down 40% and every service was better. taxes have been reduced. it is the leading ground to make things work better, faster, and cheaper in this classic washington monument argument that the only way to save money is to stop tearing something that is vital is a false choice. we tell our employees, you know, what is the quickest way to lose

weight? cut off your armbar go on a diet. which way do you want to reduce the size of government? wow, is that to close the washington monument. it's to go on a diet. that's what we did. and every time we did it the quality of services went up. let me just use as a little example here the indianapolis treatment. so ironically most water and waste water is still government-owned. for reasons that are archaic. so i announce that we are trying to privatize a waste water treatment plant. private in europe, all public and the u.s. the city council announced that we weren't. my first clue that there was more than one branch of local government in indianapolis. this so we will study the waste water treatment plant. he came back and said the plans are enormously well managed. you can save by% maybe. 5% for me is not worth the political turmoil. i said let's try it a little bit

differently. let's ask anybody in the world to bid on the right to manage our plant. bidders from all over the world. when the winning bid came in the cost of operating our plant can down by hundred and $89 million or 40%. the principle of the exercise is the marketplace and competition the charge results. this is a public / private partnership. week claimed the water better, faster, and cheaper. in the end our managers mostly left, but our employees state. and it arrived. more productive and more satisfied. so this example can apply to almost any substantial public activity. just to kind of endorsed a couple other things that the speaker said, so if we are thinking about economic effect on our cities and states and

federal government, some more explicit to the cost of regulation and the light. we asked -- we went through every single regulation of minneapolis and said what is the public purpose of this regulation? what is the health and safety producing? what is the cost to iraq in the end we eliminated 40 percent of our regulations, 68,000 transactions per year, and reduced the permitting process to the day on simple stuff. because we want people to invest. back to the beginning. the goal is to create wealth, not just to redistributed. create investment. obviously you can see this. these are all local outsourcing, privatizations to more competitions. everything you touch can be

subjected. we -- the situation that often we find ourselves and, we did in these arguments. the speaker used the phrase public-private partnerships. and often we have these kind of sharp differences between privatization and government. the fact of the matter is, and it's a very complicated world in which we live. most public services are provided by a combination of for-profit and government and often non profit. and when we allow ourselves to get sucked into this privatization, it misses the point. the basic point is how to produce these services in the most effective way possible, and that is the way that the sec does relate to each other, not whether it's one or the other. and if you think about financial tools the first way to say whether or not you are efficient is to look at the government budgeting system. so i get elected mayor.

i'm just a lawyer trying to pretend i know something about business. i say to the folks around me, bring me the city's financial. they are the best for color separations and pictures i have ever seen. just exquisite. and even more or less within 50 or $100 million the numbers at the back of the book balance. so i said how much does it cost to fill a bottle? and they go, we don't know. how much money is industry department or even industry department in the department? we don't know. audi unit you are efficient? well, we work hard. so the metrics that flight performance to cost if they are absent, anything else is illusionary. so we moved to an activity based costing system. we want to know how much these activities cost. the definition of the activity and the definition of costs are what drove the process. second the federal government -- and and not the federal government budget expert, but the fact that the capitol budget

and the operating budget is all mixed together makes for a really bad practice. because there is no depreciation of the physical infrastructure. the capitol budget subsidizes the operating budget and helps you disguise but your deficits are. and the ability to split at the capitol budget and explicit in the get depreciation was critically important, as we kind of went forward with the change. the speaker mentioned performance measurement. when i was doing my competition stuff of local businessman who chaired by outsourcing committee was a guy named mitch daniels. in one of our early sessions he asked me what we were measuring. i said we measure some stuff. we don't measure too many things. he said, well, until you start storing it is our practice. does not count until you keep score. so major, major, major. one of the problems we have is that the measurement has to be connected to the results. the results have to be connected to day-to-day jobs of employees

whoops. better, faster, cheaper. we are in exactly at the points where dramatic transformative changes in government are possible if we will allow ourselves to engage in technology and the right way. so about 10 years ago -- about 10 years, nine or 10 years ago, there was one year where half of the governors in the country in their speeches said we are going to move from and lines on line. the phrase of that year. but in line to on-line means again taking a system that is a paper base and may be an efficient and never going to make it on line which makes it quicker and still maybe inefficient or unnecessary. so the question is not how to adjust to a government exercise on line, but had to digest

government. there is no reason for paper. there is no reason for tape. here is what happens. is not just the ability of a citizen to do government under government's terms. the ability to captions of disinformation. is the ability to drive down lots of metrics. and new york city public schools, hand-held has all the data about that kid. right there. but not just the data about the kid, but suggestions about the right intervention. so we have an opportunity for enormous changes from were about systems to systems that support discretion, and we have barely scratched the surface. and if we think about it in terms of the coke production of public services which is how government relates to the citizen the ability to use your widgets on face book together information and digital town halls is just really exciting

and has the opportunity to change the debate dramatically from kind of arrogant downtown professional way that we do things today. i realize many of you know i have been very active and that faith based initiatives locally and federally. i went to the -- of went to a funeral for the head of a church. became superintendent of a pentecostal church. done a lot of outreach. went to a funeral. what he did was stood up against the curse of professionalism. first time i heard that phrase. what he was basically saying is instead of having arrogant government tell us what we need to do in our communities that curse of professionalism says

only this regulated group can do this activity. he will say we want to play our part. we want to play a part with government. we are not trying to have the mission of our nonprofit, and this is the mission of our church distorted by professionals had think that they know the way to these solutions. so as we move forward these partnerships require much less arrogance and much more participation on the local side. so a better, faster tool number three change the incentives for producers. make the department's care about overhead. another quick little story. these are those stories. they apply it largely. so we used to give awards, right, for the employee of the month who identified the most. we had of the celebration. some guy wrote in and said, and the public works department. at the training. a produce videotapes. that want to -- i think you should close my department.

all right. this seemed like something. man bites dog. we went out there. the press followed the south. they put the camera in front of the sky. i still remember this. i was a little worried. why are you doing this? and he said, but. the mayor forced test. we did activity based costing. i saw how much it cost me to produce a videotape. was the cost of the building, the cameras, the setup, the overhead. this bill by the safety tips for one quarter the price and we can reinvest the money. and this is the same individual, the same guy that had been there every year for 20 years. he transformed the way he thought about this job. so these are the most tories, but they can dramatically change where the aggregate at to the way we produce government and the way we produce public services. change the incentives with the consumers. ride, there are -- without going through these if consumers have

choices they will make a good choices. government has the responsibility to do that. we are bucking at. a lot of controversy good and bad about the indiana and outsourcing model for eligibility. an article not so flattering in the "wall street journal" this week. here is the deal in indiana. there are two before they did this. two and and a half million on necessary trips a year by welfare moms to welfare offices to stand in line to receive services that were incomplete. two and a half million trips by people who could least afford it, it is to take care of. low-paying jobs to get to because the bureaucracy of operated for its own benefit and not for that of its customers. once we rethink these incentives and actually activated those folks who cared about change there are very widespread. as you all know, expensive wasteful government is most harmful to those who are poor

because those who have money can either move out of the jurisdiction or hire somebody to get the permit or hire somebody to drive them or whenever the case may be. this who are hurt most of those who are poor. .. >> this requires transparency, it required outcomes, it requires people know when their choices are. i think a lot as mayor, one of the major roles, government should not just produce but facilitate the marketplace.

all right. so how do you know when you go to a gas station that you're getting a gallon of gas. it's actually because a contract from the government once a month tests the pump. so you don't have to bring your can to the pump to see if you are being cheated or not. there's a rule for government. and verifying and transpairing information. if government would do more of this and less of the kind of heavy handy work, the marketplace can work better and we can make a change. better. faster, cheaper principals number five. and because i've written a book on this, i want to talk about governing network for a second. i don't think the path of the future is by enlighted public official how to make his or her public employees work better. it's necessary, but not sufficient. because today what needs to step back and said the public

official is to say how are we working with the nonprofit and forprofit to produce value in our community? how do these contracts get set up? how does the marketplace get regulated? it has a very different approach than one what just looks at the bureaucracy itself. we need to look at the local framework. there's a lot written about bush, faith-based office in the white house. to me one of the successes and most important successes is reducing the bias against those organization that want to reach out to level the playing field by removing obstacles. that requires deep penetration in the faith-based office. that was only successful in part even because it had outpost of each of the cabinet agencies.

instead of watching this stuff and making it better and making it more even is important. >> i think in terms of our social outcomes, unfortunately, the nonprofit world because it is so dominated tends to lose its focus often on outcomes as well. and social interpreters today needs to be just as disruptive to think about new ways for social results. changing the playing field, basically, lots of ways to think about this. the pub public sector today is not set up for the next approach for government. the speecher can take this too personally or take a crack at the public administration schools or unemployed by the way.

and we teach the traditionally folked on how to be really good government bureaucrats. right? and i think the point of that is that maybe insufficient. in today's world where how you manage a public procurement, how you manage the contract, how you manage your relationship with the other centers, how you involve and solve problems across jurisdictional lines. those are skills more associated with the private than public sector. we are not training to have the necessary skills for the future. why do we need to think through what that skill set is? you think through the legal framework. and that includes looking -- i had a group of mayors recently talking about the stimulus money. and it is in large part so far totally unconnected.

in fact, the stimulus money has just kind of prolonging the period until folks needs to respond. so we need to think about approaches and new ways instead of just kind of tapering over the cracks. look at local innovation. so i had this moment when i was testifying in congress, i think in the last two years before some house committee on housing. i can't remember which subcommittee it was. so i said to the chairman, i have a proposal for you. if you give me 80% of the money you gave me last year, and no rules, and tell me how many units of housing, i'll produce that number and more and you can keep the 20% of the money and all of the rules. just tell me the outcome. to which he said, how can we trust the mayors to make the right decision was federal money. all i'm saying is it's

legitimate to tell them what the performance outcome. maybe what we aught to do is say here's the outcome we want and get rid of the rest and dramatically increase the effectiveness of public dollars. it's cost twice as much with federal dollars than local dollars. because of unnecessary bureaucratic rules. here's the way it looks. the federal government taxes are gas expenditures. it's unnecessary roadwork and gives us back and says we should be appreciative. that's the message. one of the reasons that we're bankrupt. i'm a little sensitive about the third one on there. i would suggest -- i'm associated with the federal agency that's involved in community national surface. i think that would be a great

idea if we spent more time on performance auditing and not just -- i've seen several programs where if you keep the books perfectly and accomplish nothing it's a success. that if you make a bookkeeping error and you accomplish a lot it's a failure. we need to make sure that the books are kept correctly because of federal dollars. it maybe more attention because of the outcomes and the performance measures that will have an effect on creating the change that we are looking for. and that is a little bit more about the federal implementation. i think the more block we have, the better off we would be. citizen engagement is -- and i mentioned this briefly in my opening remarks. i feel we have a serious obstacle to change in that beneficiaries have changed. they don't really know who they are.

and the people opposed are change are very well organizationed. when i went to provetized part the drivers knew who they were, and when a citizen got on the bus, the driver would turn to the citizen and the line and say the mayor says eliminate this route every day. they were very close @ customer. and the drivers became very agitated with me. so to the extent that we are talking about, then we have to look at waste engaged in the general citizen rate so they can stand up against the special interest. special interest are not always union labor interest. but that dynamic for change needs to be dramatically enhanced. i heard the speaker give you how many of you have cameras in your cell phone?

i was with the uk in one of their government reform operations. they were complaining about the web work and had the meeting with 20 of the leading web 2.0 world in the folks in london. one of them said i'm so tired that everybody is always paying attention to disability access. what do you do? >> we put up a web site. we asked them all to walk around and take pictures and post it on a common sight that said this is the worst place in london. they saw all those places. the next week they started fixing them. you can apply that example using digital tools in a dramatic way. for citizen input, it's for citizen participation. i think one of the most exciting things is the ability of these 2.0 tools to link citizens with

other citizens. we have gotten that we think the only way a good deed can be produced is by governor employee. i'm asking mayors to think about this differently. a lot of people are hurting why your community. and the number of young adults who want to help now is at a record high. it's very significant. but the system is a little bit broken. and the government thinks that it's responsibility is to solve the problem and tries to maybe support it a little bit more by people who want to help and dramatically changes the mix. the question to mayors is what's your responsibility? the responsibility might be to increase that bucket of good deeds that happened in your city. a lot of ways to do that, lots of 2.0 ways to do that. we'll put up on the web site the kind of surface that can accomplish that. the citizen in a community helps another citizen. and the whole series of effects

that occur when an employee does that. the speaker mentioned the concept program. lots of copy cat programs fortunately around the country on the stat programs. they are very significant and i'll leave this up here. but if not, i've watched for some time as has the speaker. and it wasn't just that bill bratton measured with the stat program. it's that he measured and measured and measured. and each week came back and asked what has been done about the things he found were broken and had that system effect the promotion and retention of the management of the n.y.p.d.. all right so those mayors and governs who have stat program and don't connect the measurement is irrelevant. because it's measurement

connected to performance that matters. these are just some of the five key aspects that we've seen. i think it's one of the problems is the reason that both of them are kind and good. the reason that we have much effect is that they tend to measure in ways that aren't connected to the day to day connect of the employees in the system by the conduct and pay and performance don't change dramatically as a result of the federal government measures performance. last just a couple of quick examples if you take an example that applies to education, i'm impressed with the approach of michelle reid a school superintendent. i was talking to her, and she said very clearly my job is not -- this is about exactly what the speaker said about detroit in reverse. my job is not to run a public

school system. my job is to educate the kids in the city. choice maybe part of that, but my job is to educate the children. that is almost unique in this country. because everybody else thinks their job is to run the school system. the public value is the education of a child. we think about these things differently. the basketball of tools that we apply is substantially different. leadership makes a difference. let me just make a couple of quick comments about that. i become mayor of indianapolis, and i get the right to hire 50,000 people that work there. and of the 50, let's say a couple of dozen reports to work every day as the secretary.

every day they walk into the office and sit down. these are the folks that i hire. they are talented people. think get management reports from their staff. and their al attitude is i'm going to lead my team. which is good. eventually all of their information comes from the folks who need to be changed; right? so very quickly, they become captive by their own bureaucracy. i think innovation requires executive level. it requires somebody working next door to the governor. my whole city of indianapolis, i hire somebody and three people work for him, and i said do me a favor run them up for government and nominate areas. you guys can argue about what's right. unless that happens, we won't know what the areas are. what we suggested is the time and internal change office.

i think if you look at what mayor bloomberg has done, he has a change office for innovative change. you can argue about policies here and there but it has to come from the executive. another speaker is from the legislative branch. i consider that most of the problem. and in my city of city council and the committee of jurisdiction was the problem. the chairman of that committee almost always saw the people who worked in that work group as the people that that committee chair was supposed to protect. very rarely did that committee chair think of the citizens in the west of the city as his or her primary job. i encourage the president to create a rules committee or

blacklike committee to nominate the changes outside because they cannot occur through the normal process. and the agency and legislative or executive offices. one of the reasons i think -- one of the many reasons that texas has been success is it does in fact have a real process. every sunsets in texas. how much money should have one of the performance targets and i think the fact that automatically making these organizations go out of business but justifying their existence is the only way to introduce the level of disruptive change necessary. again as i mentioned when i started, i really think if we take our eye off the ball, this challenge that newt has given us is impossible to produce. even in indianapolis there was

very little support for compensation. very low support for public employees reducing their jobs, there was a lat of support for better government services. our competitive process which put activities up for bid does not name the competitive program, please vote for me program, it is called building better neighborhoods. and every neighborhood in indianapolis was poor and neglected, i said do you like the way your park looks? do you like the way your police station lookeds? okay. if you want things to change, then you need to support my program of change. and then we left a bright blue and white sign that said building better neighborhoods. when this vote passed, this park will receive. this is the quality of the services on the bureaucracy.

like it or not. my face of change has to be that or jobs. and there is a cost of jobs of the high regulation and taxes. and when we get the face correctly, i think we can animate those people who will be the beneficiaries of that change. so better government can be cheaper under the speaker who mentions scott walker, reduce taxes, reduce the work force, reduce the regulatory burden, and watch job growth occur. they are not unrelated exercises and they produce dramatic value. the city cannot grow if the number of people who continue to ensue grows faster than those who produce them. i used to think i was numerator and denominator. the taxes were growing faster than the wealth. you can't get there from here. making those issue visible, there is indeed an important issue and important challenge.

it's just the restatement of the kind of eight ways to create better, faster, change coupled with leadership. stand back and say, can this be done? the work we did in indianapolis, the work that scott has done in milwaukee county, it not very difficult as management matter. it's only difficult as a political matter. today it was even easier as a mayor with tools and systems and better accounting systems with respect to what we're trying to do with attention to public value. but it will require that we indeed create a demand for change among those who will benefit. and those who will benefit are those who will see new opportunities for more jobs. i do think we can get to the future in this way that the speaker has mentioned. thank you very much. [applause] >> any questions?

>> yes, sir. i need to solve montgomery county's problem in the end. right here, sir. >> i'm bob, i'm an consulting engineer. you mentioned doing things with information technologies. were you able to do some of the things over the internet? >> yes. even as old as i am now. let's see if i can make this -- so the first thing we did was we moved application process and paper process on the line. that was like 12 years ago. so it's not a remarkable thing anymore. but then what i found was that that saved time because now public wasn't throwing out

pieces of paper. i still hadn't created change. i walked through our city licensing department early on in my career kind of campaigning about how -- i walked in the door and somebody a person that wanted to invest walked up to the counter. and i heard the women say it was a half an hour. it wasn't a half an hour to get the permit, it was a half an hour to get the application. the person knew i was in outsourcing. get what we've outsourced the drainage permits. great, i said. how much have you done? i called the guy in the firm he's in chicago, illinois, and said is that the best you can do? and he said, well, no. but you asked me if i could digitize the drainage permit,

you didn't ask me how to fix the process. if you ask me how to permit process, class them all together. we had digitizing the onlike process that was antiquated. so that system is working. i think the exciting thing today is how we're going to capture tools and citizen engagement and coproducts, citizen engagement in -- we the 3-1-1. which is a sophisticated system. and it turns out as you can figure this out that 3-1-1 is a very sophisticated system. but all it is today is a citizen calling government to ask government to do a specific activity. like there is, you don't know that your neighbors has called or four of you could get

together and do a park cleanup or there's common action. what we really need to do is find ways that these digital tools are not use unilateral one way. and even if -- i think we need to have a lot of changes. i did a lot of it. some of it worked, some of it didn't. i feel like the montgomery county, you have a very friendly. >> i apologize. yeah. this disappeared. i feel badly for kind of dominating the time. this is another factor, obviously, you heard my question from before. 53% of the doesn't is being spent on payroll and benefits for public service employees. there's another factor involved, and it's a little different than what you do, and that's cost of

living. because it's extremely expensive to live in montgomery county. but police -- with regard to the police in the county should be allowed to take their squad cars. they have to live out of the county because they can't afford to live in the county. there's the cost cutting and issues like that. don't you have to take into the consideration of concept of trying to generate wealth, but it can open up and make it the opportunities for people to come in and be creative. i think things like opening up for contracting and things like that. through these new contracts you can leave off of the public service. you talk about the public time and partnership, you run into a big problem and you are dealing with the -- if you start outside

immediately it starts to. >> well, i guess to answer your question, yes. i don't think government creates wealth. i think government can retard wealth. we basically need to figure out how government does with the essentials. it is unfortunate habit in many cities doing bad taxes and regulations and tax incentives for a couple of winters. things that you are doing well. reducing the cost of government but doing it well. that's the platform for us. >> last question. >> thank you i'm supposed to intrigue by the principal and make users bare some of the cost for choosing a more expensive method of delivery.

i'd like for you to elaborate on that. and maybe respond to the question of tax paying customers, do you think there's any value to incentivizing cash transactions for those more expensive method of delivery and perhaps rather than making it higher, lowing the costs, like emergency rooms, for instance, they choose for emergency room rather than a community clinic or something. if it's a cash transaction, will there be any value of cutting done those expenses as opposed to making them pay a higher price? i'm just asking. is the question clear enough? >> i'm going to answer the question as if i understand it. [laughter] >> first of all, i had -- when i

was with the elected officials who wanted to charge a fee for doing things online. the goal would be to make it cheaper to doing things online. you want to drive behaviors for doing it less expensive. all of the benefit programs can be run off that. we have enormous amounts of digital information. and many of our processing of the government is in part because of the pressure from the congress doesn't do too much digital process because of school lumps in this case which are necessary and important. the emergency room one is way too complicated. because by federal law because of the setup in society, you treat people walk into an emergency room regardless of whether they can pay or not.

so having them pay, that exercise is a little bit complicated. however if we can come up with a system that says there is some consequence for abusing the emergency room procedures, which is the case in almost everyday hospitals. and b,there's an option that makes sense, i would agree with that for the nonemergency room additions to emergency rooms. if you look at those, they make sense. so you can continue to build more and more time for the highways which we need to do anything, or you can say we have a huge underutilized capacity because it's free no matter if it's at noon or 7 in the morning. i got into the argument about the seniors complain there because they have the subsidized rates. they like to play golf.

finally after weeks of negotiation, we made this deal they could play golf only on wednesday and thursday, and play small surcharges if they want to play on saturday. but the prices had to drive the behaviors. there's lots of way to do that whether it's health care or services. let me close by saying what i don't want to do is leave the confers focused. i have to go back to the first part which is saying we are doing a lot of activity that doesn't produce valuable outcome. the way to create is to say public health, not public hospitals. jobs, not job poaching. that's where the process i think will produce all sorts of changes. thank you very much.