thinking about to these folks left before. what's going to stop them? they've exerted their will for lack of a better term. >> guest: that's a great question. i cannot tell you how may times i got asked that question and continue to get out of theqj,p"p job of trying to convince

the afghans of pakistan governments and others in the region that it is committed in the long run to the stability of afghanistan. and part of that is actually working with neighbors. the russian, and the indians, the afghans, the chinese, the iranians to some degree as well on that as well. because as we weren't historically from afghanistan, the neighbors of a large stake in afghanistan as well. just go to gap, i would say when i was there last month there was a fair amount of concern over the july 2011 deadline that has been set. and everyone over there is doing an excellent job of structuring structuring -- that doesn't mean

we going to have a massive a job. i do think it's very important to watch in this country about afghanistan. i think it's important that the president, members of congress are out there talking about firmness of our commitment. i think we can do more in that area to reassure them. there is an argument to be made that if we put a timeline on that that's going to force them to get their act together. and there's a certain amount of truth to that. but i don't think request to that point yet. i think you do that when they're in a bit of a firmer fitting. we need to write now send them a message that we are going to be there for the long-term. and i tend to agree with president karzai's timelines. i think it's going to be five years to get them to the point where they can take over most of the security. i may even be a little bit aggressive but i think an aggressive time frame is good. >> host: blue and washington d.c. is on the air. >> caller: all make a quick

question and then i'll hang up and listen to the answer. who exactly is helping the taliban and because my point is this. i don't think iraq would be funding them [inaudible] >> host: we cut the basis of your question. your cell phone was fading out there. let's talk about the funding of afghanistan with outside players in afghanistan? >> guest: well, the taliban has been a pretty good job of getting redundancy in its financing. so it gets money from a range of types of behavior. it gets money from the drug trade, including taxes against farmers, taxing the movement of

poppy along major roadways. it also gets money from mosques of major donors in the arab world, including wealthy donors from saudi arabia, the united air and other nations. not state-supported wealthy donors. it is also gotten support and continues to get support on the taliban case, despite the fact that iran nearly went to war with the taliban at the end of the night to 90's. iran has provided some low levels to the taliban in some other insurgent groups. state support. as has elements of the pakistani government. it's interservice and intelligence director. and so there has been state-supported. so interestingly, this arrest of the taliban and second in command in karachi has been any notable oily springs up the

question, what is a notable shift in pakistan's policy toward the taliban? >> guest: i think that's an excellent summary. the only thing i'd add is that i mentioned how leadership is really crucial in terms of afghan security forces, is also crucial in terms of the taliban. and they don't have a huge foreign presence, but we do know that some of their commanders are pakistanis were from other countries. and those people are very important. in many cases more important than a large amount of money. because we've seen some very militarily skillful taliban forces and that's not an accident. they're getting some very good leaders from pakistan and elsewhere. and that's again part of why they're judging the pakistan piece of this is so crucial. >> host: let's talk a little bit specifically about pakistan. it sounds a little schizophrenic that if the head of the isi is supporting or the isi is supporting the taliban after its, but they're also our ally.

did i say that correctly? a >> guest: you did say that correctly. the pakistan government has continued to acted in its own interest, as anything way. they've targeted militant groups that threaten states. so they have targeted al qaeda on their territory, they've also now increasingly targeted what some people call the pakistani taliban, based out of the south waziristan because it's like to massoud had another range of militants. dave operated in areas where militants can be targeted for suicide attacks in pakistan. but at the same time they have assisted historically militant groups have operated in afghanistan and kashmir in india. >> host: and when you say they do you mean state support? >> guest: elements of the pakistani state that included support to them.

>> host: out of their federal budgets in some way? >> guest: out of whatever budgets they have in some way. >> guest: you've got to remember the pakistanis have viewed afghanistan in the context of their troubled relationship with india and a few.as somewhat of an insurance the policy of rear area. and there's still a lot of suspicion among pakistan. because in the past as we were in afghanistan, we've been stuck on that. they too were upset about the way we attend in afghanistan after the soviets lost. so they were to some extent still hedging about how long is the u.s. going to be there and we need to have the taliban on our side at some point in the future. >> host: so the obama administration, how is it addressed the pakistan question? >> guest: well, i think they've been doing a pretty good job so far. you know, most of it -- most of the effective work is going on behind closed doors. but clearly we've seen some good

cooperation from them. we saw the arrest of a number to tell a band figure recently. you know, -- >> host: a rest wasn't just happenstance? >> guest: i don't think so. they probably could have arrested him earlier. again, they were doing a better job now cooperating with them and we are providing more assistance to them as well, which i think snake in a more cooperative. >> host: there's another side to that which is our ally. let me bring this in diabetes e-mail e-mail we got from colonel paul calvinists in its address to you, seth jones. we met a couple in 06 when i escorted you and zero piatt and reduce the. i worked strategic reforms for the m. a y. in the amt and a solid 2 cents. i look forward to reading your book as i will be returning to afghanistan in a couple of months. my question, how do we deal with

what i believe is the other center of gravity in the war? the population of the western democracies in the growing afghanistan fatigue? do you believe the west has the will to sustain the major effort required for the counterinsurgency fight and how do we get the word out on positive aspects and improvements over the last two years? saft, you have the respect of the u.s. armed forces. thank you for what you do. >> guest: quick question from a great soldier. this is a very important question. what we've seen with some countries, with the canadians, for example, is a decrease in commitment to afghanistan. they're deployed a range of forces to kandahar and are now primarily in and around kandahar city. we've seen the dutch long-term commitment waning. ..

for example to help train police forces even if it's not in the most insecure areas can be helpful so i think there are ways to continue to get allies on board and of this war begins to turn its looking like a kid

who's potentially at a turn, european population support may actually begin to change. >> host: last call for the guest read daniel, frost byrd maryland. please, go ahead. >> caller: yes, this is an especially interesting program this evening and by thank c-span for continuing its excellence. i'm wondering, we do here as you even mentioned a moment ago we hear a great deal about the significance and problematic distru least of the pakistani intelligence and the karzai government is not of the larger pashtu community, and i'm wondering if any of you, perhaps mr. jones especially no of any attempts, overt or otherwise to arrange direct communication or even back channel communication. between those elements of the pakistani intelligence and the

karzai government and or other centers of leadership in the suspicious pashtu community. >> host: short answers. to start with you, mark. >> guest: yes, they're have been instances of that that have been going on quietly. and i think i would like to make the point that karzai for all of his faults, he does have certain moral authority and a unifying figure in the country and i think he is someone who potentially is capable of brokering certain compromises with elements of the taliban. >> guest: there have been efforts of particular to improve the relationship between president karzai. less the isi but presidents ariana leadership def pakistan. in that sense reaching out to the civilian side can help influence the military intelligence side. so this is the way we've seen that pakistan and afghan

relationship began to develop. >> host: finally this tweet each of about 20 seconds to do this. please have the authors give a synopsis of the books of the end. i missed the first portion of the show. seth jones. >> guest: my book looks at the question why the insurgency began in afghanistan after the u.s. overthrow. i look at a couple of sectors. one is the collapsing governments in afghanistan including corruption issues and then focus in particular on highways in the last chapter to stem the insurgency and develop more effective counter insurgency efforts. >> host: mr. moyar? >> guest: mine is a series of case studies being afghanistan. it argues leadership comes down to a question which side has better leaders in certain areas of leadership, and identifying how do we get those kind of people into positions of authority. >> host: mark moyar come seth jones, thank you for being on

booktv prime time to discuss the afghanistan war. >> guest: thank you. >> host: coming up, two more hours of book tv in prime time this evening. up next is michael steele the chairman of the gop. he was at the reagan library recently talking about his new book the 12 step program for defeating the obama agenda. following that you will hear from pulitzer prize-winning economist joseph stieglitz on our after words program. his newest book is called free fall and he's interviewed by laurie wallach of public citizen. that's coming up on booktv prime time. remember to give all booktv rn twitter at twitter.com/book. we set up when we have 40 hours of programming on c-span2. thanks for being with us this evening. now here is michael steele. it's a lot of fun to be here. it is a lot of fun right now as you can imagine in washington

and around the country on the heels of what has been one of the most profoundly important elections i know i've seen in my lifetime in massachusetts and the win of scott brown in taking back the people seat as he put it. [applause] incredibly, incredibly important. so, we are having a lot of fun. and it is a good space to be right now. just as this is a good space to be. i had the incredible honor of visiting the reagan ranch and be among cost the things of his life he and nancy's lives together and it's wonderful. it's a great energy that i get from that and i got from that. now to be the come and share

some of that in the context of his legacy and certainly what it means going forward has a real honor. i really appreciate the young america's foundation and inviting me here to be a part of this. andrew is right we spent a lot of time over the years working with the various groups that come into washington or on a visit are on the country and it's such profoundly important work. i was in the board room before coming down and i was struck by nothing fancy about it, it was on a wall and basically said young america's foundation is committed to encouraging that young americans understand and are inspired by the ideas of individual freedom, strong national defense, free enterprise and traditional values and that is such a powerful statement and it's part of the underlining thinking if

you will love that i try to capture in the book, "right now." a lot of folks in washington all the hype doubt about this book and i don't really understand why. it speaks to some of the core things that we believe as conservatives and republicans and this speaks to them in the context of reagan but most importantly the context how we've regain the trust and faith of the american people who if you haven't figured out right now are not too happy with us. and they've had good reason not to be. but that's part of the past and that's part of i think also the process of healing and recovering. and so i took on the idea of the 12 steps because i think it was an important part to get to recovery. so that's kind of the background and we will get into more but before that i really do want to thank wendy for her sponsorship

of the speaker series for 2010. what a wonderful gift to the community and america to have the voices that have come through here and shared with you in the broken bread with you. get up there so people can hear what conservatism is in the 21st century and some of the things we face, the challenges and opportunities. wendy, i know she's not here but i really want to thank her publicly for her support of this series and her work with the foundation. certainly to the members of the president's club and the rawhide circle. i won't even go there as rawhide. i had to think about that because i'm from the east coast so rawhide means something completely different. [laughter] usually it is would you have after your mother is on spanking new. [laughter] i didn't understand but it works. certainly to ron robinson, president of the young americans

foundation and andrew who is a great guy this morning and helping for me to get there and see -- it was raining and started to hail and was just perfect. [laughter] it was perfect president reagan was speaking to me letting you know the cloudy days may be a part of what you do, but the sun does come out. and when it does you better be prepared for it, and that is a lot of my experience in public life dealing with the clouds and the malaise and the floods and all the crazy stuff that goes on but knowing that the sun will come out and things will get better. i was always struck by the quote may you live in interesting times. [laughter] and they don't get much more interesting than what i've seen over the past year. a friend of mine pointed out that was actually a curse and i

could see how that would be the case. but the reality is living in interesting times enables us and in power as us to do interesting things and it allows us to go beyond our comfort zone and of the things we think we know to explore new avenues and opportunities. so, for this afternoon what i want to do is kind of set the tone since we are living in interesting times i thought it would be important to set the tone in a little bit differently with a quote from frederick douglass who once noted i glory in conflict that i might hear after its salt and victory. now i've always liked that. and i'd like to i think primarily because as a roman catholic african-american conservative from washington, d.c. -- [laughter] -- my whole life has been conflict so i get that part of it. i really do.

but today in this our what conflict sauce is not the ups and downs of the elections board rather the nature of conservatives in this post reagan era. it's the vision of the conservative movement. it's radical nature into the unique challenges and opportunities that come from both conflict and victory. and you've seen that played out in small measure over the last few years certainly the elections of 06 and 08 and even as recently as 09 and virginia, new jersey and now in massachusetts. but no great thing has ever been achieved without overcoming obstacles and no quality is more indispensable to the process than the ability to press on through adversity. in other words to persevere. so, in these very interesting times, where we have to confront

conflict in order to attain victory we must persevere. we must find a way to make all of it fit and all of it work to read the first thing i noticed about perseverance is that it comes more easily to the optimist. as a young man i was struck by ronald reagan's optimism and sense of hope. for me that sense of our best days lie before us was captured in the phrase morning machen america. now, that was 1984. but i think by now a lot of people feel and have come to believe that it's more like lunchtime in america. or even dinnertime. in other words, our best days are behind us. in the sun is setting. the day is done. as a young african-american male growing at the nation's capital, such optimism moved me to understand the power of

perseverance of the power of perseverance. and to be able to put into focus that we are often touched and indeed moved to action not to buy the great figures of history but by those whose names are not written in the history books, the names that don't appear on the nightly news but the names of individuals who live in our neighborhoods and communities indeed in our very homes. such is the life of mabel. mabel is one of many faces of america who struggled to raise a family and believed she could provide for her kids more than she herself had received. she was one of those many faces to believe in writing the history of the country not in its history books, cards and consciousness of the individual, of the community so that the

promise of this great nation would become its truth. she grew up the daughter of sharecroppers, had to squint to the colquitt school when she was the fifth grade to work in the cotton field of south carolina, she married a man who abused her both mentally and physically and he himself would die at age of 36 from alcoholism. she would go on to work in a laundromat the next 45 years of her life and the most she ever made was $3.83 per hour. now despite the hardships that come from limited resources and certainly limited opportunity, mabel had an extraordinary sense of the possible. she did what it took to stimulate the economy of her household. she did what it took to make sure despite all the hardships things that needed to be done, raising the kids, providing for the family got done. she made certain as she put it

it would be she and not the government who would raise her kids. it would be a sheet and not the government who would provide for her family and she did a pretty good job because today her daughter is a very successful pediatrician and her son stands before you as the chairman of the republican national committee. [applause] the power of the mabel is a power that we all witnessed every single day and it is why what we fear the most right now, stripping away that power from mabel, the power she feels that she has to raise her kids the way she wants to provide for a family the way she wants. stripping away from her is why

the fight right now in this country for freedom of opportunity. the very things this organization are trying to impress upon young people to appreciate and understand about the free markets and the free enterprise and value of family and community matters. mabel's life in bodies perseverance. the struggles and challenges of her time will tell opportunity for her children and while her story, like so many of ours, contain hardships she also found a way to turn her hopes for her children into action. her desire that tomorrow will be better for us than for her meant more than anything else. she made sure her kids knew the value of hard work both in school and in the workplace. she made sure we could think for ourselves. she made sure we had a good education. she made sure we knew right from wrong. she had our behind in church on

sunday and in a classroom on monday morning. she understood the value of america and the future of her kids. through a remarkable example of her life, my mother was the first person who taught me about fiscal discipline, the value of a dollar, budgeting and most importantly how thoughtful investment when coupled with hard work can provide in power and an opportunity. now, lord knows why doesn't officials of the united states congress can't figure out what the sharecropper's daughter with a discreet education figured out a long time ago. [laughter] out to create wealth with the family. how to create wealth within a community. and while her bank account and not have made her rich, she was rich and purpose as every day she found a way to turn her hopes into action. mabel was never discouraged by the trials of the moment because she knew that they would pass,

and because she was in it for the long haul. she was going to work it out. and that is the power of perseverance. i remember as a young boy at 17, 1976, first time i would get to vote that november. i turned 18 in october, get to vote in november, so back in september, august i'm trying to decide don't to be a republican or democrat -- now my mom is a democrat. she is a roosevelt democrat. my dad is a democrat. and so she raised me to appreciate that i had a mind that i could go out and learn and decide for myself what i wanted to be and she pressed me hard on that. don't be a democrat just because ibm. don't fall lockstep into a mind set were a way of thinking just because others are so she instilled in me a sense of independence so you wonder why i get in trouble in this job is blame mabel.

[laughter] because the independent spirit allowed me to go and discover a man named ronald reagan and it was his voice i heard in the campaign that sounded so much like the way my mother raised me. when he talked about in america there would be better. when he talked about opportunity and the power that comes from individuals, not from government so why go to my mother and say i decided to become a republican. [laughter] welcome the idea of going out and doing that was great. the actual doing of it however was a whole nother conversation which began something like lord, beebee, why do you want to do that? [laughter] so even to this day there is still moments i think she's trying to recover from that and get me back. [laughter] but she understands and she still understands why i did what i did because of how she raised

me and what she passed on. that legacy. and i really appreciate that legacy more than anything else. there was a great moment in 2006 when i was running for the united states senate election my time on the edge of the bed with my wife watching the returns and as in all elections it starts out great. we've all been there. you're lookingt@@ job.

[laughter] that's it? [laughter] and then she got up and left and there i said. lost an election, got to get a job. but what i took out of that moment was something that my mother had taught and that i learned in listening to reagan and that my wife brought home to me in a very real way. persevered. this, too, shall pass. get through it. don't be overwhelmed by it. don't let it breaking down where you can't get up. and as i reflected on this book

-- malae wrote this book actually before the 2008 election got under way and because of publications and delays and all that it turned out and god works in mysterious ways i could update to capture some of the realities of the 2009 election. but the core of the book focused on this idea of a party that had been beaten down. a party that had lost its way. a party that had fallen away from conservative principles that defined it for generations but now was faced with an opportunity to move forward to pick itself up. do not be overwhelmed by the circumstances. ronald reagan understood the importance of connecting to the maebell of america. through the themes that inspired us and policies that restored the strength, pride and prosperity of the nation, he did the unthinkable. he helped america embraced conservatism and the core beliefs of the conservative

movement. he made it cool to be a conservative. and that opportunity afforded to him enabled him to then changed the course of this nation to put it on a pathway in which it appreciated prosperity and opportunity, where it appreciated our role in the world and fight for freedom. not just here but abroad. but since then americas changed in our movement has changed, too. but what we believe has not. what we believe has not. in the words of austin powers, we now have the opportunity to get our mojo back. [laughter] to be relevant in this century in this hour in this time to engage in the the date of the big ideas and the small ideas, to fight for those principles again in a way that empowers the maebell of the world because

they know there is someone standing there helping them provide for the next generation. thurgood marshall once said we all need to pull ourselves up by our own bootstraps. but every once in awhile it's nice to have someone bent down and help you. and that is what freakin' understood -- reagan understood that while we espouse independence every once in awhile it's good to know someone is way to be there to help you, to lift you up, to not do it for you, but to show you how. to give you the tools. and in the times we live right now, what is the cry from the american people? don't do it for us. give us the tools and let us do it for ourselves. whether it is health care, job creation. whenever it happens to be, the

cry we hear across the land is we can do this on our own. individually we are strong. together we are stronger. but in all of that it's not the government's job or role to shape the outcome and create that pathway. i think conservatives now have an opportunity to reaffirm to the american people the core belief that government should be limited so that it never becomes powerful enough to infringe on the rights of the individual, that those taxes that we pay, those little things that come out of your paycheck, that they be kept low so that individuals might keep more of their hard earned money. the business regulation should encourage entrepreneurs to take the risks necessary for innovation and development and growth as opposed to using the regulations to beat businesses into submission. some just talk about change,

folks. but what we believe and know about the resilience of the american people that will underscore the change this nation needs is that it is the individual that will stand america up. it is the individual that will help america prospered. it is the individual that will keep us strong. our work is not done. but in some respects, in many respects our work begins a new not in the sense of starting over but starting with a different perspective to a 21st century perspective focused on how we will make the hope of tomorrow a reality today. you heard the mantra. hope is on the way. keep hope alive. hope you have a nice day. [laughter] but they're comes a point hope doesn't get it done. there comes the point where action is the core of what must

happen. and that action is what worries people. is it government action or individual action? and that is the debate this nation faces right now. and whether you see the results of massachusetts or virginia and new jersey as an example of the american people answering the question there are many more opportunities for that question to get answered over the next few years. not in partisan terms but in truly american terms what is this great nation all about? what is its strength and where does it come from? it is one of the gifts ronald reagan left us when he described this nation the way he did as a shining city on the hill. because one of the aspects of that is the light that emanates from the hill is a time or full

white. and the question is where does the light come from. it shines not because of government but because of her people. the light emanates from the hill from its people. the difference between prosperity and poverty is not government. it's people. the difference between ownership and control by government is people, not government. and ronald reagan might think understood and put that in its precise context as he possibly could. so, like reagan when i was 17 and today i put my faith in people, not government. his spirit reminds us the promise of america is the promise of endless possibilities, and it was that spirit that drew me in to the

party that donner now the chair. it is the spirit that recognizes individuals as the catalyst, the action point, mont government negative i think what the future fights over the role and control of government will be about. the optimism and hope that emanates from such possibilities i think enables us to persevered and in power as us not to give up on ourselves and certainly not on this great country. next year the nation will celebrity centennial of president reagan's dearth. between now and then we have an opportunity to reignite his vision of america to remind ourselves and the nation that it is morning again in america. a morning bright with possibilities, the morning of the day representing the rest of our lives as men and women and as a nation. president reagan said it better than i ever could when he said

we've got to quit talking to each other and about each other and go out and communicate to the world that we may be fewer and numbers than we have ever been, but we carry the message they are waiting for. this is your time. this is our moment to carry the message america is waiting for to be the light of this great nation once again. to lift up this begin, this grand wonderful experiment we call the united states and do it in a way in which reagan would be proud. certainly we all know he would expect no less from us. if we are true to his legacy. and true to what he left behind for us to do today. so right now is our moment. right now is an opportunity for us to be something better,

different. but very familiar. and that is the test. are you ready to pass that test? are you ready to do what is necessary to hold the light up once again and show america and show the world its morning. thank you. [applause] thank you very much. [applause] now i guess we have some q&a. the fun part of the program. [laughter] >> my name is louis and i want to thank you for coming to visit us.

my hope is that we don't celebrate reagan's great deeds but that we celebrate the heart of the man because it was that humble heart that topped the board, shoveled manure, cleaned toilets and did not see himself as president of the united states. and we just won a huge election because our people, myself, saw an arrogant democratic party three of the reason why we have an arrogant democratic party is because we have an arrogant republican party. so i would love to see how that is going to change with our party. >> so what point [laughter] but i believe it has. and the nature of some folks in washington that the way i

started to answer that question will be news because there are those who don't want that changed. there's some who like to wallow in the muck of past accomplishments are what they believe our past accomplishments and what is often times lost as you heard this before the will of the people. but it's a real thing and you've seen it now expressed very, very loudly in three elections and my sense of it is that in large measure many republicans and conservatives out there are working toward the same goal. looking back and understanding past mistakes but not dwelling on them and beating ourselves up to the point where you can't move forward. but understanding that in order to move forward you have to at least acknowledge and accept the

role that you may have played in some of the things we are now confronted with. and the commitment the american people are looking for and i assure you yourselves as well is okay are we going to get the same old or is this going to be different? show us how. tell us how. and that is a very unique opportunity and not too many political parties or candidates really get a chance to do that, to go back to the american people and laid bare how they have missed step in the past but have a better sense now of what is expected of leadership. that contract with america in 1994 meant something to people and it still means something today. when they solve this wholesale march away from those principles outlined, those ideals that were fully dealt in the document people took it personally to get it was be as if you're own kid

started to reject the very things you raise them to believe and sort of try to help them understand and made the commitment to them and them to you that this is part of our family. so that sense of rejection was very strong and still is for a lot folks. my hope and certainly the work that i try to engage with the leadership around the country is to understand that and let's move forward with a difr#h"dbakp

>> ra, too, would like to thank you for visiting. it's an honor to have you here. n robert olson and i from an hour and a half up the coast. the results of the recent elections both in november and this week i am more optimistic than i have been since probably the 2004 election so are many people who think as i do. we are so optimistic i'm concerned we've become overconfident and complacent. there are too many people already declaring the next congress after the november election as ours. so i guess my question is what can we all do, both you as the

leader of the party and us as the rank-and-file to make sure we maintain our edge and don't let overconfidence lead to something that we don't want to see come nov? >> that is a good question as you read probably i got in trouble because i am very -- i've been maebell raised me to be very pragmatic guy, very honest. i tend to tell people exactly what i think which it learned in this job people don't necessarily want you to do. [laughter] nor do they want to hear it. but of course that doesn't stop me so that someone else's problem, not mine necessarily. i really believe that this november we will do incredibly well given the candidates we are beginning to see emerge and to our already leading in races around the country. how but ultimately ends i don't

know yet. there are still races where individual candidates haven't decided. we don't have a declared candidate at all. so there are still a lot of factors there and that's been my only point is i agree with you i don't want to put the cart before the horse and make declarations i can't back up. someone told me well you are the party chairman you should be the cheerleader and i went no, don't look good in a skirt or the white pants. know my job as party chairman is to be the leader and to be honest and to be thoughtful and to be deliberate and leave out a strategy that will achieve the goals that people want winning elections and helping the party regain its footing with the american people. you can't just wipe away what happened in 06 and in 08. i mean, that wasn't a repudiation of just normal

course. it was outright rejection by the american people. i know firsthand. i was a candidate in 2006, so i know that first hand. you don't just get up because people are upset with democrats and obama and say they are going to love us. no, if you've been listening to the american people they are telling you clearly a pox on both your houses. if you do not understand what this is about -- [applause] -- if you do not understand our frustration and anger, and if we don't understand that frustration and anger and if we don't know what this is about for them, we are doomed to make the same mistakes and to repeat those mistakes and that is not something i want us to do. so i am very excited. i am working very hard to go out and get good candidates. i have this enormous sense of opportunity ahead of us and

everyday work to achieve the goals state after state after state of winning elections, bringing principal conservative leadership to the front of the room and leading with that, not running away from it but leading with it and trusting the american people will like what they see and hear. so far we are 3-0. so i think that pragmatic approach works. you know? the smart approach works. doing what is necessary on the ground to lay the groundwork for those candidates to run, to help them take the message directly to the people and not have it filtered through the national media or the local media who have a whole separate agenda. that's part of my responsibility i try to uphold a free day so do forgive me if i'm not out here doing the ra-ra every moment. i don't think that is what you want to read i think you want

someone going to the opportunities and seizing the opportunities so we get the win and if we come out where we have got more at the end of the day that we started, that's good. but the reality is we are in a very different ball game than we were two years ago, four years ago and there is a lot of hard work to be done and i am committed to getting it done because i want the majority but when we get it i want us to keep it. i don't want to lose it again. yes, sir. there you go. yes, sir. >> my name is frank. and again, thank you for coming. i almost feel like i ask for the microphone to sue because you pretty much answered some of the biggest concern i had. i think what happened in massachusetts needs to register with the republicans because they didn't win this. the independence in massachusetts one this. i'm from massachusetts are originally, and i know what drives the state and it

certainly isn't the republican policies. i think that was a wonderful thing that happened, and i think that you put your finger on something. the people in this country have said they are not happy with either the democrats or republicans, and if the republicans behave like they've done in the past, the recent election will have meant nothing. i was reading "the wall street journal" a few days ago and there was an article in there that talked about how the american people were kind of disgusted with both parties. i think in fact what they were disgusted with his politics. and i think the message or got out of "the wall street journal" article said that the republican party has an opportunity to rally around a central theme and that is term limits and getting those people of washington that a professional politicians, not interested in what happens to us, but what happens to them,

the power grab, the greed and the bipartisanship that doesn't exist anymore, this partisan nonsense where 100% of the party goes in one direction if another party goes of the other direction something's wrong with that philosophically. and you, as the leader of the republican party have got to hammer that home so that the people that are running under your banner, and i happen to the republican by default. came here from massachusetts and couldn't find a democrat. all i found was socialists and communists. [laughter] but i sincerely hope that the message got across from that election in massachusetts. thank you. >> thank you. [applause] [laughter] yeah, there's a number of points

i could start with on that one. [laughter] know, i think you're absolutely right. i really do. i think that "the wall street journal"'s point is a good one that we do have an opportunity here unlike any that we have seen. and it's not just about term limits about whole lot of things starting with okay, what do you believe in and water to quench a fight for? starting with what are you going to do? how is what you believe it when you are going to fight for and do different from what they are doing and what they believe needs to be done? and that is for us a real unique spot to be in. again i go back to my earlier point you don't get second chances in the scheme to often. and the american people are looking at us and say okay here is a second chance. show me something different. show me something that i haven't

seen before or that i don't expect because what i have seen up to now is not what i want from republican leadership and i go back to my point that my opportunity as chairman is to galvanize within the core of the party, grassroots activists, men and women who believe fervently as i do in with this fight is about and why what we can do as republicans as part of a broad conservative movement in the country can do and must do. 40% of the american people now self identify as conservative. that is a big number and age of obama. that is a significant. particularly when you go back and look at the results of the 08 election he would not have got 540% of the people coming out of 08 what self identified as conservative. but what happened? they began to see policies on

fold, the decisions on gitmo, on health care, decisions on how to deal with the economy, jobs, and they realized i think i'm a little bit more conservative than i thought i was because i don't want any of that. so now we have a chance to come and fill in the blanks based on principles that are foundational fact that we believe free-market should be free so wealth can be created not appear for government but here at the grassroots so it can be invested and spent and saved by individuals within the community so that drew can build a business and higher my 18 year old son when he gets done for the academic year and something to do in the summertime. you know? that is what this is about. and if we lose that momentum that's being generated by the likes of bob and donald of virginia and chris christie in

new jersey -- new jersey? we want new jersey for good this stakes then you're going to a slingshot to massachusetts. now be honest, i don't even have to go back and a year. i can go back one month and i bet you 90% of the people in this room would not have predicted tuesday's outcome. they would say massachusetts isn't going to win. that's nice he's trying. god bless him. [laughter] but you had a candidate who didn't get up because he believed something and he brought that something, those beliefs to the table and shared with the people of massachusetts and said to them what they are doing now has not been good for you. and what i'm willing to do are two things: one, account, to be accountable as a leader and i go to washington. and number two, i'm going to washington and i'm taking you with me.

very different conversation with the people of massachusetts than the ones they've heard before. that is our moment. we are the party that is not afraid to account any more. we want to be held accountable in our leadership and when we go and lead, we want you with us because we have our faith in you, the people, not the institutions of government, and i think that is a very powerful argument to make and it's 1i think getting back to this gentleman's question will allow us to achieve the goal of taking the control of the congress this year. if the people have the faith that when we get it will do the right thing with that. yes, sir. >> chairman, thank you for being with us today. i appreciate it. my name is chris garcia a student at pepperdine university. along the same line of communicating with americans and getting them to understand what our principles are i think that

most people here would agree the republican party historically has a problem communicating our ideas to the american people. i've come up with an idea of creating something very simple to pitch to the american people, something like the call of three cars and republican goes perfectly. number one, you respect everybody matter what their race, religion, creed. we believe in traditional values and that goes along those lines. number two door responsible for your actions and that includes self accountability, free markets, not relying on the government and the third would be the reward. if you produce you are going to be rewarded and that is the american dream and what we all agree on as what made america strong. what do you have s. res the idea to pitch the american people some kind of a simple even marketing strategy that is going to say hey, listen this is what made america strong and the republican party. we are the party of the american

people. >> look in that camera because you just did. [laughter] [applause] you just did. [applause] what we have to realize, folks is that i've got a title, that's the jews' >> what are you sitting down for. stand up, man. [laughter] >> i'm the chairman. don't sit down until the chairman says sit down. [laughter] >> no my point is -- my point is, we look around and we look to someone else, you know, who's in leadership to lead. and the one lesson that i learned in the course that i've been on since i was a young man and certainly the time that i spent in a monetary as an augustinian, is leadership. this is how i leader. -- leader.

a true leader is someone who's never afraid to follow someone's leadership. because people see that and they say, wow, he's giving over -- or she's giving over leadership control, control to someone else. and is following. and that's very powerful. that's something that reagan did so well. where he recognized in others their ability to lead in this moment. he didn't have all the answers. he never pretended to have all the answers. quite frankly, i don't think he wanted to have all the answers. because then that leads to something else. something else not very good. he trusted others and their ideas. so the fact that you've stood up is the first step in leadership. the fact that you laid out some ideas is the second step. and the third step is that you conveyed to everybody else the validity and the importance of

what you're trying to do, by your nature and your youth and experience. all those things come in to play and empower them. to trust you. because you're willing to step up and step out and say, hey, i got some ideas. chairman, yeah, we can do that. the question then becomes, how do you then take what you've talked about and put it out in a way so that others can follow you, on college campuses, in your community, amongst your friends. that's where the opportunity lies. a lot of friends tend to look at particularly young republicans and they go, well, could you come over saturday and lick some stamps and do some door knocking for us. that important work has got to get done. you don't have to ask for permission to lead anymore. you're a part of right now. so, folks, they say, you're the future. no you're not. you're the right now because if we don't recognize the right in leadership, we're going to lose.

we're not going to regain the strength we had in the past to lead. because it's your generation that's making a difference in this time. and if you don't believe me, how do you get a barack obama as president? he struck a chord and he inspired a generation of young folks to get engaged in a long time. now what's happening? the kool-aid is wearing off. [laughter] >> and they're waking up and they're seeing, wait a minute, unemployment among 20-somethings is at 30%. i can't get a job. the prospects of paying for a college education is dimming. all these realities are beginning to hit home. they've never seen double-digit unemployment or gas lines. they've never seen the future that we've known as past. and they're about to confront that. and it will be someone like you who will help guide them through it. and that's what i want you to know. that you're already empowered. your ideas -- the fact that you've been able to capacity

lies in three rs a way for your generation to begin to appreciate what this grand old party is about will enable you to help us make this the grand new party. a party that embraces not just its past and the legacies of great men and women like a reagan but it's future in individuals like you. >> that's very encouraging, thank you. >> thank you. [applause] >> all right? this gentleman here. excuse me, this gentleman here has put his hand up three times. help a brother out over here. >> thank you. i have a very simple question. >> that's right. >> the view from the rnc on california and our good senator boxer -- >> time for her to go. >> amen. [applause] >> let me just say without revealing a whole lot of strategies here 'cause i know

our friends are watching, california is going to be very important to us this year. and we're very excited about the prospects both at the gubernatorial and the senatorial level. and we're excited about the prospects at the congressional level, legislatively. while folks have been focusing on all the crazy noise that come out of washington about the republican party and who shot john and who's mad at whom and who's picking a fight, we have been very quietly and methodically building and layers and layers of support networks, grassroots organizations and opportunities to be competitive and a lot of races that people don't expect us to be successful in. i'm tired of this party taking the position, we can't win there so we won't play there. i've told the political operations and all the other adjunct departments within the rnc that there are going to be

races where everyone is going to scratch their head, well, fred, why are you over here in this race, you're not going to win this race, but at some point ladies and gentlemen we have to plant a flag as a party saying we want to play here even though we'll get our clocks cleaned. and it's about time we do that. [applause] >> test case, new york, upstate new york. now, while everybody was focused on new york 23, all right, and losing their minds over what happened in new york 23 -- and they should because that was the biggest cluster you know what i've ever seen. all right. it was crazy. it should not have happened. but while folks were focused on new york 23's kongal district, guess what we did. we won two county executive races. you may say to yourself, big deal. well, the counties are as big as some states in population. and what it meant was whether it was westchester county where

barack obama won with 60% of the vote last year, a republican now runs the county this year because we won the election. and so the point is when you go and engage, and when you're prepared to compete, when you're prepared to go after the ground, you may not get it right now. you may not get it the next time. but there will come a point where you will. and so whether it's california or new york -- wherever it happens to be where we've not been competitive before, our goal now is to be competitive. to get good candidates to run and support the candidates and make the investment that's necessary for them to win. now, everyone, as i said before, would not have advised anyone to invest in massachusetts. they wouldn't have advised to invest in new jersey because, well, republicans just don't win there. at some point you have to stop believing the old thinking. and stop doing it the old way.

and take the risks necessary to compete. and i'm the chairman who's prepared to do that. and i get beat up for it sometimes but that's fine. throw the rocks and the stones at me. meanwhile, i'm letting my guys and gals go in there and win. hit me again. keep going. hit me again. that's the goal here. that's the goal here is to put ourselves as a party in a position where we could be competitive. and we will be very competitive in california this year. trust me. trust me. [applause] >> well, i thank you all very much. [applause] >> andrew, thank you so very much. this has been a lot of fun. i've enjoyed being here. i've enjoyed being in the spirit of reagan. and certainly being at the reagan library last week. and to be here at the ramble this week and to be here with

all of you does my heart good. and it is so nice to know that so many people still give a damn about this great country. and are willing to fight for it every day. and i'm just honored to be one of the little soldiers that's been picked out and chosen to go down a particular path to do my best to make sure that we can win. thank you so much. and god bless you. and god bless america. [applause]

>> did you know you can view book tv programs online? go to booktv.org. type the name of the author and subject into the search area in the ♪ >> coming up next book tv come up "after words" an hour-long discussion between a guest host and an author of a new book. this week nobel prize winning economist joseph stiglitz talks about the 2008 u.s. economic collapse and its effect on the global economy.

professor stiglitz argues that we need to change the incentives in our economic system and that government oversight is required for the economy to function. >> host: hello. we're here today with professor joe stiglitz. and he's got a new book, "freefall" that describes the way we got into the current economic crisis, critique some of what's been done to deal with it and lays out some of the bigger picture, remedies that we need to address and the debates we need to have in our country to forward to a more stable economy that works for more people. so thank you very much for the opportunity to share your book with folks on c-span. it's a very interesting read. and i wanted to start out where the book starts out.

which is sort of the path to this disaster. how we got into this. the first section of the book describes it and it's some things people aware with. deregulation that the financial sector pushed for. the fed not paying attention to a bubble as you describe, helping to create it. but the thing that you write about that i think most people haven't thought as much about is basically the issue of incentives. you talk about ceo pay and executive pay but it's more than that. tell us a little bit more on that. >> guest: let me first emphasize why it's so important. economists disagree on almost everything but the one thing they agree on is incentives matter. if incentives don't matter, we're out of a job. so it's a very natural way for economists to think about the world. what went wrong in part were

incentives at the individual level and at the organizational level, the level of the bank, the financial institutions. the banks always talk about the importance of incentive pay. what we discovered in the middle of the crisis was that was a charade. because they got high pay when their performance was good. they got high pay when the performance was bad. so it was clear that that was partly -- partly a charade. but it was worse than that. because they were designed to encourage short-sighted behavior and excessive risk-taking. short-sighted behavior in the sense it was an annual basis. not on long term, five, ten, year. not how well workers were doing or how well -- what the firm was doing in a broader sense, creativity, how it was doing compared to other firms.

if the stock market would go up, they would do well. so it was very much short-sighted. and designed to encourage excessive risk-taking. >> host: now, the structural incentives are interesting about the short-term risk-taking. >> guest: that's right. but it was incentives not only the individuals of the organization. >> host: right. >> guest: you had banks that were too big to fail. what does that mean it was too big to fail. that means if you gamble and you win, you walk off with the proceeds. if you gamble and lose, the taxpayer picks up the tab. so what are you going to do when you have that kind of asymmetry? . >> host: you're going to gamble with my money. >> guest: it's not real capitalism. but they call it capitalism. because you socialize the losses. you privatize the gains. and the point i try to emphasize is, when you have that kind of

capitalism, it's not efficient. and it leads to the kinds of problems that we have. in fact, i joke with my students and said, if we hasn't had a crisis, all the theories of incentives would have destroyed. the crisis vindicates what we've been teaching but unfortunately a lot of people are suffering skrulth. -- as a result. >> host: i have a vision of adam smith and david ricardo sort of rolling in their graves. because the way it's not -- it's not supposed to work that you take the risks that you lose and are rewarded. people in your own profession particularly in government policymaking professions you describe how they missed seeing the bubble building. they helped create the bubble. greenspan.

tell us a little bit about that. >> guest: well, as i tried to analyze who's to blame which is the question everyone wants to know, unfortunately, i have to say the economists come in for some share -- other economists, of course. but they played a role in a number of different ways. there were some economists that were pointing out markets don't always work. that there are problems of information particularly important in financial markets. there are things that have consequences of their actions affects other people for which they are not compensated. pollution, for example. there are a lot of market failures as we call it. and we've gotten a much better understanding of those market failures. but, unfortunately, almost the predominant view of economics forgot about all of.

and they became almost a servant of financial markets and others who wanted -- who gained from of a free market ideology. the notion that markets were self-correcting, always were. now we should have known that that was absurd. we had the great deposition. -- depression. markets didn't work. 1 out of 4 americans were out of work for a long time. we know historically that markets don't work but they forgot all that. they talked about a new economy. that somehow we were different. but the only thing that was different is in some sense is maybe our hubris. that capitalism has had its ups and downs since the beginning with the one exception. the 50 years after the great

depression where we did learn the lesson and we created regulations to try to restrict this kind of bad behavior, and they worked remarkably well. not only in the united states but around the world. there was one period in which there were almost no crises anywhere in the world. once we started stripping away the regulations and didn't put in new regulations to reflect the changing economy, the new derivatives and things like that -- once that happened, we started having crises again. more than 125 in the last 30 years. so this is not a surprise. i was chief economist at the world bank, and i saw these crisis moving from one country to the another. this is only, you might say, the second crisis in the united states. we had the s & l crisis in '89 but this is the biggest crisis in the world. and, therefore, we feel -- we know it this time.

and our taxpayers are paying for it. whereas, taxpayers in other countries. but as i say, economic theory has -- the economists have a lot to blame in the sense that they forgot about these important experiences and what economic theory had explained when markets work and, unfortunately, when they often don't work. >> well, the book is very useful in explaining the caldrons in which the freefall was brewing. different sort of problems in the economics profession, the big trend toward deregulation, the bad incentives. but brought all together one of the things i think that you make a very compelling case for is that this was a manmade disaster, not a natural disaster. and this is really important 'cause i think of how many times -- many of us, myself, watch on television and economists come out and say, this was the 100-year storm. this was a fluke of nature. but, in fact, you make a very

compelling case that actually it was a creation of man. >> guest: very much so. this wasn't something that happened to the financial markets. it was something that the financial markets did to themselves and to the rest of our society. and you could see it brewing. and you could see the errors in logic that led to it. i mean, for instance -- here again to talk about the role of the economics profession, they put forward this idea that markets were always efficient. and if they're always efficient you couldn't have bubbles. if you couldn't have bubbles you didn't have to do anything about deflating the bubbles. so greenspan could feel comfortable in saying, oh, there may be a little froth but nothing for us to do anything about. and went on to say, if there's a problem, much better to fix it after the fact. he didn't say how much it was going to cost.

and how long it would take to fix. but, you know, there was a party going on. and the regulators didn't want to be a party pooper. and particularly because they couldn't believe that markets couldn't take care of everything. and again it's partly a problem. they weren't going to have to pay for the cleanup. we were. >> host: wow. and you describe the following in the book -- and i'm actually just going to look at some of the particular statistics because when i read it, the way i felt about it, and even more so after the massachusetts vote, the details of the fallout from this manmade disaster are like the footnotes that describe the rage a lot of americans are in across this country, red and 58% of working age population is currently employed which is the smallest percentage since 1947.

we all hear the 10% unemployment but when you look at it from that perspective, that's a stunning figure. millions of families have obviously lost the value of their main asset. you describe the inequality of who's been hit because with the real estate deflation, it's for most working people their house is their big asset. income and equality at a height not seen since the robber baron age. the book is filled with some pretty startling descriptions of the fallout. you describe that situation and what came after as a major economic war between main street and wall street. and here's the question, wall street keeps messing up on their own measurements. they're not doing well. but they keep winning in this war. and that gets to sort of what happened after all that damage was done by certain players. how does that come to pass? >> well, one way of thinking about it is, you know, the financial markets weren't very good in doing their main task,

which is managing risk and allocating capital. but they were very good at managing political capital. and they spent a lot of money. and they've gotten a high return. they first got a high return from deregulation. they made a lot of money. they then got a very high return in the bailout. the bailout terms were very favorable. the congressional oversight panel looked at, for instance, when we were giving them money, we got back securities. the securities that we got back at the time they were issued were worth about 67 cents on the dollar. so we got cheated. many the people who were doing this were former investment bankerses if they were working for a private guy, they would have been fired. it raises the question for, who were they working for? but now they're getting another dividend from those investments.

they're successfully resisting pressure to reregulate. not to go back to the old regulation 75 years ago the world has changed but we need a regulatory structure that's appropriate for the 21st century. and in my mind, that was part of the real debate of what we should be doing at that critical moment. were we going to try to go back to 2007 before the crisis? the financial system was overloaded. 40% of all corporate profits were going to finance. credit card fees that were extracting money from ordinary people as much as they could, modern technology would allow for an efficient mechanism transferring money to the bank account to the merchant. they charge 1%, 2%, 3% for doing that.

these all are reflections of the failures of the 2007 regime that we don't want to go back to. we had as we say a bloated financial sector. we had to bring it down to size. we forgot that it's a means to an end. not an end to itself. but when we brought it down to size, we should have asked the question, what do we want from the financial sector? what parts should be -- maybe some expanded, venture capital, the kinds of firms that finance google and the other new dynamic enterprises. that finance the small and medium size enterprises that create jobs. all the job-creation has been. what do we do? we let 140 of our smaller banks go bankrupt this year. but we poured in front money to the big banks whose focus has

not been on lending.n÷ whose focus has been on speculation. you know, when they came out with the high returns, everybody was -- where were they making the money? trading. it wasn't from lending. and they still aren't making money from lending. lending has been cutting back. >> host: they've got small business by the neck. >> guest: lending is based on collateral. collateral is often real estate and what's happened to real estate values? it's come down. so we're going to be facing even more difficulties going forward. but when we were pouring money into the bank, we didn't ask those questions. where we want our financial system to go and the as a result of this we wound up with a financial system more concentrated. we were talking before about incentives. we economists sometimes call moral hazard.

the risk of the kind of -- the kind of of risk of gambling. it's gotten worse. >> host: well, one of the things i recall from the book that i thought was very clever is you talked about how we get too big to fail or too big to resolve banks because of too big to ignore campaign contributions. and if you look at this whole situation of billions being poured into those banks, they've gotten bigger than ever as a result of the response. with americans having millions -- millions of americans having lost their households without any help, you basically come to a conclusion from your book that in some ways things have been made worse. it was a bad situation. but that the way the response was done made it worse than it had to be facing a bad situation. and one of the things that struck me is you talked about the failures of the bush and the obama administration were rank amongst the most costly mistakes of any modern government in any time. in what ways did the responses make things worse? and what's still salvageable. and i'm talking about the

initial responses not the reregulation because we're going to discuss that.gpj the original bailouts and the emergency measures. >> guest: let me first give a broad perspective. the banks and the financial system had wasted money. you know, if we had all this capital we could have spent it to create jobs, to create new enterprises. we didn't. we put money into houses where they shouldn't have been and for people who couldn't afford them. so that was the initial mistake. then we have the crash. well, going forward the question is, how do we best use the resources that we have? there's no reason that we have to underutilize resources. we made some mistakes. now go forward and use what resources you have fully. but what have we been doing? not using our resources fully. that's why 1 out of 10 americans are in the unemployment but the number is much worse. 1 out of 5 americans would like

to a full-time job can't get one. so, you know, 1 out of 5. that's a serious problem. and if you look at some demographics like youth, african-american youth, it's 1 out of 2. >> host: it's horrifying. >> guest: it's horrifying. if we had done the right thing, we could have used this money to help americans stay in their homes rather than the millions who have lost their homes. we could have used9r1 the mone stimulate the economy to create the jobs. but what did we do? we poured the money into the banks. when we did our welfare reform in 1996, for the poor, we said, if you want to get welfare you have to do certain things. you have to -- when we put the banks on welfare, we said, no, it would be bad for the banks if we put any conditions on the banks. so what do we do?

we said, do whatever you want. we trust you. >> host: with my money. with your money. >> guest: we trust you. now, look at that record. would you say we trust you? what did they do with our money? they did what their incentives said they would do. and this comes back to the theme of incentives. they paid out the money in bonuses and dividends. and in the book, i try to explain why that was. why it was so predictable. but, of course, if they were paying money out, it wasn't money that was going to be lent to create new jobs. it wasn't money that was going to recapitalize banks to make them able to lend more in the future. now the interesting thing is

congress -- people are so angry, we are doing it indirectly surreptitiously. they can borrow money from the fed at a low interest rate. lend it on at a higher interest rate. lend it on to the government and no risk and book the difference as profits. so we are recapitalizing. but in a way that will diminish the growth of our economy. because it's not under lending. and we're giving them money without any constraints. what are they doing with the money? they're asking where is the highest return. they are looking around the world. where's the highest return. where's the highest growth, emerging markets. so now we have a double problem. americans are unhappy 'cause they are not creating jobs. lending is weak. but the emerging markets aren't happy because we're about to create a bubble there. and so they managed to get

everybody to cause problems to every economy around the world. so brazil has said no thank you. we're going to try to make sure that you don't rush in with your hot money to lead to a bubble. we saw what a bubble can do. we don't want that. thank you. >> host: well, it's very interesting. i hadn't thought really about that as part of the solution, their solution that didn't work being causing more pain. because one of the things that the book describes which i think is very useful for folks in this country to understand is the role of the u.s. in exporting both a radical deregulation model and the crisis and the contagion worldwide. the monetary fund and the bank conditionalities that were imposed on developing countries to deregulate, to liberalize their financial sectors, et cetera. the world trade organization was used in a similar way or u.n.

commission report describes the problems with that. so now we have those institutions and those rules imposed. and then we have a worldwide crisis as a result. what is the worldwide response that's needed as far as trying -- 'cause we've exported a crisis. and it came from us. what is the u.s. role? what is the global role in dealing with the global nature of this crisis? >> well, let me first talk a little bit about the global consequences. as you said we exported our deregulation philosophy. we also exported our toxic mortgages. and in a sense if we hadn't exported so many of our toxic mortgages, about 40% of them, the downturn in the united states would have been worse. but we made -- we exported our problems. and we've now created a global crisis. this crisis has a very clear made in usa label.

now one of the consequences of that has been that it has undermined you might say our credibility. our role of leadership because people used to turn to the united states. and they would say, we ought to imitate american institutions, american policies. you knew what you were doing is what they said. they don't think that anymore. and the fact that asia is growing and the emerging markets are growing much faster than we are is really leading to a new you might say geoeconomic, geopolitical balance. and you see that in the force with which some of the emerging markets are responding in global negotiations. they're much more reluctant to listen to the preaching of the united states. the united states -- the secretaries of treasury will go

to china and say, yeah, wag their fingers say you ought to liberalize your financial markets like we did. and they had a robust debate in those countries. they said, no thank you. now they say much more loudly, no thank you because we were worried. now we see how worried we should have been. . >> host: right. it's an interesting disconnect. i noticed with the g20 summits you have a global call for reregulation. we're going to shift a little bit back to this to the u.s. reregulation context. but at the same time, you have the international monetary funds, sort of the arsonists being in charge of putting out the fire as far as the instrument perhaps for some kind of a global mechanism in the crisis. you have at the world trade organization the united states pushing for more financial deregulation. those rules already as you've identified have to be reversed.

the existing wto rules havelock-in deregulation and instead they seem to be pushing for more. there's these global institutions -- you call for -- you mentioned the need for a need of a global institution to manage a global economy. and the sad news i thought of as someone who knows wto is professor stiglitz, there is one. it's the wto and it says no regulation. and the same with the imf. so how do you see the dynamic of internationally the -- given the shift in the u.s. role, which has its upsides given which as you call it market fundamentalism didn't work, with what we're exporting. how do you see in this dynamic that new rules are created? >> guest: one of the good things from the fallout of the crisis was the recognition first of all that the g8 was outdated. you couldn't have global problems be addressed by a small club.

how could you talk about global warming when the biggest polluter is not at the table and when china is not at the that i believe so moving from the g8 to the g20 was a step in the right direction. >> host: and the g8 being the club of the u.s., the european countries and the g20 now adding in china, brazil, india, just for our listeners. >> guest: that's right. there's still 172 countries not represented. and the g20 was a self-selected club. no political legitimacy. no sub-saharan country other than south africa, the developing countries basically unrepresented. so real deficiencies in the structure. but the other thing that was good about the g20 was that it became a place where the leaders got together. and unfortunately in the way the global governance too often works is it's delegated to

particular ministries, particular cabinet positions. so at the wto, you have the trade ministers. at the imf, you had the central bank governors and the secretary of treasury. now, what i saw when i was in government and saw when i was chief economist at the world bank, that quite often those ministries have very little to do with the national interest. those ministries start reflecting special interests. so the u.s. trade representative and trade ministries in other countries get captured by particular special interests. the finance ministries, treasury reflects wall street. and the similar financial institutions in each of the countries. so that's how you could have the leader saying, we want -- we need more regulation if we're going to prevent a recurrence.

and at the wto, they're saying, we have to push the agenda of deregulation even though we've had the biggest crisis in the last 75 years caused by deregulation. and even though the spread of it around the world was facilitated by capital market and financial market liberalization. this is a special interest agenda. and i think in a sense this dissonance has brought home the extent of capture of these ministries and the difference between what is in the national interest and what is going on in these particular international agencies. . >> host: and that is going to make a perfect segue -- because we have to take a short break for coming back to talk about the difference between the bush and obama administration approaches to regulation. and also what can be done going forward. and

obama approaches to regulation and also what can be done going forward. .. >> host: thank you for staying with us. and we're going to go back to our discussion with professor joe stiglitz and his new book

"freefall." we're just about to discuss the difference between the bush and the obama administration approach to the crisis. so in the book you talk about something i think a lot of people don't realize. some of the top personnel basically didn't change. you talk about obama campaigning on change you can believe in. but with respect to his economic team and to some degree the approach, it was more like rearranging the deck chairs on the titanic. what are the big differences between bush and obama to the extent that there are in their economic policy but particularly in addressing the crisis? and what lessons do you take about the continuity of the personnel? >> guest: well, i think there was a clear decision to maintain continuity of the personnel and partly continuity of the policies. because they didn't want to -- they were afraid of destabilizing the markets. you know, the markets use this

notion of fear all the time. and they said if you don't do this, they hold a pointed gun at the congress and said if you don't give us a blank check for $700 billion, capitalism will fall apart. and so they use fear all the time. and they say you have to have continuity and obama bought into that notion. now, there were some very big differences even within that because what they did -- obama -- bush did not want to do anything about stimulating the economy. >> host: stimulus is a big difference. >> guest: bush did not want to do anything about mortgages. and pouring money down the -- into the banks was like a massive blood transfusion to a patient suffering from internal bleeding and not doing anything about the underlying cause, the mortgages. so in that sense, those were two very big differences.

the problem was the stimulus was not big enough and not well enough designed. the continuity was -- a third of it was a tax cut and the tax cut was what bush had done and it had failed. and predictably, economists explained why when you have this overhang of debt, the uncertainty, you're going to save a lot of it. to stimulate the economy you have to spend. >> host: uh-huh. >> guest: on the area of the mortgages, things were worse. 'cause the fundamental problem was that the bubble had broken. the problem was that the banks, the regulators, didn't want to believe that they had done such a bad job. they didn't want to believe that there was this bubble. they wanted to believe that the high prices were the true prices. and we were just in a --. >> host: momentary. >> host: --

.. guest: if we say the right things and talk about green chutes everything would recover overnight. >> host: back to like it was. >> guest: back to like it was. the reality was, of course, we had been in a dream world. and the reality was this new low level of prices. and that meant 1 out of 4 american homes were under water. they owed more money than the value of their homes. that would mean millions of americans were going to lose the value of their homes. to deal with that problem you had to write down the value of the mortgage. in one way or another. you had to do it. they didn't do anything about that problem. and the result is that in 2010, we expect somewhere between 2.5 and 3.5 million mortgage foreclosures --. >> host: more. >> guest: more than in 2009 and 2008. so it's not like the problem is

getting better. in some ways it's getting worse. some have been restructured. but even restructuring has raised problems 'cause a lot of the restructurings have added new fees. and with the new fees, people are more in debt. the banks can record the profits from the fees. the fact that they're more in debt shows up in a problem further down the line. more of them may go into foreclosure. but that's a problem that we'll have to deal with years down the line. so on these two key issues, it was really -- they did something much better than bush. i mean, you can't compare the two. but it wasn't what should have been done. >> host: but that's very interesting because the other observation you had that i thought was very interesting is that in how obama responded to the crisis in, for instance, buying the argument about stability.

and maintaining both a lot of the same personnel and the same policies. you note that he is conservative in the sense of conserving the system and relative to how he campaigned is a transformational figure in that he hadn't offered an alternative view of capitalism but their goal was to muddle through and in part to throw money into the existing system it off shore it up. where do you think that takes us? >> well, obviously it's taken to us where we are now where the economy hasn't recovered. in the way that it should have. our national debt is much larger than it would have been had we done the right thing. but, you know, when you talk about, you know, conservative or what is in the american tradition, there was one aspect of that that i found particularly disturbing and that is when they were pouring money into the banks, rather than

going with the usual rules of capitalism, firms often wind up owing more than they can pay. and they go into bankruptcy. >> host: and it's resolved. >> guest: and when you get to bankruptcy you convert the shareholders lose everything and the bond holders new the new owners. in the case of banks we have a very similar process. what we do we call it conservativeship. what you do is you -- shareholders lose everything. the bond holders become the new shareholders. and because government has insured the depositors sometimes it has to put more money in. and sometimes it has to put so much money in that it becomes the effective owner. and then it reprivatizes it and sells it back. that's the american way. but what's so interesting is that this whole process got captured by the banks. and they said, oh, that's the kind of thing they do in sweden and these other countries but it's not the american way. but it was the american way.

we did it in continental illinois. we've done it over and over and over again. we have laws saying that's what you're supposed to do. we suspended the rules of capitalism to give more money to the bankers. but not only to the banks but to the bankers, the bond holders and the shareholders. so in that sense, again, we made things worse going forward because we changed the incentives. because it meant that they didn't have money at risk. government was standing there ready to bail out the bond holders and the shareholders. and if that's the case, there's no market discipline. so they were undermining the market in the name of the market. >> host: that observation is actually one of the most perversely interesting ones. and when you think of moving forward, you close the final chapter talking about how it often takes a near death experience for a person to be basically forced to reevaluate their goals, values and priorities.

so here we've had something close to a near death experienced or as close as i want in my lifetime, thank you very much, of the economy yet there do seem to be a sizeable number of individuals, financiers, some of them cycled here in government not only here but international agencies and other countries, pundits, some economists, some scholars who seem hooked on these presumptions that have pretty much been factually counter-proved and keep touting the same the market self-correcting. and i'm wondering what is it going to take if this didn't do it to get folks to look at the fundamentals, which in the second half of the book is what what you're calling for. >> guest: well, that's right. i think there's a way of explaining this which is to remember how well some people were doing before the crisis in 2007. most americans were not doing that well.

median income adjusted for inflation, that is the people right in the middle. their income in 2007 was lower than in 1999. but a few people were doing very well including a lot of people in the banks and a lot of other people in our society. but it was relatively few. a lot of people would like to go back to that kind of a world. so they have an incentive to try to say, you know, nothing big has happened. it was something that happened to us. another way of thinking about it and it fits in with your discussion of how we approach the problem. you know, the plumbing has been clogged, stuffed. and what do you do then? you call a plumber. which plumber do you call? well, you call the plumber who put in the pipes because he's the one who knows where all the problems are. he created the problems. but if you call in that same

plumber to unplug the clogged pipes, you're not going to get a retroredesign of the plumbing system. he's going to say very much. just send you a big bill for the services. you're going to be angry because you should -- you should have had a better plumbing system in the first place. >> it's going to start flooding again. >> guest: exactly. so the thing that i think is really important for us is to have a vision of not only the kind of financial system we want but also what kind of a society, what kind of an economic system we want. and remember the finance is a means to an end not in itself and that's even true of the economy. the economy is a means -- it's an essential part.

if our planet doesn't survive because of problems of pollution or global warming, it's not going to do a lot of good to know that we had a high gdp. so we really have to assess where we're going and are we going where we want to go? one of my concerns about what was happening in the years before the crisis was that not just did we misallocate our scarce physical capital, our money went to the wrong place, but also our human imbalance. -- capital. as a teacher it's something i felt very intensely because i would see some of the best, most talented students being lured into finance. and in another era -- some of

them become doctors or some of them would have become researchers and discovered a new laser or a new transistor. it would increased society and our well-being. people would have gone off to do work in development, helping poor people. but the attractions of the mega bucks on wall street lured so many -- such a large fraction of our most talented people. and i think that's an unbalanced society. >> host: the final chapters of the book talk about the connection between the financial system and the underlying economic system and then envisioning what you want as a society in making the economic system to deliver on that. before we get to that i want to just go back to the domestic part of re-regulating the financial system. because in the book you describe -- there were two phases. there's the immediate oh, my god moment with the bailouts.

and you describe very interestingly the use layman -- lehman collapse. and after that the federal regulators started working on reregulating change changes to deal with the structural issues. how has that been going? do you think -- you said the test would be if what's on the table were adopted, would it prevent what just happened from happening again? how are they doing? >> guest: pretty badly. pretty badly. let me just give you one example. the major change in regulatory structure is to give the fed more power. but the fed -- >> host: wait a minute. >> guest: they were the ones who were responsible. they didn't use all the powers they had to prevent the bubble.

they were the ones who said -- well, not only that -- not only did they pump it up in that way, they could have done something about putting in regulations on down payments, other instruments. one of their arguments was we only have one instrument, interest rates. >> host: you make those points in the book. >> guest: yeah. so they were responsible. so here you had the agency that caused the problem or at least is a large responsibility and you say we're going to solve that problem by giving it more power. without changing any of the fundamental structures, without changing the fact that in the new york fed it's basically owned by the banks. >> host: is this the administration's plan or congress' plan or both? >> guest: actually what's so interesting it was the administration's plan. and the house plan. the senate said this doesn't make any sense. and the senate said we have to create a new systemic regulator

because the fed clearly didn't do its job. but even in the house, there is a great deal of skepticism about the fed for another reason. we live in a democratic society and one element of a democratic society is transparency. you've written about that. and the fed is not very transparent. and it was particularly not transparent in what it did in the crisis. bloomberg went -- had to sue to get some information, critical information, that it thought should be in the public domain. it won the suit. and what did the fed do? did it disclose the information? no. it appealed. it said we are not subject to the freedom of information act, which is one of the basic laws of our democracy to make sure that citizens can know what the people who are supposed to be working for them are doing.

we understand why now they didn't want to disclose. you know, the aig bailout with the money going to goldman sachs, you know, i wouldn't want to disclose that either. and, you know, making statements like we had to do it. the french said it was a violation of the law if we didn't pay them 100 cents on the dollar. meanwhile, in france, they were settling these for less than 100 cents on the dollar. you know, we got royaled. >> host: it wasn't treatment in the u.s. of different classes of interest. which is to say 100 cents on the dollar but for the -- 'cause there was a contract. but you point out for the uaw working guys >> guest: they had to re do their contract. double standard.

not surprisingly, the financial markets have resisted doing the kinds of things that need to be done. the beginning of our conversation we talked about the risk of too big to fail institutions. haven't done anything about that. >> host: and let's talk about some of that. you talk about in the book the importance of what had been a glass-steagall-type. you explain it needed to be updated but the idea of looking at the size and also looking at firewalls so that, for instance, a commercial bank can be gambling like an investment bank with my savings. and it doesn't look like congress is looking either at size or at the firewall. >> guest: that's right. and there are other things they haven't really been really adequately dealing with. incentive pay. one of the things people are very, very concerned about. incentives pay leads to more risk-taking and short-sighted behavior. there's some regulations that

are trying to move in that direction. but moving very slowly. not clear we're going to get them through. part of the problem is in regulation the devil is in the detail. so you can get something that looked pretty good and then you start reading inside. one of the important things was the consumer financial product safety commission that many of these products that were being sold to individuals were not really good for their interest. they were good for the banks 'cause they generated a lot of fees. >> host: but not safe for consumption. >> guest: not safe for consumption. and, you know, we look at toys. we look at food we eat. but we say, you can buy these complex products that not even the banks can understand and let alone somebody who's a first time home buyer. so very important, i thought, to have some kind of consumer

financial product safety commission. >> host: but -- >> guest: it look we could get one. >> host: which is a problem. >> guest: which is a real problem and so they wanted to do just a mild thing saying everybody who offers a mortgage has to offer a plain vanilla mortgage, no bells and whistles, just -- was clear and simpleã"uh

>> guest: they're not going to make money on standardized products that are trading competition because competitive market profits get squeezed to zero. they like the non-transparency. but how to capital markets exercise discipline if they don't know what the banks are doing? so the problem is that here in this key area, again, it doesn't care if it doing enough. and even when we look like we're doing the right thing, if you look in the details, they are vince rating what the intent of what was needed. >> host: not number five necessary but what are the five

things, three things, the three things that congress better due to be able to really make sure we don't get into this pickle again? and also to make the economy the financial part of the economy work better for people? you mentioned bankruptcy reforms, easy, very simple reforms, electronic payment systems not controlled by visa and mastercard. what would be your one, two, three, four, five short side of this to do that they are not? >> guest: derivatives include another, doing something about incentives systems so that you don't have these people rewarded in ways that excess risk-taking, shortsighted behavior. you need to do something about excess leverage, and whole variety of other ways of risk-taking. they have gone to 30 to one, 40 to one leverage. what does that mean? it means that if a value of an asset goes by two, three, 4%, they are wiped out.

what happened to our real estate assets? they went down by 30%. they were wiped out multiple times. so we shouldn't have been surprised. the thing about leverage is when things are going up, you make a lot of money. but from a social point of view, all the leverage does is shift risk from one place to another. it shifted the returns to the banks and shifted the risk to the taxpayer. we can't allow that. it's a big thing to fix. so those are within the financial sector, the most important things to fix, to prevent another crisis. but remember we want to do more than prevent another crisis. we want our economy to start growing. so we want to try to make sure that we have the financial system that does what it is supposed to. >> host: that was a key thing in the book. talking about having a clear vision of what you want your

financial system to do. and what in your view would that be? what do we need to do besides trying to avoid the next crisis make it work moving forward. >> guest: one of the points i'm trying to raise is that incentives matter. incentives matter, not just in the back way that they mattered in the past, but if we got the right incentives we get the right innovation. the innovation that we've had have not been directed at improving the ability of homeowners to manage the risk of home ownership, you know, increasing the stability of our mortgage market that there were ideas out there like the danish mortgage bonds, but they don't generate the fees and they weren't interested in those things. so one of the things i think is important is if we can get the incentives better aligned between society and what the private rewards are, i have enough confidence in the market. baby i'm a bit optimistic here,

that they will be innovative in ways that we will improve the well being of our society. one of the things that we clearly have to do is to try to encourage more lending to small and medium-sized enterprises. and that means that a variety of ways of doing that, but basically right now we encourage, you know, the way we gave the bailout money, disproportionate, it went to the big banks. they made a lot of their money not from money but from trading. so we should have done things that encouraged that part. now, it's not too late. >> host: so the real economy gets the finance his. >> guest: so let's link, if the fed is lending money to the banking system, let's say you can't use that money to speculate in brazil. brazil will be happier. and so will our firms that get the money.

the happier. so this is a win-win. >> host: and they knew just to be able to finance their operations. >> guest: exactly. >> host: hire people again to build a manned. >> guest: exactly. so there are things like this that we can do. we've done things like this and other countries have done it. so this is not, you know, breaking new ideas. these are using things that work in other countries and at other times another context in the united states, bringing to bear on our current problems of increasing lending to small, medium-sized enterprises. the other thing you mentioned i think is very important, is having an electronic payment system. they are complaining about a small financial service tax, but they impose a much larger tax in a much larger tax on every transaction, whenever you use one of those debit cards, they are imposing a big tax. >> host: this is going to

probably our last question because we're running out of time, but you talk about the importance of being the financial system right as necessary, but not sufficient. because the bigger question is the broader economic system. and you talk about three challenges that the world faces. restoring calm demand in full employment, restructuring the financial system. and the restructuring the u.s. economy to deal with it shifts in the world's economic structures. you talk about hunting for new comparative advantages and creating programs to a matter that. but in the mix of all of this come you talk about the challenge of the vows between government and markets in this perverse taboo in the u.s. to actually do what has workforce in the past, that great of growth and we had regulated finance, et cetera. but also a lot of other countries are capless economies do. and think in those three big challenges, i'm wondering and closing what you think we're going to see from the obama

administration going forward and what you think ought to be done? >> guest: 's i think the obama administration has made a shift from the bush administration, and recognizing there is an important role for government. but the question is, how do you -- what that role is, how big a role ought to be. and they all agreed that there ought to be a role, even in the financial sector agreed there ought to be a role in bailing bailing them out. so ever but agrees. but i think most of us think they should have a broader role. and we talked in this conversation a lot about the role in preventing disasters. if you're going to have to build a big hospitals, let's have some preventive care so not so may people go into the hospital. but there is another i think a much more creative role for government.

you know, what has been the most important innovation of the 20th century? the last part of the 20 century was the internet. who finance that? governments. the private sector rotgut to market. what i find interesting about that, it is kind of a private public sector partnership. couldn't have happened without the government playing a critical role. you look at all the basic research on which all the advances of technology that we use, most of that basic research is supported by the government. with there is, good reason why that is the case, but the fact is that you can't have the advances in technology if you don't have advances in science in which they rest. >> host: therefore the innovations and the growth and the employment. >> guest: all has to rest on a foundation of government.

and what i found so disturbing during the bush era was this constant bashing of government. the government doesn't do everything perfectly. i mean, and any of us who have look at what happened during the bush administration have to agree that the government often gets things very bad. but it's also the case for the private sector often doesn't get things perfectly. no government -- no democratic government probably has ever wasted money outside of war on the scale of our private sector in this crisis. and we should remember that. so private sectors fail. governments fail. we need to have systems of checks and balances. that's part of the democratic process. but one of the concerns is that system of checks and balances may be getting undermined. and that goes back to what teddy roosevelt said one energies ago, if we allow some economic forces

to get too large, they will shape not only the economy, but also the politics. antitrust law that he advocated successfully was not so much motivated by economic distortions. that was an important aspect of it, but it was by how this could affect the political process. i think as we look at what has been happening in the last year, and what happened in the years before the crisis, we have to be -- re-examining exactly that same question you'd. >> host: in this book makes a very good contribution as it lays out the case and give some very good ideas of the role of government at what we need to do moving forward. time in this discussion. >> guest: thank you.

>> now health and human services secretary secretar kathleen seb. it comes after anthem blue cross announced plans to raise rates on its california customers by as much as 39%. from washington this is about 20 minutes. >> i am kathleen sebelius, the secretary of health and human services and i wanted to talk to you for a few minutes today

about a new report that we are releasing. you can get hard copies here, or visit our website, healthreform.gov, and the report is entitled "insurance companies prosper, families suffer." what the report does is document some of the extreme premium increases that some of america's largest insurance companies have requested over the past year. to shine a spotlight on what's happening to families and small business owners across the country i'm in this last year alone the largest insurance company in michigan requested a 56% rate hike. and connecticut it was 24%, in oregon we saw a 20% rate hike being requested. maine, it was 18.5% last year, which was actually denied.

and this shouldn't come back and asked for 23% rate hike. and most recently, which has gotten a lot of attention is the wellpoint anthem request for a 39% rate hike, which would affect 800,000 of their individual market customers. not to get just an example of what that means if you're dealing with this as an insurance customer, we have a letter from a mother in california whose premiums have been raised 38% recently. and that translates to her family, $7000 more a year for the same benefit package that she had last year. and one of her sons has type i diabetes, so she really has almost no choices in the marketplace with a child with pre-existing condition. it's impossible for her to find other coverage, so she can either pay this $7000 x. or drop coverage altogether. we are seeing this at the same time where not only is there an

economic downturn around the country, but we know that insurance companies are not suffering that same kind of downturn. the five largest insurers in america have declared more than $12 billion with profits in 2009. wellpoint alone posted $2.7 billion profit in the fourth quarter of 2009, just a week before they filed for a 39% rate increase. last week, i sent a letter to the ceo of anthem, which is the blue cross companies under the parent of wellpoint. and asked for some explanation of these rate increases. and in part in response the company has now suggested that they will delay the increases for two months, responded to the california insurance commissioner, to our request, and to come and discuss this situation with members of

congress. but i think this kind of great increase gives a highlight to why the president said a year ago, we need to address health reform, comprehensive health reform as a part of addressing the economy. we won't fix the economy without fixing our healthcare system. it's why he has invited, a week from today, leadership from the democrats and republicans from the house and senate to sit down, roll up their sleeves and talk about a company that health reform plan moving forward. and is urging congress to continue on the job that they started until they finish this project for the american people. the plans that are pending in congress actually would give some additional authority to this agency, providing oversight on insurance companies across the country. making transparent the kind of rate increases that are filed on

a routine basis, but often very hard to determine and hard to highlight. i would have to be available to americans. we would be able to see, not only the rate increases that are pending, but the justification for those rate increases. both the house and senate bills complicated medical lawsuit. so companies would have to spend the majority, the vast majority of the money coming in the door on paying medical benefits, not on overhead or advertising or ceo salaries. and we would have a new consumer friendly marketplace. we would have choices for customers like the mom in california who currently is really caught. just finally, there continued to be examples out of california. we have a woman who saw and the razor raise over 30% last year, and said a self-employed hard-working person, she has no

other options for health coverage. she is pretty typical of the 800,000 customers caught in that individual market plan, but also consumers across the country who have no affordable options and no way to avoid the kind of rate increases that they are saying. so we think it shines a light on the urgency for health reform, and again, the report is available on healthreform.org, or on here in hard copy. and with that i would be pleased to answer some questions. yes, sir. [inaudible] >> and there are other names in the latest report does come out. is it getting kind of personal? are you going after certain targets here and try to pressure them to hold the line? >> well, i think that there isn't an intent to select

certain companies. unfortunate, this is pretty widespread. we are talking about the data that is available and accessible in the companies that we know have filed these rate increases, but unfortunately, they are not isolated cases. what we would like is transparency for every company in every state in the country. so these wouldn't be, you know, picking and choosing. and in most places in the country, these marketplaces are very, very concentrated. so the largest companies in, i think every state but one, are the companies we selected for the rate increases. and they dominate the market. yes, sir? >> madam secretary, as you pointed out, this is a problem that the present have been talking about for more than a year. everybody understands the problem. can you walk us through what democrats and the administration are suggesting what their solution is?

>> well, i think that the democrats have actually been engaged in working on solutions for over a year. and conferences legislation has passed both the house and the senate, a lot of it is very, very similar. there are, as the president said, you know, he wants to hear some solutions from the republicans who suggest that they are also interested in health reform. but so far have not come to the table with any kind of comprehensive proposals to so the opportunity is there next week to talk about the principles that the president feels are very important. lowering costs for families and businesses. and again, congressional budget office has suggested that if you look at just the individual market, which are report focuses on and look at the impact of the house and senate bills on the individual market, comparing similar benefit packages and what will happen with health reform, premiums will go down between 14 and 20% just by passing the bill.

addressing cost, addressing long-term sustainability doesn't lower the trajectory of healthcare costs over the long run, does it cover more folks and does it get rid of the current insurance practices which right now lock people out or throw people out of the market place. yes, ma'am. >> you were an insurance commissioner yourself. don't states have the current authority and ability to take a hard line against these kinds of rate increases? and if so, why are we not seeing more activity from the states to manage this? >> well, some states do in some states don't. and california where the rate crea was filed, they had the so-called file and use rating authority. so company basically puts a rate increase in place, filed with the insurance commissioner's

office, and after the fact the insurance commissioner can go back and deny it or lower and. if it doesn't meet in california, a medical loss ratio of 70%. the laws there at around the country. some do have that sort of prior approval. so in maine and a couple of other examples that we gave here, the rate had to be filed in advance. and the insurance commissioner actually did take action. what would we would anticipate again, what hell for him at his page is a first line of defense, if you will, would be the state insurance commissioners. they are on the ground. they have the data collection ability, but then we would have also a very transparent process nationally with not only rates being filed in advance with transparency of what the justification for those rate filings are, but also a national medical loss ratio. which franklin would be tougher than california, and companies

would be expected to live up to that. and finally, a specification that if a company wanted to participate in the new exchanges, in a new marketplaces once they were set up in 2014, one of the criteria would be to examine the practice between the time that the legislation was signed and a time that the marketplace got set up to see what they have done to their customers in the intervening period. so huge profit margins and huge rate increases would make a company and unlikely participant in the new marketplace. yes. >> secretary, you said in a report that this is profit-based, profit motivated. the insurance companies to a larger extent are saying this is just healthcare costs they are left with pools of people who are sicker, and it is pure economics. what's your response to the argued that this is just a pure economic decision on their part? >> well, i think that while we

don't want countries to be a solid been no claims get aids, and there's always a balance between making sure that there's enough money in the door to pay claims and there are the ability on into the future to pay claims. insurance companies and health insurance market have made 250% profits over the last eight or nine years. the five biggest companies in 2009 alone, and a time where we saw a huge economic downturn where the gdp posted a minus% increase. we had insurance, these top five insurers who had 12 points to billion dollars in profit. so to suggest that this is entirely in line with even healthcare costs, which clearly are still exceeding typical inflation cost, these profit are wildly excessive, are way over

anybody's estimate. there are also companies where, you do, the top execs at these covers are paid up to $24 million each. huge overhead costs, lots of advertising budgets. so i think the ability to say what percentage of what you are collecting is actually spent on health payments, providers, hospitals, medicines, and what percentage is either profit or administrative overhead is something that outside should be shy done. done. and that is really part of what this transparency would be about. i know we have some callers -- know we don't. nevermind. yes, sir. >> madam secretary, the healthcare summit next week, up to now we have two democratic bills, the house bill in senate bill with significant differences between them. is it your expectation there

will be one democratic proposal next week or will we look at two? >> i think the president has indicated that he intends to have a proposal, which he will put on the website and available for public consumption before the summit. so there will be one proposal. >> just to follow-up, so that one proposal will be coming from the president and will represent the best of the two bills? >> i certainly hope so. yes, i think it is the presidents come and i think the idea is that it will, you know, take some of the best ideas and put them into a framework. yes, ma'am. >> to questions. >> you are cheating. >> these payment increases, are they primarily affecting people on the open market, are they affecting people who and sponsored plans? >> these are individual market.

>> which is approximately what percentage of americans with health insurance? i'm trying to get sense of how many americans are being affected by these increases again the second question is, why do you think health insurance covers are doing this if they're making such huge profits? >> well, i'm not sure. i don't want to give you an inadequate number that i know million of americans are affected that it is the one that people have virtually no options. because they don't have an employer negotiating for discounts and providers and discounts in pharmaceuticals. and they don't have the grew protections. they don't have offered the group rating laws that exist. but i do know it affects and millions more now because a lot of companies unfortunately have dropped their group coverage, and more people are in the individual marketplace.

companies, insurance companies are often responsible to shareholders as well as policyholders. and so there is sort of a dual responsibility in terms of fiduciary making money. and frankly, when you are selling health insurance, you make more money by having people who don't get sick than people who do get sick by paying out less in benefits, by, you know, having a market strategy that has a healthier marketplace instead of a sicker marketplace. and i think that these are strategies that are typically employed, to some degree or another, any individual market where there are not necessary rules of the road that covered it. they are are not the rating rules that exist, and people are really out there on their own.

often medically underwritten on their own. so your own personal health history is what may determine your costs. and clearly, there is still a profitable marketplace to be had. and knowing that a lot of these customers have no choice, they're really only choice is either paid increase rate or drop the coverage. they don't have a shopping place to visit. >> last question, please. >> in the press release here, there seems to be a synopsis of the plant. and it repeatedly uses the singular reference health insurance exchange and i wonder if we can takehat as a signal that's what the president wants. . .

a member of the legal policy advisory board of the washington legal foundation. and you might recognize him -- well, frequent appearances on television commenting on our lawsuit-happy culture.ç steve, ladies and gentlemen. [applause] ♪ freedom ♪ freedom ♪ freedom ♪ yeah, freedom ♪ freedom >> good morning. i have the very difficult task of squeezing into 1 minute an introduction of herman kahne. herman is an author. he's written four books. a radio talk show host. he also exemplifies the american dream of entrepreneurship. he took 400 burger king

restaurants and raised them to some of the best. became the ceo of godfathers pizza. ended up management in that country. herman is truly a renaissance man. he's many different careers. but i remember one thing -- the first time i became aware of herman was in 1994. when there was a presidential town hall meeting of president clinton's healthcare proposed bill. at that conference, herman challenged the president on the bill when he said with all due respect, mr. president, your calculations are incorrect. you may remember herman doing that. and i remember saying, that's the%q man i want to get to kno and i'm glad to call him my friend. and i've gotten to know him. i've used up my 1 minute. let me introduce a true american. ♪

♪ hey rock the boat ♪ don't sink ♪ float >> good morning. good morning. >> good morning. >> i want to thank those of you that stayed out late and drank a lot. [laughter] >> and still got up to come to this presentation this morning. [applause] >> because now you can tell those that slept in what they missed. >> yeah! >> our founding fathers said it better than any group of men in history when they said we hold these truths to be self-evident that all men and women are created equal. that they are endowed by their creator with certain unalienable

rights that among these are life, liberty, and the pursuit of happiness [applause] >> it didn't say a guarantee. [laughter] >> and there's nowhere in the constitution where it says that the federal government should establish a department of happy. [laughter] >> it said the pursuit of happiness but you and i know that the pursuit of happiness in this nation as defined and conceived by our founding fathers is violently under attack. it is under attack from liberal proposers with this administration and with this congress that are designed to strip us of many of our liberties. that is designed to restrict our

ability to pursue our definitioç of the american dream based upon each individual's aspirations. each individual's motivation. and each individual's determination. not the dictate of the federal government. [applause] >> and so as we wrestle with beating back cap-and-trade and tax and kill, as we wrestle with beating back employee no-choice act, as we wrestle with beating back healthcare deform legislation, you see if something that's supposed to reform something, it is supposed to make it better. there's absolutely nothing in that proposed legislation, either version, that makes anything better.

it just makes everything worse so you can't call it healthcare reform. [applause] >> healthcare deform legislation. all of these attacks on the pursuit of happiness but there's good news. there is good news. the voice of the people is being heard. that's why they'd been put on the back burner. [applause] >> the voice of the people is being heard. that's why they're being put on the back burner. that is good news. but we're not done yet. we've got some more work to do.ç we won't be finished until they move from the back burner to out the back door. [applause] >> and we have an opportunity to

do that in november of 2010. [applause] >> move them out the back door. now, here's how we do it. it's really very simple. you see, the founding fathers, they did their job. the founding fathers did their jobs. i did my radio show remotely last night from here, from d.c., and i had a caller -- and i was talking about the mount vernon statement that was signed two tays ago by nearly 100 leaders of conservative organizations from d.c. and all over the country. and i was praising the wisdom and the foresight of the founding fathers. and a guy actually called and said, how can you admire and praise the founding fathers when many of them had slaves?

i said you don't understand.ç the wisdom and the foresight of the founding fathers was to set the bar high and not low. it didn't say we hold these truths to be self-evident that all men are created equal except slaves. it didn't say that we are endowed by our creator with certain unalienable rights except for slaves. it didn't say that. they set the bar high and challenged this nation to work up to those ideals, which we have done. [applause]2l >> you don't set the bar low. because you will work down to it. the founding fathers set it high and as a nation we have worked up to those ideals.

we are the only nation in the world that's been able to change the way we have changed in the last 200 some-odd years. the only nation in the world. that's the greatness of america. our ability to change. and so i said i'm just glad that they set the bar where they set it. because over time we have worked up to that. so the founding fathers did their job. they didn't develop a limited declaration. they didn't develop a limited constitution. no. they developed those founding principles that we should never, ever get away from. which is why i was proud to be one of the signers of the mount vernon statement two days ago because we needed a reaffirmation. [applause] >> a reconfirmation. [applause] >> and as one of my other callers pointed out last night, he said, mr. cain, we need a revival. and that's exactly what this is all about. that's why you're here. that's why i'm here.

this revival is happening. it's happening across this country. [applause] >> so the founding fathers did their jobs. you know, one thing that i love about talk radio is i learn so much from my callers. [laughter] >> i really do. i do listen. i get accused of, you know, only taking calls where people want to disagree with me. but that's just not the case. if you can make a logical argument for your point of view, i will listen. and i will share with people. but if your argument is illogical and no facts, i will cut you off. [applause] >> i don't like to waste people's time. i don't like to waste people's time. another caller called one day and said, mr. cain, i love your show. i love what you stand for. but she said i have -- she said i have a question for you. i said what's that. where are the defending fathers.

the founding fathers did their job. and she made me job and think. we must be the defending fathers. of this nation [applause] we are the defending fathers. and there are three things that we need to do in order to continue this momentum. in order to be able to do what the second part of the declaration of independence says. too many people call up and say, my vote doesn't count. can we really change things? and i have to remind my audience and i remind people when i'm giving talks, if you read the declaration of independence, don't stop at life, liberty and the pursuit of happiness keep reading. and if you keep reading it says, when any form of government

becomes destructive of those ideals, it is the right of the people to alter or abolish it. [applause] >> we've got some altering and some abolishing to do. [applause] >> don't stop there. that's the most important part is about our right to alter and abolish. and i would like to point one thing out. i recited that without a teleprompter. [applause] >> i'm just saying. and as the defending fathers, all of us are part of this defending fathers movement, i don't care whether you call it the tea party movement, the 9/12, intelligent thinkers movement. all of the various organizations, that is the beauty of this movement.

it has multiple arms. it has multiple arteries. i've said that for the benefit of my doctor friends that are here this morning. thank you. [laughter] >> docs for patients. three things we need to do quite simply to make sure that we can abolish the liberal control of congress in november. and just like the founding fathers set the bar high, i believe we need on the bar high we need to change the court of appeals starting with the house of representatives and here are the three things we need to do in order to bring it about. first, stay connected. stay connected. every one of you here is connected to an organization. or an initiative. or a movement. stay connected. and one of the reasons that we are experiencing the success

that we are experiencing is, quite frankly, because more people are getting connected. one of our responsibilities is to encourage other people to get connected. not everybody should or could run for public office. not everybody should lead an initiative. but everybody can do something. and because we have become more connected as a movement in the last year, that's why some members of congress are hearing the voice of the people. now, the president doesn't hear us yet. his administration -- they do not hear us yet. harry and nancy, they ain't listening yet. [laughter] >> but the good news is, the core conservatives in congress along with some moderates and independents, they are beginning to listen. they're beginning to listen.

that's why all of these threatening proposals have been moved to the back burner. and it is our job to get them out the back door. so we've got to stay connected. one of the -- one of the great things that i felt so proud of a couple days ago when we signed the mount vernon statement and many of the people that participated are here today is that all of these nearly 100 organizations who for so long have operated in their individual silos have gotten above the silos and they're looking across.ç and somebody made the statement -- i don't remember who said it first. nothing unites a movement like a common enemy. [laughter] >> and we have a common enemy. it's called the liberal attack on this nation. [applause]

>> so stay connected. number two, stay involved. and encourage your friends and neighbors, if they'll listen, to stay involved. you can't make people get involved. but whenever you hear the statement, i don't have time to pay any attention to that stuff, you say well, one day you're going to wake up, to paraphrase former president ronald reagan you're going to wake up one day and you're going to be telling your grandchildren what freedom used to be like because this isn't an environment. we're already telling them that. this is an environment where we can't sit back.ç you know, it used to be where we could elect people, send them to washington. and they were statesmen. and states women.

and they would do what was best for the nation and best for their constituency. that doesn't exist anymore. this is why they have to hear from us frequently, loudly and forcefully in between elections. that's the different dynamic that we're having to deal with. [applause] >> and that's why we have pushed these things to the back burner. we got to stay involved. and so when you have an opportunity to talk with or influence some of your family membersq -- my son, he's 32. my daughter is 38. i finally got them to pay attention. [laughter] >> you know how i got their attention?ç i said now dad is not a cagilloonair and mom and dad are going to be comfortable in our

old age, and if i don't spend it all, the government is trying to take your inheritance. [applause] >> it's amazing how that got their attention. [applause] >> they woke up the next day as conservatives and didn't know it. [laughter] >> i said welcome to the american dream. welcome. so stay involved. and encourage others to get involved. and as i tell folk, get off the sofa and get off your anchovies. because americans are under attack. number three, stay informed. stay informed. because if you don't stay informed and if you don't know your facts and if you don't know

your history, you could be tempted to drink the liberal kool-aid without knowing it. and there's a lot of liberal kool-aid out there. and in order to stay informed, you have to be aware of what i call the liberal tactic that is they use all the time consistently no matter which liberal is talking. and if you -- if you recognize their tactics you'll be able to counter their tactics with good information, good facts and reasonable logic but sometimes some of these reporters that i see on tv, they are blindsided so quick they don't know how to react. you have to stay better informed because if you look in the liberal playbook, you will find that three primary tactics -- they commit what i call liberal sin. capital s, capital i, capital n. and watch whenever you see a liberal being interviewed on tv. they call the radio show all the time.

and sometimes when i know that it's one of my regular liberals, i will warn the audience. i'll say, now, we're going to take thomas. but you all know what to look for. he's going to sin. s, whatever the topic he's going to shift the subject. they do it every time. i was talking to a liberal one night on my radio show. i said did you know that president obama has allowed the national debt to increase over $3 trillion in one year versus george bush allowing it to grow $4 trillion in eight years.çó almost as much in one year as eight years under the bush administration. but the liberal says, well,

george bush got us into this war. [laughter] >> i didn't ask you about the war. we're not talking about the war. we're talking about runaway tsunami spending but they like to shift the subject. watch that. listen for that. and if you're in dialog with them, then you can get them back on track. so they sin. they shift the subject. they do it all the time. secondly, i. they ignore the facts. to paraphrase jack nicholson in that famous movie "liberals can't handle the facts." they hate the facts. when president obama started trying to sell healthcare

deform, he continued to use the number 46 million people are without health insurance. now, fortunately some radio talk show hosts -- [laughter] >> some news -- cable news outlets and a lady by the name of sally pipes of the pacific research institute and others took a look at the data and unraveled that 46 million and found that it was not 46 million people who were going without health insurance because they couldn't afford it. some of those people made enough money to buy it and they chose not to. and some of those people were counting in that number were residents of the united states of america but they were not citizens. and do we owe health insurance to every other person in the world? >> no. >> so when you start to peel back the numbers, it's not 46 million.

and then in the president's address to joint members of congress on just healthcare, he started using the number over 30 million. the real numbers are about 10 million. he still has a few others in there. and here's one other thing about healthcare deform that i want to make sure that i state in case somebody else didn't state it.ç we do not have a healthcare crisis in america. we have a healthcare cost crisis in america. and that proposal is not the way to fix it. [applause] >> i'll get the liberals who call up and say, well, what do you have against all americans getting healthcare? i said i have nothing against all americans having healthcare. there is a right way and a wrong way. and unfortunately your party, your leaders are trying to shove it down our throats and we the people are saying not this time. you're not going to shove it

down our throats. [applause] >> so this is why we have to know our facts.ç know the logic. the know the facts. there are three things we need to do to bring down the cost of healthcare in america. this is not a healthcare seminar.i] but i got to take advantage of this opportunity so when you are in dialog with a reasonable liberal, you can point out to them -- i know there aren't many of them but you might get lucky and run across one on the bus or something. three things would dramatically change the healthcare cost equation dynamics in this country. number one, tort reform. [applause] >> number two, level the playing field in terms of who gets a deduction if you buy health insurance.

right now the employer gets the deduction but the employee doesn't get a deduction. and if you level the playing field so it doesn't matter who pays for it, you get a tax deduction for your health insurance. now, let me just say parenthetically we need to eliminate the stupid tax code. but while we got it we might as well do the right thing for the people and that's number two. and number three, allow insurance to be sold across state lines. if you do those three things -- if you do those three things and if government gets out of the way, we won't have a healthcare cost problem. [applause] >> it's commonsense. it's not rocket science. it's commonsense.ç so know your facts. know your logic. stay informed. that's all we have to do in order to be the founding -- the defending fathers, the sin,

s.i.n., when they can't shift the subject on you. when they can't ignore the facts they name-call. you right wing nut cases. you tea party -- let me see if i can't remember some of them now. nancy said we were astroturf. harry reid said we were unpatriotic.p jeanine garrafalo that we were redneck tea baggers. [laughter] >> and some other democratic leaders in congress called us crazy. well, it reminded me of my grandfather when we used to spend time on the farm during the summer. and when we did something to upset my grandfather, we thought he went crazy.

[laughter] >> and grandpa's favorite phrase when he was coming after us -- when we be saying, but, pa, you're going crazy. he would say, i'm going to show you some crazy. [laughter] >> and that's one of the messages to the leaders in congress. yes we're crazy. we're crazy about the declaration. we're crazy about the constitution. and we are crazy about the greatest country in the world. and we want to keep it that way. [applause] >> yes, we're crazy. [applause] >> we're crazy. oh, yeah! [applause] >> we're crazy.ç yeah! they