all parts of the country, including upstate new york. one thing that makes my job even more interesting is that the new york fed is unique within the federal reserve system so i thought i would tell you about that. policy, so federal market committee decides they want something about it on the monetary policy front, they entrust new york to carry it out for the operational arm of the federal reserve board with respect to the conduct of monetary policy. to implement monetary policy would buy and sell treasury securities. we are also the eyes and ears of the federal reserve on wall street. we operate fed wired switches a payment system that allows banks to implement payments real-time between each other. and we provide quite a few banking services for the u.s. treasury. for example, conduct the treasury auctions that the treasury uses to fund the

federal debt. we also offer lots of services for central banks and governments around the world. for example, deep in the bowels of the federal reserve there's the federal reserve vault which is the largest repository of golden world. if you combine vineyard that you can, it is interesting and encourage you to do that. finally, as i mentioned earlier with a pretty diverse district compared to some of the other federal reserve banks. we have manhattan, which is pretty dense, ranging all the way to upstate new york which at times is quite sparse, and the caribbean islands and puerto rico, and the virgin islands. so even in normal times there's plenty to keep us busy, but in the last few years it's been even a little bit busier than usual. so let me talk about the last couple of years, the crisis and

our response. as you know these are not normal times. the financial crisis that broke in mid-2007 instance of a dramatically following the failure of lehman brothers, really was the worst financial crisis the united states has experienced since the great depression. and that crisis in the financial our coach was followed by one of the longest and deepest recessions that we've had since world war ii. so much so that people are now referring to it as the great recession. the federal reserve responded aggressively, and i think very creatively, in an effort to pursue our mandate. and our actions in response they'll into two broad buckets. liquidity to the financial system for the financial markets could continue to function properly. in order to enable households and businesses to maintain their ability to maintain credit. giving out nhl central banking role we loaned funds to

financial firms, secured by their high quality collateral. traditionally such loans had only been made to depository institutions such as banks, but in the u.s., the moderate u.s. financial system their many other vendors that are not banks that these companies and markets provide vital financing for credit card loans, short term needs and many other activities. during the crisis, the ability of these non-banks to continue to fund credit became apparent. for chile many years ago congress made the federal reserve emergency authority to lead to non-banks in what is called quote unusual and exigent circumstances. during the crisis we were in unusual exigent circumstances. so use this authority to lead to a wide variety of financial firms and markets. we had to make particular difficult situation with making emergency loans to prevent the disorderly failure of individual

firms. we did not do this because we wanted to help those firms, per se, but because i bought them to collapse in a disorderly fashion in the midst of a financial crisis would have done great harm to the u.s. economy and to households and businesses throughout the united states. and all the actions that we took the federal reserve's loans were collateralized and we're very confident we will be repaid in full. in the second but we took aggressive steps to these monetary policy in order to support economic activity and employment. by the end of 2008, we reduce the short-term interest rates that we directly controlled to virtually zero, the lowest level of short-term rates in history of the federal reserve. given that the economy was too weak we went a bit further in order to provide still further support to the economy, we bought more than 1.5 trillion of long-term assets, principally mortgage bonds guaranteed by fannie mae and freddie mac. that are supported by the u.s.

treasury. when the fed buys long-term assets it pushes down long-term interest rates. this actually provides support to economic activity because it makes housing more affordable. it supports consumption because households can now refine its their mortgage at lower interest rates. in addition, lower long-term mortgage rates reduce the cost of capital for businesses, and this encourages them to hire more and invest more time and that actually lends support to the economy. so where are we today in terms of the national economy and the outlook? let me start my discussion with a few comments about national economic conditions. as i discuss any recent speech the great recession has been followed by tepid recovery. since june 2009 economic activity has grown, but not robustly. in recent months, in fact, the momentum has slowed. after rising at about a 3.15%

annual rate in the second half of 2009, world gdp grew more slowly in the first half of 2010. we expect that when they get the third quarter gdp numbers later this week we will see growth plus or minus 2% or so. with demand growth, growth barely keeping pace with principally to increase their productivity, the rate of growth has not been sufficient to generate much in the way of employment gains. and so as a consequence on the unemployment rate remains stubbornly high currently today at 9.6%. and as is typical in such circumstances with which we have lots of unemployment, there's lots of slack in the economy. and as a consequence of that slack the rate of inflation has declined. so the question is why are we experiencing this soft patch now? why has the economy slowed that i think there are several reasons for this. in the first year this recovery as is typical benefited from firms replenishing their inventories.

during the recession the inventories were drawn down sharply. and as the recovery started to take hold businesses felt more confident, began to replenish their inventories. unfortunately, this has mostly run its course and so the benefits of that are not petering out. second, the growth in polls from the 2000 fiscal sting this package, still positive, but not as powerful as it was before. and third, the u.s. usually and off that we seek from inventory growth to private final demand growth has not yet been fully established. instead we have ongoing sluggishness into key sectors, the tip of let past recoveries, consumer spending and housing. the slow recovery of consumer spending and housing in the face of various substantial monetary policy and fiscal policy stimulus reflects the painful and winding of the dynamics that work, that happened during the expected that preceded the great

recession. that led to a sharp rise in house borrowing and in home prices. the rising home prices help to support more borrowing as householdhouseholds use lines of credit and second mortgages to tap into the rising home equity. is also fueled a strong boom in home construction. the increased demand for houses growth of home prices but these whole price increases could not be sustained without limit. when home prices eventually peaked and started to turn down, the somewhat shoddy underwriting practice revealed in the dynamic linking home prices credit and consumption went into reverse and the home price boom turned into a bust. so let's consider first what this means for consumption. consumption of goods and services rose at about a 2% annual rate during the first half of 2010, and we not seeing much signs of a strengthening in

the third quarter. several factors are inhibiting families from spending. these include job and income losses, low levels of confidence, declines of 12 as the real estate and stock prices have dipped. households are saving more and paying down their debts. and, of course, leaders have tended to reinforce this, and with tightening underwriting standards were credit wrote to do saw pre-recession. the question that is critical here is have households completed their deleveraging so they will soon spend more, or does the process of further to go? although we believe that substantial progress has been made in this deleveraging process it's hard to tell whether, whether this has run its course. let's consider what housing market activity both new construction and sales remains depressed. one reason for this is that many existing homes stand vacant. we estimate that there are roughly 3 million vacant housing units more than usual.

this stock of vacant homes will shrink when you foreclosure pipeline empties, and more of these empty homes are rented out or sold. on the civil side, even though mortgage rates are unusually low and household prices because they have fallen have boosted housing affordability to the highest level in four years, the current pace of sales remains very sluggish. impediments does this include tight lending standards, bad job market and continued uncertainty about the future of trajectory of home prices. one important fact is the fact of the large drop in home price between 2006 and 2009 has reduced the amount of equity that households have in their homes. this makes it more difficult for homeowners to trade up and move into better homes. and, in fact, for many families, the mortgages they hold today are worth more than a homes are worth. this means that they cannot

easily refinance their mortgages or sell their homes if they need to come if the experience a crisis, which is job loss or serious illness. on the foreclosure side, foreclosure completions at the end of the foreclosure process are at all time high. that's the bad news. the good news is that the initiation of new foreclosures may finally be starting to slow. recently there's been a lot of attention focused on cases were some of the documentation used in the foreclosure process may have been flawed. the fed actively encourages efforts to find viable alternatives to foreclosure. not many people know this, but we have a team of new york fed officials that work with counselors and activists to support distressed homeowners. and our lawyers support legal a program for people facing foreclosure. at the same time when to recognize that it is important that foreclosures that duke apply with the law can ultimately take place. this is a necessary part of returning the housing market to more normal conditions.

along with two other agencies the fed is referring the foreclosure practices at the major bank mortgage services. we're also getting not on bank potential liabilities with any representations about the mortgages bought by investors that may not have been correct in all cases. we want to insure that housing finance business is supported by robust back office operations. that means for processing new mortgages as well as for foreclosures. so that home buyers, investors have full confidence in the process. we are monitoring developments very closely in this area in order to evaluate the potential impact on housing come on financial markets, and on the overall economy. let me turn to economic conditions of upstate new york. it's no secret that this region has struggled with weak economic growth and population loss in recent decades. the reason, particularly as it

has lost many of its high-paying manufacturing jobs over the years. the good news though is this process has yielded find a more productive and more diversified economy with a much larger service sector than before. for this and other reasons i won't discuss can upstate new york economy has weathered the great recession well to do well compared to the rest of the country. while the upstate economy generally underperformed the nation during the 1980s and 1990s, this recent expense has been quite different. while things are not good here in absolute terms, the great recession began in upstate new york later than it did for the united states as a whole, and job losses were actually less severe than for the nation as a whole. the relatively strong economic performance of the region is clearly tied to its stable housing market. of state new york's will give a slow economic performance and the lack of population growth during the expansion of the

2000s supported only modest increases in home prices and sales during the housing boom. so as a consequence of that when home prices and sales began to decline quite rapidly in many parts of the nation, they were relatively steady across this region. a result of upstate new york has been largely spared the boom and bust cycle in housing that occurred in many other parts of the united states. in fact, many of the upstate new york's metropolitan areas even extends home price appreciation during the housing bust the making these places among the best performing in the country during this period. many parts of the country experienced sharp housing busts with sharp drops in housing related activities such as construction and purchases of major appliances. for example, in fast-growing places such as california, construction jobs would be a very large share of employment. that was good news during the boom, but during the bus a large number of these jobs were lost

from the subsequent recession. this dynamic did not take place in places like buffalo while the housing sector very small to begin with, and they were very few jobs to lose during the housing bust. another important part of the story is that homeowners in much debt and household here are less strength than they are elsewhere. one reason for this of course is that home prices did not appreciate rapidly here to homes remained relatively affordable. moreover, there was generally much more penetration of risky non-prime mortgages to these regions housing market. to upstate new york home loans have generally perform better than elsewhere in the country with fewer delinquencies and foreclosures. indeed, much of the region was spared. compared with other parts of the nation, the upstate economy has performed relatively well over the past few years.

as a large and growing sector, local colleges and universities are part of the story and they surely contributed to the region's economic stability over the past few years. indeed the university of oslo provides a clear example of how university can play a key role in its local economy. the benefits of a higher education, go well beyond their direct economic contribution such as employment and spending. for a very important reason, these activities to increase the region's stock of human capital. that is, the total supply of knowledge and skills in the workforce. contributes his economic success and resiliency. the educational activities of colleges and universities help build the skills of the local workforce. in addition to knowledge created by colleges and universities through the research activities can play a key role in starting a supporting local businesses. businesses can use university expertise infrastructure and

research to help them develop cutting-edge products and services. furthermore, universities often employ local businesses to develop and commercialize new products that arise from the research activities. this is a dynamic and expand local activity and possibly create new jobs for highly skilled workers in the region. institutions such as the university play a vital in the upstate economy and the diversification of buffalo's economy has helped the region to whether the great recession. in particular, major investments in the buffalo niagara medical campus has allowed health care and education sectors to expand and become increasingly important part of the local economy. the sectors provide stability because they are less susceptible to contraction during economic downturns compared to other parts of the economy. moreover, the buffalo robust banking industry provides an additional source of strength. and the strong canadian dollar has held by attracting canadian

shoppers to shop over the border and the united states. this has bolstered retail sales, contribute to local economic stability over the past few years. so what does the federal reserve doing out in response to the economy? since the beginning of the downturns the fed is actively his mantra policy to help support economic activity and improve economic outcomes. both here in buffalo and across the nation. as a consequence, things have been better than what we would have gotten in the absence of such support. with regard to monetary policy, the fed has in place a highly stance that the it will keep short-term interest rates accept a low levels for an extended period of time. the fed also retains large amounts of mortgage-backed bonds required to support the housing mortgage and other long-term interest rates to the historically low levels in place today. the federal open market committee and the chairman has stated their commitment to take further actions to bring

interest rates down, further should economic conditions warrant. in a recent speech i said that both the current levels of unemployment and inflation and the timeframe over which they are likely to return to levels consistent with our mandate are unacceptable. i said that i thought further fed action was likely to be warranted unless the economic outlook were to evolve in to evolve in a way that made me more confident that we would see better outcomes are both employment and inflation before too long. turning to predatory policy, the biggest lesson of the financial crisis is that severe financial disruptions conflict very large and persistent cost on people's lives and jobs. over the past year dictatorship has supported important regulations to create a global financial system where players cannot fly back into risky businesses as usual the type of behavior that generated the crisis in the first place. these include the recent

agreement with international bank regulators sometimes referred to as basel iii, to impose stricter capital could he stand for locally active banks, and a considerable regulatory changes embodied in the dodd-frank act which was passed by the u.s. congress to reform the u.s. financial system. these measures recognize that to avert or contain future financial crisis is, we need a financial system that can withstand large negative shocks. first, market participants must not have the incentive to take on excessive risk. instead, incentives should reward actions that support economic growth and financial stability. and financial firms must set aside enough capital liquidity so that when things go wrong, they can absorb the losses with their own resources. finally, if these offers proved to be inadequate and if a financial firm does their towards better, official sector needs the tools in place to wind

them down in an orderly manner without having to make the terrible choice between a chaotic very that would devastate the entire economy versus a taxpayer-funded rescue. in conclusion, i have to say i've really enjoyed my past few days traveling through upstate new york. it's been a real privilege to talk to all of you, how my job at the federal reserve affects your lives, and what's going on in your lives and how we can take that into consideration in terms of how we conduct monetary policy and regular policy. the links i think our many. first, how the fed to do a mandate for employment and stable prices guys our actions and fix your lives. how we rely on understanding economic conditions in this region as an input for how we going to our policies. and how our efforts to restore financial stability provided a more solid foundation for lending to households and businesses, including small businesses.

to summarize, conditions at the moment after recession that was milder in upstate new york than in many parts of the country, the region is showing signs of a modest recovery. a more diversified, more knowledge-based economy, and a relatively small housing sector helped limit the recession's impact on many communities in this region. nevertheless a great recession did spread much pain throughout this region, an unemployment rate, unemployment remains much higher than we would like. the fed cannot wait a magic wand and make the problems remain from the preceding period of access vanishing immediately. but we can provide support for the needed adjustments. even with our best efforts, the road to recovery in upstate new york and elsewhere is likely to be long and bumpy. but i am confident that we will and the dynamics is that is represented in this room, the private sector combined with academic learning and research,

i'm very confident this will provide a strong underpinning for future prosperity. i thank you very much for coming here today, for your very kind attention, and i will be happy to take a few questions. [applause] >> thank you, bill. as we said can we have the microphones in the aisles. we have only a limited amount of time, based on mr. dudley's schedule. so i would ask you to please identify yourself, wouldn't answer questions from and to keep your question breathe so that we can get the response year. so who would like to start the questions? hi, how are you? my name is cindy. i was when it, i know you talked about housing and health care is a big thing and in the a lot of people are saying that is what implemented. i know a lot of the specialty medications are on increasing rates. so isn't going to regulation for help there as well? like i know they're providing

jobs. are you guys thinking ahead of that? >> i want to give you some ground rules for the questions today. where the federal market be next week, and so as a consequence of that, the rules of the road are are not supposed to talk at all about monetary policy or the real economy. so if you want to check the national economy. so if you could push your questions in the lead regional economic conditions and greater and financial reform, those questions i have no constraints. but if you asked me about monetary policy and national economic conditions, i'm going to have to shy away from those questions. turning to your question on health care, this is something that is pretty far away from the fed's dual mandate of employment and price stability. but there's a lot of questions that have been raised by health care reform in terms of how health reform will be implemented. obviously, this is hugely important for the country. health care represents a very significant share of gdp. and so how health care reform is

implement a carried out i think will have a significant effect for economic performance over the next few years. i think it's too early to answer that question of how that is going to go in a sort of basis. it is certainly one thing that we hear about from the business community. quite a bit of uncertainty about what the health care means for them. and that uncertainty is probably a factor that is one of the reasons that is causing people to be a little more cautious in terms of their behavior. >> question from this site. >> good afternoon. on a separate federal reserve banks able to address the variations in implement in regions across the country?

>> i think the way i would frame it is, the federal reserve banks all of our very focus on economic conditions in the region so that they can share that with the other federal reserve bank presidents. and the members of the board of governors so that everybody has a good picture of what's going on in the entire nation. once that information is shared, based on what's best for the country to give would be very hard to have the 12 federal reserve banks go into the meeting and just say what's going on in their the region because then there would be a lot of people, as a disagreement, very, very hard to reach a consensus. so information is shared, a national picture is assembled, and i think that it's fair to say that the federal reserve bank president and the board of governors make policy based on what they think is best for the country as a whole.

>> i am professor at ub. we tried to put people together. we tried to do things. i would like to follow up on what you just said. my understanding is that there is a share of information and gathering of information, different regions of your constituencies. my question is simple. [inaudible] >> well, we do a number of things. and one thing that we do is we actually provide a lot of information about what's going on in the regional economy. every quarter when the regional economic briefing where we share a lot of information that we have assembled with reporters

and in the region to try to shine a flashlight on what are some of the key issues in the region. for example, last week with a regional economic meeting where we focus on housing. and what was different and the same about housing in upstate new york, new york city compared to the rest of the country. another thing we do is we do a lot community outreach. that means working with community activists in the region. we do work on financial literacy, education. you know, it's very, very important for us to stay well-connected to the regions. the reason why we spent the last three days here, that's very, very important. that provides the legitimacy for the federal reserve i think and the institution. that's why the federal reserve has a lot of support nationally. so i think it's hugely important that we stay in touch with the region. we need to offer value added back to you. we will work very hard to do

that, and we're always talking to people about what other things might be advantageous, in other words, were we have an advantage or we could be helpful in supporting activities in the region. >> we will take one more question. >> does the fed expect the unfunded pension obligations of local and state governments to have a drag on the economy and either regionally or as a whole? >> the question is do we think the other point pension liability of the state and local governments will have a drag on the economy immediately or in the future. well, i think the answer is of course, those unfunded pension liabilities at some point will have to be funded. now, they can be funded by pre-contributions or they could be funded by changing the terms and conditions of those pension commitments. so it's not really clear exactly when this might take place, how it will take place, and has

significant the constraint will be from those decisions. you know, i don't think we should expect anything that dramatic in the near term, you know, the pension liability to longtime to build up and it will probably take a long time to sort of work down the unfunded pension liability i think this is a long run process rather than short run process. >> thank you very much for your questions. >> and the professional business

fraternity of delta sigma phi, i would like to thank you, mr. dudley, for joining us at the university of buffalo. to show our gratitude, i offer you these two tokens of appreciation. the first is a presidential $1 u.s. coin. former united states president fillmore was an original founder of the university of buffalo and served as first chancellor starting in 1846. this symbol represents the university of buffalo's embracement of our historic influences and is a constant expression of our commitment to excellence and our contributions to society. the second is a commemorative pen from the brothers of delta sigma phi who represent a large portion of the top students in the school management. we ask that this gift be recognized as a reminder of our obligation to further a higher standard of commercial welfare,

and it is with great pleasure that i present these to twow at this time -- you at this time. [applause] >> thank you very much. i have a collection of very interesting dollar bills and coins in my office that have a lot of historic significance, so i will add this to the collection. thank you. >> please give a round of applause to our speaker. [applause] thank you for coming today. that's the conclusion. thank you. >> thank you. >> thanks, bill. [inaudible conversations] >> republicans will control the u.s. house in 2011, the biggest

party turnover in more than 70 years. the senate remains in democratic hands although republicans gained at least six senate seats. among new republican senators are three tea party favorites, rand paul in kentucky, mike lee in utah and marco rubio in florida. independents backed gop candidates for the first time since 2004 by a margin of 54 percent to 39 percent. we'll bring you live coverage now, again, hosted by "the national journal." >> presidential election. as you also probably know, it bodes very well for republicans in redistricting. if you have control of the governorships, if you have control of the statehouses, you likely have control of how the new maps are going to look for ten years. so what we're going to do is dig deep on these elections, why they happened, what it means going forward. and this whole presentation's

kind of emblematic of what we're trying to do new at "the national journal." many of you are familiar with the magazine that's been put out for years with what was called congress daily, a great look at american congress. one of the great political almanacs in washington right now. what we did last week was combine all those newsrooms into one, about the largest in town, more than 100 people. and our job, very simply, is to combine these resources and give you all the news you need to know when you need it, where you need it. so as smart as our take may have been in the magazine, it was foolish to believe we could have waited until the end of the week for you to get it. on a free web site which launched last week, on a subscriber web site that has just as much information -- all the information that subscribers

got as of last week plus a ton more, a lot more. we have a revamped congress daily, it's now called "the national journal daily." not only does it look better, but it has twice as much politics in it, also about five times more people coverage than it did just a week ago. again, like i said, what we really want to do is bring to you everybody day in your paper you carry around, in the magazine you take home with you on the weekends information you need to know when you need it. we try hard to take these issues and your politics as seriously as you do, and when others are racing toward the bottom, we're out to prove there's a market for really serious information. and i would like to thank our underwriters for helping us put on this wonderful event. altria, the credit union national association, the united technologies and corps vis

communications. i would ask you, please, to shut off your cell phones, and i would like to thank the audience on national journal.com that is now watching this live stream. by the way, we'll be cutting away from this wonderful event at 1:00 to bring the president live on national journal.com. the first person i'd like to introduce is rick gross of cuna. for the last 20 years rich has worked as a political affairs and trade association professional. he has combined campaign politics, grassroots activism and understanding of the legislative process to advance the political operations of three major trade associations. they include the national association of home builders, the american insurance association and, of course, as you all know, cuna. rich? is. [applause] >> thank you, ron.

these were exciting midterm elections. cuna and credit unions were happy to be a part of this wonderful event. cuna represents nearly 7800 credit unions who provide services to over 92 million credit union members across the country. as a financial cooperative, credit unions are a vital part of our financial system long known for their grassroots system and have put this in play being involved in several elections with thousands of volunteers. cuna is always happy to be at the forefront of the political spectrum, but serving credit union members is our number one goal. our partnership with "national journal" has been an exciting one over the last several years being involved at the party conventions during the the 2008 cycle as well as me -- me vents

such as this. we look forward to many more successful events. enjoy your day, i hope you get a lot out of it. thank you. [applause] >> so if you had a chance to check your blackberries this morning, hopefully, you got your need to know memos, and also we put out a general need to know memo. on our front page this morning was an analysis by ron brownstein written from the set of abc news last night breaking down the demographics and analysis by michael hirsh, one of the great magazine writers of our generation. he had an analysis. a video by mayor garretts breaking down -- major garrett in a medium that he knows better than, certainly, i do. and also a profile of every newcomer in congress, and there was a lot of surprises last

night. if you're a subscriber this morning, you have at your disposal a profile of every new member of congress. also behind that pay wall you'll find hotline. hotline is led by a colleague of mine named reid wilson who's the editor in chief of that organization. washington's premiere daily briefing on american politics. his reliably accurate analysis of national political environment is featured in his weekly column which is called "on the trail." reid is also a political contributor to sirius, xm radio. before becoming editor in chief, he was one of the leading blogs in washington d.c. i could tell you reid is one of the great young leaders in journalism and a good friend, and the poor guy didn't sleep a wink, so please, be patient with him. >> i'll try not to drool on myself. well, ron mentioned that the republicans picked up 60 seats

last night. i wanted to dive a little bit into these numbers and just talk about who lost because the answer is, essentially, everybody. the congressional blue dog caucus, of course, the conservative democrats up on capitol hill, before yesterday there were 54 members. six of them retired, 21 of them lost their seats. that's one-half of the caucus that will not be coming back in the 112th congress. conservatives like bobby dwight and congressman gene taylor of mississippi all lost their seats. freshman who were swept in 2008 along with president obama, folks like tom pair yellow, mary yo kilroy and ann kirkpatrick all lost their seats too. and there are still seats to go. 60's probably not the final number we're going to see. congressman jim costa is still fighting for his political life. congressman melissa bean still trails her seat. gary peters, rick larson in washington state, gabby giffords

and even ben chandler in kentucky all have uncalled races. some members are actually trailing, solomon ortiz is actually trail anything this texas. you've got to feel bad, his son is a state representative in the state of texas. he lost last night too. it was a big day for republicans in the state of texas. jerry connolly, right across the river, also running in this an uncalled -- in an uncalled race. the scope of this loss is truly tremendous for the democratic party. take a look at the chairmen who lost their seats last night. congressman john spratt of south carolina, congressman ike skelton of missouri, and the one that shocked me and i think shocked a lot of people, congressman jim overstar in the iron range, the very traditionally democratic iron range of minnesota lost his seat after a very late surge from a democratic challenger.

on the armed services committee alone, congressman ike skelton, john spratt and gene taylor, three of the four ranking members have lost their bids for re-election, and the fourth ranking member was solomon ortiz in texas. he's trailing in his election. ron mentioned the six senate seats that flipped in if illinois, pennsylvania, arkansas, indiana, wisconsin and north dakota. still have my home state of washington left to call, and even though we have an all mail-in ballot, for some reason, we just cannot count votes fast enough. back in 2006 it took congressman dave like art three weeks to learn he'd been reelected. with a race that's got patty murray ahead by 50.5, might take her just as long to figure out her fate as well. in if alaska, you can count that as a safely republican seat. scott mcadams finished in third place. joe miller or lisa murkowski will be the state senator. i want to talk about the exit

polls that we saw last night, and this entire swing, this 60-seat landslide that we saw came after only about a seven-point shift in the electorate. men shifted towards republicans by just nine points, women just by six points across the country. whites were the largest swing. in 2008 only 45% of whites voted for republicans. this year 60% of whites voted for republicans, a 15-point swing. but across the rest of the dem graphics it's pretty even -- demographics, it's pretty even. seven points among white evangelicals, seven points among the non-white evangelicals. a little higher, 11 points among those who live in rural areas. what that really tells you is this thing was across party lines, it was across economic lines, across really all social lines as well. so the landslide here was truly, truly widespread. and it did not help if you

opposed president obama. there were a large number of democrats who voted against at least two of the three signature bills that the 111th congress passed; health care, cap and trade and the stimulus package. of those, of the members who voted against, at least two of them, 11 lost their seats. then again, among those who voted for all three, 25 lost their seats. it tells you president obama was a drag on the ticket, i think it's fair to say speaker of the house nancy pelosi was a drag on the ticket as well, and the actions of the 113th congress really didn't factor in. i don't know of anybody who can claim to be more of an independent democrat than gene taylor, and this morning he's looking for a new line of work. with that, i want to bring up two folks who had a significant impact on the 2010 midterm

elections, richard trumka is the president of the afl-cio, and mike duncan is the chairman of american crossroads so, please, welcome both richard trumka and mike duncan. [applause] [inaudible conversations] >> you didn't give them breakfast. >> there we go. so, gentlemen, thank you for joining us this morning. there we go. i'd like to start with mr. duncan, former chairman of the republican national committee, now chairman of american crossroads which spent millions of dollars on this election cycle. what happened last night? >> reid, thank you, first of all, for doing this.

i think it's great that "national journal" is putting this on. what a difference a day makes. what happened last night? well, we had a mega tsunami. what's beyond tsunami? a mega tsunami. you've got to go back to 1948 to find a house that made more changes. it's more than the house and the senate, the six at least that we picked up in the senate. you've got to look at the state legislatures and governors all over the country. we have probably 19 bodies of the legislature, maybe ten governors. the redistricting process coming up for the next ten years from our standpoint is going to be much fairer now because we have part of the decision making process on that. so those are the facts. what happened? well, last night the people spoke. it was, i believe, a rejection of the obama administration. two years ago i stood before some of you at the national press club and talked about what had happened then. i accepted responsibility for the defeat, congratulated president obama, president-elect

obama, and said that we're a center-right country which we still are and warned that if he lurched to the left and he choked on the bone of responsibility, that the republicans would be back. and i think he did, and i think his agenda was overreaching, and i think that's what happened last night. >> mr. trumka? how do you read last night's elections? >> well, first of all, i think the corporate agenda and groups like american cross roads had a good day, but the question is why? and, obviously, i disagree with what my friend michael just said in a lot of ways. yesterday the issue that people drove them to vote was about jobs and the economy. and it wasn't because they bought on to the pledge to america because if you look at it, we don't have all the data analyzed yet. we're going to be doing a call at noontime. so any of you that choose to find out the rest of the data we have, please, feel free to join our call at noon.

but if you look at it, we went through all the issues, and 63% of the people in those congressional races, 100 races, oppose, for instance, tax breaks for people over $250,000. 63% of them -- 62% of them oppose privatizing social security. so we went through those. and if you look at even the republican voters, the exact figure, as a matter of fact, 65% knew little or nothing about the pledge to america. so this is the third consecutive cycle where the people in power have been kicked out of power because of the frustration. so the, i think the reading from last night is the american people know that the economy doesn't work, they're suffering, they're angry because of that, and they're going -- you're going to have to now that you're part of the governing structure, you're going to have to come up with a way to create jobs and get the economy back on the

move. because i think they're frustrated not because too much was done, but because too little was done. and as a result of that, i'd have to say that the republican strategy of stopping everything probably had an effect. it worked. but now that you'll be in the governing structure, you won't be able to just say no. you're going to have to come up with your ideas, and you're going to have to create jobs. hopefully, we can do that together. that's our ultimate goal. >> so you're essentially arguing that voters, that the vote last night was not against -- rather, was not for the republican party, it was against democrats. >> yeah. it was against the ruling party, the party in power at different levels. if they believe that their agenda was embraced, i think they're going to be short lived where they are right now. because it was an anger about not getting the job done. now they're part of getting the job done, and they'll have to come up with something that says here's how we create jobs.

and if it will actually create jobs, we'll probably join with you on it because that's good for america. >> are well, i hope so, and i think it is about jobs. i agree it's about the economy, but it's about the obama administration not paying enough attention to the economy. i think that we will present policies, a tax policy, for example, that goes along with a monetary policy that's going to take more action on trying to put more money into the system. but we have to balance the budget. we have to get government spending under control. and that's what people were talking about. they understand that that's part of what makes up the psychology of jobs in this country. when you, when you suppress small businesses by keeping them in the dark about what the policy's going to be, we don't know what the tax rate's going to be, that hurts creation of jobs at the very local level. that's going to be a big change. >> michael, will you also help us stop the outsourcing of job? will you help us stop rewarding companies that take jobs offshore? >> let's stick with start

rewarding companies who create jobs here. let's stick with analyzing the vote last night. [laughter] would you agree with mr. trumka -- >> this is -- [laughter] >> would you agree with mr. trumka that the results last night were not a validation of republicans, but rather, a rejection of democrats? this. >> people in this country are giving us a chance, and we will take advantage of that. look, we messed up. i acknowledged that in 2008 and 2006. we had an opportunity, we didn't do enough, we didn't listen enough. i think you saw the republican party listening this time, and can i think that was part of the pledge to america. they understand that americans are hurting, they understand that people are out of work. the new misery index has to do with foreclosure rates and unemployment rates. that's the change, and we get it. >> i hope that's true. >> both sides, both of you have been in organizations that spent millions of dollars on this election. mr. trumka, let's start with you. one of the actual few bright spots for democrats last nighting is that among, where

there was this seven-point swing nationally towards the republican party, among union households that swing was only four points. i know the afl-cio was talking a lot about the successes you had in place like west virginia, in several districts in pennsylvania. talk a little bit about the effects that the afl-cio and other labor groups have had on the democratic election. democratic effort. >> well, first of all, we don't have all the data analyzed, so i can't give you a state by state or a race by race analysis. but overall i think our members voted for progressive candidates by about a 30% margin. in places like nevada, it was even higher. i think it was 69-29 that we voted for harry reid, in west virginia it would have been higher as well for joe manchin. we made millions of phone calls, sent out millions of pieces of mail, we had millions of door knocks, and you'll see in demographic after demographic if

you're a union member, you voted for progressive candidates, and if you're not a union member, you voted the other way. so you'll get to see that today pretty graphically. we think we did our job in what we were supposed to do, and our members voted pretty overwhelmingly for candidates that are going to support working people. >> mr. duncan, american crossroads is one of these new super passes they're calling them. you've been involved in races all over the country. talk about the effect you think these outside groups have had in favor -- >> first of all, we're using the labor union models as what we're going by, and the outside organizations that were set up in the 2004 and 2006, and i congratulate rich because he did turn out his people. and we're working on that. we were able to be involved primarily in eight senate races. we focused on senate races. we exceeded our budget. we did millions of dollars in television advertising, millions

of pieces of mail, millions of phone calls. we're not as good as you are on the deployment yet, but we're working on that. we did some experiments this time. we think we made a difference. we were involved early on in nevada, we think we kept that race close there. we were able to target our efforts. we worked early on in arkansas. we worked in missouri. we worked in pennsylvania. we worked in colorado. we were involved all over the country. toward the end we did some house races. but it's an acknowledgment that the outside groups on the democrats' side have done a good job over the last three cycles, and we're just now catching up. >> well, you did more than catch up because you conservative groups outspent progressive groups two to one yesterday. >> it's interesting, though, on turnout they may have outspent some liberal-leaning groups on television, but it seems like a lot of the union money went to ground operations. why would, why go, why do the ground operations, the ground game instead of blanketing the

airwaves? >> well, we think that's our job. our members trust us when we talk to them one-on-one. and we did do a good job of talking to them. not one penny of afl-cio money went to a candidate. our money went all to the ground game, all to talking to our members. we probably touched our members between 15 and 20 times in this election in one form or another whether it was a mail from their local union or from us, whether it was a phone call, whether it was a door knock, whether it was a leaflet at a worksite. we probably touched them 15-20 times, and it made a difference. when you see the demographics today, it made a difference with everybody because we have members that are born again, we have members that are ultra conservative, we have members that are just the rest of society. we mirror society except we give them the facts and give them the information that they need to make a decision. it makes a big difference. >> let me set the record

straight on money. over the last three cycles, the democratic groups, the left groups have outspent the republican groups more than two to one, and even in this cycle we're just catching up. we're getting close to a level playing field, but we're not there. >> let's talk about the larger picture and what this means going forward. mr. duncan, you were quoted in "the new york times" saying this is sort of the practice round for 2012. both sides, both outside groups spent far more than the democratic national committee or the republican national committee or the appropriate, you know, associated committees in the house and the senate. is this evidence that the outside groups are becoming more powerful and more influential than the party organizations that you're trying to elect? >> well, let me put this in perspective. let's talk about how much we spend on potato chips in a year, $7 billion. let's talk about how much we spent last week on halloween according to the national retail federation. if i had candy, i would give to both of you. we spent on candy and costumes

$5.8 billion. in totality this time we're going to spend about $4 billion on politics. most of that is going to be spent by the campaigns and the party committees. i think the outside groups spent about $400 million. i don't think that there's too much money in politics. i think we don't invest enough in our democrat. >> you know, speaking of potato chips, the country also spent more on potato chips than it did on energy research last year which i find quite appalling. >> what do you think about the outside spending? is this, does this mean that labor organizations and groups like american crossroads are becoming more powerful, more influential than the democratic national committee and the republican national committee? >> >> well, i think there's two issues. one issue is not just how much money was spent, but who spent it. because they have these wonderful-sounding groups, and then when you combine the amount that corporations spent on lobbying, the corporations spent on the election, you vastly,

vastly -- you dwarfed us in all of that. the question is who's spending the money? i mean, some of your money came from foreign sources. >> that's ooh not true. that is absolutely not true. you cannot, you cannot say that because it's not true. i looked at every donation that we had come in -- >> where'd you get the money from, corporate america? >> we got our money from individuals all over the country -- >> corporate america. >> donations and large donations. >> so let's not -- >> are you willing to put that list out? are you willing to talk about where -- >> let's stay focused on the election. >> are you going to disclose all that? >> okay. moving quickly on. mr. trumka, let's talk more specifically. last night, clearly, a rejection of democratic, the democratic initiatives of the last couple years or at least the fact that those initiatives haven't turned the economy around fast enough. what does that mean, in your mind, for president obama going forward as he begins his re-election campaign in 2012?

>> i think he should do what we're going to do, because as of today we're going to have three priorities: jobs, jobs and more jobs. we'll be pushing our five-point plan to create more jobs. i think the president ought to do that. i think he ought to put these guys to the task. they said they can do it, now let's make them do it. i wish you success because for every job you create, there's an american out there that'll be able to make a living and, hopefully, rebuild part of the middle class. so i would tell him to stick to his jobs -- to his principles. to work with them but not compromise his principles. >> to work with the house republicans. >> absolutely. i mean, they should have been working with us and the senate republicans should have been working with us, and they didn't. their strategy seems like it worked. i'm saying try to work with them if it doesn't cost you your principles. if it costs you your principles, then you have to stand for your principles. but create jobs and put them to the test.

if it's the same old stuff which they said during the campaign, well, we'll cut more taxes for the rich, we'll deregulate, the same policies that got us into this mess, i mean, that's not going to make the american people -- >> first of all, he had a historic election, and he did not reach out to work with the republicans. when you talk about an enemies list, when you tell a leader of the congress we won, get it? that's not reaching across the aisle. i was glad to see that he made calls last night to speaker-elect boehner and to senator mcconnell, and i hope that's a good omen for us. but to get to the jobs that you need, we've got to have policies in this country including tax policies that encourage small businesses. john boehner understands the american dream. you saw that last night in his emotional response. he came up that way in a small business, created his own small business -- >> now, mr. duncan, there

were -- what republicans have said, a large number of them, congressman kevin mccarthy from pennsylvania, congressman mike pence from indiana, even eric cantor hinted at this as well that republicans should not compromise right now, they should take the same tack that president obama did and say, well, elections -- >> i wasn't talk about come propoise. >> do you think house republicans should go to the table and work with president obama? >> i think we should work with what the american people were telling us about. deficit spending, the fact that we've got to have certainty to create jobs in this country. and that means that president obama's got to move back toward the center. this is a center-right country. >> let me ask a quick follow-up here. one-quarter -- this is an amazing statistic -- one-quarter of the house republican conference is new, is a freshman. it's going to be somewhere around 80 members once all the chips fall.

is that a problem for john boehner? there's this massive new influx of pop list members -- populist members coming into congress. is he going to have the same kind of control over them that, say, denny hastert and his leadership team had over that republican conference or newt gingrich -- >> he doesn't want to have the same control. 80 new members is an opportunity. it's an opportunity to let people read the bills, to have them three days beforehand, it's an opportunity to let the committees legislate more, it's an opportunity to let congress work the way it's supposed to work. >> mr. trumka, what do you think about the democratic agenda that we saw in the 111th? the one sort of boogeyman that a lot of republicans warned about was the employee-free -- excuse me, the employee free choice act. democrats didn't move on that. did that have an impact last night or during the campaign season on labor trying to turn out for democrats?

>> i'm going to answer that, but i want to comment on what michael said. michael said that they weren't given a chance to cooperate or to govern. there were 424 bills that were passed by the house of representatives that were sent over to the senate, and the senate had a record number of filly busters where they didn't try to compromise. they just wouldn't let debate go on -- >> including cap and trade, something we probably agree that shouldn't occur. >> the point is that if democrats respond in kind right now, we won't get the jobs done that we need. but it'll take us taking the first step because you had a chance to govern, and you said no to everything that came down. you didn't say, let's sit down and negotiate it out. you said, no, and you filibustered it. i think that was one of the most outrageous things that the country's seen to stop progress that way, and hopefully, we won't see that in the future. did the employee free choice act have a dampening effect in this

election? this probably early on it did because -- probably early on it did because there was an enthusiasm gap early on with our members, but the more information we gave them and the more progress we showed them that was made, reining in wall street, progress on health care, the different things that was done, i think that it had less effect. and will we continue to fight for it? absolutely. and the reason we'll continue to fight for it is it's a very, very essential part of the recovery. look, our country is 72% driven by consumer spending. if people don't have money in their pockets, they can't spend. to compensate for that over the last years, they borrowed. we know there's an end to that. consumers can't borrow anymore. and if you belief that corporate america -- believe that corporate america out of the goodness of their heart is going to start sharing more money with a vast number of workers in this country, i have property --

oceanfront property in southwestern pennsylvania that i'll sell you. what we need is the ability to sit down with our employers so that we can work together, so that we can be profitable together, we can share in that profit and then build an economy from the bottom up. >> okay. can't you agree with me that they have to have an environment and a trust in government where they'll invest their capital? you know, back during the depression this there was this d of time when capital wasn't being invested. we've got to allow that money to get out there because small business, not wall street, small business creates most of the jobs in this country. >> yeah. and small business is starving right now. they need those banks to start lending. that's one of our programs, one of the five planks of job creation for us, getting money -- used or paid-back t.a.r.p. money -- to get banks to start lending to small and mid-sized businesses -- >> the money's there. people aren't applying right now because of the uncertainty.

>> let me go back to something you just brought up, mr. trumka, the t.a.r.p. vote has clearly had a big impact on this election. largely on mr. duncan's side of the aisle. senator bob bennett lost his convention as he was running for re-election. senator lisa murkowski lost her primary although she may have won anyway. congressman bob english, all because they voted for t.a.r.p.. a number of democrats who voted for t.a.r.p. lost last night, although it's not clear that's the reason they lost. what impact, mr. duncan, do you see those who were against t.a.r.p. as having on the republican concern what impact will they have on the republican party going forward? >> >> it was a giant motivator on the republican side because it was ill con conceived and then ill carried out. there were good results in it, but it was part of the government overreaching and more

deficit spending, and that energized a lot of people in this country. >> you know, look, you had 21 out of 54 blue dogs lost last night. if this was all about ideology, those blue dogs should have won, and they didn't. you know, it's too complex and too simplistic to look at a race and say, this vote. i mean, it's far more complex than that. i think there was an anger because this economy, people are hurting. more and more americans are hurting. 15 million people unemployed, 11 million more underemployed, 6.5 million that have been unemployed for six months, they're angry, and they want action. and i can tell you, michael, if you don't start the action and we don't start the action, it'll be the fourth cycle the next time around you'll get tossed out. >> what do you think about that, mr. duncan? we've seen, now, three cycles in a row as mr. trumka mentioned earlier. that hasn't happened since

1946 -- 1946, '48 and '50. are we getting into an unusually volatile period of american politics? >> it is. some would refer back to the beginning of the last century with the changes in government. the people have given us a chance this time. we had change in 2008, and we're having a change in the direction, change in the ship this time. we get that. i had a chance last night to talk to leader boehner, talk about some of the programs that he's putting forward. this is a great opportunity for the republican party, and the conservative principles of this country. get back to the basics. don't spend more than you have. look at what the governors have done. and i think haley bash bear did a great job articulating that. we can cut pack on the size of government, we can create an environment that helps small businesses produce jobs in this country. those are the things that you're going to hear us talking about. health care reform you'll hear us talking about because such a dramatic impact that it had on

us. you'll hear us talking about cap and trade. cap and trade would have destroyed the competitive advantage in many parts of this country. these are opportunities for us to put the conservative principles forward. >> mr. trumka, are we seeing a newly-volatile electorate? >> absolutely. people want action. they're fed up and they're frustrated, and they want action. if you want to listen to 'em, here's what they said last night: 85% of them said allowing health insurance denial for pre-existing conditions, we're against that. they were against, 75% were against reducing or eliminating the minimum wage. 72% for against eliminating the department of education. 63% were against raising the social security retirement age, and 63% were against cutting taxes for those who make more than $250,000. so that's what they said last night in the 100 congressional districts that swung that election.

so i do hope you listen and work on that. >> i think there are other questions on there, do you want a smaller government, do you want a more efficient government? i think people do. and that's what they're saying to us right now. we've got to create a new environment in this country. >> let me ask one question, this is what they'd like to hear. everybody keeps talking about a smaller government. what would you eliminate from this government? and don't say waste genericically. what would you eliminate? >> >> well, let's leave the policy stuff to the policy guys. i want to ask sort of a question that we'll all be asking ourselves over the next few days, and everybody will be sort of predating their own actual knowledge. when did you know, mr. duncan, that the house was going to be, was going to fall into republican hand? >> i think we started seeing that in the early spring. we started seeing indications at that point. the quality of candidates. i remember speaker boehner came to lexington, kentucky, in april and talked to me about, and

talked to the group about 100 house seats that he thought would be in play, and people were laughing at that point. but we knew because there had been a great effort to recruit quality candidates this time. we saw the mood of the country moving in a different direction, so we started to believe at that point that there would be a change in the congress. >> mr. trumka, did you have any premonitions that this was coming? >> yeah. when we saw the citizen united case decided and more money flowing into this election than there was oil in the gulf, that's when we started to figure there'd be a problem. [laughter] >> that's just absolutely not true. i mean, you guys continue to outspend us, you did this cycle. >> oh, come on that's just preposterous. >> we only have a few minutes left. >> put the stats in the national journal. >> you obviously read what's the matter with kansas. you create a reality, and we have to put -- >> we only have time for one more question. i want to make this a good one for both of you. mr. duncan, the tea party has influenced the republicans and

ginned up this new populist mood. where do you see republicans going from here, and how are they going to avoid what mr. trumka forecasts is yet another cycle in which the bums get kicked out? is. >> well, the liberty and freedom movement in this countries has helped the republican party. it energized us. you saw it in volunteers w the turnout yesterday. you'll see these people coming with fresh idea, you'll see them holding us accountable. i think it bodes well for the future of the country because we want more people involved in our government. we need to have more money and people involved in politics. so i think they will be assimilated within the party. the party will be much better off for the fact that we had this movement. >> mr. trumka, where does the democratic party go from here? you've just lost more seats than any party since 1948. how do you regroup, how do you get back into the fight? this. >> first of all, the operative word that michael said is he believes there should be more money in politics.

i don't know if you caught that. >> to catch up. >> i personally believe there's too much money in politics, there ought to be more policy debate where we actually talk about policies rather than trying to destroy people and destroy their character. where do they go? they've got to go back to the simple notion of jobs, jobs, jobs and more jobs. fight for jobs. fight for the reauthorization of the transportation act. fight for the clean water act. fight for clean energy act which will do twofers, they'll help solve a problem in this country, and they'll help create jobs. there ought to be a major investment in infrastructure. that's a ten-year period so that we can crowd in private money into the process and fix the problem. we have a $2.2 trillion infrastructure deficit. we need to fix that. the only way to do it is to go after it and make a long-term commitment. they should make that commitment and force votes on job bills. stay true to their principles, work with the other side if it doesn't cost you your principles

and if it does, then you have to pull up, and you have to fight for what you believe in. >> all right. mr. trumka and mr. duncan, thank you so much for joining us this morning. >> reid, thanks. [applause] >> we have jeremy jacobs who's the editor of hotline on call. thank you, gentlemen. [inaudible conversations] >> all right, there we go. that's better. jeremy, hotline on call, and he was with me all night as we sat there and yelled and screamed at each other across a loud newsroom trying to figure out who'd won and who'd lost. what happened last night?

>> fist, i'd like to say -- first, i'd like to say i think we'll agree on one thing. [laughter] for all of the talk about how bad things were for democrats, maybe they can take solace. there are two trios in the house. in this iowa, david loebsack, bruce braley and leonard boswell all held on. those were target seats that, you know, a week ago i probably would have thought one or two of them would have flipped. north carolina also held on in kind of a surprising way. of course, the flipside to that argument is that bob etheridge who no one thought was going to fall about two weeks ago did lose last night in north carolina. other places democrats did well, california governor. i think democrats would be very happy about that. if you looked at the beginning of the cycle, there was a lot of reservations about jerry brown and about meg whitman and her pocketbook.

a big win for them, it was a healthy target raised for them. it's very important for them going into california, going into redistricting, excuse me. the other one i would point out is -- excuse me -- >> one thing, by the way, while jeremy's flipping through, jerry brown had probably the best victory speech of the night. at one point he said i'm really into this politics thing. i thought, hey, so are we. [laughter] >> jerry brown had some of the best campaign ads we saw this cycle and proved that ads still work. and two of them, actually, he used meg whitman's own words against her, and one he tied her probably as well as anyone to another politician when he tied her to arnold schwarzenegger by playing clips of them saying the same words. there was 12 of them. it was a very effective ad. the other one we're remiss not to say is nevada senate. it's almost hard to overstate how big a win nevada senate was

for democrats and how surprising it was. it made all the prognosticators, myself included, look like idiots. everyone had written off harry reid -- maybe not reid, maybe just me -- but that was a huge win there, and in west virginia with joe manchin. he's one of the most popular politicians in the country, and it took that to win in a very republican win. but those are big wins for democrats. >> one of the great joys of working at the hotline is every morning you get to sort through, you know, 2,000 clips so we can bring you the best news of the day. and i had my doubts about harry reid's re-election, too, but one guy who didn't was john ralston, a fantastic political analyst from nevada. a lot of states have that sort of one guy who know the state better than anybody else, and no one knows better than john ralston. he said harry reid would win by three points, and is he was actually shy by two points. harry reid overperformed john ralston, that's a big feat out in nevada. jeremy, what else around the

country? sure, democrats had a few bright spots, but in the long run, this is a pretty historic defeat. >> absolutely. and i think one thing to point out is the number of tea party candidates and candidates that are backed by senator jim demint that won last night. not all of them did, christine o'donnell, for example, lost. but including demint at this point, that would be six senators in the senate that will be part of that caucus. he gave substantial resources to it. and that gives him a tremendous amount of bargaining power and leverage when it comes to the senate. if ken buck survives -- ends up winning in colorado, that would be a seventh. so we're approaching a tenth of the senate being at least in some way either with their bank accounts and what not aligned with jim demidget. demint, of course, has said he's not going to run for president, but this gives him all sorts of bargaining power in the senate. >> and yet of the six seats that

republicans have picked up, four of them are decidedly not -- >> that's right. >> -- friends of jim demidget. rob portman in ohio, mark kirk in illinois, dan coates in indiana and john hoven in north dakota. demint didn't play in ohio or north dakota. he thought about getting involved in the illinois race, correct me if i'm wrong, didn't he actually get involved in that? >> oh, yeah, he did a very long time ago. >> and he did get involved in the indiana primary. >> right. >> who dan cotes ended -- dan coates ended up peating. he ended up slipping into the seat that, oh, gosh -- >> indiana. >> [inaudible] thank you, is retiring. anyway, four of the six, though r these sort of establishment candidates. >> right. >> does that tell you that the tea party movement has been overrated or not? >> well, it's hard to say. i mean, obviously, if you look at the demint candidates that

lost, the tea party candidates helped democrats maintain the majority. christine o'donnell in delaware ruined the republican chances there which could have been a pickup of mike cassel. for what it means as far as governing goes and looking forward, it's hard to say, but i do think one of the counterintuitive arguments is that this class could be more willing to compromise with democrats, this incoming class, than maybe suggested by all the tea party rhetoric out there. rob portman's a great example of someone who understands government. moderate when he was in congress. that was, those would be people that harry reid and democrats would probably reach out to and, of course, that's not, that's very counter to the rhetoric that jim demint has put out there during the primary season and during this general election. >> and of the incoming members you take a look at marco rubio is a conservative, but, you know, he was a legislator too.

>> right. >> and he was speaker of the house. it takes something to get along there. rand paul -- >> right. i would just add on rubio, marco rubio move today the center after charlie crist got out of the republican party and he became the de facto front runner in that race. he's another one that might be more moderate than people anticipate. >> in the few minutes we have left, give me the unreported story, the story we haven't really seen emerge yet. >> are well, the first thing that comes to mind right now is that harry reid, dick durbin and chuck schumer are going to be having a news conference this afternoon, and the first thing that came to my mind was how angry it probably made chuck schumer. [laughter] angling to become senate majority leader. make of that what you will, and chuck schumer also funneled a lot of money to the state party of nevada to help harry reid, but i don't think there was any question that he had -- had the three of them driven the

possible candidate to be senate majority leader, the three of them discussing the state of the democratic party will be an interesting press conference to watch. >> and, of course, at least it provides some harmony in the house that dick durbin and chuck schumer live in together. that would have been the angriest couple of roommates you could see for a while. i think that the big untold story here is the simple fact that a good campaign run in the right time can actually win. but not all the time. >> right. >> take a look at harry reid. he ran, essentially, a perfect campaign. so did a couple of members, joe donnelly in indiana -- well, i'm sorry -- >> one i would add to that is pair yellow who actually lost, but he ran an extremely strong campaign in a district there was no reason to elect a democrat this year and made that race a lot closer because he was helped by obama in the last week, but he ran a very strong campaign. >> one interesting point we're pointing out in today's hotline

spotlight is that the notion of the trifecta of senate seats, the sort of symbolic senate seats that republicans thought they could pick up a while ago, the illinois seat held by president obama, once held by president obama, the delaware seat once held by mike cassel and the nevada seat held by harry reid. the lesson, i think, from those three is, are, well, the three very different lessons. in illinois you had president obama do everything he could in the place where he was most popular, but voters were so dissatisfied with government 65% of illinois voters told exit pollsters they were either dissatisfied with or angry with the federal government. it is almost impossible no matter how popular you are to overcome that even in this a state like illinois. take a look at the members in illinois. bill foster, phil hare, debbie halvorson. there's a good possibility even melissa bean will all be looking for new jobs.

and, by the way, mark kirk's seat, that seat that was supposed to go to democrats, republicans won that seat last night too. so there are a few states that turned out worse for democrat than president obama's own state. then you take a look at a state like delaware where the tea party candidate came in and really robbed republicans not only of one seat, but, you know, some house republicans thought they might even have a chance of keeping that senate seat with the right primary nominee. that right nominee lost along with congressman mike cassel, and democrats picked up the two seats. i think that talks a lot about the dangers republican face going forward if they continue this sort of shrinking the tent and purr fewing the party -- purifying the party. final ily, take a look at nevada. even now and then a perfect campaign can overcome even perfect campaigns. illinois was the state that actually flipped to republicans. >> well, i mentioned the

democratic, the places where democrats can take solace today. just one example of how bad it was, in wisconsin last night the democrats lost the governorship, they lost the senate, they lost the senate seat, they lost two house seats, they lost both chambers of the state legislature all in one night. and this is a state that voted for the democrat in the presidential election the six last presidential elections. that just shows you how much -- a blue state, a bluish state like wisconsin can change. >> all right. thanks so much. we would encourage you to take a look at your hotline which will be out well before you get out of this session today. thanks for your time. [applause] [inaudible conversations] >> good morning. thank you all for coming this morning. i'm sure some of you are sleep-deprived and bleary, and we appreciate you being here.

i'm the senior vice president at "national journal," and we appreciate your participation, and we hope that this morning's discussion gives you food for thought on what may happen in the next congress and certainly as we lead up to the 2012 elections. i know that my colleague, ron fournier, mentioned that we will no longer be live at 1:00, and i wanted to assure our online viewers and participants that we will continue to stream the event through the launch with charlie cook, and that's expected to go about 1:30. just wanted to take care of that. we're having a brief microphone switch up and a restaging of the stage so, please, bear with us for just a couple minutes. our next panel will be taking questions, so i encourage you to think of your questions that you would like to ask several soon-to-be former member of congress and former members of congress. you will see staff with "national journal "t-shirts, and they will have microphones, so,

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matter to all of you, and that's why we are here and delighted to welcome this next great panel. thank you very much. [applause] >> thank you, bruce. moderating our next panel is "national journal"'s own jason dick. he is a 12-year veteran and currently the editor of national journal daily, the publication formerly known as "congress daily." as editor, jason is responsible for the accurate, credible and insightful and intelligent coverage you get every day. in the issues that you receive as a "national journal" subscriber. i'm going to turn it over to jaizen and the distinguished panel. >> thank you very much, victoria. thank you, also, for coming to a

policy discussion so early in the morning. [laughter] we are going to focus on policy