losing their jobs is very feint on health insurance -- dependent on health insurance. why not scrap it altogether for a completely portable system? that's water under the bridge, but i'm wondering, having passed a big health care bill whether you think it's going to make things better or worse for small businessesome. >> goodness, that's a huge question. i think with a lot of the regulation there's a lot of unknowns right now. my business, i'm still trying to figure out for my own health insurance plan what the impacts are going to be. a lot of new questions. i think it adds one more thing that small businesses are having to figure out. i'm of the camp that something needed to happen, so i agree that -- >> you're glad it passed? >> i think so. but there's still a lot of questions that need to be answered. >> this i think it gets to what rebecca said. i think the uncertainty around how it's going to play out and what it means for small business

is just another thing that small business has to deal with today that's a challenge. .. but it is positive particularly given these times. >> i suspect i know where you are coming from. i would like you to explain what did you think the bipartisan move toward repealing that reporting on transactions, weather or not that is gotten rid of weather that will make a positive difference. >> it is a financial disaster. you can't add thirty million people and say that is not going

to have an enormous effect. our major problem -- >> if the bill is received it will -- >> just a second. first of all, you start out -- the major problem for the last several years has been small business a major problem. this is going up at double-digit rates every year. in the last decade it has gone up by 130% where wages and costs are going up 20%. you see a huge gap in health care. got to get control on the spending side, on the cost side. what do we do? we go out and make it worse by adding thirty million more people to the system with no additional supply. we are already going to be sharp, 120,000 positions, if

nothing else happens. now add to this demand. my point essentially is we have a supply/demand that will be unbelievable. the second thing is along those lines, the financial shenanigans that have gone in, cbo has to abide by sir restrictions. basically a ten year window frame. one of the ways this things supposedly works financially is we start a system of long-term health care for seniors which we begin to pay for in the timeframe which extends way out beyond the time frame when benefits have to be paid. the program doesn't come anywhere close to paying for itself according to the social security administration. all these sorts of things cbo

has to abide by, anyone who plays with the numbers. we have a huge financial problem. our rates are going to go up. >> i disagree with my colleagues -- >> you disagree with my numbers? >> the millions of people who are now going to access affordable health care fundamentally functions. you have been a drag on the economy. they had to go to the emergency room for services. if they access health care that they need to visit doctors and be part of the process that you

can diagnose problems before they become acute. i disagree with you. it will be a long-term savor for the economy. secondly for small-business and large business alike these employees are going to get -- be much more productive. now we have the health care they didn't have before. you won't find them taking sick days or missing work because they weren't taking care of their health. >> if you look at small-business lending they have the threat of the tax issue, so when you have the combination of the two, is

there of business demand out there for the lending. >> the tax issue has gone away. >> they are not applying for it, therefore the banks cannot lend it. when you get into if they qualify they will be marginal. that is where we could partner with the sba and have leveraging and it would be what would work and be good for all and we could get those who needed it to get loans with sba, but still to me the perception is health care is a fear for the small business owner who wants to go out and create more jobs. >> we shift gears. an interesting question from taylor webb who is the congressional intern somewhere

in this audience. if you did show up, make your way to the microphone. his question was not about regulators for financial institutions but individual entrepreneurs. in light of the financial crisis the appetite for risk has been reduced at the individual level. what is the best path to encourage individuals to take risks with small business? who wants to take that? >> the entrepreneurship is interesting because people are willing to take risks. that does not seem to have slowed down -- >> you don't think this problem exists? >> this impacts everything. entrepreneurs still rise. if you look at across the nation a lot of businesses are starting. particularly from other communities. growing at the rate of 30% in entrepreneurship. there are problems with landing

fees kind of things. what i would like to suggest is speaking from my point of reference there are a lot of opportunities for entrepreneurs developing in california program for small and medium-sized business. they offer money for these investments that have gone away. there are a number of things in the works that we need to flush out and give the government matching funds as well. >> this is going to be a real problem and i am not sure it has to do with attitude, entrepreneur real spirit is dying. it has to do with access to finance caused by a housing. a lot of people use their home as a piggy bank if we can call it that.

would you are seeing is the deflationary of the housing market. that is very important. you are having a series of folks who might ordinarily go in and who cannot do so and we are seeing right now the statistics are starting to come through, for the first time in my memory, having fewer starts in the last couple years than we had in the previous years. we not only have these groups going out but fewer coming in and a lot of it is tied to housing. >> taylor, do you want to follow up? jorge corralejo was suggesting the problem at the individual level was less significant than you think it is. >> to give some background how in michigan obviously michigan has been hit by this economic crisis. my dad used to have a

manufacturing home business going down as well. that is the background for this question. even so, being from my home town and in a family that has lots of relatives i can just see the pinch in their pockets when their home is the base for loans from home business and as far as there might be areas in the country that are more conducive to small-business being given out but how do you see these new policies being put in place actually in some of the areas in the country that must be most hard hit warehousing prices like michigan totally collapsed? >> this is a small town problem? >> without a doubt there are parts of the country that are feeling the pain much more than others. it will not be a simple we are out of the woods. it will be regional. you can see parts of the country

and i definitely -- when we first started talking leacock about are we heading in the right direction. i look at numbers every single day. little be doing? it had the lowest level of volume in the history of the program ever. the week before christmas was the highest week of loan volume activity ever. that is all good. again, do i measure success by how much volume they do? i measure success by i would love it. if the gap is shrinking. that tells me there has been a big gap. however, we are starting to see lending. taking advantage of government programs. we provide full.

my mission is i provide access. i ensure access to our small businesses through our lending partners to small-businesses that are otherwise cannot accept capital on reasonable terms and conditions. so really, by watching our volume go up it tells me we are doing something right. with the recovery act and extension of the jobs act at the end of september, our flagship program had a higher loan guarantee and fee abatement for small business owners that pay for the government -- basically it created encouragement for small business and also encouraged our lenders with a higher guarantee. the other thing i looked at, this made me smile quite a bit, i was wondering i wonder how

many -- when businesses buy equipment, that tells me that they're making a decision to make investment and that usually translates into growth. that is a long-term decision. i took a look at our flagship program. what proportion are going towards equipment purchases? the recovery act kicked in. we talked about these provisions. kicked in in february of 2009 and extended into the job back in september. it doubled. the percentage of loans that went towards equipment purchases doubled february of 2009. that tells me that entrepreneurs are making a conscious decision to invest. with growth in our loan partners it tells me that our lenders are looking at -- lenders need to

lend and lenders want to lend but everything we talked about, there are challenges. it takes time to find out how to deal with those challenges. one way to deal with the challenge is to look at the credit enhancements that are available. how do we make it make economic sense? how can we also control of our risks? >> going back to the real estate issue. it came up with the previous panel. , from the chamber when asked what you would like to see government do, do something about the real estate problem. on the one hand we have people saying government supporting money down ratholes is too big and they need to stop spending and do something. rebecca and kathleen, and also jorge corralejo, what should

government do. >> such a regional issue too that is very challenging. weather coming from, where markets don't have a lot, what you do, you are having to borrow or sell properties, part of it is all the regulators or working through these products. that is very regional in terms of how they go about dealing with it. >> the first panel didn't answer the question. >> i was looking for the answer. it is a huge issue. no easy solution. we need to get the foreclosures behind us. lot of people in their homes can't afford to be in the home. >> what is the role of government? >> helping the lenders get through the process.

we continue to hear about delays and getting that behind us is important for small business moving forward. >> let me throw in one extra. everyone is talking about tax reform. take away deductions and get their rates down. mortgage interest deduction, one of the deductions we are talking about and what should we do about real-estate? >> i wish i had the golden parachute on this one. i can tell you more about the problem than the solution. it is unbelievably important. just a few numbers. 94% own a home, much higher than average. median is 60% more valuable. plus, of those who don't have home-based business, office or whatever you want to call it, half of those own that in the

rural area. and if we want to take a step further, almost 40% own investment real-estate. over half of which own more than one. the small business owners are heavily into real estate to say the least. one of the critical reasons is the issue you are talking about on tax reform will come up. my gut is small business owners won't like a particular provision of what probably will be a major discussion on tax reform which is elimination of the home interest deduction. my guess is capital will be the one. it is going to be central. has to be central to discussion but in the short term it will be really tough because we have this horrible problem and we have sat on it for two years and

done nothing basically. three or four years where we sat on it and heaven knows what they are doing. >> what ought to be done on the issue of corporate tax reform? timothy geithner's meeting with chief financial officers from 15 countries to talk about the possibility of removing deductions that many businesses like. when i was talking to an analyst yesterday they said half of all business income goes to businesses that are not organized as corporations and you can't do corporate tax reform and bring the rate down because those businesses will be paying 45% and it has to be done down the road. >> clearly tax reform is on the agenda and should be on the agenda. i am old enough to remember the '86 act. it worked pretty well and all of a sudden so on and so forth.

so i think this is something good that can benefit small firms in the long term particularly when it comes to simplification. there are certain parts of the code that have to remain relatively complicated because if we talk about depreciation that has to be there. a whole series of things that don't have to be there. the home office deductions are the real ones for example. doesn't have to be anywhere close to that complicated but it is. the whole idea of what is an employee doesn't have to have 20 test. >> can tax reform at the individual or corporate level or boat be done before the 2012 election would take longer? >> i think you can only discuss it for a couple years. this is a huge. this is very big. i don't think you can do it well in two years. >> getting back to your house in

question, extraordinarily complex of course. government can continue to play a major role in that instead of outlay in money for principal reduction which generally are not working, people under water for far more than minor principal reduction it is a waste of money. that money can be better used for home ownership and you can utilize these counseling sessions to put people into new homes which would reverse the trend that we have. that is the short note on that but that is something we have been discussing and taking a look at when you are looking at the principles of new home ownership. instead of continuing to lose existing house you are in you can buy something more affordable and reverse the trend that way. >> i want to ask john and

anthony hill question that came up in the notes sent by rebecca. she stands somewhere on it but i want to get your perspective on this. it goes to some of the things congress did in 2009/2010 that sounded popular. let's limit overdraft fees and debit card fees. the question is banks have to be profitable and viable to support small business lending. are the aggressive new regulations and restrictions on income from overdraft and interchange fees jeopardize in banks's ability to lend and ultimately hurting borrowers'? >> when we look at overdraft fees, banks are offering a large portion for our banks especially small community banks. the overdraft policies that we put forth is looking at the trade off and utility for the

consumers. it is low comp. we want to make sure consumer is getting some value for what they're getting. >> i concur, these are certainly important. large banks too. there are constraints of the have to use to protect the consumer and that is part of it. where we see any of it, it has any reflection, creates any problems with lending. >> from your perspective, you don't think it makes problems in lending. do you see it as appropriate protection of the consumer as opposed to the grandstand in terms of voters doing something that sounds great and but may

ultimately have unintended consequences? >> i think it is important, we are trying to protect consumers, making sure in this end that they know exactly what they are getting, what value they are getting. >> that is enormous. >> i will be nice. it is one where all banks of lumped into one category. you look at community banks. we are not going to take advantage of the consumers. we don't have automatic programs and different stuff that has been created. the community bank, just about everything i do these days is being regulated. our ability to balance, it is soft. how do we balance the income

statements to do what we do? and, a cure approach to regulation. some of these products have been taken advantage of. to make consumers understood the products. we did in a way that also in shores long-term safety of the system. i think we struck a pretty good balance. congress did good job on that. i understand their rig

differences among the bank community in terms of size and the types of product and services they offer. that said, the legislation established a base line. this was not providing the types of fees, retirement on banks. the lobbying community, or advocacy community wanted. it is as strong as those folks wanted. they are appropriate and necessary steps. >> you said you would have voted for the health care bill. i am guessing you are a democrat. >> yes. >> this would make you a more credible critic. you agree with the charge the obama administration has gone bananas with regulation?

>> no. [laughter] >> there's a time and place. what we are doing a lot with regulation is painting with a wide brush. there are a lot of unintended consequences that go with them. >> i wanted to address and agree with rebecca when i found out she was a democrat. she did -- on the head about that. charges of what -- we can't all be painted with the same brush. that has to do with state regulations and a state regulator as well as it does, the size of the bank environment. we still get to go back to some

basic common sense examination of banks and look at them individually and geographically and make sure we do the best job to protect what is our main job which is from my standpoint the safety and soundness of the institution. >> the federal government and federal regulators capable of common-sense examination? [laughter] >> that is a good question and one that i will answer very candidly. they used to be -- more so it appears that since we have this financial problem, banks have been suspect, they have a number of problems sooner or later and

it looks like now, primary regulators, weather is -- it looks like we are coming down from washington and at least what i see is everybody wants to say we can't do or we can do but washington is -- and to me, that is not where we need to go. we need to be sending that authority and responsibility down to that region and that level person that should be able to work with that institution. know that market, know the economic condition that come with sound judgment. >> i thought you said was a mistake to paint with a broad brush. anthony is painting federal bureaucrats with a very broad brush like that. >> with respect i have to

disagree. when we propose regulations or changes in our procedure the majority of the time of the regulatory -- we put these up for public comment and take those public comments into consideration before we finalize our rules. the same thing when we get ready to pursue corrective action that is having problems. that action is tailored for a specific need against the institution if it is capital management or whatever it case might be. we just look at all troubled banks and and say you have got to do different things. >> let me follow up with you on a question that kathleen submitted and see if kathleen is satisfied with the answer. how do federal regulators communicate with counterparts in the field and how do they in sure there is consistency and coordination of lending standards across the country?

>> one thing we do is periodically, most of the regions from our washington level, our entire staff, once a quarter we talk about issues, talked about new regulations, talked about congressional action that may impact the way we are going to regulate institutions and we are issuing internally all types of memorandums that detailed this is the way we're going to consider. a couple things that are public and specifically to commercial lending and encouraging banks do continue to renew or extend credit and when you take those memos we talked directly with our staff and encourage them to see a credit that is deteriorating or collateral behind the credit is deteriorating but the individual still has pain capacity, let's not criticize that specific credit. let's use judgment and balance. >> i want to go to the jury.

does anyone here think there's a problem with consistency and coordination? .. >> all of a sudden the change is very abruptly. it goes back down the other way. we don't have rules and we don't understand one another anymore, and everything is changing so we keep blaming one another

somewhat of the problems are. and i'm not sure till such time that if we don't get more stability and find out what normal means, we don't know what normal is anymore. until we find that out we are going to be pointing fingers at one another. i think that's probably a real problem. >> many of our banks, if the bank or feels they are not being treated fairly or that we are not being balanced, we want to hear about that at a regional level, at a washington level. we have an ombudsman, and the chairman indicated earlier we will have an 800 number, and consumers can call into. if you don't feel you're getting a fair shake, that we are not using proper judgment we want to hear about it. >> kevin kelly who may be in the audience, if so, i would invite cabbages stepped to the microphone, asks how can local community based organizations must work with the fdic? >> i think they're a number of

ways. we have had several events around the country when we talk with community-based organizations about how they can partner with banks to do activities, do some lending activities. we also have advisory committee that composed completely of community bankers. you can provide input about any of our policies and our practices that might be signing individual lending or small business lending. so there's a number of things we do across the country and a lot of our policies that give the public an opportunity to give us input about our operations, what we're doing, what we can do better, what kind of obstacles that we're presenting to lending. >> i want to go to one off the wall topic. it's not so nearly on our agenda, but its link to something that is happening next week. hu jintao, the chinese leader come is coming to me president obama next week.

secretary geithner gave a speech yesterday and talked about some of the issues related to american competitiveness, both decisions we can take in this country and things we want china to do regarding the evaluation of the currency. let me ask you, are you satisfied with the approach that the administration is taking to china? would it be better off for american business if they were more aggressive in trying to press the chinese on protection of intellectual property, of currency, or would that risk trade war that will would ultimately backfire on everybody? >> that's a little out of my area of expertise. >> i'm going to plead the same thing. i don't feel confident in answering that question. >> i have a major, just an experience, not a great deal but let me comment with regards to that. there's no question the president needs to -- china is a

major partner, they hold a great deal of our day and we need to i think show more leadership. over the past of years i think that has hurt us. with regards to evaluation, but also with regards to importing businesses here. i'm on the board of governors, and we deal a lot with chinese companies, and some of them are moving to this country. being with a small business chamber, we are looking to generate some contractual agreements with them to expand businesses for some of their products, and major corporations moving here. overall, we need to put a much stronger role, i think the seat. we are doing some things in southern california. however, it's a far greater, far bigger issue on these kinds of things, absolutely we need much stronger leadership than all of these areas. >> john, i know it's not your

area of expertise either but if you have a view, should the administration be tough with china? some of the polls say they should. >> i definitely think we should toughen up and we should protect the dollar, and you know, we stand a lot to lose if we don't because they already owned half, or that portion of it anyhow. i don't know that we want to get any deeper. >> i want to go to a question that jorge had said, which is beside small business lending, what step would have the greatest impact on the development and creation of new jobs? we talked about real estate. set that aside. what else either that government can do or that business can do that would have the greatest effect on generating job creation given the fact that we've got an appointment, over 9% -- unemployment over 9% and it will stay there for sometime.

who wants to take that? >> to some extent, the whole idea of the payroll tax being readable, two percentage points i believe on individual side is a good idea. we are two years too late with it, that's the problem. that should've been a stimulus policy to begin with, is focused entirely -- >> but going forward? >> going forward on this i don't see, i think we're limited by the amount of money we have already spent. you heard senator warner talking about the next couple of years where to start document deficit, where we are going and all that. so i think our options are really, really limited. and the idea that we now have begun to put an actual stimulus into place is probably the best we're going to be able to do for a while. as long as we're not talking about real estate. >> is there anything the government can do -- as we talk about the $2 trillion on corporate balance sheets that a sitting there, waiting to be

invested. we've talked about the lack of demand, that's a problem that is causing the money to sit there. but what can be done about that? >> that's going to come when there's a demand, when there's demand for investment. look at smaller firms right now, and you look for either physical investment or you look for inventory investment. and i mean, we had barely back to kind of a very low level now. we are out of the very depths. >> does everyone on the panel like the one of% on the tax deal, is that a good deal? >> so we'll have to get into that. but part of that is caused by sales. look, the big guys, yeah, they get good profits but a lot of them are coming from overseas. rather than from your domestically. so if you're going to get more investment we have to have more

sales. >> you're interested, in charge of the economy. [laughter] >> what can we do to spur jobs given the fact we're broke? >> i don't think there's anyone silver bullet. i think speedy's are there any partly silver bullet? >> a range of things you've heard today. spring additional lending to small businesses. spurring innovation. the president talked at length about his innovation agenda. so it's helping small business owners, entrepreneurs take advantage of the great ideas that they have right now and being able to turn those ideas into products and services they sell both domestically and abroad. where i actually agree with my colleague, denny, it is finding a balance of protecting american companies, but also ensuring that we are competitive globally. it's working all across the

globe with our partners, our trading partners, to make sure small businesses, large businesses have access to the markets, but also have the financial wherewithal to do what they need to do. i think you've heard recently from the business roundtable that they expect their members to increase their hiring, to increase their investment in their companies, fairly substantially. and i think that will go a long way to turning around the types of increase in small business investment that we would all like to see. but it's not going to be one thing. it's going to be housing, housing as well, ensuring responsible homeowners can stay in their homes that they have everything they need, it's really just stabilizing the economy as a whole, not just one individual effort. >> i interviewed alan blinder who is at princeton, democratic

economist. he said we need to recognize -- he's considered a moderate. we need to recognize what a jobs crisis and we're going to be in that crisis for something a time because it's going to be very slow out of that hole. we are to think about direct government hiring. you know, new deal kind of stuff. is that crazy talk? could it make sense to? >> well, i don't know that having federal programs aimed at hiring is the way to go. i'm probably not qualified to talk about that. >> is it a good way to go, direct government hiring? >> i think it's important because again, look from our point of view in los angeles, southern california. los angeles has about 600,000 small businesses. that's probably more than any large group of states put together. the last few years we've lost over a quarter of them, and if you look at the desperation of

these kinds of businesses, sales is critical. people need of money in their pocket to buy from their local retailers. we are seeing a flood of people that are going under. so i think that is very much a part of the stimulus package. what's important to note is we cannot slow down or stop this recovery by the absence of stimulating the economy. and that's what we are taking a look at. and i think it has real value. >> my comment is this country is small businesses. this country was built on small businesses. this country has been pulled out of the depths of every recession we've gone through with the help of our small businesses, and this country will, the opportunities for us going forward are our small businesses. two out of every three of us work for or own small business, correct? you know, why i worked with his small businesses for 20 some years is because i'm fascinated by them.

they will find the opportuniti opportunities. they will find the opportunities, every single time you. and so, we go back to what we discussed, sales. so we need to take a look at where, you know, where are the opportunities. we are a global economy, exporting your these are the opportunities for our small businesses and we need to take a look at that and we need to see, you know, can we provide the assistance? can we provide a technical training? can we provide the tools for our small businesses that really define us to take advantage of that? >> let me follow up and testament on the panel because i've had some conversations with economists, left and right, who usually this part of the conversation is off the record because it sounds politically incorrect, but when i talked to said something to the effect that we have waited over romanticized small business.

starting and stopping in that sort of thing. but if you look at it candidly, the best jobs are in large business, the jobs that pay the best, jobs that have the best benefits. we need to focus more attention on increasing hiring among large businesses rather than small businesses. it's kind of like talking to family farmers in an era where that's a little obsolete. >> my comment is this. and i can drive through town and pulling up to my kids all the businesses i have helped over the years. i was in the trenches. i was doing -- perfect example. businesses that are provided, maybe provided alone for a restaurant to open up a second location, and we talk about how many jobs is that going to create for the restaurant, how many employees do you have? that is as you walk to the project in step back and take a look at how many jobs has that actually touched, that project, the contractors, the equipment

companies. it's a mind-boggling if you stop and think about. i think we are under estimating that. >> any, is that too much mom and apple pie talk to? >> i think it's been kind of interesting weasley because the economy is coming out with all these sorts of things. if you look at the bureau of labor statistics, what they call the dead series which is business employment dynamics series, which is recorded officially the number of 92 through -- ongoing. it 64-65% of all net, underlying net, not just gross, net, hires versus layoffs, or you know, whatever. net jobs are created by smaller firms. and a goodly number of those are smaller firms under 20. does our government numbers. i'm not making this up.

and all the data that we have going back to about 1976 prior to that, says approximately the same thing. so all of a sudden we get somebody comes out, and i know who the people are, the suspects here, no, they're good people and they're very bright people. but all of a sudden they come through and they say well, yeah, but a lot of them are brand-new firms. well, hello? they are small firms, are they not? they are new firms. we don't start first with five, six, 700 employees. so that makes no -- that's kind of just superfluous to the whole argument. and so, the job generation thesis is quite clear going into this recession. what's going to happen after this recession, i mean, we've been able to do this for years and years and years. a guide by the name of david wrote the original thing

everybody has criticized him, but i think he has written, proven to be correct data. so here we are. these are job generated. we went into this recession, we maybe see -- sing something to happen from this recession, but basically it's indisputable if you just look at the government numbers. >> with esther and defense, the contributions of small contribution and a lot of hope in things get better, than a look right now, we want to thank our panel and we've got two more speakers at the end. we're not quite done. thanks so much, guys. [applause] >> chinese present hu jintao is traveling to washington next week, and members of the obama edition has held a series of events to discuss u.s.-china relations leading up to his visit. this my secretary of state henry

clinton will discuss u.s. policy toward china at a state department for him. live coverage here on c-span2. this is expected to start in just a moment. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] >> live pictures from the state department as we are will a waiting secretary of state hillary clinton. she will be talking at u.s.-china relations this morning. while we have a moment very quickly we will tell you some of the other programming items that are coming up here on c-span2. from des moines, iowa, the aisle inauguration of governor terry branstad. that will start at 1110 time that eastern this morning. we will have that.

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>> again standing by for a martial secretary of state hillary clinton delivering what is being called the inaugural richard holbrooke lecture on a broad vision at u.s.-china relations in the 21st century at the state department this morning. she's apparently running just a couple of minutes late. we will have live coverage when it gets under way. in the meantime remarks fromt, commerce secretary gary locke. he talks about the u.s.-china ce relations.. >> thank you very much for the introduction and thank you for

the great work that you and the u.s.-china business council do day in and day out to foster this very important relationship. i do want to acknowledge jim sasser in the audience here, for ambassador, u.s. ambassador to china. he out to be a. talking, really from his vantage point of his years of service in the united states congress, the net state senate, excuse me, and also from his years of serving in china. years in but ambassador, please stand upf so we can recognize you as well for your great service to this country and the u.s.-china so relationship.great seice to [applause] we are here today less than a and week away from a very important state visit by president hu jintao. more than two decades ago on my first trip to mainland china cad first trip to mainland china, i could not imagine that the u.s./china relationship would eventually become so consequence shall. nor could i have imagined a

scene like we witnessed a few days ago. u.s. secretary of defense gates joining it together with his chinese counterpart to stress the need for stronger military ties between china and the united states. in 1989 on that first trip to china, i came in from shanghai's airport on a rickty, russian-made bus and stepped into that city's dimly-lit streets into a world vastly different from the one i left in the united states. the streets were swarming with bicycles at 10:00 p.m. young men with their dates riding on the handlebars, grandparents pedaling to the market, boys and girls with white knuckle grips on their parents' shoulders. bikes everywhere. shanghai then was a very gritty, industrial city filled with nothing but low-rise buildings. there were no sky scrapers and very few automobiles.

there was little sign of what was to come. today shanghai's skyline is dotted with more than 400 skyscrapers. if you go to the world financial center, one of the tallest buildings in the world, you can actually stay at the park hyatt hotel with a lobby on the 79th floor. those bikes that i saw on my very first visit have been replaced by cars, elevated freeways, mag-lev trains shuttling people and converse. to see it to be awed. i am every time i visit china. the explosive growth in places like shanghai have helped lift almost 200 million people out of poverty, and in the years ahead, hundreds of millions more chinese will join the middle class. the united states welcomes this growth because it's good for the

people of china, it's good for the global economy and it's good for u.s. companies that offer world class products and services, products and services that improve the quality of life and standard of living for the people of china while providing jobs for americans back here at home. with the u.s./china business council's help, this has become perhaps the most important bilateral trading relationship, and china is the top destination for american exports behind just canada and mexico. america is the number one nation market for chinese exports. indeed, last year expormts to china from america were up 34% compared to 2009. indeed, u.s. exports are on track it to exceed $100 billion in 2011. in the past 20 years, u.s. exports to china have increased by a factor of 12.

imports from china to the united states have increased by more than 30fold. we are at a turning point in the u.s./china economic partnership. the policies and practices that have shaped our relations over the the past few decades will not suffice to overcome the economic ka challenges faces the united states, china and indeed the global community. today i'd like to talk about how to move forward and unlock the full potential of the u.s. china commercial relationship in the early 21st sentdary. the gross trade imbalances between our countries are a good place to start because they threaten global stability and prosperity. i think a great illustration of that can be found in trenton, new jersey. many of you have likely taken amtrak up to new york, and when you pass by the delaware river in new jersey, you see that famous sign. trenton makes, and the world

takes. well, replace trenton with china. you have a simplistic but pretty accurate description of the global economy over the last few decades. china and the united states benefitted tremendously from this arrangement in recent years. american consumers got an impressive array of low cost goods, and in its transition into one of the world's top exporters china was able to lift millions of its citizens into a fast-growing middle class. that's not sustainable anymore. the debt-fueled consumption bing in couldn'ts like mesh must end, and couldn'ts like china realize there are limits and drawbacks to purely export-driven growth. that's why we need a more equitable xhesh relationship, and it's within our reach. the united states is doing its part to facilitate global

adjustments by increasing private savings and exports as well as taking steps to bring down the long-term fiscal deficits to a sustain able level. they're making the rebalancing of its economy one of the cornerstones of its forthcoming five-year plan. china is aiming to promote domestic consumption through a variety of measures such as boosting the minimum wage for workers and building an improved social safety net. changes like these will hasten the rise of the middle class that wants the same cars, appliances, and medical care and other amenities long enjoyed by consumers in the western world. the chinese government is putting an intensive focus on strategic emerging industries with more high value work in areas like health care, energy, and high technology. the chinese have signaled they want foreign businesses to

develop these sectors by entering into joint ventures and conducting more research and development in china. this is assistance u.s. companies are eager to provide, as long as china dealing meaningful with concerns about intellectual property protection as well as a variety of other issues i'll touch upon later. such cooperative projects can serve as the foundation for a stronger economic relationship between china and the u.s. but china's success of addressing the concerns of internal businesses including those in the u.s. will help determine whether it realizes its economic vision. a vision in which china is a leader in innovation and a producer of high value goods and services. here's the good news. we see examples of how this future could play out with the businesses and governments collaborating to

>> gary locke from yesterday. we will go live now to the state department where remarks on secretary of state hillary clinton on u.s.-china relations. >> so ambassadors, dignitaries, foreign minister, welcome, secretary steinberg, good friend from the white house who is working so hard to make the visit of president hu jintao a success. all family of ambassador holbrooke, welcome today. it's an all or -- it's an honor to have you all here at the richard holbrooke lecture. i think of any of you know any with a state department come if you walk into the bureau, you are immediately confronted by the dignitaries of american

foreign policy on both sides, some of the greatest names, ross and others have served with great distinction for many, many years. and these are all suitably somber black and white photos, shorthairs, men holding pipes. all except one. there is one man, enormous, big hair, very young, unconscionably young, 34 years old, youngest assistant secretary to ever serve. looks more like a drummer in the doors than a distinguished diplomat. that meant of course was her predecessor in this wonderful job, and browser holbrook who served with great distinction. he was one of the key architects of the opening of the relationship between the united states and china. so it is only fitting today that this inaugural lecture that is going to be given to you in the mumbai secretary clinton be about this relationship.

this incredibly consequential relationship that will defy the 21st century. without further ado, it is my great honor to introduce and welcome our wonderful current secretary of state, secretary clinton. [applause] >> thank you. well, this is a bittersweet moment for me personally to deliver his first inaugural lecture. i want to thank her for that introduction, and for reminding everyone that you're a tough act to follow, my friend. along with deputy secretary jim steinberg, the trafficking of the state department have brought intellectual vision to our diplomacy in asia. where ever i go in the region, people always have a kurt

campbell story to tell. and some of them are even flattering. [laughter] >> so thanks to my great team here at the state department, jim, kurt, and everyone for all of your hard work and leadership. and it is a special honor to welcome my colleague, foreign minister along with so many distinguished ambassadors including ambassadors john. to this end i don't richard holbrooke lecture at the state department and the ben franklin room, for nearly half a century as a young foreign service officer in the non, as the tireless negotiator of the dayton accord, as a special represent for afghanistan and pakistan, richard holbrooke grappled with some of the most difficult and important challenges of american foreign

policies. and he left an indelible mark on this department, on our country, and on the world. because of his efforts, america is more secure. millions of people around the world have had the opportunity to live up to their full god-given potential. and we are honoring richard's legacy in many ways and this afternoon many of us will gather at the kennedy center to share stories and remembrances. and one of the ways we have chosen is this new lecture series, which reflects richard's passion for serious policy questions. and his conviction that they deserved serious discussions. richard had a hand in nearly every crucial foreign policy challenge in the last 50 years. if he was not invited to have a hand, his hand was there anyway. and i look around this room, not only at americans, but as many of our friends from across the world. many of you know what i'm

talking about. he was tireless. he was relentless. he would not take no for an answer because i would give him no over and over again, and it was not the answer he wanted. he worked with many of us on these important issues. and today i would like to focus on one that he knew well, and that is on everyone's mind as we prepare for the important arrival of president hu jintao. the future of u.s.-china relations, as the state department youngest ever assistant secretary of east asia and pacific affairs, richard was as kirk has said, a key player in the programming of the opening of formal diplomatic relations with china in 1979. later, he served for many years as the president of the asian society year throughout his career richard understood that a strong u.s.-china relationship would bolster stability and

security in the asia-pacific region. and he was also clear eyed about the many obstacles to our cooperation. most of although, he saw that the success of the relationship depends on its ability to deliver positive results to the people of both our nations first and foremost, but also to the rest of the world. these insights remain just as relevant today, and we heard them underscored this week by secretary gates in beijing, and by secretaries geithner and lock here in washington. three decades after our nations first opened the door to engagement, our relationship is marked by great promise and real achievement. but also by significant challenges as one would expect. and more than ever, we will be judged on the outcomes that we do produce, for greater peace, prosperity, and progress in our own country and throughout the

world. america and china have arrived at a critical juncture, a time when the choices we make, both big and small, will shape the trajectory of this relationship. and over the past two years in the obama administration, we have created the opportunity for deeper, broader, and more sustained cooperation. we have seen some early successes and also some frustration. and moving forward it is up to both of us to more consistently translate positive words into defective cooperation. it is up to both of us to deal with our differences, and there will be always differences between two great nations. we need to deal with them wisely and responsibly. and it is up to both of us to meet our respective mobile responsibilities and obligations. these are the things that will determine whether our

relationship delivers on its potential in the years to come. now, we have already come a very long way since the first tentative step of the diplomatic opening in 1979. after many years of the virtually no contact, we have had three decades of intense engagement. in the beginning our relationship was almost exclusively focused on the common threat posed by the former soviet union. entering the 1990s we began to engage on broader regional issues. and i remember with great fondness the trip that my husband and i and our daughter took to china as part of that intense engagement. today, our relationship has gone global your we debate and discuss nearly every major international issue in both bilateral dialogue and multilateral meetings. and these are on issues that we

have concerns together on, and these are on issues on which we are fundamental disagreement, such as human rights. the breadth of our engagement will be on full display next week when president obama welcomes president who to the white house. these three decades of relations between our countries have also been three decades of impressive growth for china. when richard holbrooke and his colleagues first visited china, its gdp barely topped $100 billion. today, it is almost $5 trillion. trade between our two countries used to be measured in the hundreds of millions of dollars. today, it surpasses $400 billion annually. china's transformation made possible primarily by the hard work of its people, and the vision of its leaders. was also aided by an open and dynamic global economy.

and by the american power that has long secured stability in the region. it has lifted hundreds of millions out of grinding poverty, and now helps drive global prosperity. the united states has welcomed this growth, and we have benefited from it. today, our economies are intertwined, and so are our futures. but despite its progress in the past 30 years, china still faces great challenges. when i speak with my chinese counterpart, they often talk to me in passionate terms about how far their country still has to go. he gets even with all that growth, china's gdp is only a third of the size of america's with nearly four times the number of people. and our trade with the european union is still greater than our trade with china. as secretary geithner noted this

week, china has a lot of work to do to move from a state dominated economy dependent on external demand and technology, to a more market-oriented economy powered by domestic demand and innovation. more of its people are also seeking greater respect for the cultural and religious beliefs. they are seeking more opportunity for improved working conditions, and for legal recourse for injustices. understanding the strengths and challenges is essential for us and others to understand today's china. and it provide important context to the country changing role on the world stage, into the future of the u.s.-china relationship. history teaches that the rise of new powers often ushers in areas of conflict and uncertainty. indeed, come on both sides of the pacific, we do see some

trepidation about the rise of china and about the future of the u.s.-china relationship. some in the region, and some here at home, see china's growth as a threat that will lead either to cold war style conflict or a american decline. and some in china worry that the united states is bent on containing china's rise and constraining china's growth, i view that is stoking a new streak of us are chinese nationalism. we reject those of use. in the 21st century, it does not make sense to apply zero-sum 19th century theories of how major powers interact. we are moving through the uncharted territory. we need new ways of understanding the shifting dynamics of the international landscape, a landscape marked by

emerging centers of influence, but also by nontraditional, even non-state actors, and unprecedented challenge -- challenges and opportunity created by globalization. this is a fact that we believe is especially out of trouble to the u.s.-china relationship. our engagement, indeed, i would say our entanglement, can only be understood in the context of this new and more complicated landscape. i said when i first went to china as secretary of state early in my tenure, that there was an old chinese saying that when you're in the same boat you have to grow in the same direction. we are in the same boat. and we will either row in the same direction or we will unfortunately cause turmoil and whirlpools that will impact, not just our two countries, but many people far beyond either of our

borders. this is not a relationship that fits neatly into the black and white categories like friend or rifle. we are too complex nations with very different histories, with profoundly different political systems and outlooks. but there is a lot about our people, and every mind is of each other. and energy, and entrepreneurial dynamism, a commitment to a better future for once children and grandchildren, we are both deeply invested in the current quarter, and we both have much more to gain from cooperation than from conflict. now, this doesn't mean we will not be competitors. that's the nature of human endeavors. it is who we are as people, but there are ways of doing it that are more likely to benefit and not. a peaceful and prosperous asia-pacific region is in the interest of both china and the

united states. a thriving america is good for china, and a thriving china is good for america. our friends and allies across the asia-pacific region would agree. they also want to move beyond outdated zero-sum formulas that might force them to choose between relations with beijing and relations with washington. so all of this calls for careful, steady dynamic stewardship of this critical relationship. and approach to china on our part that is grounded in reality focus on results and truth to our principles and interests. and that is how we intend to pursue a positive, cooperative, and comprehensive relationship with china. now, i assure you hear that phrase quite a bit over the next week. positive, cooperative, and comprehensive relationship. because that really does capture

our hopes for the future, and that is how our two presidents have described his relationship. but you cannot build a relationship on aspirations alone. that is what makes this a critical juncture. as i said at the outset, the choices both sides make in the months and years ahead, and the policies we pursue, will help determine whether our relationship lives up to its promise, and it is up to both of us to translate high level pledges of summits and state visits into action. real action, on real issues. to keep our relationship on a positive trajectory, we also have to be honest about our differences. we will address them firmly and decisively as we pursue the urgent work we have to do together. and we have to avoid unrealistic expectations that can be disappointing. this requires steady effort over

time to expand the areas where we cooperate, and to narrow the errors -- the areas where we diverge. by holding from to our respective values. as we build on our record of the past two years and shape the future of our relationship, the obama administration is pursuing a strategy with three elements that all reinforce one another. we are practicing robust regional engagement in the asia-pacific. we are working to build trust between china and the united states. and we are committed to expanding economic, political, and security cooperation whenever possible. let me start with regional engagement. the united states, by the blessing of our geography, is both an atlantic and the pacific power. and we are committed to our relationship through both of these great oceans. we are firmly embedding our relationship with china within a broader regional framework,

because it is inseparable from the asia-pacific web of security appliances, economic networks, and social connections. in doing so we will maintain an appropriate perspective on this relationship. today, it is as important as any bilateral relationship in the world. but there is no such thing as a g2. both of our countries reject that concept. there are other key actors, allies, institutions, and emerging powers who will also work with us to shape regional and global affairs. over the past two years, the united states has reaffirmed our commitment to be an active participant and leader in the asia-pacific. as i said in hawaii this fall, we are practicing what we call forward deployed diplomacy, expanding our presence in terms of people, programs, and high

level engagement in every corner and every capital across the region. america has renewed and strengthened our bonds with our allies, japan, south korea, thailand, australia, and the philippines. and we deepened our partnerships with india and indonesia, vietnam, singapore and new zealand. we're taking steps to ensure that our defense posture reflects the complex and evolving strategic environment in the region. and we're working to ratify of free trade agreement with south korea come and pursuing a regional agreement through the trans-pacific partnership to help create new opportunities for american companies and support new jobs here at home. those goals will be front and center when we host the asia-pacific economic cooperation forum in hawaii later this year. we have also worked to strengthen regional architecture in the asia-pacific, including signing the oslo treaty and

cooperation. and attended east asia summit for the first time and increasing engagement in the pacific island forum. a more robust and coherent regional architecture in asia benefits all of us, especially the united states and china. it helps to ensure that every nation and point of view is heard. and it reinforces the system of rules and responsibilities for protecting intellectual property to ensuring freedom of navigation, that form the basis of a just international order. in these multilateral settings responsible behavior is rewarded with legitimacy and respect, and we can work together, hold accountable those who take counterproductive actions to peace, stability, and prosperity. our regional engagement places this relationship in the african context. the second element of our strategy is to focus on building bilateral trust with china. we need to form habits of

cooperation and respect that help us work together more effectively, and whether disagreements when they do arise. the most notable example of our efforts is the strategic and economic dialogue, which brings together hundreds of experts from dozens of agencies across both of our government. not only to discuss an unprecedented range of subjects, but to inculcate that affect or habit of cooperation across our two governments. secretary geithner and are looking forward to hosting our counterparts this spring for the third round. this is a good start, but i would be the first to admit that this trust lingers on both sides. the united states and international community have watched china's efforts to modernize and expand its military, and we have sought clarity as to its intention. a secretary gates stressed in beijing this week, both sides

would benefit from sustained and substantive military to military engagement that increases transparency. we need more high level visits, more joint exercises, more exchanges from our professional military organizations, and other steps to build that trust, understanding of intention and familiarity. this will require china to overcome this reluctance at times to join us in building a stable and transparent military to military relationship. but we think it is so much in both of our interests, and we will continue to raise and work on it with our chinese friends. but building trust is not just a project for our governments. our peoples must continue to forge new and deeper bonds as well. in classrooms and laboratories, on sports fields and trading floors, our people make the everyday connections that build lasting trust and understanding. that is why we have launched a new bilateral dialogue of people to people exchanges and new

initiatives such as the 100,000 strong program that is sending more chinese -- more american students to china. though students are on the front lines of charting the future of our relationship, and i saw this for myself firsthand at the shanghai expo, where we were delighted to have 7 million chinese visitors come to our expo. and they were all greeted by american students speaking chinese. and it came as quite a surprise to some of our chinese visitors that we have so many american students who had studied chinese and were excited about being part of such a tremendous international effort as the expo. the third element of our strategy is expanding our work together, along with the rest of the international community, to address the shared challenges. global recession, nuclear proliferation, terrorism, piracy on the high seas, these are threats that affect all of us, including china. and chinese joining us in confronting them.

so we continue to encourage china to help us do even more together, to work more actively with us to solve these problems. we have a wide-ranging agenda, a number of areas where we will ultimately be able to judge whether i relationship is producing real benefits. on economic front as secretary geithner discussed earlier this week, the united states and china to need to work together, to orient our economies, to usher strong sustained balance future of global growth. in the aftermath of the global financial crisis, the united states and china worked effectively to the g20 to help spur recovery. can you imagine where we would be economically if either china or the that states had failed to work together so constructively? it almost is a frightening prospect to imagine. we must build on that cooperation, and in his speech as secretary geithner noted that chinese firms want to be able to

buy more high-tech products from the united states, make more investments year, he accord the same terms of access that market economies enjoy. not the same time u.s. firms want to ensure that the $50 billion of american capital invested in china create a strong foundation for new market and investment opportunities that will support global competitiveness. we can work together on these objectives, but china still needs to take important steps towards reform. and in particular, we look to china to end unfair discrimination against u.s. and other foreign companies, or against their innovative technology, to remove preferences for domestic firms, and measure -- and any measures that disadvantaged foreign intellectual property. we need to open up more opportunities for american manufactured goods, farms and ranch products and services, as well as allowing currency to appreciate more rapidly. these reforms we believe would

not only benefit both our countries, but contribute to global economic ballads, predictability, and broader prosperity. and we also need to work at some of the global strategic issues that confront us. take a climate change for example. china and united states are the world's two largest emitters of greenhouse gas is. our cooperation at the u.n. climate conference in mexico was critical to the conclusion of the cancun agreement. now we must build on that progress by implementing the agreements on transparency, funding, and clean energy technology. there is no time to delay. and the united states and china working with other partners, including the e.u., japan and india, will set the pace and direction for the world to move rapidly toward a clean energy future. on international development, we could make a significant impact

by outlining our investments and coordinating projects. we would ask that china embraced internationally recognized standards and policies that ensure transparency and sustainability. i often in my discussions with china's leaders hear them say that their country speaks to the developing world because of their extraordinary progress. but their development practices in africa and elsewhere have raised serious concerns, and we welcome the commitment to development, but we would like to work more closely together to have common standards and approaches. on security issues, there's also room to work more closely and constructively. on iran, for example, we have made progress, but now we have to follow through. as a prominent member of the united nations security council, china health impact of sanctions, now we are working together to implement them. and we look -- send a clear message to iran's leaders to

cease its illicit nuclear activity. and let me go on to a problem that has vexed us over the last two years, particularly in the last several months, namely north korea. the united states and china both understand the urgent need to maintain peace and stability on the korean peninsula, and to achieve the complete denuclearization of north korea. for our part, america will continue to stand with our allies, south korea and japan, as they contend with her belligerent neighbor. and a secretary gates said last week, north korea's nuclear and ballistic missile programs are becoming a direct threat to the united states itself. so this is not just about peace and stability in northeast asia, nor stand with our allies, this is becoming, unfortunately, more of a national security challenge to our own shores. from the early months of our

administration, the united states and china, along with our partners, south korea, japan and russia, join together to condemn north korea's provocative missile and nuclear test. and with china's support last year we adopted in hand sanctions the security council. these efforts showed clearly that when china plays a very constructive part, we can produce results together that sent an unequivocal message to north korea. and we have emphasized to our colleagues in beijing that china as a country with unique ties to north korea and share of the six-party talks has a special role to play in helping to shape north korea's behavior. ..

>> we have begun to work together to restrain north korea's provocative actions. we are building momentum in support of north/south dialogue that respects the legitimate concerns of our south korean ally and can set the stage for implementing the commitment to irreversibly end north korea's nuclear program. it is vital that we work together with china. we these to make it clear to north korea that its recent

provocations, including the announced uranium enrichment program, are unacceptable and this violation of -- in violation of not only security council resolutions, but north korea's own commitments in the 2005 joint statement. until north korea demonstrates in concrete ways its intention to keep it commitments -- its commitments, china along with the international community must vigorously enforce the sanctions adopted by the security council last year. on taiwan we are encouraged by the greater dialogue and economic cooperation between the mainland and taiwan. as witnessed by the historic completion of the cross-strait economic framework agreement, our approach continues to be guided by our one china policy based on the three joint communiques in the taiwan relations act. in the period ahead, we seek to encourage and see more dialogue

and exchanges between the two sides as well as reduced military tensions and deployments. finally and crucially, on the issue of human rights, a matter that remains at the heart of american diplomacy, america will continue to speak out and to press china when it censors bloggers and imprisons activists, when religious believers, particularly those in unregistered groups are denied full freedom of worship, when lawyers and legal advocates are sent to prison simply for representing clients who challenge the government's positions and when some are persecuted even after they are released. now, i know that many in china china -- not just in the government, but in the population at large -- resent or reject our advocacy of human rights as an intrusion on sovereignty. but as a founding member of the united nations, china has

committed to respecting the rights of all its citizens. these are universal rights recognized by the international community, so in our discussions with chinese officials we reiterate our call for the release of the many political prisoners in china including those under house arrest and those enduring enforced disappearances such as chung. we urge china to protect the rights of minorities in tibet, the rights of all people to express themselves and can worship freely, and the rights of civil society and religious organizations to advocate their positions within a framework of the rule of law. and we strongly believe that those who advocate peacefully for reform within the constitution such as the charter '08 signatories should not be harassed or persecuted. we believe, also, that when china lives up to these

obligations of respecting and protecting universal human rights, it will not only benefit more than one billion people, it will also benefit the long-term peace, stability ask prosperity of china. for example, an independent, impartial judicial system and respect for the rule of law would protect citizens' property and guarantee that inventers can profit from their ideas. freedom of expression for everyone from political activists to academics and journalists and bloggers would help foster the open exchange of ideas that is essential to innovation and a creative economy. a vibrant civil society would help address some of china's most pressing issues from food safety to pollution to education to health care. this promise is already apart in the work of -- apparent in the work of individuals and ngos who volunteered after the schezwan earthquake. the longer china represses

freedom, the longer it will miss out on these opportunities, and the longer that nobel prize winners, empty chairs this oslo, will remain a symbol of a great nation's unrealized potential and unfulfilled promise. i know that china's leaders believe that political reforms could shake the stability of their country and get in the way of its continuing essential economic growth. but we have seen nation after nation from south korea to indonesia to many parts of the world where once they realize that denying people the right to express their discontent can easily create more unrest while embracing reforms can strengthen societies and unleash i new potential for -- unleash new potential for development. it is clear that we cannot paper over differences, nor should we try to dod so. but the future of our -- do so. but the future of our relationship can be strong if we each meet our responsibilities as great nations. the world is looking to china, and there's a lot of excitement

about this. because we think that there are ways that china can be a unique leader in the 21st century, embracing the obligations that come with being a 21st century power will help to realize a future that will give the chinese people even more, in fact, unimagined opportunities. but that means accepting a share of the burden of solving common problems, abiding by and helping to shape a rules-based international order. you know, the united states first emerged as a true world power nearly a century ago. and there were times when, frankly, we resisted taking on new obligations beyond our borders. there's a strong internal position that goes back in our history where we just want to tend to ourselves and let everybody else worry about the future. but whenever americans turned inward attempting to avoid

accepting that responsibility, events intervened, and we were summoned back to reality. our leadership in the world and our commitment to tackle its greatest challenges have not drained our strength or sapped our resolve. quite the op it. they have -- opposite. they have made us who we are today, a force for peace, prosperity and progress across the global. this is a critical juncture, yes, but i would say to my fellow americans this is not a time to fear for the future. the world has never been in greater need of the qualities that distinguish us, our openness and innovation, our determination, our devotion to universal values. the world looks to the united states for leadership to manage the changing times and to insure that this juncture leads to greater stability, peace, progress and prosperity.

that is what we have always done, and it is what we will always do. that is what america is all about. and we have a tradition of moving beyond past problems and conflicts. it is sometimes hard to imagine that in a lifetime of my mother the united states was involved in two world wars, a terrible depression where we sent many of our best young people off to war this far off places, and yet we have forged close relationships with former adversaries. today we have a positive relationship with china, and the chance for a very positive future. the united states welcomes china as a rising power. we welcome china's efforts not only to lift their own people out of poverty, but to export prosperity and opportunity.

and we look to china to join us in meeting the challenges of today and tomorrow. we look forward to a time when our future generations can look back and say of us, they didn't just talk about a positive, cooperative and comprehensive relationship, they made the right choices. they worked together. they delivered results, and they did leave us a better world. that is our vision, and that is our commitment for this most important relationship. thank you all very much. [applause] >> as chinese president hu jintao prepares for a state visit next week, tensions between the u.s. and china appear to be framed this an article from the hill by ian swanson. i think it's going to get worse before it gets better. the chair of the u.s./china economic security review commission said that of

u.s./china relationship. you can read the entire article at thehill.com. looking at our live coverage today from des moines, iowa, the inauguration of governor terry branstad. that's at 11:10 eastern this morning. and then at noon we go to arizona for a head call update on the condition of congresswoman gabrielle giffords and a number of the other victims of the shootings there. we hear the congresswoman's condition continues to improve. a little bit later this afternoon a memorial service for the late diplomat, richard holbrooke. we'll hear from his family as well as bill and hillary clinton, kofi an nonand admiral mike mullen. live coverage gibbs at be p.m -- begin at 3 p.m. eastern here on c-span2. this weekend on "after words," former adviser to martin luther king jr., clarence jones, with a behind the scenes look leading up to the historic march on washington and the i have a dream speech. also a critical assessment of

stereotypes and a new biography of our first president. find the complete schedule at booktv.org and sign up to get our schedules delivered directly to your inbox with your directv alert. an event with john pistol. he talks about the agency's efforts to respect privacy rights while securing the nation's airports and railways. the american war association's law and national security committee held this event, it's 40 minutes. >> there are over 450 federalized airports. he has control of the federal air marshals' service and the security for highways and pipelines. john comes to the tsa is a 26-year veteran of the fbi where he specialized in national security and counterterrorism issues. he began his career as an agent in '83, served in minneapolis and new york, was the supervisor

o organized crime sections, was in charge of special agents in boston, and in the his career he has won a number of prestigious awards. for those of us familiar with these recognitions given out by the department of justice which include the award for outstanding professional limb and exemplary integrity. he's a graduate of indiana university school of law, and i think he's become quite well known to the american public. [laughter] i was saying to him, there are not a lot of people in washington diving for this seat, and i think it's a testimony to his commitment to public service. there are very few people we think could do the job as well as john is doing, and it's not easy, and i think i know this room has a great deal of appreciation and thanks for all of your public service and what sacrifice that means, john. so with that, john will speak,

and he's been gracious to say he'll take a few questions, and we'll finish the way we normally do, around 9 a.m. so with that, john, it's my pleasure to have you come up. [applause] >> well, thank you, harvey. appreciate that kind introduction. judge, thank you for the invitation to the committee and all here this morning. it is a pleasure to be here. really just want to talk about four brief areas of national security as it relates to transportation security and go over those and then see what questions you me. the first is just to set the stage in terms of what the current threat environment is, what are we dealing with, that's the context that we do all the things that we do in transportation security. the next point is how do we deal with this as part of a continuum of national security so that the layers of security that we use in the tsa, how does that fit in the overall construct? a third point is looking at how

do we balance the privacy and security issues that became so apparent to people right before thanksgiving? and then the fourth point will deal with what is the way forward, and that's where i'm going to ask for some participation either now or later on. we're really looking at what is the vision for transportation security in the years ahead, and we talk about that in terms of a 20/20 vision, say ten years, nine years from now. what does the transportation security look like, and what should it look like as we try to balance privacies and security? all the while recognizing that the key aspect is how do we protect people who are traveling, particularly by aviation? those are the four points i'll touch on. first, the current threat environment. obviously, we know that there have been a number of attempts and, obviously, overseas some successful such as in stockholm recently, but there have been attempts particularly by al-qaeda in the arabian

peninsula. going back over the attempt last year, the northwest airliner coming into detroit coming out of yemen, and we saw another attempt here on 10/29 from yemen, the cargo plot. the two words that come to mind when i think about the current threat environment are persistent and evolving. we have seen these determined attempts, we see that particularly al-qaeda in the arabian peninsula, aqap, is consistent. they are determined, they are innovative, they are creative, they are bold. all you have to do is look at "inspire" magazine. i'm not one usually to promote people to look at jihadist literature, but in this instance i think when people look at that and how they take credit for the cargo plot, i think it's instructive for everybody who is, has any interest in what transportation security looks like is the credit that aqap takes and the description of how

they constructed those devices. the fact that they would be in the toner cartridges of the printers, that even if opened up, somebody would not be able to detect there was a bomb there. the fact that they had taken steps to cleanse the outside of the container so that if somebody took explosive trace detection or a bomb-sniffing dog by the container containing the bombs, that that would not alert. the fact that they actually took photographs, included a book that they put in the container, the box with the printers just to show that they did this, and then the fact that it only cost them $4200 and several honests of preparation -- months of preparation and a handful of people to do this. what that does addresses the absolutely thecialts that we're currently dealing with -- vulnerabilities that we're currently dealing with in the transportation area, and that's talking about on the cargo side. so, obviously, there's been a huge focus on passenger transport over the years, but now with this cargo plot, it raises the stakes, and there's

been a number of discussions and meetings. tsa just hosted a meeting monday and tuesday this week of the international community on steps that we can take as part of that international community recognizing the critical interdependence that we have with our foreign partners both this governments and this -- in governments and in the private sector to shore up those vulnerabilities and defenses. so we see, again, a persistent and evolving threat. there's a number of other issues going on. we've seen a number of arrests here in the u.s. of some people referred to as lone wolfs. individuals who are doing things that are, perhaps, aspirational in nature. and forchew that itly for us -- fortunately for us they are dealing with undercover officers rather than true terrorists. for example, the individual in oregon who wanted to blow up the christmas tree lighting ceremony, the individual here this washington who wanted to attack the subway system. a number of these examples over

the last several years that we have seen individuals who have wanted to do something and, again, fortunately for us, they encountered online undercover fbi and joint terrorism task force officers and agents. the concern over that is some people say, well, that's -- they're not true terrorists, and they are aspirational, they're not completely operational, they don't have the means of carrying out the attack. the concern that we share, of course, is that but for that alert work by the joint terrorism task forces, what if that person had connected with a true terrorist or somebody who shared similar aspirations and could construct the devices that would be used to blow up whether it's a federal courthouse in springfield, illinois, or a bank building this dallas, texas, or those other two examples i gave. so again, we see a persistent, evolving threat from a number of groups whether it's from al-qaeda senior leadership out of the administrative tribal area, whether it's al-qaeda in

the iraq or aqim or it's the taliban, the pakistani taliban, pennsylvania sal she saad, the times square bomber that was working the with ttp. those are some of the threat streams we're currently seeing, so that's the context we're working in the. so the second point is that national security apparatus we have to try to secure our transportation, obviously, those means of transportation particularly focused on aviation, i like to describe it as part of the continuum, tsa's part of the continuum that is part of this national security apparatus with, on the one end, we have the foreign efforts whether that's foreign intelligence collection from foreign intelligence services or law enforcement agencies, security services such as we saw with the saudis back on the cargo plot. they were able to obtain not only strategic intelligence that there was a plot, but tactical

intelligence that said here is a tracking number for these two packages that contain bombs. go track them down. now, that's such a rare occasion where we have credible, timely and accurate intelligence that we can take action on. but that's, that is the best case scenario, and that's so rare that -- we just rarely see it. so that's the best situation. what we usually have is that there's intelligence that something is happening, and it may with a plot to do something -- be a plot to do something on an airplane. we had right before christmas on december 23rd we received new intelligence that al-qaeda in the arabian peninsula may be using thermoses to put tatp, the same type of material that was used on christmas day and on the 10/29 cargo plot and in the assassination attempt against the deputy administer of interior in saudi. the same bomb maker made those three bombs, he actually used his brother to carry out the

suicide bomb against mohamed men knew ya, so this plot was they would use tatp around the cylinder of a thermos, put it on either a passenger or car duo plane p and -- cargo plane and however the think aboutuation, the detonator they didn't describe. so that's general intelligence. so what do we do about this? we put out an alert saying make sure all our transportation security officers are alert to that and do additional screening in addition to x-rays and the other screening to see whether there may with a viable plot. so if you happen to be traveling in the next or the near future and you want to take your thermos with you, just be aware there'll be subject to more physical screening and closer trace detection. that's on the one end of the continuum. obviously, what are men and women in the military -- what our men and women in the military are doing overseas, trying to limit the effectiveness of having training camps overseas whether it's in

the pakistan, afghanistan, yemen, somalia, wherever you describe to make sure that there are not opportunities for training camps as we saw prior to 9/11. so that's the one end of the continuum. we then move more toward the shores of the u.s., and as we look at what we have going here, the fbi where i came from has thousands of investigations of individuals here in the u.s. the joint terrorism task force, there's over 100 of those around the country, are the lead operational arm for the u.s. government working with state and local authorities to try to address those issues that may pose a threat here, so that's ongoing. and then we have the state and local police, nearly 800,000 of those around the country who, hopefully, will -- and i believe will likely be the next set of people who will detect a plot. they are the eyes and ears out on the street, and so they are the ones who have the contact with the community and all those things. so we have all those as opportunities to identify and

disrupt a terrorist plot. it may be a state trooper pulling somebody over for speeding, it may be any number of things. so we have all those opportunities. we also have concerned citizens. somebody may talk about their neighbors as we saw in the u.k. with one of the plots leading up to the july 7th '05 bombings. some neighbors said there's something going on this this house. unfortunately, it developed more quickly than the authorities were able to disrupt. but the fact is that concerned citizens whether it's part of a see something-say something campaign or just being alert can be great force or multipliers for us as we try to protect our citizens. so those are all opportunities we have to identify and disrupt punitive terrorist plots. what it comes down to, then, for the men and women of tsa, if all these layers of security we have have not identified that person, and we have somebody particularly here in the u.s. who is, perhaps, a lone wolf but perhaps has just been under the

radar, perhaps has just been very effective in acquiring the knowledge and the skills and the ability and the material to construct let's say a nonmetallic device just like we saw on 12/25, it goes through the web site and sees where advanced energy technology machine are -- he or she, i should say -- and be recognizes that there are places where we just have the walk-through metal detectors. knows that his device whether it's like the underwear bomber or somebody else, that will not alert on a walk-through metal detector, ask so conceals it artfully and goes through that airport and gets on a plane. then it's on the men and women of tsa to try to detect something, whether something in the documents that would indicate something, whether it's secure flight which is operation now which tsa runs, it has the name, date of birth and gender for everybody traveling through to the u.s. and, obviously, if they're on the watch list, they get secondary screening, perhaps

no-fly. all those opportunities, but that person may get through. let's say it's reagan or dulles, they may get through, and then it's really up to the federal air marshals as a last line of resource as far as defense for the u.s. government. now, obviously, alert flight crews and passengers and things may be able to do something, but that's not what we want to rely on. so that's why we have these layers of security. so that's the context for why we are doing the things we do which brings me to the third point. we do the things that we do in terms of security screening based on the latest intelligence. and so as we saw before thanksgiving, with we went to more thorough patdowns. the reason was because we don't want underwear bombers to get on planes and blow them up, kill people here this the u.s. that's the bottom line. there was a lot of controversy about that, a lot of controversy about the advance imaging technology machines. i will note -- i'm not sure it's well known, we've tried to talk

about it -- but we actually started deploying the advanced imaging technology machines back in the tall of -- tall of '07. people say why are you always reacting to yesterday's threat? two points, we need to make sure we're addressing yesterday's threat. shame on us if something happens that was previously attempted or successful and we didn't do steps to shore that up such as hardened cockpits for taking over the aircraft. so that's one point. the other is how do we best go about doing that, what do we do to insure that we are informed by the latest intelligence that we are taking steps to address those security concerns? so we deploy the ait back in the fall of '07. after 12/25 of '09, the attempted womaning, we then accelerated the -- bombing, we then acceleratedded the acquisition. that's what i think caught the public attention, acceleration of the deployment coupled with

the enhanced patdowns. so those are simply steps we are taking to try to make sure that you, your loved ones, everybody else can arrive alive. that's the bottom line. so what do we do in terms of trying to balance security with privacy? we try to make sure that we are using the least intrusive means of detection, that we are sensitive to and attuned to those privacy issues in two fronts, one on the technology, try to use the best technology that can detect nonmetallic threats of the current, most significant type of threat that we see while at the same time preserving the best privacy for individuals that would go through that. and we do that in two ways. right now with our technology, obviously, hopefully you're aware that the person, the security officer never sees the image. the person seeing the image is

in a separate room and never sees the person, so we never make that connection for those concerned about modesty and privacy. so we do that. the other thing we're doing is always looking at refining technology, and so we're very interested in what's known as the automated target recognition technology which is currently used in amsterdam. we are testing it out right now. we're very interested in that because, i believe, it completely addresses the privacy, the modesty issue that many people have concerns about by simply presenting a generic image. i was out at our integration facility out at reagan airport yesterday looking at how that testing is going, and it simply presents a generic image. some have a stick figure, some have what they call a blob, but it's just a generic figure, and if there is an anomaly from what the normal -- a lot of variations of what's normal for men and women -- but what that, if there's an anomaly, then it would just show up as, say, a

box. for example, yesterday one individual demonstrated kept his blackberry on just to show what would happen, and so he dose -- goes through, and the passenger walks through and actually sees the image right there because it's just a generic image. so the passenger and the security officer see the image at the same time and, oh, there's a yellow box here on the left hip, so let's try to resolve that. so the person says, oh, i forgot to take my blackberry off. so i think it addresses the privacy issues and modesty issues in a very good fashion. so we're working through that, and we're hoping to add some refinements in the technology that we can deploy that sometime this year. we will, we're just waiting on the technology on that, so we'll see on that. ..

>> and what it comes down to, i believe, is where do we find that balance between privacy and security and as i mentioned a couple of times in some media events around thanksgiving, i think reasonable people can disagree where that balance is for themselves. for other people, i think, they generally think, yep, it's good. but when it comes to me what is my comfort level with privacy and security and that balance. again, i think reasonable people can disagree. we want to be sensitive to and

hear those concerns. at the same time, making sure that we are providing that best security possible to keep bad things from happening. so that brings me to my last point in terms of what is the way forward? what is the future of train station security? so i'm very interested in looking at the best risk-based intelligence driven approach possible. we talked about that for -- i came in six months ago and have been talking about that since i came in. how do we use the latest intelligence, the latest techniques, tactics and technology to ensure that we are using risk-based intelligence driven approach. what does that mean in practical terms? it will means we will use more behavioral detection opportunities. people talk about the israeli model and for those of you who have traveled through it, depending on what your status was and everything, you were afforded some very thorough

security or fairly light security frankly. and i'm very interested in that. recognizing that the airport has about 11 -- between 10 and 11 passengers a year and we have dozens airports, individual airports in the u.s., obviously, that do multiples of that every year. we have 628 million passengers in the u.s. this year and last year. we have about 100,000-person difference for those -- who are tracking those things. the 628 million versus the 10 or 11 million so the challenge becomes how do we best go about doing that recognizing we can't be all things to all people all places all times. so how do we best leverage our resources significant as they are, 61,000 employees but with over 450 airports and not even considering surface transportation issues in terms of rail, buses, some of the things that harvey mentioned, those rather opportunities and

challenges that we had but just focusing on aviation, want to do use more behavior detection and how do we use the information we already know about passengers in an informed and intelligent manner so we know their date of birth, their name and their gender. so not much to go on. so we know that the u.s. government and private entities put a tremendous amount of information about individuals. so one of the opportunities we have is looking at the trusted travelers programs. those individuals who are willing to provide more information about themselves in exchange for a different level of screening. so more an identity based screening than the physical screening. we'll still do physical screening, obviously, for virtually everybody. but, for example, we made a decision back in november about the pilot. we've got over 110,000 pilots here in the u.s. and yet we have been going through the same

security as mohammed atta would have. that doesn't make sense from my perspective so we're working "with the airlines and the pilots associations to refine the technology that we have piloted in three airports to allow for pilots to do -- use it's-based screening so they would not go through the traditional physical screening. flight attendants also. so we're looking at refinements with them and have made some minor modifications as we work through those issues. so there's groups of people out there, the very frequent travelers who again are willing to provide some information. we had some programs in the past. we're looking at those but we're also looking at what we can do as a government in terms of providing probably a fee-based service but to say, okay, you don't want to stand in line, here's what we can do. there may be other groups of people that we look at. in that respect also. so those are some of the things that we're looking at in terms

of the tsa, the future. we're also looking at the checkpoint of the future. really looking at it from the perspective from the curb side when somebody is dropped off to the cockpit. there are opportunities through that process to learn about an individual through using the israeli model simply talking to the person, so where are you going and where you have been and where do you live? and all those things and through that can learn a lot more about a person, who is traveling. obviously, we have a number of k9s and k9 handlers. we're hoping to expand that because i believe generally people are glad to see k9s in airports and other place unless it's snarling german shepherd or something but generally if it's a friendly dog, and what we do is have k9 handlers walk through airports with plain cloths behavior detection officers and many times they may look like they are a passenger.

they got a backpack and a suitcase and a boarding places to watch and see how people respond to that k9. i would have loved to be in the schipol airport in amsterdam on the 24th and 25th when abdulmutallab went through. if there had been a k9 walking through the airport and have the behavioral detection officer observing people reacting to the k9 to see how abdulmutallab have responded. how would he reacted knowing he would have had about this bomb in his underwear and being concerned about dogs, to see what type of reaction. so those are the type of things that we're talking about. expanding some of those areas, expanding our k9 program. doing things from our intelligence, risk-based intelligence perspective. that's what -- some of the areas we're looking at. so i would be interested in your thoughts and not necessarily -- if you have them, that's fine but my email address is

john.pistole at ds.gov and there's a pretty strong spam filter and it got tested but it still works. [laughter] >> if you have ideas, i'm very serious about this. a lot of smart people in this room. a lot of national security experience, a lot of perspectives on how things work. a lot of frequent travelers and so you -- if you have ideas, why can't we do this or why can't we do that? well, i'd like to know about that. so send me an email, call me. whatever. and we'll take that into consideration 'cause we are working through a number of things. so with that, let me stop and turn it back over. >> great. [applause] >> i'll take a few questions and we have 2 minutes left. >> yes. my question, there's been a number -- increasing number of cases where american citizens are able to depart the country

when they're in a foreign country, however, a no flight status is imposed on them and they are not able to return to the united states. how do you think those places should play out in the courts? >> so the question about the individuals who go overseas and are then designated as a no-fly and can't return to the united states at least by plane. they can always return by other means which is not good option for most. the question becomes, is there an interest by the u.s. government to have that person return in the interest of equities or whatever. some individuals, there may be some charges pending against them either sealed or unsealed. so each of those instances are treated as an individual situation and last year we've seen a number of waivers for those individuals to come back either so the fbi could interview them in more detail or because there are pending charges perhaps fields they could come back and face

charges. each situation is reviewed and then an assessment is made. within the intelligence law enforcement community. >> is there a constitutional issue on the right -- >> so i would defer to our lawyers on that. there have been some discussion about that. but to my knowledge, there hasn't been any successful challenges to that. >> sure. >> i thought your idea -- stewart baker. focusing on the traveller more than just on the materials, obviously, where we're going to have to go and saying there were some travelers we can give a little less scrutiny to is fine. but the real key here is to find the travelers who get more. to do that you have to be able to make distinctions among travelers based on intelligence. that raises some issues but i wonder if you have thought of ways that you could do a better job of selecting the people who need more scrutiny?

>> so i mentioned both those who have worked in the government and others just aware, obviously, the u.s. government holds a lot of information about many people, significant amount, about many people especially those who hold clearances and things like that. so there's obviously some distinctions there. what we are reviewing are all those data holdings coupled with industry holdings about people. and what can we use from recognizing the privacy and civil liberty issues but we are teeing that issue up to see again, okay, we're using more intrusive type of screening. is there more intelligence-based information based screening that we can use. that is on the horizon for 2011. >> john, a comment first and then a question. i had traveled extensively in

november and december in 10 or 12 different cities in the united states and i think i mentioned this to you a couple of weeks ago. to include coming back overseas the day before thanksgiving -- >> we'll leave this event at this point to go live now to des moines, iowa for the inauguration of terry branstad. served between 1998 and 1989. this is his fifth oath of office. >> do solemnly swear that i will support the constitution of the united states and the constitution of the state of iowa and that i will faithfully and impartially to the best of my ability discharge all of the duties of the office of governor in the state of iowa as now or

here after required by law. congratulations, governor. >> thank you very much. [applause] [applause] >> and a smile of pride. >> they have done this so many times. this is the fifth and his wife looking on like, wow, are we doing this again? but i think that's entitlement on both their parts. and as he told you yesterday, dean, a little bit of nervousness is good but he doesn't feel too much because he's been in this. >> he admitted to butterflies. he said it wouldn't be right if i didn't. >> well, when you're speaking to more than 1,000 people you're bound to have a bit of them. [applause] >> standing ovation for the governor right now, governor-elect terry branstad is now sworn in, governor branstad again. [applause]

>> >> madam lieutenant governor, mr. speaker, madam and mr. leader, mr. chief justice, justices and judges, legislators, elected officials, distinguished guests, relatives and friends, senator danielson, thank you for presiding today. and even though governor culver is not with us today, i want to thank him on behalf of iowans for his service. [applause] >> leader, let me congratulate you on being the first woman majority leader in our state. we're all proud of you. [applause]

>> your dad, dell, is smiling down on us all today very proud. lieutenant governor reynolds, thank you for your inspirational remarks. huh-uh i finally met my match in energy and passion for iowa. [applause] >> and i look forward to the day when i witnessed the swearing-in of our first woman governor of iowa. and it's about time. [applause] >> for the past 15 months, i've traveled all over our state from river to river, border to border, from farm to factory,

from cafe to office buildings, it's been an experience of a lifetime to reconnect with iowans at their jobs, schools, places of worship and play. to have a conversation with them about our state. where we are and where we want to go. and what i'd like to do today on this the occasion of my fifth inauguration as your governor. [applause] >> i want to tell you what i've learned. to make my humble attempt to distill our collective wisdom into a statement of principles, a new covenant between a state and its people. this new covenant must have as its poll star the fact that iowa is an exceptional place. we're blessed. [applause]

>> we are blessed with the richest resources of soil and water. we are the envy of the world. populated by hard-working honest and caring people that feeds and powers the world. and ignited by our ingenuity we've only scratched the surface of our potential. iowa stands at the precipice of opportunity greater than any time since our ancestors crossed the mississippi to view the expansive prairie as far as the eye could see. with the advent of open markets, a growing world middle class and a need for sustainable solutions to the world's problems, iowa sits at the seat of history. [applause] >> the world is hungry for our

food and biomass. envious of our technology, pining for our productivity. the economic winds which were a century or more blew in our face are now firmly at our back. iowa is exceptional. and these are exceptional times. our challenge to seize the day. to those that say our goals of 200,000 new jobs and a 25% increase of family income is too high, i say you ain't seen nothing yet. [applause] >> only wrong-headed policy choices can prevent us from entering a golden era of iowa history. and we must start with government. it must change. less it dampen our opportunity and squelch our individual

innovation. our old way of doing government's business must be radically altered to do the people's business. we must rid ourselves of the yolk of too much government which taxes us too much, spends too much, and regulates us too much. [applause] [applause] >> government must as abraham lincoln once said do only that which the people cannot do for themselves. that is a new covenant principle number one. new covenant principle number

one. we have too much government, state, county, cities, school, local and it must be reduced. for too long, we papered over the fact that our appetite for government exceeds our pocketbook to pay for it. [applause] >> my 86-year-old dad, edward, is sitting here in the front row. and he would tell us that our eyes are too big for our wallet. [laughter] >> and our state auditor tells us that at least 15% must be permanently eliminated from government in order to make our books balanced once and for all. and i aim to make sure that we do it and that we do it now. [applause] >> we will all share in the sacrifice while protecting those that need our help.

but we will remove the lead boots of excess government from our economy and without that burden, we will be able to run like the wind in the race for prosperity. [applause] >> second, government must serve the people. and not vice versa. leadership is about service, not power. i stand here again as your governor with my wonderful wife, kids and grandkids. and i'm here because i yearn to serve. [applause] >> and i ask each government employee from the clerks to the supervisors to the department heads to never forget. it is the people who are our bosses. [applause]

>> and we must serve each other without the compulsion of government. in 1835, a french nobleman named alexis de tocqueville came to the united states and he noticed americans were different than europeans. he said wherever at the head of some new undertaking you see the government in france and england. in the united states, you will sure find an association of people. and you know that's still true today. every day iowaance volunteer to make the state the wonderful place that it is to live, work and raise a family. the boone hope foundation is a great example of this. kids were coming to school in boone without a warm coat or hungry, tired, sick or worried about their family. teachers like many others throughout iowa used their own

funds to help these kids knowing that students can't learn when their basics aren't met. those caring teachers started something called the boone hope foundation. and that foundation, since 2005, has raised $129,000 from community donations to help students and their families in a time of crisis. groceries, medical bills, eyeglasses, snow boots and mittens have all been provided to children in need because a community cares. let us all renew our commitment to get involved, to help the homeless, feed the hungry, minister to the sick, pray for the wayward. to make each of our communities better by stepping up and stepping out and to those who are the most fortunate, we bear a special responsibility to extend the letter of opportunity to those in need. [applause]

-- a ladder of opportunity to those in need. [applause] >> we need to look no further than the record number of iowans current deployed in our armed forces. from salvador junta, to anthony sellers or service men and women protect us every day with their valor and sacrifice. we all know the story of salvador junta, our most recent recipient of the medal of honor. to all iowans, we are busting our buttons, proud of this young iowan for his bravery, courage, and steely resolve. [applause] [applause]

>> i doubt that many of you know sergeant anthony sellers of burlington, but i was privileged to meet him, introduced to me by his proud father, kent. kent is a veteran himself. now confined to a wheelchair. but in burlington, he was beaming when he introduced me to his son who has completed two tours in iraq and is now at ft. benning preparing for another deployment. anthony, like thousands of other iowans, has answered the call of freedom. and he embodies the spirit of selfless service that makes our state and our country that shining city on a hill that tom payne wrote about over two centuries ago. surely, we can use their example as an inspiration to us all. [applause]

>> third, it's time to restore transparency and integrity to our government decision-making process. in iowa, we prided ourselves on limited but quality government services. when government said it would do something, we did it. and for the right reasons. our problems were serious but manageable. and as a people of good faith, we rolled up our sleeves and solved them but we've gotten off-track. we've overpromised and underdelivered turning solutions into problems. iowans deserve better. [applause] >> and we will get back -- we will get back on track with a slimmer, better managed and sustainable government that you can count on it when you need it.

and it will start by opening up to the people, our budgets, briefings, and the like. sunshine remains the best cure for what ails our government. [applause] >> the fourth principle of our new covenant in iowa must be a renewed commitment to provide the best education in the world. [applause] [applause] >> providing iowa's children with a globally competitive education is key to their future and the future of our state.

employers say they need a better-prepared better-trained work force. this means higher expectations for our schools. sadly, where iowa's education system was once the envy of the world, today it's middle of the pack. our young people must be able to think critically, solve problems and communicate effectively. they need a strong background in math, science, english and social studies. the bar is continually being raised in this knowledge-based economy. it's time to put in place reforms that are the hallmark of high-performing school systems starting with assuring that there is a first rate teacher in every classroom. [applause] [applause]

>> this is the time to put in place reforms that are hallmarks of high-performing school systems. and as i said, we start with having the first absolutely top rate teacher in every classroom. but the new year is also an opportunity for iowans to have a conversation about how to accomplish this. how can we attract top students into the teaching profession? what do good, experienced teachers need to become effective instructors? and how do we get rid of teachers whose students consistently do not learn enough even after those teachers have received coaching to improve? i plan to convene a summit. i plan to convene a summit with some of the top education

leaders of our nation and state to benchmark iowa's status and lay out a plan for legislative consideration that will give our kids the best education in the world. [applause] >> it's not just our schools that must do more. teaching children the value of good education is the job of parents. [applause] >> instilling the importance of life long learning, not just by words but by example will help families and iowa prosper. it's time for all of us to get involved. finally, we must celebrate success. our tax system, whether it be property or income taxes punishes those who create jobs

that we need. that will change, both will be reduced and simplified. .. >> alex haley once said that she would -- that we should find a good and praise it.

in our state and in our communities we should find that success, embrace it. we should report responsible risk-taking, for the spirit of entrepreneurship that all parts of our state, rural and urban, will grow. it is the ticket for bringing our sons and daughters home, and getting all who live here a chance to share in our bounty. [applause] >> that then is what i learned on my travels around our state. iowans have worked harder, sacrificed more, tightening their belts further, and endured the greatest recession since the great depression. and now it's time for government to do the same. it's time for new covenant between iowans and their government. it is a cabinet that is founded

upon the principles of limited government. service above self, transparency and integrity, world-class schools, and celebrating the success of iowans. these are the principles that will guide my days as your governor. the collective wisdom of iowans will inspire me every day to get i was a government as good as the people that it serves. and i ask all of you, republican and democrat, liberal and conservative, young and old, to join me in that effort. no one of us has all the answers, but together we cannot fail. one long day on the campaign trail i was visiting with some folks in a small town café, and one of the farmers who appeared to be in his 80s asked me what

i wanted to accomplished by running for governor again. well, i route all of our goals, and then i stopped and looked at him and asked what he felt he had accomplished in his days. he looked at me with a twinkle in his eye, took a long sip of coffee, and shifted his seat. well, he said, i left my farm better than i found it. when our days are done, when our time has come, we will be asked, how do we wish to measure our days? i, for one, remember that farmer in that café. i hope to lead the state better than i found it. if all of us would approach our days with that same sense of stewardship, we will have fulfilled our mission. with your help and god speed, that would be the case. and a remarkable history of an

exceptional state will march on unabated. thank you. god bless you, and god bless the great state of iowa. [applause] [applause] >> the inaugural speech of governor terry branstad.

>> see what members said online with c-span congressional chronicle, follow the comments of your congressman, track data timelines and read a transcript of every house and senate session. congressional chronicle, it's washington, your way. >> david welch, staff writer with bloomberg businessweekerg joins us from detroit. thank you for being with us this morning. david welsh, staff writer of bloomberg business week joins us this morning. which are off with an article that talks about how the mood is considerably better this year.

if it was the house so, and why? guest: all of the executives -- if it was, how so, and why? guest: all of the executives were upbeat this year. most of the companies are close to breaking even. this was not the crisis we saw a year-and-a-half ago or so. everyone is looking at a pretty good year and getting even better. we are kind of getting back to the business of making cars and trying to sell them. maybe it is a return to normalcy for the auto industry for a while. host: and what are the big discussions? guest: if you go to the show, you will see a lot of smaller vehicles, fuel-efficient vehicles. everyone is looking down the barrel of oil going over $120 per barrel. you've got efficiency and

hybrids and electric cars, that has been the buzz for the last couple of years and it was especially this year. a lot of the vehicles being shown at the show are some kind of put in hybrid that can give you 40 m.p.h. on the highway. they are trying to make the case to the american consumer lead despite gasoline and the rules coming down the pipe, you can have your cake and eat it, too. host: carmakers are attempting a small miller -- asmall miracle, according to one article. and the law of physics still means that small cars are less safe in crashes.

products will still average 35 miles per gallon in 2016. they could be of to 62 miles per gallon by 2025. that all but mandates shrinking cars. guest: this is an age-old problem for the car business. the industry has pushed for more efficient vehicles and consumers have always wanted a bigger as tv's. the carmakers have been -- bigger suvs. the carmakers have always been stuck between what the government wants them to do and what consumers want. for reasons that are very technical, and i will not go to the details, but the 35.5 actually = about 27 to 28 miles per gallon -- actually comes out to about 27 to 28 miles per

gallon by the with the testing is done. for people who want hybrid technology or a clean diesel engine, you do have this push and pull. the company could be held back by the fact that fuel prices are expected to rise. they are already over $3 per gallon right now. that does not make people want to switch to a compact car, but it does make them wary of about -- does make them wary of buying something big. id will be a challenge. why is everybody putting them out if nobody is buying them >host: david welch with

bloomberg is our guest. the numbers are on our screen. a comment coming to us on twitter. guest: it is testing my memory to tally all of them appeared reason members say they will hire zero thousand engineers in the next two years. those are really good jobs. those are people that will work on hybrid drives and electrical systems. there have been some high tech jobs like that that have been at it and will be added. -- have been added and will be added.

ford announced during the show that they will hire 7000 people. we are not back to the level of employment where we were before the crisis started a few years ago, but you are starting to see some growth on the part of ford and gm and they are bringing people back. chrysler hired some engineers as well. slowly coming back and there are some pretty good signs. host: let's hear from michael in oklahoma. good morning. caller: good morning. if you watch motor week on television they go through a to 10 cars for every week. the mileage is terrible with the around town knowledge. they get 31 or 32 on the interstate, but the around town mileage is in the teens, sometimes 60 or 17. yes, they put out an economy model, but they put 10 other models or 20 other models with

horrible around town mileage. it is just where they are. guest: the caller has a good point. when you see advertisements on television, the car companies -- all of them -- intend to talk about a highway fuel economy. -- they tend to talk about highway fuel economy. they changed it to measure more of city driving that highway driving. it used to be the other way around. and it is for that reason. a lot of these cross over as tv's -- crossover suvs get better gas mileage than they know, you're not getting 35 mpg

in combined fuel economy with these. americans are not going to be driving too many cars. -- but are not going to be driving to many cars that are getting 35 mpg out there. there are just not the many options out there that did not super fuel economy. host: the ford explorer was named truck of the year, -- the chevy volt was named the car of the year. are those the two big ones to watch. guest: are certainly vehicles to watch. particularly the vol. -- the volt.

it is not something new out of the show that we need to look at. but it is something that needs to be watched because there is a big debate here. there are people that like a green cap apology and the latest in car technology, do they want something like a niece on leaf petcthat goes 100 miles on a bay engine? other people want something that has to be plugged in. others say they do not want that because they do not want to be stranded. starting in 2012, they will want to sell quite a bit more than their initial plans. it will be interesting to watch how the public reacts to go and

how many of these get snapped up. -- how the public reacts to both and how many of these ducks napa. host: next caller, good morning. caller: you alluded to the fact that drivers do they need more room. -- think they need more room. do these you will have any sense of conscience at all? -- do these people have any sense of conscience at all? guest: there is a great car movie with jeff bridges called "tucker" and in that movie he says it is advertising. nobody is supposed to believe it. they've got that incredible advertising about what their cars can actually do. if you are talking about fuel

economy, it gets people in the door. it gets 40 mpg on the highway and when they look at the window sticker and realize it is less, they have to make their decision based on that. it is an advertising issue. how much do you want to make the case that your car is perhaps greater than is don't include every bit of inflation in there and they will find out later. it is a risk they take in the showroom. host: joe, writes in -- and he is talking about the bailout. talk to us about what the perception is that the auto show about how the bailout has affected the opinion -- the public opinion of the auto industry. guest: in detroit, first of all, that is where the show is.

chrysler is controlled by fiat null and are close to breaking even. gm -- by fiat nowlin and are close to breaking even. gm has growth in the past year. they have saved quite a few jobs here in the u.s.. and some optimism in detroit over that period in the rest of the country -- over that. in the rest of the country where we have seen in the last year, the anti- rea out crowd that really had a problem with this -- the anti-bailout crowd that really had a problem with this, they were very vocal. some of the companies that were bailed out, they criticized some of their marketing moves or

spending ideas. how most americans are not that bothered by the fact of gm was bailed out. there is a certain percentage of the population that does not by gm -- gm -- buy gm. but they are louder than they are big. host: here is another story. let's hear from holly, democratic caller in kalamazoo, michigan. caller: good morning. we have large bewick's that have done well by us.

i drive a honda. he was really banging his knees on the vehicle because it was too small. some people really do need larger vehicles. i think detroit needs to step up and deliver the cars with mileage. i think they can be pushed to do it and if they do it detroit will flourish again. thank you. guest: certainly, they can deliver these cars. if you want a bigger car that gets the fuel economy, the question always comes at what price. you will have to put the technology on board to make that happen. in the buick lacrosse, which is kind of a large sized, mid-size sedan. they're going to come out with a

version that has a small battery on board. does not cost a lot more. i think it can get 37 mpg on the highway. you will see solutions like that that do not add several thousands to the car. but it will still cost. you can get a bigger vehicle, but you'll have to pay more money. you cannot ask these companies to operate cellaragselling a vet a loss. host: and republican in lexington, kentucky, welcome. caller: good morning, david. i agree with some of the other callers. people are bigger today and you cannot put them in tiny cars. as a senior citizen to live in the cars that set too low to the ground, often times we do not

get the mileage that they say we're going to get. we drive a van and it is much more suitable to our needs. guest: you found the vehicle that you want. most vehicles are going to be available. gm is working on a next- generation of trucks and large suvs. again, it depends on how much you need that space and what you want to pay for because fuel prices will get more expensive. fuel economy is not back to

where it needs to be. as fuel prices go back up, you will see more demand for fuel efficiency. you can have it, but you'll have to pay. host: what is the most exciting thing that has happened at the auto show this week? guest: this is not the kind of show that -- where you have some great new bentley or rolls royce or some piece of by kendeigh that everyone is fawning over. -- some piece of white candeye t everyone is falling over. i looked at a number of vehicles that might be kind of fun. one of the most important

vehicles of the show is the new high -- a new honda civic. is everything that honda civic has always been. honda has been in a bit of a slump last -- lately. they actually lost market share last year. it will be interesting to see you aware that will go as far as honda, and then the industry as well. there is a model that is supposed to get 40 miles per gallon, very fun to drive. and a car will be built that is all will drive. it sits higher than a typical monday, but it is in a small package. -- then a typical mini, but is

in a small package. car companies have to make cars more comfortable and more fun. and you are starting to see it happen. host: next caller, go ahead. caller: i know there is a lot of tension after the tucson tragedy, but i have a simple question. this will define fascism as privatizing the game. hypothetically, if the federal government does not make a profit off of bailing out gm, is it or is it not fascism? guest: and no, i don't think it is fascism. i did not catch whose definition that was, but i do not. but bigger question there is whether the government is going

to make money off of general motors. of the government is going to break even on these things prepared that stock went out at $33 per share and eventually got to $35. if you throw a cost of the other bidder could see -- the cost of other benefits, cost avoidance you could call it, and you could say those things as well. it is not just including those numbers in there. -- it depends on whether you want to include those numbers in there.

what the government avoided becomes a bigger question. and it is probably one that people will debate for decades. >> invest a production rose solidly in december. but auto production dipped. what does that say for the auto industry? guest: auto sales are rising pretty steadily throughout the year. and coming off the year before that when sales were really at an historically low level and production was pulled back. as soon as it was built up and they've not the head of a -- they looked at a lot of information that enabled them to pull back a little bit. i think we will see a steady, level production going forward.

now that we know where sales are going to be, it may depend on picking up the market this year. 12.5 million cars estimated this year to over 13. it depends on who you talk to. if it is a 11.5 or 12 million vehicles, that will be in a steady range. let's go host: to austin, texas. -- host: let's go to austin, texas. caller: are people being high educated enough about the electric cars? the average has was on tv show it being plugged in and you can just take off. i know it will be three or four hours to charge it up. what is being done about these

things for electric cars? guest: you have several questions in there. first, our people educated enough on the electric cars? -- our people educated enough on electric cars? they are not. carmakers are doing a full-court press to do that. but despite we have written about them in the media, i get surprise for ackley by those asking some of those questions. this caller asked some very good ones. how long will it take to charge up your card? that depends on what you have in your house. if you have it