>> gary shapiro back to the electronics show and policy makers, coming out of the show, coming out of all of the technology again, what would you like policymakers to know about your industry and how would you like them to react here in washington? >> i think policy makers understand as they about to the ces command this estimate does and republicans, innovation is pulling the economy of around and there is a fair amount out there. it is tough and not be optimistic about the future as a country, society, as an industry and you recognize that the government is in the one who creates the jobs that have to make sure entrepreneurs can start because we run that chauffeur smallest company in the garage to come up and exposed to others and we keep it cheap for him because every big company starts the small company and they want to see the more entrepreneurs. as we want policy makers to go and be exciting.

we want them to understand free trade is important. apple makes products and china the the innovation ideas come from about $4 worth of the assembly in china. free trade is very important. have a skilled work force is important attracting the best and brightest and focusing on the good use of spectrum and thinking of the future as a nation. also waiting to have to recognize the companies in the world in technology are a lot of them are based here and as a u.s. strategy we shouldn't be going after them because when i travel around the rest of the world they want to attack those companies. some want to emulate but you go and the top of the systems and the antitrust and blocking measures and privacy we are just going after google and intel and microsoft and the best companies and we have to be aware of that.

>> you write in "the comeback" make no mistake i'm not opposed to copyright or patent, but i agree with thomas jefferson denunciation of what he called the monopoly of invention which is the jealous guarding of an ovation at the expense of further progress. >> well, that is a very fruitful area to talk about because you have intellectual property, copyrights, trademarks, patents. and when we start with patents and copyrights with the same amount of time, less than 20 years, now copyrights' expand so it's almost forever, and the penalty has gotten so high that for a company that elevates it could be subject to billions of dollars worth of damage if you break this unknown copyright law and in french because we have to be very careful. we of the best copyright industry in the united states and we have to protect them from the commercial policy and we have to change the link the term and these huge damages, to hundred 50,000 a day sweetened

bankrupt companies that somehow the go over in terms of innovation. >> gary shakira was president and ceo of the consumer electronics is a season. paul kirby is senior editor of telecommunications report and this is gary shapiro's bouck "the comeback" how innovation will restore the american dream foreword by mark kubin. thanks for being on "the communicators".

recently sworn in as the 74th

governor of maine. the ceremony before a joint session of the legislature was about 40 minutes. our coverage is courtesy of the maine public broadcasting network. ♪ ♪ ♪ [applause]

[applause] >> the chair would ask anne lepage and the lepage children to step forward. >> will the governor elect please step forward. raise your right hand and repeat after me. i state your name do swear that i will support the constitution of the united states. >> that i will support the constitution of the united states >> and of the state's >> and of the state >> so long as i should continue >> so long as i shall continue

>> a citizen thereof >> citizen their of >> so help me god >> so help me god. >> i state your name swear >> i do swear >> that i will faithfully discharge >> i will faithfully discharge >> to the best of my abilities >> to the best of my abilities >> of the duties incumbent on me as governor >> the duties incumbent on me as governor >> of the state of maine >> of the state of maine >> according to the constitution >> according to the constitution's ban against the laws of the state >> and the laws of the state >> so help me god. >> so help me god. >> congratulations, governor. [applause] [cheering]

[cheering] [applause] [cheering] [applause] [applause]

[applause] >> the secretary of state elect charles summers will come forward and read the proclamation of the governor's election. >> mr. chairman, members of the legislature, distinguished guests, citizens of the state of maine, it is my distinct honor and high privilege to read the following proclamation. the votes given on the second day of november last in the cities, towns and plantations of the state of maine for governor, the returns of which should be made to the office of the secretary of state, having been examined and accounted by the

legislature which is declared that a plurality thereof was given to paul richard lepage. he is duly elected and that he who, having in the presence of the two branches of the legislature in the convention assembled taken and subscribe the oath required by the constitution to qualify him to discharge the duties of that office. i therefore declare and make known to all persons who are in exercise of any public trust in this state that all good citizens thereof that paul lepage is governor and commander in chief of the state of maine and that obedience should be rendered to all his acts and commands as such. god save the great state of maine. [applause] [cheering]

>> it is my distinct honor to present to you the honorable governor of the great state of maine, paul richard lepage. [applause] [cheering]

[applause] [applause] mr. president, mr. speaker, members of the 125th legislature , governor baldacci, former governors king, mckernan come brennan, honored guests, welcome. and thank you. mainers have a long tradition of being hard-working and working

together. as i begin, i would like to thank john baldacci. john and karen and his and how your administration did everything asked and more to make this transition a success. anne and i -- [applause] [applause] anne and i are very grateful and we join all mainers in her thinking of the baldaccis for their service from city to state and to the nation.

[applause] this morning when i was up and getting ready to come over, my wife handed me a note from my daughter, and i will tell you, it was very difficult for me to keep my composure. it was heartfelt, it was absolutely terrific, and i just can't say enough about how proud i am of my wife anne and my family for being there for laughing and supporting these past 16 months. this campaign started when they say the first week was who the hell is this guy?

[laughter] in about january there is this lepage fellow out there, and then about the middle of may they say there is a dark horse in the field, and done ha-joon mind they were calling me secretariat. [laughter] [applause] well, first and foremost, i am a businessman who served his community as a mayor and now has its governor. my pledge to people is very simple. it's going to be people ahead of politics. [applause]

mining concern as i enter this new challenge of life is for the parents trying to make a better life for their kids, the retirees trillion to survive and keep their homes on the fixed-income. the college graduate trying to find a good paying job. the entrepreneurs with the courage to take risk to create jobs, and finally and the most important, to the main tax payers who were tired of footing the bill for the blow to the establishment and augustine. [applause] [cheering]

[applause] it is time to make state government more accountable, it is time to deliver value to our taxpayers, it is time to put people ahead of politics. [applause] of the word people appears in the constitution 49 times. you cannot find a single mention of the words politics, republican, democrat, green,

independent. in the 37 pages of preamble, articles and sections of our constitution, the framers had a right. people. [applause] affiliations, political leanings, the obsession of winning or losing have been getting in the way of solving our problems. we need a new approach. it starts here, it starts today, and i need all of your help. [applause] i am willing to listen and work obstructive sleep with anyone

committed to honest solutions that will benefit maine people. to insure i get plenty of input, i will be hosting a monthly breakfast meetings with groups of teachers, business people, environmental people. oat meal and solutions are going to be on the menu. [applause] the last two mornings the staff has made the oatmeal and it's piling up because i get up and run out of the house. [laughter] so, it's oatmeal. i intend to reintroduce governor mckernan's capital for a day. we are going to have town hall

meetings on a monthly basis and all of the county's. [applause] it is my intention for myself to go around and learn from people what they want their state to look like. i will host constituent services to meet directly with maine people. come in, share your concerns, provide some ideas. if we disagree, and i assure you we will talk about areas of common ground so we can inch forward. because, folks, i am not going backwards. [applause]

while i will listen to anyone, my administration will be focused on making maine work for everyone. there are no favorites. no car walz, no favors for special interests. good policy is public policy for every one in maine. [applause] there is no greater example of serving the common good and the sacrifice of our servicemen and women every day. the peaceful transfer of power, our rights and our liberties are not free. they are earned each and every day by those who served. [applause]

46 service members from maine have made the ultimate sacrifice in defense of our state and our nation in the last seven years. i am honored that some of the families of our fallen heroes are here today. [applause] [applause]

anne and susan along with their daughter are here with us. they lost private first class jordan in august 2009. starting tomorrow morning, suzanne will be the receptionist in the office of the governor. [applause] the family of corporal andrew hutchins of new portland is also with us. corporal hutchins gave his life in service to maine and the nation last november in afghanistan. corporal hutchins wife, heather, is due to give birth to their first child, allysa braelynn, in

march. all of maine shares the sort of the families of the fall heroes and we will honor their service to protect their liberties. let us have a moment of silence to honor the sacrifices of the fallen heroes and to reflect on the lost their families continue to endure each day that we've remained free. thank you. bourn area where we must come from politics and special interests aside is our education system. students are the most important people in the classroom. every decision we make and every dollar we spend must be focused on the individualized needs of each child.

[applause] our standards must be higher, administrations must be leaner, the dollars must go to the classroom. [applause] and most of all, we have to find solutions to make maine the number one state that shows the standard for education in this country. [applause] i believe we must bring vocational education act to the priority in our schools. [applause]

training our young people in the trade while the year and a diploma is a path to a good -- better life. [applause] in addition, and you're going to find me very passionate about this program, is i believe we need to create a five-year high school program in maine where students can graduate with an associate's degree with the heads of going into the workforce or as credits towards you for your diploma degree at the university or college level. i believe -- [applause] this will do two very important things.

it allows the youth to be in the support systems one extra year, and it lowers the cost of education, the high cost of education at the university level. and i really hope that both sides of the ogle can come to grips with educating the most important asset in the state, and it's our kids. [applause] approximately one in every three mainers is on some form of state or local government assistance of food, shelter, income or health care. for the truly needy and impaired, these programs are an important lifeline and we must

maintain them. [applause] while we are a very generous people, we do have not the ability to pay for every one, and we do have limits on our resources. [applause] the programs of maine need to focus on maine residents -- [cheering] they must focus our efforts to move people from dependency to self-sufficiency, and we must. [applause]

and we must, must implement a tiered system that rewards work and progress towards self-sufficiency. [applause] and we need to have a limit. it cannot be a lifetime career. it needs to have a start and an end. [applause] i recently met jennifer cloukey, a single mother of four and a full-time nursing student. like me, jennifer escapes at some very tough times.

jennifer works two or three jobs at any given time that has to rely on temporary assistance to needy families and the food supplement program to make ends meet for her family. seven years ago, she built a home through the help of habitat for humanity. jennifer was determined to be a good exceed to her kids and other single moms. this coming may, she will be graduating from nursing school. [applause] ..

[applause] ladies and gentlemen, there are so many jennifer's in the state of maine who want to move ahead. we need to provide the leadership so that they can all move ahead and we can all applaud people like jennifer. [applause] my favorite subject, business.

maine is the hardest place in the country to start a business. consequently, manners are not average approximately 80% of the per capita income in this country and we are feeling desperately to make investment needed to grow our tax base. folks, my staff gets really nervous when i use two word. quite frankly, that means i'm going off on a tangent. [laughter] only the other can create the jobs and investment we need to move this state forward. [cheers and applause]

[applause] [applause] profit is not a dirty word. [applause] in fact, it is the direct and indirect solution to our challenge. the search for profit is what drives investment and innovation. without profit, no one has the incentive to create jobs or build a tax base. profit is what keeps our youths from leaving maine in search of better opportunities. profit is what makes the public

site are possible. without profit, we do not have economic activity and we do not have income to grow the tax base. therefore, profit pays the bills. [applause] profit leads to more competition and through competition, we -- we the people, end up with more choice and greater value. [applause] every private or public sector job, every program, every nonprofit, every state service and every incident in society started because someone took a

nickel worth of input and turned it into a dime worth of output. it is a trend that has to continue. and here are four steps to make it happen. one, simplicity, it needs to get a lot easier to do business in the state of maine. [applause] we are conducting a statewide redtape removal audit to identify the statute, rules and the roadblocks that prevent us from creating the jobs that we need. [applause] be mindful, i believe in vigorous regulation.

i believe in strong protection. however, these safeguards need to be clear, decisions quake, and we need to have a collaborative relationship between regulators and the private sector. [applause] second, savings. it needs to be less expensive to do business in maine. [applause] everything from licensing a business, health care, workers compensation, utility costs all need to go down. [cheers and applause]

business is nothing but a math game. it is the same for everyone, whether we are an international player in the paper industry or the corner deli, you need your read or breakeven point. the cost that we can control through public policy needs to be addressed. our forests, fisheries and farmland will never reach their economic essential in maine if it is cheaper elsewhere to operate factories in turn would into paper, processed fish and two males and potatoes into my wife's favorite, chips. [laughter] [applause] finally, skills. skills, we need to train the

next generation of workers in maine to prepare them for the industry that will offer the most potential. we have one of the world's best science and math magnet schools and limestone. [applause] it's run by motivated teachers, motivated students and affordable access it will be made to work. representative terry hayes, assistant democratic leader in the main house is a proud magnet school mom. her son danny participated a one-week program and then applied in the magnet schools because he had interest in math and science. ladies and gentlemen, today

danny, dean's list in the engineering school at university humane, who aspires to live in maine. [applause] we, the elected officials, need to work together to make sure he danny haynes and others like he can stay close to home, earn a living and raise their families. [applause] and i've got a lot of finally. here's an excellent scale. we need to provide our industry with competitive advantages of costs, regulatory environment and translator for us to

succeed. we are fighting for the future of maine every single day on a global basis. that is how we are going to achieve a competitive nature is we need to have balance. we need to find the right balance between the environment, between education and most importantly, competitive workforce. if we do that, we can return the state of maine to a competitive contributor to the world economy and we will be in a position to attract new industry of information technology, biotechnology, semiconductors and all the new world economy is. we need to find balance in

maine. but we need to do it together. it can only be done if we do it together. the senate, the house, the governor and most importantly, the people of the state of maine. [cheers and applause] in closing, i'd like to say i ran for governor because i know how to run a business. i know how to create jobs. in my experience, you build a team, you make decisions and you stand accountable for your actions. i will spend every day of the next four years working to make me a better place for all maine people. we will start --

[applause] i will start by asking one simple question. can the governor do it alone? and the answer is simply again? >> no. >> exactly. it's going to take hard work from everyone. i'm ready to provide the leadership, the focus to move the state of maine forward. i do not care about editorials, opinion polls -- [cheers and applause] for the next election. [applause] or the next election because frankly i have for years and a job to do.

[applause] in four years, i will stand accountable for the jobs that we create, for the prosperity we bring to our state. being governor is not about me. it's not about my administration. it's not about the legislature. it's not about the gas to bureaucrats. it's about maine people. [applause] and i'm going to let maine people judge how maine moose alert in the next four years. thank you for being here, thank you for listening and let's get to work. thank you. [cheers and applause]

[applause] [applause] [applause] >> china's president, hu jimtao comes to washington this week

>> in a few minutes coming form on how federal and state government can cut spending. and the less than an hour and have come a look at how states are trying to balance their budget. later comes the special inspector general for afghanistan reconstruction testifies at a congressional hearing. he resigned last week. later we'll be at the outmigration ceremony for me to governor

>> i believe that the best way to carry on dr. king's work is to reach out to someone in need and make an ongoing commitment to community service. >> now, a form on how federal and state government can reduce spending and increase revenues. figures are good at going pennsylvania governor, ed rendell, added by an former white house budget director alice rivlin. this nearly 90 minute event was hosted by the brookings institution. [inaudible conversations] >> welcome back. i hope everyone had a good lunch. we are going to get it now. we've been talking about innovation in the dirt to

innovation in the public, from greece to germantown, pennsylvania, local, state, and national government are all facing budget crisis. without question, this is the greatest thing that's driving innovation is politics. as we heard the first three panels, ross of faith in infrastructure and investment deficit that are holding the facts from competing internationally as a country. so the question for all of our panelists really is how to do these two twin challenges at the same time. get our fiscal house back in order but not under vesting in the same competitive. we're going to start today. i'll let you choose panels and a second. we're going to start with a question that is less than washington, which is the crisis facing states and localities. states have to balance their budget coming at state after state faces significant shortfalls.

pennsylvania faces roughly a four or 5 billion-dollar shortfall after governor explain that to us in a second. new york is roughly nine. texas, 14 in california, at least 18 billion perhaps upwards of $25 billion. these are enormous challenges. stay revenues in particular how the rising entitlement cost of public pension plus medicare and medicaid. and because states can rent deficit, and often forces the pragmatism over political polarization. so at the national level comes in the states have to do on an annual basis we been able to roll into longer-term interface. on the question is whether or not those are sustainable and will force a meeting of the minds in a very polarized washington. so with all these issues are the fumbled a really terrific panel but i'm delighted to have,

starting with governor ed rendell over the last last figures until next tuesday has been and will be the governor of pennsylvania. that's 2009 and 13 days down and five to go. [inaudible] >> we do data here. alice rivlin has held the two top jobs in the federal government at either end of pennsylvania avenue in addressing budget issues, the congressional budget office director of the office of management and budget. less well-known perhaps outside of this building is that she's been a senior fellow at brookings off and on for four decades and she's been a member of both the presidents commission on fiscal responsibility and cochair of the bipartisan policies debt reduction task force, with senator pete domenici. to her right is senator ivan bayh over the last figures has been senator until last week.

and before that was a governor for eight years and it's hard to imagine looking at alice that she's been here for four decades the 90s but public office without bob. he started shortly after he graduated from the university of virginia law school. >> i value are going to say high school. [laughter] to his right literally and figuratively is ron haskins, other senior fellow at brookings who served on the maturity house ways and means committee staff during the years when newt gingrich was speaker of the house and when speaker gingrich and president clinton were able to work together on a number of different issues including welfare reform, which ron was instrumental in. llosa was the senior advisor to president george w. bush on welfare and policy and other things. he's written quite a lot about theft and reduction in government reform and efficiency. and finally to the far right,

and brookings -- ann fudge who unlike runoff technically at some level assigned by. and that's a good thing having run traffic outside the kraft food and also served on the president deficit commission, starting with governor rendell. connect in the federals to the locals as the 2000 sms package when a long way to helping the localities do with the media budgets, shortfalls from the financial crisis. for that money is not coming back or least not in the enormous amounts in the first two years. how do state and local leaders to this? how did they address the budget deficit, but also investment deficit they're facing quite

>> on the internet by going back in time to when i first became governor in the first six years i was governor we had good times, good growth, both averaging about 5%. every percentage of growth for pennsylvania is an additional $250 million in revenue. and i took the additional revenue and savings were able to fluctuate in the cost of the operation of the government and i spent -- i don't apologize. i believe government should spend money on physical infrastructure, protecting its citizens. i spent in pennsylvania and is by far the better for that pending. had received money, we took out and then the recession we continue this, but we started taking up tanks for the cost of the operation of the government. today we spent almost $2 billion a year last on the operation of the government, the overhead of the pennsylvania government than we did in 2002. in terms of low numbers, rg geo,

general government operations is less than it was in 2002. we did it because we apply the same things we did. we looked at every government program and set eliminated if it's not good. the lemonade if it's good but not reaching the mark. find a way to do it better. let me just give you two quick examples and then i'll go to what's next. we source our purchasing. believe it or not come when i became governor, pennsylvania had 800 separate contracts for office supplies. by thursday night and bidding it up to one company, justin not alone, we saved $11 billion -- $11 million a year. overall by leveraging purchasing and pennsylvania purchased $3 billion of goods and services. by sourcing our purchasing a car we saved over $300 million a

year on an annualized basis. there is a center for american progress noted that the federal government did the same thing, it could save $40 billion a year and given what the federal government investment purchases is probably not far off the mark. common sense things. we've fixed computer contracts. we source than, say $17 million on the workforce for the 78,000 workers we have in the state of pennsylvania. paquette, these are things that are obvious, but nobody ever did them. we have gotten significant dollars for weatherization. our own dollars and course lately and begin federal dollars and then the stimulus, a huge uptick in federal dollars. whenever connected as weatherization dollars to her liking participants. people at a price and would give it to them and would have a weatherization program and never the two should meet. will somebody decided, let's

start whether rising the people asking for lighting. and guess what happened? unlighted requests went significantly down but we save significant money because we whether rice landed a disney to use as much fuel. comment and stuff. i could keep you here for the next hour talking about other examples, but i won't. let me shift now to postrecession. postrecession in the midst of a recession, every state is made budget cuts. in pennsylvania we cut $3.5 billion out of our budget in the last two years. the new governor is going to have to make further budget cuts. but i believe by making those budget cuts in the right way, by increasing revenue and that's happening all over with governor christie in the state yesterday said the same thing that's happening in pennsylvania return of revenue growth. we had last month the revenue came to $175 million above estimate. were thinking we may have for%

revenue growth in the next fiscal year beginning july 1st to june 30th. but that increase revenue, with increased savings, were making these cuts and continuing to find ways and there are always new ways to do it or it would borrow from everybody in the world. if other states do something to save money, i want to know about it. i do not, i think we can get through this crisis. pennsylvania loses 2.6 billion stimulus. this is another billion dollars in increased mandate costs, that's medicate corrections and almost $500 million a year in increased pension costs for teachers and state workers. so those are two big drivers. with renewed growth and judicious savings, will be about to get to rethink the next year or maybe the next two. what the spending i did, in the teeth of the recession increased

education funding significantly. i think we're the only state who did that, but we needed to have it made great progress in education. that's probably going to grind to a halt as is the federal money. so we can get through this up with that increased spending and hoping to years past that the economy is robust enough and growth continues and we can get back to investing in things that we need to invest in. the last thing. physical infrastructure, the way we've invested as i've pumped up the capital budget. even in these difficult times, states can use capital budgets to continue to invest in their physical infrastructure and to create significant jobs and significant contracts for both construction companies in manufacturing companies. i urge all new governor's an existing governor to look at capital budgets as a way to do it. frankly, last thought, frankly

it is long overdue for the federal government to have a capital budget. there's no reason for us to pay for bridges which have a 40 year life span the same way we pay for paper clips that have a 40 day lifespan. >> alice. you've been on commission after commission. i was surprised the energy additive experience rather than one that is the energy out of you. tell us about that. what is making you think that this might actually be fixable mass? >> if it is not a fixable mass, were in deep trouble. we have to fix it. and unlike the governor's experience, which it is optimistic in the sense that he is saying maybe the economy has turned the corner and our revenues will start up and things will get better.

this states are in trouble because of the recession and the deep financial crisis that precipitated it. that is unfortunately not true of the federal government. the crisis facing the federal government and it is a serious threat is not the crisis of a recession, although the recession and the things we have to do, like it in the state of pennsylvania to get out of it increase the debt. but the problem that the united states government is seizing is that we are on a track that is unsustainable, not because of the recession, but because it thinks we have done policy wise

over a great many years, combined with the fact that we have an aging population and a very rapidly rising cost of medical care and case for good medical care. we want it. we all wanted. and older people consume more of it. so this is the story everybody's familiar with it because it's true for a long time. if you project the federal budget, even if the economy recovers, what you see as federal spending will grow faster than the economy can grow and revenue while. revenues will grow at any set of tax rate about as fast as the economy grows. but the three big entitlement programs driving federal spending over the next few years, medicare, medicaid and to a much lesser extent of the

social security will arrive faster than revenues will. and not just opens and increasing wedge that we have to borrow. this has been true for a long time. we knew this was coming. but it's hitting us had a very bad time. it's hitting us at a time when i get level has risen. two years ago you might have said serious problem about the aging population and the baby boomers and the rising cost of medical care, but we have time to fix that because were not an especially high desert country. we have a debt of about 40% of our gdp three years ago. well, it's just not true anymore. now it's more than 60 and on the projections, even with significant recovery it goes to 80%, 100%. that's serious stuff.

and the real question is what ill posed. can we get back on a sustainable fiscal track, which will take reducing spending and increasing revenue. can we get back on a sustainable fiscal track and still invest in our future? now, basically i'm only optimistic as we have to get back on a sustainable track. whether we can do it without killing our future investments is going to be really, really hard and that's what these sessions have been about. because everybody who hasn't quite caught up with the realities will say well, yeah right, we've got to fix the fiscal things, but we can't hurt the most honorable, can't hurt national defense. we certainly don't want to hurt research organization or

infrastructure. so that's most of it. >> from a math standpoint, how do you do it? gives a sense of the two-term commission a lot of overlap. but where are the biggest savings? were the biggest savings have to come from? >> you do everything you can possibly think of. and that means first reforming the tax system so we can raise more revenues with a simpler and more progrowth tax system. this is an enormous opportunity to do that. and we may also need a broad-based consumption tax, which states will not be happy about because they have consumption, right? but that is certainly a possibility. we need to reform medicare and

we need to reform social security, although that gets a lot more attention than it really deserves. it's a small part of the problem. and we've got to make the other parts of the government, defense and discretionary depressed expanding a lot more efficient and find new ways of financing the infrastructure that we need. that's not going to come out of the usual sources. we have got to finance infrastructure in a much more intelligent way, which i think means road use these out of the gas tax, congestion fees to reduce congestion and a lot more polling. >> so senator bayh, you have been a well spoken critic on the

inability of washington and particularly the other end of pennsylvania avenue to get things like this done. so i'm both the politics and the substance on the politics, even though her face in this class, can we -- can we apply the brakes in time before we go off with? on the substance i'd, republicans say we don't have a revenue problem, with the spending choices. but they going to make our choices particularly on things like health care costs are essentially reforming health care yet again in order to hit the brakes before you go off the cliff? >> welcome in the industry that, bill, is yes, but it will not be easy at all. first for me start by thanking you and everybody at brookings for hosting this. i miss being governor because every year we have to give state of the state addresses, so forced me to take a couple weeks and take the longer-term brio. congress that doesn't happen. there's no question the comparative economically and

innovation is the key to that drives everything else. and last week or so we've seen an extraordinary situation where the secretary of defense is posing reforms to the pentagon because it of his viewer entering fiscal austerity. this literally touches upon every facet of the government and american life and how we resolve it is a way to define our country for the next generation, at least perhaps longer. so to get to your question, i'm an optimist by nature, but my experience on the hill for 12 years is perhaps a little more skeptical about the ease in which these things can be addressed, particularly because of the political dynamic. my own guess is that the following will happen, that it will take exogenous events, the debt ceiling limit were going to bump up against, that is something that can't be avoided, just like the expiration of the

tax cuts on december 31st could be avoided. that forced the congress to act. we can't allow the country to default. i guess this will bump up against that. you'll see temporary extensions, but ultimately will get done. the price for that getting done will be several fiscal reform, perhaps including broad taste tax reform, somewhere along the lines that alice was mentioning. the democrats will have to be willing to say will agree to spending caps going nowhere. republicans perhaps will agree to reform the tax code that will afford investment savings, make it efficient, get the corporate done to make it globally competitive, but at the same time generate more revenue for the government. so there's agreement that compromises to be made, but the overall political environment right now and my father has been on the process for a long time, with the exception of the 1960s, during the time of the vietnam war, some racial tension, i can't recall the political environment been as polarized in this difficult as

it is today. so that will make progress more difficult. but exogenous events will force progress you will be occasions when enlightened self-interest the part of both parties will lead them to strike compromises. for example, in my legislature when i was governor, the democrats control a few years am a republicans a few years, with but a few years. people who are in power, democrats controlled the white house and the senate are held accountable. and so you can't just howl at the moon. you can't just make, you know, prognostications about some grounding in substance. i think quickly both sites will see there's an election coming up, even though they disagree most things they will be in their self-interest to get a few things done. with regard to the topic of innovation, i would say "don't ask, don't tell" is coming out. there's some prospect there for some progress on education reform. i'm sorry, no child left behind. what did i say?

no child left behind. i was going to say in the area of immigration reform for not going to have the tree not for some aid of broad-based immigration reform, but perhaps something on ensuring the greatest inventors and entrepreneurs can come to our country. you can see some progress on that. green energy. i think the republicans will want us to be more energy independent on the imports of oil. government will like the co2, so there's some progress there should be made. protecting intellectual property, which at the end of the day, you can innovate all you want to. if other people steal your ideas come it doesn't benefit you economically quite so much. so perhaps the more rigorous regime of intellectual property. there is something for the come together even if the overarching narrative is one that's pretty disagreeable. did i answer questions? >> for those who want your early, with two policy briefs released on two of those issues

on reforming integration for high skilled workers and also on having to do with intellectual property. >> one other thing come in the context of the tax reform, which i do hope we can grapple with this week due at the debt ceiling, making permanent the r&d tax credit is a no-brainer. i mean, those of us up in the, we like having to be renewed because it made people, and ask it to be renewed. but as a matter of policy, not to be made permanent something would hope i would get done in the course of that debate. >> sarong, you've spoken about the bipartisan failure to address the debt issue and it also lived on capitol hill through times when democrats and republicans with a lot of fighting both within the party and between them figured out a way to work together. is it possible this time around. it's been intensely polarized environment. in the senate i think the most liberal republicans and there were two from maine, senator

snowe and senator collins are to the right of the most conservative democrat, ben nelson in the house is not that much different and that's a real change. things are a lot more polarized structurally on the than they were. within the republican caucus on one of the issues that senator beit talked about at the action in person event coming up at the debt ceiling, there doesn't appear yet to be consensus within the republican party and how to do with that. how do you see it on the hill, particularly on the republican side? is there -- is there a coalition for common ground? >> let me begin with a personal story that the panel might enjoy. last night he went home and how my books and put them on the kitchen table and it just happened the agenda for this panel was on the top. my wife came in a few minutes later the bad and she said while, governor, senator, the

great alice rivlin, great business executive, who is this guy haskins? [laughter] so the other panelists, i want to thank you for enhancing a reputation with my wife. i think i'm like senator beit. i hadn't heard him say that before that i'm inherently an optimist and i've seen a lot of amazing pieces of legislation goes through the house and senate impasse that people say would not pass an opera for many others. but i think 15 years on the hill and a couple years in the white house have convinced me that were long ways from any serious solution to our problem and it's questionable whether we'll get there before we have a really serious outside of that. so i'm not optimistic. if you do a mathematical thing here and figure out what are the fact there's a 10 to push towards some kind of agreement among republicans and those that would oppose it. there have been some hopeful signs. allison emphasized this. by the way, i try and go by

there as often as i can kush is optimistic and it makes me feel better even though i don't agree with her. [laughter] republicans are serious about supporting. i bet you they get 50 or 60 billion. i don't think they'll get to 100, but if elected appropriations, but the defense often things we know they are going to cut. these are some serious deep cut. some 20%, 30% cuts. they probably will become law because i don't think the senate will go along, but they'll been interesting to manic. second thing that i think is just completely shocking and their son a single person in this room that could predict anything like this would've happened then that is mike crapo and coburn signed on to tax increases. that is enormous. especially for some other things with republicans the republicans and the antipathy towards increased taxes is shocking. it passes any human understanding that republicans are so opposed to taxation.

so the thought that coburn, there's not many more conservative than coburn, would sign onto something involving tax increase that they experience third, i think brian really understands this stuff. he spoke inherent proteins and referred all his material. most people don't like it solutions, but they're real solution and is a real leader and i think he will force the house and force the house leadership is necessary to do something serious. and the most thing potentially is the philosophy of republican party. the situation is for republicans to do what they want to do, which is reduce the size of government. they love the vote to increase spending, but intellectually, republicans talk about smaller government and much better situation to do it than the one we're in right now. but there's some indications on the other side, too. one of the most important is the rule publishes pass in in the house republicanrepublicans favorite all along.

i think they have a mathematical genius to figure this out. if you increase spending by a trillion dollars, that really is a trillion dollars will increase. if you cut taxes by a trillion dollars, that's not really trillion dollars. so tax cuts are exempted from the budget rules, which is just bizarre. and the thing that bothers me about it is that is one of the most effective budget process mechanisms congress ever invented and did have some effect and now it's been more or less ruined. the final thing is i think really important, notwithstanding the fact that i think ryan is a great theater. the leadership on the senate and house i do really untested in something just to manic pillow really take very, very serious compromise and giving it on both sides. and especially note the new republican membership of the house, i was in the house when i was a staff on the ways and means committee under 75 in the house and they were all wired

and they were going to change washington and by golly washington was never going to change them. compromise. no cover aqua to compromise. compromise is to see. there's a lot of freshmen who feel that way in the house. the only solution to man or out his great leadership. no matter what you think about newt, and it was god in 1995 and 1996 and newt really, really ran republicans in the house. i can remember -- you may remember republicans shut down and gingrich went back for 400 times to get a deal. he got a chill brought it back not a big session with house members here can agree to manic session. u.k. by with a 20 minute talk about what was in that deal. it was a brilliant talk. when he got through, he looked inside this is the best we can do. it may not be the best deal, but this is the best you're going to

get. if you don't take it, you can find yourself another speaker. when people within that room, very few people were going to take it. so that's what it takes. and maybe boehner is going to take off that way. i'm also very optimistic about boehner. maybe mcconnell will turn out that way. but it isn't clear now that the leadership that is needed will really be present, so i'm not optimistic. [laughter] >> on the r&d division of a company that's not sure whether it's going to have a product for you to sell, but the product that appears to be coming your way is not liked either by the engineers or the assembly line, but everybody's saying we have to get out there that if the company fails. how do you sell that to consumers clacks >> well, i think one of the things -- first of all, i want to make a comment to what ron said about senator coburn and i'm going to use that is sort of

a platform for my other comment. your comment was super surprised that he supported tax increases. if i made another statement that would be equivalent to that with you that he supported the recommendation of the fiscal commission, which meant that we would deal with spending and we would deal with taxes, which comes off in a very different manner in terms of the interpretation of the statement. and i think when you look at it in the context of what actually for several senators about whether it was urban and the fact that social security was affected by the recommendations are taxes, back to your simple not nynex, the truth of the matter is we had to do with those sides of the equation to begin to tackle the problem. i say that to say this. in communications to consumers,

it's about what we say in how we say it. the facts, but what is highlighted in what is perhaps diminished impacts a person's perception of the issue. during the course of the eight months eight months or so and serving on the fiscal commission, one of the things that i was most concerned about was probably done a good job of helping people understand the depth of the problem? and so there were many efforts undertaken to do that, whether for those of you who may have seen "the new york times" article when they had a whole page and here's how you can solve the deficit problem and here's the levers that you can push. i was a way to help people try to understand the complexity of the problem. believe it or not, there was enough that put together so young people could look at how we tackle the problem, understanding both sides of the equation. the interesting things about communication today versus 20

years ago for communications at the 21st century is that there's no one mass-market communication platform anymore. there are multiple and there are multiple consumer segments cut which means as we tried to communicate the urgency of today's problem and that the potential solutions are, that we have to come in and a very micro level. i'm coming up with one big, you know, macro message is not going to work. one of the things that you see -- i have to smile. at an awful lot of lot of you know that pete peterson started his career in the advertising business. but one of the things that his organization has done is come out with the sad. you can decide whether you like them or not, but they are trying to increase awareness of the problem. it's the huge debt at that talks about in a very interesting way

the problems that we are dealing with. that is one factor and that is one way to go about it at a mass level. on another level, their subtle groups out there now who in their own way are trying to get groups of people together to talk about the problem and to talk about possible solutions. this is a very challenging problem. one of the things that i think governor rendell spoke to in his opening comments was what they've done in pennsylvania in terms of addressing both the cuts as well as the investment. if there was a phrase that i would use in terms of helping people and what we need to do, it's the cut in interest rates, which we try to incorporate many times during the course of our commentary in the report. we are in a world where like business has been doing for the past 20 years, there's not enough money to do everything we want to do. so through product to be any

really conscious thought to what can we afford and what do we have to cut, that's the approach that's kept business, you know, at a point of trying to drive through some very challenging times of not having sufficient money to invest. so there is a phrase that were a marketer, i would like to begin to inculcate more in the conversation is that we need to cut and we need to invest. there is no one or the other. it is not either/or. we have to do both. i think part of the story will be what individual states have been able to do and how we raise the profile of what state actions have done to keep states afloat and how then we might be able to use that on a broader national level. >> how is it playing in germantown? >> it's worked fairly well in pennsylvania, actually.

i just love building america's future, the infrastructure organization nature with governor sort shoemaker and mayor bloomberg. some suggest we stop using the word infrastructure and start using the word future structure, which may or may not be good. but we've got to change the dynamic and convince the american people boosted spending and investing in things that are important like intellectual infrastructure, growth was cut to discern the difference between the two that got to cut and eliminate figurative advance spending, but we can't do it at the cost of stopping investing. our son george stephanopoulos' show at january of last year and they played a tape of talking and i said we say no to spending, no to bahrain and no to taxation comment header.

they came back to me and said what do you think? is that it's a recipe for disaster. if we stop investing, there is a business in this country that's grown successfully did the best and its own future. if we do that were cooked. so fox cannot been interested in blood sport, by the congressmen onto the same show. and he gave the same breath, gave the same rest. it was my turn i said congressman, you seem like a reasonable man to me. truth be told, he didn't. [laughter] i learned enough from tv wanted to be a nice guy. i said you seem like a reasonable man to me. tell our viewers how we're going to keep our roads, bridges, dams, levees, porous, water systems, how will we keep them safe and working effectively and efficiently to compete economically and have a sense of well-being. how are we going to that if we don't invest in their upkeep?

and he really went silent for 10 or 15 seconds. i think the question had never been phrased that way to him. finally he said, very democrats go again using the word invest when you really need spend. that was some of the fancier. so we do it to find a way to get the message across. maybe not inside the beltway, both have to find a way to get the message across outside the beltway and american hometowns. you can stop investing. no business does it. if we stop investing, were fast on her way to being a second-class economic power. no question. that is, answer about it. the american infrastructure beyond the notice to scrambling. it's coming right before is that no one has the will to do much about it. >> sticking on the infrastructure point, alice, senator biden, ron, other than the transportation bill, how much appetite and how much --

how much budget and with for investment or other ways to structure at lakewood the governor was suggesting for capital? we heard it being not particularly optimistic about infrastructure bank. where could this lead where we want to meet? >> will first, you may be leased to know that the congress made them by name because he's thinking about running for governor of my state. the next time you're on a panel with him when it had to confront reality. he may have a different take on federal states, too. it is true that is the governor saying, novel spending is treated equally. as a profound effect on public tv efficiency, those sorts of things that we should probably

prioritize that in constrained to fiscal environment. so we're going to have to set priorities. i would emphasize with a push short-term when each differentiate between the short-term and long-term. we may not be able to sustain the levels in the short-term we desire. we need to prioritize to tighten the belt, get in the in order. but then quickly pivot once we've accomplished that to prioritize investments in those things that relate to pursue our comparative advantage lead to innovation, both physical and intellectual capital. that's the way i look at it. so we maybe not. for two to three years. >> and ask a question? when i became a week this the biggest deficit in american city ever did. i could everything and people at various and never went as picketed them whenever. but i managed to use the capital budget to invest in our growth and to create some jobs and

economic vitality. why is there such a resistance? i've never been able to figure this out. why is there such a resistance in washington to establish a budget? every other business has that, most businesses do it. why is there an aversion to it? >> i've never been an appropriatorcomest that probably gets into these dynamics of the appropriations committees in who gets credit for the budgets and things like that. i'm a theoretical scale come you're absolutely right. it had to be done from a management standpoint, but we join with congress and other congress operates and that gets into the rome of psychology were some might suggest abnormal psychology. >> you're talking about one in the is the other. >> the fear of budget tears about establishing a capital budget is that it becomes simply an excuse for more pyrene. and i think the key to financing infrastructure is we've got to

charge for the use of the infrastructure in sensible ways. now, at your level, the state level, you actually do some of that into it at the local level. you do borrow for infrastructure. but something has to bat those bonds, a dedicated revenue stream of some sort. at the federal level, we have not been used to doing not so that the budget tears have thought well, you know, there they go again, those infrastructure folks. they just want to head to the federal debt. in the federal debt is is going up very fast and we can't add to that. so there's got to be a different kind of thinking about how you finance infrastructure at the federal level. the other thing is, i think, the reason it's been resistance is it is very hard to define what is -- what is investment in the

federal budget. ..

market will impose discipline on the political process, but at that point the imbalances not such size dealing with them will be even more painful and disruptive, and so that's why i'm hoping that cooler heads will prevail and we will have this initial exogenous even rather than waiting a few years down the road for the larger more difficult to grapple with. >> would you expand on that for just one second? the idea, the distinction between investment and other spending turned out the way it did because everybody thinks investments are good things especially investment of human capital which the government does a lot of. this is a great reason why we have to deal with the deficit now because if we deal with an

emergency in the events you described congress is going to be like him a grandmother hollings. we are now trying to be careful about the cuts and nobody is calling to have time to think that if we do this it will happen. we need a reasonable debate about this we need to start now and have an orderly reasonable debate we're the ones at the most votes when and if there is room for bipartisan compromise so this is to be you're point about investment it's a point about why we need to get started and do this now and not wait. >> is a point we made consistently in the depths of the commission about now because the longer we delay in action, the more difficult the decision becomes. and so one of the reasons that we put forth a very specific opportunities to make the cuts on some very specific sort of free marks within which to look at the tax reform simple

vacation to deal with the corporate side so that we don't fall further behind competitively i think we have a template. now the question is will our congress use the template as a way to have serious discussions so that we can have actions before your right we get into a situation that not very wise decisions are made. >> we are going to go to governor rendell won about 15 minutes. >> i want to go on to what to the senator said because the definition of an optimist is and somebody that thinks we are all going to sit down around a table and agree on things. it's not going to be like that. the mission of an optimist with someone who thinks much of the political system will get it in time that we can't let this

catastrophe happened it would have to act. they may not all act in the same we would it will precipitate a negotiation. that is the definition. >> it is kind of the situation to read just one last tidbit and i will get the questions with regard to the debt ceiling is a wouldn't be surprised about that. i hope it won't come to this. but we are going to tip toe -- nobody in the house is going to want to vote for this the republicans because they ran a platform of fiscal austerity and get the deficit under control of the democrats because they are in a minority and you want a majority to make these tough decisions, go for. we aren't going to raise the debt ceiling. so it's going to be very hard it won't be easy in the senate but it will be harder in the house, and i wouldn't be a bit surprised if we didn't see a repetition would plead out of the time of the initial t.a.r.p. vote. if you're in luck recall the markets are on pins and needles.

nobody wanted to vote for that in the house either. the first vote went down, it failed and the market sensed dropped precipitously. within 48 hours people concluded we can't have that. but that's my plate. it took the market, outside defense to force the political process to do ultimately what needed to be done so you might see a repetition of something like that. >> i want to turn to questions from the audience. before doing so, i am tempted to point to the 800-pound gorilla in the room which is the weight of health care costs on the budget moving forward but if there's not optimism about raising the debt ceiling which is relatively easy then i can't remember optimism about that. so why don't we go to darryl and then a few more questions. >> this question anyone who wants to comment on this feel free to do so.

it seems congress has become so dysfunctional in terms of inability to address problems come extreme polarization, heitor partisanship in the senate the rules changes that interfere with the institution's ability to get things done. having served on the institution if there were changes you could make to improve the performance of the institution would want those changes be? >> that's a longer conversation going on in the democratic caucus and coming to the floor rather to change the rules on the filibuster and if so how to do that. my best guess right now is that you may not and there's a whole debate whether under the constitution the senate can write its own rules on the first day by simple majority vote. i don't know whether that is going to be put to the test are not. my best guess is there may be something negotiated between the

leaders that will lead to the reform of the filibuster requires the 60 threshold vote requiring more members to actually be on the floor physically to filibuster and a number of those kinds of things, so this one thing that guns of the work. the work suggests it might be filibustered and it is certainly one of the things. i think we need to find a way to get some of the younger members actively involved. we operate it's interesting the democrats and republicans of doherty differently than the senate. republicans wrote to the chairmanship i think every six years the democrats don't just in perpetuity, and hillary is working with such large sophomore class is. he's working to try to get them involved a little bit more and they tend to have a little bit more of a reform instinct about them that would be a good thing. but it would start with another anonymous holton and chicken stock executive branch appointments and nobody even knows who's doing it. so at least having to announce who you are and articulate why

you are doing what it is that seems to be a fairly sensible step to take so i would look for some modest changes and not the informal vote because i would cause all hell to break loose and the filibuster probably the reform of the cold, some of those kinds of things. and senator begich has been appointed as the representative of the freshman class and sophomore class not to the leadership committee. and look for mark warner. he's somebody that is stepped up in the taking a leadership role. joe manchin is as i was saying before hand the difficult transition having been a chief executive and being one of the 100 having an office in the basement of the building which is i will show you one story and we've got to get on. i've been governor and my chamber of commerce comes to receive in my first week in the senate a contemporary office, the crash receptacles yet to get through to get to the cubbyhole and then in the chamber they were all kind of hesitant. they didn't want to say anything and finally they said evin,

who'd you piss off? [laughter] he's still got the governor in him to stir the pot a little. >> i just want to direct a little bit of the question to governor rendell. on the one hand, you've got your own set of issues with your state legislature on how to get things done. one of the political class or the broad people you talk to in pennsylvania look at what goes on in washington particularly in the senate is it discussed or is it just off the radar screen they are not really paying attention? >> have don't pay attention and half shake their heads. i think, correct me if i'm wrong, but when we were -- when we had the 59 votes, 41 senators are present 18% of the american population. it's not something from happening in the united states government. absolutely ridiculous, just ridiculous. interrogating. i actually called david as soon

as i left office the plaintiff in a taxpayer suit to say that the filibuster rule was unconstitutional because i believe i have no legal basis. [laughter] i just know it has to be. [laughter] >> david will find one. >> the gentleman in the blue sweater. we for the microphone and tell us who you are, please. >> you said we need new ways to finance infrastructure. what will you see selling and governor rendell, could you talk about the challenges of placing tolls on the roads to invest in the infrastructure? >> it depends what kind of infrastructure you are talking about. i am not a big fan of selling a

lot of things to investors unless it is an appropriate place. but i have in mind is shifting the highway financing for example to the road use pricing and the gas tax is a diminishing source because more fuel efficient vehicles and it doesn't charge you for the use of the road or driving on a congested road, so it doesn't have the right. >> i would say the first thing the federal government has to do in the authorization of the act is lift the ban on states tolling, federal credit and highways. it's insane. the theory is we don't want our taxpayers to pay twice. that's like saying you pay money to buy a car but then you're not going to pay money to maintain your car.

ludicrous. right now the moral is we can't other than the states that have been grandfathered, we can't call a federal highway where federal money was a portion of the construction cost, not even a majority. there are supposedly three pilot programs. none of them have gotten off the ground. it is insane. it cost us on a 80 which i wanted to toll in the federal government turned us down. i think we lost on the order of health care, but nonetheless, body goes through pennsylvania up in the mountains. it's impossible to maintain. we spent $80 million a year just maintaining its to c plus condition. using extra money to help us on other highway stuff we were turned down. it doesn't make a bit of sense and if we are not going to get the money to do transportation infrastructure from d.c., and it

doesn't look like we are, we are certainly not going to get anything that closely resembles the oberstar proposal, and they have to let that happen. number two, we have to get the private sector involved in infrastructure in this country in every way. in every way. if we are not going to be willing to step up and fund for ourselves, we've got to do it. the private sector, i am told from the that there is at least $130 billion right now ready to go in american funds and european funds ready to be invested in the american infrastructure right now where there is a reasonable return on investment. we ought to be doing it. we need to legalize it and the states where there are barriers. there ought not be any federal imperatives to it. i don't think we sell, i feel the least the differences. if we lease as the term of the contract we can control when the polls go up. we can control the debate and this digital and control certain

things. we have to do it. we have no choice. >> the public appetite for that? you think the public will be willing to do it if -- >> of the public realizes there is no other alternative i think we will do it. when we talk about releasing the turnpike was a big outcry you're going to turn it over to foreign investors, and at that time it was mccrery and and i suggest we have to worry about our australian terrorists. [laughter] and then a spanish company was the most successful bidder and said to the public okay, if you don't want that, nobody flies into disney world any more because they operate the airport. >> governor i want to follow-up with your comment to ask the senator about the experience in indiana because understand and indiana you actually sold these

highways and actually to comment more broadly partnership will be outsourced utility kind of operations like utilities electricity generation it's an american invention we invented it and forgot about the world war. the best of the world has increased at. i think we need to do that starting with i think federal infrastructure bank that can be privatized. so i'm curious your perspective. >> the indian told that run across the northern part of the state was sold to a group of international investors and helped fund projects all across the state. it proved to be somewhat politically because they felt they were paying the toll but not all of the money was being reinvested in their area. it was going other places. we have had a couple of elections since then so it is in place and going forward. i would just -- thinking about all these things the most

interesting pieces of the devin i have seen the last several years was from a poll presentation by the democratic senate campaign committee several years ago. abc has taken a big poll, 3,000 sample. one of the questions they ask on the poll is out of every dollar you pay in taxes have any sense to you believe are wasted? some people said 100 some people said the zero with the average to the american people, 42 cents on the dollar. and that's not possible because the government, a lot of us transfer payments and that sort of thing, the amici interest on the debt and that sort of thing. but from a political standpoint if that's what people believe, if you are asking them to give more money to an enterprise the believe is wasting 42% of it you need to address that concern. how does that relate to this discussion? when you are talking about user fees, things were people can see the results they are paying you are more likely to get public support for that than if you just kind of dumping into the overall general budget and they

trust us. this will benefit you. so that's one of the reason these kind of ways of raising revenue are viewed more favorably because people can see the results and they believe the money is being used for the purpose the expect rather than being wasted. >> i got the time schedule wrong on this, but i want to just follow up on what evin said. he is absolutely right. those of us who believe the government spending can be a good thing and can be targeted to things important -- if we are going to fight the battle, infrastructure is the best thing for the reason evin said. people can see it. even in the 2010 election where everyone who wanted to spend any money was bludgeoned to death, 61% of the transportation infrastructure ballot initiatives that require either increased borrowing or increased taxes pass, and they pass by 64% of the vote because they were

tied to a specific project. it was and give us money for infrastructure broadly. they were talking about a specific project. we are going to widen the bridge from two lanes and use it for a half-hour each in the morning and a half an hour at night. we are going to wide net to six lanes and it's going to cost x and we want to toll or borrow or raise taxes. >> 61% in the worst climate for spending probably in the recent history of the u.s.. so i think we have to do this. we have to find a way to put our heads together to fund our infrastructure. and besides, it is the single best job creator. jobs on the construction site, jobs back in the factories. the first year of stimulus funding for transportation in pennsylvania, first year, $600 million. we had two years, $600 billion each. orders for steel increased and

the state, asphalt and concrete over 50%. factories high your back workers in the heat of the recession and you have to change the way we score in washington. if we went on a ten year infrastructure revitalization program, the additional jobs, the additional federal taxes and corporate taxes we produce would be let's assume the debt service was $280 million a year. we figured out the additional revenue to the federal treasury would be about 120 to 130 billion. so it's not 270 billion to the federal treasury. it's 150. there is no offset in the way that you score down here in washington. another thing that's nice. [laughter] >> one thing as the governor is getting his mic of indexing stage left so to speak what is the bandwidth on the right for this kind of thing first investing in infrastructure and

in user fees, pay-as-you-go, all of that. does it make it easier to swallow or do they feel that it's the fox in sheep's clothing? chemical that privatization there is a lot for it. [laughter] >> i think that is a reasonable thing and also there's a fair amount of evidence now that a lot of these public-private partnerships we see now highways and so forth that work pretty well, and the voters have accepted it, so i think there are good arguments for it, good reason for it, and also, not to be lost, you don't have to raise taxes and that is a huge deal. so i think there is -- this is an excellent things that in a reasonable environment you can make some compromises. >> next question. islamic i want to go to somebody that hasn't -- john in the green tie.

>> thank you very much. my question has nothing to do with asia although that is the other 800-pound gorilla in the room and it's interesting to hear about the public-private partnerships because i can assure you they do work extremely well. i wanted to ask a more fundamental question of the panel because in the previous panel we talked about to stand at the argument on its head and consider what should be done to the different sectors to function effectively. in my country we have seen in an almost unprecedented way facing terrible economic crisis the formation of a coalition government. people we never thought would come together being forced to come together and i would like to ask the panel in their view the present political system works or is working so poorly that the concept of perhaps the redesign along with the coalition may be in the short brothers and long-term is

feasible. >> i think it is a good question. you could have also mentioned germany, spain, the netherlands, to some extent france. all of these countries have taken bold decisive action, all of them with great leadership and they are making progress. some of them made remarkable progress in the netherlands especially. and yet, the u.s. sits around throwing bombs at each other. i don't think we've done a single significant thing in the house and senate that they agree to that we can agree to spend more money and to cut taxes, but to actually take decisive steps to solve this problem i don't think we've done anything. the idea of changing our form of government going to a parliamentary government or some such thing scares me to death and i did it scare c, too because you never know what you're going to come up with, so i don't think that's possible. i think the real problem is the mindset of the leaders,

political leaders in america today. there was a time people realize we've got to get this done, we have to cooperate, we will get the votes and we will get it done and there's all kind dix hills of that in the past and that mind set of we are going to get a deal i think is really evaporated and there is a lot more name-calling and a lot more challenging the other side the most fundamental philosophical way, and you don't cut deals so this is a task we will see the next couple of years. there are indications in the way you said i recognize that as often as some. my give it to the political system hasn't been up to it so far, that's for sure. >> let me add to that comment because i travel a lot and spend a lot of time in the u.k. for a variety of meetings and it's been fascinating to watch the transition with a coalition government and i've asked myself that very question with something like that be possible

here in the u.s., and i don't think so to be quite blunt about it but here is where i think the opportunity of prizes. when we as a country are met with a massive challenge we rise to the location but the question is why we have to wait for that moment as a challenge to be able to act. we had an incident here in the states a few days ago, and it's just absolutely unthinkable. the question is how much of this is a moment for us to now step back and think what do we need to do differently and that is a lot of conversation going on around that. government-wide i don't think we are going to move to a coalition way of operating but i do hope we can maybe diminish the

conversation and talk about how we can cooperate to solve the problems of these need to be addressed now because time is just not on our side. islamic in the 11 to follow-up with the center on this point? >> i'm reminded of something a former prime minister of your nations that about us. of course his mother isn't american. he said the americans can be counted on to do the right thing. once the exhausted the alternatives. [laughter] and so, we may be close to that point. we are not going to change or former government to go to a parliamentary system but we may reform the command structure that we have to rely mentioned some things in the senate. we may change some of our budgetary process to find a constitutional way to give the executive some line-item veto authority as well as governors have. that is a constitutional issue that there are ways to deal with it. media other things in the long run that put us on a better fiscal half in terms of changing the balance. but the one thing i would say is that from time to time we have a

two-party system that leads to more stability. we don't act as quickly but, you know, there is something to be said for both. i would say a couple of the other european nations with the exception of germany i'm not sure i would change the fiscal situations with any of them. your country is taking an aggressive steps to you with your problem but it is at bigger and our problems would not think that gets to an institutional superiority in your government as opposed to our form of government. but the point i want to make this from time to time when dysfunction has gripped our form of government it isn't an known for a third party or if they're forced to come along. i remember ross perot in '92 he garnered about one-third of the vote running on getting the deficit down dealing with our fiscal house in order and all that kind of thing. the two major parties then tend to collect the message of third party so and not predicting we will have a third party or that sort of thing that i do think

the two parties get discredited you might see the third force a rise which would attract the support of the american people and the workforce one of the two major parties to take action. >> i think our version of coalition government is called divided government and the works to get some things done. we had divided government from 95 through 2000 and we did balance the budget and get it into surplus and past welfare reform and a few other things. that may happen again. that is one of the reason we are not on as bad a situation as we might think. >> since 1960 we've had much more divided government than one-party government but that does raise the question i wanted to direct back to senator bayh and may be wrong as well. there seems to be a short window in this congress for it because you're going to have a presidential election in two years which means we are going

to start having a presidential election this spring, summer or early fall, and at one point on the republicans fight the nomination process starts up. and at some point, the game becomes anything the president wants to do, the republican candidates won't want to do and will make it difficult for the republicans in congress to support any sort of deal with the president. we saw this in the lame-duck session where immediately once the deal was done mitt romney one of the most moderate republicans potentially in the race immediately condemned it even the conservatives and republicans in the deal in recent so tell us a little about that time sequencing in the next year of the divided government and when does the window closed we talked about the action forcing even the of the debt ceiling. what is the gaming look like between now and memorial day or the latest labor day? >> i think six months is about right to have three different kind of politics going on. one will be presidential politics and those who seek the republican party nomination have

to go to places like iowa, south carolina, new hampshire and present themselves to the most ardent of the parties intend to be more conservative, more archaeologically intransigent than even the republican electorate as a whole, so the challenge for them is how do the appeal to that tea party element and the same time not alienate independent and moderates? my guess is dillinger award winning the nomination first and be with the senate second, so for them they will be of the kind of opposing almost everything the president does. in the senate, we've got a number of closely at 53-47 and there are at least that many, enough seats in place that the senate will be in play so if you are mitch mcconnell in the minority were going to be looking at okay how do we position ourselves to try to maximize our chances of succeeding in the upcoming election and that is going to lead to more opposition than not. they will say it worked well the last couple of years if we agree with the president only three

things can happen. it works and he gets the credit, it doesn't work and we get the blame with him, it's just not an attractive way to go some more opposition than not since we require 60 votes that makes it difficult to move things to the senate. but the third thing i was going to mention and this is more the optimistic side you have the politics of the house where we have a new republican majority, and as ron was pointed out some of them are fairly ideologically fervent and so forth, they are going to bump up against reality now and eventually the leadership -- this is my view on john boehner, he's practical at the end of today, they can't go to the electorate two years from now with nothing to show for their leadership. it's concentric circles. for the concentric circles with the president wants and what the house and majority might support overlap there is where you can get some things done and both sides have an incentive to do it because the new house isn't going to go to the people to say we did nothing but argue for two

years. we argued what we actually got some things done. >> '95 and '96 that is exactly what happened. republicans said no to almost everything and aren't going to compromise and then people sat around and said wait a minute, we haven't done a damn thing. we have a huge agenda contract with america and republicans started dealing with democrats and passed a lot of legislation to the get go to the electorate and say that they had made achievements which indeed they had. >> if you look at the polling the last election it was a referendum on the status quo in washington, number one, and to a somewhat lesser extent something some of doherty had done that were viewed unpopular early in the public. it was not an increase of the republican party generically or specific agenda by the republican party. so if people are equally unhappy two years from now they're constantly voting the rascals out. if they have nothing to show they will be the new rascals so if they have something to show

for this they will be the victims of. >> we have time for one more question before the last panel. let's go to the gentleman of the we in the back. >> thank you very much. i retired from the state government of california 2006. first to ask this question or make a comment of senator bayh talking about the british, trust me the united states position is worse than the british. so i give you a metaphor from africa. when iraq is about to take its last breath it shakes its tail so i hope you guys will start thinking the united states is in a situation and you have to stop using clich formulas of explaining government efficiency and effectiveness and come up with a drastic way to solve your problem of the rice -- i've been

here since 1967 to read this is the best country to be that you're making a mockery of it. thank you. >> i don't want to end without a question so if we can get one more question. >> it sounds like the voice of the electorate from this last election. [laughter] >> some of the comments made about tax policy reform having a more pro investment pro savings kind of a corporate tax and things like that. i see measures like that is providing the policy certainty on the private-sector in the future which i think is the key, and i think that goes beyond budget cuts. islamic is there a question or so? >> the feasibility and the time of doing something like that and having real tax policy reform on those lines. >> as with the ways and means

committee staff in '86 when we passed what most think is a spectacular tax bill, the economic textbook broaden the base, and lower the rate. there's always appetite for that. dave camp said he could go for that. the speakers at several times said he doesn't like all these tax expenditures which is essentially broadening the base. i can tell you that is annexing pulled the bill and there's no way you could pass and get. i don't know how that happens because the lobbyists were everywhere. everybody got a score and the lobbyists were everywhere trillion to carry the bill and up until the last minute and the smart money was the bill is going to die. maybe you feel differently about that. i think there was always an appetite for the tax reform. if it is defined as broadening the base and lowering the rate. but the competition this time is you've got to do it to raise more revenue.

that's a tax increase therefore you get the anti-tax fervor than you get from the republican interest groups so i will not predictable happened but the other things we talked about at the terrace at least a chance. >> i think the goal of these things it depends on whether there is a sense of crisis that overrides the army of lobbyists who will be there to oppose everything and that's when to take a lot of leadership as you said. estimate the odds against anything passing in a divided congress are almost by definition less than 50/50. but i get back to the debt ceiling and the fiscal crisis that we face there is a precipitating event and the republicans and house, some democrats in the leadership position some representing the president have mentioned it tax reform as something they would like to see get done in that context so i would like to put this house haulier than normal because something has to get done on the debt ceiling and if this is one of the things that can get done to kind of make people feel better about what

has to happen it won't just be take your medicine. there will be a pro growth of government to this that some of the business can also find to be a positive thing pumas bin laden was going to say one other thing about the business community, one of the elements of tax reform we talked about in the context of the fiscal commission is what we could do to make the business community more competitive globally. so some of the tax reform options have elements that contribute. >> with that i want to thank the panelists first and foremost who were terrific on this and then you, the audience for terrific question is staying with us for the day. we have two more panels left. the next we are going to go right into it, so we really do request people stay in their seats so that we can grow quickly into the next panel. [applause]

[inaudible conversations] more now on how states are dealing with their budgets. from washington journal this is about 45 minutes. john is the deputy director of the center on budget and policy priorities state fiscal project. weome to the prorogram. >> guest: good morning.gr yourost: your group just wrote faheyticle, wrote a report rather updated in december was called the states continue to feel the recession called the 's continuing to feel the recession's impact. what is the current fiscal state of the states? are they getting better or worse? >> the question is what you do

when the bombs drop out? the state and the people that served up in crushed by the national recession and its aftermath. state revenues have never collapsed to the point they have in the past few years. what that really means is people's needs are rising in an economic crisis, and the resources available for states to meet the needs have shrunk dramatically. people are starting to feel that in all kinds of ways, whether it is college tuitions making it almost impossible to go to college and get a good job, or whether it is seniors and health care, cutting off school days or closing libraries, laying off cops and firefighters. at every level people are feeling this. it is really causing quite a problem. not just for the people but the national economy as well. when the private sector is faltering, state and local government spending is an important drive for the economy. to the extent that which this

crisis persists, it can threaten recovery and it will persist because the sheer is looking like the worst year yet, even though revenues are said to pick up a little bit. the help the states have gone is almost gone. -- the help the states have gotten is almost gone. host: tell us a little bit about some of the remedies that governors, either democrats or republicans, are trying to come up with in order to set their state fiscal policy right. guest: that is certainly a bipartisan crisis. what has been happening over the past couple of years is first states have cut spending dramatically if. they have cut spending so much they're reaching a point where it threatens the economy and

threatens the future. most they have also raise revenue. they have said we need a balanced approach. there is no single way to solve the crisis this serious. they have also been raising revenues. states do not have a lot of options in tough times. they have to balance the budget from year to year. they cannot read monday so there is no either or choices. money.n not print monethey cant

in one state the governor is saying no new taxes and the other the governor is saying maybe new taxes if the citizens want them. guest: i think that what governors will find out. a lot of governors ran on the platform of cutting taxes. when you are an office and have to make the numbers add up, traditional you see people take a different approach in realize if they try to solve the problem by cuts alone, you do not make the investments you need and do not create the building blocks of a strong economy. host: we want to look at some of

the state's balanced budget requirements. unlike the federal government, every state except vermont is required to balance its budget by constitution or statute. states generally cannot pay for ongoing expenditures using borrowed funds. tell us about the exception of vermont. and guest: i am not sure why that is. require a balanced budget. vermont is the only one that does not have that requirement. host: the states generally cannot pay for ongoing expenditures by using borrowed funds. if they cannot borrow the money, and some are insisting they will not raise taxes, where will the cash come from? guest: they will cut and cut and cut. the quality of life will supper.

as i mentioned, states cannot have a lot of options. it revolves around a combination of cuts and taxes in using reserves. most aids went into the recession was very healthy reserves. texas, which has the biggest reserve in the country, so far refusing it. you see a lot of help from the federal recovery act. host: we are talking with john ure, the deputy director of uthority.'s fiscal acti caller: i heard very little about how the paybacks of the billions have been paid back. what fund does that go into? what was it supposed to do?

hos guest: it was supposed to help financial institutions that were in huge trouble, and for the most part it has done that. host: next up as philadelphia, pa., on the line for democrats. philadelphia, go ahead. caller: one of the major issues is how they have allowed k street to run around. as ip to powerful leadership in washington, oftentimes i hear from them and asked them the question do you think you will maybe see a secretary of commerce or secretary of education or even a deputy secretary that is a regular person that has experience? most of the time they say no,

you have to be connected to get those types of positions. i think one of the things -- i think it is one of those things hurting as in this country. guest: they are usually people that have a reputation. i think that the state level you see a lot of people filling positions that are there more for their qualifications and their connections. not everyone is standing in line to be a stakeout officer at a time when state budgets are in the deepest trouble they have ever been. i can see where you might say that is a problem, but we have to hope for good people. host: we had this twitter message that said this -- guest: that is a good point, and

at the state level as well. some of the states that are in the first from right now are states that during the boom years of 1990's decided to cut taxes. one of the things we have to worry about as the recession lifts and finally revenues returned to where they were before is the ability to cut the taxes again. to cut them, it is kind of like saying to someone at the bottom of the deep hole, i have a shovel for you whenever you need a ladder. you cannot make the problems worse. the national economy would be better served if the bush tax cuts had not been extended. we all know what had to happen for the deal that got worked out to happen. states need to take a look at this and be careful. this is not the time to be failing to make investments. if you start to cut taxes in a crisis like this, you could face

the consequences. host: next up the silver spring, maryland. caller: i disagree with you there. i think the millionaires and not be taxed as high as they are. if you look at maryland specifically, they had hundreds of hundreds of million dollar shortfalls in the budget. that is mainly because we have millionaires leaving our state. they have to remember 5% of a millionaires income is more than the average person's 10%. in you have to keep that in mind. second of all, you have to keep in mind to are the job makers? the people that are the billionaires' are the ones that create jobs in this country. you cannot deny that. 50% of small-business owners

makeover $250,000 per year. they will be affected by the tax. we all know small businesses are the top breeders in the nation, so how could you possibly say that raising taxes on these guys would somehow benefit america when ultimately they will be the ones making the jobs and the decisions about who to cut in hire? hirand who to guest: i will respectively disagree. there was a study showing that millionaires are not leaving the stage. and they were moving down because of the recession and when it did to their investments there were not millionaires anymore. they're not leaving. a lot of studies have shown the same thing, when you raise taxes, some people will leave it. the vast majority will stay in the state and this they will get a huge net gain in revenues that

can use to provide public safety in schools and everything else. a lot of people create jobs. i do not want to say because you are a millionaire, you are creating jobs. and you may be investing the money overseas. becausesing jobs middle-class people are getting laid off by corporations whose profits are increasing. i do not think we can say this as simple as raising profits on the wealthiest people, there will be a downside. host: next up is port charlotte, florida. mike on the line for independence. go ahead. caller: i have a comment that leads to me a question. the gentleman is misinformed about what is going on. here is the thing.

how do you justify the tax structure? is there a way to adjust things so there would be a flat tax. i understand this has been proposed before and there was a lot of support for it, but it went nowhere. i believe a flat tax is the way to go. it would eliminate all of the class controversy, and basically disruption into what is going on in everyone's lives. secondly, i would like you to address the fact that most state taxes in certain states, and how does that affect your opinion on how this goes as far as states' responsibilities? guest: good question. , but youirness issue ma

make a good point. gov. christie said we all have to sacrifice, and then he failed to renew a tax increase on people making over $1 million and raise taxes on the poorest people in the state. you make a good point there. those states that have an income tax have a graduated income tax. impactlps neutralize the of sales taxes and property taxes, which are not based on the ability to pay. some states have no income tax or sales tax. new hampshire has neither. when it comes down to fiscal responsibility, the bus system is for the state to have a sales tax and income tax. taxes that can grow with the economy. a lot of states that have sales

taxes have not updated them in your so they reflect a time when people spend more time on things and the and in services. -- than on services. we found that if states raise their tax rate by 1% and only $500,000 perg $5,00 year, there will be additional revenue. host: our next call for jon shure comes from detroit, michigan. matthew on the line for democrats. caller: i would like to know if vermont has a balanced budget. they're the only one without a mandate. is there budget balance? host: on the front page of "the detroit press" they're talking

about politics works that could be cut. -- the holiday perks that could be cut. state workers get paid days off on the day after thanksgiving, veterans day, and the eaves of christmas and new year's day. what you think about that? if they were adjust that to help balance the budget, how would you feel about that? caller: i think there are better ways than that. i do not think cutting people's holidays are a the way to go, but that is my opinion. guest: thank you for the call. i will be in detroit later this week, so please work on some warmer weather if you can get it. i do not know why vermont does not have the same requirement. they're really in the same situation as most dates. they have seen the revenue

collapse and they're trying to deal with it. host: in the article it says the overtime cost of each holiday is about 1.7 $5 million. -- is about $1.75 million. guest: i like to think that is a lot of money, but in the course of the state's budget, that is not a lot of money. michigan was in a recession before we had a recession. and obviously auto industry caused a lot of problems in that state, so they're having a tough time picking out. host: kentucky on the line for republicans. go ahead. and callecaller: the question is what makes your guest think that revenues will turn to the level that they were? i think we're in for a long line

of decline as far as the economy is concerned. we have given away most of our productive ability in this country. guest: i take a lot of issue with that question. usually after recession ends, it takes states to to three years for the revenue to recover. the last thing that it's good again after the recession is employment. if you are not working, you taxes. paying it usually takes two to three years after a normal recession. this is the worst recession since the great depression. how long will it take this time? the answer is nobody knows. i have heard people say it will take a decade. we know this will be a really bad year as governors are proposing the fiscal budget that will start july 1. it is an open question as to how long it will take to come back and what it will look like when we do come back. "the new york times"

they have this about illinois. host: what it seems to be

saying is that businesses are not necessarily at first to raising taxes, but want a stable environment to do business. guest: when illinois raise taxes last week, some state governors made some smart the comments about bringing business to their state. what businesses need are trained workers. they need a clean environment. they need a good transportation system. those are the building blocks for transparency. illinois did take a step in the right direction, and the taxes are so highly competitive with its neighbors. host: more numbers. states have close budget shortfalls over $430 billion for fy 2009-2011 combined to

balance the budget. they had to address 2011 gap's totaling $130 billion, or 20% of budget's in 46 states. guest: you cannot make it sound more dramatic than it is. it has really been an incredible crisis. it does not happen in isolation. at the same time this is happening, people's needs are going up. more people are on food stamps and have lost their jobs and health care. never has it been more important to be educated and get a good job just since the recession began, demographics are an issue. 7000 more children in school. you cannot base this crisis only by saying if we tighten our belts. the people who say that it is really be careful what you wish for, because since the recession began, 400,000 state and local government workers have lost their jobs. and that can send a ripple

effect of job loss throughout the economy. host: state budgets and taxes, according to your organization, state tax collections adjusted for inflation are now 12% below pre-recession levels and over 30 states have raised taxes to at least some degree, in some cases quite significantly. guest: 'e starting to see revenues go up a little bit. states are saying our revenues are coming up above expectations. that means they have gotten good at being pessimistic when it comes to estimating what revenues will be. we do think that is stopping. it is kind of like you fell off the top of the building and you have worked your way back up to the second floor, so you have a long way to go. host: jon shure. host: jon shure.