federal reserve chairman ben bernanke said today that the u.s. economy should grow in a more rapid pace this year. also warned it will take several years before the unemployment rate falls to historical normal levels. speaking to an audience of reporters at the national press club in washington, d.c., mr. bernanke talked about the national debt and said the federal budget is on a, quote, unsustainable path. this is an hour. >> i cover business of the economics dues for the associated press and i president of the national press club. we are the world's leading professional organization for journalists and we are committed to the provisions future through

our programming and by fostering a free press worldwide. for more information about the national press club please visit our web site at would back press.org, you can also find information about how to donate to our library. for all of our members worldwide, i would like to welcome our special speaker today and all of those attending the event include guest of the speakers as well as working journalists. i would also like to welcome the c-span and public radio audiences, and you can follow the conversation on the twittered with the hash tag npslunch. i will last as the questions as time permits and i would now like to introduce the head table guests from your right. we begin with keith epstein managing editor for the center of public integrity with the washington post investigative fund. space is a producer with cnn. rick bunning, one of our former presidents up washington bureau chief of the houston chronicle. donna leinwand also a former nbc

president. timothy all in is the washington economic senator for reuter. and michelle smith, assistant to the chairman with the federal reserve. melissa chavanel, over the podium, with news hook media and chairman of the speaker's committee. we will skip the speaker for a minute. bob carden with cardin communications and a speaker committee member who organized today's event. thank you. david skidmore, public affairs with the federal reserve board. allyson fitzgerald, a reporter with bloomberg. she's also a vice chairman of the npc committee. during the hirsh, nightly business report. and steve betner with market news international. that's our head table and you can give some applause. [applause] >> it has been quite a journey for our guest speaker today. the middle class some of the

pharmacist and schoolteacher, he has been an economics professor, the head of the council of economic advisers under president bush, and now our nation's chief central banker. he became the chair in 2006, just in time for the great recession. he was leader renominated by president obama to serve another four year term as chairman. reflecting his stewardship in the face of crisis, he was named time magazine's man of the year and 2,000 lung. but the journey started well south of washington, d.c.. if you ever driven south on i-95 you can't help but notice the billboards and screening letters as you approach the border between north and south carolina, talking in unusual roadside enterprise known as quote kosoff of the border." that is where our guest waited tables after graduate from high school in south carolina. [laughter] he got his bachelor's and economics from harvard and a ph.d. from mit. he taught at princeton and stanford as well as nyu and mit. along the way he became an expert on the causes of the

great depression, it that expertise was key and responding to the 2008 economic meltdown. mr. bernanke's willingness to use the power of the fed to intervene in the financial markets is credited by many with keeping the recession from becoming the great depression. those measures have been controversial. the texas congressman ron paul is reintroduced legislation the would require a full audit of the fed. and his son, rand, from kentucky is joining and this legislation is seen as a challenge, the fed's goal and the tradition of political dependents. some conservative economists and even some of his fellow governors think mr. bernanke's efforts to have gone too far, including the decision to inject another $600 billion into the economy to foster the recovery. the issue was whether the fed is courting inflation as it responds to persistently high unemployment. just today, the european central bank expressed the view that longer-term crisis pressures remain contained, despite rising

energy and commodity costs. the president repeated the very close monitoring of inflation is warranted. i am particularly grateful that chairman bernanke agreed to be our first one to nseries speaker of my national press club presidential term. please give a national press club welcome to chairman ben bernanke. [applause] >> thank you. thanks, and good afternoon. i am very pleased to have the chance to be here of the national press club, and i am especially glad to have a conversation with journalists who write about economic policies from the nation's capital. your job is not easy but it is essential. virtually every american is affected by developments in economics and economic policy. the contemporary economic issues are highly complex and a few non-specialists have the time for the background to master

these issues on their own. the public has to rely on diligent reporting, clear thinking and lucid writing of reporters determined to go beyond the dillinger bumper stickers and sound bites to help people understand what the need to know to make good decisions, both in their personal finances and at the holes the couples to read these our responsibilities and the journalists i know to country seriously. so thank you for what you do. today i'm going to provide a brief update on the economy and how i expected to evolves in the near term and then all i will turn to some implications for monetary policy. and finally, i would like to briefly discuss some of the daunting fiscal challenges that we face as a nation. the economic recovery that began in 2009 appears to have strengthened in recent months. although to date, the growth has not been fast enough to bring about significant improvements in the labor markets.

the early phase of the recovery in the second half 2009 and early 2010 was largely attributable to the stabilization of the financial system, the effect of the expansionary monetary fiscal policies and a strong boost of production from businesses rebuilding their depleted inventories. the economic growth slows last spring as the impetus for the inventory building in the fiscal stimulus diminished and as problems roiled the financial markets. more recently however, we have seen increased evidence that a self sustaining recovery consumer and business spending may be taking hold. notably we learned last week households increased their spending in the fourth quarter in real terms at an annual rate of more than 4%. although a significant portion of the pickup or such a strong sales of motor vehicles the consumer spending looked to have been reasonably broad based. business investment and the new

equipment and software also grew robustly over most of last year as firms replace aging equipment and as the demand for the products and services expanded. in contrast, in the housing sector, the overhang or the vacant and foreclosed homes tends to weigh heavily on both home prices and residential construction. overall, however, including household and business confidence accommodative monetary policy and more supportive financial conditions, including an apparent increase in the willingness of banks to make loans seems likely to lead to a more rapid pace of economic recovery in 2011 than we saw last year. while the decatur suspended production had on balance been encouraging the job market has improved only slowly. following the loss of about 8.5 million jobs in 2008 and 2009, private sector employment showed gains in 2010. however, they were barely

sufficient to accommodate the inflow of recent graduates and other entrance to the labour force and therefore not enough to significantly reduce the overall allin plan agreed. recent data provide ground for optimism on the employment front. rick symbol an issue for a mint limit insurance of generally been trending down and indicators of job openings in firms hiring plants have improved. even so, with output growth likely to be moderate for awhile and with the reluctance to add to the payroll, it will be several years before the unemployment rate is returned to more normal level. until we see a sustained period of strong for job creation, we cannot consider the recovery to be truly established. on the inflation front we have recently seen significant increases in a highly visible prices notably gasoline. in the prices of many commodities have risen largely as a result of the strong demand

from the fast-growing emerging market economies coupled in some cases with constraints on supply. nevertheless overall inflation remains quite low. over the 12 months in december the crisis for all the goods and services purchased by households increased buy only 1.2 per cent down from 2.4% over the prior 12 months. to assess the underlying trends and inflation the congress also followed several alternative measures of inflation. one such measure is the core inflation that excludes the volatile components and therefore can be a better predictor of their overall inflation is headed. core inflation was on the 0.4% in 2010 compared with around 2.5% in 2007, the year before the recession began. wage growth slowed as well with average hourly earnings increasingly 1.8% last year. these downward trends in the wage and price inflation are not surprising given the substantial slack in the economy.

in some although economic growth will probably increase this year, we expect the unemployment rate to remain above and inflation to remain persistently low level of the federal reserve policymakers have charged to be consistent over the longer term with our mandate from the congress to foster maximum employment and price stability. under such conditions the federal reserve would keep up the east and monetary policy by reducing the target for the short term policy interest rate. however, the target range for the fund has been near zero since december, 2008 and the federal reserve indicated economic conditions are likely to work in exceptionally low target rate for an extended period. as a result for the past two years we've been using alternative tools to provide monetary accommodations. in particular over the past two years the federal reserve has further east monitoring conditions the purchasing longer-term securities on the

open market. from december, 2008 to march, 2010 we purchased almost $1.7 trillion in longer-term treasury agency and agency mortgage-backed securities. in august, 2010 we began reinvesting the proceeds from all securities that richard or redeemed into the longer-term treasury securities. so the security holdings roughly constant. another the same time we began this to signal to the markets we were considering providing additional monetary policy accommodation by considering further asset purchases. in early november we announced the plan to purchase an additional $600 billion in the longer-term treasury securities by the middle of this year. all the purchases are settled to the banking system with a result of the deposit reinstitution told a very high level of reserve balances with the federal reserve. although large-scale purchases of larger securities are a different monetary policy tool, then the more familiar approach

of targeting the federal fund rate, the two types of policies affecting the economy in similar ways. conventional monetary policy works by learning market expectations for the future path of short-term interest rates which reduces the current longer-term interest rates it contributes to the easing of broader financial conditions. these changes by reducing the borrowing costs and raising asset-price bubbles for household and business spending and increase economic activity. by comparison, the federal reserve purchases of longer term securities have not affected short-term interest rates which remain close to zero, but instead put downward pressure directly on the longer term interest rates. by easing the conditions in credit and financial markets, these actions encourage spending by households and businesses to essentially the same channels as conventional monitor a policy thereby strengthening the economic recovery. fisa a wide range of market

indicators supports the view to the federal reserve security purchases have been effective at easing financial conditions. for a simple, since august when we now start the policy of reinvesting the securities and signaled that we were considering more purchases equity prices have risen significantly, volatility in the equity market has fallen a corporate bond spreads have narrowed and inflation compensation as measured in the market for inflation securities has risen from low to more normal levels. yields of five-to-10 treasury securities initially to point as the market's priced and prospective purchases. these subsequently rose as investors became more optimistic about economic growth and as the traders still lack their expectations of the future security purchases. all of these developments are what one would expect to see when will the republicans more accommodative. in a more conventional means. interestingly, these developments are also remarkably

similar in the following months in the march 2005 announcement of significant expansion of the security purchases. the markets responded in similar ways to each of these policy actions when this credence to the view that these actions had the effect on the financial markets and are thereby providing said the tickets support to job creation and the economy. to my colleagues and i said we would review the purchase program regularly in light of incoming information and will adjust as needed to promote maximum employment and stable prices. in particular, it bares emphasizing that we have the necessary tools to smoothly and effectively exit from the asset purchase program at the appropriate time. in particular, our ability to the interest on reserve balances will allow us to put upward pressure on the short-term market interest rates and thus the tight monetary policy would

required even if the bank reserves remain high. moreover, we've developed additional tools that allow us to drain or mobilize bank reserves as we facilitate the smooth withdrawal of policy accommodations when the conditions warrant. for and by redeeming or selling the securities we told. let me turn to the fiscal policy. fiscal policy makers also face significant challenges. the federal budget deficit has expanded to an average of more than 9% of the gross domestic product over the past two years. up from the average of 2% of gdp during the three years prior to the extraordinarily wide deficit largely reflects the weakness of the economy along with actions that the administration and the congress took to ease the recession and the steady financial markets. however, even after economic and financial conditions return to normal the federal budget will remain on an unsustainable path with the budget gap becoming

increasingly large overtime unless the congress enacts sycophant changes in fiscal programs. for the civil come under plausible assumptions of fiscal policies might evolves in the absence of major legislative changes, the congressional budget office projects the deficit to fall from about 1% of gdp currently to roughly 5% by 2015 but then to rise to about 6.5% gdp by the end of the decade. after that, the cbo projects the budget outlook to deteriorated more rapidly with federal debt held by the public regionalist 90% of gdp by 2020 and 150% of gdp by 2013 from about 60% at the end of the fiscal year 2010. the long-term fiscal challenges confronting the nation are especially daunting because they're mostly the product of powerful underlying trend is, not short-term temporary factors. the two most important driving forces to the federal budget are the aging of the u.s. population

and rapidly rising health care costs. indeed the cbo projects the federal spending for health care programs which include medicare, medicaid and subsidies to cruce purchase health insurance and new entrants exchanges will roughly double as a percentage of gdp over the next 25 years. the ability to control health care costs while still providing high-quality care to those who need it will be critical for bringing the federal budget onto a more sustainable path. the retirement of the baby boomer generation will also strain social security as the number of workers paying taxes into the system will rise more slowly than the number of people receiving benefits. currently there are about five individuals between the ages of 20 to 64 for each person age 65 and older. by 2013 by most of the baby boomers will have retired the ratio is projected to decide about three. overall system and pressures as a seat with social security are

considerably smaller than the pressures associated with the federal health care programs but they are still mobile. the projections by the time do not account for the likely economic effect of high debt and deficits. but the government debt and deficits were to grow at the pace and envisioned the economic and financial effects would be severe. sustained high rates of government borrowing would drain the fund away from private investment and increase our debt to foreigners with adverse affects on the u.s. income, output and standard of living. moreover, diminishing the investor confidence the deficits will be brought under control will ultimately lead to the sharply rising interest rates on government debt and potentially broad financial turmoil. in a vicious circle, i rise in interest rates would cause debt service payments on the federal debt to grow even faster, causing further increases in the debt to gdp ratio making fiscal adjustment all the more

difficult. how much adjustment is needed to report to be cut restore to the united states? to help answer this question it is useful to apply the concept of the primary budget deficit, which is the government budget deficit excluding interest payments on the national debt. to stabilize the ratio of the federal debt to the gdp of convenient benchmark for assisting fiscal stability, the primary budget deficit must be reduced to about zero. under the cbo projected that i noted earlier the primary budget deficit expect to be 2% of gdp in 2015 and then to rise almost 3% of gdp in 2020 and 6% of gdp in 2013. these projections provide the adjustments the will be necessary to attain fiscal sustainability. to put the budget on a sustainable trajectory, policy action either reductions in spending or increase in revenue or some combination of the two must be taken eventually to close these primary budget caps.

so by definition, the unsustainable trajectory of the deficit and debt is a cbo outlined cannot actually happened because creditors would never be willing to lend to a government whose debt relative to the national income is rising without limit. the economist herbert stein simply described the situation he said if something can't go on forever it will stop. [laughter] one way or the other fiscal adjustments, sufficient to stabilize the federal budget must occur at some point. the question is whether these adjustments will take place through a careful and deliberate of process that ways priorities and gives people adequate time to adjust to changes in the programs or tax policies or whether the needed fiscal adjustments will be a rapid and peaceful response to an elite or financial crisis. acting now to develop a credible program to reduce the future deficits would model the enhance economic growth and stability in the long run, but could also

yield substantial near-term benefits in terms of lower long-term interest rates and increased consumer and business confidence. plants recently put forward by the president's national commission on the fiscal responsibility and reform and other prominent groups provide a useful starting point for a much-needed national conversation. although these proposals differ on many details, they demonstrate the realistic solutions to the fiscal problems are available to the of course the economic growth is affected not only by the level of the taxes and spending, but also by their compositional structure. i hope that in addressing our long term fiscal challenges the congress and the administration will seek reforms to the tax policies and spending priorities that will serve water only to reduce the deficit but also to enhance the longer term growth potential of our economy. for a simple, by reducing disincentives to work and save by encouraging investment in the skills of the work force as well as the new machinery and

equipment, by promoting research and development and by providing necessary public infrastructure. our nation cannot expect to grow its way out of our fiscal imbalances. but a more productive economy will ease the trade off that we face. thanks for your attention and i look forward to taking your questions. [applause] >> thank you, mr. chairman. first of all we are extremely grateful for your decision to return to the national press club where you were here just a short time ago. we need it is important as a journalism organization that we have transparency in the government and to give reporters and others, the american public the opportunity to hear your thinking and respond to questions and real time as you are doing that, so think you. in that regard i ever see these discussions have also sort of been occurring behind the scenes at the fed with your colleagues and there was a notation from a video conference of october 15th

which said, and i love how some of the official languages displayed here, but it is participants discuss whether it might be useful for the chairman to hold occasional press briefings and provide detailed information to the public regarding the committee's assessment of the outlook and policy decision making that is included in the committee's short statements. so it seems as if that is a very official way of saying should we be holding more news conference, should we go into places like the national press club. your colleague and central banking so to speak in europe told the news conference, what is your thought about regular news conference this as opposed to the piecemeal approach we are seeing right now? >> i think that sentence spoke for itself, don't you? >> absolutely. [laughter] >> let me say first -- transparency is very important.

it's important because we live in a democracy, and the public needs to know what you're doing and why we are doing it. it's important because our policies work better if markets participate and understand the actions we are taking and what is likely to cause changes in those policies and the like. the federal reserve has come at enormous distance. you may not be aware but in 1994 the fed didn't even announce when it changed the rate target and now of course we have an after meeting statement with folks of like the european central bank in almost any other bank we have detailed minutes that release the weeks after the meetings. we release full transcript of a five-year lag. we have extensive speeches and to some of these and other mechanisms, so we are a transparent central bank and we have made a lot of progress in that front. on press conferences, it has been a difficult decision as we thought about it. on the one hand, the real time transparency is very important and valuable piece of it all the other hand we don't want to

create unnecessary uncertainty and volatility in the financial markets by saying things that may be misinterpreted if they are to ad hoc. that being said, as i said, i put a lot of vow to the entrance currency. we moved in the direction that we are looking very seriously at whether we have a committee in fact headed by vice chair janet yellin looking at the chain of command occasions and i know they're looking seriously at the idea i would give a more regular press conference and the hope that would further increase the fed's transparency. >> suggest to update us on where that stands, how far into the future do you think a decision might come on that? >> not too far -- [laughter] the committee is working on it, and i think they will have some recommendations pretty soon. but never comes out the words or to the additional steps to make us more transparent and clear about what we are doing and they will share those with us, right? >> absolutely. >> the next question is sort of about the personal side of the

question and that is this comes from the audience. one of the most frustrating things about being the chairman of the fed is in the world is hanging on your every eyebrow and the possibility of the financial market, i eat exuberate as your predecessor had to deal with way back when. >> and what is your that seriously. this is a very challenging job that we face, a very challenging period. we have had enormous problems and issues with the financial markets and financial stability we have had to address. i believe the address them adequately in terms of stabilizing the system. now we have to implement a new set of laws rules to make sure that in the future we don't have this kind of instability again. at the same time, the economy although it does look to be growing more quickly is still in a deep hole and very far from

where we would like it to become a and we need to manage policy of monetary policy and as i talked about today fiscal policy to try to bring us back to the employment and get back to work in a way that is consistent with stability and in particular the continued low inflation so it is a challenging job and i have a great staff at the federal research and great colleagues on fomc and in that respect is challenging and interesting from my perspective but it's frustrating because it takes a long time. it takes awhile to meet the progress in the economy that we would like to make. >> from today's headlines question from the audience do you believe any of the growing unrest and lead the world especially to nisha and egypt is linked to higher food prices which the questioners as results from the fed's large scale purchases. >> i'm not going to address the first part of that. i don't have much insight into the sources of the unrest.

i would guess thinking about asia for example but there's a lot going on including issues about democracy and representation and the broad economy and the like so i'm not sure i accept the premise of the question of what about food prices in general. when you talk about other prices you need to talk about the slide demand, and in some cases sued for civil there are constraints on supply and there have been issues and so on but the most important development globally is the fact the world economy is growing more quickly. particularly in the emerging markets. we have essentially to speed recovery where the industrial economies like the united states are growing relatively slowly in the attack the industrial economies are just now coming back to the level of output and demand we were in before the crisis three years ago. so the countries are growing slowly the emerging markets are growing much more quickly. now, the federal reserve's three

policy is aimed at stabilizing the united states economy and in the united states i don't think anybody can argue the economy is overheated and it is going to quickly it is short of resources. we are using our policy to address stability in the united states. so the question is where is the demand coming from? it is most the coming from the emerging markets. the markets are growing quickly for a couple of reasons. one is the factors will long-term trend for the emerging markets to develop quickly and that of the whole is very positive development because it means millions of people who are in poverty are not moving closer and closer to a more middle class standard of living which is of course a very good thing but as people's dalia it's become more sophisticated and they eat more fish and beef and was greens the demand for food and energy and the like grows and that is the primary long-term factor affecting the

price of commodities and food. the other factor is that in some cases some of the emerging markets are facing inflationary because their own economies are growing perhaps even faster than the capacity that is the policies haven't been such to keep the growth in capacity balanced which means inflationary pressures are rising from those emerging markets. but i did it is entirely unfair to attribute excess demand pressures in emerging markets to u.s. monetary policy because the emerging markets have all the tools they need to address excess demand in those countries. they can, for civil, use monetary policies of their own. they can adjust their exchange rates which is something they've been reluctant to do in some cases. so it is really up to the emerging markets to find the appropriate tools to balance their own growth. that being said, even the inflationary purchase in the markets the continued growth is continuing to put pressure on

the prices of commodities including food arnold the world. but just one final comment on why the federal reserve policy cannot be primarily responsible was just that you asked about the middle east. food in egypt is priced in pounds, not dollars. if the dollar is weaker, the egyptian pound is strong per commesso clearly what is happening is not a dollar affected is a growth of six premier li and the emerging market that is creating this demand for commodities which is driving up the relative prices of commodities. >> to lead the correlation site for the moment, as you will get these unfolded of the world you see the price of oil rising, how do you see that as presenting risk to the u.s. economy as you try to do your job? >> will we pay very close attention to the prices and the of the commodity prices because they do present really two kinds

of risks. the first is the higher oil prices are kind of a text. we are trying to stimulate the economy, trying to get consumers to become more confident, the able to spend more, and to help put people back to work, to the extent that part of their income gains are drained away by higher gas prices or exceed all that's going to be negative and is going to slow the recovery, so as the international factors lead to higher oil commodity prices that is a - from the perspective of consumers and household budgets and economic growth. the other place where it is an issue yet we are watching very carefully is what withstanding and i think a commodity price increase is primarily come from the global economy rather than the u.s. per say. nevertheless we have to pay attention to that because we also have a strong commitment to the stable prices and low inflation. right now inflation overall

including food and energy prices is quite low in the united states and in fact almost any other industrial country not to mention the emerging market economies. that being said we have to make sure that it stays that way. higher energy prices add to the inflation because they raise the price of heating oil and gasoline and the like. even more serious, if they begin to feed into other prices, so ford sibling they begin to feed into the wages or goods and services that are produced using energy than you might get a broad inflation problem and we are absolutely determined that we will do whatever is necessary to keep inflation low and stable in that in that respect that is a challenge we have to address. islamic in your speech you talked about the bond program. there was a time when the was thought to have referred to an ocean liner and now the first reference to the program somebody is asking do you attribute the stock market rise since late august and if not, why not and as a follow-up i

might say the process of helping the u.s. economy filtering through various sectors of the economy as you go about engaging in that process? >> first to be very clear, the preface of the monetary policy is not to increase stock prices per say. the purpose is to strengthen the u.s. economy to put people back to work and create price stability, but the way the monetary policy always works is through interest rates and asset prices. that's how it works by changing the prices in the financial markets. so yes, i do think that by taking these securities out of the market and pushing investors into alternative assets we have led to higher stock prices and lower stock market volatility. by the way, when the last time we did this in march, 2009, was about a week before the absolute minimum where the standard was in the 600 following our actions

the standard of the stock market grows quite considerably, yes, the policy is affecting the stock market really into ways. one is by lowering the essentially long-term yields and forcing investors into alternative assets, but also because as this process has been working through and we have seen both in the earlier episode that a few months after we began the process to see the stronger economy, this time we began the process in august and no four or five months later we are seeing a stronger economy. as the markets see the strong economy materializing, that is incorporated into the expectations of the future economic activity, and that causes the market to rise as well so it is a circle in that respect. as i described in my remarks, the whole idea here is to move interest rates, moved the price is in the direction to stimulate more economic activity, put more

people back to work and get rid of the risk of the inflation and create a stable price environment and if you look at the development, since august i think things have moved in the right direction. >> is in the course of the extension from that is people want to know what you look at to decide whether to extend the program etc. i think you said that it's possible the there were the extension beyond the current in the of the program, so what kind of things to you look at to decide where to go from here? >> welcome the first of all, as we noted in our statements and our commentary, we are reviewing the program on a regular basis. we want to make sure it is working as intended and it's not having any adverse side effects. to answer your question more generally, the approach is more or less the same as we always used. how we make decisions about the federal fund rate? what we do is our best to create

an outlook for the economy. to say where are things going, where output going, where is inflation going, and we ask ourselves given the level of the monetary compensation we have now is the economy on a trajectory that will give the best possible outcome in the medium term. if not, if inflation looks to below or the deflation is there or the output is low and unemployment is too high the would be a situation that requires stimulus. vice versa it becomes increasing problem of the economy is growing quickly that would be the reason to scale back. so in the same way that we addressed the monitor policy under normal circumstances in the short term interest rate by looking at the outlook and trying to gauge whether the economy is growing at the pace consistent with the eventually returning to full employment and stable prices, by the same approach we look at that all halgand based on that we will either provide more stimulus as necessary or scale back or stay with what we have, so really not a simple answer.

we have to use the best we can in terms of the forecast models to try to assess where the economy is headed. and get the same time perhaps the most politically charged question, that of the unemployment situation you said it may be a matter of years before the unemployment goes down to the level that is considered to be a more normal. is that something that you look at as you decide whether to extend or not? >> well, certainly. half of our mandate is maximum employment, and we want to get the labor market's coming you know, working again, and better if we can. it's very important because not only is 9.5% unemployment a very large waste of human resources and a very taxing burden on many families around the country, but about 45% of all of the unemployed had been unemployed for six months or more. and what that means is that if they don't find work in the next six months or two years, if they find work again in the future it

could very well be at a much reduced wage or part time. people who are not employed for long periods of time lose their skills and connections and their knowledge of what is happening in their particular line of work. so the consequences could last a long time so it is important to put people back to work as quickly as we can. it's going to take a while. the very nature of this is that the economy has to grow about 2.5% just to accommodate people coming into the labour force, so in order to keep the unemployment rate constant we need about 2.5% growth. back in august when we were thinking about the policy, growth was looking like it was around to come so we are looking at a situation where the rate would begin to rise again. so in order to get the growth above the 2.5% mark, we embarked on these new policies and we are looking forward in 2011 we think it will be about 2.5%, therefore we expect to see it declining over time. it is not going to be as fast as

we would like the of the other hand as i mentioned, there is good news. i think there are a lot of indicators including we had once again this morning the new claims for unemployment insurance which is a pretty good number looking at whole range of statistics on the labour market. the sense is that employers are becoming more willing to hire and i feel we will start seeing some stronger payroll reports and lower unemployment rates pretty soon. >> another question from the audience talking about the same program said you announced purchases before the congress passed the tax cut extension, the payroll tax holiday and several other significant stimulative measures. as that given the fed any reason to consider ending your latest program early? >> as i mentioned earlier we try to mcginnis as that of the outlook and based on that we decide whether or not we are where we should be or whether we should do less for so long and in this particular case when you

are making our projections we have already taken into account most of what is in that package. we had anticipated the bush tax cuts would most likely be extended if least in large part. we had participated in the insurance would be extended at least in large part. part of the package that was surprising and thus create additional stimulus is the payroll tax rebate. as we factor that into our analysis and of course on the margin we will respond to the way that fix the outlook but it wasn't that we were surprised by this package. we expected a lot of it to happen and the was built into our forecast when we need now for policy decisions. >> you referenced the jobless claims numbers and obviously the data flows on the nearly daily basis. what do you think is the single biggest thing if there is such a thing holding back the companies from increasing the hiring right now?

>> there's a lot of factors. it isn't simple. certainly one issue is, and perhaps one key issue is the uncertainty about how much the demand is going to be. remarkably, at the beginning of the downturn firms lay off large numbers of workers and they were able through very significant productivity gains to meet existing demand with fewer workers and only as the demand had began to grow beyond the level before the recession began has there been any pressure on the firms to begin to add the work force? swahili now they are beginning to see women that we are now seeking enough increase in our sales, and we have already exhausted the obvious productivity gains it's time now to start bringing on new workers, so that uncertainty about the duration and the stability of the recovery has

been the key factor explains why, for the disabled, they have been using a lot of temporary workers because they can bring temporary workers if the economy weakens again they can let them go. it will be a really good sign when we see the tiberi signs been converted into permanent jobs, and i am hopeful that is where we are going to be headed in the next couple of quarters. >> so, you have been exporting congress and essentially the federal government to attack the fiscal situation sooner rather than later. we have seen what happens in europe if you don't do that. what do you think the risk is that indeed the financial markets force the solution before the lawmakers and our administration to it themselves? >> it's really impossible to give a projection. right now the markets seem to be behaving as if they think these problems will be addressed in the sense the u.s. government can still borrow at reasonable interest rates.

so, evidently investors believe that the u.s. economy is strong enough and that our political system is able to deliver stability in our budget situation over the medium term. in one respect certainly they are right in that this is a very, very wealthy productive economy and there is say no sense that we are economically unable to find a solution to these problems. we are rich enough and have enough resources that we can find those solutions. no question about that. some of the commission's we have seen for a simple we have put out some plausible possibilities. i am not endorsing any particular one of the demonstrated here are various ways we could go about doing this without reading the part of our social safety net and without radically raising the taxes etc., etc.. so it can be done. i think the question will be do we have the political capacity, the political will to do it, and

i think that is what the markets will be following, and indeed in europe it has been less a question of resources. everyone believes that europe has the resources to meet the sovereign debt claims and it has been a question of will the country's demonstrate that they have the will to collaborate together to solve these problems. i believe they will. but it's really that political uncertainty which is the key issue for the markets, not so much the economic capacity. >> have you seen any evidence of any time in the past that there is political will of that magnitude to attack a problem of this size? >> it's difficult to say. i think there is a lot of interest. there has certainly been a number of members of the senate and the house who have for years been talking about these issues and have pressed for taking steps to address them. clearly there is considerable interest in the general public

and trying to address these questions. so i wouldn't -- i am not a political prognosticator and i wouldn't try to make an assessment but i know there's an increasing understanding of representatives in congress and in the administration and in the public that these are important issues and that there is only so far we can kick the can down the road. we have to address this and the sooner we do it the less painful it will be and the better it will be for our economy. some of them there are more near-term issues. the one questioners as to not become a true policy but will the fed policy have to be adjusted if there were shut down of the government house some politicians are threatening does the fed had enough options to get friends of the government shut down the private sector to the contractors leave off workers and adversely impacting other channels. >> just to be accurate i think is being complicated is not a shutdown of the government, but a refusal to ratify the debt

limit extension and this is a very serious matter because under the current law, if the debt limit is not extended for a time the treasury has various resources that it can use to make payments on a national debt, but beyond a certain point it wouldn't have those resources and the united states could conceivably i think this is very remote but it's not something you want to play around with the united states would be in a position of defaulting on its debt, and the implications of that for a financial system, our fiscal policy, for our economy would be catastrophic. so i would very much urge the congress not to focus on the debt limit as being the bargaining chip in this discussion but rather to address directly the spending in the tax issues that we all have to deal with if we are going to make progress on the fiscal situation. the debt limit itself is again

something where we need to be very careful the we don't create any impression that the united states is not going to pay its creditors the interest on the national debt. that would be again a very far that outcome. >> we talked of the legislation percolating on capitol hill. can you talk about where the policy stands now by virtue of the dodd-frank legislation and what you think some of the proposed legislation is not the right thing to do? >> the dodd-frank legislation with the fed cooperation and a lot of other fed is initiatives has basically created a completely transparent fed as far as financial concern. people say all that the fed, with the need is open the books. what is the transactions. currently, every program that we initiated during the crisis has been completely open to the gao.

all the information has been provided to the public. december 1st we put out a record of all 21,000 loans that we made during the crisis. all 21,000 which by the way were paid back with interest explain what the program was and what the criteria, the bar were, the collateral, when was it repaid, we provide a weekly statements of our balance sheet, we have an outside auditor which comes in and audits the books and publishes all the information every year. so every aspect of the fed financial dealings are wide open and we have invited the gao to come in and look at all of our activities come extraordinary activities during the crisis, and all of our ongoing activity. so there is no sense in which the fed has a secret financial dealings. all of our assets and transactions are open to the public and will be open to the public and i've committed to

that transparency. no, what audit the fed means in the language that has been used by some members of congress is not about the financial fed rather it is about auditing the monetary policy which means the gao would be assigned by the congress to look at the monetary policy decisions to take the material prepared for the meeting to depose potentially the members of the meeting to essentially provide an evaluation to the congress in a very short horizon of whether or not the fed was making the right monetary decisions. i feel this is different from what most people think about 20 feet above an audit, and what this is basically is a very sick again challenge to the notion that while the congress has every right to set the goal and objective of the federal reserve and the tools of the federal reserve it should be up to the fed to make monetary policy decisions independently of

short-term political influences and with him on towards a long-term objective of the economy. and with that kind of legislation would do is nothing to do with financials. would be very much a psychiatrist at words direct congressional oversight of the decision process itself and personally, i think that would be very bad outcome. we have seen around the world that in the empirical evidence and practical evidence to support this the the central banks the independent in their decision making and have a clear mandate provide a much better outcome both in the economy and financial market than a central bank which is dictated by whose decisions are dictated by the political considerations of that is something i think is extremely important principle. >> is this sort of pressure coming from the outside helping to you might you with your colleagues on the federal reserve board at all? clinical this issue every member

of the federal reserve both current and past fighting would be extremely united. this is a fundamental bedrock principal of the banking, and if the federal reserve becomes essentially an arm of congress seeking monetary policy decisions i think that would lead to worse outcomes in terms of inflation and stability in the u.s. economy. >> here's a banking question. bankers say the leaders and regulators in washington are telling them to lend more of the bank of lovell the senators and life deal with on a day-to-day basis are concerned with the financial health and less with promoting lending. what are you doing about the disconnect? >> this is an issue that we have been very focused on for quite a long time. there is a problem here which is we don't obviously want banks to make bad loans. we don't want lone star not wait to get paid back. we want sound loans. on the other hand, when you have

a creditworthy borrowers coming and asking for credit it's in the interest of the bank and the borrower and of the whole economy that they get made. so we need to find the appropriate balance between loans that are appropriately proven safe on the one hand but the creditworthy borrowers are able to get credits. and we have, working together with the other bank regulators going back several years now we have been providing extensive guidance both to the banks and examiners about how to make an appropriate balance. we have done a large numbers of training class is, we have asked the fed banks to call in and talk about their concerns. we've had meetings all across the country to meet with bankers and small businesses to talk about issues that have arisen as we have put an enormous amount of resources into trying to find the right balance and i feel we've made a lot of progress

frankly and i would suspect as we look forward to 2011 and on that we would see increased willingness to lend and examiners wouldn't be an issue if there are good loans to be made it's very clear the should be allowed to make them and we would encourage them to make them. seabeck some housekeeping matters we are almost out of tibet before asking the last question very important matters to take care of. i want to remind members and future speakers the comedian and humor is the voice of the simpsons will discuss media myths on march 14th. we might even try to get into a few voices for us and then the voice of taxation the commissioner of the irs will be here before the tax deadline. second, i have some walking away gifts for you. more than one. i would like to present you with the traditional coffee mug which my understand you have had once before but nevertheless we would love for you to perhaps share that with a loved one. [laughter]

we will be watching each day to make sure that it doesn't show up. [laughter] than we thought to have been so kind to join us on multiple locations we want to provide you with the unusual highly coveted national press club baseball cap. [applause] the last question, having you here today is a big deal for us, for me since i've been covering business and economics for many years now it is a little like the super bowl for business journalists speaking of which the super bowl this weekend and i'm wondering first do you watch football and you have a favorite in the game between pittsburgh and green day which will be in dallas. >> i definitely do watch football and baseball season is in there of any way and i am looking forward to the game. the redskins didn't make it this year once again unfortunately.

[laughter] so i will be objective although i do know one of the teams has a quarterback named ben. [laughter] i'm looking forward to the game and i think the gdp will drop to nothing during that three hour span. [laughter] -- before, mr. chairman. [applause] >> thank you for being a good sport. we would like to think the national press club staff including the library and broadcast center for organizing today's event and for more information about joining the club or how to acquire a copy of today's program please go to our website at www.press.org. thank you, we are adjourned. [inaudible conversations] plank

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>> president obama spoke today at the annual national prayer breakfast. bleshed in 1983, it's established by the fellowship foundation. after the president's remarks, we'll hear from the husband of arizona congresswoman giffords. >> ladies and gentlemen, president of the united states, barak obama. [applause] >> thank you. [applause] >> thank you so much. [applause] thank you. [applause] thank you very much. [applause] thank you, please, please have a

seat. thank you so much to the cochairs, jeff and anne, to all the members of congress who are here, the distinguished guests who have traveled so far to be here this morning, to randall for your wonderful stories and powerful prayer, to all who are here providing testimony, thank you so much for having me and michelle here. we are briesed to be here. i want to -- we are so blessed to be here. i want to begin by saying a word to mark kelly who is here. we have been praying for mark's wife, gabby give forwards for many days now, but i want the entire family to know that we

are with them for the long hard, and god is with them for the long haul, and even as we pray -- [applause] even as we pray for gabby in the aftermath of the trajty here at -- tragedy here at home, we are also mindful of the vieferls that we're -- violence we're now seeing in the middle east, and we pray that the violence in egypt will end and the rights and aspirations of the egyptian people will be realized, and that a better day will dawn over egypt and thought the world. for almost 60 years going back to president eisenhower, this gathering has been attended by the president. it's a tradition i'm proud to uphold, not only as a fellow

believer, but as one who was in the church. for as some of you know, i did not come from a particularly religious family. my father who i barely knew, only met once for a month in my entire life was said to be a nonbeliever throughout his life. my mother, whose parents were baptist and methodist, grew up with a certain skepticism about organized religion, and she usually only took me to church on easter and christmas, sometimes. [laughter] yet, my mother was also one the most spiritual people that i ever knew. she was somebody who was

instinctively guided by the golden rule, and who nagged me constantly about the homespun vams of her kansas upbringing. values like non estty -- honesty and hard work and kindness and fair play, and it's because of her i became to understand the equal worth of all men and all women and the imperatives of an ethical life, and the necessity to act on your beliefs, and it's because of her example and guidance that despite the absence of a formal religious upbringing, my earliest inspirations for a life of service ended up being the faith leaders of the civil

rights movement, and there was, of course, martin luther king and the baptist leaders, the ways in which they helped those who had been subject to make a way out of no way. they transformed a nation through the force of love. there were also catholic leaders like father theodore and jewish leaders, muslim leaders, and hindu leaders that were called to fix what was broken in our world, a call rooted in faith. it is what led me just a few years out of college to sign up as a community organizer for a group of churches on the south side of chicago, and it was through that experience working

with pastors and lay people trying to heal the wounds of hurting neighborhoods that i came to know jesus christ for myself and embrace him as my lord and savior. [applause] now, that was over 20 years ago, and like all of us, my faith journey had its twists and turns. it hasn't always been a straight line. i have thanked god for the joys of parenthood and michelle's willingness to put up with me. in the wake of failures and disappointments, i've questioned what god had in store for me, and been reminded of god's plans for us may not always match our own short sided desires, and let me tell you, these past two

years, they have deepened my faith. [laughter] [applause] the -- [applause] the presidency has a funny way of making a person feel the need to pray. [laughter] abe lincoln said as many of you know, i have been driven to my knees many times, but the overwhelming cix that i had -- conviction that i had no place else to go. [laughter] fortunately, i'm not alone in my prayers. pastor friends like joel hunter comes over to the oval office once in awhile to pray with me and pray for the nation. the chapel at camp david has provided consistent fellowship,

our faith leadership office, a young minister, himself, starts my morning off with meditations from scripture. most of all, i've got friends around the country, some of who i know, some who i don't know, but i know they are friends who are out there praying for me. one of them is an old friends named jay wilson. we call him mama k in this the family. she's our children's god mother, and she has organized prayer circles for me all around the country. she started small with her own bible study group, but once i started running for president, and she heard what they said about me on cable, she felt the need to pray harder. [laughter] by the time i was elected

president, she said, i just couldn't keep up on my own. up. and was having to pray nine times a day just for you. so she enlisted help from around the country. it is also comforting to know that people are praying for you who don't always agree with you. tom coburn for example is here. he is not only a dear friend but also a brother in christ. we came in to the senate at the same time. even though we are on opposite sides of a whole bunch of issues, part of what has bound us together is shared face, recognition that we pray to and serve the same god. i keep praying that god will show him the light and he will vote with me once in a while.

is going to happen. a ray of light is >> my christian faith then has been a sustaining force for me over these last few years. all the more so when michelle and i hear our faith questioned from time to time. we are reminded ultimately what matters is not what other people say about us, but whether we're being true to our conscious and true to our god. seek first his kingdom and right courthouseness, and all these things will be given to you as well. as i travel around the country, folks often ask me what is it that i pray for? like most of you, my prayers sometimes are general. lord, give me the strength to

meet the challenges in my office. sometimes they are specific. lord, give me patience as i watch maleah go to her first dance where there will be boys. [laughter] lord, have that skirt get longer as she travels to that dance. [laughter] while i petition god for a whole range of things, there are a few common themes that do occur. the first category of prayer comes out of the urgency of the old testament prophets and the gospel itself. i pray for my ability to help those who are struggleing. the christian tradition teaches one day the world will be turned right side up, and everything will return as it should be, but

until that day, we're called to work on behalf of a god that shows justice and mercy and compassion to the most vulnerable. we've seen a lot of hardships these past two years. not a day passes when i don't get a letter from somebody or meet someone who is out of work or off their home or without health care. the story randall told about his father, that's a story that a whole lot of americans have gone through over the past couple of years. sometimes i can't help right away, but sometimes what i can do to try to improve the economy or to curve foreclosures or to help the health care system,

sometimes it seems so distant and so remote, so profoundly inadequate to the enormity of the need, and it is my faith then that biblical injunction to serve the least of these that keeps me going, and it keeps me from being overwhelmed. it's faith that reminds me that despite being just one very imperfect man, i can still help whoever i can however i can wherever i can for as long as i can, and that somehow god will leverage these efforts. it also helps to know that none of us are alone in answering this call. it's been taken up each and every day by so many of you, back home, your churches, your

temples, synagogues, your fellow congress agree -- congregations, so many groups in this great country of ours. i came across a group called charity water, a group that supports clean water projects overseas. this is a project started by a former nightclub promoter named scott harryson who grew weary of living for himself and not following christ as well as he should. because of scott's good work, charity water helped 1.7 million people get access to clean water. in the next 10 year, he plans to make clean water accessible to 100 million more. that's the kind of promoting we need more of, and that's the kind of faith that moves mountains, and there's stories like that scattered across the

room. people take it upon themselves to make a difference. sometimes faith groups can do the work of caring for the least of these on their own. sometimes they need a partner whether it's in business or government, and that's why my administration is taking a fresh look at the way we organize with faith groups, the way we work with faith groups through our office of faith-based partnerships, and through that office, we are expanding how they can partner and help feed more kids who otherwise would go hungry or support groups, we're working with non-profits to improve the lives of people around the world in ways that are aligned with our constitutional principles. in this work, we plan to expand it in the days ahead rooted in the notions of partnership and

justice and the imperatives to help the poor. of course, there are some needs that require more resources than faith groups have at their disposal. there's only so much a church can do to help all the families in need, all those who need help making a mortgage payment or avoiding foreclosure or making sure their child can go to college, there's only so much a non-profit can do to help a community rebuild in the wake of a disaster, there's only so much the private sector will do to help folks who are desperately sick get the care that they need, and that's why i continue to believe that in a caring and in a just society, government must have a role to play, that our values, our love, and our

charity must find expression not just in our families, not just in our places of work and our places of worship, but also in our government and in our politics. over the past two years, the nature of these obligations, the proper role of government has obviously been the subject of enormous controversy and the debates have been fierce. one side's version of compassion and community may be interpreted by the other side as an oppressive and irresponsible expansion of the state or unacceptable restriction on individual freedoms. that's why a second recurring theme in the prayers is a prayer for humility. god answered this prayer for me early on by having me marry

myrrh shell because -- michelle because -- [applause] whether it's reminding me of a chore undone or gaining wisdom of watching my third ball game in a row on sunday, she keeps me humble, but in this life of politics when debates have become so bitterly polarized and changes in the media leave so many of those to just listen to our biases, it's useful to go back to scripture to remind ourselves that none of us have all the answers. none of us no matter what our political party or station in life, the full breath of human knowledge is like a grain of sand in god's hands, and there's some mysteries in the world we

cannot fully comprehend. as it's written in job, god's voice thunders in great ways and does things beyond our understandings. to balance this uncertainty, this humility with the need to fight for deeply held convictions, to be open to other points of view, but firm in our core principles, and i pray for this wisdom every day. i pray that god will show me and all of us the limits of our understanding and open our ears and hearts to our brothers and sisters with different points of view that such reminders of our shared hopes and shared dreams and shared limitations as children of god will reveal the way forward so that we can travel together. last recurring theme, one that binds all prayers together is

that i might walk closer with god and make that walk my first and most important task. in life, it's easy to be consumed by daily worries and concerns and even easier at a time when everybody's busy, everybody is stressed, and everybody, our culture is obsessed with wealth and power and celebrity, and often it takes a breath of hardship or tragedy to shake us out of that to remind us what matters most. when we see an aging parent wither under a long illness or we lose a daughter or a husband in afghanistan, we watch a gunman open fire in a

supermarket, and we remember how fleeting life can be, and we ask ourselves how have we treated others? have we told our family and friends how much we love them? it's in these moments when we feel most intensely our mortality and our own flaws and the sins of the world that we most desperately seek to touch the face of god. my prayer this morning is that we might seek his face not only in those moments, but each and every day, that every day as we go through the hustle and bustle of our lives whether it's in washington or hollywood or anywhere in between, that we might every so often rise above the hear and now and kneel before the eternal, that we

might remember the fact that those who wait on the lord will sore on wings like eagles, they will run and not be weary, and they will walk and not faint. when i wake in the morning, i wait on the lord, and i ask him to give me the strength to do right by our country and its people, and when i go to bed at night, i wait on the lord, and i ask him to forgive me my sins and look after my family and the american people and make me an instrument of his will. i say these prayers hoping they will be answered, and i say these prayers knowing that i must work and must sacrifice and must serve to see them answered, but i also say these prayers knowing that the act of prayer itself is a source of strength.

it's a reminder that our time on earth is not just about us, that when we open ourselves to the possibility that god might have a larger purpose for our lives, there's a chance that somehow in ways that we may never fully know god will use us well. may the lord bless you and keep you and may he bless this country that we love. [applause] [applause] [applause] [applause]

[applause] [applause] congresswoman, congressman miller, thank you for inviting me here today. not so sure i can thank you for having me follow randall wallace, and the president of the united states though. [laughter] what allowed me to be here today i think is gabby's condition. it continues to improve. every day she gets a little bit better, and the neurosurgeons and neurologists tell me that that's a great sign. the slope of that curve is very important. it's good to be here at an haven't that's become such an important part of our national dialogue. as you can imagine, the last month has been the hardest time of my life, and the hardest time

of my family's life. it was on january 8, just four weeks ago on saturday, that gabby's life and my life have forever been changed. we're not the only ones. the shooting has cost other families dearly. gabby's community in tucson, my community in tucson, the people of tucson are suffering. they are suffering deeply, but suffering together. when something like this happens, it's natural to think how? why could this happen? why were six people killed? why was a 9-year-old girl, an innocent child killed who just wanted to meet her congresswoman? why was gabby shot through her head and left barely clinging to life? we can't ever know the answers to these questions.

we won't. thankfully, miraculously, gabby survives. i was telling gabby just the other night, two nights ago, that, you know, maybe this event, this terrible event, maybe it was fate. i hadn't been a big believer in fate until recently. i thought the world just spins and the clock just ticks. things happen for no particular reason. president lincoln was a big believer in faith. he said, "the almighty has his own purposes. he believed there was a larger plan. i can only hope, and i told gabby the other night, that maybe it's possible that this is just one small part of that same plan. this event, horrible and tragic,

was not merely random, that maybe something good can come from all of this, maybe it's our responsibility, maybe it's your responsibility to see that something does. as many of you know, i'm an as trough naught. i've been fortunate on three occasions in my life to look down on this planet from space. we orbit the earth nearly the same distance that washington is from my hometown of west orange, new jersey, but from space far above that traffic on the new jersey turnpike, you have an entirely different per spective of life -- perspective of life on our planet. it's humbling to see the earth as god created it in the context of god's vast universe. many of you may know that my

twin brother, scott, a also an astronaut, and through this very difficult time, he's been aboard the international space station. it's a really tough place to be when you're twin brother and your family and the nation is going through something that is so difficult. he was asked by several journalists what it's like to be so far away and unable to return to his family during this time, and i think what he said bears repeating. scott said, "what we do here in space is incredibly challenging. our country faces a lot of challenges, and the way we address those challenges is through team work. i'd like to see more team work with more people not only in government, but everyone in meeting the challenges our country faces. hopefully if any good can come from this, it's that we learn to

work better together." scott concluded by saying, "we are better than this. we must do better." my brother is right. i know we'll do better, and i know that prayer must be part of that effort. one morning when gabby was still in tucson at the tucson university medical center, i was outside visiting that memorial that just sprung up on the grass in front of the hospital. it is in a -- it is not a formal religious site, but there's a lot of angels people left there, i mean, a lot of religious material on the lawn, bibles, angels, prayers. the people of arizona have turned that place into a place of prayer, a pilgrimage site. on that particular morning, there was no wind, hundreds of candles burning on the lawn, and

it was like stepping into a church, a place with heaven itself as a ceiling. that reminded me that you don't need a church, a temple, or a mosque to pray. you don't even need a building or walls or even an an altar. you pray where you are. you pray when god is there in your heart, and prayer isn't just asking. it's also listening for answers and expressing gratitude which i've done a lot lately. with that, i'd like to conclude with a prayer that my wife's rabbi who married us who i believe is in the audience today, not positive about that, i'll try to find her later, who said over gabby's hospital bed on the first night when this happened on january 8. she said, "in the name of god,

our god of israel, may michael, god's angel messager of compassion watch over your right side. may gabrielle, angel of strength and courage on your left, and before you, guiding your path, aerial, god's angel of life, and standing before you is god's angel of healing, and over your head scrownding you -- surrounding you is the presence of the divine." thank you, and god bless you, and please, please continue to keep gabby's thoughts and prayers in your heart. it is really helping. thank you. [applause] [applause]

[applause] >> on tomorrow's washington journal, mississippi senator, roger wicker, jeff bingaman and stephen rose.

>> a new senate homeland security report claim the army and fbi are not doing enough to prevent the 2009 fort hood shootings that killed 19 people. they criticize the fbi for failing to notify the army. the committee investigated on

its own. ranking member susan collins presented their findings earlier today. this is 40 minutes. >> this is a copy of the report which i believe has been distributed to you. we're very proud of the report and grateful to our bipartisan staff that carried out the report which we embrace today. the staff was led my mike alexander and his team led by gordon letterman, there were full partners in this endeavor and i think senator collins will name others in her statement. they worked long and hard on this investigation. the product of their labor, this report, presents, i believe, the

most comprehensive understanding yet of the massacre at fort hood, and enables us to make recommendations particularly to the department of defense and the fbi about how they and we can work together to better combat radicalization for violent islamist extremism among people like the accused killer inside america, and to prevent anything like the murders at fort hood from happening again. throughout our investigation, the victims of this attack, their families and their families, have weighed heavily in our minds because our report's painful conclusion is that the fort hood massacre could have and should have been prevented. we have reached that conclusion because our up vest gages found with the department of defense and the fbi had compelling

evidence of the growing embrace of violent growing extremism in the years before the attack that should have caused them to discharge him from the u.s. military and make him subject from an aggressive counterterrorism investigation. two associates at walter reed army medical center called the man a ticking time bomb. others said he was the worst. instead of disciplining him or removing him from the military all together, they inexpublicbly promoted him and suggested that the evidence of his radicalization showed a knowledge of islam that could benefit our military and our country instead of showing that he was a clear and present danger to our military and our country.

the fbi ran up the qualifications as a suspected terrorist involved in antiamerican activities and was himself the subject of a major ongoing fbi terrorism up vest gages. the -- investigation. the fbi asked us not to identify this individual. the media reached the conclusion he was the rifle clerk and terrorist who is now in yemen and to say based on the evidence i've seen, this was not just one of thousands of stray pieces of evidence that comes to the fbi, but it was a serious piece of evidence that required the most serious and urgent investigation, but what followed was a lackadaisical investigation by the fbi coupled with internal disagreements and a failure to use effective intelligence analysis to lead

the bureau to end its investigation prematurely leading to the government's failure to prevent the attack at fort hood. the fbi actually had information that a member of the united states military was in communication with a target of their own terrorist investigation and did not pursue its investigation of that lead or notify the defense department. in reading the report, you'll see a number of redacss. for three -- retractions. we have been in frustrating negotiations with the law enforcement and intelligence communities of our government over their proposed classifications and retractions. although some of our objections have led to withdrawals of requests for retraction, we still believe some of the

remaining ones are unjustified. nevertheless, we consented to these out of respect for the law enforcement and intelligence communities and in order to produce this report in a timely matter, confident that the remaining retractions could not diminish our findings or recommendations. with that said, let me describe some of the evidence we found that should have flashed like red lights to the fbi. first, let me talk about department of defense. from 2003 to 2009 when he was a psych psychiatric resident, he ultimately suggested that revenge might be a defense for the terrorist attacks of 9/11. he openly sympathized with violent islamic extremists, and defended bin laden.

he justified suicide bombers saying u.s. military operations represented a war against islam stating one the risks of having muslims in the u.s. military is they might publicly say had had an allegiance to the religion that was greater than his allegiance to the united states constitution which as a military officer he is sworn to uphold. to me, it's infuriating that a member of our armed services that expressed such radical opinions to other memberrings of our military was not -- members of our military was not discharged. his words made him not just a ticking time bomb, but a trader. -- traitor. they said the movements knew full well of his problematic behavior. as the officer assigned him to

fort hood and decided to deploy him to afghanistan admitted to an officer in fort hood that you're getting our worst. the most astonding reason they gave for not taking action against him is that he could provide an understanding of violent islamic extremism in the culture of islam. his reports were sanitized to turn this into a virtue as if he was benefiting the u.s. army with his radical beliefs. for example, an evaluation report covering july 2007 to june 2008 said his work on the role of culture in islamic faith in the context of terrorism, "has extraordinary potential to inform national policy and military strategy." let me now turn to the fbi's role. the fbi under director muller

made significant progress in transforming itself into america's lead counter terrorism organization. in this case, unfortunately, the fbi had the opportunity to take actions that would have prevented the fort hood murders and failed to do so. the terrorism task force in san diego flagged the initial communications with the suspected terrorist that i referred to for review and transferred the communications to the fbi's joint terrorism task force here in washington because he was located here at walter reed. t21

>> he was radicalizing the extremism in a way that could well lead to an attack and to some, the fbi conducted a superficial inquiry and ended it prematurely. san diego's joint terrorism task force was upset with the way the washington task force handled the case, but they too dropped the matter. fbi headquarters specifically the national joint terrorism task force and counterterrorism

task force never got involved in the investigation, although these two parts of fbi are responsible for overseeing the bureau's counterterrorism work. as we say in the report r this was a warning that the fbi's transformation is a work in progress, and the fbi must accelerate it given the home grown terrorist threat. our investigation reaffirmed what we have known since the 9/11 commission reached the following fundamental conclusion in its seminal report in the summer of 2004. america's enemy today is not terrorism or a particular terrorist organization or a particular religion. the enemy is the ideology, the political ideology of violent islamist extremism. despite the work of america's

military intelligence and law enforcement and personnel in pushing back the forces of terrorism and preventing individual terrorist attacks since 9/11, the ideology that inspired 9/11 and other attacks and plots around the world continues to motivate individuals to commit terrorism, and that now increasingly includes americans inside and outside america, people we refer to now as home grown terrorists. we must take strong new steps urgently and with the same since of purpose we all felt following the 9/11 attacks to identify and combat the ideology of violent islamic extremism and to prevent the terrorist attacks against americans in which that ideology causes. in our report briefly, we make the following recommendations. the department of defense policy's against extremism among

service members must finally explicitly describe and confront violent islamist extremism. the department of defense can no longer ab soup that -- assume that reality with vague terms like violent extremism or workplace violence. it is violent islamic extremism. they must differentiate between violent extremism and protected religious observance, particularly, of course, by muslims. that way the thousands of muslim-americans who serve our country honorably in the american military every day and in other ways will be protected from suspicion for practicing their religion. military employment evaluation and personnel records must

describe behavior or military personnel will pose threats to other members of the military and the public as was the case here. the fbi needs to bring its 56 field officers more effectively under the fbi's head quarter's leadership. the fbi headquarters never stepped into the dispute and ensured the evidence received the urgent and aggressive attention it deserved. the fbi has to make certain that the joint terrorism task force is effectively sharing informs and coordinating operations with other federal state and local agencies. the department of defense as i said was not informed of the fbi's inquiry into the case even though, i repeat, a service member radically -- excuse me, a service member radicalizing the violent islamic extremism

clearly posed a threat to the military and our country. the fbi needs to take steps to ensure the large number of intelligence hired since 9/11 are used effectively. that was not the case with regard to this case. finally and most broadly, our government must develop a more comprehensive national strategy to counter domestic radical decision into islamic extremism. we have not adequately defined the roles and responsibilities of agencies of our government and other institutions of our society that must effectively counter radicalization to fight violent extremism in our country, and of course that work must be done with leaders of the muslim-american community. 13 people were killed at fort hood. to honor their memory, we pledged to use this report and its recommendations as a blueprint to ensure the

appropriate reforms are adopted quickly so the next human ticking time bomb will be identified early and diffuse before another deadly detonation. we belief this report and recommendations are particularly timely given the dramatic increase in home-grown terrorist plots against america and americans over the past two years, and finally, senator collins and i are transmitting this report to the secretary of defense, director of the fbi, the director of national intelligence, and the homeland security counterterrorism advisor at the national security counsel with our request that they respond to our findings, recommendations, and questions as soon as possible. we're also sending a copy of the report to the president for his review. senator collins. >> thank you. thank you. i'm very pleased to join

chairman lieberman in releasing today our investigative report into the advance leading up to the fort hood attack. before i begin my formal remarks, i want to thank the chairman for working as a team on so many issues. our staff's also worked as one, and i want to echo the chairman's thanks to our staff led my michael alexander and brandon melhorn. they worked extremely hard over the year, and they encountered a lot of resistance along the way, but we all have that to bring us to where we are today. our conclusion is alarming. the department of defense and the fbi collectively had

sufficient information to have detected the radicalization to violent islamic extremism, but failed to act on the many red flags signaling that he had become a potential threat. due to multiple misjudgments and failures to act, actions that might have prevented his attacks were not taken. detecting the role can be very difficult, but in this case, the fact is that both the fbi and army were aware. this is not a case where a lone wolf was unknown to the fbi,

unknown to the military officials until he struck, and that is the tragedies of this case. he was known to both the fbi and to the army. this was an american military officer known to have communicated with a terrorist suspect under active investigation by the fbi. a military officer whose radical extremism was increasingly evident to his colleagues and to his superiors. most sis certaining to -- disconcerning to me was the failures. first the failure to act on the obvious radical decision by at

least disciplining him or even discharging him, and i want to point out that those steps that could have been taken, that should have been taken under existing personnel and extremism policies. his increasingly extremism was well known by his supervisors and colleagues at walter reed as was his poor performance. he traced the clear path towards radicalization in plain view of his fellow army officers. indeed, as the chairman pointed out, his revelations of his acceptance of violent ideology disturbed his colleagues to the point that two of them

separately described him as a ticking time bomb, yet despite the indications and clear evidence, the army took no action laying the foundation for what would be a cursory investigation by the fbi which relied in part on the inadequate and misleading officer evaluations. the second finding that is most discerning to me was the failure of the joint terrorism task force to share with the army the fact that he was communicating with a known terrorist. in this case, the jtaf did not live up to its potential and

agented up stead -- acted as another type instead of communicating vital information. third in my judgment was the woefully, inexcusably inadequate investigation conducted by the washington joint terrorism task force. as the chairman has pointed out, it was about a half day, four hours. that is all the time that the washington spent investigating whether a military officer in communication with a known terrorist suspect amounted to a national security threat. additional investigative action was not taken even when the jtf

requested the use of leave and pressed for more action. this hasty decision to close the investigation cost the government its last best chance to identify the threat posed by the major and to potentially prevent the november 2009 attack. let me make just a few other important points. our investigation revealed that there were no legal restrictions that encumbered the investigation of the major. you may recall that at first administration officials points to restrictions that they said make it difficult to conduct the investigation, but what we have

found is there were no legal restrictions that hindered that investigation. similarly, there were no legal restrictions that prevented the sharing of investigative information on him in particular his communication with the known terrorist suspect with the army. there was no reason that information could not have been community -- communicated. third, the behavior and declarations of walter reed were not first amendment protected activities, and they went far beyond an academic debate. it's clear that the fbi has made great progress in focusing on counterterrorism since the attacks on our country nearly 10

years ago, and the fbi has experienced some successes for which we give them credit, for which our nation is grateful, but it is equally clear from our yearlong investigation that much additional work is needed to truly transform the fbi into a counterterrorism effective organization, and much more needs to be done by this administration to name the enemy that we face and to develop strategies to counteract them. thank you. >> thank you very much, senator collins. thanks for all the partnership that once again we and our staff have been able to use to deal with this real threat to our

security. we're open to questions now. >> senator? thank you, senator. what do you say directly to the families of the victims of fort hood, those 32 people wounded, some still carrying the billets of the -- bullets of the attacks. >> yes, this is painful because the conclusion of the investigation is that the massacre carried out here at fort hood in november of 2009 could have been prevented. what do you say to the families who had people killed there other than to say having found what we have found that this was a preventable attack that we will do everything we can to push the relevant federal government agencies to do everything they can urgently to make sure that nothing like this ever happens again. this was -- fort hood massacre

resulted because of the tragedy of errors, just one after another by organizations that normally perform effectively, but in this case for a host of various reasons and some that are hard to explain just totally failed to act in a way that as you look back at the evidence with the clarity of hindsight that just shouts out, stop this guy before he kills somebody. >> i would just echo the chairman's comments. we kept in mind that victims and their families throughout this investigation, and it's why that we kept pushing forward, and it's why that we kept demanding information. it's why we took the unusual step of actually issues subpoenas because we didn't

thoroughly understand what happened and we wanted to make sure that we're truthful with the families about what happened, and that we put in place effective reforms to greatly lessen the chances of such an attack happening again. .. as we have a right to expect

federal employees will do as of yet no one has been held accountable. >> that is very disturbing. the department of defense has told us that they are waiting until after the legal proceedings against the major are completed and i expect and hope we will see action at that time. that is a long time. >> if you're interested in this part in the argument negotiation the law enforcement intelligence community there are two arguments made. one is we had to be careful not to disclose information we learned with compromise ongoing counterterrorism investigations. of course we don't want to do that so we try hard to accept those. the other is because there was an ongoing prosecution in the military justice system we had to be careful not to affect that

prosecution and we felt the argument we still feel today that we were not about determining guilt or innocence the mover 15th, 2009 when this occurred. in other words a murder case. we are trying to figure out how did he get to that point to be able to stand up, shelled out it and kill 13 americans so that is what a lot of time was spent. we thought we ought to go ahead and publicly. >> your report is somewhat reminiscent of reports after 9/11 to connect the dots. does your report of fort hood show miers' believed? >> our committee spent a lot of time on this. i think a lot of progress has been made in connecting the dots with the establishment of the national counterterrorism center

and the director of the national intelligence. unconvinced the organization's existed prior to 9/11 we would have been able to stop the attacks of 9/11, but this case, the hasan case shows they are on finished and these great agencies, the department of defense and the fbi just acted in a way that was negligent and not intelligent with no sense of urgency when warning lights should have been flashing. part of this is not only to make sure that it takes some of the steps we've recommended but that the next time somebody in the fbi or the dod here's a fellow service members a some of the things hasan said it will revert him or her at the same is true of the others communication to a

known terrorist suspect that they will act more aggressively. >> and there have been some successes, for a sample the headley case arctic sybil's where the federal, state, local law enforcement intelligence agency did work together and thwarted terrorism. there have been others that have been close calls we have been surprised by. in this case, however, i do believe it is fair to say that the dots were not connected despite the fact great progress has been made since 9/11. >> i guess what practical step to you think the fbi and the army can take to form a better relationship and maybe that's one of the things mentioned in the report is a better relationship with the muslim

community and how do you strike the balance of the muslim organizations to have objective to various sorts of law enforcement. >> interestingly probably a couple of-years-old this committee has been giving an ongoing as you mentioned in the report series of investigations regarding home grown terrorism for now for what, four years? seven. and one of the interesting things when we had a group of leaders of the muslim american community and asked to do they have a good relations and interestingly the answer was the fbi to the joint terrorism task force and special allegiance have reached out quite effectively to the muslim american community in the there is a lot of anxiety in the muslim american community about people within the community particularly young people being radicalized to not to get in

touch of the opportunities in america to become anti-american terrorists so that's why there needs to be cooperation between law enforcement and intelligence community and the muslim american community. in the department of defense, as far as we can determine, they are still not prepared -- the department of defense is still not prepared to call the enemy with is, to the less you know you're in the ne are able to discredit you will not be a will to defeat it. the enemy is violent islamist extremism and to me when you say that it shouldn't offend muslim americans. the overwhelming majority of whom are clearly not a violent extremists they are patriotic law-abiding muslim americans, so in the department of defense i think they've got to start by being truthful about who the enemy is. >> i just wanted to ask whether your investigation you saw any

evidence of a terrorist conspiracy contacting the transfer to pakistan and whether you see a broad conspiracy. >> the as raise know, there was no evidence that hasan was part of a broad conspiracy. this is what makes the case is typically so difficult, except here as we have said to you he was open and the statements that were radical at walter reed and was intercepted the communication with the terrorist suspect. it just shows the difficulty. as far as our investigation shows hasan was the lone wolf. it bares stating that today a lot of the lone wolves who are radical islamist terrorists potentially can become by their individual action part of a larger conspiracy just by calling on the internet, and as he did in communicating with

this well-known anti-american terrorist who is halfway and around the globe asking questions, getting answers for what was acceptable behavior, giving it to chat rooms and that is part of an attempt of how we better fight violent ideology of the violent islamist extremism, one of the things we are going to try to do we and we are giving some of it now is to intervene to try to present the other side if you will to people trying to become part of a larger conspiracy even though they are acting individually. >> in general, what we found through our investigation in homegrown terrorism is that the individuals frequently inspired by al qaeda or by other violent islamic leaders, but not directed by them. that can happen on occasion, but

that is the more common pattern that we see. to go back to a point of a year earlier what is so first reading in this case is this was not the lone wolf operating covertly with no one aware of his existence or his communications with a known terrorist suspect. this is an individual who is open about the fact that he has radicalized who says outrageous statements of in and tell your class of military officers and yet he's promoted. it's just astonishing it a very troubling. >> thank you. >> thank you. [inaudible conversations]

speed

last month the federal government's energy information administration predicted in its short term energy outlook that the price of gas would substantially prize this year and next year. richard newell, the and the minister of the energy administration testified at a

senate, energy and natural resources committee about energy and oil markets. this is two and half hours. >> why don't we go ahead and get started. senator murkowski is on her way but stuck in traffic and ask that we proceed without her. let me first say that -- welcome to the committee. we have eight new members of the committee in the s. con. res. committed one or two of them have come to the earlier hearings we had, but i hope several will come to this hearing and let me just mention who they are it welcome them all. senator franken, senator coon, senator mansion, senator portman, senator lee, welcome to the committee. senator coats, interpol and

senator hoben. let me go through a short statement and then we will begin our testimony. this is an oversight hearing on the energy and oil market outlook for the 111th -- 112, chris. as you know, we usually try to start each new congress by having a sort of scene setting hearing of this kind which will look at the broad energy trends that we expect to influence our thoughts on energy policy also more specifically on the agenda items that come before the committee during this two-year congress. today we will start the discussion by hearing from dr. richard newell, the administrator of the department of energy's information --

energy information administration. he's going to give us highlights eia's short- and longer-term forecast and we appreciate him being here. he just returned from a trip to the middle east, to stand, and perhaps he can give some insight from that trip to the committee is a heavy consumer eia information and product, so we always appreciate having eia share it's the dhaka and its analysis with us. we also will hear from ambassador jones who's the deputy director of the international energy agency in paris. we look forward to discussing iea total fallujah of supply and demand through 2025 to be i also note that iea was founded as a forum for responding to eia

supply disruptions and a still has an important role to play in that capacity. executive director tonaka found the situation in the middle east required him to me that the headquarters in paris, but we were in good hands with investor jones who's impressive resume includes the u.s. ambassador in many of the countries in the middle east, and given the current situation we are seeing internationally we are especially grateful to him for giving the international energy agency perspective. we are also pleased for wooful to have two other witnesses on energy, both of whom are for earlier to the committee. they testified in 2008 as we attempted to understand that

your's historic price spike. mr. diwan is a partner and head of the advisory pfc energy in washington, and mr. burkhard is the managing director of cambridge energy research associates in cambridge massachusetts, so we very much appreciate you being here. since the hearing was announced early last makai think it is safe to say members and witnesses alike but follow the developments in the middle east with much interest. fortunately it appears unlikely that the political turmoil will result in a major disruptions or transportation at least at this time. that's my impression. however, i know about what ever, whenever the geopolitical events of this kind ochre it reminds us of orval portability to the

disruptions and it is a spur to consider policies that help to reduce that four of devotee -- vulnerability. that's why i am glad to see that eia is forecasting a decline in u.s. consumption of imported oil between now and 235. until recently we have seen the increasing oil all but impossible. we now see that 2005 might well have been the high water mark in u.s. oil import dependence increased vehicle efficiency and transitions to increase reliance on the biofuel together with u.s. oil production all of those are creating national and economic security benefits. i'm optimistic further technology and the enzus, both

of the vehicles and fuel could make us even less reminded of the imported oil from the current forecast predicts. i hope the congress will have the good sense to remain on this path towards increased energy independence. with that let me refer to senator murkowski for any comments she would like to make before we hear from the witnesses. >> good morning mr. chairman. i was eager to hold this hearing even before the unrest we are seeing in egypt and how this is grown into the international crisis we are now witnessing tebeau we see this a lot of this committee that today's hearing is particularly timely. while we see no interruption in the supply oil the unrest in north africa is affecting us and that should of understand the consequences associated with the current energy policy. carol harp. i think there's agreement the

nation is too dependent on foreign oil and i've always thought it unfortunate that agreement ends there. i've never been one to divide the critical need for greater energy efficiency for greater investments and alternatives and a responsible path forward for clean energy future. this is a major undertaking and reflect the decisions of biofuels and other technologies we will need adequate accommodation in the coming decades and we will build on in this committee but i'm also interested in what we can achieve today not just to mauro despite the unfortunate state of our economy to oil prices on the near $100 per barrel and hardly anyone expects the correction back to 50 or $80. instead it's more likely to stand as current range or trim with imports for more than 50% of the supply. we are on the verge once again of seeing the huge cost of high prices hold for our economy.

worst of all, this is a problem that is at least partially of our own making. over the years orleans have been locked up and promising opportunities put out of reach. the u.s. sit on huge unexplored oil reserves in the offshore and in my state of alaska and the rocky mountain west. we have shale formations that are now even acceptable for research and development and at times our energy policy goes beyond first reading -- frustrating it becomes impossible. the people expect their government to keep energy affordable right now it's failing on that front. we own the oil and the natural gas on the federal land. the government is not a landlord but a management outfit that we allow through representatives to contract for the development of these resources for our benefit. with the value of these resources is sustained such high levels and we were overly dependent on foreign sources for the supply this is not much

tolerance for keeping them locked up. we easily have money. before onerous leal but instead choose to hemorrhage nearly a billion dollars a day of our economy. it's not that i expect the nation to supply 100% of its own oil. we will, and it's not that i expect increased domestic production to see all the deadly bringdown the price of oil back down to the preferred price range. it won't do that, but i do expect honesty in this discussion about what increased domestic production can do to protect against supply disruptions, increased security, restore our trade balance, generate government revenues and most of all create jobs to the defense of north africa should be a wake-up call to those who work on the energy policies. civil unrest is a fact of life in the nations that provide the imports. iran now holds a presidency and is perfectly comfortable with $100 oil. the supply disruption as opposed to the mere specter of one would

likely spark the prices to levels that would stifle or economic recovery and result in genuine hardship for american working families. as the community street background quoted from the bipartisan policy center they said a buy quote, a $1.1 the increase in the beryl oil cheeks $12 million out of the u.s. economy. if tensions in the middle east caused oil prices to rise by $5 for even just three months, over $5 billion would leave the u.s. economy. obviously this is not a strategy for creating jobs. that is the end of the quote. that is a tremendous amount of money, and clearly we are talking about exponentially more when it comes to the dependence on foreign oil. usatoday.com i am leaving my call for a realistic and truly aggressive approach to the energy we face for the sake of the national security for our economy and the sake of the world's environment. america should produce as much of the oil it uses as possible.

it's this guy went in concert with the result of revenue and the ease of manufacturing that will allow us to take control of our energy future. i am anxious to work with senators on both sides of this to achieve a more appropriate balance in our energy policy, a balance for most all forms of energy. i thank dewitt this is the the testimony that you have presented this morning and i look forward to the discussion that we will have. thank you, mr. chairman. >> thank you. whittled mr. que, dr. newell. if you could take eight bandits or so and give us the main points we need to understand and i would ask the scene of the other witnesses that we would include in the record your complete written statements of each case. dr. newell, go right ahead. >> thank you, mr. chairman and members of the committee i appreciate the opportunity to appear before you today. the energy information administration of the statistical analytical agency

within the u.s. department of agency doesn't promote or take positions on policy issues and we of independence with respect to the information and analysis we provide. therefore we our views shouldn't be construed of those representing that part of the energy or other federal agencies to be focusing first on the short-term outlook for oil. the eia expects a continued tightening of the oil markets over the next two years. world oil consumption grows by an average of 1.5 million barrels per day in 2011 and in 2012 and our outlook, while supply growth from the non-opec countries averages less than .1 million barrels per day. consequently, we expect the market to rely on increased member production of crude oil and other liquids and a drawdown in the inventory to meet the world oil demand growth. with the tight world markets the eia expects the price of west texas intermediate crude oil the

key u.s. benchmark to average about $93 per barrel in 2011 this year, $14 per barrel higher than last year's average. and we expect the price to rise to an average of $99 per merrill by the fourth quarter of 2012. however, the forecasts are subject to a great deal of uncertainty. for example, the market value of the futures and options contract which we tracked closely is telling us that there is about the one in three chance the price of oil could be above $110 per barrel of the end of this year to the eia expects the price of regular gasoline to average about $3.70 per gallon this year about 40 cents per gallon higher than last year and $3.21 per gallon in 2012. prices will be how your during the summer driving season and certain regions of the country particularly the west coast. there is also said it contains

the prices could diverged substantially from the scholars due to uncertainty in the oil prices. i will now turn to longer-term and energy production from the eia outlook which we update while once each year. the reference case we release in december represents an energy future through 2035 over the next 25 years that assumes continuance of current market and technological trends, consumer behavior and current law and regulation. it doesn't include the effect of the potential policy that have not yet become wall. the reference case represents the baseline that is useful of jumping off points for assessing alternatives than the full weld look which we will release this spring it and put a large number of sensitivity cases but examine the impact of different technological market assumptions and policy assumptions. renewable growing source in the outlook albeit from a relatively small base. total use of renewable fuel

growth 3% per year on average compared to overall consumption which grows only less than 1% per year on an annual average basis. growth in renewables results from the implementation of renewable fuel standards which is a federal standard and also state level mandates for renewable electricity generation turning to natural gas, the prospect for the domestic natural gas production have dramatically improved over the last several years with the emergence of the shale gas production. u.s. shale gas production has increased 15 fold over the last decade and proved reserves have tripled over the last few years. this has led the eia and other analysts to reassess the u.s. shale gas resource base and in a new reference case just released technically recoverable shale gas or nearly doubled the and we assumed in last year's outlook. as a result, u.s. natural gas production increases 25% of the

next 25 years and the projections for natural gas prices are in turn significantly lower than we had previously assumed. lower projected natural gas prices underpinned the increased natural gas consumption which rises 17% of the next 25 years for nearly for use of industry and electric power. coal is another source for electricity generation and consumption grows gradually for what the reference production as existing plants are used more intensively and the few new plants already under construction are completed and entered into service. the increase by the ten gigawatts 101 gigawatts and 2009 to about 111 gigawatts but to 35. this is the this six gigawatts of the balance coming from existing plants. jeneane beck to oil, the prices

continue to rise in the long-term outlook is the economy underpins the demand growth that is faster, more rapid and supply growth from the non-opec producers. but to 35 the reference case price is $125 per barrel in real terms in our outlook. recognizing the possibi oer rk and policies with full outlooks issued this spring will then play wide range of oil price scenarios the verge significantly from the reference case assumption. total u.s. consumption of oil and other liquid fuels grows from about 90 million their loss per day and 2009 to 22 million per day in 2035 in the referenced case. this modest growth reflects the increase in fuel prices and the implementation of the finalized standards of statutory mandates that drive the fuel economy of the vehicles to 35 miles per

gallon to 2020, by 2020. however pending standards proposed for heavy-duty vehicles and in light duty standards beyond 2017 are not reflected in the referenced case. virtually all of the increased liquids come from the biofuels driven by the federal renewable fuel standards along with increased natural gas liquids and natural gas production as we expect domestic oil production to increase to come from onshore enhanced oil and recovery products and shale oil. attila the this offshore production in this year's reference case is lower than last year's outlook due to the delays and though project, changes and expected sales it will work natural gas prices said to be coupled with oil production. as a result of the increased domestic production in the modest consumption growth, we expect u.s. dependence on imported fuel to continue to decline.

after reaching the high of 60% in 2005, the imported petroleum share of total liquid fuel fell to 52% in 2 billion continues to decline in the projections to 42% by 2035. eia data projections are meant to assist policy makers in the deliberations in the private sector in making informed decisions. in addition to preparing baseline projections that i have reviewed this morning eia often has responded to requests from this committee and others for analysis on energy and economic impact of energy proposals. we look forward to providing the assistance you need in that regard. mr. chairman, members of the committee, this concludes my testimony and i look forward to any questions you might have. thank you. >> thank you very much. ambassador jones, why don't you go right ahead. >> will thank you, mr. chairman.

for those who came in late - jones, director of the international energy agency six september of 2008. prior to joining the eia i served as a u.s. diplomat mostly in middle east producers. i was also ambassador to kazakhstan. i am going to speak to this one above the international energy trends today and over the next 25 years focusing on four key topics. first, recent international price increases in their impact. second, the iea role in the emergency response to the oil disruptions. recent developments in gas and coal markets and finally come a long term ends in the world energy. the price of oil has risen more than 25% since last september. this week in it is the price of $100 per barrel for the first time since 2008. some blame this increase on speculation recent data for the final quarter of 2010 suggested was a gold supply and demand

with year over political unrest in the past few weeks. will these prices last? the iea is skeptical. the situation today differs from 2008 and several key respects. opec has three times as much capacity now as has already shown a willingness to use the production is up by to under 50,000 barrels or maybe more since september. the stocks are also higher. government stocks of unequal 60 days, refining capacities improve worldwide. however the each option crisis remains a wild card. if international prices to stay at today's levels for the rest of 2011 it would bring us close to the burden equal to 5% of world gnp. today's tensions in the middle east make inappropriate to review the role in preparing for in coordinating international response to the oil supply disruptions. to belong to the iea each member contributes to the vehicle must meet in stocks of at least 90

days of the net imports. these can be government stocks or commercial stocks of the government must have the legal authority to order the release and emergency. most countries have a mix of public and private stocks including the united states. stocks can either be in the form of cruel or refined products. in many countries have both. however the strategic petroleum reserve only holds crude oil and mr. scheck and i recall the iea welcome your bill in the previous congress that would have changed that. in a crisis, the iea clich the consults with the member countries analyzes the likely impact it recommends of course of action to the group such as the release of specific amounts of oil in the market. if the action is approved leave and work with the members to insure they all do their part. this includes regular reporting and consultation until there is a disruption that is over to the outreach to the important energy consumers outside of the iea is also vital to managing the

supply disruption. given the increasing weight of a play in the world markets. in the crisis we would also consult with important producers including members of opec to retain nonmembers took part in the training exercise including china, india and russia. all the serious crises has been fortunately rare over the past 35 years, in my short tenure at the iea i have seen occasions when public reminders that iea could resolve the emergency stocks held column markets. besides oil, natural gas is now ordering intense interests. american companies success in producing gas from the shale deposits is encouraging other countries to look for unconventional gas. activities growing in australia, india and china but also in poland and elsewhere. now this is probably going to take several years to the individual results. however, it is already clear that the calls and they supply,

the shifting patterns of trade having a major impact on the gas prices around the world. to come to the united states is now going to your ability to shut instead. in some markets prices have been as low as a quarter to a third of the oil on an energy basis. this is losing the competition for the pipeline gas giving it to consumers in europe. they are not very happy about that. more gas also needs more natural gas liquids which are becoming an important factor in the production at the margin. this is one reason why we see the market as being relatively well supplied for 2011. abundant gas should help keep the price is down. eventually more gas could even help the prices. but right now, the prices are climbing to to the strong demand china and india for power generation. for all these reasons, the iea is excited about gas and will lease a report of the golden age of gas here in washington in june. 2011 is also the time of uncertainty for the analysts.

what course will the incipient economic revival take? how will the government respond to the market's? in most recent addition of the world energy outlook we looked out what would likely happen to the world energy current policies continue for the next 25 years. though results were disquieting. world energy demand for increased by about 50%. fossil fuels will continue to dominate although it would only increase by a quarter gas use would increase more than half and the coal use closer to 60%. growth in all forms of energy is expected to be driven by economic expansion in the emerging economies notable to china and india but also the middle east becomes an important consumption center. in fact, of which only recently passed america as the world's largest energy consumer is expected to double consumption by 2035. another feature of this scenario is growing market power for opec countries. the production is said to increase from 40% today to

one-half over the next 25 years. moreover, were of the world's production will come from difficulty of the most pleases which means it will cost more in real terms. in short, the scenario points to a less secure more costly and more environmentally harmful method of energy than we have today. to avoid the energy future, we in 2010 contained proposals for an alternative path based on three elements. first, the strong push to improve energy efficiency, second, steps to d carbonize the production using renewals, nuclear power and carbon capture in storage and finally accelerating the development of advanced vehicle technology. in our view the steps would help improve lives all over the world by enhancing all countries of energy security insulated economies from the price volatility inherent in the markets and reduce the pollution of the land, water and air from the increased production transport and use of fossil fuel

that would otherwise occur. i want to stress however that our scenario doesn't foresee a rapid decline in the fossil fuel alone end to it. rather we advocate shifting the supply to a more varied and more secure affordable and clean source. mr. chairman, i would like to close with a brief personal comment to be having worked in the least in the former soviet and seeing the security economic and environmental impact for the current world energy system at first hand on the convinced we can do better. thank you very much for your attention to. >> thank you very much for your testimony. mr. diwan, go right ahead. >> mr. chairman, members, i ungrateful for the opportunity to come before you today to discuss the energy and my company's view of the oil market. i hope that my comments today

will help you to understand better the present situation in the oil markets and i can focus my remarks on four points in particular on the short stroketo medium term markets. first when we look at the fundamentals of supply and demand situation and we look at the oil market right now, the way that would describe them is they are a wealth supply. the demand is rising almost exclusively in the next two years with the deaths not very strong because we are counting on to areas which are china and the middle east and little of the rest of asia. the countries are not showing a strong demand growth. so in this on a balanced demand if you want it makes a global demand not particularly strong and i agree with dr. newell is around 1.5 in the next two years

the liquid production, and i would like to include crude gas liquids and biofuels all liquid have shown strong growth in 2010. it is a record year in the question is it is a one-year wonder or telling us something more. i don't think that we will have such a strong role in 2011 and 2012. i think 2011 will actually show good numbers probably close to a million barrels per day before 1.5 per day. the question is why do we believe that and the beginning of an answer seems to be showing that actually hi oil prices are having an impact on supply for the first time in a long time. we have had high prices now for almost eight years. we still have to see it reacting both in a crude but also natural gas and liquid and biofuels to compete with crude oil.

and i will speak more about that. finally worldwide stocks are at the respectable levels norms and did a certain area clearly oversupply. if you look at the oil market today you don't see visible pension and the oil markets like we do two or three years ago. the second point is that not only oil markets are well supplied but we have a very large cushion in terms of spare capacity, probably all of 5 million per day. in historical terms this is a high number and in the percentage of demand is also a high number. and we don't believe that that number will shrink dramatically in the next two years. maybe a million per day, maybe less, maybe more. so what we are describing as the supply the oil market isn't changing dramatically unless we have a factor crisis of moving supply. moreover, when we look at the

numbers we are not factory iraq and the potential increase in the production and capacity in iraq in these numbers. so outside an exogenous crisis, the markets are well supplied. obviously we have a crisis right now, but we don't have any supply disruption and what we see in egypt shows the good and bad in the market which we have very quickly even if there is no supply. but the individual reaction is short-lived and not very dramatic and move by $5 already we are starting to lose that as the disruption has occurred in the guess you would believe there is a strong sense of any disruption. finally it probably the most difficult part is to understand the price formation. i've been looking to the oil prices now for almost 20 years

and they remained a mystery. because when you look at the oil market in terms of supply-demand stocks, spare capacity etc., the prices are at 19. years ago the numbers would have been at $15.5 years ago would have been at $40.100 years ago at $100. so they don't predict the level, the more predict the price of half if you want. so how do we account for having the prices let's say between 70 to $90 this year with this type of fundamental committee and i think we need to give broader issues to understand that and the one i would like to talk to you one is very important it is the price marginal supply. what price to bring in new beryl of oil into the production.

so how high the price has to go to push for new investments and more marginal area obviously you're going to invest first in the most field and the more marginal ones come as the prices rise. in being in canada and brazil requires probably not $70 to be break-even prices. oil prices have risen to bring more supply to markets and its $70 to $80, $90, i don't know. it is attracting new supply. the second important determinant of the prices for me is really the internal the of producing countries. it's with the gulf countries and particularly of the opec producer require internally to

balance the budget. it's pretty much the only resources. when you look to the countries in general and you look at the balance of payment they all have budgets around 70, $80 so in the way they believe that is the way the markets are going to be there constraining the supply to stay close to these prices. the prices increase, those prices increase rather and push prices higher as the market pushed prices. the third element which is very important, and i came here a couple of years ago to discuss the oil. it's become an asset, like equity, fixed income, gold dollar or other commodities coming and the flow of money is quite important in determining how in the short term price moves in determining the price and that is quite important.

we see some important changes the last few months i think and we can talk more about that in the q&a, and i feel that there is a lesser ability to increase very quickly, so just through the money flow. i will stop here and come back to more during the q&a. the queue for giving me the opportunity to come and talk about that with you. >> thank you for your testimony. mr. burkhard, go ahead. >> thank you, mr. chairman, members of the committee. i appreciate the opportunity to share some thoughts with you about energy and oil in particular, the oil prices and gasoline prices are as we all know very visible. millions of people see them every day when they filled up the pub and was just two and a half years ago we saw oil of 140, that was just two years ago when the oil prices were close to $30 a barrel.

these swings have had a great impact on americans into the economy and the prices on the rise again and it's raising questions. yet again about the impact in the economy and why we are seeing these kind of prices in the turmoil in egypt raises the question about the geopolitical stability of the world oil supply. what's happening in egypt sprawled of -- part of a broad story that we would refer to as a global redesigned into the global redesign is what we describe as a period with change, the change as an informal mechanism that shape and manage international relations. there is no blueprint for the global design but it's clear the pace, the distribution of economic growth is affecting the global balance of economic political and military power all the time when the world faces a

court of requesters about macroeconomics, management, security and energy. oil demand supply and price are key variables that will shape this designed and energy overall will play a significant element. the political people in egypt has promoted the anxiety in the oil markets. the market is always fearful when there is a threat to the biggest oil exporters in north africa and even bigger ones clustered in the persian gulf. egypt is not a major exporter it is a slight in porter, but about two to 4% of the global supply does the transit in egypt and what happens in egypt obviously has an impact beyond its borders in the least. the prices are considerably higher, but looking back what has happened over the last decade goes beyond concerns about the stability in the middle east.

there's many reasons that explain what happened, but perhaps the most important accord of what happened this by starting increase in come gdp and other e merging markets. we all know this but looking at some of the statistics shows how stunning vistas. in the last decade gdp per capita in china is of 235%. 245%. and india is up 176%. that's from 2010. a stunning. rarely if ever have we seen living standards for so many rise so quickly and this is due to some extent to the breathtaking as bread and success of market based decision making and nearly every corner of the world. some of the growth in the past decade was based on misplaced exuberance, yet we are still

grappling with that painful aftermath, but the broad trend of the rise in global prosperity or in tact just look how successful the economy of india and china have been since 2008. over the last decade the demand in the market has increased about 12.2 million barrels per day. that is roughly equivalent to the entire production the past. that's what's happened in the emerging markets at the core of this, the higher-income aspirations for how you're living standards. there are other factors as well that play into this. i will amplify a few of those. one of the supply side. they can take anywhere from a couple of years to more than a decade to bring on a new oilfield to bergenfield overnight because the price went up. also, how the industry costs. this was perhaps arguably the

second most important trend in the markets over the past decade. from 2005 to 2008, according to the iowa chess of string capital cost index which aziz rebuffed consumer price index for the oil industry, and the short time period 05 to 08 the cost of developing field doubled on average around the world, so in other words accompany had to pay double in 2008 in order to develop the same barrel of oil compared to 2005. other factors as well has become the new gold. it is a financial asset in which the investors take positions based on their expectations of the value of the dollar, inflation and global oil demand supply. the role of the financial players has gotten a lot of interest over the years especially in 2008 and they can

exchange with a given price trend but the primary reasons the price trends are rooted in the fundamental supply side demand industry cost and geopolitics so what does this mean for today and in the future? one is a reminder that the oil market is a reflection of the world that means prices go up and down in response to what is happening around the world, but perhaps more importantly what does this mean for the future? in 2010 there is about 1 billion members of what could call the global middle class. that is people who live in countries with per capita gdp of $10,000 or more. but 2030 pub cicilline 20 years that will have grown to about 2.5 to 3.5 million people in the global middle class. so over the next 20 years to .5

to 3.5 billion people in countries with per-capita income of $10,000 or more. that means more oil. more oil demand. and there is a strong case for the oil prices to be above levels we have seen for most of the past 22, 30 years. this will reflect continued prosperity of the world. it will foster innovation and efficiency. does it mean prices are inevitably going to continue to rise? no. there are some factors that will offset that. one is the view that already is the peak demand europe and north america, australia. we do believe the demand peaked in 2005 petroleum based and it will not exceed that level again. fuel economy, biofuel mandates, demographics, the global health boom is turned into a global aging boom that tends to lower the consumption.

but all of this figures into the changing balance of power in the global redesigned and there is no blueprint for how this is going to unfold, and there will be of course times of turmoil which you see today on folding in egypt. to conclude, energy prices and especially oil continue to reflect the global economy and the geopolitics. thank you. >> thank you very much, all of you come for your excellent testimony. let me start with a couple of questions and, dr. speed naim kuhl can you just elaborate a little bit more of your testimony about what's going to happen with the percentage of oil we've to import over the next 25 years as you see a?

i do think that your testimony seems to be very different from what we have to start we heard in this committee which is imports have gone a bit will continue going up. you are saying now this is consistent with what mr. burkhard just said that the level of imports peaked in 2005, is that your position? maybe you could elaborate. >> yes, 2005 and 2006 was about the same at 60% of the overall liquid fuel consumption. it has come down since then and a good part of that has to do with the economic downturn and when you have a decline in domestic oil consumption that seems to come first serve that is one of the things that has led to that significant downward shift over the last several years but we see that the point to 42% by the end of the

projection. if you actually look at the overall petroleum supply which includes both imports as well as domestic production that is about flat over the projection but there is an increase in overall consumption of liquid fuel that is being met by the natural gas plant liquids which are domestically produced when you produce natural gas you can get liquids out of that as well which ads to conventional oil it also biofuels which increases, and so there has been a number of different factors that have led to this change. one is more moderate growth which i could attribute to two factors. one is the increase in the fuel economy standards we have seen over the last several years but for light trucks first and light duty vehicles. we also have higher fuel prices which leads to the market incentive for the folks to choose a more fuel economic car the next time they go to buy one and the same for the trucks. also, we have the of the

supply-side we of the increase in the natural gas liquids associated with our increased expectations for natural gas production and increase in biofuel due to the renewable fuel standards so all of these together have led to the decline in need for imports of oil. >> ambassador, let me ask you, i see that you made the statement that the growth in gas production or gas supply a downward pressure on the price of oil? i thought i heard you say that. could you explain that a little more? are you talking about the fact that the production of gas goes result in some gas liquids being produced and that is a factor or are there other things going on that we need to understand? >> the was the thrust of my remarks. a lot of it is the shale gas in

the united states produced the unconventional gas are fairly whet and producing more natural gas liquids a was a natural gas liquids production in the u.s. has increased which is one of the reasons why u.s. oil production hasn't gone down as rapidly as some people fought with and that's true worldwide as well particularly in the opec countries producing large amounts of natural gas, a lot of that is fairly went which means it has large amounts of in gl mixed with it in a separated and they are included in the crude oil production or they are sold like crude oil. in fact, the increase in the opec production is interesting because ngl is not subject to the opec production restraints. as a country like katar that is producing a lot of natural gas liquids can sell those and it doesn't appear as a part of its quota, but yet it has a real impact on the market and that is