assistant to the president and adviser to timothy geithner. on the consumer financial protection bureau she will speak about the impact of credit card regulation reform that went into affect your ago today. it set limits on when credit card companies can raise interest weights. we will have live coverage on russell senate office building -- c-span2. remarks from timothy geithner. he said the economy is getting stronger. unemployment remains high but businesses the starting to hire. the treasury secretary projected u.s. debt ceiling will be raised. was posted by atlantic magazine. >> miraculously seated next to me is the senator from utah, senator orrin hatch, ranking republican on the senate finance committee and a senator who spent 37 years or 31 -- 34 years in the senate. it is good to see you. thank you for being here.

>> i heard a look for people with charm, with and charisma so i am happy to fill in. >> we are here to talk about the jobs of the future. what do you see right now? you represent the state of utah but you have been in washington for three decades but what do you think the outlook is for young people who are watching? >> if they are going to school, college and autographs they have an opportunity to get good job. it didn't finish high school will have a difficult time in life. it pays to go through high school and go to college and pay attention to those things. that is the greatest the country in the world and we're in danger of losing.

>> we're losing that. some say the gross national debt to gdp, we're 65%. we spent -- less on government and creating business opportunities in this country that includes everything from cutting corporate tax rates and doing it in a way that doesn't harm small business companies, it is basically helping our young people to plan and jobs. >> what is the government role in doing that? >> we are spending 12% of gdp right now.

we haven't spent that much since world war ii or shortly thereafter. usually is 18% to to -- 20% at the most. right now revenues are 14.8%. practically 18% or higher from time to time. when you are spending 25% of revenue and expenditures, with 14% coming in, that is putting the country in great jeopardy. also a huge national debt to bring down. the only way to do that is to be competitive. that means giving business an opportunity to grow businesses and keeping our high tech world going. i am chairman of the republican high-tech tax force and the high-tech world is second to none in the world but we are in danger of losing that when you

consider how competitive people turtle china has become and two countries and not all of them. >> people have analyzed what happened to job growth or the lack of it over the last decade or the last year or two and looking back, job growth was starting to slow. the two decades of 2000 to 2010, we are not seeing the kinds of automatic growth we had seen before. those ingredients were already there. my question is what are the fundamentals in the economy that need to shift beyond tax changes? >> still, it will be catastrophically stupid for us to throw it down the drain.

too many controls and when the administration came in there will be deferrals which means are we going to tax the overseas profits of large corporations? if we do they are uncompetitive because other countries don't do that. so we went under but the current losses are not very good in that particular area. >> that would be a tax break. >> if they don't tax overseas profits, to bring back to this country, businesses overseas. is long as that company is moving ahead that company will -- >> they're always on hand. many have grown jobs overseas. >> that is not true. for instance in the 1980s, the

50 largest multinational corporations in the world we have 47 based in the united states. our core tax policies and some of our other government -- to everything, we have the exchange. that is pretty pathetic. >> remarks from utah senator orrin hatch speaking of jobs and the economy earlier this month. timothy geithner also appeared at this event. we are going to move over live to the treasury department this morning where we are standing by for remarks from elizabeth warren, assistant to the president and treasury secretary timothy geithner. >> it really is a treat to be here today. at our first conference any conference that fittingly is about data and measuring the effect of a new set of rules on part of the credit industry. one year ago today many provisions of the credit card

accountability and disclosure act took effect. we come together on this anniversary to mark the event but our primary goal is to analyze and discuss the impact of the card act. at the consumer protection bureau, we are determined any actions we take will be grounded in a deep understanding of the market we are overseeing. our organization reflects this commitment. search and ruleriding are brought together in a single position in the new bureau comprising five expert teams in specific market areas. the card market team was the first to get underway and this conference represents the kind of work we plan to do on an ongoing basis. one year after the card act took effect it is appropriate to ask whether it had its attended

effect and how the credit card marketplace has changed as a consequence of this new law. there are clear causal links we need to draw now. and work connection are more tenuous we need to keep asking questions and analyzing data. we must recognize the limits of this approach. public policy formulation cannot be put on hold until every question has a definitive answer. the data will always be limited and the answers will never be definitive. even so we will work to formulate policy based on evidence and rigorous analysis. this conference is important to the agency. i will work with you today to help inform the way the new consumer bureau will approach the credit-card market. we hope to leave here with a better understanding of policy implications of what the data show and how to frame the research questions that remain

to be entered. when the act was signed into law in may of 2009 was clear the credit-card market was in need of serious reform. congress concluded certain practices in the credit-card industry were not fair and transparent to consumer and the card act passed with strong bipartisan support in both the house and the senate. as president obama said when he signed the card act into law the act was intended to uphold, quote, basic standards of fairness, transparency and accountability. the concerns that gave rise to that were not profitability for the credit-card industry but rather the message is to generate some of those profits. pricing had become too opaque. self issuers had understated price up front, counting on interest rates, fees and

penalties and other often unexpected charges to let the company charged an overall higher price than the consumer anticipated. the harm to customers was significant but the harm to competition was also substantial. some issuers explained that when they made improvements in cards potential customers could not tell. so for example when one of the largest issuers in the market dropped clauss amid much fanfare, the cards were so complex that customers could not tell. within a few months the company reversed course, reinstituting universal the fault. so the card act was designed to reduce surprises in repricing of accounts and take a major step in improving the overall

transparency of credit card costs. as a result of the card act consumers have better information about how much they are paying for credit and how much they might pay on interest if they paid down their balances more quickly than they might otherwise have planned. thanks to the card act there are no more shifting due dates and customers have 21 days to make their payments, both of which should make it less likely that they will be hit with an expected late fees. a year later the card act brought about major changes in the way the industry operates. in part this is attributable to the protection congress enacted. the data we have assembled to indicate that much of the industry has gone further than the law required and in curbing repricing and overlimit fees. a number of issuers have eliminated some of the practices that can confuse customers and cost them money they reasonably did not expect to pay. lenders in the industry deserve

credit for moving in the right direction. not everyone embraces this approach. as soon as the card act became law some lawyers were asked to find different ways to accomplish that which the law was intended to prohibit. to its credit the federal reserve board responded with a rulemaking proceeding designed to close the loophole. i doubt anyone thinks this is the last time such a rulemaking proceeding will be required, we can probably agree that this approach, avoid a rule or another rule and so on, is costly for consumers and costly for the industry. it multiplies the number and complexity of the rule this approach creates special challenges for those smaller banks and credit issuers that still offer credit cards to their customers. i believe the card act is pushed in the right direction. it has brought about significant

reform in pricing practices of credit issuers and the information provided to consumers. even so substantial challenges remain. thinking about the approach to regulation and how to approve markets without an overreliance on rules will be our next challenge. we all believe and have experienced benefits of competition. when markets work well and efficient producers and shoddy products are more likely to fall under their own weight. with competition consumers tend to get improved product choices and lower prices. competition may also increase the rewards to firms that innovate in ways that consumers value. for a market system to fully serve the interests of consumers consumers need to be able to understand the cost, benefits and risks of alternative products and to be able to compare those products straight

up. by this standard in the credit-card market, we have more work to and the task is formidable. even with improvements brought about by the card act there are a lot of moving parts in a credit-card price. despite the important progress made at improving the schumer box disclosure and monthly statements, it is difficult for many consumers to understand the cost and risks of each individual credit card or to compare cards directly. our next challenges will be about further clarifying price and risks and making it easier for consumers to make a direct product comparisons. our new consumer bureau will make clarity a top priority. industry representatives have expressed their willingness to help and many consumer groups and academics are committed to helping as well. we want to work collaborative the with all parties.

a part of that collaboration, we want to be sure we understand the consequences of the card act, both intended and unintended. this conference is a first step in that direction. so i anticipate that today's event will provoke some thoughtful and informed discussion about what has changed since the card act took effect and what those changes mean for consumers, issuers and the market and what remains to be done. that is the most fitting way to commemorate this one year anniversary. is also the right way to launch a new conversation that uses our collective brainpower to advance more efficient markets. so thank you again for your time and your energy. thank you for being here today. we need you. thank you.

as [applause] >> we will be live again this afternoon with a discussion on retirement and the future of social security hosted by the woodrow wilson international center. that will get underway at 3:00 eastern. ireland's general election is friday. the prime minister is stepping down because of the country's economic problems. candidates to replace him, leaders of the three irish political parties will meet in their final tv debate this afternoon in dublin. you can see coverage at 4:30 eastern on c-span. >> frakes the brazil one of c-span's public affairs offerings. live coverage of the u.s. senate and booktv. 48 hours of the latest nonfiction authors and books. connect with us on twitter, facebook and youto that side of for scheduler e-mail that

c-span.org. >> hello ken egypt. speakers include a former military attache based in cairo. former staff director of foreign relations committee. this is just over an hour. >> good morning. i am vice-president of the middle east institute. thank you for joining us today for an examination of the egyptian military. there are a lot of seats in the front. hosni mubarak was still in power when we planned this talk. now the question of the egyptian military, who they are, what their function is and priorities and how they might react in this environment is more timely and

relevant than ever. just to remind everybody it was one week ago that hosni mubarak stepped down handing over power to egypt's military to general mohammad, amazing to think this has happened in just seven days. since then the military has pledged to oversee an orderly transition toward civilian rule and democracy. they have dissolved the parliament, suspended the constitution, and formed a committee to oversee constitutional reform that they will put before a referendum in a few months. they will run egypt for six months or until new presidential and legislative elections are held, whichever comes first. and the cabinet that hosni mubarak appointed is in place. a lot of remarkable changes in one week. a lot of excitement but also a lot of fear and suspicion that

the military may simply hold on to power or hijack the names of democratic process underway. with this in mind the egyptians are continuing to demonstrate. they are out there today to mark what they call for friday of victory and continuation. interesting that -- we have a lot of seats here -- for those who don't know him, the spiritual leader of the muslim brotherhood based in qatar, he came in to lead friday prayers today. he praised egypt's new military rule but warned they must quickly restore civilian rule. a lot of pressure on the military to do the right thing. can they? will they? how will they? how will they react to obstacles in their path? all this remains to be seen. it is a mystery because they are a mysterious institution. we are lucky to have two

individuals here who know more about the egyptian military than those of washington put together. between them they have decades of experience working on a personal basis with the egyptian military officials. we are lucky to have them with us today. we will start with colonel angle heart, he has been director of middle east studies of the army war coverage and military adviser in europe -- middle eastern affairs at the state department. lived ten years in egypt serving as u.s. defense attache in cairo and representative of the multinational forces and observers with implementation of the israeli peace treaty and during his residency in egypt he was involved with egypt's military and other state institutions. dr. graham bannerman is one of our own scholars who has head of

international consulting firm since 1987. prior to that he worked on the staff of the foreign relations committee. he was committee staff director under chairman richard lugar from 1979 to 1984 and was responsible in south asia. he was with a state department before that as a member of the policy planning staff as well as middle eastern affairs analyst and loves teaching middle eastern affairs all over washington university. so thank you once again for joining us. a real honor and street and we will start with joe angle heart --englehar --englehardt. >> good morning. what an exciting time. kate has laid out the questions that have come up particularly in events of the last week and i expect you are here and i'm going to answer all those questions.

we are probably not. in keeping with the way m e i does business we will try to give you background, understanding of how the military operates and the things that go into some of a things that happened over the past few weeks particularly the past week and see if we can get some understanding. i am not much on predicting the future myself. maybe you will try to take that on. one of the problems we have that many of the commentators we have had speaking about the egyptian military and things that have happened in egypt over the past weeks, a problem arises because the egyptian military is a very secretive organization. any military is secretive. any military liens on its military secrets.

the egyptian military, born in the modern sense in its surprise attack across the suez canal from the 1973 war has grown up with a secrecy much heavier than most. this secrecy keeps the military, keeping business to itself and doesn't talk very much about itself in public accept for those kind of ordinary military things reporting and very broadly something that is going on. i think this secrecy is an issue worth thinking about and it has several consequences. first of all there is effectively no civilian oversight in the egyptian military. particularly that of the legislature. secondly what the military does is largely opaque to the public

also has we have seen, the public is very comfortable with the military and very trusting of the military. third, military officers born in this attitude of secrecy form really a semi closed society and that kind of a society can stifle independent thought and foster group think. it doesn't necessarily in all cases and we have some excellent examples in the new supreme council of people who are not caught up with groups think. but it is a problem that arises from the secrecy of the military. last, his military has a pathological fear and mistrust of the press. this last issue, you have seen played out as soldiers have tried to shoot cameras away from

those takes that everybody in the world has seen in tahrir council causing the facebook international internet revolution and the international satellite news channels. over the past weeks as i have been watching the news commentators we have heard a lot of viewpoints that reflect a view that was made popular in abdul al anwar's books egypt:a military society. this book was written in 1968. it tells a story after the 1952 crew about a military asserting

control over all the essential elements of society and all the essential elements of the government and setting out to remake the egyptian society. in the 15 years of this book, this government, this military government set about doing away with a feudal society, breaking the back of the bourgeoisie and establishing an arab socialist state. when he wrote this book he was right. direct military influence was pervasive in all elements of egyptian society. times have changed. increasingly under hosni mubarak the private sector in egypt has expanded by leaps and bounds. egypt has moved towards a real capitalist economy.

this development has brought economists people still technocrats, financial figures to the forefront and slowly eclipse the role of the military on nonmilitary matters. by the time this year's revolution began, we can say the military has become much less significant player, in the egyptian politics and society than it had in the past. today the egyptian military reflects more about egyptian society than egyptian society reflects the egyptian military. there is no doubt that the military is an important state institution and today certainly it is the most trusted state institution. you could even say it is the rock of the state. embodies egypt's national pride and egypt's national identity. it is a serious credible military organization and people strongly believe in it.

we have seen this great respect of the egyptian public for the military play out in the public acceptance of the rule of the supreme council assuming the reins of government and doing anything that is done over the past week. that said, the military simply does not wield the same degree of influence over domestic affairs that it used to. there are in number of questions concerning the military and its role in society. grim end are going to touch on these briefly and we will be happy to respond further to your questions. i want to cover two more issues if i may. one of those is egypt's relationship with israel. we had an interesting presentation on wednesday by two pollsters that highlighted the divergence between the mubarak government and the public on the issue of israel. and of course with the public

being significantly less positively inclined toward israel. this divergence is also present, also present in the military but i have seen in my role as a peacekeeper with egypt that the military is much more inclined to the viewpoint that mubarak previously had. 30 years has built a lot of understanding and trust between the egyptian and israeli military's and there is little inclination to change that status. there is little inclination to do away with the positive benefits that the egyptians have seen from the peace treaty. as you have seen, the supreme council has reaffirmed egypt's commitment to its international treaty and when it was saying that it was speaking about history to israel. ..

>> for those who want to think about what egypt has done for us lately, in terms of military assistance, just remember the large egyptian force that fought alongside us in the first gulf

war. the egyptian force that was sent to somalia as our interest in that country was winding down, it allowed us to make a more graceful exit. now, all this said about sort of long-term relationships, it is worth noting that current personal relationships to give senior officers the ability to communicate directly with each other with a minimum of misunderstanding at time of crisis. and i think that's the best way for us to have seen between occasions that have gone on in the past few weeks. let me also say that egypt's military in reflecting its very strong national pride, i cannot imagine how any attempts to force good behavior by

threatening assistance levels have a positive effect in egypt either in the short or the long run. now, i've got a few more pages of notes here, but let me put those aside for a moment and let graeme speak. and they let me encourage your questions on any of a friday of subjects. -- any of a variety of subjects. thank you. [applause] >> i'm someone who also believes that the question and answer period is probably much more worthwhile than anything i say, of course, but let me say something about the egyptian military leadership and their attitudes, how they look at the world. these guys, they are veterans, serious people who care about their country deeply. they've committed their entire life to protect their country, and their stability. they do not like being involved

in the affairs of state. they do not want to be where they are. that is, they went there reluctantly, but they did so because they believe it was absolutely in the national interest of egypt to do so, and they are there for as only as long as they have to be. i mean, i spoke to one of the members of the council over the weekend and he would listen to his voice and he was exhausted. they are wrestling with a series of problems from the beginning to the end, and they're trying to address them in an orderly fashion and get themselves out of the process of running the day-to-day business of egypt. i'm not saying the military doesn't care about the national interest. i'm not saying they don't care what happens, but they don't think it is the responsibility to make the day-to-day decisions. if you look at what they are doing, what have they done? they say we set up this constitutional group, they're going to write a constitution, not the whole constitution. what they're concerned about is

the framework so they can elect a parliament and a new president, and they can come out and get out of it. they have said there will be no military candidate for presidency. one of the remarkable changes over the last 15 years when you do with egyptian military officers is they have come to the conclusion that there does not need to be a military president of egypt. that's not necessary. what their needs to be as a president and the military needs to be there. they don't see a very vital role for themselves to intercede when events occur that threatens the stability of the country. if you look over the last 35 years, when has the military intercede in egypt? in the 77 riots. in the 80 police riots, and any islamic killings in the late '90s. those were the only times the military came in. they restored order and they got out. that is their goal and objective now. they are not there to take over.

now, what you see among the pressures on them, you have one group of people saying you need to get out fast. you need to show you're not going to be there. and another group saying if you get out fast, and you're not going to be there he will not give the democratic party's time enough to organize and you're going to turn it over to the muslim brotherhood and the current government. so, therefore, you have to stay longer. they have a conundrum. they are being told different things. and they say why don't you bring more of the people from the street into the process? so they say we would like to do that, but who do you choose from a leaderless crowd to be the leader? it's not our job to choose those people, so please, for my party and we'll bring you in. but we don't have to there yet. they're looking for people to do that. they don't see that as their role. do they have a keen interest what comes out? absolutely. they care desperately about that, but do they want to control the process? no. the other problem is their military. military people are not

democratic an organization. by definition, how would you like to have decide on about it, let's take a vote. it doesn't work that way. i can tell you, i remember the first time that the field marshal came to washington to deal with congress. you talk about a cultural shock. having to go to capitol hill where everything is in discipline and you're talking to people five minutes going this way are that way, and that here's a man whose whole life has been disciplined in organization. it is very hard for people to adapt. they are working on that. he has people on his staff. yes people on the council who are very good at that. the military has looked after the interest in washington better than any organization i've seen in my entire time in washington. every year they send ones are twice he a delegation from the military that goes around washington, and talks to people on capitol hill and the

administration for 30 years. so you have built a whole quadrant of people have worked in washington who understand how we were, who understands the congress. when you sit down with those guys, the advisors to the council, and members of the council, they understand how this works. they may not be comfortable all the time but they understand it, and that's positive. therefore, if you ask me and my positive about the military, i am. clearly if they have the opportunity to get, to bring things to the conclusion, to set up a process that would be democratic, that is the goal and objective. now, the problems they face i do not envy them. they themselves share many of the problems that the society does. if you spoke to them in the past, if you sat down and chatted with them about how they saw their society, how things are going on, they had the same fears that the people did on the

street. they did not like the police. they had a problem with the police because the police were doing two things. one, their job was to take care of the egyptian people, to protect the people. you can't rule the egyptian people and do that job. second, they thought they were in disciplined and untrained. they felt that they needed more of both of those things. in addition, they had reservations about the economic changes in society. this is where i disagree with my friend, a close friend, frank, when he said that the military was supposed to economic reforms here this is the famous we delete table. that's not quite the case. they were proud of economic reforms because egypt had made huge progress. and when you talk to them, before the recent troubles and you said, isn't it great that some of the spanish financial papers were calling egypt the next bric country and all this? they had that national pride.

we're glad we're going, but the reservation was over the cost over the way changes were being made. they sat there and they said, yes, we see why you're privatizing these industries, but our concern is, our concern is that in the process, to make these companies to be sold, you are putting a lot of people out of work. and that our jobs for those people and that worries us because that has few social consequences. in addition, you have created the people who bought the companies benefit terrifically, and you created this new wealthy class. and for those of us who spend time in egypt, i first went to egypt in 1963, and those of us who seek the abolition of how the society looks and you see this new conspicuous consumption in egyptian society, on one hand, they did communities on the outside, golf courses, when people in the center of town,

some didn't have basic services, and it was a problem that was not sustainable in a society for a long time. and they were worried about that. at the same time, we in the outside, myself included, first eliminate the subsidies for all these commodities because that's uneconomical. but the consequence of that was you created, you eliminated the safety net. this is what protected the poor. so all of a sudden, the military point of view, you are creating a class, a large percentage of society that was dispossessed. and that is a formula for instability and for radicalism. so, therefore, the reservation was not come as my friend frank said, because they wanted to keep essential control, they reservation was over the social consequences of the program and how to balance that against the need to do economic development. so they were worried about that, and that was something that they

care deeply about but they can't address that at this point. they need to have a civilian government in place to address these larger term problems. this is not something the military can handle at all. so icy -- what i like to say is, these are good people. they are disciplined. they work incredibly hard, long hours, and their only goal seems to be is what's best for the country. now, do these people have personal ambitions and are they concerned about institutions? if so, they don't display the. you don't get ahead in egyptian military by displaying personal ambitions. this is why you can have somebody like president sadat who had been vice president, who had been there and as vice president you never saw any profile of him. so when he took over for president nasser, most of the assessment in washington on how long he would last? he will not last, sadat, because he doesn't have any personnel. doesn't have anything going on,

but that's because he is number two. now he's -- then became number one, it was a different personality. the same thing as true in the military. this has been thrust on them. they have the council and they will work together. these are people have worked together a long time and they're trying to address issues. will they do everything right? probably not. are they doing the best they can? absolutely. i think the best thing for us, for joe and i do at your questions about anything specific -- specific. >> thank you very much. [applause] >> thank you very much for that insight. why don't you both stand at the podium. i think i will start. talking, graeme, about having a military doesn't want to take the reins of power, doesn't want to be in this position but we do have any egyptians who are suspicious suspicions about the role. and if things don't go the way

the military likes come if you have elections that lead toward a more islamist government, or a government that is not pro-peace, how do we guarantee the military does not sort of take control? do we need to set of modalities like they have in turkey would have a national security council that is set up, a framework where the military is guaranteed certain powers, and so are civilians, civilian institutions, the military has respected that. has come in from time to time to take over when they don't like the direction of policy has been going, but these days the step back and letting turkey do its thing. do you see that happening in egypt? is this what we need to do to guarantee the egyptian military stays out of power but does what it needs to do when things go the wrong way? >> i think the first thing is we're going to do nothing. the egyptians are going to do it. they will do it their own way

and we will have nothing to do with it. and the fact is we have a great relationship with the egyptian military. and because of that relationship they will listen to us, they will talk to us, they will take our advice. but they're only going to act in what they see as egyptian national interest. so, therefore, if we think we can call them all the time and do exactly what we say, no. and, in fact, the more pressure we put on them, the more difficult we make their job because they want passionate they'll have to be nationalistic. so all these people say, let's put a fence on foreign assistance and military assistance to egypt or it's totally counterproductive. it's all the result we don't want. we have to have faith in those people. they have been there and they're doing it, and we know them well. this military is so different than the military 30 years ago. when we worked with him 30 years ago and you met, and you a friend with egyptian mildred officer at this embassy in

washington, and he went back to kyra and you went out to see him, you and his friend could not see him unless the minister of defense personally approved the meeting. why? because he didn't trust them. they thought we were like the russian. they felt we're trying to control their life. they were nationalistic. now in the last 20 years thousands of egyptian military officers have trained with americans. they no longer have a distrust. for better and worse that a better understanding of us with our weaknesses and our strengths, and they will talk with us and they will disagree with us and have arguments with us. you can now have, you are not a threat anymore. they do not see us as a threat we once were. but they do disagree with us. they have severe disagreements with us and they have those discussions. and those discussions are not threatening the relationship it they are discussions between people who are friends. so what we want to see is the military is going to do the best they can to get at.

they will accept advice, they will listen to us, but in the end they will do what they seek is in egyptians interest and we on the outside cannot change that. >> we will open the floor. if people simply state their name and affiliation. >> bill flies from johns hopkins. to question. one is a yes or no perhaps. do either of you represent now or have you, or are you affiliate with a firm that represents the government of egypt? >> no. >> now or -- >> i worked with the government of egypt for a long time. i have not done that for four years or more. >> other than being egypt peacekeeper, no. >> could you describe the other side of this question, nonpolitical side, what are the military capabilities of the egyptian military? can they defend egypt to borders against external attacks, either

from either -- other states? can be defend -- installations like now, and are they capable of projecting military forces beyond their borders? in other words, as a real military, what exactly are their capabilities? >> let me just, let me just expand a little bit about what i've already said, said on that issue. it's a credible military. they are a strong military it i think we've seen some figures recently that their the 10th largest military in the world, and when you're the egyptian military, in one sense, or if you're trying to work out the military assistance for egypt, there are some interesting conundrums. when you say defend themselves, are you talking about the

libyans who can't cross the border? or the sudanese who can't get to the border? and on the other side, there is a strong and durable peace treaty. so egypt as a strong military. that military doesn't so much defend the suez canal against what kind of threats one would have to ask. but it provides a very strong rock for the egyptian society. >> people in the overflow rooms that we have question cards, that you can hand and interns who will bring the men. >> thank you. you have. picture of a very enlightening body of the egyptian military. can you comment on their human rights standards? in particular, torture.

>> how about this? the egyptian military is part of egyptian society, and it reflects egyptian society. there are any number of things, corruption being one of them, we're a different understanding of standards occurs. i'm not talking that human rights can or should be abused but there's a different understanding of what constitutes abuse, what constitutes pashtun what constitutes corruption, and what is the government expected to do. the egyptian military directly has very little to do with society in terms of face-to-face interaction. so if you want to talk in general about military and human rights abuses, it doesn't come to that because they don't do that.

on the other hand, the egyptian military is an enforcement arm of the government, and that government has some particular views. whether or not any given situation we might find instances where the egyptian military was involved in practices that we would appreciate that they not do, i can't say for sure one way or another. what we did see, of course, was the tremendous events of last friday night, or last thursday night where, after that speech by mubarak, it was very clear to everybody that the next morning crowds were going to be out. they're going to be out in the millions, and it was a good chance there was going to be destruction, and a good chance that there would be cause, real problems caused. the military was right in the middle of that. there's been a fair amount of us

listening to what we want to hear about what people said in the process of this past week, and as things, things went along with the military said was that it would not fire on peaceful demonstrators. the military was, on last thursday night, was in a very uncomfortable position, wasn't it? with a very real possibility that there could have been violence on the street, and it could've been up to them to provide, to provide security and to establish security. that was avoided. that was avoided. >> let me -- can i please add to that? it's an issue. the question is, i saw the amnesty report from london saying that two people said they were tortured by the military. could that happen? absolutely. isn't a policy? absolutely not. i think what's important about the military is they tried their

best to be disciplined, and they tried through this whole situation. but the stress upon these people, and their individuals come individual soldiers who get separate and things, and could something happen that an awful? absolutely. what you don't know is some of those people who broke into the police station, which has not got a lot of publicity, took weapons. and they were after, and they killed some soldiers, trying to provoke them. and so the military have the problem of their own people being attacked in certain places and trying to keep it under control. i ensure that if the amnesty report are true, and the military did torture these two people, that i guarantee that this military officers is as distressed as everybody else and they will look into it. that said, when you have a chaotic situation you have now in egypt, you don't know who's a military officer all the time.

because the security forces have always worn uniforms, and has always been a confusion. some of the other city forces have apcs and things like that so the average person, myself included, cannot tell the difference necessary between a military unit and somebody else who's out there on the street. so you're in a chaotic situation. i would hope and i have no idea that the egyptians, milton looked very much into the allegations, that there was the torture and to look after it. they care about the reputation. >> recognizing the egyptians don't know what's going to happen next, let alone us, i would like you to comment on model some other countries and the possibility for egypt as we tried to think away through the next steps. they reorganize, have a democratic and everything. but short of that, a democratic election, bad guys win, 100,000

people killed in the civil war against the military. you can think of the iran model, moslem fundamentalist comes to power and stays there. major blow to u.s. interests. not to mention an attack on iranian people. or the tunisian model which a threat, or a slow difficult to characterize process, change of leadership but not change of the system for longtime. and in a decade gradual transformation where overtime police and military became better, the parliament became better, that leadership became better but there was never one thing, never a revolution per se but a muddled through the positive and are doing relatively well. feel free to offer a different one. >> you know, this is one of those things come in my life i had a case of imposition right supposed to predict where things go on and i have some responsibility i was on a department in the spring of

1979, and iran was my responsibility. so my record is not particularly good at predicting the future. i personally believe that egypt, because of the nature of the egyptians and egyptian society, has a chance for more of the indonesian model. because i think there's an evolution that's going on here. you see a willingness on both sides to sort of talk about things and work forward. you just hope it doesn't spin out of control. but as i pointed out before, what you have to worry about is this 40 to 50% of the population that has been suffering. and, therefore, we do their frustrations become great? what happens there? the problem egypt -- agent has to face is huge. can anyone solve that and before the government and face all the other challenges they have? and the answer is, i don't know but i certainly hope so. there are a lot of good people both democratic movement, in the military and others in egyptian society who are working together

trying to get through a good solution. and i think they have a chance of getting there. i hope they get there, but it's going to take all of their efforts and our support from the outside. >> let me add something here. i think, i think that when we look at the supreme council, and we look at the membership, which is field marshal tantawi and a senior commanders of the military basically, with a few others thrown in. it appears to me that there is nobody that achieve those positions based on their championship round democracy. these are good people. they're dedicated and they are very strongly dedicated to egypt and the progress of egypt. if i were to underline things that the military and this military council are interested in, i would underline social

justice. i would underline peace. i would underline security. and as we go ahead in this, let me throw another thought out. we had some posters over here at mei on wednesday, and they did an excellent job of showing some of the issues involved in egyptian society. one of those was that 90% of the egyptians were in favor of democracy. they found a dichotomy in fact that 75% of the people in egypt were also strongly committed to the role of islam in government. 75% of the people in egypt thought that, in fact, there might be a group of religious authorities that would take a look at what, take a look at

what the laws were, and have the authority to overturn laws. i thought back to a lot of conversations i've had in egypt and elsewhere in the middle east, and i'm struck by the question that, when people start talking about democracy, we are not always entirely sure what they think they mean by this. and what kind any democracy occurs up on capitol hill and in the small towns and villages throughout the united states is likely to be very different than the kind of democracy that finally comes up here in egypt. so, as we look at things as we look at events that unfold up in front of us here, i think we have to understand where this military council is coming from. they are committed to a

democratic solution. they are also committed to social justice, the idea of security, in egypt. thanks. >> take to questions from the overflow room. both are from the u.s. navy. one, with the egyptian military except -- and number two, while it is true, the u.s. and egyptian military have a close relationship, it's also true that the widespread of influence in the region among the general populace. way more representative regime comes to place, will there be pressure on the egyptian military to back away from the relationship with the u.s. military? so to questions about -- >> do you want to start? >> not in the near term do i see a civilian minister of defense. that's not in the system. they don't believe that the civilian control over the

military like we do, is fundamental to the american belief. that's not acceptable at this time. it may be in the future. i would not have thought 20 to go that egyptian military would be an advocate for a civilian president. but they now have evolved to that point. with regard to the military, military to military relationship, i think the egyptian military sees it somewhat different than we do. i think they see it is a more cooperative relationship. they see they get a lot in in te the relationship. it's an aegis national interest as long as that is the case a will have the relationship it is interesting here in washington, we always say we give egypt $1.3 billion worth of aid. well, and cairo they said look, we wait some other restrictions on the capacities of the suez now so your fleet can go from north to south very quickly. it's supposed to be a 30 day notification and we way that for you. you're not supposed to have any nuclear ships or weapons go

through the canal. we way that for you regularly. how much would it cost the united states if you have to resupply, if you had to go around africa rather than the canal. so they said look, this is a relationship that we are partners. .. >> i'd like to know something about the social structure of the egyptian army.

it is constricted, conscripted army, how do people enter the officer corps? are they chosen from a certain class of society? and we hear that a lot of the wealth has come through, after -- has come to the army. is that so? >> first of all on the, on the issue of the muslim brotherhood i started off by saying that the egyptian military is very reflective of egyptian society and that is very much the case as far as the brotherhood is concerned. the egyptian military has a visceral fear of the muslim brotherhood from the security standpoint. they are strongly concerned about what the, what the muslim brotherhood's aims are. on the other hand, the egyptian military, like the rest of egyptian society

understands that islam is going to be part of the government. when we are talking about what kind of democracy we're going to have, it is going to be a democracy with some islam in it. to what extent i'm not prepared to predict for you today but it certainly, certainly is going to be one where there is a mixed bag. the military and its social structure, it is a conscript army. every egyptian is required to serve or to sign up for conscription. huge numbers are conscripted each year. about half of them go to the military. half of them go to the police. so when you saw all those guys out with the batons and the shields, those were conscripts. the central security force is a conscript force just like the military is. the military uses its

conscripts for two years and in addition to straight military jobs, military of course runs military industries where it produces goods and services that are primarily used for military reasons. the officer corps is drawn broadly across egyptian society f we were talking 20 years ago, we would be talking about a society that saw the officer corps and the path through the officer corps as the fastest way up in society. and i think that times have changed. we've had the advent or, and the huge increase in availability of college education in egypt. and that, many people are seeing that the business route and the, is much more attractive. so the military is not quite in the same social position that it was back in the time

of abdul malek's book here. >> on the brotherhood, there is no question there is suspicion. they saw the islamic fundamentalists kill president sadat. they saw the troubles in the 1990s so they're suspicious is. what i saw most interesting in the last 18 days with nadya suleman met omar suleiman, and sitting with the muslim brotherhood that was remarkable to me, neither of these two trusted each other. omar suleiman was the man in egypt who spent most of his life chasing the muslim brotherhood and the muslim brotherhood who was the people spent most of their life trying not to be chased by omar suleiman. here they were because of the national interest willing to sit down at the table and talk to each other. if you look at group of 10

rewriting the constitution, the fact that the military took somebody from the muslim brotherhood and put them on that is a clear indication that the military knows these are important element of society and they have to be included in the process. similarly, as kate pointed out at the beginning the muslim brother hood has gone out of the its way to say nice things about the military. everybody is going out of their way to make this work and that gives you some hope. with regard to the society, the officers, yes, i think there is probably a high number of officers who come from families of officers but i think if you go to our own military academies you find a higher percentage of the people come from families of military officers because it is a career they take. i think the point joe pointed out too is that the military officers do not have the same standing and wealth in society they did 30 years ago. yes, their life is fairly

good. yes, it is better than the average person in society but their life is nowhere in comparison to how the new business class has gone. there is the wealth in the new business class overshines. they have not done that. and with regard to corruption now i would think only one would be a fool to say there is no corruption in the military or anyplace else in egyptian society. but you have to look is it institution or was it individual? if you look at the minister of defense, he came to power in 1991 as the minister. the longest serving minister of defense in the history of egypt. he was put in there because he was seen as an extremely honest person. he has been minister of defense now for nearly 20 years. he doesn't own a house. he doesn't have a car. i mean he has, and that is the reputation he has of being extremely honest and it permeates down. the people around him do not

want to be seen as not doing that. does that mean that there aren't individuals someplace out in the system that are taking advantage of it? absolutely. but what it means is the system itself tries to be honest. >> got a question. >> i just add to that, part of my job in egypt this last six years was dealing with egyptian businesses and i had, i had contracts and arrangements with about 700 different egyptian businesses, including many of the military businesses and my experience was that the egyptian military businesses were almost entirely free of any tint of corruption in a society and in a system where there were payoffs and asked for payoffs all over, particularly in, well in both civilian and in state enterprises.

>> you had a question? all right. we've got --. >> i'm from professional solutions and i must say i'm not quite as optimistic as you two guys are. it's true i was there a long time ago but for 20 years i've been briefing and debriefing teams when working on the ground with the egyptian army and i agree entirely that it is much more professional. they have learned a great deal from the united states and our military security assistance relationship with egypt is absolutely vital and we should not ever think about dropping the amount of money we put into the egyptian military but let me say this. the egyptian military is a very privileged class. it still is. there are still no nco corps that is professional.

that means there is very wide gap between the officer class and enlisted men. so what bothers me is the fact that expectations are quite high now. you've gotten rid of mubarak. they're going to expect good things to happen. i don't see that happening economically or in terms of a better life for people for the next six months. so i wonder what's going to happen when there starts to be these expectations are put into, into demonstrations or whatever? how will the army react? will they actually enforce control or will the soldiers obey the officers? i still have a doubt about that. >> [inaudible]. >> and i'm sorry, from security. before you mentioned omar suleiman. so i don't think we can consider suleiman an arm of

the military apparatus. what is his role? the press report he negotiate with israel to send the military in the rafa gate with the crisis when the security forces --. so basically suleiman reporting to the supreme council or is the council reporting to suleman? thank you. >> who wants to take expectations and who wants to take omar suleiman. >> i take suleman. >> i take expectations. i don't disagree with tex on all of the issues. these are clearly challenges and it will be hard we have a huge amount of problems and there is lot of goodwill. i'm glad i'm not trying to face those programs. and they will clearly not address the economic

problems of egypt. they want to get that out of there and so that the civilian government can address the economic problems of egypt this is where the united states can come in. we used to five, six years ago used to give some of our assistance. the economic side was to help people make the transmission while the economic reform was going on. we were helping people suffering from loss of jobs jobs because of privatization. we put money into the ministries to help them. problem we stopped doing that it did not become an american interest. a lot of aid was going to consulting and promoting democracy and civil societies and thinks like that. we didn't have the real sources to have a real impact to make, to cushion this transition. we are part of the problem ourselves because we moved away from that. >> suleiman. >> suliaman is not there the

council is running it to be fair. >> i have two questions in the overflow room about the economy and the military. the egyptian military and their links to the economy can they be stumbling block to egypt's liberalization. that is from german embassy. from mei member, what are the military officers running many industries? many industrialist are out of favor. well entire industries move to get more of the pie. military getting more of the pie and military blocking liberalization to guard their own economic privileges. i think we have to see where military military privileges are and this is partially an answer for you, tex. in context. military salaries have stagnated over the past years. and as graeme already indicated the new rich class

has blown far away and above military in this society. the businessmen and the financiers and those people live in villas. the military lives in apartments. their society, they are in a comfortable place in society but the same place that anwr malek was talking about. there are officer clubs and there are perks. they are probably better seen today in the context of a military where there have to be some additions to salaries which have been stagnating for years military is comfortable with you not overly ostentatious place in society as well. military as i mentioned before has been running a

number of businesses. where those businesses are today, generally is, for example, the military food industries and the military water industries, they produce those kinds of goods for the military primarily although they do use areas where they have economic advantage to sell into the civilian market. i have to say i don't know and i've done a lot of business with the military in this regard. i don't know any part of the economy or any sector that the military is involved with where it is anywhere near even a major player, much less dominant in the society. it would be hard for me, let me -- i almost made a prediction here. i want to be very careful about that. let me, let me refer back to, back to something that the

graeme said earlier and i'm not at all sure that the military wants to do anything out of what they're in right now as far as running the business. i can't imagine that they would be interested in running the economy or taking on the issues of the economy. we used to joke and tex probably joined us and who would ever want to be king of egypt and take on all those problems? i think the military is smarter than that now. >> let me say something about the industries. they're part of the way the military takes care of itself. they don't want to be dependent for vital supplies on an insecure civilian sector. they have their own farms to grow their own bread and their own chickens and do their own water. this is all separate to them. that is important to them. it is their autonomy and their security. if they do make money in the

private sector, if the water pumping produces more bottles of water than they consume, the money that is generated there is used to in the military budget. it is not going into the pockets of guys to make guys running the factory rich. this is a way they can stay off budget. i'm sure our pentagon would love its own source of revenue where they didn't have to go to congress every time to get things done. this is how they see it. this is what they do. is it democratic? is it popular control over their resources? absolutely not. but is it a corruption? no. it is a different system. >> [inaudible]. >> i'm jason. i'm an independent consultant in egypt, basically what you seem to have is a military regime, right? demonstrators were asking for the downfall of mubarek and to the regime but the military has basically taken over. so the regime isn't going anywhere. the military is staying. it will still be a large

military state in a lot of ways. so what, does that, what hope does that give us for genuine change coming out of mubarak's demise? >> claire,, national conference on state legislatures. i'm interested in knowing what role the military will play in the elections in september? >> i am i think that latter one is a great question. i would certainly, certainly look to where the military has been in fact in what it's doing so far. military is not expert on constitutional law, so it got a committee and the committee is doing that. would we expect that the military would try to run elections themselves when there is already a system for running elections in egypt? the system for running elections, conducting the elections, counting the votes and all that sort of

thing, operates and has operated. the real issues involving elections have been more about qualifying of candidates, harassing the candidates as they weres as they were trying to campaign in the course and then the thugs coming out and trying to prevent people from voting. does the military need to run that system? i'm not sure that it would see that it really does. military regime? >> transition from military civilian, how do you guaranty this? >> the question over here what about has the regime changed and will it change if the military is still there doing these things? i think the change will come to egypt. the question is will it be the change that everybody wants? will it go far enough? will it go as far as we want? it certainly will not end up to be a jeffersonian democracy. it will be something that the egyptians evolve on their own that meets the need of their system. what you really, i think what you should hope for is

that the military goes back, lives in its isolation and sits on the sidelines in case things fall apart. they can calm things down again. what you don't want the military running the day-to-day life. you want a president who is civilian. you want a prime minister and cabinet responsible to the people who run the regime, who run the day-to-day life, address the problems of the country, with the military sitting on the sidelines and developing a different relationship over time with the rest of society. is it going to leap to exactly what we want? no. by the way, we all have problems with demock system if you're state legislatures can you he will tell us where the wisconsin state legislatures are right now? we all have our problems. >> jeff wright, washington institute for near east policy. could one or both of you talk a little bit about the smc itself, how it works what the relationships are

at the top, who the key people are, what kind of dynamics are operating within that? it's a big question, at least in my mind. this is the group that supposedly running egypt now but, really kind of who are they and how are they operating and what should we expect from them, as a group? >> who is on the council? we can go with that easily. head of the council is field of defense, tant town which. -- tantawi. you have the second army command ear and third army. northern commander, southern commander, western commander, central commander. those people are there. in addition you have the hid of military intelligence. he is on the council. you also have the head of the operations authority. the head of the amas authority and head of financial authority and legal guide from justice. to those people you add two advisors to the minister who

are special assistance to the minister. they're on council. that is who the islamic council. the field marshall is in charge. there is no question about that. this is not a democratic group where the generals sit around and discuss stuff. they are making decisions. things are being assigned to people. there are of course at thats and responsibilities. and i assume, so-and-so general so and so is good meeting with people. have him talk to the protersers because he is good with that. you're the lawyer, you're sit with the constitutional council. they have responsibilities and they're being assigned. >> independent. question assuming you have one year parliament in the place. the government is there and the parliament is 75% like sharia law and cut off relationship with israel. do you think this military

will be a good guy or bad guy? how are you going to define it? that following the parliament or the who is going to follow the --. >> i told you what i thought about predicting the future. >> yeah i think this is one you can't predict. that is pure speculation. you just hope it doesn't happen. you see people all sides on this question having goodwill and you have to hope they work it out. if we all can design scenarios we all would be terrified by, yes we can. but i don't think, we've got to help them not get there and assist where we can from the outside. that's all. >> last question or two? >> [inaudible]. my name is kamal i want to ask this question. in africa, middle east people go to the military because they want to be the president. is that not the case of egypt or the rest of africa?

>> i can tell you it's not the case in egypt. they join the military because they want to be in the military and that's where they stay until they retire. and then the senior officers very often just like senior officers here in washington and gosh knows we know that, get jobs in government enterprises or civilian enterprises. that's where they're pointed. they're not, we always said there are field marshall's baton in every private's knapsack. what is not there is the presidential seal. >> may have been true at one point but clearly if you sit down with these people and talk to them. talking about the range of officers, they never talk about anything but the national interest. it is really incredible. they may be just, but with each other, it is the same. it is very, it is a very interesting group of people

and they have devoted their lives to this. now are there a group of people coming along somewhere in the ranks we don't know? well we don't know. that is the answer. it is really quite interesting >> you think the -- mubarak family before and after? >> we have no idea. >> that's a question that will remains to be seen. the clearly there is a lot of is skepticism here about the egyptian military handing over the reins of power easily. but i guess we'll just follow developments for the next six months and, watch and see. so, thank you all very much for joining us today. thank you, graeme and joseph. [applause]

>> my question came out all wrong. i was talking about the turkey model. would turkey be a model where they have this --, military, civilian setup? >> we're live again this afternoon with a discussion on retirement and the future of social security hosted by the woodrow wilson international center that gets underway at 3:00 eastern. president obama travels to ohio today for a small business forum at cleveland state university. over 100 small business leaders from the state are attending. you can see the president's closing remarks after meeting with those leaders at 1:55 eastern on c-span. ireland's general election is friday. the prime minister is stepping down because of the country's economic problems and the candidates to replace him, the leaders of the three major irish political parties will meet in their final tv debate this afternoon in dublin. you can see coverage at 4:30 eastern also on c-span.

>> a look now how the president's 2012 budget proposes to address the nation's financial problems. ndm think tank is the host of a discussion with a number of economists including one formerly with the federal reserve. commerce department official with the clinton administration moderates this hour and 15 minute conversation.

[inaudible] >> good afternoon. i want to welcome you to this event by ndn. i'm rob sha -- shapiro. i direct the global project for ndn and i'm going to be the moderator. this is budget week in washington, d.c., the beginning of budget month which will then turn into budget year and who knows, could end up as budget decade. that is certainly where the debate is heading. you know the battle over the budget this time brings to my mind the u.s.-sost yet -- soviet arms reduction talks of the 1970s and 1980s. the issue is not whether

both sides can settle everything at once but whether each side can make sufficient concession in the first round to keep talking and take them to the next round where another compromise can be reached and keep talking until the third round and so on. that is in fact how we brought the deficits under control in the 1980s and then again in the 1990s. one step at a time. once the two sides had found a common frame of reference. the problem right now is that we're a long way from any meeting of the partisan minds. the only common ground is that both sides, however reluctantly, see whacking away at deficits which today are running around 10% of gdp, as an economic necessity. they don't however agree on what those economics portend. the president sees deficit reduction as part of the general effort to boost u.s.

competitiveness. that's why his case hinges on combining targeted public investments in the things that which contribute to growth for all industries. research and development, education and training, and basic infrastructure with targeting spending cuts as well as a significant dollop of revenue increases. this approach really came directly from bill clinton's 1992 campaign where it was called cut and invest. and it is no coincidence that gene sperling, the president's top economic advisor today helped manage economic policy in that campaign. . .

>> the best argument for this approach is at it has worked in the past. when clinton followed the script, what followed was the longest expansion in u.s. history and the strongest teams in business investment, jobs and incomes in 30 years. to be sure, japan demonstrated in the 1990s that very large investments of infrastructure can be wasted, particularly if special interest dictates where they go. and we've demonstrated we are not ndn from that dynamic.

the 2009 stimulus almost would've a greater effect had congress not substituted many of its more parochial priorities for the original plan that the president laid out. the republican budget proposals are targeting quite differently with defense and the time it's still largely off limits and a sense of urgency to achieve large cuts and the deficit quickly, the gop cuts for everything else are much deeper and they don't distinguish between public investment and other kinds of spending. the gop logic also doesn't accommodate either high revenues or a gradual glide path to lower deficits. much like prime minister cameron in britain, they believe that investors will give up on the united states -- [inaudible]

>> attention, the markets don't seem to buy. if investors thought that america's credit worthiness were in genuine risk from the current investment we would see sharp increases in long-term interest rates because investors would demand higher returns to offset that risk. that's not happening even though investors certainly take deficits very seriously. i believe that based on the historic record they still trust the two parties will find a way to contain those deficits, step-by-step as they always have in the past. and i think the markets are probably right that the economic causes of failing to address the deficit eventually will nudge both sides to the negotiating table. if you look at the events already scheduled, i think it's very possible the democrats will blink first. if the republicans are genuinely serious about holding up the debt limit, i think that will

extract significant concessions from democrats on spending, if only because they know that no matter how it begins, the president will be held responsible in 2012 for any economic cataclysm that occurs under his watch. then it will be the republicans turned to swallow high revenues. the base well how about both the john boehner and mitch mcconnell will no that without high revenues, the cats which would be required over time would make most americans recoil. and they may very well get in -- get an assist from broad tax reform. for example, they could increase the burden on high income people as the president has called for. perhaps not doing it through the rates of the bush tax rates. offset that with cuts of the

corporate tax rate which after all hiring would enjoy most of the benefits of the corporate rates. all that, however, with the prelude to the final discussion which, of course, is entitlement reform. it's very hard to imagine that negotiation occurring without a foundation of trust built on prior agreements on spending and on revenues. that's why at least i expect that to proceed beforehand. and people also know that i think without serious movement on entitlements, we are going to be at economic risk for the next generation. that at least is my view of it. we have three people with much more highly educated views on the budget that i have. with us today.

and we're going to have a lively discussion. let me introduce each of them right now. they will give short presentations. there will be some discussion back and forth and then we will open it to you to ask your question. the first person will hear from his bill gale. immediately to my right. bill hold the r. j. francis miller chair in federal economic policy at brookings where he focuses on tax policy and budget policy, and pensions and savings behavior? a codirector of the tax policy center, a joint venture of brookings. and from 2006-2000 he was vice president of brookings as head of the economic studies program. prior to joining brookings, bill taught economics at ucla and was the senior economist at the council of economic advisers under the first president bush.

he received his ba from duke and earned his ph.d at stanford. he is widely published in both scholarly and popular journals as well as the author, co-author more edited, editor of numerous books. i have to tell you, all the bios read very similarly. you just have to change the schools everybody went to. sitting next to him is kevin hassett who directs economic policy studies and is a senior scholar at the american enterprise institute. before joining aei he was a senior economist and the board of governors at the federal reserve system and an assistant professor of economics and finance at the columbia university business school. he also serves as a senior economic adviser to the john mccain 2008 campaign, an economic adviser to the bush 2004 campaign, and is the principal economic adviser to senator mccain and his 2000 run in the primary.

he is consulted to the treasury under both democrats and republicans and is the author of six books, as well as again numerous articles. he received his ba from swarthmore and his ph.d from university of pennsylvania. and, finally, we'll hear from stan coolender, widely seen as one of this down two or three leading experts on the budget. is a partner in the washington, d.c., office of qorvis communications. writes the popular column fiscal fitness for will call, and before that for decades he wrote a weekly column on the budget in the "national journal." in 2009 his blog capital gains and games was named by "the wall street journal" as one of 25 best economic blocs in the united states. he is one of the few people in this town has worked for both the house and senate budget committee. he has also worked for the financial dynamics business

communications, and he was the director of the federal budget group, at price waterhouse and president of the budget and research group. he's also a former stand up comedian, and married into enacted. i guess you have to have a sense of humor if you're married to an actress. he holds a bachelor degree from berkeley and a ba from and why you. -- nyu. we will first to remarks from bill gale. >> thank you. it's a pleasure to be here, and i want to make a couple of comments about the budget outlook generally and and talk about the administration's budget. you're right, this is budget week. i don't know that this budget will be around a whole lot longer than this week. so we should talk about it now while it's still alive. but to take a step back from the

budget first, we have deficits, big deficits in the short run. we have a deficit in the medium-term, and we had big deficits in the long-term. so the surface answer would be we just had big deficits. there is one issue a big deficits everywhere. and it's important to realize that although we did a big deficits everywhere, there's different causes and effects of deficits in the short, medium and long-term. in the short term we got deficits around 10% of gdp. most of us think that's a good thing. we have this massive collapse of economy, the federal stimulus that was provided is helping. replace aggregate demand. decreasing government spending. putting money in people's pockets through tax cuts and stuff like that so the short-term deficit themselves although they get a lot of the attention, for people to think about budget, they are not their concern. if we did not medium-term and long-term deficit, nobody would

be worried about the short-term deficit. the medium-term deficit, like 2014 to the end of the decade, this might sound a little chronological but basically just a fundamental imbalance between what we are willing to raise in taxes and what we want to spend. there's this fundamental imbalance that, according to my estimate and other people's estimates, will be about 6% of output every year. that's even after the economy recovers to full employment by 2014, 2015. we are talking about persistent 6% gdp of deficit. and that sort of your first sign this is unsustainable. if the economy is going all out and you've got a deficit of 6% gdp, something is wrong and there's an imbalance. in the long-term deficit build on top of that 6% of gdp, they built an increase of health care spending. when robson is entitlements i want to modify that.

it's basically medicare and medicaid. social security as part of the issue but not a very big part of the issue. basically medicare and medicaid take off after about 2021, 2022. and that gets layered on top of the imbalance that exists in the short term. why are these an issue in the medium-term and long-term? there's two issues. there's a quote from hemingway novel of one character asks another, has he gone bankrupt? and the other guy says to ways, gradually and then suddenly. okay? so there's a gradual effect any significant the gradual effect, they can eat away at the capital. to reduce national saving, reduce the amount we can invest and so on. the sudden effect would be the greek like intervention where investors freak out and leave the country. take their assets out of the

country. i don't think we are an imminent concern of the type of situation right now. i think in fact we are very far away from that type of situation. so the concern is more the first time, the gradual eating away at the capital stock. that's almost more dangerous because it's invisible and its insidious, and there's no defining event. there's no deadline that we have to make changes. so we've got this medium-term issue which is going to gradually reduce economic performance and we have this long-term issue which is fundamentally unsustainable and could create some sort of financial market reaction. and so the question is what the administrators doing about this. etch-a-sketch is budget this week. and the answer is that they have a plate holder budget. they are excepting the short-term deficit. not a whole lot you can do about that. on the medium-term, they are offering modest changes.

on the surface of the medium-term outlook looks okay. it gets down to the budget deficit down to 10% of gdp. but there are a number of things that they do to get there that are not really well defined. a number of magic asterisk that account for upwards of a trillion dollars in spending. there's another magic asterisk called gdp growth where the administration's essman of gdp over the next 10 years, it's basically 4% higher than cbo. that doesn't sound like much but it is about a trillion dollars in extra revenue. so there's an issue about whether there really solving the medium-term issue, situation or not. my sense is no, they're not. there's no issue about the longer-term issue. they are not solving anything in the longer-term pics i think they put forth no big initiatives on the long-term

side. the question is what you make of all this? as rob said we're going to proceed in steps. i doubt system are going to solve everything at once. so i think what's clear is that to some extent the budget is a missed opportunity. we had a missed opportunity last year. reading this opportunity to you before. we will have lots more missed opportunities. it is depressing. you need to have a sense of humor to be married to actress. i think you need to have a sense of humor debate budget analyst in washington. at least have to be strongly resisted to depressive tendencies. exactly. so this was a particularly big missed opportunity though, the pantheon of missed opportunities. the reason was last year obama asked a commission to come up with options to reduce the deficit. and to everyone's surprise, the

commission actually did that. they succeed. they didn't get 14 votes but they got 11. they came up with a plan. they got those from the right and the left. everyone who voted for it made the point that they don't like everything in it, but having a solution is better than not having a solution and this was a good option compared to doing nothing. so that gave obama the opportunity basically to do in his budget the same thing, to do what he asked the commission to do which was to say he options to reduce the deficit. i don't love them, this is a starting point. this is a talking point. i'm taking the plunge following what the fiscal commission did. he basically just didn't do that. that's the missed opportunity. again i don't think it's fatal. it just means we have one more budget that is dead in congress, the same week it gets sent up there. but the situation is getting more dire, and pretty soon we

won't be able to afford to miss opportunities. so it's disappointing but not fatal. we will soldier on and go to plan d. which is essentially people talk behind closed doors and try to work something out, and the next year we will do the same thing with the budget again. so pardon me if i sound fatalistic, and pardon me if i'm not up in arms the way some people in the indycar but it's sort of come in my view one more missed opportunity to deal with these issues and it gives you a sense of why we're in this situation now. to begin with. let me stop there. >> thank you, bill. before we go on, i forgot to do this. c-span, this is very 20 century of us but we have to insist that everybody turn off their cell phones. it can interfere with equipment. but i'm being 20th century. you cannot be connected all the

time. so please, turn off -- [inaudible] [laughter] >> please turn it off. otherwise it can interfere. thank you. next we'll hear from kevin. >> thanks, rob. first let me say that it is a great pleasure to be here. i think as bill says, when you're a budget analyst it's very easy to get all the press, but one of the things that gives one focus, there are places like indiana around trying to generate good thinking, how to fix the nation's problem. while simon and i don't always agree about everything, i think we always agree about this ultimate objective. and that's why i think that really if you stop to think about it there's a lot more cost optimism than you might think. because our nation a series problems but it's like one of my favorite tv shows, with his daughter it's also weird puzzles. someone shows up in the emergency room and had a high fever and you don't know why, that's a big problem. they have a knife in the chest that is good is because you take

the knife out, so them up and they are better. you can think of the u.s. as having a nice nhs. we know what the problem is. and i think that we know how to fix it. and a sign that we know how to fix it is that i agree with bill wholeheartedly about the president fiscal commission. i think that they did a fabulous job. i disagree a bit about the fact of the tax and spending that they chose, but i think it should give one cause for hope. there was some bipartisan support for. moreover, i think the very good people that we are working underneath the committee, the bones of the project like bruce reed, are now very important members of the administration. so i think that if you're handicapping it and he didn't look at the president's budget, then you would have to say that the nation needs to have more cause for optimism. so i think there's a seriousness about fixing a problem, a seriousness reflected in the

series proposal by the present. maybe something good will happen, and again even gene sperling, i think gene going over, i think is actually very partner on both sides of the aisle. he has a great history, giving bipartisan things done. it gives one cause for hope. so the question is why did we get this kind of lame brained budget were even people on the left and the right were saying he dropped the ball, he didn't show leadership. i think we've spent a lot of time speculating but i think my own view is the budget is kind of the thing that has a life of its own. this is kind of an uncanny resemblance to last years budget, and that's always true. i think that kind of bureaucratic sclerosis might be as much of a -- an explanation for the disappointing budget as political decision and not be a leader because i think if the

president had decided not to be a leader, i think that is something i share. so i'd like it in my remarks is go forward and talk but what i think the problem is and what i think the solution should look like. i don't think bill said anything that i disagree with, so there's not a debate at this point. although i should say i was relieved we made it this time of year all the way through bill's presentation without having to listen to something about duke basketball. [laughter] >> at swarthmore, i don't brag about basketball. so i think the key question is where are we and what do we do about it. and in terms of where we are, bill is right. we have high definition, and i think the high deficit in the medium term and the long term clearly can only be addressed with entitlement reform.

and we are is people are weary of it. but i think that actually fixing those problems, fixing the entitlement problems is not nearly as complicated as people let on. and so, for example, if on social security we change the indexing formula, maybe in a progressive fashion so that future benefits are guaranteed to be at today's level, in real terms but they don't grow with wages, then that essentially puts social strata about. you can get short of balance if you want it to be more progressive. on medicare, my view is that what we should do now is start to commit to having big deductibles in the future, that if we tell people now that 10 years from now when you retire, every year the first x. thousands of dollars of medical care will come out of pocket, and it's amazing how much room

you can buy in terms of balance. if we say it now, people will have time to prepare. so people could start to plan. i could even see in a grand bargain something that is something like increased social security benefits for those at the bottom in an amount enough today future deductible and to grow the two together so again you had a reform that didn't create the rest that people at the bottom would have health care that they need. and on the other spinning side, it's as bill said kind of almost a sideshow. but it's going to be the most interesting show this year, because mr. boehner has promised, the republicans promise that they're going to reduce spending by $100 billion in what was really last year's come and they pulled back a bit and so now it's calendar year, not fiscal year they have to get

to the 100 billion. they're shooting for 60. just as an aside i think the way they'll play out as they will there will be a lot of noise, but in the in mr. boehner will get most of his 100 billion of near-term reduction in exchange for the debt limit because, frankly, i think the political weight from last fall as part explained by the high spending picked we do something like this, do something about discretionary spending, then there's a concern that it might cause some kind of damage to the economy which relates to what bill said about maybe we all like the fact or accept the fact that it's a necessary cause for recovery from the chairman recession we had, was the big deficit right now. therefore cut a corner if it might be we can't really cut spending because the economic cost of that will be too high. i've been doing a lot of work lately looking at the literature that explores what happens to countries that have a legal fiscal consolidation. they start out with a knife in the chest and a ticket at the

soda. and in that literature there are two things that people have looked at. one is what happens to growth in countries when you have a fiscal consolidation. and second, when you look at the countries and restrain your view towards countries that succeed when had a fiscal consolidation, and what did their consolidation look like? how did they fix the deficit? and i would counsel with some council -- caution. some lessons and should be drawn on in the u.s. while we start to decide how to fix our problem. and the first lesson is that we shouldn't allow him anxiety about near-term growth affects to turn us away from the past. and, in fact, there is some evidence, there's been some doubt cast on by some recent work at the imf, when a country announces that it sort taken the tough medicine, that you can get kind of a near-term celebration. one way to think about it would

be this, that right now that rhino is talk about how u.s. corporations are reporting their cash and not -- porting their cash. one reason they might be hoarding that cash is they're looking at $1.6 billion deficits and thinking at some point they're going to come to me to pay for that, and with future taxes necessary going up with the deficit, then why should i be investing right now so that i would just have stuff in place that the government can take. they can sort of be more optimistic and they can unleash a flood of capital right away. the evidence is that those effects can really be quite strong, and there's literature even, the title, the non-keynesian effects of fiscal consolidation. something of a puzzle to economist, why we have fiscal consolidation in the near term you can get some growth. i've been looking very carefully at the searcher and i would counsel some caution.

of just willy-nilly signing the papers that cites the growth of that. some work at the imf found that the people are starting fiscal consolidation were defining consolidation as basically periods when revenue goes up, or deficits go down a lot. and the problem with defining it that way as opposed to an ex ante base is looking to see if they passed the bill as a fiscal consolidation entitlement, is something like a stockmarket boom can make tax revenue surged and the economy boomed. but it's not really a policy change and you wouldn't want to about the boomed to happen, the company stock market booms to color your thinking on what a fiscal consolidation will do to an economy. if you sort of fix that problem and look only at fiscal consolidation that were kind of statutory changes in law, in what you see is it looks like the growth effects are very small and inconsequential. and the sort of celebration of

fact seems to about a handful the negative keynesian effect of lower government spending. in fact, there's only one type of fiscal consolidation that seems to be stimulative. if you fix this problem and those are consolidation debt reduce transfers in the long run, which kind -- which kind of makes sense. the second thing that people look at i'm going to say is what percentage of the consolidation should be spending and what should be taxed? and on this, if you do it sort of the old-fashioned way that doesn't account for the stock market, the newly we are looking of statutory changes, then both approaches agreed that the consolidation will only be successful in the sense it will reduce the deficit if the majority of the consolidation comes from spending, and i have a recent paper where we review the evidence on this.

and the range of spending consolidation for successful consolidations is somewhere between, say, 85% spending to maybe about 10 or 15% below that, depending on which samples you're looking at. so i think that's kind of something that we all may be intuitively feel that as we move toward the tough choices, we need to fix the economy and to put us on a sustainable path. we're going to have to cut spending and spending are going to have to cut its entitlement spending. we are going to have to cut it significantly and there's not a lot of room for enhanced revenue. but i can say that a-15% increase in revenue is really large. so there's a big tax psyche in the proposal. with that i would say, i actually feel somewhat optimistic. i think the president and fiscal commission was also that on the

tax side for me, it based on my reading of history it was a great first are. inserted even if we adopted a proposal it would be a lot better than where we are. >> and finally, stan collender. >> thank you. century ended with a fiscal commission let me start there. there are at least two votes i counted that voted for, they didn't take a vote for the pledge some support to the program that two co-chairs laid out only when they knew there wasn't -- there's wouldn't be the number that would give him up to 14. now, having said that, 11 out of 18 is not a significant amount. nine out of 18 would be an insignificant amount. it would been enough to keep moving forward. but the two most important votes were the ones that they didn't get, i should note with a little -- they voted -- they would been

in position to implement most of that. they are still in position but they're not doing it. the interesting thing is ryan yesterday criticized the president for not including the commission report in his budget when ryan voted against it. or expressed no support for it. so i don't think it was the biggest a. i think is great for policy because of put everything in one place that they wanted to see. the problem with the budget issue as i see, there's nothing that was said here i think that was substantively wrong. you disagree with each other of it. about is the budget a as a default. the budget issue is not a rational issue. it's an emotional issue. and, therefore, everything you guys are saying is to go have to get over the emotional help before any of that would be considered. how emotional or rational is that? take a look at any of the polls. there was a recent poll by reuters this and 71% of americans don't want the deficit tea party and other folks that

they will not raise the debt ceiling. but they all use that one hotline, headline number. yet the only area of federal spending to get anything close to the majority of support was foreign aid. the one that always gets, and upon that overstates the about the spinning because the average person thinks the federal budget is 25% foreign aid. it's not. it's 1, and going down. there is a poll like that. in my blog, yesterday there was a poll in south dakota that shows virtually the same thing. there wasn't any area of spending. it's interesting, other than farm support that got the majority are close to 48% support. every other area of spending including medicare, not even close. what made that unique was that it was a poll of tea party people.

so the tea party folks who are adamant that spending has to be cut, when you get below the surface, they don't want to lose any of the service they're from the government. that's what makes the debate so irrational. governor spending is unpopular. government services are not. there's a fundamental difference between those two in average mind of everybody. i was talking about the budget, it was all around the country, everything from -- democrats and republicans. the reactions were virtually the same no matter where in the country we went or which political party. everybody thought that spending was a disaster and need to cut back, but it could all be done to waste, fraud, and abuse. and i get to this point, not because, there may be a trillion dollars in waste, fraud, and abuse, i doubt it. i get to this point because what

you guys were saying in terms of what has to happen, i think is the second step. the first step is we have to get beyond this emotional help, let's put it that way. this a rational situation. and that's the context and the things that look at the presence budget. a little bit of history here. 1994, republicans win both houses of congress two years after bill clinton had been elected president 1995, john kasich, at the beginning of the year and then chairman of the house budget committee, now governor of ohio, he was going around the country saying two things. one, president does agree with us because spending. we may just shut down the government has seized -- and see if anybody noticed. second thing he was saying was we, republicans don't care whether clinton submits a budget issue. that elections have rendered him and his budget irrelevant. will just are without him. we don't care what he submits. we have her own idea.

they waited. as congress always do they waited for the present in 1995. the reason being the deficit being an issue in 1995, they assumed and everyone was expecting the president would propose large reduction in spending, including medicare cuts. a were furious when he didn't. he thwarted all those plans for him to go first, and to even make it politically acceptable for them to support medicare cuts are for him. he proposed what by those standards of that you was a very vanilla budget. it was dead on arrival as every president's budget is these days. but the point is the parallel to this year is extraordinarily. a lot of people post the commission. where's expecting clinton to come up with bold initiatives ideas. when he didn't, when he came up with a very familiar budget that very touched the problem, the criticism in 2011 by dan and

ryan is virtually the same as the criticism in 1995 by gingrich and kasich. both times they said were disappointed in the presence leadership is chosen not to be. we're going to go off and do this ourselves. and as the republicans promise and 95 and did, ryan and boehner are going to pitch their own budget. they would do what everyone wanted. the reason i bring this up is i think the situation in 1995 is extremely instructive. republicans went first in 95, got killed for doing so. by the time the end of the year came, we had ended up one shutout in november, one shut down at the end of december and the beginning of january. gingrich and the republicans took it on the chin politically. it was the beginning and end of gingrich as the speaker. and for those of you who went to a, there are six people who might have, don't look around.

[laughter] >> first of all, that's rudy. anyway, -- that's rudy. what do i think will happen this year? i think you'll be largely a replay of what happened in. as we get to the continued resolution passionate you're shaking your head no. that's good. let's argue. as we get towards march, i think boehner will have to allow the government to be shot once to show he can do. indeed, show the tea party had difficult and helplessly painful it will be. i can't possibly imagine at this particular moment will cover life of spending levels in 2011 would be satisfactory to the house and senate. i just don't see it. i would like to be proven wrong but i just don't see it. in fact, if you watched any of the sunday talk shows last week, paul ryan was on a couple of them. the fox news sunday what he said i would be willing to consider a short-term continuing resolution if it meant that negotiations would continue.

what he wasn't asked him what he did say was at what level he would be went to consider a short-term. i find hard to believe he would consider or even be able to get past the current continuing resolution that is, it would have to include spending cuts which i don't think the senate would agree to. so even if it's only for three weeks or four weeks, and as far as the debt ceiling is concerned, you probably our most of you have read the letter from secretary geithner to john boehner and paul ryan sink what they would have to do to the debt ceiling. at some point it's probably about six weeks worth of cash management, things they can borrow from one pocket and put in another. as i reviewed the techniques i did a column about this several weeks ago, it's one thing when checks are do. but there are also a friday and it's very difficult to stop those checks from being paid. but it's another thing if you actually slow down spending currently so that you don't have

to start writing checks. and i'm assuming although there's no anyway anyone can confirm this, the agencies have been told if you don't have to sign a contract right now, slow it down. if you can reduce the operations of the program, slow it down. it doesn't mean money will not be spent. it would just be slowed down until after the debt ceiling is eventually done. so i think those were expecting the debt ceiling to be the real lever, real hammer to get an assignment, will be disappointed from my perspective it'll be three or four months he for it becomes a real problem. but the bottom line is i don't, after all the things we can agree on, i don't think the politics will make this happen. and it may be that we need to have in 2011. what happens in 1996, e.u. member the the shut down? in the first shut down, the first day's story in the news

were the headlines of people in winnebagos and mobile homes trying to get to national parks. the trees were allowed to grow with a government shutdown. people were pounding on ranger stations. the second issue of stories of people trying to get into and get a passport or a private visa. not possible. the third day was when government contractors realized dam, there's no one there to process my check. there's no one there in the loading dock to accept my good. the second shutout which lasted i think 19 days italy took five days before contractor started laying people off. the anger about the in availability and unavailability of government services was so hard, that a change the situation rather substantial. that's the kind of thing i think that will drive the debt ceiling package with that in mind. >> okay. were going to exchange comments were couple of minutes and then we're going to open it up. i have only one comment.

i think it makes a big difference why a government shutdown in terms of its the fact that if it shuts down because there are no appropriations, you can juggle these accounts and find ways to keep a lot of things going. it has a political aspect, but it doesn't have much of an economic effect. if you shut it down because you haven't raise the debt limit, i think that since a real shock through financial markets. u.s. and global. we have never done it before. it has never happened. date u.s. currency and u.s. securities are considered the most risk-free instruments of the world. i think that would have a terrible shock affect. which would be very bad for the economy, at least in the short term. i think they would see it coming and say, can't do that.

but in any event, i would want to make that distinction. [inaudible] >> appropriations if you're still in place, if agencies don't chat with treasury to see if there's money in the night before the issue a request for a check. >> there's a certain point in which you can't buy the checks anymore because -- [inaudible] >> so basically the way, the treasure has the bank account and as long as there's money in the bank account, the fed clears the checks. there's a lot of money in the treasury your and basically if you have a day we get a lot of income and there are not a lot of outlays, your checking account gaza. that can happen for the treasury. there's also a strong seasonal component because it row 15, a little later this year, everyone starts mailing taxes into the government. so i think if you basically can run the clock at a keep or checking alive, to april 15, then i think you get through maybe even to the end of june playing the tricks as dan

mentioned. so you can sort of half the debt limit event but not shut down the government speaker you'd have a debt limit event could have significant economic impact without shutting down the government. i think it would shake confidence. >> if you didn't make an interest payment. >> just one more thing about this. the ones that are probably most at risk, they will get paid almost certainly. but government contractors are the one who should -- are the ones who should be worried. >> if the government has this limit and can't for whatever reason issue checks, there's no establishing seniority of claims. talk to lawyers about this. there's no seniority. there's a lot of uncertainty created, and the whole come at the risk of saying the obvious, a whole amount of uncertainty and stress that we create is

unnecessary speak abroad, i'd like to respond to the comparison of the early budget shutdown of talk about why i was shaking my head there. i think the previous government shutdown was really miss managed by republicans, but i don't -- i don't see speaker boehner making the same kinds of mistakes. and so, i think that, you know, if he was out there looking bombastic and accused previous leaders, then he would be set up exactly right. one thing he said the obama budget with a 10 to go to such behavior, but i know mr. boehner. i think he, actually he is a very sober and calculate person, and he is not going to fall into traps the way the previous folks addicted and i think more

importantly, the spending has gone up a lot. the deficit is so large, and the amount that they need to spend may be an ultimate deal so close to the current level that it seems kind of unthinkable that they wouldn't be able to get this whole thing to work out without a government shutdown. because the alternative is that after the last election, mr. obama could say hey, i really don't think, would you shut down the government. sure you passed that bill in the house but i'm going to veto it. i'm not going to help because i'm not willing to cut spending this much, given the massive deficit. i think that's a much harder position you have to take. but on your site i looked at the history of the budget showdowns, the debt limit has gone up, 64 times? times? it's got a 62 and down three i think since 1962 which is the year i was born there so it's happened a lot. i've been a million showdowns and it every single one i look at where there's a significant

dispute between administration and house over whether we should cut this and that and the house tried to play chicken, the president always one. the president has never really lost one of these. >> the debt ceiling without and the president didn't shut down the department. [inaudible] >> let me just add two things. number one, there's a fundamental, two fundamental things. by the way, boehner sounded a little shrill the last few days. but there's a couple of fundamental differences between now and 95 that yes, they do have a learning experience from years ago. there was no tea party your the tea party folks have shown a willingness over the first two weeks of congress to roll their own leadership and not necessarily go along. that to me is rather obstructed. i don't think a lot of them got calls from constituents yet about what happened. but that's number one. number two, and maybe much more importantly, gingrich had a good

that i'm not sure boehner has. i don't mean to steal. but gingrich was allowed to negotiate with clinton and to come up with a compromise deal. what he expected to be the. it was the way he showed to be part of the decision-making process. one of the things that's happened over the last two years is out of my testing redefined as collaborating with the enemy. and i don't know whether we've gotten over that yet. compromising, bring on agreeing to something with the white house, signing on as a cosponsor, voting for something can easily get you threatened in the primary. so i don't know whether the ability to vote for repeal is as great the first time around and that's what i think a shutdown would change the policy. >> i think they will shut down some point for the reasons you mention. i wouldn't be surprised if the debt limit gets voted down the first time and in a come back and they do something, and they

pass at the second time. but the thing to understand is the debt limit has nothing to do with the projected path of fiscal policy. the debt limit is an issue of we have all these bills that have come to from past congressional action to delete reason we have debt is because congress spends money and congress legislated tax changes. we have this debt coming due from those activities or and raising the debt limit is just an issue of whether the congress agrees that it's going to pay for the obligations that it told of the government to have. so it's as if you have a big party, and in the bill comes due and the credit card, and you said no, i don't think i'm going to pay it. it has nothing to do with whether you'll have more parties in the future, whether you scheduled expensive vacations. the problem on the fiscal side is more parties, the future revenues and future spending are not in balance. but the debt limit has nothing

pashtun raising the debt limit right has nothing to do with it. it just has to do with paying the pass bills that are now coming due. so we tend to talk about this debt limit in the same conversation as fiscal policy trajectory, but they are totally separate. >> the reason congress wants to say okay, we're going to pay the credit card bill but we will cut up the credit cards. they want to get some kind of credible commitment not to a future party -- >> the credit card anytime it wants to. the only reason we spend money is congress authorizes it. congress doesn't need anyone else to force them to stop spending. they can do it themselves. >> while i think you're right, the debt limit is not a fiscal issue, but it is a financial system issue. >> certainly. they can do enormous damage. >> enormous damage. >> and without doing anything to actually solve the longer problem.

>> let me just point out one thing, and that is, you know, the deficit -- i do a lot of work and climate change, and one of the things, first things i recognize in climate, climate change is that it's one of the hardest things in politics because enacting climate legislation, because it entails asking people to absorb short-term costs in order to avoid a charger long-term cost. and that's almost impossible to get people to do. it's hard enough to get people who have short-term costs for a long-term benefit. but to avoid a long-term costs, particularly when you can't specify exactly what the cost is going to be, where it's going to hit, when it's going to be. people say, hey, wait a minute, i will wait to see the cost before i'm ready to to pay anything. so you have to figure out a way to reduce the short-term costs.

reducing the deficit is very simple. we are asking people to absorb short-term costs in order to avoid a larger long-term cost. we are also single be a long-term benefit of a an economy with a much more manageable debt. by do think that at a minimum that we don't really get a significant, significant agreement around revenues or entitlements. into we have a strong economy. until people feel better about the economy and consequently feel they can absorb marginal costs, or those costs are targeted to relatively small groups. that's the other option. the clinton approach in 1993, for example, that the real costs were borne by high income people. a fairly small share. and there were a lot of defense cuts, but we just won the cold war. that paved the way.

>> that has a what the last couple of years. the president try to limit tax cuts. >> interestingly enough, the country supported a. the public supported ending those tax cuts. but the party dynamic didn't support it and so we are not there yet. as i said, i honestly believe we only get to those issues once we've come to agreement on smaller issues, and that lays the foundation for the bigger picture. >> why don't we take some questions from -- okay. if you could identify yourself. >> thank you. does this work? i am from the carnegie endowment for international peace. i look at this an international perspective, and i was actually quite surprised that he lacks the sort of tone of the conversation because, you know, when i compare with the international, united states really is not looking in very

great shape. and, in fact, today united states is the only country, the only advanced country other than japan that is not confronting its long-term fiscal issues in a decisive way. you know, once the u.k. began to do it and the europeans are doing it your japan and the united states are the two that stand out. so somehow other countries are able to cut short-term costs. and so that's one question. well, what is it about the united states that makes it difficult to cut short-term costs? we are not -- other countries do. and the other question i have is on taxes. i understand the point about relative the benefits of cutting expenditure against increasing taxes. but if i compare united states with other countries, so other

countries, advanced countries have very large tax, 15, 20% in the case of the europeans. they have a large gasoline tax, and they, and they also have space at a time the mortgage interest tax cuts by and large. i'd like to understand, these are potentially very large sources of revenue. i'd like to understand in the same context of my general content of the question, how feasible any of these options look at the moment in the united states? >> why don't we go down the line, and you can respond to whatever part. >> he's the tax expert. >> the one thing i would say, i want to bet value added taxes coming at some point. i don't know how big, i don't know when.

i can't imagine it would be done in the absence of tax reform. quite honestly. it could be part of that. one of my co-bloggers have been predicting it will come for a couple of years. so i would say that's on the horizon. on the others, on the mortgage interest deduction, for example, there are huge, first of all, i mean, almost 70%, 66% of americans own their own homes, but it was tax deduction. would like to have a tax deduction when they sell it. so that's number one. there's a huge public support for it. there's also a huge support on interest group side, mortgage bankers and those type of things. it's not the kind of thing you can typically get through congress by snapping her fingers. just one more thing about that come in the past about flat tax income as as you point out to folks at the flat tax will limit the mortgage deduction for charitable deduction interest and others, it goes away within

seconds. >> first the international issue about the u.s. and what it might mean. a recent article about this, i can e-mail you, where i looked at that dead stance of other countries in the year that they lost their aaa rating. and found that the u.s. was sort of already in the middle of the pack. you can say we should've lost it already, but even if we go out to the country that lost it the latest, and i would guess if bills pessimism about progress, you know, bears fruit as it turns out that's what happens, then it's not that long until the aaa rating, the aaa rating is gone. now, that's not an overnight calamity, but i wonder if it doubles for the question for my

co-panelist whether that might not be the kind of event that would finally make people be serious. on the tax side, i think if you look at the u.s., everybody right now, including myself whining about the corporate rates about the to be the highest, there are a number of ways in which our system is out of whack with the rest of the world. we don't have a value added tax and so, therefore, we are grossly high income tax. we don't have the value added tax and there are a few other things that we do that are quite a bit different. most countries have a payroll tax were is a lot bigger. and there are a lot of reasons bill and i could talk to you about about why payroll taxes can be a more efficient tax. so there are a lot of room for us to improve the tax system and it's frustrating that we are not doing it. i was a bill and i have been frustrated over tax reform, and kind of you a view that was quite similar. probably as long as we've been frustrated over we have been ducking the debt issue of. >> just to follow up on everything that kevin -- i have

written and advocate for all three of the policies you talk about. about the gas tax and trimming or getting rid of or converting a more interest deduction into something else but i think all these changes make sense. i'm guessing that at least two of them are going to be necessary because i don't know how we cut spending given the numbers that stand mentioned, i don't know how to cut spending enough to reach a sustainable situation. otherwise in terms of why we are not like other countries, you know, i don't know exactly, but it is interesting in parliamentary systems like the united kingdom, the government says here's the new policy and it gets implement a. and then the u.s. says here's the new policy, the administration says edwards has you've got to be kidding. our government is designed to not be able to do big things fast. and it is certainly defective,

you know. [laughter] >> sometimes that's an advantage, sometimes it's a disadvantage. in the '90s it was an advantage. the economy was going strong. there was gridlock, great, let them do nothing. the economy was taking off. right now the we have big problems in the short term. where big problems in the long term. we need a government that can address those issues, and for a variety of historical reasons we don't have it. >> i certainly agree with the parliamentary system is a distinction here. but from what i would take issue with most of the rest of your views. the reason the united states is not in danger of that kind of loss of confidence because the rate of return in the united states is much higher. out of today growth is much higher. the underlying economy has been judged to be sounder which is why the capital income is about

$10,000 greater in the united states than the e.u. 15. we are seeing some ability to really address this in japan which has always had the ability. ..

>> immigration restricted to, our demographics are bailed out by very high immigration rates. in these terms, in rational terms, many terms i think of -- in terms i think of as rational that the u.s. credit rating should be at risk. >> hi. zack from the roosevelt institute campus network, and we're a group of 86 student think tanks across the country and based on college campuses, our latest chapter. so we were invited by the peterson foundation along with aei, i believe, to participate in the fiscal solution summit in new york. and so we've been going through this process along with a number of other think tanks. one of the things that we

started looking at in order to come up with a solution was sort of what had driven this short-term deficit and medium-term deficit over the past 10 or 15 years. and, you know, we found that this isn't something -- in the short term, it isn't anything like we were experiencing around the turn of the century. so we found that the massive costs of the war, the, you know, tax cuts not being offset from the early 2000s and the countercyclical response to the recovery is sort of the main drivers of these. and we thought that perhaps our solution should take those into account, too, and look forward, how will drivers like that continue to cause problems for us? and so one of the main ones is, obviously, rising health care costs which seems like it burdens the government, it burdens people just as much as it burdens the government, the lack of a kind of grand strategy for defense might lead to, you know, big investments and more

down the road. so it seems like when we talk about these things, there's not a whole lot of discussion of the drivers. it's mainly about getting the numbers to match up in some way or another when it's not the, it's not the structural forces that caused our short-term deficit right now. so do you think that there's a chance for us to have a real conversation about the drivers of spending over the next few years, or do you think that it's, that, you know, the problem as it's cast in washington is kind of too focused on the specific ones the cbo wants to look at this problem through? >> i could go first because you mentioned aei, but i look forward to what bill has to say. i think that you're exactly right, that looking at the cost drivers is something that hasn't happened and needs to. i'll give an example that's, you know, a little bit outside of the area of the panelists, at least as far as i know, which is defense spending.

i think we all agree that congress tends and even politicians tend to, you know, want to do more but fund less. and so i think that if you have a military objective that's very wide and poorly defined and, you know, then likely it's the case that defense spending's way too low for what we're asking our military to do. if you wanted to reduce defense spending, then you ought to have an honest debate about what should the u.s. armed services do? what is an objective that we all support, and what is something that we think is too far from a primary interest of the u.s.? you know, and that debate could take into account the fact that there maybe is a free rider problem that we have a big military that's policing and other people don't have to, and maybe that free rider is indelible, maybe it's not. that's the kind of debate you would really need to have if you're going to say, well, you know, could we get a percent of gdp out of reducing defense in the future? to do that, i would guess we

could only do it if we're willing to give something up, and nobody's having that conversation. and i think that's a real impediment to progress. >> you're right that the drivers of the short-term deficit are different than the drivers of the long-term deficit. that's another way of saying what i said at the beginning which is the short-term and long-term deficit are different issues. so i think it's totally right. the important thing to remember, i think, is the deficit is a difference between spending and taxes. so we can choose to support a high level of medicare and medicaid if we want to as long as we are willing to contribute to taxes necessary to maintain that health care expenditure. we could cut medicare and medicaid to the bone and support it with the current level of expenditure as long as we're willing to live with that. so it's, there's this, there's a balance issue between what

happens on tax side and what happens on the spending side in the long term that, i think s essential. and it comes down to what kind of government do you want. kevin mentioned kind of rethinking the u.s. posture in the world. that's right, we need to do that. we also need to rethink the social contract at home because, and this comes back to something stan said at the beginning, the american public's not ready to have this discussion. they want lower taxes and more spending. that's not really on the table as an option. which is one reason, by the way, i thought the fiscal commission report was important, because if we can change the discussion from, well, don't touch my mortgage interest deduction or don't raise my taxes, be if we can change the discussion from that to here's my plan to solve this, if you don't like it, tell me your plan, right? if we can have a debate among plans that actually solve the problem, then that's sort of the first big step to get over this hurdle that stan was talking

about earlier that people don't get this. the first step is, obviously, that people have to get it. and so i applaud what you're doing, and we need, you know, a lot more groups doing the same thing. >> i don't want to add -- i don't want to destroy your young and impressionable mind here. [laughter] yeah, okay. [laughter] okay -- [inaudible conversations] >> old guys. >> i'm not sure as correct you are in terms of analyzing the problem you are, that is how did we get here, i'm not sure it makes much difference to those who are looking to use it as an excuse to do something else. that is, for many people the fact that there were tax cuts that were unpaid for that drove the deficit, et, etc., is irrelevant. they define this as a spending issue.

that's, this is why i keep saying be careful about being too rational about this. that's not to say the discussion shouldn't take place, just like bill was saying, but coming up with what you think is the definitive answer of how we got here from here may not make much difference in terms of what conclusion they ultimately come up with. it's just there are some folks taking advantage of the situation to push their own agenda. >> we say that in an open political system like the united states, the resolution of these problems is often determined by the distributional effects. and that's what the fights are over. everybody knows that some spending's going to be cut, some taxes are going to be raised, but some spending is not going to be cut, and some taxes aren't going to be raised. there's going to be a distribution of, of costs to bring down this deficit that will not be equal, and subject

to enormous debate. one of the reasons why tax increases at the top are a very popular way is because it puts all the burden on a fairly small number of people. now, you can justify that and say, well, they have the resources to bear that burden. the same thing is true of how we address medicare. this is going to be a matter of the distribution of costs among elderly people with higher deductibles, for example, or physicians and hospitals who with lower reimbursement rates, or pharmaceutical firms and equipment manufacturers with something that begins to look like price controls, or nonelderly people and non-health care industries who will end up bearing more taxes, for example,

through a value-added tax if that were the way that we decided to finance health care which, i think, is actually makes a lot of sense. as an economist. but it's not going to be decided by the economics of it. it's going to be decided by the politics which arise out of the distribution of the costs and the distribution of benefits. and that's what we really have to think through when we're trying to figure out what kind of package can actually draw support from be both parties. our time is just about up. i want to make one announcement, and that is next week this debate or this discussion at ndn continues tuesday when jason fuhrman, the principal deputy national economic adviser and assistant to the president will be here to give an address, and my guess is that the budget will come up at that and fiscal

policy. and we hope that you'll continue to be part of ndn's discussion of these issues which will go not only through this year, but into the next of the next of the next. thank you. [applause] [inaudible conversations] [inaudible conversations]

>> president obama and a team from his cabinet are in cleveland at this hour taking part many a forum on small business and jobs at cleveland state university. over 100 small business leaders from that region of ohio are holding a number of meetings on how best to create jobs. c-span will have live coverage of the president's closing remarks planned for about 1:55 this afternoon. >> coming up here on c-span2, we'll be live at 3 eastern with a discussion on retirement and the future of social security hosted by the woodrow wilson international center. and ireland's general election is this coming friday. the prime minister is stepping down because of the country's economic problems, and the candidates to replace him -- the leaders of the three major irish

political parties -- will meet in their final tv debate this afternoon in dublin. see coverage at 4:30 eastern on c-span. >> c-span2, one of c-span's public affairs offerings. weekdays, live coverage of the u.s. senate, and seconds booktv, 48 hours of the latest nonfiction authors and books. connect with us on twitter, facebook and youtube and sign up for schedule alert e-mails at c-span.org. [applause] >> u.s. trade representative ron kirk was the keynote speaker at a recent breakfast celebrating black history month. he talked about the contributions of past civil rights leaders and the responsibilities of parents and communities. he's introduced by house democratic whip with steny hoyer who hosted this 45-minute event. >> we are honored today to have an african-american, an american

who has contributed mightily to his community, to his city, to his state, to his nation and now spends an awful lot of time traveling around this globe to make sure that we do, in fact, have the ability to make it in america and sell it all over the world. [applause] ron kirk, graduate of boston college, graduate of the university of texas law school, chosen by "the national law journal" just a couple of years ago as one of the 50 most influential minority lawyers in america. one of 50 most influential minority lawyers in america. this is a person who has made

extraordinary accomplishments. he is our trade ambassador. ambassador kirk is responsible for fighting for a fair playing field for american businesses and workers as they compete in global markets. he works to expand trade opportunities around the world for american businesses and to negotiate agreements with our international trading partners. he is a vital part, i told you he was meeting yesterday with president obama, who was one of our speakers, and valerie jarrett, he was meeting with them yesterday. and they were meeting, i know, about how america does better in doing what president obama wants to do, doubling exports in the next five years. we can do it, and this is a vital reason why. he's a vital part of the president's cabinet and the president's initiative to create jobs by doubling exports.

ambassador kirk understands that it takes strong partnerships between government and the private sector and a willingness to fight for fairness and opportunity for american businesses be we want to create more jobs -- if we want to create more jobs here and help more entrepreneurs and families make it in america. i want you to remember that phrase, make it in america. people want to make it. and the psychology of making it is critically important. you want to have that sense that we can do. you know, i love that story about the little train that could. you know, you know that story. don't you love that story? i think i can. i think i can. i think i can, i think i can, i think i can, i think i can, i think i can, i knew i could, i knew i could, i knew i could. [laughter] i think i can. i can! prior to his service as trade representative, ambassador kirk was elected the first

african-american in history to be mayor of dallas, texas. [applause] and but for, you know, democracy makes mistakes. it's the best system ever founded. you have some extraordinarily courageous people, and in the square that we know call freedom square in cairo who stood up for democracy. but, you know, democracy sometimes makes a mistake. i should be introducing today u.s. senator ron kirk from the state of texas. but like i say, we don't always get it right. as human beings we understand that they can make mistakes, but senator kirk should have been here with us. but thank heavens he's here with us in this capacity as trade ambassador. his tenure as a popular and

successful mayor saw him lead a number of important development projects and increase dallas' reach to the world through several new trade programs. ambassador kirk's bringing to us a wealth of experience in local, state and federal government. ron kirk is an historic american. he is also an african-american. i think it's important for us to understand that he is an outstanding historic american. and he is a wonderful human being. and he has done wonders for his community, for his state and his nation. and we are so appreciative that he is here to bring us his perspective on the history of african-americans and his role in that history. ladies and gentlemen, ambassador ron kirk. [applause]

>> let me begin by thanking congressman hoyer not only for the kind introduction, but for his friendship, for his leadership, to senator cardin and all of the elected officials in the audience, but especially i want to take one moment and thank all of you in this room. i am proud to be from texas, i love my country, but i'm a partisan democrat, and i served in a partisan role. i just want you to know there's not a single statewide elected official, democratic-elected official in the state of texas. i'm soaking all of this in today. [laughter] but i'm also telling you all, i want to thank you for continuing to send and support enlightened, strong, good leaders to our united states congress like steny hoyer, like senator cardin, senator cull cow sky

and -- senator mull cow sky and, please, don't ever take this for granted because we saw what happened last year, every community doesn't have the luxury key of someone who will stand up and fight for the issues that you know are important to our community. [applause] i wanted to say that to you, i want to mention, and i did have some opportunity to spend some fun time with the president and valerie last night. what they most enjoyed was putting pressure on me for the fact that they both have already spoken here, and i'm not going to tell you what all the president said -- [laughter] but he was pretty proud to tell me he thought he'd set the bar reasonably high. [laughter] so all the good things i said about steny, i told him, you didn't me any favors. you should have me before you bring barack obama. but i am so horned and -- honored and so humbled to be here and even see a few friends

that i knew from if my time in texas and to see so many others who care about our country. i want to take a moment because i not only am proud to lead the office of trade representatives, but we have some of the most dedicated federal employees, and unlike our current speaker of the house, i happen to believe people who go into public service are some of the greatest people in our community. [applause] from our teachers and a number of my employees, congressman, who live in your district, and they support you and wanted to be here today, so from all of my staff that took the time to come to share this morning with us, if you all would stand so we can acknowledge you. [applause] as congressman hoyer referenced, recent events in egypt and, i think, across the middle east

serve as a fairly poignant reminder to all of us how our peaceful, tolerant and open form of democracy is special. and something that we ought to cherish and something that we should not take for granted. and i think all of us know particularly as we reflect on the history of america and african-americans' role in making that history, that our history is replete with our own story of struggles for which we fought and our parents and so many others to make sure that we could, in fact, perfect this union. and have america live up to its promise to be place of opportunity for all americans irrespective of what color you are, what sex you are or where you were born. and i am proud to be a product of that struggle. and i want to take a little bit to tell you -- i know you may not know me as well as barack obama or tavis smiley or some others, so i'll take a few --

and tavis is a good friend of mine. i love nothing more than being on programs with tavis, and we tease him because nothing irritates tavis more than western we were on a program together -- we were on a program together, and this woman went on and on and on about travis smiley. we love travis. [laughter] and i was, like, well, tavis, maybe you're not as famous as you claim to be. [laughter] but he's a great intellectual. but i've said before, you know, i'm 56 years old. no relevance to this but for the fact if you count back young people, i was born in 1954 which was the year the supreme court decided brown v. board of education. i grew up in austin, texas, otherwise a fairly progressive city, but still in 1953 it was a selling -- 1954 it was a segregated city like too many cities in the south and a city

governed still by a lot of the principles of jim crow. when i was born, my mother and father could not vote. like a lot of black families all across the south, they had to suffer the indignity of trying to go vote and either raise money to pay a poll tax, or they had to take these literacy tests. i know those of us who are at least my age and older know this, but for the young people here, i mean, you need to understand how insulting it was to stand in line, and the literacy tests they gave to everybody because they wanted to make sure we weren't discriminating. so white folk would go up to the line, and they'd say, who's the president of the united states? and they'd answer that. then somebody black would come up, and the first question used was how many people died on the titanic? [laughter] and black folk were smart enough, we figured out the number. and so everybody taught everybody that number. the next question then they asked, literally, was name them.

so you can understand what our families went through. not just might mine, but so manf our families to give us the privilege to be here today. now fast forward just three decades later, and after having mother and a father and parents and a community that made sure, first of all, that we stayed in the church and we understood the power of our faith and that we went to school and that we studied hard every day and that we made good grades and that the entire community made it understood, you're going to go to college, and you're not just going to go to college, you better make good grades. and when you come out, we don't want you just to get a good job, we want you to vote, we want you to be involved in your community, and we want to make sure that you keep that door open for others. so in a state that my parents couldn't vote in 1954, i had the greatest honor of my life just

four decades later to be sworn in as secretary of state and be the chief elections official -- [applause] by governor ann richards, then go on and had the opportunity to be elected the first african-american mayor of dallas and then be reelected with people from all walks of life. and i'm proud of that, but i'm more humbled by it. i'm going to take one minute and give you my 30-second black history lesson because people in dallas think i don't talk enough about being the first black mayor of dallas. and i tell them the problem is i'm the fifth first black mayor of dallas because i knew my history. and tom bradley, who became the first black mayor of los angeles was born in calvert, texas, not 30 miles from dallas. steny's good friend and fellow member of congress, emanuel cleaver, was the first black mayor of kansas city and was born in a little place in texas.

it's to dallas what silver spring is to d.c., right next door. [laughter] willie brown who was the first african-american speaker of the california assembly, the first black mayor of san francisco, california, was born in this maheya, texas, right next to dallas. and be my man, maynard jackson, the first african-american mayor of atlanta, georgia, was born in dallas, texas. his grandfather founded new hope baptist church. they were run out of dallas by the ku klux klan and later in if life maynard became a great friend and mentor to me. he would always call me and, basically, his message was, boy, don't mess this up. [laughter] and i would tease him because he would tell people his family was run out of texas by the clan, and i could say i can understand

you going to georgia. [laughter] i'm proud of the opportunity i've had in my life, i'm more proud of the fact that i have an inincredible family structure. i have a wonderful wife that works and supports my habit of going back into public service. i have two beautiful, thoughtful daughters, and i have two parents who sacrificed and gave everything so my brothers and sisters and i could have the best education, have the opportunity to live out not only our dreams, but their dreams as well. i say this especially for the young people in the room because so much of what i did that i get to be introduced as the first of was more because of when i was born. and the doors someone else opened s. and more than anything else of my father's wisdom, i remember him sitting down with my brothers and sisters and i, and this was after we and so many had fought to pass voting rights and civil rights and

other things and explained to us all you all are going to have the opportunity to be the first through the door in a lot of things. what i want you to do is to conduct yourself in such a way that you're not the last one through that door. [laughter] [applause] because he understood. he understood that for those of us who were privileged to stand up and say i'm the first that if we don't conduct ourselves with a different standard -- i don't care what anybody else does -- he understood so many times everybody else gets judged by what we do. so i want to spend a moment and talk to you this morning, frankly, it's not so much about my work as a trade representative, but i want to stay on your theme from civil rights from the civil war to the present, jobs, education and empowerment, and i want to talk about something that's really deeply important to me and, i think, everyone in this room, and it is the power of our families to recapture that community spirit and do everythi w