reducing and eliminating the retired health benefits, delivery flexibility. that takes us from 73.5 giunta 65 billion in between. administrative cuts come successful union negotiations i would like to get us down to 60. what that does is gives about a $5 billion cushion from the revenue right now that we will have this year that gives us the ability to pay down the debt that keeps us from going into the future and addresses the capital issues we've been talking about today. seabeck thanks so much. senator mccaskill. welcome. >> i would like to fall on the chairman's question he just asked. we have a difference between two different agencies that say that a five day delivery you all say

it's going to save 3 billion the regulatory commission said it would generate 1.7 billion. i don't know how much of that difference is attributable to the loss of business that inevitably is going to occur when you can't do this six day delivery. you have an advantage right now that was six day delivery. if you were looking at this through the very cold lands of a pure business model, you are giving away the major advantage have when you give away that sixth day. can you speak to why there is such a wide disparity between the savings the two agencies came up with, and you know, what keeps us from going up to four? and aren't we really if we are not careful, if we go to five, aren't we talking about the beginning of a death spiral here? >> let me address a number of

the questions. first of all, to repeat what i said to the chairman, we do not want to go to the 65 but financially we are in a situation where we've got to take that as an option going forward and it is tied directly to the loss of a contribution on the first-class mail. if i had an answer to stop that we did that in place right now. america is changed and people are paying bills on line, every bill that's paid on line that is 18 cents comes out of the cost to cover the six day delivery and office is out there. the difference between our estimate and it boils down to two things. their estimate of revenue loss, 600 million, ours is 200 million. we talked to a lot of customers and did a lot of opinion polls. many customers in the past used to make sure that they -- that we delivered mail on saturdays.

they've moved away from saturday by far our latest date of volume for two reasons. a number one, many businesses are closed saturday and number two, what we've been told his people to a large extent don't look at their mail on saturday as much as they do the rest of the week because they're busy with other things. so, the 200 verses the 600 million that's part of the difference. the of the part of the differences our estimates of being able to save and capture the costs. we think we can capture a substantial portion of the cost of saturday delivery by observing it into monday. the letter mailed we deliver today is sorted by automated machines and processing facilities. so that the variable cost in the morning that a carrier would have experienced years ago they don't experience today. once you're on the road and deliver to a number of houses our average cover is around 90%

today. every saturday business costs us $3.8 billion. we think we could save 3.1. we know that we will have to add some costs we can't afford but based on our history we've taken cost of the organization and we will be able to do that. theater thing is i in canada devotee to do with its going to get done. >> let me also ask about the potential to impact on the five day delivery on the residence. i was disappointed when i realized the postal service's survey the you did in this regard or not really in the rural communities. one was in suburban atlanta, and the other was suburban seattle. would it be possible to take a look at a rural community, not one that is within commuting distance of a major city is those folks that in terms of

getting their medicine, which of course we all know that saturday delivery is very important in terms of their ability to receive mail on saturday. is there a reason why what i would call a world community is that included in the survey? >> we can go back and take a look at that. there's also been a number of surveys done across the country by restless and at the gallup poll that have looked at different communities across the country, and consistently what comes back is when asked the question if you made a choice between no delivery saturday closing post offices or substantial increases in postage rates 70 present of americans have come back and said eliminate the saturday delivery. our proposals to eliminate the delivery would keep the post offices open so from several perspectives people would still have access to postal services and if they wanted they could rent a box and get their mail

that way. >> fodor role post office closing, i'm a little worried about what i have learned that there may be a situation where you call something other than a post office so you get a around some of the requirements in terms of notice to the community. could you eliminate that situation for me because changing the name of a post office to a substation or some other name and then not having to go to the community and get the kind of input that is needed i mean i get that we have got a huge problem here, i get to that the money coming in doesn't match the money going out and i am not trying to throw tax in front of the bus except to think it's important that the liberal communities feel like they have an opportunity to weigh in and i want to make sure that there's not some ability that you may have to get around the regulation for notice and public

hearing by just renaming it something different. >> we agree 100% we it's a process in place right now as a matter of fact we just finished the federal register notice where we will provide public input, public notice and public input on any changes to access we make. we know the postal service especially in the rural areas is very important and to your point, we have got about cost and benefits. we won't do anything to hoodwink the american public that we. we are proposing in the federal register a top-down approach that assures fairness sood you don't have won a state that's going gung-ho and another that doesn't take a look at it. it also assures we make the right decisions and senator begich we were talking of the importance of what we do in alaska, and i appreciate in the missouri and arkansas we have gotten a lot of the rural areas, too said you have my assurance

we will make it a very fair process, people will have plenty of input and makes the decisions and make sure we reach out and send anybody the screen to be effective post cards will go out to customers and we will have a hearing and discuss and take their input. >> i want to compliment you on so many pieces, so many parts of your legislation i think a lot of it is very, very strong and i know how hard you worked on this and i do want to compliment mr. donahoe i think you're trying hard and difficult circumstances to figure out how to put the puzzle together. i do feel very strongly if we can say six days it is important to the integrity of the product that we have which is the united states postal service six days a week is going to happen and i worry that we are going to diminish the ability of the business model to survive if we start cannibalizing it by going to five days so if there's any way that i can work with you to say the six day delivery i sure would like to do that. >> i'm going to go back to the

negotiations that taken place between the postal service and one or two of the unions going forward as part of it as well and our ability to help them in other ways to compensate for the -- the savings is a number between 1.7 billion, and roughly 3.1 billion, somewhere between there and that's real money. >> of one to come back and before i yield to senator begich for closing questions just a clarification, in your view of what would still be provided on the postal world where there is no saturday delivery would include people could have a box, post offices would be open. what did you say about express mail? >> we would keep the post office open, we would have post office box accessibility and we would deliver express mail and run the network so the mail coming for the network, payments and remittances for credit card companies and what not would still run so monday it would be

delivered or in some cases if people have what is called color service and they would have large facilities for that mail. >> thanks very much. >> mine is just a clarification and in a statement. i call it what you said to senator pryor with of of 30 miles or within. as you know in alaska 80% of the area is a long road access, so i'm assuming that is part of the equation because when we did the air service there was the great debate we would cut off the surface to get to the hub to the next in many cases it is hundreds of miles away and there is no road to get there so you recognize that -- >> in alaska presents the situation been hit with the universal services similar to hawaii that we have to take a different look as we work through that. estimate as to send

notifications to the folks i know everyone gets mail and material in the mail and they don't pay attention to it until something bad happens and then they say i didn't realize that was happening. and i would send out a postcard and it would say closing your post office, and i guarantee you will get 100 per cent engagement otherwise if it is just a regular we are notifying you of the post office situation and change an operation here's what will happen. they will set it aside and sit down and read their catalog for the day. islamic maybe we will use the code click here to find out what is going on. >> i will just tell you -- >> if anybody come plans of going to tell them you gave me the idea. [laughter] >> i will give you an example i was invited to a meeting when i was mayor and was about a land use issue no one was going to come out or because so many months away to the flyers and out of the neighborhood is learn how your taxes are going up so

they had full capacity and the local council members and said your up front, we are not. and they would talk about the land issues and people would refuse but they got fully engaged. >> thank you for using the mail. we appreciate it. >> and they can't deliver it on top of that. >> thank you. >> senator, thinks for being here today and being an active participant. we need your participation so thanks. that's going to do it for the first panel. thank you very much for joining us. we would appreciate your response to those. thank you. islamic mr. chairman as the panel is coming up, do we have a vote at noon? >> initially noon. it's moved to i am told 12:17. so we have the opportunity to hear the panel, second panel, and probably have to break off at 12:dirty. >> okay. thank you.

[inaudible conversations] >> find your seats, please. and i will ask those who are

planning to leave to go ahead and make your way to the door. i'm going to briefly introduce the witnesses for the second panel. if you didn't catch it, the vote has been moved from noon to about 12:15, and i want to complete the testimony for this panel before we have to break. we have a vote followed by the respective caucus meetings but i want to finish this panel and have a chance to ask a couple questions and then we will move on. our first witness on panel to is margaret and we welcome you. the director of accountability and compliance of the postal regulatory commission, ms. has

also worked on rates and classification of the commission and served as the lead postal auditor at the gao. next postal service inspector general mr. williams is the second independent inspector general of the postal service is that correct? before taking on the job, he worked as a deputy assistant administrator for the aviation at the transportation security administration. he also served as inspector general at five other agencies. next is cliff guffey. how long have you been in office now? >> [inaudible] >> as it seemed longer? [laughter] -- [inaudible] >> you have had a full year. congratulations so far. i know it's not easy. before becoming president

mr. guffey served for nine years as the executive vice president and a senior top leadership positions since '86 and started his career in the postal service in 1971. next is marks strong the president of the national league of postmasters where he has held leadership positions since 2006 i'm told. he is the postmaster in arizona we could use some sun around this city and a couple of days we will get it. finally, we have jerry cerasale for the direct marketing association. mr. cerasale has a long history working on postal issues including stints at the house committee on post office civil service and the legal staff of the postal service and postal regulatory commission. it's great to see you. thanks for coming today. full testimony will be part of the record. please, proceed. >> good morning chairman carper,

remember brown and members of the subcommittee. thank you for the opportunity to to present the views of the u.s. postal service financial crisis. mr. chairman regrets being able to testify personally today. she is presented comments. i ask that the chairman's comments be made a part of the official hearing record. >> without objection. >> the united states postal service will include its year and will not have sufficient cash or authority to pay all of its bills. the commission analysis review of the postal service request for the rate increase from the postal service cash flow problem is related to an overly ambitious requirement for the postal service to refund its future retiree health benefit premium. over the past four years the postal service has paid $21.9 billion to pre-fund the benefits. all other things being equal without the pre-funding requirement, the postal service would have achieved a small net profit over that time.

instead, over the last four years it has accumulated losses exceeding $20 billion. this year it will exhaust its authority and anticipate another multibillion-dollar loss that will leave the agency insolvent. german carper you proposed legislation to address the crisis and build on a postal operating model of the post of accountability act. the commission supports the fundamental approach of your bill and addressing the financial crisis as well as longstanding issues related to postal service funding of the pensions and future retiree health benefit. the strategy is grounded on objective expert analysis that incorporates the best practices of business and government and previous studies. the commission appreciates the bill provides a regulatory oversight of the mom products and services that may be proposed under the flexibility to be provided to the postal service. this will promote growth and innovation while protecting the

public interest as it is the case with coastal products and services. the commission also supports modernization as the allies reprocess to make it quicker and more robust. the requirements for the postal service to respond to the issues and recommendations in the advisory opinion is an important improvement which may be further strengthened by requiring the response prior to implementation of the changes. the gold altar the opinion process to produce decisions within 90 days from the date of the postal service request to the commission. under the current all the commission evaluates the changes in formal hearings on the record that are subject to the administrative procedure act protection. this proceeding can be time-consuming. the proposed legislation with the opportunity for citizens, mailers, competitors and other parties to octane information from the postal service and test the service resumptions. as a result the commission would be able to produce its opinion more promptly. however the detailed analysis and extensive outreach of the

recent advisory opinion on the five day delivery would not have been possible in the 90 case. the commission hasn't conclude what is the 90 day limit. the postal service is also advised in the near future the plans to request an advisory opinion related to the closing of the large number of post offices nationwide. the commission understands the postal service need to address the network to the changing demand and its evolving capability. however the requirement of effective postal customers be properly notified and evolved when the postal service considers closing the retail office they depend on to read the postal service proposed revisions to the rules for closing the consolidating retail facilities. the commission provided its comments to the postal service including recommendations to better ensure customer's ability to offer input coming from the evaluation of the affected facilities and coordinate the discontinuances and the availability of replacement retail services. i would like to reiterate the commission support for elders

and the postal service financial crisis as outlined in your bill. congressional action to address the retiree health benefit issues remain the key element of any reform effort. effective oversight is vital when the entire system is under such great stress. the commission will let have transparency and accountability and promote positive change and adequate service levels needed to keep the postal service vital and relevant that concludes my statement a bye would be happy to answer any questions. the chairman could not be think you very much for your participation. give our best. >> i appreciate the opportunity to discuss the serious financial condition of the postal service whose leadership the anticipates being unable to meet its financial obligations in the fall. the postal accountability and enhancement act was crafted to incentivize the postal service to adopt a volume driven

infrastructure. it also required the refunding of benefit plans of the screamers from aware they have been subject to the wrongful overcharges. consequently the resulting payment of 90% of the $20 billion in the past four years. this causes in flux structure crossed and burdensome debt. the contaminant infrastructure optimization are under way it will take time on those numbers large-scale actions were undertaken simultaneously which could outstrip the management ability to control optimization and avoid unintended consequences including service disruptions. so what is needed? in addition to benefit reform, postal service optimization of plans to post offices and it minister of infrastructure my office has recommended the conversion to the easily with a letter carrier routes for effective management. flexible rules managing the a bin flow of mail. a comprehensive delivery point

strategy maximizing the curbside delivery and cluster box facility. the district offices simplification of the acceptance and pricing growing the value of mail and finding the postal service's role in the digital age. the digital age is continuing to disrupt many communication industries, the technologies provide americans low-cost instant communications, sophisticated data organizations come search engines, hyperlinks and mobility. however americans need stronger infrastructure to cope with serious collateral issues and citizens would benefit of the postal service could support americans and addressing the emerging confidentiality, security, dependability and privacy problems of digital communications. partnered with federal state and local government agencies to provide that each government services and post office windows services for more complex transactions provided safety net for those left behind by the digital revolution center

carper's bill proposes allowing the postal service to provide mom postal service as utilizing digital infrastructure consisted of public interest. the bill would provide the postal service an opportunity to find its role in the digital age. the postal service aside more than $300 billion in cash to meet its obligations. additional contributions of $55 billion will result in a 100% pre-funding level. it doesn't include the overcharges documented by my office and others if the overture to return to the funding level will exceed 100%. a lot of the funds are being reexamined in the action conference and the postal service could explore an option of clarify increase funding requirements to be inclusive of assets. the purchase price of the postal service real estate is $27 billion of the fair market foley was even greater.

the postal service owns a real-estate and premium locations for example to the nearby national postal service has $47 billion but the assessed value of $304 million. if this is an example of the fair market value tax payers are well protected and a surplus of access would likely begin of an over to the treasury of the postal service were shut down. there are provisions that may allow the postal service to work to fashion an appropriate arrangement to recognize the assets and the obligation. against the backdrop the postal service continues to be billed the $11 billion every year for every ty cherry obligations instead of taking the cost of the fund created for that purpose. as i testified before, i agree with senator collins colin september 2010 for the change of copulation as the postal service pension fund payments.

failing by opm senator carper's bill to require the recalculation to correct the mistakes and balance the account is desperately needed to stop the crippling payment. there's an overwhelming need for substantial objective review of the benefit plans and payments this will allow construction to clear, fair and accurate financial map for the postal service future course otherwise the postal service will be build into insolvency weigel over funding its benefit funds. thank you. >> thanks for your testimony. thanks for the work that you've done and continue to do. mr. guffey, please proceed. thanks for joining. >> and cliff guffey president of the american postal workers union. i am pleased to participate in the hearing today with the representative margaret cigno and inspector general williams who have through their hard work dedication and leadership, much to preserve and protect the

postal service. as a chairman of this committee knows legislative relief is necessary to restore the financial stability of the postal service. the p.w. appreciates the leadership shown in proposing legislation there will meet the postal service critical need for the immediate financial relief. we strongly support and the entire coastal communities strongly supports the proposal to permit the postal service to use more than 5 billion each year from its overpayment in the civil service retirement account to meet its obligation to refund postal retiree health benefits and pay workers' compensation obligations. it bares emphasis that this is not a request for a subsidy or bailout of the postal service. the postal service says been dealing with the challenges because of the decline in mail volume. we are confident under the leadership of postmaster general donahoe and will continue to do so. the exhibit to the testimony is a chart that shows the postal service income for fiscal year 2007 through 2010 as the chart

shows during this period that included the most severe recession since the great depression the postal service had income excluding the health benefits refunding payments of more than $600 million. and only of a government agency could they refer to that as a little amount of profit. that's profit. this was achieved by the postal service through aggressive cost-cutting measures. over the past three and a half years the postal service reduced the work hours by 245 million hours and cut costs by 12 billion. it will cut another 30 to 40 million this year. the historic collective bargaining agreement concluded in the postal service would save the postal service billions of dollars and provide the necessary work force and work force flexibility. thus the postal service has shown the capacity to sustain itself during difficult times of declining volumes when it cannot sustain is the burden of the

unique in a reasonable requirement that a profound thought health benefits over without access by which it has overfunded. from 2007 through 2010 when it would have had a financial surplus the statutory leave required payments for the health benefits totaled nearly $21 billion. in fiscal year 2010 the payment for their retiree health benefits consumed 8.2% of the postal revenue. with additional payment of 2.2 billion to fund the retiree health benefits for current employees augment the postal service was required to pay 11.5% of its revenue for the health benefits. these payments deprive the service of the capitol needed to improve and maintain the distribution networks and develop and launch products and result in a debt. i want to emphasize we very much appreciate leadership of the german addressing the issues

over funding and the health benefits refunding. we also appreciate the fact senator collins introduced legislation that will address the issue. from the retiree benefits requirements and encouraged the fact the members of the house also introduced bills that would deal with these problems. there's a broad strong consensus in the community to support the measures. there's also a broad consensus to support proposals to revise the provision on offering products to permit to partner with state and local governments to offer additional government services and facilities and accept for shipment. we also support to help it get the changes and communications while continuing. the measures will help the of revenue and help maintain postal network that can deliver services to every part of the country.

where the american flag flies at a rich community in the country and to take those flags down and replace them with a grocery stores or gas stations should be the last alternative into those postal facilities. we will help any way we can for the legislation to address at the expense of the employees. i will be happy to answer any questions the community may have >> thinks mr. guffey and you are recognized please proceed. >> members of the subcommittee, thank you for inviting the national postmaster general to the to his authority. it's a pleasure to be here really commend you for holding the hearing. my name is mark strong and i'm the post master of arizona, a very large urban post office. i'm the president of the league. i'm originally from montana and served many small post offices. founded in the 19th centuries

the association that represents postmaster's through the united states. dixon and how to address the postal service financial crisis it is critical to understand why the postal service finds itself in the position that it does today. it's not because of electronic diversion of mail but electronic diversion has slowly been pulling some mail out of the system but that has been with us for decades. electronic diversion was a factor 30 years ago, was a factor present during the recession and will be a factor for years to come. electronic version has been and is the fundamental factor of postal life and hasn't changed much in recent years. the largest factors that caused the crisis are the recession and the fact that the postal service has to make annual payments to refund the retiree benefit obligation even though there are surplus funds in the pension plan. today the postal service is still running a deficit mostly because of the retiree health benefits payments we are making.

we wouldn't be running the deficit if we were not paying 5 billion plus into the health benefit fund despite the fact that there's 50 to $75 billion surplus sitting in the pension fund. senator carper's bill and senator collins bill would fix the problem and we strongly support those efforts. in fact, the lead was one of the original supporters of senator collins bill. without substantial relief in this area the postal service cannot continue as a viable entity for long term. no business of any type in any part of the country could afford to pay $5 billion supplemental annual income tax as competitors do not pay and remain viable. one reason the postal service should not do is close the small post offices. as senator collins will tell anyone, small rural post offices are the keystone of many communities and keeping them open costs the postal service a very little money. according to the datacom and we recently checked this, the total

net cost of the 10,000 smallest post offices morgan once third of all post offices in the united states is less than seven tenths of the total cost for the united states postal service. this is nothing. it around in iraq in the spreadsheets closing small post offices does not save the postal service in the significant amount of money but it is one of those cost saving measures that is popular with middle level postal officials because they can look good and give the impression that they are driving large costs out of the system. closing post office is not popular with american public as indicated in my testimony according to the 2010 gallup poll, 86% of americans oppose closing post offices. this is overwhelming nation wide endorsement of post offices of consistent with the 2009 gallup poll which showed 88% of the public proposed closing post offices. i've shown in my testimony few

other government services rank this type of importance in the public mind. the reason for this is that as detailed in my testimony come post offices and post masters do much more than sell stamps and deliver mail. they perform all sorts of other functions and are the glue that binds america together. although it is sometimes difficult for urbanites to understand this, those words, the glue that binds rural america to get there are not empty words or useless rhetoric and they are not gross exaggerations. they are the truth. if you allow the service to close substantial numbers of the post office then you will seriously hurt america even if the postal service could provide adequate postal service which helped them which it cannot do. one way to maintain is to allow them to sell other products such as the office supplies in order to offset some of their costs. senator carper's bill would do this. this has a minimal problem of competition in the private-sector since there would

be no local competitors in most of the rural areas. thank you for considering our views and i will take any questions. >> please proceed. >> good afternoon, senator carper. >> we have about 15 minutes. >> a leading trade organization for markers and nonprofits reaching consumers directly members represent about 78% of the mail and 80 present of the postal service revenues. they're an important communication channel for all of the members and those of the magazine publishers and nonprofit mailers and the 21st century. and it's in the financial crisis. we agree with you on what you've done on the pensions, the pension obligations for every hour that is worked in the

postal service has been fully funded by postage that we've paid. we also pay between 50 to $75 billion in the pension obligations for the hours worked before the postal service was ever created and that is a tax base also overpaid in the payments and we asked these overpayments be used to offset the retiree health payments that are currently harming the cash flow positions in the postal service. we think the legislation should require the governors to use any tension over the payment refund for the retiree health benefits until those legacy costs were completely funded. the facilities we agree with you on the post act to give the postal service more flexibility and the use of the kiosks and others of retail services to the american public. we also supported senator collins as the coal location of the postal facilities and other

retail outlets and vice versa. kuhl locating with federal, state and local governments as well. we support the positions on the post ek and we think the postal service should work with and partner with the private sector expertise on those products rather than starting out from scratch we want to commend the postal service trying to and the summer sale of the code postmaster general will keep up and bring some more. we support the provisions in s. 353 requiring a cost-benefit analysis for any new meal preparation requirement. and if that cost-benefit analysis shows there is a shift of cost to the miller we think that that should be considered

as a rate increase under the cap there are concerns with the post act. first, we think that the powers given specifically to the governor's should not be delegated. there's a reasons they have persons appointed governors. delegated we also believe that the 45 day decision requirement on the postal regulatory commission for the transfer, just for transfer of products from the market dominant competitive and vice versa is short. transfer between those provisions can have serious consequences for the members. we believe that ending the period would not harm the postal service because that product is still being offered looking at the transfer.

finally the postal service has to deliver 150 billion pieces of mail rather than 250 billion we can't afford that capacity, and it has to be done today and not tomorrow. thank you. >> thanks for your testimony in a think all of you for the valuable testimony. i just wanted to share on the subject of whether or not the world has changed in the electronic media i was just over in afghanistan and pakistan senator begich and i know scott brown and i have been over there a year or so ago. i think about what the world was like when i was serving in southeast asia during the vietnam war and, important to us and the squadron how important it was to us just to hear from our friends and families back home to get letters, cards, we

were stationed in california overseas and on the san francisco chronicle about five days late to receive time about four or five days late and when i was over in afghanistan two or three weeks ago i saw the soldiers and sailors and airmen and marines skyping. they can access this in francisco chronicle through the internet or "newsweek" and pay their bills electronically. the world has changed and continues to and for us hot we have to have a postal service. it doesn't continue to add to the budget deficit and the idea that with or of this people opposing closed office at the to post offices at least that many people also oppose running huge budget deficits and they want us to do something about that and what we have to do is come up

with a way to continue but at the end of the day to not add to our budget deficit the next ten years i think we can do that in the challenge to figure out working together how to do that and think outside the box. let me go to senator begich and then i have a question but i ask no more than five minutes. >> i'm going to make some general comments and because we have a vote in our title the schedules i think there is a recognition between the last panel and this panel, and to use your words they are the right size for the times we are in today and that is a challenge and i think the bill that senator carper has brought forth is a good step. there are obviously tweaks that need to be done. as a matter of fact mr. strong, was in alaska not long ago meeting with the postmasters. it was an interesting -- they had no conference room so we had to do the meeting in a restaurant bar which i thought was appropriate because we had a great discussion at lunchtime

but what was good is the talk about it especially in alaska, and i just want to really say to all of you that you will find me in trying to solve this problem and on the pension issue i've dealt with this when i was the major we had the free pension programs police and fire, two of them were underfunded, and we've restructured and the city no longer had to pay a payment because we've restructured it and became more satisfied in the long term benefit they received there was a win-win all the way around and they were highly unionized police and fire folks but it was painful getting their to be frank with you but at the end of the day we figured out and worked out better so i think the approach again mr. chairman there's going to be some work to do it that's why this hearing was good to hear from you.

my son and ii like having him collect stamps because there's history behind each stand and last thursday went to the post office website, ordered some first edition stamps and they came on monday. when you think about that, that shows the efficiency you have to organize it, package it, put it in, deliver it and we got it, and that is just an amazing thing, stamped envelope on the can stand from here and a village in western alaska is amazing so i credit the post office. thank you mr. chairman for allowing me to say a few words. >> we look forward to working with you on these issues. one question and this will be for maybe mr. guffey and

mr. strong to members were directly with postal customers every day as we all know? what do you think the postal service needs to do to reach out to customers with their individual customers or the biggest out there to attract new business? what do we need to do to attract new business? >> one of the problems we are facing for many years as a world work rules have gotten in the way to prevent the post office from staying open until 5:00. there's a post office and at 18th and king but they closed at 5:00 the people bringing it on the mail packages and what have you just miss out. they must go to one of our inhibitors. we changed the rules to allow the post office to stay open longer without the payment of overtime and doing certain things. we also lowered some costs of the new employees and longer-term benefits so that the postal service can open and where there are clerks working

can lower their costs and keep the post offices open longer in the general community rather than shutting them down because the cost factor in other words we try to help the cost factors. we must be -- we lowered the cost of processing inside plants. we tried hard at that so the big mailers could keep their discount and bring more mail to the post office to keep the cost down. the man and women of the union are very concerned about the post office and they want to help it to be a viable institution and the overwhelmingly voted to do those types of things. >> congratulations, thanks. mr. strong? >> a number of things. i had the privilege of being on the panel a couple of weeks ago and i talked about the complexity of the bulk mail units where the customers come in and it is a very complex operation, and i think we have to reduce the complexity to make easier for the occasional user to conduct mail into the system

but one of the things gerry brought up is the fact we have to look at the complexity of the window, the retail services selling the products we currently have sometimes can be a struggle only for the customer to understand but the retailers' receipts so we have to reduce the complexity of the operation as well. we already have an outreach program where we have deposed ministers involved and it is a customer connect don't reach. we need to expand and continue to grow that and get all of our employees involved. postmasters are great salesman. we need to continue to get them into the field and sell the products we have and get them the time away from the desk to get that done. i think we can, i think we have the people to do with and the product lines to continue to grow and be a vital part of america and work at that.

>> i'm going to run over there and vote. about five minutes to go so i'm going to go. thank you so much for joining us today and for the preparation and hard work you do every day to help make sure that we have a strong and vital postal service. i would like to quote who said adversity lies opportunity, and i think there's plenty of adversity for the postal service but there is also opportunity and it's incumbent on each and every one of us to find that opportunity and work together thinking outside of the box to come up with opportunities we never thought of before and when i see my neighbor is getting of those netflix and my wife being delighted to receive a mother's day card from the other side of the world or when i see flat rate boxes the postmaster general is holding up, when i

talk to folks the medicine is delivered six days a week to the mailboxes there is a lot of good ideas out there some of them realize, a lot of them haven't online and with respect to the energy cost the last thing i want to mention is we didn't touch on this but it's part of the 800-pound gorilla in the room in terms of driving federal budget deficits the cost of health care, the cost of health care. and its minimum to beat one of the major drivers and 80% of the gdp for health care costs they spend half of that 9%. they cut into get better results. we can't be that dumb but part of our challenge is to figure

out how to get better health care results for better health care results for the same amount of money and that is a issue for another day but it's an important issue as we deal with this one today. so i look forward to working with my colleagues here today. those that weren't certainly look forward to working with senator collins. we are going to figure this out. it's not going to be tomorrow or next week but we will figure this out and we will figure it out this year. that having been said, this hearing is adjourned. thank half.

>> order, order. welcome, prime minister to your second session in this parliament and your agreement to come three times a year, of which this is the first before the end of this calendar year. we have shorter more frequent visits to cover subjects and greater depth. today, it aims for chosen and the second is focusing intervention and asking you to support it. sobol come. i will hand to andrew toney. >> do you think the government can rate the secretary is this parliament? and if so, by how much? >> i think government can change the trend rate of growth by making supply-side reports.

it could make an estimate for you what i hope i would be. i notice obviously the office of budget responsibility hasn't changed the loughner to the growth, but they have said it may be possible to sort of thing could have an impact. the way i see it is clearly there is no room for a fiscal tumulus because effectively we'd have the situation and pursue a budget deficit. clearly the economy is headed monetary stimulus in interest rate or his foes they could be. so the tool that's left to government is to do everything you can on the supply-side economy to make sure the planning system is working properly, making sure that labor is working properly, to help individual sectors with changes that could hope those industries grow and that is what the growth review of the chancellor and i have been writing and to -- is all about. we took 117 separate commitments, including some that were about cutting regulation and two to 350 billion pounds.

that is the a limit growth review. as i said, i can't give you an estimate for how much would raise the growth rate by. >> i think there is a consensus that it is absolutely crucial if you give companies capacity to enable written. but that bank of england has fallen. when will it use the power of its own to ensure there is an increase? >> what i say is the minority -- the reasons are disappointing, but they only go up to march and of course the agreement that we reach with the banks, project merlin, which was all about increasing bank lending really runs from the whole of this year. i think you should judge this across the year rather than

anyone's given month. that agreement was 190 billion pounds of new credit for 179 billion last year and for smes, which i think it's a critical piece of this coming 15% increase to 76 billion pounds. that was an agreement with the banks and their cited the agreement is to deliver the extra gross lending. clearly we need to make sure that does happen. >> quite clearly it is too early to come to definitive judgment on how successful the project has been. however, certainly there is still a considerable body of anecdotal evidence coming in the bank lending hasn't improved. what is the government's position if in fact a level of bank lending continues to drop? and what measures of it looking at to rectify that? >> or two answers to the

question. one is for which you do with the bank than fulfills their cited project merging? the other side was that we will not introduce further bank levies, taxes, bonus taxes and all the rest if lending cases for coming. that's the point. so let it fulfill their cited the deal, including the government wouldn't have to fulfill its side of the deal. sites are not coming they are clearly other steps we could take. assembly authority taken. obviously there is the enterprise growth fund, which is a classic sort of loan guarantee to try and increase bank lending. their other measures you can look at on that site, but i've always believed the project merger is very much time to try and settle this argument that the banks. i don't think it's construct good to have an endless series of new battles to fight taxes on

the banks at the same time is getting an economy to grow. let's try and have my lending for the banks, lower bonus payments this year and last year. a set of taxes on the banks and guaranteed about tax revenue for the banks. i think it was a good deal, but we have to make sure the banks to their cited the agreement. >> as ownership in a part in this? >> of course it does. and of course the things is a further site to this. of course as owners of the banks, we have an influence there as well. that is the case. of course that the case. as i said come in the first to try and make the project work in the way it was intended to do something after all the banks headed into believing they could find a gross amount of money to large and small businesses and indeed saying they wanted to do

that. so i think we should judge it across 2011 for the progress remake on that front. >> i would just point out that the net increase in lending is possible to increase the vote landing, but its effect and the amount of money flowing to business. >> the problem is if you target -- the problem is the target local arrived at more businesses justified at the time they want to write down debt and repayment. and i think targeting is something that's actually more useful in terms of making sure the banks are prepared to make fresh commitments. otherwise they could meet net ending targets by ensuring firms not to pay back the money. >> it could also be met by some deciding there is no point in asking back anyways. >> well, i'm a constituency mp like you are in it lots of

examples of people coming to me and saying i never preach my overdraft limit. i've never cause my bank and a troubling yet i'm not able to get the loan. so i took a recognized as a problem. that is why was instrumental in getting the project underway. i think this is the first step we take, combined with the loan guarantee we've increased and i'm not expecting these things not to work, but absolutely sure you're concerned that bank lending is a key to helping get the british economy moving in a consistent and sustainable way. >> i just finished with a a question about export and uti? if the government policy is to succeed given the state of domestic power is essential to boost ports, why is the government cutting the budget

and u.k. t.i.? >> first of all, i totally agree with the thought underline your question which is we've got to rebalance the economy. we need to see growth coming from manufacturing, investment, exports, rather than believing we can briefly the economy and the basis of property, government spending and a consumer boom. and the good news is over the last year can export is up 16%. manufacturing 5%, business is up 11%. clearly like many other parts of government has had to find efficiencies. we've had to make savings across government in order to fill in a huge budget deficit and start to get to grips with that. what we have to do is maintain numbers in ukti's network which is the crucial part. the overseas network where we have over 90 people in china, over 80 and india, for in japan.

those numbers are maintained. all of the savings are for reducing corporate spend in advertising. also this is an area i ain't a close personal interest because i believe the trade agenda is so important that the connection that i got stephen green who is a very respected chief executive of hsbc, a bank that didn't get trouble in the boom has come across to beer trade minister, eager to the presentation recently with the number of cabinet ministers about buddies they need to do with ukti and the export credit guarantee department and i think they're going to be on the really superb political oversight leadership from him in the years ahead, which is good news. >> i want to talk a little bit about bank lending. he said that the bank lending was right target, this case and i'm quoting the mail, this is

completely left the bank off the hook. it's perfectly possible for the growth funding target while with growing businesses. do disagree with them? >> all i'm saying is saying is you can target the growth or you can target the net. i think it's better to target -- to get a commitment about the gross lending, the amount as it were out of the door in lending to large and small businesses. if you did the same, you could find -- you might find that the figures were effectively being massaged by encouraging firms not to pay back loans, even when they wanted to and therefore the problem is small business can't get a hold of all the money. that's the problem and therefore i think targeting the amount of money out of the bank into this mess particularly solves this increases the right way to do it. >> well, i agree.

i agree about the sme point and i think that's usually important. the money didn't go to the start of. it didn't go between 2 million -- those who are between 2,000,010,000,000. so it's a very poor start up for your new inspiration will not get access to finance even under the agreement. why not? >> well, what you're referring to in many cases is going to be project finance, leasing and other such things, where we have to talk about encouraging banks. it's also about encouraging law firms to look or for capital goods. >> honestly, this is your surgery and my surgery and we can't access them whenever therefore we cannot access finance to grow. >> yes, what i'm saying is at

least other arrangements as well as the banks. but we also have of course the enterprise finance guarantee, while lending up to 600 billion to around 6000 smes and over the next four years another 2 billion pounds. so we are trying to look at all of those. i think also export credits is another area because a lot of -- the big picture thing we should think about is if we can move from where we are today, one in five of her smes exporting if we could move that to one of four smes importing would be 14 billion extracts for us. again, a lot of that is about investment and capital goods, some of which are about bank lending, some leasing and other financial products. >> were talking about the very small start up, which cannot access finance from the banks and under the project improvement has no -- you have

none at all. >> you're only looking at project mergers. the other government policies, whether the loan guarantees it will be given the budget where you think anyone who has looked at what can you do for small firms, startup firms have set will be dated in terms of investment allowances and the capital formation credit. those are quite powerful in terms of trying to get money to small business. we specifically went to on the venture capital organizations. but other things can we do in a budget that would help? are quite powerful. >> what can i just come back as well as the sanctions. the sanctions you might they are attached, might be tougher on their bonuses. that would get them to land. what are the sanctions you think about, given the actual landing

at gun and immediately we have too look at the sanctions you have in your mind? >> the sanction -- why did they sign up in the first place? why did we suggest you stand back and think about it? the banks recognize is extremely unhealthy and a model competitive market economy to be in a permanent state of war with the politicians on all sides of the house. it's an extremely unhealthy situation. an endless debate going off what bank taxes some of these we can introduce. we must reach an agreement that says we pay a lot of tax. we're going to pay even more in tax. or paying your bank levy which has also gone up, but what we want to do is get back to the proper practice of lending money and oiling the wheels of a market economy. so let's have an agreement where we promise to increase gross lending and you say you're not going to introduce another tax on the rest of it.

that is quite a sanction because it was an agreement and they have to be on their side of the agreement. i think what, of course argue for a different approach and say the government should manage the bank itself. i think there would be danger is frankly because we are politicians, not bankers. you can have even more on the loan guarantee schemes. that's another route. i think this project is the right way to do it, but clearly it has to be judged across the air. >> can ask you a more general question on growth because it's now not just blow the french and the germans. on the last quarter and managed to get the greeks as well. can you say to me what evidence you've got to show that your approach is working? >> well, the first by meme, statistics is actually the

americans. that's an important point and also had a sum of the country. actually, it was that had of portugal as well. but we are going through an enormously difficult process of rebalancing and economy that did have the most over indebted banks, the most overleveraged households, the most overbroad government, the most out-of-control immigration, the most fast increasing government spending. remember three quarters of growth had been coming from government spending, housing finance and immigration. that's a sustainable model. so when we're sitting here will have to rebalance and try and bring about a situation where growth comes to manufacturing,

exports, technology, investment, rather than pumping up the bubble. that's extremely difficult because obviously you are seeing a reduction. you are seen a reduction in public-sector employment. and so we need to generate an increase in your planet in order to give people the chance of a job. the good news is over the last year there actually 400,000 more people than there were a year ago. i'm trying to make a general point. the rebalancing of the economy. but the fact the economy is now growing in the investment manufacturing exports are growing, it don't take it for me the government and the bank of england and the oecd has says there are signs of rebalancing the british economy and that is a healthy sign. what we have to do is try and secure and expand the growth as part of the bank lending we've been discussing, but also the growth review. as i said there is a direct

fiscal measure you can take because we've inherited a situation where the government was supported. interest rates pretty much as well as they are so we've got to look at what can we do to help supply a sign that the economy? is a sad, 117 commitments. regular proposals would cost 350 million a year. a presumption in favor of sustainable term of 50,000 new apprenticeship and the next state growth review is infrastructure, and mid-cap companies, look at the power of open data to create new businesses and all specifically look at the rural economy. >> a very final point is committee considering whether it should be done because of our performance look a bit small? it feels to me a lot like word

noshing growth, have massive inflation. it feels like an era of taxation where the people are separate. >> well, i don't accept that the economy is a growing. and the point i made -- the main point about moody's and the credit rating, if you look at what has happened to a really key indicator in our country, which is happening over the last year, it's actually followed in the u.k. by 44 basis points. if you look at all of the european countries, particularly those with question marks about that, it's up by 316 basis points. kris 544. my view is if we hadn't take steps to set out a credible path of deficit reduction, u.s. and british interest rates go up rather than down in the whole rebalancing picture of manufacturing can export

investment, business growth would've been absolutely laid out flat. that i think is the key judgment we had to make and i'm sure it was the right judgment. >> senator, the jobs are important to delivery. top work program or did the right job in the right space. if that case number -- because it changes you've made in the best and send them the cbi forecast are much smaller over the next few years. but there's a mismatch in the number of people that's actually available. >> well, the zero pr forecast unemployment will rise next year and every year after -- as i said, the date picture is we are trying to other rebalancing

economy are inevitably whoever was sat here now would be seen a reduction, but needing to generate a growth in private sector reclaim it. now we have got 100,000 more people and worked in the u.k. buddy except what you're saying, which is as we put in place this big for program, the biggest seen since the great depression, we've got to make sure that businesses are still growing and taking people off. and i think at the moment that is happening. but i don't accept that it's all about what jobs are available as people come off welfare because what's different about the work program is for not just hoping if you like the friction of the unemployed, people have become unemployed and need a lot of jobs. we are trying to help people who have deep problems in terms of literacy, skills, self

self-confidence, mental health. we are trained to help all of those people. and for those people, they've been left behind in the past and a welfare program that really hope some will find jobs for many people to do if they get detailers support they need. >> the president clearly -- there's implications for individuals. there will be people who will not be able to say about because of the market of the jobs, yet they have potential to also benefit and gives them a lot of money. with government going to do for those individuals? >> the first thing is we'll help them to get a job. at the moment they've been left. >> it's not going to help them get a job. or some people for the millions

who often benefit from one to another. there's much income which is quite insidious of the labor market. >> let's first of all question that assumption. over the last year there's 47,000 more people i work in scotland today than a year ago. again in the north west durham are people who work than a year ago. so the idea that jobs growth has been confined only so one or two parts is not the case. that's the first point i've made. the second point is if you can get someone to help in training they need so that they are no longer incapacitated from work, then they should be treated the same as someone who is seeking what the plans involve.

but i'm more confident and that that if we give people that help in training that there are the jobs. there are 482,000 across the economy. and also the key thing is this hasn't been tried before in terms of proper payment by results. so the organizations that are doing the training are going to get paid more for dealing with the hard cases. now that hasn't been tried before. i think it can make a very big difference. and again, he can't find a job genuinely are available, you should be receiving benefits if you need them. >> the point as a result of changes -- >> as a set, if someone is in capacity -- an equivalent, they actually can be trained to the extent for the investigation

says they should be on the benefit, they should be treated the same way as someone who is actually seeking work. they should be actively seeking work. but of course the whole point of the changes as people who genuinely can't work should be supported and generously supported throughout their lives. what we have found is that you go through people on what was incapacitated, you find many people -- they're those people generally incapacitated who is a compassionate society we should support and make sure we look after. the second group is those who cannot work and offer rails treat them can get positions where they were. the third group are people who shouldn't have helped the benefit in the first place you should be actively seeking work. they think it's the responsible thing frankly to go through all these people. >> let's move on.

>> trimester, the government inherited a very high level of youth unemployment. but steps can the government take? >> i think this is a very, as you say, severe problem. what kind of want to understand the extent of it. there are just less than a million young people ages 16 to 24 who are unemployed. if you exclude those in full-time education, the unemployment numbers include. between 607,000 young people cannot find work. and the way i put it if they think we have a problem, a welfare problem and an opportunity problem. as i discovered rios of a government problem. the school problem is there's too many people going into the labor market you don't have the necessary skills and qualifications to work. we've got to fix the problem of people leaving school out of the

qualifications. the welfare problem is that in some cases people have been able to get onto welfare and find themselves better off than welfare than they would be in work and so that the smith reforms were about to make sure you're always better off in work or the opportunity and this always happens tragically in a recession and after a recession is that it younger people harder because the new jobs are coming on stream. so their government does have a role to expand apprenticeships, work placements and that's exactly what we're doing, putting firepower into the area. we have had a problem of looking at 16, 17 euros who are unemployed and need help. this sort of falling between the crack. one of the things we're doing is making sure job centers, department working pensions has the money and resources to focus on those people.

but in time, part of this is raising the participation age and education and training from 16 to 18 in making sure we make the opportunity available to other young people. i think that's the way we have to do it. >> in holland, benefits to other people are peeping municipalities and if they spend less than the money allocated by government they keep it and if they spend what they have to pay the price. we simply brought the legislation in a transfer of the attitude and approach of the municipalities to seek government processing in the center and focus much harder and making sure get were up to age 27 you can't get work in training. other changes to the incentive system that can bring about in this country to lead us to join the dutch and having the lowest number of unemployed young people in the oecd. >> am not certain about the dutch are doing. but we have in common with them is the universal credit system,

because it raised the clay works right from the bottom of the income scale in the bottom of the lowest numbers of hours worked all the way up, it means however few hours are working, working a little bit more will always mean you keep a bit more income and because it basically interact between the benefit system and the way -- and what you're getting in work, i think you have an enormous incentive. should we do more to try and recognize some of this problem is they've done in holland? i think when we have given the chance to run more services on welfare, they've actually found it in their interest to really get the welfare bills and costs because they never have to pick up all the costs. i think it is an interesting agenda. but are certainly study. >> they also provide opportunity for vacationing stream from the age of 12. to think there's a case for us

extending educational opportunities at an earlier age? >> inc. having those options available but we are to us to the wolf report. in a nutshell what it was same as there've been too many poor level qualifications that we've turned that young people and they start them up and i think it's basically saying two things. one is that to make sure standards of vocational qualification are high and meaningful and worthwhile and the second thing she is saying is you really mustn't give up on young people having the core skills of english and math, even if it means that there's almost no job in the world that doesn't involve having the rigorous reporter. i think we should follow that and i also think our plans in terms of putting money into university technical colleges,

which should be high-quality schools that would have a very prestige level for people who want to take a big part of this as well. >> at last prime minister you acknowledge that we need to spend more time with advisers. >> i have. i even had a big dinner. i've had meetings with him. >> ayrshire baccalaureate. the government put down some positive things. for example, creation and innovation is followed the previous government. what else are you going to do to help development competitiveness of british industry by applying? >> the first thing was the big picture decision was to not cast in cash terms the budget door having to make cash sales to

things that are more politically penny fuller, for an end for policing budget. i think nonetheless the right one. i would add into that a science-based policy. i think introducing the 10% corporation tax rate for companies that develop intellectual property and exploited in this country. the mention the technology and innovation centers. we've also put specific money into things like synchrotron and capital investments. >> the physics between 2004 and 2012 is harping of its funding. these are serious cuts. it's incredibly important for the future.

>> obviously science and technology she makes decisions about the individual level. by complete chance i met a position last night and i said i know i'm going to be questioned about this report. neither one of them challenges towards highly specialized areas as they make our application, they've got to make them relevant. they can expect to get money because it's an important area. they have to prove the worth of what they're doing. >> you can't just leave that. i'm a firm believer and i wouldn't want us to choose the priorities. what i would say to you as one of the places of evidence we produce very clear, gap between the research councils and department of education over budget and the national scores observed that the project which demonstrates how to incentivize

young people and yet if they're not careful i'll dissipate out. >> well, first of all, there are things we've got to do in terms of the ricker and the education, which is very much on the agenda. i take the point that you make about the importance of high profile projects that actually can inspire people in terms of science. and one of the ideas were looking at is to produce than brittany sort of novell sale price for engineering from the something that happened every two years of massive sponsorship and it would have -- and what for things to work they have to have a real boost of money and status. i think by that is only one thing and it's only engineering, it's things like that that could help raise the status of a whole area of scientific endeavor.

>> final question is part of our strength is in the international collaborations we have taken a wide range of fields, particularly in the big science projects. but pretend the sordid scene has been a difficult partner because of the lack of long-term commitment toward subscriptions involved. is there a strategy that's going to take us beyond 2015 to make sure that britain and their leading scientists can stand up and be a key part of some of those collaborative actions? >> bellarmine, i did after this last conversation we had, i organized a surrogate big seminar at number 10 and gather together the chief scientist,

scientists from the highly theoretical through to the very applied through to david outerborough. so where is britain's advantage and how quaint thought it? i would say we are second only to the u.s. in terms of academic excellence. it seems we have a joint challenge, which is people do like studying in britain and the approach to science in britain because of our emphasis on basics, but we've got to maintain that bought the same time recognize that it's easier to make the case for investing in science if you're seeing results in terms of the application of science, the growth of rad, the group to and all the rest of it. the strategy should be about you got to try and do both. i think we've been stronger if the first and we have in the second and so i think we should

get quite a lot of attention to the second. but even as an oxford graduate, and committed. >> really insensibly over the course of an hour than trying to listen and all i've heard is a reference of greed. last but not least, surely the whole way we'll get the growth is by having green growth. in terms of the actual kinds of growth, it seems to me that finance trumps everything. the environment doesn't, and except as an add-on extra. haiku we demonstrate that green growth is actually invariable? >> i don't accept the approach but i can understand why. to me what we did was right at

the start was set up the green growth was a very big part of the government strategy. the growth review then comes on top of that where we're asking ourselves basically what else can we do around the economy to make sure the planning, housing, employment law, regulation is not getting in the way of growth and specific set or so the economy like pharmaceuticals. but the green growth part is absolutely there and i would say in terms of what is the evidence, the green investment bank with 3 billion pounds of new money and it is a massive massive commitment anytime in the government is having to make spending reductions. the green deal, which could be transformative program in terms of greenhouse this is going to have massive investment behind it. the renewable heat initiative adults and people have focused enough in terms of what it could mean for replacing boilers and building of new homes in renewable heat initiative for business, residential as about

eight under 60 million pounds attached to that. obviously even if they speak i think chris ewen is making a statement downstairs about the carbon budget, where britain is now leading the world and setting out tower going to get to be 50% reduction in emissions over the period ahead. so i think you take those things together, britain does have a very set of circumstances to encourage people to make investments. we don't just leave it at that. i literally pick up and said, and invest in britain, though not sure when. we've got to encourage the manufacturing premises so that cannot be made available. i totally agree with you that the green part of the growth agenda is vital. >> is so combatant, but that aside you've touched on different things correct the

green investment bank through given the chance through that ask the chancellor's to revisit in order to stimulate the economy? >> i've had long discussions with the chancellor and -- i'll tell you i think clearly we have got to get on top of borrowing in britain. i promise you i'm going to answer your question. the real missing piece in terms of green investment is much more equity rather than debt in the green investment has 3 billion pounds of money it can spend is enormously valuable in terms of leveraging and other borrowing by other financial institutions to make green investment. i think what it will be as a catalyst for green investment that otherwise would go ahead. it's the equity partner will have the real impact. we do have agreement that i think aspiring powers as as

well. if i said to you a year ago that the investment bank has 3000 -- >> how much we need in how quickly we needed -- if i may add onto this statement which i feel as i commend the places about the fourth carbon purchase. i simply wanted to ask you, we are being told the single development would be a process between the cabinet office. [inaudible] i just wonder if you could tell us what trade-offs there might have been? >> the process is basically speaking is serious and quite large cabinet committee, one of economic affairs, one home and won a national security.

the chance to change the economic. the agreement on the climate change budget was agreed between the chancellor, business secretary and quite a change secretary to the economic affairs committee. >> number 10 is always involved. absolutely. in this case -- >> my office was involved in trying to encourage a solution. >> the sticking point was obviously we want to meet as forthcoming budget and meet the 15% target and were doing that. the climate -- the business secretary and others had serious concerns about energy intensive industries and how we should try and put together a package to help them because they are being affect did not just by the common budget buffet also changes to the electricity

markets and other costs. it's very important that it does actually how climate change. you simply drive and energy intensive industries to go locate and poland rather than britain. that was one sticking point. we have a good agreement were going to deal with that. and also another part was to make sure that what we believe europe should follow our lead and going for a 30% reduction, they haven't yet committed to that. so there is a review cause in 2014 to make sure if they're not on the pathway that we shouldn't put ourselves on it, too. were confident we can persuade. i think you see a very good and green and announcements about our future intentions, but the government quite right we says make sure were addressing the concerns people have. >> a couple quick points.

one is acknowledging property. >> the economy as you are well aware, the sort of indicated in northern ireland productivity employment, economic and tvd are historically low with also got a high dependency on the public for. there are things which were discussing to try and change that. one of the things which is worrying me is the growth in the distant republic cannot tvd. we've seen an example of it just yesterday. and that will do more to her and the economy anything else. is there anything else you can do, prime minister, to counter this? >> a first of all, the relationship between britain and the republic is stronger and i think it's sort of a demonstration of that. it can cause the relationship is

extremely strong. obviously we've developed facing justice, which was the right thing to do, but we should still stand behind and support the national security council discussion or were granted an additional 200 million pounds over the coming. i think we have to make sure they're doing everything to help the security and cooperation bases. again we've got to stand back and ask ourselves, why is that young men are still committing themselves to this hideous level of violence when everyone else wants to make progress? i think we've got to make sure we do everything to keep communities together and cut off those who go through extremism. we have to ask as well to make sure politicians in order to ireland to everything they can to ensure the future. the great success from the peace process and evolution is the elections in northern ireland or

about health and education and housing and that's a great development here thingy to help encourage that and get politicians to really think of their future and they're going to build up rather than still being about constitutional issues in the relationship but partly security, part lee verbalization. >> the government supplemented oil and gas really damage the industry and investing. i think except in the government does ask you engage with them develop confidence because we were an industry that would go to a me to ask that we have again to set the teeth tax

relief in the budget proposal. >> i accept it's a very important british industry. what we have managed to discover in the north sea and they've been to apply his fantastic success story for britain. i think what we are proposing is there not least because for letting the last change was $66 a barrel was more like 100 t. now and according to treasury estimates that oil and gas sector will be full 50% higher in the coming years than a couple years ago. i think it's very definitely except that we need to discuss the setting and make sure that we do understand the tax relief

and training provided certainty they are. and of the chancery ministers are going on that issue. >> you are engaged in a company -- a major company told me last week they had three operations going before the budget. to had been transferred to africa on a major project has been abandoned and another one is scarce and review. at the casino price is not high but that they're trying to squeeze production out of the risks also high. we engage to make sure you understand -- you said please invest in our offshore industry. these come these are investing this money we can do during whether they should. >> i certainly have had these conversations. the post-tax profit per barrel will be higher in the next five years, so i don't think we've created a situation where investment shouldn't go ahead.

>> that's where the problem arises. >> if you look across the base and those are correct figures. so we have to put recognize the overall fairness in a particular time we do try to keep the fuel duty in the budget, to give households some relief. the money had to come from somewhere. and at a time when the oil prices of 113, $115 a barrel rather than where it was five years ago. >> most oil companies are not going for a price like that. >> the oil price stays at that level, the forecasts to the oil price will still predict a plus $100 a barrel price in 2015. that will mean that those companies are still highly

profitable and can afford to pay the charges set out in the budget. >> prime minister, in response to the questions on the growth in the first half of the question, you referred repeatedly to rebalancing the economy. i wonder whether you could give us a little more detail on exactly which you really need. perhaps i'm the public versus what do you think the correct level for the economy as? >> i never believe you should target a particular percentage of gdp. i think what you need to do is make sure so you rebalance

between public and private. >> the savings ratio is about 4.5%. what would be a long-run savings rate and a balanced economy? >> again, these are not -- these are not individual figures that we are forecasting or predict dean or targeting. the targets that was given the budget office responsibilities about getting the budget -- structural budget back into balance and i think if you think of the situation we inherited and the problem we had, it was a

budget deficit around 11% from a large part which was structural. if you continue duke it unsustainable. >> with talk about private sector. >> the right thing to target was getting the structural budget deficit back into balance and targets are additions to other figures >> you've talked today about rebalancing between manufacturing and services. at the moment according to financial services produced around 8% in manufacturing 13%, what would be the correct figures have a balanced economy? the 11% financing in 19% in german. >> the balancing of the

economies are less reliant on one part of the contrary >> what we really need to know is the balance between the two constitutes a rebalance the economy. he views the language to repeat and in many speeches i'm trying to get -- >> what it means the economy has got to come from the source is growth that it didn't come from in the past. growth is very much driven by government expenditure and consumption based on the back of borrowing rather than the other thing is growth can be based on, which is investment and export.

and the balance between exporting imports. >> the manufacturing will have to reduce something else. are you not? >> i'm looking at it in a slightly different way, which is saying given that you can't get demand through government expenditure, given that we have in the past have consumer led expenditure where we need to see growth is in business investment and also in exports. so that is what i mean by rebalancing. the second rebalancing is when you look at employment, clearly we're going to see a reduction in public site to employment so you need to see growth in

private other ways to rising unemployment. so we need to generate the dirt. but what i don't want to go is where the economist in the past somehow services there back in manufacturing is good. >> wishes try one more. for example >> you can look at per capita we have part of our country. but what you have seen his income disparities grow between

countries rather than shrinking. if you're trying to balance between all the regions are his income disparities reduce rather than increase. >> prime minister cummings talked about the need for a massive rebalancing of our economy you might be playing a key role in bringing this about, but when i've asked you a whole raft of issues of what this actually means beyond friendly language about rebalancing the economy, i can't say we've had much substance. you are not saying okay i want to see income differentials vary between the regions for example i want to see more jobs created in the north and even recognized less -- >> i wanted to think reducing rather than increasing.

>> a rebalance the economy between the regions therefore would be won by the northeast in london is left. >> over the last decade the disparity has been going and i would like to see that narrowed. >> a question on the other subject we have today which is overseas devotion military capacity to support it. >> good afternoon. i put a lot of questions here on no-fly zones. i think what if one really wants to know is what is the strategy? the exit strategy is to successfully implement the u.n. security council in 1973, which means they are no longer attacks

on civilians taking place in libya and effectively that will mean the libyan people have the opportunity to choose their own future. we are responsible for delivering the first part of that, which is my team 73 being put in place. the libyan people are responsible for the second part of that. >> can you see the operations in power? >> i think it's difficult to imagine a way in which u.n. resolution 1973 could be implemented with gadhafi still around because he is the person responsible for inflicting massive casualties and damage on his own people. ..

you bridge the gap between what we all want to see which is a live will be a free to determine its own and what we have by turning up the pressure, and i think if you look back over the last few weeks you can see her repeated moves to turn up the economic pressure, agreed essentials dealing with oil and oil products, you see great political and diplomatic pressure, the coming together of the contact group and arab countries, the steady recognition by more and more people with the transitional

national council in the right into law qtr to discuss and yes, military pressure where you have seen their ramping up of the pressure within the rules of 1973 by the nato allies in terms of targeting command and control, america coming back in. we've grown over ms. ross and tripoli >> the command and control center happens to be at times. >> i said when i made my statement and the debate in the house on the targeting policy. targeting must be consistent with the resolution 1973. that is about taking all measures to protect civilian life. of course that includes takes on the artillery pieces and also command and control. it includes -- it's about the

organization and the people that are ordering the civilian life. as i said i'm not good at the commented on the target but it is within the rules of resolution 1973. >> on the point which is he wants a change to the rules of engagement to the infrastructure project. what he instead of having mission creed consider initiating settlement between the regime and i use the regime deliberately. >> i don't think it is remotely where we are, but when we're still sitting up the pressure and that is actually quite effective. people like to talk at a stalemate the third biggest city

in libya, the people snuffed out by the regime completely as we speak the port being shared by the regime that they've been beaten back by the rubble. so my view is to keep turning up the pressure diplomatically, economically, militarily. all of that is having an affect and i don't think now is the moment. the second part i would say is if you listen to the national transitional council which is made up of people representing not just one part of libya but all of libya and in my view there are not secessionists rather are the islamist. they want a space future for libya. the do not believe in holding discussions and talks with gaddafi. they want to make sure we put in place resolution 1973 which as i

say within doing what we're doing and where he is now is important. >> thank you. at what point do you feel the repression has gotten so bad that it justifies and as far as syria is concerned, are you concerned that once the arab league invites us to make an attack on libya it's being silent about syria and other countries? >> the difference between libya and syria let's begin with does that mean, syria is unacceptable, the amount of people who have been killed by the regime is appalling. the figures from human-rights watchdog and there's no reason not to believe, it has been an appalling level of regime intimidation and killing and we should condemn it as well which we have. we shall also take steps which

we have in terms of sanctions and asset freezes and arms embargoes and all the rest of it but there is a difference i think between libya and syria and one of the instances is we were invited to do what we are doing by the arab league and there was strong local and regional support. i don't think we can say that about syria. >> the one of the weapons we have nowadays in the structure reform and the strategic defense emphasized the importance of one of the ways we delivered that in britain is the bbc world. just at a time north africa is kidding quite serious don't you think for the world service to be obliged to cut the service as a result of the funding to? >> it is obliged by the government to cut.

and every organization in britain as having to cut links secure and very fair funding settlement for the world service that enables them to run good services but they have to then make reductions of as many as possible in the administration, back office and the rest but that has to be decided independently by them, not by ministers. >> of the service has a reputation throughout the world. it is one of the most respectable causes of law and there are only two houses anyone is listening to as al jazeera and the world service and i think's the bbc has a better representation of independence, yet we are cutting it and we are doing it because they have

entered all the money to run it. if we want results, your committee resources for the military organization is an important priority of the foreign office and the strategic defense review. don't provide the extra resources to fund the service if it is cut before the arab uprising? >> all the time you have to look at the decisions we've taken, the impact they are having. if you look at the figures for the reduction of the world service budget and i don't have them absolutely at hand, but it didn't seem to me this was an unmanageable reduction to make those sorts of cuts but at the same time broadcast puna services. and if i look at what other organizations in that space had to do, if think it is perfectly preferable. >> in the press the ministry of

defense moving on now to the capacity to deal, the administrative defense ran a hendee lay in finding a billion pounds of savings. is that true? >> i have to say i don't recognize many of the defense related figures i see in the press. the way i see it is this. [laughter] i recognize some of the letters on the sea, yes it would come to that. but all i recall is we had a strategic defense security review. we settled the budget and it worked on record, the budget was 33 billion pounds this year and 34 than 43 basically slashed across the period, the defense budget in the world and when we fixed the budget these were in line. now of course with the defense

budget there are all sorts of pressures and costs that come along, not necessarily libya because it is paid for through the reserve command to be fair to the ministry of defense, it probably was the most traumatized budget and frankly department that i came across as the prime minister because it had this overhang of 38 billion pounds of the commitment of the various projects that would not be possible, so the process of getting the department began to a serious budget is extremely difficult. but i do recognize but of course you get discouraged and in any department because of fuel costs or pressure or changes with land price, whichever, changes between the budget and the money you have available. >> let's abandon the figure of a billion pounds. do you -- is it true the ministry of defence has won a

delay in some of the savings was required to fund, savings which it had not oddly enough identified by the time the u.s. gr was published? >> again, i don't want to in any way get this wrong. so maybe i will have to write you as well. i get quite involved in this budget because it's very important, and the treasury, the minister of defence and the number ten work very closely on trying to make sure the process of getting the budget back into shape is going properly. late scene is in some cases they've managed to identify savings and changes there are helpful in terms of the budgetary situation but other cases make it more difficult. but that's natural when you've got this sort of car crash of a budget trying to get it back in shape. it's a sort of ongoing process but i don't recognize the

billion figure and the sort of putting it off to the future. i don't recognize that either. >> would you recognize the suggestion after seven months the u.s. gr hasn't stood the test of time? >> i don't because first of all, it needed to happen. we hadn't had a defense review for too long. our commitments were completely out of whack with our resources, 58 billion, overspend we have to deal with and the criticism you should have taken i don't accept because the decisions for the carrier strike and whether it should be tornadoes or -- i don't think the situation is getting any easier. you have to go through the arguments, listen to the arguments and make the decision. in terms of how has when you are involved in the two conflicts, afghanistan and libya, all the time you are learning about the military is learned about what works, but doesn't work, so of course we will learn as we go

along from libya and afghanistan but so far i would say the things we are learning reinforce the thrust behind the review which was flexible armed forces, easier to deploy, the importance of the transport, the importance of the drones was one lesson to reduce the extra emphasis we put on even more necessary in the future and i would like to go even faster on that. but it wouldn't lead me to question or challenged any of the fundamental assumptions. >> there was a headline today about afghanistan, this is u.s. alarmed by david cameron's push in early afghanistan withdraw. what's going on? >> to worry about peeper headlines the reality that we

are the second biggest contributor after the united states and the toughest part of the country the troops are performing magnificently and they are appreciated hugely by the americans in terms of what they are doing. obviously this year there will be some troops coming home. it's not a new announcement in any way. our enduring force level remains at 9,500 but after you know above that in special forces and some of the extra operations we've undertaken solely think if you look at things like what is happening in the troops airport at kandahar and also some people involved in the rapid reaction force will be around in afghanistan in the coming year up to february, 2012 but the force level that remains at 9,500. i am sure the americans completely understand that.

it's rather less than the reduction and they are planning to read and as i say they remain in the toughest part of the country during the most difficult jobs and when you go there one of the first things the americans say is a much they appreciate the incredible work our troops to. >> i hope by giving the answer -- last week we asked the chief of staff would you still describe national ambition as being a full spectrum of capability? and the answers were no, the chief of the general staff, no. would you answer this? >> yes. of course -- >> [inaudible] >> all of a sudden the importance of intervention with the indication for the defense?

>> the question being are you a full spectrum of defense power i would answer that by saying yes because i think if you look at the -- >> i really well, i promise. if you look across and take a navy that has got submarines for the nuclear deterrent we are renewing that has to of the most model it to date carriers coming down the track. if you look at the air force as the typhoon, one of the most capable successful aircraft anyone has any where in the world -- and we spend 900 million pounds on the special forces. to me that definitely describes the sixth biggest economy and that describes a full spectrum capability. now of course, the defense chiefs will always quite rightly because they are standing up for

their services they will want more. and i think the relationship between a primm minister and defense chiefs should be quite robust. and i like the fact that the chief of the defense are able to have good proper arguments and discussions. that's how it should be. in the and the politician has to be as responsible. i am responsible for the fact we are still in afghanistan. i am responsible for the fact i'm putting people who were at risk in libya. that's my responsibility. they do a fantastic job delivering the intent of the prime minister. but in the end of, it got to be the relationship where the politicians are able to have a frank and clear discussion and we were not always saying the same thing publicly which is not why i'm trying to give a definitive answer publicly to what they said because i feel when you look at the 33 billion-pound defense budget as i said to see a pretty full spectrum capability. of course there are additional

things you would like to have and always more that you'd like to have if you are running the navy, the army and say i got everything i want. what about this or that? what i say we've still got a very strong set of military capabilities to the like of which only one or two other countries in the world have. >> development has been for with the rapid response to the humanitarian situation in north africa and has contributed 14.75 million asra loss $17.8 million to the appeal but i fink many people as you pointed out are aware of the fact that this intervention was not at the behest of the local community to the encouragement of the arab league. if you look at the u.n. archer flash repeal part from kuwait not a single contribution from

an cno lead country and in terms of the reconstruction of north africa when they enable that should the poor people of sub-saharan africa or the people of north africa and their neighbors consider that and what assurances do you have that the air no lead would actually take a lead in the reconstruction. >> i have seen the figures, too, and on the basis of this, you could argue that turkey contributing $9.8 million is making a pretty reasonable contribution to get if you say 14 but when you look to the biggest they do look low. i want to investigate these further because of you to the principles of the country mentioned to wait to have put a huge amount of money into the transitional finance facilities. so i think the question we have to ask is everyone pulling their weight not necessarily the same way but are there putting their

way to the in different ways. i think when you look at what the cut tarries and the jordanians are actually doing in terms of the contact group, the military commitment, the political leadership i would say they have played a very positive role. i certainly wouldn't want to criticize and i would like to go and investigate and see whether they are not picking up another way is for the donation figures that you give that you would accept if i put that responsibility this attrition with the poor people of rwanda for the reconstruction. >> absolutely, and i think's when it comes to the reconstruction, britain wants to play a leading role, and we have a stabilization team ready to do that, but i think we want to work with the corporation counsel country's many of whom have resources to bring down to

do that. >> one final question on the commitment to the .7% and the secretary defense letter that is built and in trying to the law some government's ability to change its mind about the pace at which it reaches the target to directed the resources to other activities or programs rather diem aid. can i have your assurance that is not the government position but when do you think we can have in front of the parliament the bill to enshrine that commitment are you still committed to it? >> yes we are. to be clear the government is committed to 1.7%. we are going to achieve that in the timeframe that we set out. we will be bringing forward legislation in this parliament. there's the parliamentary timetable issue that will be brought forward. to be fair in the record he is

saying he is in favor of the legislative target. he's in favor of the legislation and the target. even more important legislation is a truly finding the money for what is it difficult commitment to make at a time we are making reductions elsewhere. it is the right thing to do because we have the poorest in our world even in times of hardship at home. i think also if we take the view of our national self-interest trying to rebuild some of these countries we will stop problems to being visited at home and also i would say as the prime minister and i know they would agree about this the fact that britain has kept its word is worth a huge amount of input in the commonwealth in the united nations and the european union in the g20 in terms of full

spectrum capability, does britain matter and punch above its weight. >> the suggestion the government might change its mind doesn't force the case of the legislation. >> indeed. islamic can i welcome the announcement of the humanitarian aid and as we hold the discussion there is a mass demonstration planned on the streets. what do you think is the best way to try to resolve this crisis? >> clearly we need a transition in yemen and it is as we discussed before fantastically important in britain's interest in terms of the terrorist threat that has been located in yemen. that is the end of osama bin laden and sharper focus that this is a part of the world that al qaeda is still relatively strong.

what i king is in our interest to try to encourage the political process where you have greater demographic participation, the regime that has the support of its people, and the president who has agreed to the corporation counsel process delivers what everyone has promised. now it is hugely difficult with all sorts of problems and pressures but the transition to the new government, fresh elections and a great participation based on the confidence i think is in their interest and our interest. islamic when did you last speak to the president? >> i haven't spoken to him until last month or so. i have in my national security council team won extremely talented official who knows yemen very well to talk to a great deal about this issue. we discuss it at the national security council regularly.

i get regular updates. indolent it is frustrating but it keeps looking well he can't -- it can't go on like this. but it hasn't actually reached --. estimate is that for the international community to lead this? surely the u.n. or the e.u. should be moving in. it's a mediation problem isn't it? you have a president who will stand out and somebody has to go and and broker the deal and at the moment of gcc is incapable of doing that. >> riding that is a very good point. you would think that the gcc would be the best organization for the neighbors, friends in that group but you think that would be the right way to

deliver it. i can go in on this obviously the role they could play at the e.u. level may be said is something worth thinking about. but i think the idea of the gcc bringing together was a positive one. as barrett the problem for us in the national security council you notice is al qaeda and the arabian peninsula and the identification of anwar al-awlaki as a potential successor to osama bin laden. would you accept or support a u.s. move to try to remove him from this in the same way they went in and removed osama bin laden because clearly here was someone who would pose a danger to young men but also our national security. that's the interest in yemen, isn't it? >> first of all, the

relationship with yemen has to go beyond counterterrorism because clearly there are many facets to the problem and we should be dealing with all of them but it's a big part of our interest and we worked with them and it brings us to this point it's a difficult thing to do because khan yunis not be happy with everything else in the country and yet the counter terrorism corporation needs to go ahead as it should do and let's hope that whatever the transition goes to place it will be possible to go on that will affect al-aulaqi himself and the individual behind some of the more recent plots that we have seen to read and clearly it would be in our interest deferral credit and the arabian peninsula was properly effect that we should be acting with the international law and that is the way we should approach this. islamic a final question about the widow of a summit in london who demand that she return to

yemen to read you favor her being in pakistan and properly interview gindin fever of the opportunity to interview the widow of osama bin laden and they may have information that is helpful. >> i would certainly say that the americans being able to do that. i mean, i think it is time for the american pakistani situation. we have to understand each other's difficulties and pressures. >> [inaudible] >> fighting -- i don't think that the prime minister and the president of pakistan do. as i said to the house, clearly there is a support chain that went into pakistan because he was a part of that but i don't believe the president and the prime minister knew.

i think the key thing is for us to understand our respective situations in each other's countries. and as i sit in the statement in the house it is in our interest to back the democratic politicians in pakistan in the fight against terrorism to do that we need to understand the pressure they are under about all the questions they are being asked the need to understand the pressure we are under with everyone saying how could they not have known and all the rest of it and i think it is an important moment for americans and pakistanis, britain and pakistan to deepen our relationship with a moment some people say how can you trust these people i think we should be going in the opposite direction and say we've got to work with these people. the democratic politicians are trying to do the right thing. we should be free building the relationship and i hope -- >> that is the only answer to this week to throw up your hands in despair as well.

>> primm minister, it is more difficult one at the same time to unjustified intervention and not in another and to have the resources to do so any place and is their concern that with a bow stability in the region at risk of ebbing away but the one country coming out of this with that advantage and the country we haven't mentioned yet, iran. i look at it a slightly different way. it seems to me vieira sprang, what is happening across north africa is a huge opportunity. it's full of danger and things to go forward but if we deal with the great spanish history defect the countries are taking of the leaders and going down some past are trying to move

towards some form of democracy and participation that is a good thing for the world and for us it could lead to greater economic prosperity and peace so we should be positive and optimistic about what this could offer some positive and optimistic and that is why we think it's important to get the act together and offer the countries of north africa a better deal. i think it's important we persevere because of course if you let gadhaffi when that is great for the tyrants over particularly in that area. we have to accept that means you can't do everything everywhere. in terms of iran i'm not entirely sure what to say is right because the regime is one of the most dictatorial repressive of all and there is a

future for a democratic egypt and libya people struggling to throw of a leader they might think actually we don't have to go down this path. i think sometimes -- fight said this before, we can over demonize iran as a country run by a genius politicians who are strategic masters. in many ways it is a basket case country they can't even refine using the death penalty. we should be describing the regime as much more backward and ineffective and rather than beating them up is the -- i'm sorry. i am rambling on. estimate is there any risk to our credibility and not holding peace and democracy and following the course of action

the government embarked on at the moment when people can point to the fact that we may have sold weapons and gun deals and rather less than perfect democracies? >> do we get that right or not? the idea though that somehow it is illegitimate to have a defense relationship with say the kuwaitis, kuwait is a country where. there's a parliament right to defend themselves and if you believe in a country's right to defend itself it's acceptable to have a regulated trade and arms and i do believe we have to learn the lessons, recognize we

have always gotten these things right in the past. >> this may not be the favorite social location but we can get officeholders and the pri minister questions in more detail as possible on wednesday and this format makes it possible. we look forward to seeing you in september for the same questions and we are grateful today thank you very much. >> to subjects -- thank you very much. [inaudible conversations]

>> the subcommittee will come to order. this morning we are holding a hearing on the president's budget request for the federal railroad administration and for the national passenger railroad corporation track. i want to welcome administrator of the federal railroad administration mr. joseph szabo and amtrak president and ceo mr. joe boardman. thank you both for being here this morning. we look forward to your testimony. we are now at a pivotal moment for the nation's transportation policy over the last several years we've made important investments in our rail

infrastructure but the focus in congress on budget cuts has create a race to the bottom that makes it difficult to continue those investments. rail offers an environmentally sound and efficient alternative to move people and goods, creates jobs, reduces the price of goods being shipped and help commuters across the country get to work. our population is projected to reach 420 million by the mid century, almost 140 million more than in 2000. trouble on the roads and at airports is crowded today? just wait. building more and more roads won't be enough. we have to look at other alternatives such as passenger rail for the future but we need to be smart about building intercity passenger rail in a way that works with our system of road and aviation. we need to meet targeted investment where it makes economic sense to improve mobility option in and between america's city.

devalue the service and i know families in my home state of washington dalia the amtrak service which just set record writer ship for the second year in a row which is why i am so disappointed that the new republican majority in the house of representatives has targeted the transportation with the budget cuts. a year ago we sat together in this room and the last hearing discussed financial constraints in the fiscal year 2011 annual appropriations. a year later we've instituted the largest one-year reduction of discretionary spending in the nation's history. these budget cuts have had an impact on the rail transportation program. capital grants to amtrak were cut by 78 million new funding for inner-city high speed rail was eliminated for sye11 but many republicans and house savings cuts are not enough and they are clamoring for more. the house version of the 2011 bill would cut amtrak by

151 million revoking the furloughs for up to 1600 employees. it also would have taken that over two and a half billion of high-speed intercity grants. i agree leaders here in washington, d.c. need to tighten the belts and work together to get the debt under control but we cannot be reckless about this. we cannot together a federal budget that will put our fragile economy in millions of jobs at risk. the investment will make the country more competitive long-term. as we develop the budget for fiscal year 2012, the bar has never been high year for concrete results to justify federal investment. the administration used its budget request to show its vision of real placed on part with other modes of transportation but in today's environment a big vision just won't cut it. we need to see realistic alternatives for slash and burn politics that have taken over the budget debates. i'm disappointed the budget request doesn't offer that.

the competition for limited resources in the department of transportation. the transit systems are suffering across the country shutting down service is unable to meet operating costs under constrained state budgets. the next-gen air traffic control system is costly and fundamentally necessary for the future of transportation as well. that's why i need more from you. i recognize the hard work you and the staff have done to protect the agency role as a safety organization and to build the capacity to oversee multibillion-dollar investment choices with no small task and i commend you for your effort. but i need you to improve transparency. we need detailed and compelling answers to basic questions about the words they are making to the states like what markets make the most sense and why. what are the benefits to the investment? and what will it cost to

operate? march 2011 gao report on the program found the criteria and evaluation of the grant to be found. the only recommendation is that fra provide more detailed information of its record of decisions and i couldn't agree more. as the program lechers, transparency about the analysis and consideration of projects can only need in resolving the criticism about the integrity of the program. we also need to dispose of the myths that plagued the inner-city high-speed program. there should be no question about the interest states in the most recent $2.4 billion grant competition if ra received more than 90 applications from 24 states, the district of columbia and amtrak for projects along the northeast corridor with preliminary totaling near the $10 billion. this includes the state of wisconsin's application for to wondered 30 million the was the states that previously returned

the recovery act award. i support investment in the high-speed rail but it's now time to address the program critics head-on and the program to produce and communicate tangible results that the congress and the american tax payers clearly understand. i'm sure mr. boardman can sympathize with the situation or in mr. szabo. i remember a point when there were discussions about the end of amtrak. the committee saw a series of requests coming out of the previous administration that bankrupted the railroad. i worked hard for adequate funding for amtrak and the reform of its financial management. the passenger rail investment improvement act of 2008 helped put amtrak on the right track for success and management team has done so much to improve the ways that amtrak does its work. amtrak has a new level of cooperation between its board and management teams. they worked diligently should compete the strategic plans,

developed the system to prioritize capital projects, discipline for the fleet modernization, improve the transparency of the annual budget and develop a comprehensive business plan. as the leadership at amtrak face significant challenges in the years ahead, i cannot emphasize enough the importance you administer the programs and manage funding effectively and responsibly. finally, i look forward today to discussing with you the security challenges that defaced and what steps your taking to safeguard the nation's passengers. as you know, there is no higher priority with the tale of the terrorists against the target's emerging from the raid on bin ladens's compound, i want to make sure you have the resources you need to protect the railways and the passengers. thank you very much and i yield to senator collins. >> thank you. good morning. first let's join the chairman in

welcoming mr. szabo and mr. boardman to this hearing. i want to begin by thanking the administrator for working with me, state and county officials to preserve critical freight service in northern maine. the 233 miles of the line the serving this area of my state has been proposed for abandonment, and that would have endangered some 1700 jobs now thanks to a cooperative effort we can begin the important work of upgrading the track to preserve and actually improve the rail service. so thank you mr. szabo for coming to maine to make all that possible. over the past few years, the fra

has begun to transform itself from essentially a safety oversight agency to one with the added responsibility of allocating and overseeing billions of dollars in high-speed rail and inner-city projects. i agree with the chairman that we need to have a better understanding of how money is being allocated under this program. many, however, have questioned the basic economic efficiency of building a high-speed rail network in the country several states have already rejected funding for which they're states had been awarded with looming budget shortfalls in many states the cost of building and maintaining the high speed lines is proving to be daunting.

fra has an ambitious national plan in place. however, the agency is yet to provide cost estimates on what it would take to build and maintain a new network of this magnitude off the northeast corridor, this is the commission now allows amtrak to apply directly for high-speed funding. amtrak has projected that the planning and construction of the high-speed lines for the northeast corridor could cost upwards of $117 billion over the next three years. i can only imagine the costs that can't play a national system when the other ten quarters are included.

the administration's budget also calls for a significant change in the manner in which interest is funded. under this proposal the amtrak would be eliminated and it appears to force amtrak to compete for funding through fra. i am interested as a long-term amtrak supporter in better understanding how that would work. with more than 28 million passengers in the last year amtrak riders ship has increased with a belief by 5.5% with more than 147 passengers from march of 2010 to march of 2011. i suspect escalating gasoline prices will push the writer ship levels even higher.

amtrak down easter service between portland, maine and boston has become very successful. and last august we celebrated the arrival of the first shipment for the expansion project which will expand from portland to shreveport to brunswick and i appreciate the participation in the celebration. the infrastructure gives particular will come in the brownswick area, given the closure, the brownswick station federal investment plays an important role for amtrak. but in the time of budget constraints, it must be done in a fiscally responsible manner. i do commend amtrak for cutting its debt levels substantially from 4 million in 2002 to 1.8 billion today.

but there still is in that operating loss which for fiscal year 2012 is some 616 million which is nearly more than 200 million the in the fiscal year 2010 operating lough. this stems from the district route that continue to prove on successful from the dollars and cents standpoint. finally, let me just add to what the chairman said. only a few days after our operation in pakistan removed osama bin laden as a threat to the country the dhs and the fbi released an alert about the security. this was a result of the intelligence that was gathered from bin ladens's compound. i was pleased to see the

turnaround that the intelligence gathered from half wearable the world was analyzed quickly and an alert issued. all of this intelligence was not connected to any particular city or line and was stated from early last year it demonstrates the mass transit remains a tempting target for terrorists. and of course, we all know that based on the terrorist attacks on trains and subways, in madrid, london, mumbai and moscow. we are thankful that there hasn't yet been a similar attack here in our country. but we cannot become complacent as al qaeda or even homegrown terrorists could launch attacks particularly given the warning that we have received from the intelligence from bin ladens's compound.

with a an eye towards ensuring taxpayer dollars are used as sufficiently as possible, we must be certain adequate security measures and technology deployment are implemented throughout the passenger sector and also that this primarily the responsibility of the transportation security at a ministration, i look forward to getting the thoughts of the witnesses on this issue today. thank you, madame chair. >> thank you. >> thank you, madam chair. it's good to be sitting with colleagues to understand the urgent need to get on with investing in the systems and amtrak particularly on improving the opportunity to get the cars off the road and improve air quality and save money. trains help of america's economy forward since the 19th century

when the transcontinental railroad was built and then capture the imagination to the rest of the world. almost 150 years later the railroads are still an engine of success of economic success that the u.s. is no longer leading the way, and i recently returned from china which spends heavily on high-speed rail investing about 9% of its gdp on infrastructure, lamar than three times the amount we invest here in the united states and china's investments are paying off. when i wrote on a train that move faster than 200 miles an hour. also i might add with that hard to as it is now and i used last week so i don't want people to think my handwriting is a

product of age. our fastest trains travel 150 miles an hour and that is under optimal conditions. over very short distances. to remain competitive globally, america must strengthen its network, get more people access to faster trains. it's going to help spark job creation as businesses served by new trend stations and we see that. we've seen it abundantly in new jersey where we added a couple of new sections. and within a very short period, businesses will move to places convenient that's better for their employees and their customers and their staff alike. sweet gum also it boosted property value in the areas we served.

in our state i am working with amtrak to help the gateway. it's the only innovative project for the high-speed rail in the northeast corridor. each week it takes 40,000 cars off the highways and 243 flights out of the sky is. and i can't help but repeat something everybody can understand and that is penn station new york this fester in a day than all three major airports that service our area it is quite a fantastic thing and more would come if there is room for speed and comfort and i commend and truck on the success of the northeast corridor. when administrations have access to trains, they will gladly take them. when i came down last night and

the train was pretty much felt and i see that more often than not. president obama recognizes this and the administration made nearly a billion dollar investment in improving high-speed rail in the region. out of the bold vision to build a world-class high speed network will carry america into the future. faster trains give americans a better alternative to spending their time stuck in traffic on the congested highways observing the air pollution waiting in endless lines of the airport. unfortunately some say we can't afford this in high-speed rail right now and they are determined to slam the brakes on our car but i say we cannot afford the proposed house budget without the return to a more of robust economy. it's part of the planning and we

must do it. the view is we must break transportation agreements in the past like the george washington bridge built during the great depression. created jobs but also created truffle lubber to be between new york and new jersey and highways going north and south. so, madam chair, i look forward to hearing today's witnesses about how we can reclaim its role as the world leader and to get our economy back on track. thank you. >> we will now turn to the witnesses for their opening statement. we will begin with you. >> thank you, chairwoman marie, ranking member collins, senator lautenberg and members of the subcommittee. i'm honored to appear before you today on behalf of president obama and secretary lahood to discuss the proposed fiscal year 2012 budget for the federal

railroad administration. by 2015 the u.s. census project in annual or population increase of an additional 100 million people. to put it in context it's like adding the population of other and york, california, florida and texas all combined. a plan for the future of the budget proposal details how strategic investments would build an innovative national network to move people and goods safely with speed and flexibility. railroad safety remains a top priority and i am pleased to report this ag record for 2010 achieving all-time lows in the number of accidents per hundred train miles traveled and this is an example of the multifaceted approach brings about change, taking one of the most dangerous industries making it now one of the safest. to continue this progress this fiscal year budget proposes $223 million for safety and operation. with more freight and passengers

moving as the economy improves, the funding enables fra to remain focused on the new and comprehensive safety strategies while building the national network. while we remain squarely focused on safety, the momentum in the groundwork for the high-speed intercity passenger program continues. over the past year, fra operated more than 5.5 billion in the annual appropriations bringing dollars to states and projects across the country putting americans to work. with the help of fra, states have ground-breaking agreements with freight rail partners on four major corridors that assure the federal investment will produce quantifiable performance outcomes for passenger rails while improving of the world-class system .. ..

we know that our existing roadway systems are among the best in the world but congestion and traffic threatened to stymie the american economy and our productivity. we have to provide americans with new and enhanced mobility options. the president's budget strategically invests $8.2 billion in fiscal year 2012

or the continued development of high-speed intercity passenger rail as part of the bold 53 billion-dollar, six-year transportation proposal. $8.2 billion will lay the foundation for the passenger railways for the future consolidating passenger rail through the transportation trust fund. network development and system preservation. the budget proposals places passenger rails on equal footing with other surface transportation programs. new passenger rail corridors keep the sun track providing 80% of americans access to a high-speed rail network within the next 25 years. our goal is to create a balance transportation system of highways, transit and aviation enhanced with high-speed intercity passenger rail, developing a passage rail network requires a long-term commitment at both the federal and state levels to keep the american people moving and

communities connected. the strategic investments in rail that were made in 2009 and 2010 are paying off. we are enhancing the global economic competitiveness of america, boosting domestic manufacturing, reducing reliance on imported oil and creating a database of highly skilled well-paying jobs and we are establishing a pipeline of rail projects and future corridor development. for decades, investment transportation has connected cities and states from coast to coast and served as a foundation for economic growth in our prosperity. by providing a long-term commitment for high-speed intercity passenger rail today, we are taking a bold and definitive approach for addressing the nations near and long-term passenger and freight mobility demands and ensuring future generations will have access to high-quality, safe and efficient rail transportation for decades to come. i look forward to your

questions. >> thank you very much. mr. boardman. >> thank you. good morning senator murray, senator collins, senator lautenberg. before i get into the 2012 funding i would like to take just a second to discuss some of the revelations that have come in the wake of osama bin laden's demise. we have worked closely with both domestic security organizations and foreign rail organizations. it has been created and i have our vice president and chief of police who has taken an active role, john o'connor, it making sure that we are keeping an eye on what is happening not only in this country but in europe in terms of the way that this is being investigated. we are most concerned with the possibility of an external attack on a train at a vulnerable.whether that be a bridge or a tunnel and we are seeking as best we can in cooperation with dhs and tsa additional support to find warning and detection systems

that would help us in the event of such an attack. the administrator talked a little bit about his program and there is a large part of his program that involves development and if you look at some of the technology that is available today, adopting bad and extending it in using it for the future we think has real possibilities for us. i think it is important to really think about what we are really threatened with rather than some of the other ideas that have been expressed. and what we are really looking at today is ridership that has increased month over month for the last 18 months in amtrak. we see people flocking back to using rail and as senator lautenberg talked about there a standing room only and many of our trains today. are ridership has grown 36% since 2000 last week the u.s. d.o.t. awarded us a 450 billion-dollar grant to improve the. >> speeds on our northeast

corridor, a line through new jersey and the senator asked me this morning when i was going to be done. i don't have that schedule yet, senator. that one step in recognizing for the future a vision for greatly improved northeast corridor service that was talked about this morning. for fy12, amtrak asked for it for love two-point to billion dollars divided into $616 million to support our operations. 1.285 billion for capital programs and 271 million for debt service as we are working hard on debt as you have already recognize. with the exception of about $50 million in funding be requested for the northeast corridor gateway project in new york and the additional debt service money to buy out leases, these are levels that are authorized by the passenger rail investment and improvement act of 2008. we have detailed many of our major programs in the written

portion of our testimony but we have just updated the fleet plan. we have placed orders for new electric locomotives and single level long distance cards and we need to add capacity to the services that we expect to be able to add 40 cars to the existing 20 passenger service vehicles and this investment will generate for us about $100 million of additional revenue once we deploy it. we plan to begin out per curiam and with these cars and fy2012. amtrak has focused heavily on controlling its cost. we have cut our debt level from 4 billion to 1.8 as as been mentioned. we are the most cost efficient passenger railroad in america covering 85% of our total operating costs from revenue of which 76% is generated through ticket sales. we are improving how we are doing our work but point-of-sale solutions on our trains with e.

ticketing, with wifi on the trains which in and of itself increased an incremental 1.5% improvement in our ridership which translates into 47,000 riders in $6.5 million of incremental revenues in 2011. i understand as amtrak understands there will be difficult fiscal choices for you to make. as you know continued capital funding will allow us to reduce or eliminate problems that translate into increased operating expenses. over the long term and effect of capital investment program can translate into permanent reductions in expense. i also look forward to questions. >> thank you very much. as has been mentioned a number of times now we have discovered credible and specific documentation about al qaeda's interest in launching an attack against our national rail network from information that was gathered at osama bin laden's compound. that information strongly

suggests the administration become more diligent in recognizing rail transportation is a potential target and we have got to take some active steps to secure passengers and hazardous materials in particular. mr. boardman, can you please comment on the steps you are taking to protect your passengers, your partnership with the department of homeland security and what financial support they provide to the corporation with its homeland security mission? >> yes, maam. we have a very strong partnership with dhs and tsa. my vice president for security, chief of police, has an almost daily conversation with tsa staff in terms of what we can work together to do. security grants since 2005 total almost $200 million we have used those for infrastructure protection, for bridges and for example to expand our k-9 program. are k-9 program has grown from

about 23 animals and handlers to 47 today. we believe that we are probably the best in the united states with both vapor weight dogs and determining or detecting ied explosives. even one of our recent competitions, our dogs and team handlers came in first, third and forth across the country in terms of our ability. we have the ability to train and we do every single day to stay at a high level of readiness with those animals and with their handlers. we have increased their patrols. we have had a public outreach program and worked diligently with dhs and the secretary on see something, say something. we have a real safe program which really is a multistate and multiagent -- agency effort to immediately mobilize and provide assistance from all of the

community resources available for security and enforcement and we have been able to demonstrate being able to set that up in a very short. lack of time. is a matter of fact a little bit off the side of this we were able to help alabama with our own mobile command post and our employees in alabama by providing them with assistance during the recent tornado and we have an entire team of amtrak police and security folks that provide that assistance. we work with the tsa on regular screenings on in the air regular basis and we are proposing today and looking at an inspector right-of-way patrol. some of the viper operations and maybe even some air support on things that we are trying to provide across the country. the low ride issue is a difficult one especially in railroads. railroad security is very different than aviation security in the sense of the access there

is even on the northeast corridor. so often we talk about the ridership nationally of amtrak being 28 million but we handle every day in the neighborhood of 6,700,000 commuters on the northeast corridor and most of the facilities that we operate we handle and manage and control so we are well into the millions of ridership that depend on amtrak stability. >> what about additional security checks? >> additional security checks? we have worked with especially the new york city police agencies to make those additional checks at penn station and up and down the corridor. we have had many of our viper teams providing that. >> mr. szabo do you want to comment on fra? >> the president boardman did a great job articulating it from an amtrak perspective. from an fra perspective we talk

at least weekly with tsa who has primary jurisdiction here more often if necessary. we meet with them at least quarterly more often than necessary to ensure that we have the proper level of coordination we are deeply involved in the inspection and implementation of programs to protect hazardous material shipments. we work very closely with tsa on that. i think one of the most important things we can do for the future is to ensure that we have appropriate funding for research and development. there is quite a bit that we can do through enhanced tech knowledge he to make sure that there is and interference with the railroad right-of-way, to make sure that both passenger trains as well as freight trains are properly protected. we have got some r&d underway that i think would be helpful on this as far as real detection and in real-time but ensuring

programs like that and technologies like that moving forward would be very important. we do require and regularly inspect both the rail carriers and the shippers, plans for their personnel security, what guarantees they have to prevent unauthorized access to property and they are en route security plans. >> well i appreciate the comments from both of you. i want to reiterate that rail security going forward is going to be very important as both of you know and we all know long before potential plots were uncovered in osama bin laden's compound security officials have been warning the u.s. that are railways for potential terrorist targets. they did that in part because we have seen attacks abroad but also because they were failed attacks on our service transportation systems here at home. congress passed the 9/11 commission implementation act which required tsa to address a

variety of surface transportation security issues including passenger rail and mass transit, but unfortunately there are many unfilled requirements of the acts that are of concern. tsa developed several risk assessments to address rail and other public transportation at high risk of attack but they have not done a comprehensive and a session -- assessment risk of all modes of transportation and i am i'm concerned that the security strategy or rail focuses almost exclusively on rail shipments of toxic inhalation hazards despite other assessment that i've identified potential security targets such as tunnels and bridges. despite nearly doubling tsa's service transportation security budgets, these issues do remain unaddressed and unanswered and in fact a "wall street journal" article recently pointed out the fact that for every $50 tsa spent on aviation security, the agent budgets 1 dollar to

protect service transportation. now i realize that these issues ironed solely under the jurisdiction of our witnesses today but i do feel that they are very critical issues moving forward and i want to work with my friend and colleague, sue collins. she and i wrote the port security act and move forward on that and i think that is very important that we really focus on this as we move forward in the or to working with anyone who will work with us again to do that. thank you very much and i will turn it over to senator collins. >> thank you. mr. boardman let me just follow-up on follow up on the chairman's question. you mentioned, and you are exactly right, that it is far more challenging to deal with train security than air security. air security, you can vet every passenger that plane is presumably out of danger during the transit if there has been

appropriate screening of passengers and baggage and other freight. but trains can be able marble every step of the journey. so, my question to you without asking you to disclose classified information, is when you receive the joint intelligence olefson about the data that was confiscated in bin laden's compound, what specific additional set -- steps did you take to improve rail security for amtrak? you talked about inspections and k-9 use but those have been around for some time. what additional measures did to to put in place in response to this intelligence? >> the i think the answer to that is that we needed to think about how this may happen and

where it might happen for example, and you have argued pointed out that it could happen anywhere. it could happen anywhere across the country. so one of the things i looked at was, as being in the former role of being the fra administrator, was to look at what does fra and what does the industry have on its plate and looking at development of the detection devices we might be able to employ? it is mostly development in the areas because fra as was pointed out earlier is primarily, has been primarily a safety organization as rail flaw detection to see where there might be a potential board derailment based on some flaw in the rail that exists. but the technology began to come forward with ultrasonic testing

and laser-based projection of that technology to see a head of a train, to see how far ahead we could investigate whether a rail had the ability to sustain the train and a b. even if you are looking ahead and looking at the gauge of the track whether there was any widening of the gauge ordinarily of the gauge in some fashion. the first real step was, let's think about what it was that we could do for the future to detect it through technology. there is some potential. right now the way they are looking at though is at 40 miles an hour and that is okay for freight but it is not okay for passengers especially for a high-speed rail. there needs to be an improvement that. there is not funding there to do that and whether the capability is there or not, and investigation funding needs to happen to see us improve the

technology. the second thing was that we needed more patrols right away -- right-of-way patrols that we could look at and find whether there was any difficulty at vulnerable locations. there have been studies in the past done to identifiable marble infrastructure, at least in many places early on after 9/11. we began to look and catalog what those vulnerable locations are, so that there would be an increase in the number of patrols. some of that has occurred. morbid needs to happen. we are working with tsa, dhs to find a better way to do that as well. >> one of the lessons that we have learned in the homeland security committee is the importance of the partnership among all levels of government, and it occurs to me that given the challenge you face in addition to looking to

technology, maybe we should look at some sort of program like operation stone garden which dhs had where the border patrol works with state, county and local law enforcement to do patrols along the border, because federal officials, federal law enforcement, homeland security, amtrak officials cannot be everywhere. it is simply impossible, but if in fact it happened to state, local, and county law-enforcement, it really is a force multiplier, and the operation stone garden program has worked very well in that regard. so, i would be interested in your taking a look at whether we should create some sort of similar program for train security where you can work in

partnership with state, local and county officials to do some of those patrols along your railways. i think that would be a way to expand coverage and an economic way. the partnership is absolutely essential if we are going to increase security of our country, no matter the mode of transportation. >> may i respond? >> yes, please. >> i absolutely agree with you and i think a few years ago amtrak lost its way in terms of what was going it was going to do for security but we now have a direction of a very strong relationship and community policing that begins or helps with the kind of thing you are talking about and we do that with rail safe. the one caveat and i'm sure you have recognized this is we have to be careful with having untrained people in any kind of right-of-way along the railroad because of the danger that is involved. even our own folks have lost

their lives because of how quick a train is upon somebody. so, yes i agree with what you are saying. yes, i think we can do better and do something different and i will talk to our staff about doing that, but it needs to be people that are knowledgeable about the environment they are in. >> thank you. >> senator lautenberg. >> thank you each for their work that you do and the leadership that you provide in your respective departments. we see really good progress being made. however, it is not enough. it is not a discredit to you. it is the fact that we are not devoting enough energy, not enough funding and enough attention to what the circumstances are with rail. last year we saw 700 million airlines passenger trips --

airlines, 10 billion on transit and rail trips and yet we spend 98% of our money on aviation security and 2% on rail security. we know the risks are real. if we look at the experience in madrid and london and moscow in and mumbai, we know that these are soft points for terrorists and that is confirmed obviously by the information obtained as a result of osama bin laden information that has come out. so, we have got a job to do and it is frustrating and i am sure you feel it as we do here. that is, why isn't the subject overwhelming, overwhelming and not a place that we have to battle to get basic funding for these projects? george washington bridge was

built during the depression. jobs and improvements in the future and that is what we are looking at. when we talk about population growth, that might come in 30 or 40 years. when i see, when i get there i want to know that we can travel, so i would like that cooperation from you. 40 years from now the net population growth includes you will be able to move around. but, apart from bad attempt at humor, i commend the administration for recognizing the importance of the northeast corridor by awarding amtrak nearly half a billion dollars in high-speed rail funds to upgrade the corridor in new jersey, and i asked specifically mr. szabo

how will these funds like the gateway tunnel help advance the president's national high-speed rail plan? >> in making those improvements, they really do three things. reduce trip times, improve reliability and provide for additional capacity. the improvements that were announced last week, particularly those investments in the power supply in the canton area, you do all three. there has been a source of reliability problems historically so it will help fix that problem. the the new cat mary is going to allow for top-end speeds of up to 160 miles per hour so with that it is reducing trip times. the ability to expand utilization of the northeast

corridor has historically been hindered because of the power supply. so, provides that additional power that will allow for future enhancements. i think it has to be viewed as, these are only first steps but they are very very important steps that do those three things, improve reliability, reduce trip times and provide for additional capacity. >> mr. boardman amtrak included $50 million for the gateway tunnel project in its budget request next year. what will be the impairments to these ideas, to the ability to develop a more reliable higher-speed system? what will be the impairment if we don't build that gateway? >> i think we are out of capacity in the northeast corridor. we cannot add, specially in penn station, so we have tone mulls,

we have signals and approaches, we have power. we have nowhere to put the new jersey transit trains for example thatcome into penn station whereas the long island railroad trains come in and go to the west side yard and get out of the way. we don't have an ability to find a place to put the new jersey transit trains so it is really capacity is really beginning to constrain the ability to add service and then the fluidity of high-speed service. if we are really going to have high high-speed service that works, where we have three hours between boston and washington d.c. we need not to have new york be any more of a bottleneck bennett already is. >> so that is a key item in the development of the high-speed system. >> absolutely, critical. >> without question, a tunnel is essential and this one -- i mean we have had a few attempts at

other designs and so forth but this one looks like it really fills the bill and will permit more amtrak trains to get through on an hourly basis and improve the transit distance, the transit opportunities as well. >> they all work together. >> thank you madam chairman. i assume we will have an opportunity to submit questions. >> yes, you up an opportunity to submit questions. and a member well. thank you very much. i know know but fra has done extensive work to develop a commercial feasibility study for high-speed rail development strategic plan and progress of port on the national rail plan and gao reported recently of done a good job of developing clear application criteria and the merit-based review process for high-speed rail grants. at this point congress is looking for more detailed information about the designated

corridors, regional services and emerging routes you have identified. for example we want to nowhere does it make sense to focus investment in the short and long-term, what it will cost in terms of initial capital and operations and maintenance and what are the tangible benefits that we achieved with these investments? mr. szabo, when we have answers for this committee on questions like that? >> first off, let me say this. we were very pleased with the gao report backing up to that and it was the first time in more than a decade that the term good has been used in a title of the gao report. it happens only once every 12,000 reports that they issue, so we appreciate the fact that the vast majority of that report was complementary in our selection process. you made a statement in her opening address, which is imperative and that is that we show that these corridors make

economic sense. we absolutely have to provide the business case that shows we are not simply building high-speed rail just to build high-speed rail but in fact we are selecting corridors that makes sense make sense from both an economic standpoint, public benefits standpoint as well as a transportation standpoint. we are in the process now of putting together both what i would call it brought her business case that will analyze and quantify the broad benefits of high-speed rail for the nation and then as a second component to that building the business case on the individual high-speed rail projects for the corridors. and we intend to have information out to you in the next couple of months. >> the budget isn't going to get any better and we need to be able to show exactly what we are doing and why, so if we can get

that sooner rather than later and have it cleared idea of how you evaluate the public benefit for us and what those investments need to be, we will need this as we put this budget together. the high-speed intercity rail grants that have been awarded so far largely supported capital projects. obviously there are costs associated with operating the rail services and one of the reasons that florida and ohio pulled out of the program was due to concerns by the newly-elected governors about the lifecycle cost of operations and maintenance of services. can you tell us how and fra is ensuring states will be capable of sustaining services from those investments? >> first off i think it is important to note while there is a lot of chatter about the fact that three states chose to pull out, one of them chose to get back in and apply again number one and more important than that, 32 states in the district of columbia and amtrak continue to move forward with projects.

the vast majority of states in this nation are choosing to move forward. you know to your question first off, there is an old saying that the more you capitalize the less you have to subsidize relative to operations by having modern infrastructure, modern equipment and a good on-time performance and frequency of service. you can actually drive down the operating subsidy to the point where in many cases if you choose the right markets you can eliminate it entirely. i think the northeast corridor is a great example they are that there is the appropriate level of service, frequency and reliability that allows them to actually generate a net operating profit. if you take a look at the president's 2012 proposal, our budget proposal we do propose in their transitional assistance for the states. with the understanding that if some of these corridors go through their initial startup.

not that it does take a period of time to grow the ridership, and so we are in fact are posing in the 2012 budget this transitionary help for the states to be phased out over a period of time at the point that either they become self sustainable or at least the state you know knowingly went into a position that they would have to cover operating support because of other public benefits that they are receiving. that is part of the application that we review from the states, their business plan and you know they understand their commitment to cover the cost of operation should there be a deficit. >> mr. boardman i wanted to ask you about some recent criticism about amtrak for excessive overtime payments to some of its employees. as we try to put together a bill in this very tough environment we need to know that every

expense is justified so i wanted to ask you today if you could explain why the corporation faces those expenses or whether it is more cost-effective cost effective than increasing the workforce and what steps you are taking to manage that? >> thank you. yes maam. a particular area of overtime cost is on maintenance and the capital work we are sustaining. is not a new problem for amtrak. it has been a series of problems over the years and being able to control that cost. very difficult to control and initially because it requires training for the people that are involved from 24 to 30 months of training to do the work that expects to be done. it is difficult to do that planning and i think it is part of what the administrator was talking about on their proposal of having a different way of giving amtrak money for the future on a 12 month timetable that we operate on for our capital program.

for example when we got the additional funds, one of the things that increased the overtime cost was the demand to get so much of that work done as quickly as it needed to get done. but in terms of whether you hire more staff are not and take a couple of years to train them, the overtime is actually at a lower cost from a burden. in other words there is about a 54% or so benefit package that goes along with full-time employees and in the overtime that comes down to about 18%, even though the numbers of overtime dollars look high, and they are, there's actually an overall higher cost if we had been able to get people on board, train them and get them working at that point in time. then when they are a fundings went away we would have had to lay them off and we would not have gotten it done in the same period of time. all that being said, we were not doing as good a job managing the

overtime as we could have with the work rules that were available even though those work rules in some cases are not very flexible for us. so the percentage of the amount of overtime paid as opposed to the percentage of straight time paid was escalating beyond where it should be. that is back down with a focus on that. the chief financial officer and the chief engineer have made great strides in making that happen. i know that has happened because a number of grievances is gone up among the workforce because of their concerns about having some of that overtime down. >> thank you very much. i appreciated. senator collins? >> thank you. mr. wardman let me ask you a fundamental question. in your testimony, you noted that amtrak has enjoyed 18 straight months of year-over-year ridership increases, get as i noted in my opening statement, your

projected deficit, you are operating loss for this year, is actually projected to be worse than last year's. so reconcile this for me. i don't understand how you can be serving more passengers than ever before and it is not just a click lives. it is every month for the last 18 months, so that presumably means you are getting more revenue and fuller trains by everyone's experience. how come you are losing more money? >> it is a difficult thing to understand but i think i can explain it pretty well. it is the long-distance trains and it is almost entirely the long-distance trains. and there are several reasons. wages have gone up and the fuel costs have gone up. the expenses for us to operate those services has increased.

while there has been increased in both revenue and ridership in the long-distance trains, nowhere near what the increase in revenue and ridership has been on the northeast corridor. what make's it look even worse is we were able to in the past use some of the money that they have received we received over and above the northeast corridor revenues to offset and reduce the demand or need for long-distance trains subsidy. now it is more difficult because we are actually executing a fleet plan and we are using the potential of the revenue that is coming from the northeast corridor to go to pay for the debt costs on the 70 electric locomotives that we purchased, which means that there is a greater need again on the long-distance trains. the business model for long-distance trains does not work in the pro-rail folks always shudder and worry and get very concerned when i talk like this. that is what is necessary for

this transparency, is to understand that you are not going to cut costs far enough on the long-distance trains to make the long-distance trains profitable. we can cut costs. food and beverage costs are continuing to be something we are focusing on to bring down. there is a fairly significant cost today, about $60 million, that we pay the freight railroads for on-time performance. that needs to be adjusted. the program doesn't work in every fashion and formed the way but like you to do. so, it becomes more a question of policy and the united states about whether we are going to have a border to border, coast-to-coast service transportation connectivity in the united states. 42% of the disabled people that ride amtrak ride the long-distance trains. the rural isolates are particularly dependent on the long-distance trains and it is

not just the long-distance trains. about $180 million worth of subsidies needed for the state-supported trains because we haven't gotten back in the states yet the amount that was expected in the prior legislation so the corridors that they operate, some of them are part of the long-distance network. some of them operate independently. but it is that area where there is a low density that it is difficult to recover those kinds of costs. >> would you consider recommending determination of some of those long-distance routes that are unprofitable year after year? >> they are all in profitable. all unprofitable. >> as soon as we eliminate does, there will then be some that are more unprofitable on the remaining ones. is kind of like the old story about if you live in a red house and people are coming to take away the people in the red

house, the people in the yellow house don't care until they come for the yellow house, the people in the yellow house. that act is my recommendation is we either run them or don't run them but if you don't run them the first-year cost, and this is a business decision, is a little over a billion dollars because of the protections that are there for labor but also putting it -- putting away the equipment and protecting it and so on and so forth. we bring a huge benefit economically to the rural portions of the united states by having a place that people can actually get on a surface transportation mode of service. the faa itself, the whole faa is 50,000 people in the u.s. d.o.t. added 60,000. 50,000 people are paid for for the faa for aviation and about 33% of their salaries are covered back from the aviation

industry. but because of the way we are financed and subsidize compared to other modes it does not stick out like that where we have that kind of cost. >> i assume therefore that you are not a fan of former pennsylvania governor ed rendell's proposal to spin off the northeast corridor into a separate public private corporation? because that would reduce the subsidy that you have available for those other lines? is that accurate? >> i'm not. british rail when they spun off they went from about would say 1 billion a year to about 7 billion a year in public subsidy but by the time they were done. i believe you need a connected intercity passenger rail service in the united states. >> thank you. i was not endorsing it. i was just soliciting the views

of the web notes. madam chairman i am participating in the holocaust remembrance ceremony at the capital which begins very shortly so i am going to excuse myself. thank you for holding this hearing. >> submit further questions for the record. i just have a few more. mr. boardman i appreciate amtrak is focused on strategic long-term capital planning, fleet strategies and evidence describes how amtrak will replace rail cars and locomotives and i understand that amtrak applied for a 563 million-dollar loan from d.o.t. to pay for those 70 electric locomotives back in 2009. however fra and amtrak have yet to finalize the loan agreement so mr. szabo can you explain why this process is taking so long and when do we expect to have this finalize? >> we are prohibited about talking about pending applications but i will say this. we are incredibly close to

having that close. >> incredibly close? okay. amtrak is requesting 70 minute alien -- $79 million for its fleet plan in fiscal year 2012 and of the 60 million is for the first four installments to purchase new cars. i understand this would result in sufficient revenue to repay the cost of procurement by 2018. mr. boardman, why do you ask for a direct appropriation rather than a d.o.t. loan for those cars? >> i don't remember. hold on a minute. it is a backup plan if we don't receive the loan. than we need to get the money that we need to move forward. >> okay. you are hoping that is what happens at this point? >> the application for the loan is not in yet but we intend to.

>> okay. mr. szabo at our hearing last year you indicated one reason for the delay in the development of the national rail plan was the congress shaped his program as a state driven process and the 2012 budget request argues there should be a stronger federal role in the development of rail infrastructure than the current statutory framework allows. can you define for us what an enhanced federal authority means and how it would change fra's relationship with the state? >> think interstate system. frankly, this is based on the feedback that we have received from the states and from our partners over the past year, the past 18 months in implementing this brand-new program. it will always continue to be a strong federal state partnership. is going to have to continue to be a strong partnership, but we believe particularly when you start talking about express service, the top tier, you are

talking 150 220 to two under and 20 miles per hour, because this is going to be in multiple states, more regional based in most every case, there needs to be a stronger hand in the development of those segments of the high-speed rail network. in addition our experience in the past 18 months has shown us that states continue to need a much higher level of support from us then i think we first anticipated. in many cases, great example would be dealing with the freight rail industry. who are the hosts in many case for the emerging rail lines. they are national in scope and so the states have been coming to us looking for much stronger hand from fra. you know we have got basically 70 or 80 years of experience with the u.s. d.o.t. end state d.o.t. and building highways.

we have now got about 24 months of experience in building high-speed rail corridors and clearly there is a need for a stronger federal and. >> i wanted to ask you about positive train control. the rail safety improvement act mandated it and as we know the gao has been saying delayed risks. can you tell us where we are? are we going to meet the 2015 deadline? >> is a statutory deadline and fra is absolutely committed to ensuring that deadline is met and we do believe that it is achievable. the implementation plans are in from all of the carriers, particularly for the class 1. they are very very strong. there's no question it is an aggressive timeline and that everything must fall in. there is a more significant challenge for the commuters and there is for the class 1 but we

believe that deadline can and should be met. >> and mr. boardman i wanted to ask you about ada compliance. can you explain to us what challenges you have been encountering and how those will affect amtrak's ability to meet the ada compliance charter? >> i think the challenge senator has been that first understanding what needs to be done, who owned the station, whether we could get agreement from either the local community or the freight railroad or both to get whatever was that was necessary for that particular station was a bigger challenge than we ever expected across the country with a number of stations that we were dealing with well into the hundreds, 400 some odd stations. but we are now making real progress we believe in terms of making that happen and yes, because of that progress we are going to meet at least in the spirit of what needs to be done,

our spots abilities for ada. >> thank you are in much and i do have additional questions i will submit for the record. i appreciate both of their testimonies today and i want to reiterate that safety is a concern to everyone. as we all know and we look forward to working with you as the proposals come forward on the safety and security of our national railway system. >> thank you senator. >> thank you senator. [inaudible conversations]

mrs. mccaskill: i ask that the quorum call be set aside. the presiding officer: without objection. mrs. mccaskill: i've listened to the last couple of speakers, and while i certainly respect senator coburn's commitment to fiscal responsibility and he and

i have worked together on a number of projects in that regard and have the same view of many of the spending habits around here, i've got to say i'm a little confused by the opposition to this legislation by my friends across the aisle. you know, we have two ways to spend money around here. one is through the appropriations process. the other is what i call tax goodies. and what these goodies are, they're called tax expenditures. what these do is they basically say to whatever group has successfully lobbied for them you're not going to have to pay all your taxes. so there's two ways that we deny the treasury money. one is by spending money. the other is by telling people you don't have to pay the money that the tax code says you owe. and -- and we put into the tax code special deals. now, many of the special deals are done because the case is

made that they spur economic development or they spur some kind of activity in our country that we think is desirable. a good example is the interest deduction on people's homes. the notion is that we want to encourage people to buy homes so that we allow them to deduct the interest they pay on those home loans against their income tax. charitable deductions are another good example. we want people to give to charity, so we say you know what? you don't have to pay as much in taxes if you give to charity. the real estate sector is full of tax goodies for development of real estate and the creation of jobs that goes with the development of real estate. one of the big tax expenditures we have in our tax code are goodies for big oil. and that's really what this is about. now, can we get to where we need to be on our structural debt and our annual deficit without

touching the tax code? no way. no way. are we going to have to look at revenues for multimillionaires? i think we are. are we obviously going to have to look at spending? of course we are. and aren't we going to have to look at the tax goodies? well, i would sure hope so because, frankly, as some of my colleagues across the aisle have said -- and i thought they agreed with us -- that cleaning out some of those goodies could potentially lower taxes for everyone. so where do we start with the goodies that are in the tax code? might we not start with the most profitable companies in the history of the planet? do they really need this extra money that we give them by telling them they don't have to pay the taxes that other companies have to pay?

how many quarters will we have where we read the headlines record-breaking profits for big oil? how many times will we read that before we are willing to take the baby step, just the baby step of saying, you know, maybe these tax goodies for big oil are not a good idea in light of our deficit and our debt. maybe this is a good place to start. they made north of $35 billion in the last three months. now, i know that there are all kinds of things that are being put out there to kind of height behind as we cast this vote, because this is a tough vote, i think, for people who vote no. how do you explain to your constituents that are struggling around their kitchen table to figure out how they can afford to drive their kids to soccer practice, how do you explain to them that we think that instead of $125 billion -- instead of

of $123 billion of profit big oil is going to make this year, they need to make $125 billion? that's what this is. instead of making $125 billion, north of $125 billion of profit this year, big oil is going to have to really suffer along with only $123 billion in profit. and that $2 billion that we want to take back from them is going to go towards the deficit. how do you explain that to people around their kitchen table? now, oh, this means it's going to -- the cost of fuel is going to go up. everyone has debunked that. really? the cost of fuel has gone up just fine and they've got all those subsidies. i remember when oil was $55 a barrel and they had all those subsidies. and by the way, all these subsidies didn't help them go out and do what they needed to do to keep the price of fuel down. and by the way, just today, a letter was sent to the f.t.c. by myself and other members of the

senate saying what about this refinery process? you know, talk about economic ill literacy. maybe who -- illiteracy. anybody who believes the oil companies today are making a profit of 7 cents on a gallon has no idea what's going on with refineries now. a year ago at this time, refineries were operating at a capacity of close to 90%. today, they are only operating at 80%. now, why would that be? their profit per gallon of gas, just the refineries, has gone from less than 40 cents a gallon to 80 cents a gallon in a matter of a few months. 80 cents a gallon of refinery profit. many of these refineries were owned by the big five, the big five big oil. so why is that capacity down? is it because they don't have crude to go through the refining

process? no, there's plenty of crude. and how about this? we are giving these big oil companies tax goodies, and what are they doing today? they're exporting a record amount of oil and fuel from the united states, exporting. they're sending it to south america, in mexico. so while my constituents are suffering mightily at the gas pump week after week after week, these guys are sending the oil they've produced with our tax goodies to another country, instead of putting that additional supply into our supply chain which, in turn, reduces the price. the more supply, the less the price. so, one, they have put back refining capacity. two, they're exporting more, and

they want to say it's about drilling, really? we have got more rigs drilling right now in this country than we have in many, many, many years. we have production higher at this point, domestic production higher than it was at the end of the bush administration. we just issued 12 new deepwater permits in the last few months. there are all kinds of leases out there that are not being explored. meanwhile, cha-ching, these big oil companies are continuing to make profits that just make your jaw drop. so honestly, half seriously, you talk about economic illiteracy. i'll tell you what economic illiteracy is. it is thinking that these companies -- what about the fee market i always hear about from the other side of the aisle? what about that free market? why do they need our tax goodies to help them if this is truly a free market? and maybe they're right.

maybe we shouldn't pick on big oil. but what a great place to start. frankly, if we can't take these things away from the most profitable companies in the history of the planet, how are we ever going to take them away from the mohair industry or how are we ever going to do what we need to do with the tax code in the real estate sector or any of the other goodies that we have larded up our tax code with to make it so complicated and so long that frankly the people that get the most advantages out of it are the families who can't afford to hire accountants and tax lawyers? meanwhile, the real tax rate for most americans is much higher than the real tax rate for most multinational corporations. so, i think economic ill literacy is talking a lot about the debt and deficit and not being willing to take this baby step to take back $2 billion a

year that these companies get, that they don't need and they're not using to hold down the price of gas. i mean, when i realized how cynical this whole process had become is when today i got a question from a reporter that said, well, the oil companies say that most of these profits are going to these pension companies. give me a break. you know, really -- really? these guys want to talk about free market and how this is all about the bottom line and then they want to try to hide behind the fact that some of the pension funds have stock in their companies that somehow that justifies them feeding at the public trough? talk about greed ... talk about greed. so, i think this legislation is a real litmus test, because if we can't do this, then i question what we can do to right this ship that is all about the footprint of the federal government, how much money we're

spending, and how many tax spen- tax expenditures are out there. anybody that tells you this is about raising their taxes, no. this is about saying to them that you have to pay the taxes that the free market says you should pay, not avoid taxes by these other goodies. this isn't about raising their taxes. this is about saying, you need to pay your taxes, like average citizens do, as it relates to their businesses. you shouldn't get this extra help in the tax code that allows to you avoid taxes. it's a tax expenditure. it's real money that will come to our bottom line as it relates to our deficit, and it is impo senator from texas. mr. cornyn: madam president, i would yield myself up to 15 minutes. the presiding officer: without objection. mr. cornyn: madam president, i want to talk just a minute about the ill-considered proposal that we'll be getting on at 6:15 tonight and the administration's chaotic approach when this comes

to national energy policy. i say "kay otoike pproach" because to pay attention to what the president and this administration have said about fossil fuels and energy will give you whiplash if you try to keep up with it because so many apparently inconsistencies between what is said and what is actually done and then when something like high gasoline prices becomes very much a concern around kitchen tables in america, then all of a sudden the president again, as he announced the last day or two, that he's all of a sudden hope for more domestic production here in america. but it is a problem for a number of reasons. one is that who in their right mind would invest the kind of money that is necessary in order to develop our domestic energy reserves when the administration and the president himself seem to be of two minds about whether we should punish domestic production or whether we should

encourage it? and i would suggest to you that the message has primarily been one of how to discourage or how to punish domestic production of energy in favor of imported energy from abroad. for example, one of the mixed messages the president gave was in march of 2010 when he proposed expanding offshore drilling along the atlantic coastline, the eastern gulf of mexico, near my home in texas and the north coast of alaska. at the time he said, as follows. he said. "the answer is noter drilling everywhere all the tievment but the answer is not also for us to ignore the fact that we're going to need vital energy sources to maintain our economic growth and our security." wcialtion i agree with that statement. but, as you know, following the deepwater horizon incident last anger the administration overreacted in a way that killed

jobs and discouraged energy production here at home. now, we all agree that when something like this terrible incident occurs, tweendz find out what happened -- we need to find out what happened, fix it and make sure it never happens again. but every time there is a car accident, we don't ban driving. every time there is an airplane crash, we don't ban flying. we find out what the problem is, we fix it, and then we move on. and that's not what happened in the gulf of mexico. first there was an overbroad moratorium that was issued by the administration, which ultimately ended up being struck down by a federal judge. but after that the administration was not through. where the former moratorium no longer existed, there was a permtorupermatoriu. m and only 12 deepwater permits

have been approved in the last months. only 12. there were in addition cancellation of the dozens of lease sales in utah and montana and exclusion of new areas in the gulf of -- eastern gulf of mexico and off the atlantic coast. that's, to me, completely inconsistent with the president's statement just in march 2010. then we know there are numerous examples where the environmental protection agency has thrown up roadblocks and impediments to energy production right here at home. well, because the president has not had an adequate response or at least his actions have been inconsistent with his words, he reversed himself again this saturday and he said, now he supports more domestic oil and gas production, like he did more than a year ago. but my conclusion, madam president, is this is not an energy strategy. this is a public relations strategy.