five for the meetings that happening that vice president joe biden is trying to negotiate. the basic disagreement seems to be whether there will be revenue increase is whether you call them fees or taxes you're in the room and want to bust through some sort of agreement. how do you do that? >> i think you have to first of all say that our revenues when i was president were very low as a percentage of our gdp but that's because our growth rate was so high, and there is a revenue premium to high growth rates of high growth rates are not achieved by low taxes alone at the expense of fiscal responsibility. that is the lesson of my age years that is applicable to this eight years. a arithmetics still matter. as one of my greatest one-liners

when people say it would agree to why did you bring to washington when he became president i always said a arithmetics. so the idea that the lower the tax rates are the better everything will be is then debunked now for 40 years that's both in positive terms when i was president and an - terms by quadrupling the debt once and then again. so i mean how many times we have to see this moving forward before we know what in this? on the other hand, could you have taxes that are too high or too stupid? absolutely. so what i think we have to do is to say that would it be good if the federal revenues were somewhere between 20 to 22% no more of robust growth rates and maybe someday they would be lower again like they were when i was president? yeah. they probably can't get as low as they work until after the baby boomers. some of this is demographic. and keep in mind, the grand children of the baby boomers are

more numerous than their parents, so we will have a demographic relief from social security after 18 years and medicare after about 20, and that will be a good thing. but i think you just have to make the point -- i also think that we may have some room for tax reform here that one of the really impressive accomplishments i think of the simpsons commission was pointing out how much money there is in the so-called tax expenditures, and i would favor returning individual rates to where they were when i was president, and maybe even across the board but certainly for the upper income people. the i think you ought to do something with that tax expenditures. on corporate taxes i have a little different take. i raise corporate tax rates and my father was important because the percentage of the federal pie covered by corporate

taxation went the way down in the 12 years before i was president. but it is very important to be internationally competitive. so our rates are fairly high compared to all our competitors. but our the polls are also fairly high. so if you get rid of a lot of the tax expenditures on the corporate side you could lower rates and still raise the same amount of money and that would make us i think look more competitive and be more competitive but then everybody would have to pay something. you wouldn't have some corporations paying 35% under and then others paying ten. >> you talked about arithmetics and i talked earlier about sacred cow. one of the pieces of arithmetic the peterson foundation and the six groups put on the table was reducing or eliminating the home mortgage interest deduction, however there was one. is that a reasonable and

arithmetic target? >> i certainly think it can be reduced. there's no question at a million dollars it continues to inflation, and there is no question since it only goes to one home and so many people with a heck of a lot of money and the absence is a determined to get enough so that something that should be reduced, and we need that -- here's what i think about how far down you should go. you need to look very carefully at these income levels and see how much in the quality has increased. and we need to try to structure the tax system that doesn't aggravate it. one of the reasons that america is not more productive in the rate is not higher is that from world war ii to roughly 1980 the bottom 90% of americans had 65% of the income in the top 10% at

35% and the top 1% at 9%. it was enough inequality to reward people for working hard, having good ideas come starting businesses, putting people to work and not so much inequality to deconstructed the capacity to build a great middle class and a growing economy. the last 30 years those numbers have changed. the 90%, 60% drop to 52. the 10% has gone to 48. the 1% and 9% has gone to 21. so, that's too much inequality. it is not sustainable. and it's the kind of thing you get if you have all your economic growth and finance consumer spending and housing which is what happened before the meltdown, not enough attention has been given to what happened to america's economy before the financial meltdown in the last decade. we only had 2.5 million new jobs come and solve it will hire and 9/11 attacking that but most was we didn't have a source of new

jobs in the decade that would support devolving diversified economies so that's what i think about that. i think, as you know, people like me should pay higher taxes and i think we should be careful on home mortgage deduction and everything else not to do anything to would aggravate inequality at the middle class and lower levels. we've got the only time in the last 30 years when the bottom 20% income increased in the percentage terms as much as a top 20% was in the second four years i served because we have so many jobs and that it tightened the labour market because health care costs increased only as much as inflation for the first time and because we had a lot of support for the working families and for single mothers in the work force. in spite of that we didn't do anything to stop the increasing inequality benefiting the top 1%. so i just ask you all to think

about that. i think that in the back of our mind we should realize that as we come out of this and create more jobs we ought to create more consumers and their requires the income distribution support a middle class income and allow poor people to work their way into it. >> mr. president we solicited questions from the public direct to you and had de facebook audience vote on which one they wanted to be asked and the winner was a fellow named kent letcher of albany oregon and the question is why is there so much focus on reducing the indolent programs as opposed to the military or other forms of spending? >> welcome for the same reason the sat and weigel banks. that's where the money is. >> i think you do have a point. let's talk about it. non-defense discretionary spending is only about 13% of

the budget. and that's -- there are savings to be had. the gao did a study i am sure a lot of you have seen which determines for example all the different programs i think like 19 different adult literacy programs. that is just a small example but there is a few billion dollars. it's not -- it's not a significant amount and in terms of reinvestment in the future personally if it were me i personally would favor looking at that study, implementing all the things we did in the government plan which saves $136 billion over a ten year period and i would like to see that money reinvested in the non-defense discretionary spending that its future oriented and green technology bringing back manufacturing and biotechnology in a reauthorization and expansion of the new market initiative which

rewards investments and relatively poor areas in america that's what i think should be done. there is money there and it's not dramatic. then on defense i agree defense is 4% of our gross domestic product. medical spending is 17.2% and almost half of that is government insurance of some kind or another. so there's a lot more money in health care. also on social security was meant to be self sustaining and with the retirement of the baby boomers it won't be any more. but i think there are progressive and fair and decent ways to reform social security, and i think medicare and medicaid cannot produce savings in good conscience unless they are part of a comprehensive plan to bring down the rate of inflation in medical cost. you simply can't have medical costs, but three times the rate

of inflation every year in and you can't justify america spending 17.2% for canada being the next highest country at 10.5, germany and france rate first and second for overall out comes at 10%, and america ranking somewhere in the high 20s to 30s in the overall effectiveness of the health system. everybody just assumes we can't do everything about this but if you break down where we are out of whack with the rest of the world, you see that the biggest category is rooted in paying for a procedure instead of for health care. and having no comparative studies of cost and outcomes. pennsylvania i think is still the only state in the country requires all the hospitals to file the charge for various procedures and attempt to determine the competitive results. and what they find every year is

there is literally no connection between what is charged and what results were given. so that's the biggest. the second biggest by far are the administrative costs and profit margins related to the way we finance health care which is one of the things that is also a source of problems between the republicans and democrats because the republicans want to put more people than the insurance system and claim that individual consumers will have bargaining power. it's just not true. in 2009 and the death of the recession and before the passage of the health care bill so it wasn't available to blame insurance companies raise rates and in 2010 and this year claiming i'm sorry, i know we don't have cost raises but we have to have these huge reserves when of this terrible obamacare comes into reading to thousand 90 didn't have it to blame yet profits went up 26%, 5.5 million people lost their insurance, 3 million went on medicaid and a balloon that the deficits of the

federal and state government. you can't have an unregulated defect a monopoly in most states one or two companies have 80% of the market. and you don't if 30% of minister of cost in the system which is what it is to come the insurance companies, hospitals, the other providers, the employers and the individual the insured all the paperwork cost nobody else is over 19 this tune of $15 billion a year in the trillion dollar difference we can't have that. now there are other things. we have to need readmissions and medical errors, if we of the quote save a fortune and the government entity the va hospital network was the first in the country apparently to uniformly applied the procedures

to reduce debt at missions and costs about 15% of the problem. lifestyle choices particularly related to obesity and exploding diabetes are a result of that. $150 billion of this. and then we, according to the mckinsey study, we pay about $66 billion more for medicine and we would if we lived in any other country including the pharmaceutical producers and other countries. >> yet mr. president even supporters of the new health care law which you know the american public as previously split over, even they say that the health care law may not have done enough to address the things you're talking about to bring health care costs down. >> i agree but when my position, you know, when i was out there making appearances in the last campaign i said look this law is not perfect but this is a huge complex issue. what we should do is continue to

improve, not repeal it. the argument for repeal i can give you in a second. i know this is a complicated issue and we haven't talked about malpractice reform or the end of life care which is a big part of this, but the real reason there was a big push to repeal instead of to reform is one line in the health care law that says if you are in short in a big plan 85% of your premium has to go to health care and promotion if you're in a small plan 80%. and my goodness the insurance companies act like it's the end of the world but in minnesota where more and more plans pay for health care and pay for procedure they are already at 91% statewide. and if you take blue cross blue shield of north carolina for example there's already an 87%. it's not an unreasonable requirement and i believe it's going to hold. these things will bring down health care costs compared to the competitors over the next

decade but we've got to do much more of them and basically there ought to be a national system like pennsylvania that has real reports on a regular basis about the cost and result. and will create, that will give consumers power. and would have a huge impact if we do it. >> can i get back to the question for a minute because you said it is not the power that health care -- too i think there are savings. we have to include the defense. this gentleman's ? is there so much focus? most believe we need a strong defense and we do but increasingly are national security is affected by climate change from a resource depletion, the so-called power conflict of religious and other

political conflicts, so the national security is going to have a broader meaning protecting the borders and all that. i think that some of these weapons systems have to be eliminated. now that congress eliminated and believably we had the joint strike fighter which i spent a lot of money trying to develop and i believe that is why should a free service have to have its own fighter plane? it was a good idea. so when they save money on that the turnaround and say an engine might fall off let's give a whole nother company a contract to produce another in jim it was not a good thing. they got rid of it finally, but the marine corps also has to eliminate a fighting vehicles it is being produced as a 5 billion-dollar article to congress used to do that. we have 11 of groups the chinese navy has been dramatically modernizing. they have great diesel power submarines that go deep, fast and quiet but they only have one

carrier. do we need 11? keep in mind every time you do that someone in america loses a job, but in the and, if the money is properly reinvested to get more jobs. that's what happened when we had the base closing in my first term we just used those resources to build a different kind of economy. i think that there is no question the defense will have to be a bigger part of this than it has been so far. >> you touched on an important point which is there are economic trade-offs in the time the economy is struggling to rebound. while you were attempting to do these things how does this administration deal with its economic trade-off for instance if you decide to increase corporate taxes there's a strong argument to be made that you're also slowing down the, you doing that and if you cancel a weapons program, if you cancel a homeowner's aid assistance a matter how you interpret the actual effect is. the message you are sending as

you are taking jobs away, taking support away at a time we are now back on our feet yet. >> i would come by and first to think the timing is important, i think most of this should bite next year, not this year. >> because? >> because the economy is weak. >> not because the election? >> no. that he elections next week some will start before the election. it's driven by economics. second, i think that there should be an effort to take the gao study and other things that we now to cut as much prefer spending in the discretionary budgeting and reinvest in things that will create jobs. mostly manufacturing green technology and other areas. third let me say this again, i

think our corporate tax rates can be lower in a way that will be an incentive to invest in america and will raise as much or more money if we won't lower the rates before we get as much or more money out of the tax expenditure elam nations. it's not just individuals who get tax expenditures, corporations to come to wrecks of the corporate rate looks high of the bizarre thing is some people pay because of their operations are in america and they don't have the access to the deductions and others pay next to nothing so i think we can bring the rate down but we have to bring the tax expenditures down. then i see from the individual side again relating to creating jobs, we may want to move away altogether from the system that taxes labor at middle and lower

levels and in come and tax things more. you can get rid of the payroll tax altogether which is a big deterrent to creating jobs. and if you impose a progressive tax or have a tax on pollution comes so-called externality, and then create just as much money and invest more of it my problem is with the current dilemma we are in now is we need to get rid of this debt but we need to do it in a way that brings back investment. what happened when i passed the deficit reduction as we got a big drop in interest rates come spike in the bond prices, a decrease in private investment, 92% of herger hommes were private sector jobs. right now we don't have a strategy to get there or an easy path even though the banks have

over $2 trillion in cash and only 160 according to the last in the bad mortgages. so whatever we do, what ever complex things we do, should be designed to trigger more bank lending and more investment from corporate surpluses off in the united states so we get enough economic activity double boost revenue if you make these other changes. >> paul rifle approach dead on arrival is it the wrong argument to be having? >> i think that he's wrong to say no matter what happens yet no matter what the circumstances are, we won't touch taxes. i've already said by wouldn't be against lowering the corporate rate as long as you don't lose money but making sure everybody paid something. but my position is one of your tax rate exists now are perfect as compared with anybody paying

1 dollar more. the only way to make the tax system more perfect is to have it produced less revenue. and i think that's wrong. but i don't think that the democrats can say the same thing about medicare, social security or anything else. the other thing is the medicare proposal is on the merits wrong. that is there is no reason to believe that if you cut a check to of the people on medicare all of a sudden they will have market power and drive down medicare costs and they will be better off. in all probability what will happen if the dismantle some of the other cost controls as medical costs will continue to go up and people will use less get sick and die quicker or they will be poor because they have to spend so much of their money on health care. in other words, the problem is rising medical costs. medicare is a part of a whole health care system that has a toxic rate of inflation and a

spending base today that's not sustainable. it's also one of the major reasons people don't get pay raises. employers try to provide health care in a down economy that takes the better increased revenue they allocate to labor to pay for the health care premium and to have nothing left to give pay raises. so i don't -- i did what congressman ryan for making this suggestion but on the merit it doesn't work and that's what i hope the lesson that we will draw from the new york election not that we can't talk about medicare and have to tiptoe around because we've got to have a system that brings health care costs in line with our competitors and we do have to go back to your popular opinion question we have to have a much deeper commitment than we've had to making sure americans understand the american health care system foss compare with others. americans are so historic we diverse to caring about or

absorbing what our competitors are doing in some areas. we have to know what our competitors are doing in every area and has to matter to us. >> use a moment ago and i know you didn't mean a heck with the election next year but we are in washington to follow politics and is there a stomach for grappling with these issues with an election they are living not only for the president obviously but also for congress. >> if i could reach a bipartisan agreement, -- >> de ifill. >> even if people disagree with the particulars, you have many examples of that at the end of the year when president and congress made an agreement on the taxing and i didn't agree with all of it, but i thought we should take it because it's the best deal he could get and i thought the republicans should take it from their point of view of the best they could get. the american people supported overwhelmingly even though there were things almost every american didn't like about it.

there is a real hunger for us to do things. so a lot of these polls will shift if they reach the agreement, and i wouldn't put it past the president and the congress to be able to reach an agreement next year because it is an election year and the republicans now have a majority in congress and they want to hold it. >> how do you know there is a hunter to do something big? >> you travel the country and the world. where do you get that from? >> i'm not sure there's a hunger to do something big there's a hunger to make an agreement >> but we haven't done enough, any of us to educate the american people. the main benefit of all this is to register in people's psyche that this is a huge problem. because none of us have a vote in congress i think mr. ryan is coming up the unless you're in

congress unless you work in the white house, or the treasury department, you might not have an impact, but i think -- i think that the american people want us to work together to make the big problems of the country. the only problem is we are not among the country anymore. we are the oldest democracy in history now, and every society that achieves an enormous success sometimes reaches a point where they have to reform or suffer the consequences of decline because the institutions no longer serve the purpose for which they were established as much as they preserved possessions of the leaders and the constituents of the institution. people get more interest in holding on to the president and creating the future. there's some of that in america now. and we have to create an

appetite for the future again by showing people both the negative consequences of not doing it and also the positive consequences of doing it. the purpose of this is showing the negative consequences of not being able to. we also need a pretty picture of the consequences of creating the future which requires us to deal with the debt. >> my next question is where you see the political consensus but i want to put it in the words of jim dickey was one of the members of the public to read from boulder colorado. what is the likelihood that the incumbents in the house and senate will vote for any kind of debt compromise or budget bill been holding the party want to get reelected? >> for i think the likelihood is greater than the democrats will do it and the republicans and moderate districts will do it. if there's any changes in revenues which can be tagged as

revenue increases than in those districts where the tea party can control primary if you have a situation which costs senator bennett in utah because he dared to have a conversation with ron wyden about health care reform in other words the situation is the problem, and so i think it's different from district to district and from state to state but there may be enough votes for a bipartisan consensus. i think it's going to be ironically easier to get the democrats to vote for the word is in consensus than republicans if they come from districts where the antitax theology school can to clear them heretics and banish them to the electoral hell. and if you think democrats are at a better position? why would you think that? i can't imagine. you think they are in a better position to agree to a consensus --

>> because we proved that we will do things that are controversial and a lot of us -- the only thing i think that is working on the democrats fitful in taking on controversy decision is how many got the last election for doing things right on health care and the stimulus. but that is partly our fault because what i said, we didn't have a national campaign. for the first time since 1998 we ran a midterm election without a national message by the time we needed it for the and any time since 1994 and because we didn't have it we got the same result as we got a 94 but i still think democrats will work for a combination of spending cuts and revenue increases either from eliminating tax expenditures or changing rate structures. they are just more willing to do it, and i think the -- i think the democrats would vote for some changes in medicare, but they would want to believe that they would actually work to stabilize health care costs and

not just make the elderly poor and more at risk. >> what should the national message be? should it be this, something larger, smaller? .. it presents mutually beneficial trade relations, and you have to negotiate those and fight them through and work through the details. and assess things like the relative currency values if you

want to have a balanced economy with the manufacturing sector and not be totally dependent on finance and consumer spending and housing. and so, you know, my view is that we should say that is a part of it but it is not the only part of it. as i said, we will be able to sell this debt reduction thing a lot better and bring in the deficit back to a balance if we also have a positive picture of the america we are trying to create, the kinds of jobs we are trying to create, the opportunities we are trying to create. we have a lot of other issues here. college graduates are having trouble finding jobs now. bui dropped from first to 12th in the world for the first time since world war ii and the percentage of college graduates. we are still first sending young people to college but we dropped to 12 in degrees. we have a lot of things we can do that ordinary people will understand more than the details

of cbo scoring or the seven things you have to do if you want to get health care costs under control. and so i think that their political strategy here is to not be to run away from this, but to marry this to a positive program to put america back to work and a picture of what it will look like if we go through the changes. if the public won't buy it then we are stuck with what we are but i don't think we should give them a chance before we give up. they haven't had a fair chance to evaluate a real balanced plan to create a different future yet. >> since you left off is, people are so much more scattered, not only what issues are number one but also where at war and more and more places and intervene in places where it is not exactly warranted. the headlines that there are people cell phones to drive the day are not just about this issue, no matter how compelling it may be and it seems it would

make it more dill of the call to come up with a consistent but he said message for democrats or republicans in election year like this. >> well i agree with that to a point. that is, there are more sources than information and there are more things being done that are hard to put into a clear pattern. it is what happens if you live in an interdependent world with instantaneous transmission of information reporters look are like nets that walls. when you get right down to it, that is at the heart of this little step we have seen in america about what should be the final steps between the israelis and the palestinians. i mean there is sort of a microcosm of the larger global interdependence that you can actually see their. i agree with all that. but, the fundamental problems that i think we have in america america -- let me just contrast america with brazil for just a minute.

a guy named bill bishop who happen to be a liberal democrat wrote a book two years ago called the big sort. he is from austin texas. and he started off with a story of the one republican family that lived in his very democratic voting precinct in austin, texas were john kerry beat president bush 3-1. and this guy loves his republican neighbor and their kids play together and they talked and they disagreed and they learn together but everybody else was mean to him so he moved to another neighborhood in austin where president bush beat john kerry 4-1. and the argument that bishop makes in the book is that both neighborhoods were -- and he said america is overcome. we are not as racist or sexist or as we used to be. we don't have as much a religious presence in more. we just want to be run anybody who disagrees with us. and i think -- you are all laughing because you know there something to it, right? the action to describe the

development and how a developer made a fortune in the inland empire outside of l.a. or near thereby doing a profile and finding out the people who were upper income people were almost evenly divided between republicans and democrats so he devised one side, it was a one street lung development, one side for the republicans and another site for the democrats. i could make this it. the republican development had the sidewalks and basketball courts in the back. the democratic developments had rooms for yoga mats. [laughter] i swear to god. he sold all the houses in a nanosecond. so by contrast i was in brazil at the edge of the rain forest. the other day for sustainability conference, and they got serious problems in brazil. 95% of their electricity is from renewable source -- resources. they wanted to be more even as they grow so they want to build three hydroplans.

the problem is the dams had to be on rivers that flow fast and all the ones that are left are in the rain forest. so they have got competing sustainability arguments. serious problem. but what was the difference? here i was at this conference in this nice conference center. you had every oil company come every utility company, the head of the green party, the head of the people representing the indigenous tribes one of which will be totally destroyed if one of these big stands this bill than all these people whose interests are affected and they are sitting down having an honest, civil conversation in a two-day seminar where they'll listen to each other and try to work through this. now i don't want to be pollyanna here, but this is a hell of a deal. until this last year when brazil had slippage, they reduced under lula annual destruction by 75%. a little known fact. they got all the lockers out but they are still pushing the cattle farmers in the soybean

people in. >> do just that they are fantasizing about having that kind of conversation here? >> well i think we should. we should try and maybe we will have to go through another election but in the end, we have to listen to people who disagree with us. it cannot be possible that either the democrats are the or the republicans are always wrong. it cannot be possible that 100% of us are proceeding in bad faith. you know i basically think that the country has been badly hurt in the last 30 years by the adoption of two ideas, one predominately in business and won a government. the business idea was that corporations are not really creatures of the state. they are independent entities just like citizens and they ought to be able to whatever they want in elections in their only responsibility is to their shareholders. since people hold shares for 15 seconds now before they sell them, what it means is that corporations have become uprooted. my generation was taught, those

who went to business school and studied economics, corporations were creatures of the society and they had responsibilities to all their stakeholders. yes they are shareholders that they are employees and they are customers and the communities of which they are a part. we are going to have to go back for that. the primary government idea was the one that tried for the 1980 election. the government will screw up the two-party part. the secular st. of america the founding fathers they were all perfect. just about everything that's happened in the last 80 years is horrible. government always screws up. there's no such thing as a bad tax cut or a bad regulation or a bad this or a bad that as opposed to government. it hasn't worked. look at the job numbers, look at the growth numbers, look at the productivity numbers, look at the numbers. so if we can break out of theology and get back to evidence and experience and aspirations of ordinary people, think we can have bipartisan cooperation and they think the democrats are going to have to

be willing to give up may be some short-term political gains by whipping up fears on some of these things. if it is reasonable social security proposal, reasonable and care proposal. you cannot have health care devours the economy. >> i have one more question for you but before that i would not be -- i didn't follow up on an illusion you made to the israeli-palestinian peace process. did all this sounds terribly familiar to you about the 1967 borders and you feel like it is moved anywhere? >> i think for one thing i think to some extent it is the tempest or the teapot and i think first, i think what the president said was maybe too much shorthand and raised a lot of questions but also it got -- remember what prime minister netanyahu said yesterday amidst all the things that are in the headlines. he also said that if he made a peace agreement with the

palestinians he was well aware that he would have to give up so much of the west bank that not all of the settlements would be included and he would have to close some. >> he never said that out loud. >> now and i think that it's been totally overlooked and he deserves credit for saying that, specially when you look at how hard it was on sharon to get out of gaza which nearly everybody wanted to do except the settlers that were living there. so, when mr. netanyahu as prime minister before and when i was president, when all the people i worked with for eight years years saying that the 67 borders were a reference point was nothing more than saying that is what we looked at the map on. like it when prime minister barak said that he was prepared to give up 94 to 96% of the west bank with land swaps in return for certain strict requirements on the palestinians including waiving a right of return. it is 94 to 96% of what?

in other words, the 67 borders for the reference.. i think that is what the president meant. he wanted -- but i also believe that before they get back to the table israel is entitled to know that in in the end there will be recognition of the state of israel, and my recollection is that president abbas has already said publicly at some point in the bush years that a he would accept the deal that arafat didn't, that i offered and b, that he would give up the universal right of return. they gave that up when they signed the agreement on the white house lawn in 1993 whether they had knowledge it or not. the israelis always said there are some families who have been in northeastern and northwestern israel forever, who are their descendents and now in those lebanese cans we will let some of them back in but if there is going to be a peace deal it has got to be a jewish state and a

palestinian state, heavy majority. everybody knows that. i even offered as a part of this deal when i was working, to raise $10 billion which is real money back then. [laughter] to resettle the palestinians out of the refugee camps either in the new state of palestine or in the u.s., canada or wherever heck else they wanted to go the people would take them. so i think that, i don't think we should get too carried away here. if you look at the map, any operating math that any of these negotiators have used, it's clear what the boundaries were before and after 67, and it is also clear that because the piece was not made in 2000 or in the intervening years, that the land differences will be great now. when i was president you could get 97% of israeli settlers in the west bank on 3% of the land. now you have to take 6% of the land just to get 80% of the

settlers. so i don't want to minimize the difficulty, but i wouldn't just -- don't let this thing get off the tracks here because of the way what the president said in prime minister netanyahu said has been juxtaposed. you can overstate the divide here. as long as they are both willing to keep talking about this, i think they should. there are just two other things that i think were not mentioned by either that i think it's it is a mistake to forget. one of israel's legitimate complaints with arafat was always they could never be sure they have a partner for peace. although, in 98, when we had lots of things going, with the only here in the history of israel when no one was killed by a terrorist attack echoes of security cooperation. the second argument was even if we make this piece our neighbors will never accept us. there is no question that the king abdullah of saudi arabia's

peace initiative includes all the arab countries but syria, and other muslim countries around the world promising political economic security normalization. if i were the prime minister and i know he feels this way i would want to get it at the same time that you know if he got a simultaneous peace signing with all these countries that formalize relations, that would be worth something. neither the president nor the prime minister i don't think talks about that but those two things should not be ignored, given the recent developments in the arab world. >> mr. president george mitchell sat down and there is an opening for an envoy if you you of your adjusted. >> i have great confidence in the secretary of state. [laughter] [applause] they don't need may. >> i wanted and with this final. i will let you get away with that. i will end with this final question back on her main topic. you said in his view in the

atlantic you are talking about climate change for you said we are in a race against time and circumstance. is this true as well about debt and spending and do you think that the current president appreciates that? >> yes and yes. look, this is really a lot like climate change. you know if we don't change this trend something really bad is going to happen. you just don't know when. or precisely what form it is going to take. but, so yes i think we are in a race against time. secondly, that problem is already constraining our options as a country. it can strain our ability to develop a more diversified economic strategy by end of mining our ability to get investment capital as opposed to consumption capital and by undermining our ability to enforce our trade laws.

which discourages us from doing new trade agreements. i think it is terrible we have have an argadon this colombian trade agreement and the one with panama i guess it's been approved but -- and if they have made some improvements along with korea. it is terrible that you can't -- we are paying a price for this now but when we get to the point where, and then interest rates will start to rise again with more balanced global growth. no matter what mr. bernanke does. i think the criticisms of him by the way up and wrong. i don't think he should've started raising interest rates and the value of the dollar yet. i think it would have only slow down our recovery. no matter what he does when the economy comes back, interest rates are going up. the percentage of the budget as now constituted devoted to interest payments on the debt will go up. that means he won't be getting anything for spending relatively

less on medicare or defense or nondefense discretionary budget. all you will get is sent in more money out the door. so, that is another argument we have to had to make to the american people. we are fixing to have changes in all these other spending programs to pay our interest rates to other people if we don't deal with this. and yes, i believe the president will do things which will be politically risky, arguably to him and i think if he wasn't prepared to do if he would not have asked for vice president biden to chair this budget group. i think you just don't do that. you can't do that. if you get outed, for being unserious in a context like that, a president can pay a terrible price. so yes i think he will do that, the right thing they are. >> president bill clinton, thank you so much. >> thank you. [applause]

[applause] the group, known as the gang of six, includes democrats dick durbin and mark warner and republican saxby chambliss and mike crapo. they were interviewed for a little more than a half-hour by a "pbs newshour" senior

correspondent, judy woodruff. [applause] >> good afternoon everybody. i'm delighted to be here. you have such an interesting program so far. i think it says something about our great country that the issue that has everybody's attention, the sexiest issue around is the budget, and that is what we are spending all day long on. it is important as everybody here knows, and just to introduce this next to discussion, i think everybody's aware that since late last year a small bipartisan group of senators has been working to try to forge a consensus agreement on how do we address the nation's long-term fiscal imbalances? coming off the work of the simpson-bowles commission you heard from them a little earlier, this group has reportedly, they have been very careful about what they have said in public but they have reportedly been talking about all issues, including cutting

entitlements, including spending of a nature we are going to try to talk to them about now and including tax increases. there has been a lot of speculation about what they have been doing. they have been remarkably good i would say from their perspective in terms of not talking to the press, so i think a real testament to the importance of this gathering today that they are prepared to come and talk to all of us right now. so ladies and gentlemen, please welcome senators saxby chambliss, mike crapo, dick durbin and mark warner. [applause] [applause] >> senators thank you very much and i just complemented you as a reporter normally we don't compliment people for keeping things a secret, but it has been

remarkable, the degree to the work you have done has been kept under wraps up i'm going to start with you senator chambliss because you and senator warner were sort of i guess the two originals in this group and it quickly expanded to include others. let me start with you. where does your work stand right now? we know you have had a sixth member and senator tom coburn. he fairly publicly stepped away last week, and today we were supposed to have senator conrad. he is the last minute had to be on on the florida senate because of the senate debate of coming both coming up at 5:00. give us a sense as of today, where do your discussion stand? >> first of all let me say judy that what you mentioned is exactly right about the fact that if we could have six senators said in a room for almost six months in this town and the contents of the discussion, that is the way the

senate used to work and our goal was to make it work that way from day one and these folks have just been tremendous to work with. we have talked about a lot of sensitive issues obviously, and this issue in and of itself is so complex that every time we would reach a point of mutual common ground on one issue, then something else will pop up. and that happened during the course of all of this, and at times all of us became frustrated but we always came back together. fortunately senator coburn made the decision last tuesday to exit the group and is he said, take a break. i am not giving up hope that tom is going to come back. this needs to be a bipartisan agreement if we are able to reach one, and we have gotten close. and we are very hopeful that at the end of the day senator coburn is going to rejoin our group but i can't think when that is going to be. >> senator durbin, you have been

a member of this group from the outset. how hard is it been for the six of you to sit there, three republicans and three democrats, to talk about these issues? >> it has not been hard. i think we like one another and that helps. we have a different point of view on some issues and we have tried to work through them. it almost sounds like a legislative process, and it is something that we want to encourage and i hope that if we can move forward from where we are today, that it will be a model for our colleagues to join us toward a solution. i know what the alternative is as the majority clip in the senate with 53 members needing 60 votes. i can tell you it is a very difficult task unless you have bipartisan cooperation. with a divided congress between the house and the senate, it is obvious as well. so, it has been difficult on an

issue basis. not difficult on a personal basis. we have come to like one another and we have shared a lot of popcorn. >> senator crepeau, is everything really on the table and we have been told it is spending in all its forms and its taxes, revenues. is that the case? >> well, yes. everything is on the table. everything has to be on the table. that does not mean however that we are not engaged in a difficult process of crafting the compromise is that can deal on a comprehensive basis with the paradigm shift in america's fiscal policy in a way they can get 60 votes on the floor of the senate. that means some things will not he on the table in the end after they have been negotiated out or they will be negotiated into a form that was different than most people were looking at them. put absolutely everything has to be on the table. i was listening to the earlier discussion about tax policy which you referenced, and frankly i for one agree that we need to have very significant

tax reform. we need to change the pair dime in america from continuing to debate over whether to raise taxes and on whom home or whether to tax -- cut taxes and how that plays out and instead focus on developing a tax code that will be more competitive globally for our businesses, will be more fair, less complex and less expensive to comply with. that will be a huge part of the solution. >> senator warner they really -- i want to press a little bit more and whether ripping is on the table because what one hears on the outside is that one party is implacably opposed to revenue increases. the other party and implacably opposed to any sort of significant entitlements changes. so how is the dynamic inside your group any different from that? >> this is reiterating what you all talk about all day long. you know but this is the most

predictable financial crisis we are approaching in our lives. and we have used government's traditional tools already. we have used monetary policy. we have used fiscal stimulus. we shot those bullets already. so i feel kind of like the country or the congress is film and the ways and that car is headed for that cliff. we felt like somebody needs to put the brakes on. somebody needs to say let's not drive over the cliff and figure this out. there are ways and you know we took the simpson-bowles report as a starting point. when you can cut tax rates, look at tech spending, government spending by different names as governor daniels said tax expenditures, cut back on those, generate revenue and actually for folks like kant and i maintain or improve the progressivity of our tax system. there are equal ways on some of the stuff that is just math with

an aging society and with increasing medical technology. the notion of how we make our entitlement promises, keep them in a fiscally sustainable way. we have just got to grapple with it and this is one where i can speak for myself. social security does not contribute to the deficit. the idea that it is on a sustainable path just as untrue. this month was 65 -- when life expectancy was mid-50s. with the aging population, with 17 workers for every one retiree 1950, three for everyone now we have to make sure the promise of social security is there. so i think there is a real, and i am a new guy. but these senators and can't coburn and kent conrad and tom coburn. i found that there was a willingness to discuss

everything on an intellectual basis to kind of check your partisan hat and i still believe in terms of a comprehensive approach that this is the best possibility. if we can start with a bipartisan group in the senate, that is the way to move forward. not just in terms of short-term debt extension but in terms of the conference a plan. >> senator chambliss you said you all are working off of the simpson-bowles commission report. why not just about that report? >> it is easy to say you want to just take that report and put it into legislative language but the fact is that there were several options in the simpson-bowles plan on different issues, and we have had to go through and we have had to look at those options, decide which ones we think are best, number one but at the same time decide which one of those options we think is going to get 6-d votes. tickets we can go through all of this exercise and we can take all of these arrows that we have been taking for the last five months and if we don't develop a

product that is going to get 60 votes and we haven't gotten anywhere. and the overall concept of simpson-bowles is a very good foundation to build on and i think all four of us as well as common kant would say we have taken simpson-bowles and even improved it in some areas. >> do you want to give us an example? >> no. [laughter] >> we that's a ways you can actually get a pass. >> i mean we have taken some specific areas of the reform package whether it is revenues, where we look at it is not increasing taxes but increasing revenues and anybody that thinks we are going to repay this 14 trillion-dollar debt we owe and by the way even though we are down to five, that $14 trillion is still owed. so when we say we are continuing to work that is why we are continuing to work. it anybody who thinks we are going to solve that simply by cutting 12 to 14% of the budget

really is in thinking seriously about this and that 12 to 14% is the discretionary portion of the budget. that is why everything has to be on the table as mike alluded to earlier, and we have taken the plan and we have expanded it and we thank have made a better from the standpoint of both the spending reduction, both from the standpoint of reforming the entitlements as well as looking at the revenues and well we are reducing tax rates, all of ronald reagan, we are going to increase revenues follow ronald reagan. it is exactly the same approach that was taken back then. ..

sit down and make some values judgments. are all of these things important for the future and growth of america? hid from my point of view, some of them are not. some of them are. what simpson said is if he eliminated all of them, if you eliminate the entire tax code and then took the savings, 1.1 trillion, and dedicated anywhere from 80 billion to $180 billion a year then to the rest and dedicated it to

reducing marginal tax rates, you would have a dramatic decrease in the marginal tax rates of america. 40% or more in many instances so here's the question. is it more important to you to have a marginal income tax rate, 40% less, if you take a complete mortgage deduction you have today. good question, write? it's an important policy question. maybe that isn't the place we go to make the change, but at least let's go through the exercise to find out how we can reduce rates in a progressive manner. remember what i said on the spectrum reduce rates and a progressive manner and at the end of the day have more economic growth things that frankly should have gone a long time ago. >> is that the kind of thing that you can come to agreement on? >> yes, depending what the outcome is and that is why the hard work of working through the various compromises that have to be made is so critical.

again, i come back to the point that one of the most important and powerful parts of the fiscal commission deliberations and out comes was the change in paradigm with looking at the revenue and as you've already heard from richard the fact is we will have a debate and promote a debate with our activity about just exactly where in the tax code should we make the adjustments and how much should those adjustments be and how should they work out? but the bottom line is we are committed to creating a tax code that is flat, broad and has a lower set of tax rates the will of result in increased taxes for american citizens and ultimately will generate a phenomenally more powerful economic engine that is critical. one of the pieces of the solution to our fiscal problem. >> i hear senator warner this discussion in the last few minutes that may be the revenue

side may end up being easier than the entitlement side. >> i'm sure this has been thrown out today. spending is a 20% of gdp. revenues are roughly 15.3%. 60 year low. it doesn't take a rocket scientist to realize it can't be continued as a you've got to have a mix help you can get a tax cut the will be fair, progressive the will generate revenue and most of the time balance over the last 80, 100 years they've generally been 19.5 to 20 per -- 20.5. how you can cut back on the internet programs, it consisted of all, have that safety net and sometimes it has been very aggressive at making sure the purpose for government in terms of taking those most in need get protected, and i think that we

have made so much more progress than most have assumed, and on top of that i think what we also work through how to take this idea. there's a lot of ideas going on but how you get a process that can get through the senate and get it through the house and signed by the president. >> one thing you have to remember when we are talking about revenue, we talk about reforming the tax code to make the corporate much more competitive for corporations around the world, and right now with japan doing what they've done recently, the united states stands to be the highest corporate tax rate of any industrialized country. that's not right. the same approach of the corporate side as we have a preference on the personal side we can lower those corporate rates down to something that is really meaningful and significant and will put corporations and american

positions to also broaden the base by stimulating the economy and adding jobs, and that was the purpose and that's been our purpose also. >> said the u.k. and revenue from the corporate revenue side or the this revenue neutral? >> on the corporate side is intended to be revenue neutral. >> senator dorgan, what about that? >> here's the way i see it. we have a nominal corporate income tax rate and the natural corporate income tax rate and depending on your sector of the econ become if you are a small business, you're probably closer to the actual stated corporate income tax rate. if you are a larger company as we learned with general electric not too long ago, you may have zero corporate tax rate, so the tax code reward certain sectors of the business and their taxes are much lower. i think what you're trying to achieve is to try to create an opportunity for economic growth

here by lowering of marginal corporate rate doing it in a fair fashion so at the end of the day we don't give up on the revenue that comes in from the corporate asset. that is what we are wrestling with. it isn't easy important and the most to say in this group about it when it comes to what i'm trying to do i really honestly believe there has to be a safety net in america. there are vulnerable people in this country who will be vulnerable because the economy and the status in the life and the like and there is more vulnerability today among many people because of two things. the first of which is the disparity in income where. savings took a hit not that many years ago.

pensions fumbled away of the banking proceedings and so when people talk about social security, it isn't about some program dating back to franklin roosevelt it is literally their safety net and they get nervous when they hear us talking about it. i happened to be around in '83 when we went through the bipartisan exercise and extended social security. what was interesting when i was dhaka on a bipartisan basis clearly to save social security it didn't cost either party a seat in the next election. it wasn't an issue. front row over here, she remembers that. they're really wasn't an issue because we had done it in a bipartisan fashion and we did it for the good of social security. >> senator chambliss, is it that kind of discussion at that level your hat in the group or has it gotten more granular than that? you still have any philosophical discussions? >> will obviously you can't have a discussion about the policy without getting a philosophical. but we have gone beyond that. i mean, we know where he's

coming from. let me tell you, we've had some pretty strong philosophical arguments. [laughter] we know where tom coburn was on the other extreme is coming from. but we've been able to sit there and get beyond those philosophical arguments and say okay we know where you are, dick or we know where you are caught thomas. but look, we've got to figure out some way to find the common ground on whether it was entitlements or whether it was revenue policy or what. i will go back to what i said initially. it's the way the senate was designed to work and i am proud to be associated because it has worked >> you may have just called me an extremist. [laughter] >> extremism in the pursuit [laughter] >> senator crapo, when all you're doing this from senator chambliss a minute ago used the word a row. you and he and senator coburn in

particular, not to say democrats haven't been taking some arrows to that, but particularly you've taken some on your side from those who believe that the taxes just should not happen and i think if grover norquist of americans for tax reform, there's other names i could mention. are you truly able to function ignoring all that opinion out there that is making itself known to you on a regular basis? >> let me tell you, when we first voted for the fiscal commission report the knives came out. right? and they haven't gone back in a sense. when you are seriously talking about reforming the entire fiscal paradise of the united states of america at a fiscal crisis like that which we face, we are talking about everything literally being on the table and being open for discussion. and the groups that i think sometimes like to create

conflict but rather that is right or wrong the groups that have an interest in the outcome are these phenomenally broad number of issues are engaged, and i would say that the hero is one way to put it, the attacks have been on both sides in tents. nevertheless, we can get past that, and frankly i think a lot of the groups are going to be happy when they see the outcome because a lot of the fear they have are not as real as the product that we are working with. the bottom line is that we have to continually remember that the status quo is also an option. it's not a good option, and in fact i think that it's probably the worst option of any of the options we have in front of us as a nation. but as americans understand that, then they become much more willing to engage in a serious kind of discussion we have had in this group that has helped find ideas and we think the downside of the box or working on the new paradigms' we can find ways to achieve the

objectives we have across the political spectrum in ways the will provide popular support and political support. >> i want to pursue that because there are folks out there saying it's great for the six of you or five of you to be working on this but in the real political world is going to be very difficult to turn what you doing to their real legislation. how do you look at that? >> look at some of the markers out there. 64 senators, a number of weeks back who said that's a boy, stay at it, and you guys. you'd be surprised the number of senators who view it as one in or the other whose it to everyone of us individually stay at this because what is the alternative? the alternative is a potential debt crisis without the tools the government has headed the past in terms of fiscal and monetary policy. interest rates of traditional levels that would take an economy that is slowly starting

to recover but is recovering to grind it to a halt at a time when you've got potential, a mother debt crisis in europe, and stability in the market, the notion that we would step up and try to put forward something that is transformative, the coalition government in the u.k. had a deeper problem, and the have stepped up. we have a different political system. i think there is an enormous sense as we found saxby and i have done a road share of this, you could have the groups that want to preserve the status quo in this town and americans want to do their part. they want to be for something as long as everybody has scanned in the game. a lot of plans they put out so far have been accurate or not

trade is disproportionately one part of america versus another part of america barry to much of the burden. the notion of what we are going to put out or get to is something every but people have scan in the game and like we will have the enormous amounts of folks stepped up. >> we do from day one this was going to be a difficult process in and of itself but even if we as a group of six were able to agree selling it to our colleagues is going to be even tougher. so we have not had any complicated feelings about that. it's always been understood that it was not going to be an easy sale and that's why it's been difficult and why it's been so difficult at the end because in the end negotiations with major issues are always once you kind of put off until the end, and that's kind of day where we are and that's why it got so difficult credit the end. >> coming to the end does that mean you're close to coming out

with the report? >> i ask because you've got the negotiations underway with the vice president biden and you were just telling me there is discussion come in a formal discussion about the groups. is that accurate? >> it's very informal. i kept john cline allows less mitch mcconnell priced to where we are, not the details necessarily that we're we are on the process of way through this it in the very first day we sat down together and started visiting on this. >> how was this track different from that track? >> we are not integrated with them at all other than the fact you get democrats and republicans sitting down at the table in the caribbean and obviously we are in our group with the of the focused on as directed by the president i think rightly so is the deficit and what is it going to take to get 60 votes to raise the debt ceiling? we've always been more focused

on the longer-term issue because they are not going to solve the 14 trillion-dollar debt. i don't think that there is any way. that's what we have had our sights on from early on. >> how do you see your timetable? how do you see this on folding going forward? >> i feel all four of us would like to sit here today and tell you that come next week we are going to roll out this plea and everybody's going to be totally happy with but number one, we are not there and secondly, when we get to that point and we still hope we will, it's going to be a plan that everybody is going to dislike in some respects because all of america is going to have to share in the sacrifice if we are truly going to get this debt under control and address what mike mullen the chairman of the joint chiefs said is the number one of the security interest of our country, and that is to start paying down this debt is as

referenced a minute ago spending now. revenues down here. we've not only got to get it in balance, we've got to get revenue above spending so that we can start page that mortgage. if we don't do that, then we are not going to show the good faith in the marketplace of the people buy our bonds are going to require a share. so it's going to be a difficult process at best to convince folks and we are not there yet and we can't say that we are going to be their costs to be cut next week or the week after. >> senator durbin are you convinced -- i'm going to ask each of you, that you can sell the rest of the senate on what you have come up with? >> we don't know until we try, and at this point, i think we all say this with your concurrence from political parties not to quit because i feel people are seeing the alternative.

they know what happens when we debated the continuing resolution and came close to closing down they don't want us to quit. they may not agree on the particular is the understand that our process is the only hope of a bipartisan process people are getting on both sides trying to reach a common goal putting aside our own politics, democrats and republicans, trying to see what is good for the nation that is what the mission is all about. 11 of 18 moving koret of a bipartisan basis. that's a pretty good thing. we wouldn't be sitting here of the stage as likely without the good work they have done. i think there would be a gathering of delivering at some point, not sure when. i hope there would be. we will tell you when it comes to vice president biden even the president the have been encouraging to us without knowing the details in

particular because they feel that we are going to add a voice, a positive voice to the ultimate solution. >> the reason i'm questioning this, senator crapo, is we see the difficulty the converse had dealing with short term budget challenges. this one is far bigger than that over a long period of time and i just wondering where does your confidence come from? >> you asked the question where's the confidence but also the timetable. if you did about it i probably as my colleagues have been asked 100 times if i've been asked once why are you going to pick out a plan or when will you reach fidelity? and i keep saying we will reach finality when we get a deal and we are making progress in our truly doing something i haven't seen that in the united states senate for a long time and that is to sit down as republicans and democrats and try to bridge the differences between our parties and our politics and

america's politics of the most phenomenal the broadbased issues of our time. we are dealing with everything from social security to the entitlement system, medicare and medicaid to the spending structure on the discretionary side of the budget to however revenue system including defense and the mechanism to enforce that to stop congress from getting around it widget historic we does come and this we are trying to do on the basis that develops the partisanship so my answer to the question as to how we find the confidence to go forward is in the response we get from not only a work colleagues but people across the country. i said a minute ago the knives were out and they are. the special-interest groups across the country are ready to fight any proposal and they are geared up, but at the same time i can't tell you how many times every day i am contacted by people who say don't quit.

don't quit because we are counting on you. >> one other point senator coburn wrote in "the washington post" he talked of the work of the group but he said this ought to be done by the entire senate. could this work be done by the -- >> clearly if and when we get to that point, the entire senate this isn't going to happen if 60 plus say yes obviously whatever we put out we change, but we think that we have to make this -- one of the things we felt all along to do this sequentially and take this in bite size the force of the status quo will stop it. you have to fool the same so that everybody kind of at some point says i don't like that part but the son of a greater good as we are all going to to get there because my fear is that what came out of the potential government shut down which i was frankly embarrassed

about was a growing lack of -- our growing institutions up to the challenge. so as important as the debt crisis is, there's also the fact we have to reaffirm our institutions can take on these big jobs and get something done, and the only way the idea that there is going to be a one-party solution is just plain wrong. and i think we will and do have that chance to be debt starting point and we are going to surprise a lot folks and need all of the folks that have been involved in the peterson institute and others who care about this issue to not hang back. you can't just come and be part of the audience and listen. we are going to need you to say to be out there urging and if a democrat who supports this year, republican to support a democrat because it's our future. the intimacy of the challenge is something we've got to step up

and i think it's our job to at least get that started and these guys have been the ones to start. >> in closing senator chambliss how do we know when you're about to announce something? you come to work with -- >> white smoke. [laughter] >> welcome you know, there is no timetable that we have. this wasn't we are going to get this done on the sea are or something of rolled out to have the vote by the time the debt ceiling vote takes place. our statement has consistently been we are going to roll this out when we get it right and that maybe next week i would hope senator coburn will join our group and the six of us will be able to root out sometime soon, but we don't know. >> that is a tantalizing answer. this is the first time all of the senators have come together, four of the five senators have come together to talk publicly. so we are especially

appreciative. senator chambliss, senator warner, senator crapo, senator durbin, thank you so much. [applause]

treasury secretary tim geithner says the debate over raising the debt limit is theater and that he's confident the 14 trillion-dollar limit will be raised before the august 2nd deadline. in an interview with politico mike ellen secretary also said that unemployment and the housing market continues to be a problem. from the museum in washington, d.c. this is a little more than an hour. >> good morning everyone. totally week. good morning everyone.

>> good morning. >> all right. we have a few more people filing into the seats. thank you so much for coming. i would like to introduce john harris, the editor-in-chief of politico. [applause] >> [inaudible] we've got a very good one [inaudible] we would start a new line of business at our hedge fund where we can place bets and make money on the future. somebody in 2009 made a lot of money by placing bets on the future of tim geithner and the status in the of the industry should like the economy itself is somewhat precarious and two and a half years later he stirred out to be one of the administration's great survivors

and clearly playing a central position of some of the chief economic policy makers in the obama administration and made a lot of money on that of that type we had expected to be a good but andrea bayh sure mike will be asking him about that. just the other night someone probably saw the hbo special based on the books "too big to fail" i read something i didn't realize from that that apparently he's got quite the truck drivers vocabulary. [laughter] [inaudible] before we get going i do want to thank bank of america, they've been the sponsor for several of the playbook and i believe this is the fourth in the series. we've made new and every single one of them and i expect we will today. they've been a great partner to politico and we appreciate it and want to say a word of thanks

welcome to the whole playbook team. excuse me, the holding of american team, and we really appreciate the partnership. now without further ado, treasury secretary tim geithner and mike allen. [applause] >> i will say before those guys get started, people watching live can also follow this on a trader at #playbook breakfast and at the end of the show will take questions. star trek to the to thinking now and we will get you included in the conversation as the morning winds on. thank you very much. >> thank you, johnny and to the people in person. our friends here electronically and with us on a trader at #playbook breakfast. mr. secretary, thank you very much for coming. secure president obama's first treasury secretary, there from

day one. you were the president of the new york fed during the melt down. so you have a sort of permanent seat on the committee to save the world. you've had a good news this week between stock sales and aig, a payback for chrysler. dusable 75 present of the money invested in the bailout has been paid back. the time you were making those calls, did you think that was possible? or impossible? >> possible but impossible. at the time the -- think about it if you think back to the fall of 08, there is a broad based run on the entire american financial system and the world was really fallen off the cliff and i think at that point nobody would have thought the realistic prospect of being where we are today, and it's not just that we have gotten so much of the money back so quickly, but you have an automobile industry that is profitable now, restructured much stronger, leading the sort

of come back of manufacturing and to have a financial system to the debt is much, much stronger, dramatically restructured, the weakest part is gone, much more capital, much safer, much more stable and we achieved that at the ultimately that will be a very, very small step to ultimate cost of the taxpayer. much, much smaller than predicted. much smaller the and the cost of the crisis from smaller of the economy about three times of the gdp. >> much better than we could have hoped, but it was because the president was willing to do would be politically very tough things, very early on in office because he recognized nothing would be possible without making sure we threw everything we had it fixing this financial crisis quickly, and that was incredibly politically costly as you know, but the right thing to do. >> before the public opinion is turning yet or do you think that

is still to happen? >> people still look at this tough economy today. the sea on an plan at about 9% on average it's much higher than some communities. those are just the tragic aftershocks of the crisis that's damaging and i think realistically until people see -- until we get further away from that crisis you see people back to work more confidence in the prospects i think people will be that impressed frankly with the financial return to the program, but the financial return are important. think about it, people thought we were going to lose hundreds and hundreds and hundreds if not trillions of dollars fixing the the financial system, and now if you look all and you look with the fed did including when i was in new york to look what we did through t.a.r.p.. what we are forced to do through t.a.r.p.. we never want to do it again. you look at what the indian freddie did. the losses they took on all the

things we did to put under the financial fired. all of the people think the ultimate loss would be well lubber $100 billion which is an extraordinary -- remember what that means. we are now in the midst of this critical debate about how to go back to living within our means bringing deficits down over time and that challenge is much easier today because of the success of the strategy we brought to putting out the financial fire and there are hundreds and hundreds of billions of dollars that go to a long-term deficit reduction to create room for investing in education or head start or stronger investments because of the success of the funny to strategy. secure say it could cost under 100 billion. what was the upside? what did you think it could cost? if you look at what people said the time i think that the estimate of just t.a.r.p. alone peaked at $350 billion, but if you add to that what they thought they might be in fannie and freddie, it was another probably quarter trillion dollars and a lot of analysts at

the time said realistically in the trillions. that is just the direct cost to the direct cost of the crisis. they are lost revenue, higher unemployment, not just the thousands of companies that failed and those of course were terrible, terribly traumatic and again we are still living in the damage that puts on the economy. >> no stephen ratner worked for you and in his book bailout he says when you went to talk to rahm emanuel the then chief of staff about chrysler which paid back the money this week he said why even do gm? he wondered if you should do any of the bailouts. >> said that? >> rahm emanuel. >> i don't dig its likely he said that because at that time also, we were having a rich internal debate like you'd want to have about everything we are doing i remember to give up the trust the president was faced with very difficult politically,

very costly, very expensive, very risky, but the president and his senior advisers - all understood that again, our job is to do what is necessary to make sure that we prevent as much job as we could come and make sure we get at this as quickly as possible and i think we all felt that if you would allow the basic collapse of the american automobile the district, you would have seen hundreds and hundreds of thousands of more jobs lost, you would deepen the recession to magnify the housing crisis and it much harder to come out this, so what he did as he put these firms three curtsy. very difficult tough restructuring, tough conditions, and seeing the results of the truce today but in those rooms of that time you had a lot of debate as you should have had and that is a test of any credible policy making process and this president is very good about forcing people to look at all options and he wants to hear all the choices in their stark

contrast but what he's exceptionally good at is willing to decide and choose even when the politics seem terrible. >> the other day the adviser austin calls beavers on cnbc and jim crimber asked why the administration doesn't talk more about the success for a long time the politics have been very toxic but what i hear now is the public thinks bailouts are bad but i hear the administration starting to talk more about traces that sounds better than bailouts. do we expect to hear more of that now? >> it's important for people to understand and a hard thing for people to explain how far we have come, why we are in a stronger position to even with all of the challenges we face and that that was not an accident. it didn't happen on its own and would not have happened without the type of trees is the

president made using the authority to confiscate him and of course, just to give credit, he was building on a set of hard choices made by my predecessor and president bush as well and i really remarkable for the country at this time is you had a president who was willing during the transition before he took office even to make sure he had the authority to do what was necessary. so i think what is very hard for the average american to understand today will get this economy is not just as barney frank famously said you can't run the election telling people what could have been worse, hard for people to understand it could be worse than it was because people had no memory of the great depression. no experience with most countries a splinter a crisis. the hardest thing is for people to understand why it is not possible for it to be

dramatically stronger than today because this was the crisis produced in part by people borrowing too much. banks taking on too much risk, huge over investment in real estate and because of that, it takes time to work that off, to work it through so as people save more, bring down their debt that makes it slower. because you still have a huge oversupply of houses, real-estate, monetary policy doesn't have its power in helping stimulate recovery more rapid recovery in this context, so these are things that take time to work out, yet i think part of what is part today is people have a hard time separating what is the damage it is her cause but prices from the resilience and strength of the economy and i think if you look past, if you look through shops all trauma caused and what we're

looking through to what is actually happening in the economy and innovation and export strength and productivity growth and private investment and growth atingua could be encouraged and confident we are going to come out stronger. if we make good political choices in the months ahead. >> how worried are you there is a shakeout to come in housing? >> housing is again we are sort of three or four years into the housing repair and realistically -- >> that's a nice way to describe. [laughter] >> but we have several more years to go. just realistically i think it is when to take time to heal that. there are things that are encouraging because you see the delinquency rates come down steadily quite dramatically and that will reduce the risk of people losing their homes going forward and we have a terrible mess to clean up still.

we are working as you know to try to get the servicers to do a better job of meeting the needs of their customers and their investors to clean up the mess to bring more legal uncertainty to the whole process and to do as much as we can to make sure we get more people chance to stay in their homes. but the best thing you could say the future of housing the face of repair will depend much more now want what happens to economic growth so if we are growing as i expect we will going forward you will see the healing process continue. >> we understand the president himself will be out talking about these tough choices. islamic the president is going to go to toledo next week to a plant to help underscore and help people understand the amount of restructuring that happened and why not just the choice is made the decisions made in the management with management has brought to those companies should make americans feel more confident in the underlying strength of the

american worker, the quality of the american innovation and when you can do as an american company in this much more competitive world. >> i figure it sort of hurts the case as you have seen the forecast for unemployment in the 20128.2. that is a tough number. >> on unlimited is still very high and it's going to come down slowly. i think too slowly for everybody and it's important to remember that because the political debate in washington now seems overwhelmingly dominated by the long-term deficits which i hope we can talk about a little bit but it's good to remind people that again the most important thing we have to do is make sure we get more people back to work as quickly as possible it we have the economy to make sure it's growing again terribly led by the private sector a and we are a long way from where we were making progress. it's not fast enough for people and it's good to remind people the most important thing washington can do now was to create the conditions for

getting more americans back to work. they create a think roughly 2 million jobs since the low but millions more out of work and in washington should be focused on creating the conditions for that to happen more quickly and remember that our first obligation and first priority. >> would you say the country is a jobs crisis? >> absolutely of course but remember this is a -- all these things you see we'll look into the millions of people still looking for work risk losing their homes still worried about their economic security, that is the tragic consequence legacy of what was the worst financial crisis since the great depression. again, just to go back. remember, this was a crisis that if you listen to the economic historians say was larger, the shock that caused it was larger than the great depression.

and so in comparison to the size of the shock of the president working alongside with the authority that congress gave us did incredibly effective job of stopping the collapse and leading the foundation for growth and starting the process of repair but that is going to take some time. >> he said there could be another storm. what does that look like? >> that was in the context of thinking of the future financial crisis. you know, financial markets are the product of the decisions made by humans, by individuals, and you can't take risk taking out of markets, you can't prevent people from making mistakes, and there will be in the future hopefully for in the future there will be financial crises the will be a challenge for us different from those we've experienced, but the job of the government and the task of reform and what the wall

street reform act will do is give us the authority to make the crises less frequent, less damaging to make the mistakes the big cyclist hermetic, less damage to the innocent, less collateral damage from and to do that we have to make sure we put in place and stick to it and put in place tough reforms that forced the system to run with what we call better shock absorbers. so the system is better able to adjust to the mistakes. >> so we could have something as bad as a way or no? >> i think it's very likely we will see anything like that ever again, and of course we see people spend years and years reducing the risk that will happen, but there will be a crisis in the future. hopefully for the future, but i think what the reform act deutsch is to be much better capacity to manage it. remember if you think what happens to the united states of america we led the financial markets completely outgrow the framework of the we put in place

after the great depression. we let an entire banking system emerge outside of the framework of the regulation with no constraint on risk-taking or on capitol so what happens is if you allow that to happen all of the risk moved to the parallel system and you allow this leverage to build up in those laconic jul and financial giants and when things turn and the recession builds and liquidity dried up it was a collapse of the basic market that put a huge pressure on the rest of the system and so what this reform act does is give the ability to make sure that if you are a bank you are engaged in banking we are going to make sure the and you are large and too matter we are going to make sure we have the authority to put leverage requirements, capital requirements to make sure you hold more financial cushion

against loss and find yourself more conservatively so that we are all vulnerable to you making mistakes in the future. that is the essential objective of the reform act and most important thing we can do and we now have the authority to people to do that but we have to stick with the report. >> the capitol requirements were too low a they've been increased. that's a word about them being increased in the worry that could interfere in the recovery? >> we are going to be careful to make sure that doesn't happen coming and so where we think that there is a case for tougher limits, tougher constraints, that they're facing gradually over time so that we can make the system more stable without putting at risk expansion that is still in its early stage that's hard to do but i think that we can do that. you know, you are right and it's important to point out you are seeing some people run a war of attrition against the act. they are trying in to start of the agencies that need resources.

>> and who is they? >> i won't name them, but there are people in the financial community and in the political system who are trying to undo the lock, deily, we can -- >> house republicans? >> they are people -- [laughter] human beings who are doing that and what they are doing is it's very clear what you're doing. they are trying to starve the funding so they can't enforce protections for investors and trying to block appointments as a way to get leverage over the outcome and they are trying to slow down so they could weaken over time the reforms and we are not going to let this happen of course and i don't think that there is a risk of that happening, left the dhaka but the system we have today is the system that caused the crisis so the fact congress passing the reform does not itself create a stronger system. you have to let the rules be

shaped and put in place and have some traction. so again, even though our system is much stronger today, much better capitalized, the weakest parts are gone, and we did this much earlier, much more aggressively than any other country we've got to make sure that these can work. >> door courses i would say. >> have they had any success? >> no and they won't ultimately again because they are not going to -- i mean, really think of it, think the crisis caused. you think people have a credible process of legislating the reform that will come due? it's not going to happen and it shouldn't happen and i sure we can prevent that. >> you mentioned holding up appointments but there's a member of the appointments this administration has yet to make. why is that? >> it's important to point that out. i don't know why it's a good strategy. think about this. everybody i think wants to make

sure we have a strong financial system that does a better job of financing innovation, the great companies of the future in devotee recognizes it's got to be more stable system it's going to be good for business that consumers have better protection and these are unambiguously shared objectives. but for that to work you have to have people in these jobs to know what they're doing who are willing to work for their country and sit in those tough jobs and make good decisions to understand the markets and a strategy that prevents that from happening cannot be off in the interest of the american financial system and so what has happened is that by making the confirmation process unattainable for most people to contemplate, they have deterred people from being willing to come and put themselves through the process. so the reason why all those jobs are sitting devotee is because they raised the bar so high, and

that is a mistake and it's irresponsible and its terribly bad for the country. remember these are really difficult and complicated choices, complicated problems, and how can it make sense for us to make it harder and less likely you get talented people with some experience? it just can't be a good idea either for the financial community or for the people that say they want to defend their interest in the congress. >> so you're saying that it's hard to fill these jobs required to put the teeth. >> we want to put people who can be confirmed. >> we want to put up talented people who can do those jobs. find the intersection between the two things has become difficult because people are less willing to come and congress has proven itself unwilling to confirm nobel prize-winning economists. people with no political history, no political background, no politics, independent people that have a

great record of experience running jobs that are difficult to do in the supervision and things like that so that's going to have to change. i hope it will change. we are working very closely with the people we need to work with to try to find a way to, you know, and the free is this and it's important we do that. >> before this i was visiting with the playbook and a lot of them were kind to suggest questions but the question was most often suggested this morning people want to know how you felt about the portrayal of you in the hbo movie "too big to fail" based on andrew ross sorkin's book which we have called too big to read. [laughter] schenectady to carry. [laughter] >> i hate to admit this i haven't read the book. >> what? [laughter] >> i have not seen the movie either. >> you were at a screening of it. >> i agreed to go -- [laughter] >> very important distinction.

a lot to do. i agreed to go to be interviewed by mr. ross sorkin and the book i did read called lords of finance about a different financial crisis, much worse. we did sit down and talk about the crisis, since looking forward and looking back but i haven't seen the movie yet. you have jet black hair in the movie. >> my hair is very great as easy. >> said he went to the panel but not to the movie. >> yes. >> a number of people said they want to know if you work out as often in real life as in the movie. you are very fit in the movie as well. >> i do -- [laughter] i do try to work out as much as i can. i'm sure he's a great actor by the way. people say he's a great actor but i have no interest in reliving the dark moments of 2008.

>> let's relive those dark moments. [laughter] >> you talk and your colleagues talked about how close we have come to catastrophe like what was the moment that he became convinced that it could happen or maybe that it was more likely than not to happen? >> you have to look back further than that. this really began in the summer, late july and august, 2007, and that was when it turned and you saw the first signs of panic and what panic does to behavior. of course it got, of course progressively worse and scarier after that that was the turn and i figure was at that point where you saw in one famous example people really i won't describe the example but use of classic beginnings of people running away from any kind of risk and

with that goes to the financial system. dramatically worse. when we came to the fall of 08 when the movie really begins which is to talk about well, the way people think about this, they think about this as the weeks surrounding the failure of lehman brothers and aig and all those things after that, but going into that, those weeks in september it really was a gathering storm, huge momentum behind it. the world was shifting quickly into recession should. the economy was falling in the fourth quarter in the annual rate of 6% a year so it's a huge amount behind it and that was threatening to engulf the strong institutions in the world, large companies, not just large banks, and there was a very grave moment and i think none of us knew at that point, it was great in part because we came into the crisis with none of the basic tools the government's need to draw circles around the fire bricker on the firm's and

prevent fire from jumping, if none of those basic tools that is what made it so dangerous, and again that is another reason why i think in the reform act we are in a better position to contain these things because then we can force institutions to hold more capital against risks and when they make mistakes you can make the mistakes less damaging to the innocent to jump in a five-year break starting a flame will run a conservative institutions. it's been a guard their bad actors from the catastrophe or still out there? >> i don't know the answer to that. >> part of confidence and trust in the financial system confidence to have an enforcement regimes with cops on the block that will go after in the effectively detour not just a legal beater, bad behavior,

abuse, and part of it is not enforcement challenge and it's getting a the reforms in place, again, that we can't prevent making mistakes. what we can do is make sure when people take risks they aren't taking risks that imperil the system of the economy and to rebuild the economy you need both of those coming enforcement systems that work, and a set of rules that do a better job of preventing disaster, and we have a long way to go. to try to rebuild confidence in both of those aspects of a financial -- they were a great strength for decades and decades, but we lost that and we've got to build it back. >> as you see there have been reports about criminal investigations into the tater that went on during that purpose. do you believe that they will eventually result? >> i can't comment but history hasn't been written on that yet. and you have to watch and look ahead at what happens in the process but again, i feel that

we have a very strong enforcement mechanism in the united states. stronger than any other financial system in the world, and i teach people see people make sure they are using that authority as carefully and aggressively as they can to detour this kind of behavior that future. >> do you believe criminal behavior occurred? >> i'm not in place to make that judgment. i can't know that and in our system the strength of the system as i don't get to make those judgments and people in the executive. for people who make those judgments are in the future enforcement area. >> when you say history hasn't been written, what do you mean? >> i just been isn't over. there's a lot of things moving through the system now and we have to wait to see those come out. >> what are some of the companies that did it right? who can you point to that team to the recovery in a way that

you would -- >> you mean financial institutions? >> anybody involved in the catastrophe. >> i think that show -- i don't think any of them covered and no one distinguishes themselves in the period of time and the most honest and knowledgeable of them even the ones that look strong guest today will admit that. they will say that like so many other people around the world they made a bunch of judgments about the future. the assumed a more stable future than was realistic and assumed house prices wouldn't fall. the assumed that everything was stronger than it seemed, and they all got caught up in a race to the bottom on the prudence and they all got caught up in the pressure that led to more leverage and risk-taking and they all got caught up in a i think it's terribly damaging compensation race billed on

completely unrealistic expectations for what the financial businesses could produce in terms of return so i would say no one distinguished themselves. >> i have heard you say the recent months you were optimistic about some sort of action this year on the corporate tax reform. i wonder where that out. >> the president said in the beginning of the fall that he would like us to do this and so yes, that's to look at a range of options and come up with a set of reforms that would achieve the following objectives. what we want to do is make sure that we are doing everything we can for the tax system to improve the incentive for investing the united states so you see more jobs created here. when you want to do is create a system where it is more likely that the large american in the factoring companies build the next plant here where it makes sense for them to do that rather be somewhere else and to prove the major foreign companies of the business choose the u.s. as a place to build a new business, you want to make sure you get the taxes better to doing that.

so he asks us to look at options. we've been spending a lot of time doing that, consulting with the tax community to broadbased business leader community of ways to do that for people on the hill i have a regular private breakfast with the german drinking member of the tax committees, and we made a lot of progress, and i think we have a free market least a set of options which would be good for the country, good for the economy, good for investment, and would have some prospect of commanding the the bipartisan support. ..

>> again, we want to make sure we are getting the fiscal discussions in a good place. get those done, advance to the next stage, then we'll have a chance to figure out what's the next strategy for getting corporate tax reform moving. >> now you are thinking more like default? >> we have to see -- there's no reason to wait that long. we have to get the fiscal stuff done and start the process again. you know washington, the challenge in washington shapes everything that we do is how to

design a strategy that will maximize the odds you get legislation on terms that make sense. so we have to choose the timing and the strategy based on what beats that basic test. >> sounds like you are saying late, summer, fall, something like that. yeah. >> something like that. [laughter] >> pulling back the camera that corporate -- you said yes. [laughter] >> pulling back the camera from corporate taxes, what is the single tax cut that would have the best impact on economic recovery? >> well, i think we did -- we did two very good things in december in the lame duck session. >> i'm sorry, go ahead. >> we gave businesses for a limited period 100% expenses for investments in capital equipment. good cadillac effect on behavior and pretty good high return bang for the buck. and we gave them a very

substantial tax cut for a similar reason. i think those are two good examples of again effective use of temporary tax incentives to help this. but i think the -- now as you think about the economy going forward, what you need to do is more -- you have to think of permanent reforms. the people can make investments over the long term against and know they are going to be in place. remember, we live here to here with huge uncertainty about what the particular tax regime is going to be from different business and investment choices. that really makes no sense to try to run the serious economy, and country in that kind of tax regime. i think looking forward, we should be focused on the long-term investments that, you know, the tests that we try to meet is what are things in markets likely to under finance on their own? you know, the returns don't get captured fully by the innovator. and what are the kind of changes that have big long term bang. those are the two tests we

should apply. realistically, we should be thinking about permanent changes, people can plan after the long term. >> mr. secretary, are you going to be the first treasury secretary in u.s. history to decide over america faulting? >> absolutely not. two things are going to happen. one is congress is going to act to make sure we are paying our bills, avoid default, as they have and have the need to do. we are going to put in place, i believe, a long term comprehensive bipartisan, fiscal reform plan that begins this process of getting us back to our means. i think we have a very good chance of doing that. and the basis of what i see in these associations, i think we're -- you are seeing a fair amount of pragmatism. >> this pragmatism is on both parties? >> yeah, washington is a difficult place to read.

people say the most unbelievable things. you have to ignore a fair am of that and look at what people are doing and what they are open to doing. i think you are seeing more flexibility. i don't want to put anybody in difficult position. nothing is going to happen unless people are overall comfortable with the basis balance in that. i think we have a good chance. >> again, i think right now, if you are think about it, we get a lot of challenges. all of those challenges bring the unemployment, thinking about better investment opportunities in the united states, making sure we have room to invest in things like education, not just meeting our national security needs. all of those things depend on locking in a fiscal framework, fiscal reforms that make people more confident that we are going to bring the deficits down over time. if you don't do that, you leave people with much more uncertainty. >> stick with the debt for a second. then the long term fiscal stuff. you've been clear about the risk in not acting on the debt ceiling. do you think members of congress get that?

>> i think the leadership understands. i think the vast bulk of congress understands it completely. i think there are some people who are pretending not to understand it. or think there's leverage for them in threatening default -- i don't understand it as negotiating position. think about it, you are going to say the 14th amendment. >> we'll stipulate to the 14th amendment. >> i'm going to read the one thing. >> it's paper clipped and is -- >> the validity of the public debt of the united states authorized by law, including debt occurred and payment for pension and bounty for services in rebellion, this is the important thing, shall not be questioned. as a negotiating strategy, if you don't do things my way, i'm going to force the united states to default. not pay the legacy of bills accumulated by my predecessors in congress. it's not a creditable negotiating stroke.

-- strategy. it's not going to happen president the leadership understand that is they have to do this. they also understand as we do we want to take advantage of the moment to try to get people to do things they may not have been comfortable doing. put them on a long term path that's more sustainable. >> as republicans scheduled the vote on the debt ceilings designed to fail, are you worried about market reaction? what will market reaction be? >> this is a funny place watching. think about this -- as i understand it, i'm not sure i do, house republicans introduced a bill that they say they are going to oppose, ask your members to vote against, and then go tell the investors of the world to pay no attention. so it's -- it is a strange place, washington. [laughter] >> and you did get it right, by the way. >> is that right? i didn't really understand it. let me do the positive side. let's do the positive side of it. i think the leaders in congress

are trying to figure out a way to get their members to understand what's necessary. and they are trying to do a range of things to maximize the chance they get the votes for doing this. remember, this is going to require republican votes, and it's going to require some democratic votes too. in the house, of course, the majority party is going to carry the burden of getting this done. they know they need democrats for it. that's why i think you can be optimistic now. getting something done on the budget front. because you don't do anything with just one party now. you need to do it together. that'll force a bit more realism and balance into the overall package. >> you are right that they are telling the markets, pay no attention, just kidding. will the markets listen? >> i think they will. you know, if you look at financial markets now -- we pay very low interest rates to borrow short term, long term now. and some people misread that as

lack of -- we don't have a problem with deficits. but it's really a reflection of confidence that we will ultimately do the right thing. that washington will ultimately act. and act to fix this problem, much less make sure we pay the bills. so i think that you see a lot of confidence in markets about -- the ultimate capacity of this political system which we are now testing. we are going to test to do this. if you take it too long, you might see that competence as a road. you don't want to take it too long. you don't want to -- think about it. wait. you don't want to -- you don't want to force people to start to prepare for the possibility to people will miscalculate in washington. that would be terribly responsible. that's a phrase, in fact, i think if you listen carefully, you are seeing the leadership used -- they said as the precedent to me. we are not going to take this too long. we're not going to take it to

the edge. we recognize we can't play around with it. >> wall street is understandable, what about the international markets though. have you reached out to the japanese, chinese? >> they spend a lot of time trying to understand this place and country. i think they have a good field for what's theater and what's reality? >> you believe what's occurring is theater? >> absolutely. right now this is all theater. but again beneath the theater, you are seeing people start to work together. you know, i went to a dinner last night that peterson -- he is the iconic fiscal hawk is having a summit today in washington on the fiscal problems. and one of the major combatants in previous fiscal were said to me last night. what changed in terms of prospects for a good outcome on the fiscal side is when if you listen carefully, you saw the republican relationship, conservative republican leadership and the president of the united states alongside a

bipartisan fiscal commission say we need to do $4 trillion in deficit reduction and to embrace a pass for the deficit, largely the same, to bring the deficits down over the next three to five years, where the overall debt burden starts so share the link. when you see that broader consensus in the american political spectrum about what has to be done and the debate is only about how to do it, the compensation. what's the mix of things you are going to do? then that changed expectations ab the probability of an outcome is good. i think that's partly -- i think smart people look at that. they look back, for example, you look back to '96 and '97. when president clinton joined with a bunch of republicans. they were going to balance the budget. that's what shifted the balance completely. people who are sophisticated and smart. they look at us today. they know washington is hard to read. but they have politics in their

countries too. they are looking and giving us a chance to prove that again this political system can do it. >> mr. secretary, we agree that the eventually will get done. the more important and more interesting conversation is these long term challenges that you talked about. what do you think now is the prospects for a sizable deal on that this year? >> i think they are quite good. because again you have people agreeing on the broad magnitude, $4 trillion of deficit reduction, about bringing the deficits down to a level. in a recognition that you need to do as much as you can now in the form of a substantial down payment that locks in specific reforms, savings, towards that objective. you don't need to solve it all at once right now. but you have to go as far as you can. and -- so that's why i think you have a realistic prospect for doing something useful. >> what reporters out in fact conversations that the dow

payments might look like something of the $1 trillion over $4 trillion. >> the vice president said it yesterday as did the majority leader in the house. and so, of course, i think that's the realistic prospect. but remember it's the shape of it that matters a lot. because again, why do we care about that stuff? we care about that stuff because we want to make growth in the united states. job growth, investment growth stronger in the future. so it's the composition of the savings. how you balance the interest of the elderly with the young. how you balance the need to make sure we can invest in education against the obvious reality that the government is going to have to demonstrate it can save money. do things -- do more with less. how do you balance the need for better investments against the need to -- how do you make it fair? how do you make sure that people feel like they are bearing a share part of the burden for bringing the steps back down to earth.

how you do it is pretty important, in terms of creditability. if they try to solve this, if people up there try to solve this by assuming away the problem by using growth assumptions that create the illusion that we are going to solve it by assuming to be political coverage in the future, that kind of magical thinking, the markets will look at this and say it's not real. >> when you talk about political courage in the future. what you are talking about is specific targets. >> i think what we want to do is have a mix of targets for deficits with a debt cap that forces the debt down over time, enforcement that overtime makes it happen. as substantial as a down payment now so that it's -- people can see and feel the reforms are going to happen. >> now when would the real debt catastrophe come. i heard a panel on the stage where the estimates were from nine months to five years. when -- if we didn't act, when we would start to feel it?

>> there's no -- you can't know the answer to that question. that's the judgment about the capacity of the political system to get the act together. >> and at the moment -- >> you don't know what that threshold is. what sufficient the deficits are unstainable high now. they have to come down. you don't want to take the risk that you get behind it. you don't want to put yourself in a position where the market is forcing you to act. if you let yourself get in that position, then it's much harder to fix and much more costly. but i want to come back to the point about balance. again, you know, people need to look at the shape of the package and say is it realistic? is it fair? will congress hold to it over time? and that's why, you know, things like the balance between revenues and savings is so important. you know, realistically, you are going to have to find a way through tax reform and changes to get revenuistic and help

reduce the deficits. one more thing -- americans aren't going to be open, maybe should not be open to doing that until we have demonstrate that the resource that is you get through tax reform are going to be used for deficit reduction. just like the other side of it, people are not going to accept you know the dismantling of medicare and deep cuts that shift costs and increases to seniors if the savings are going to be devoted to sustain tax breaks for the most fortunate americans. it's not realistic. it's not going to happen. it's not problem. the thing about balance is important not just for fairness, but the creditability of the plan. if you put a plan out there and the market looks at it and says it's not realistic. it has deep cuts. our politically unfair balance. they will think it's less credible. >> who are three people if you left them in a room that you would trust and you believe

could solve the deficit problem? >> there's a lot of people who could solve it. i don't think -- this is not a difficult economic challenge. it's not a hard financial thing. there's lots of paths to a reasonably balanced deal that hurt the economy as a whole. people understand it. it's a fundamentally critical challenge, of how you build a coalition that can support that at the time when the country is so divided. that's the challenge. >> there are a few more than three. there are a couple of players in the conversations right now. they are one of them. the vice president is running the process. what style does the vice president biden have in the meetings? >> before i go to him, you have this around the present now. you really have an exceptionally talented group of people who have been at the center of all of the successful bipartisan fiscal reform great manies in

the last two decades. jack lew and gene sterling and jason ferman, exceptional people. the vice president is spending a lot of time not just talking about the leadership on the hill, one on one with exceptional care and discretion, he's spending a huge amount of time making sure we understands the economics of the choices. and he brings, you know, i watch him in this rooms. he makes sure that he understands everything. and he's got a very good approach of trying to make sure he understands where everybody is coming from. what they need, what they can't do, how to get to a place where they can't do something. that's one reason why i feel confident that we can land this in the sensible place? >> secretary, let's talk about europe. this is a question for my brother, scott. he's the smart one. he was in north carolina. he e-mailed me this, he was just ranting. >> what does he do? >> he's an electrical engineer.

he was ranting. i said i'd find out. why does the greek debt crisis make the stock market go down? they have total debt of $408 billion, the total of stock markets is $50 trillion. the complete fault would cost the world 1% of the net worth. why should the market fall further? >> he sounds pretty good. >> i told you, it was a smart one. >> let's look back to last spring. last spring as the european fire was building, you saw huge damage to confidence globally. s & p 500 fell 500%. people were taken by the recession, trauma, the crisis act as close as we came. that sparked a huge new wave of fear. it's probably because people have a hard time understanding what is the magnitude of these problems. are the governments going to

understand and solve is sensibly? now over the last six months or so, even as the crisis deepened in europe, people have been more able to separate that from their concern about their confidence in the broader global recovery of the united states. we've seen much more con testimony nation. but it's still a very serious problem. and apart from what your brother said, you could say it was pointing out this relatively small financial problem to solve. i think people should understand it's completely within europe's capacity to manage this in a way with no collateral damage. it's not expensive. it's complicated, but it's not rocket science. they have the political and financial means and the political will to do it. but people want to see them do it. but i think it's a containable problem both for them and should be for the world. >> mr. secretary, you were the imf policy director. you've seen some of the stories

this week about people who have worked there. you said there was a predatory atmosphere. "the new york times" had a memorable phrase like the pirates of caribbean, men on the prowl, women on guard. were you aware of those problems? >> i think to be fair to any cultural place, i think that's a hard question to ask a man. you could ask a woman that question, i think it's hard to find any -- no offense to the men, i think it's very hard for men to understand why it's like to be a woman working anywhere in that case. you should ask a woman at the imf case. >> sounds like, no, you weren't. >> i wouldn't say that. even if i was aware or said i was aware, you wouldn't have any feel or appreciation for it. >> but i would say that, of course, you'd want to make sure that any institution like that has in place the highest basic standards for ethics and behavior. so that no person working there,

whatever their gender or background faces that sense of insecurity risk. >> now since being arrested, dominque strauss-kahn has resigned. has he reached out to you? >> no. >> they seem to have a predecessor. >> if you step back, i want to let you know what's driving our approach, the institutions. these were formed in the wake of second world war. and they were set up in a really different era. they were set up with a balance of power government structure that reflected the balance of power at the time. the world has changed dramatically since that time. we have been leading, working with, not just emerging economies, but even with europe too to make sure we change the government structure to better reflect the reality. that's important. we made a lot of progress in doing that.

we have stuff to do that. part of that is making sure that people have a contestable appointment process for the institutions. people want to be confident that the judges are going to be made on the merit and talent of the individuals. you have about -- i think you are about to have two people now, kristen lagarde, and augustine cast tens, two very credible people said they'd like to run the institutions. there maybe others to join them. i think you can look at this now and be much more confident that you are going to have an open process where people are going to look for the candidate that not just has the most experience and technical, but who can command the broadest base of support. kristen is an excellent person, talent, and political skills that you need to navigate.

augustine has that as well. and, you know, we want to see a process where we look to the candidate who can command the broadest support. >> okay. i'm going to ask you one more question about that. then i'm going to go to ben white. do you expect that you'll wind up weighing in between the two candidates? >> we ultimately will. i think it's for the good of the institution. remember, christina's strength is got that i would say principally that she's european. it's her strength and should be the strength of anybody is what's the experience and talent they bring to the job. that have all matily, you know, we're the largest institution, we will play a significant role in not just making sure the process is fair, but the outcome is good. >> a lot of you in the room know ben white. he's created an amazing warning bulletin. thank you for being here. ben, i think you have a question. >> i do.

although i have to say after questioning after mike allen is never a happy circumstances. because he asked everything under the sun and does it incredibly well. just a couple of quick follow ups on the issue of the debt ceilings and budget negotiations, i wonder if you think the result in the new york special election had a meaningful impact on that debate. it seems from the outset, republicans were very emboldened to push the debt ceilings to the limit and demand a hard bargain on the $4 trillion reduction deficit target, and essentially take it to the wall, thinking they had a mandate to do that. do you think that mandate has lessened based on the result and the general sense that there's less of an appetite amongst the public for some of the cuts that republicans are seeking. has the nature of the debate changed on that? >> i don't think the republicans ever had a mandate to default on the country's obligations. not a chance. i think in terms of the

election, i'm not a political person. so i'd say the following, i think what is clear is that we need to build on the reforms in the affordable care act to find a way to get more savings out of the health care system, including medicare, over the long run, so that we can afford to give people who retire access to health care within adequate benefit and adequate burden to them. it is absolutely clear that we're going to have to do more reforms, more savings from the health care system going forward. but it's also clear that you do not need to and we will not dismantle that basic commitment to seniors and shift it to a defying contribution plan that shifts cost massively to the seniors. remember the house republican budget illustrates what you have to do if you were unwilling to

touch revenues. if your objective is to leave in place these exceptionally low tax rates for the most fortunate americans, then you are going to have to do transforming dismantling of basic commitments to our seniors to the poor and to the elderly. there's no alternative to that. it's not going to happen. we're not going to say we never supported. absolutely, we have to make sure we find ways to get more savings out of the health care looking forward. >> what do you make of the new york result? >> that's what i make of it. we're not going to dismantle. that basic commitment of the safety net for the seniors. but it's also true. and this is an important reality. people accept it. if you listen carefully, democrats, jenny said it yesterday, chris said it yesterday, we're going to have to go beyond the affordable care act and get more savings.

we want to do that in a way that leaves in tact an access to health care for senior citizens and leaves them bearing an unfair burden of the cost. >> one more -- i'm sure you saw the ugly dust up of elizabeth warren and some of the republicans in the committee. i wonder what your thought is on whether the president should use recess to appoint elizabeth warren afford of the fcb, or is he polarized that's she's a distraction to the dodd-frank, and go ahead and move somebody else. >> i didn't watch the hearing. i read about it. i thought what happened was unfair to her personally. i think she's done a good job of not just starting up the agency, hiring people like holly petraeus, and others to help come run the noble task. and you saw her just recently lay out very important reforms

to simplify disclosure of a mortgage application so people know what they are getting and make better choices and can protect themselves from people that take advance of them. that is a very important objective. and, you know, i would just say that, you know, the oversight process is a very important thing to preserve and make strong and credible. i think what you saw yesterday will leave everyone to question whether the oversight process is like on the up and up. how many is political theater, how much the is necessary tough job that congress has to do? i've testified more than 50 times since i took office. and, you know, it's a hard tough thing to go through. it's necessary. but for the oversight process to be viewed as fair, and not just tough, but good and credible, you have to try to make sure you

take as much as political theater out. it's impossible to take all of the politics out of it. but i want to do that. that's why i say what happened yesterday is not just unfair to her, but not benefiting the policy. >> mike woodward. >> hi, debt ceiling. as you know, there are members of the house of representatives that think this is not theater. >> not? >> theater. the brinksmanship. >> you are using theater in a dispairingly way. >> in what were you using? >> the appropriate context. >> well, to use your phrase, they are human beings. as you know, they feel quite strongly about this. and the question is what is your contingency planning that must be going on in case there is some sort of default? >> let me just say clearly, the

united states will never default on it's obligations. this country will never put itself in the position where people believe we are not going to pay our bills. it would be a catastrophe failure of basic governance to do that. and congress will do what it has always done which is to pass the debt limit. so our plan is for congress to pass the debt limit. our fallback plan is for congress to pass a debt limit. and our fallback to the fallback plan is for congress to pass a debt limit. >> as you've said, sir, you live in an environment of all contingency or all options on the table. you have to be considering that possibility. >> oh, i find it unthinkable. and again the -- under our system of government, congress has imposed on itself this unique obligation no other country has it, i think. remember, this is about paying your past bills. it's not about your future

obligations. and again, i am very confident that the leadership in congress understand that basic fact and i am very confident that they will act to make sure we can pay our bills. and i'm also confident that we have a chance to do something very important. >> so there's no contingency plan. there's no fault back plan. >> congress will -- i'll repeat again, congress will do the right thing here. i think the harder thing and i think it's -- it is the more important thing is to make sure we find a way to build a bipartisan, comprehensive balanced fiscal reform plan so we are living in our means and not leaving the economy vulnerable to the future to the kind of concerns that can build if you look like you don't have your arms around this. >> in a second we're about to get the hook here. as we say good-bye, final question. question about the president, he's not an economist, what's the toughest or hardest question

that the president has asked you? >> asked me? >> yes. >> oh. that's an interesting question. well, i'll tell you a story. i think this is a fair story to tell. i remember going to him the first day after i was confirmed. i went to the oval office and the united states and larry summers was there. this is the first time i'd -- you know, we'd spent a lot of time talking about strategy and the financial system. there's a whole range of things that were happening in the financial system that -- that we haven't really talked about. i went into him and i said we have these five very complicated, potential, catastrophe bombs that we had to diffuse still. they were going to be -- it's going to be expensive. aig is one of them, but just one. it was going to take a lot of resources and politically terrible to go through it. but nothing was possible unless we did that. as you know, we laid out a broad

financial strategy that people didn't regard with much affection and enthusiasm at the moment. it was an excellent strategy. we did everything that we said we were going to do. it had a huge impact in turning things around. that was not evident at the time immediately. and he did as you would expect. he did this all the time with us. he check in how are things going? and he'd ask me are you competent this is going to work? and that's the tough question. because, you know, if you look -- i said this, if you look back, took economist 60 years to figure out what caused the great depression, what was the lesson from that policy during that time? i said nothing is certain in life. but i'm very confident the strategy is better than the alternative strategies. it's the best chance for working. but that's an example of the

question. >> playbook is big on birthdays. in august, you are going to be 5-0. how are you going to celebrate? >> i usually have just with my family. i hope -- i'm sure i'll be with them again, near an ocean. >> and ben white -- ben white says you've tried surfing. is that going to be a regular thing? >> i want to make it clear for the record i do not surf well. remember you, i am almost 50. >> but you might try it again this summer? or what would be your sport of choice? >> i do anything that involves the water or sail or the surf or the ocean. it's, you know, it's the coolest thing. >> mr. secretary, we really enjoyed this. thank you for doing this. >> thank you, mike. >> in a few moments, senate debate on extending certain expiring provisions of the patriot act.

in about 45 minutes ---

>> debate continues today in the senate over extending certain expiring provisions of the patriot act. a procedural vote on the issue is scheduled tomorrow morning. republican senator rand paul of kentucky has objected to the amendment process. this is 45 minutes. >> well, i thank the senator from new mexico for this comments. i think what this shows, it is a bipartisan effort that says that we should protect our constitution. those on the left and those on the right who believe in the constitution think it should be protected. and it brings some of us together who may not necessarily agree on all other issues, but when it comes to the constitution, when it comes to the basic bill of right that is we are concerned, both on the right and left, on the democrat and republican side. the problem is those of us who are concerned with the constitution are in the minority of both sides. so we are being quieted down, we

are being told to sit quietly in the back of the room, and don't make waves. we want to have a debate over the patriot act because we are concerned about our liberties. we are all concerned about terrorism too. but we don't think you have to give up your liberties in order to combat terrorism. on february 15th, we extended the patriot act for 90 days. during that period of time, and on that vote on the senator floor on february 15th, we were promised a week of debate. and we were promised an open amendment process. we are now amidst a process where we have will no debate and no amendments. do we fear terrorism so much that we will not have debate? do we fear terrorism so much that we throw out our constitution and our unwilling and afraid to abate -- to debate our constitution? i think it's a sad day.

senators afraid to vote on the issues of the day. afraid to debate the constitution. afraid to have an open forum and debate important the patriot act is constitutional. i think it does a great disservice to the voters. they talk about this being the worlds most libbertive body. we are unwilling to ask questions about to whether or not the patriot act is unconstitutional. we've been in session 99 days since then. we've had 99 days since we've extended it, 43 days in session, and 56 votes. what does that mean in the context of things? we are setting a record for the least amount of votes ever to occur in the senate. there are important questions we should be debating. unless there's fore gone, and they have counted the vote and decided the outcome, we are precluded from debating. wendell phillips, the greaten --

the great abolitionist wrote -- leads to loss of liberty. in the aftermath of 9/11, we amended the constitution with the patriot act. and you say, whoa, we didn't add an amendment to the constitution, did we? well, we didn't do it the way we are supposed to. but we did in reality amend the constitution with the patriot act? how did it happen? we were fearful. 9/11 happened. we wanted to stop terrorism. all of us want that. but do we have to give up our constitutional ribs in order to do that? how did the patriot act change -- how did the patriot act change -- how did the patriot act change the constitution? how did the patriot change the fourth amendment? well, we have in the fourth

amendment it says that the right of the people are to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrant shall issue but a probably probably cause, and particularly describing the place and the persons to be seized. well, the patriot act changed this. the patriot act changed the standard from probable cause which is a long standarding tradition and standard within the court, which limits the police from coming into your house unless there's probable cause that you've either committed a crime or are in the act of committing a crime. we change this to a standard that we call now relevance. but that's changing the constitution. how do you change the constitution by majority vote? it's supposed to be a super majority in both bodies. then it's supposed to go back and be ratified by 3/4 of the

states. it's supposed to be difficult to change the constitution. difficult to amend the constitution. why, because we thought some of the rights were so important that we should not allow a majority to change them. those of us who own guns and believe in gun ownership think that the second amendment is protected from a simple majority taking away the second amendment. likewise, the first amendment, those of us who prize the ability of the press to print and respond and hold beliefs however unparticular, those of us who wish to have a country in which religion is not hampered and we can say what we believe and not have it hampered by the government. we don't believe that a majority should take away these rights. by a majority did take away part of the fourth amendment. because we changed the standard of the fourth amendment from probably cause to relevance. so if they want to look at your records, they just have to say it is relevant.

they don't have to say you are a terrorists, they don't have to say you are a foreigner, they don't have to say you are conspiring with anyone, they want to say they have interest in your library records. how often is this going on? there's something called suspicious activity reports. some of this was started before the patriot act, some of it separate, much of it was emboldened by the patriot act. the suspicious activity are where your bank spies on you. you may not know this is happening. you may not know, and they probably won't tell you. but if you made a transaction that occurs and involves more than $5,000, you could well have been spied on by your bank and reported to the government. some people say i'm not doing anything wrong. i don't care if they look at my records. here's the thing, if you look atavist -- look at my visa bill, you can tell what doctors, if i

see psychiatrist, what magazines, books i order from amazon, whether i drink alcohol, whether i gamble, there's a lot about your life is that is involved nor financial records. i think they do deserve protection, and that we do deserve a standard where we don't just say, well, it might be relevant, or we want to troll through all of the records to see if anybody is committing a crime. this one is even worse than many of the other aspects. because suspicious activity reports do not begin with the government asking any questions. they tell your bank to watch you. your bank is to watch you and watch all of your transactions and to report to the government. so they have forms. you say maybe they are only reporting terrorists. since 2001, since 9/11, eight million suspicious activity reports. eight million have been filed. over a million of these are filed a year.

the thing is that you could well ask for a freedom of information act, freedom of information inquiry and ask whether or not you've been investigated by your government for your transactions. my point is that this is an invasion of your privacy, it doesn't have any judicial restraint upon it, and the other thing is that it may not even be good for finding terrorists. it maybe that they are getting so much information that they can't even read or listen to all of the information. and it's kind of like what they are doing to you at the airports. because they insist that everybody be searched and everybody be patted down, we are patting down 6 years olds. a little girl in my town, her dad is a physician and practiced with me was patted down when they are putting the hands inside the pants. this is absurd. 6-year-old girls. they are wastes time on people who will not be attacks us and

spending less time on people who might be attacking us. if they are looking at your banking record, they don't have time to look at who is attacking us. eight million, no judges order. this one aren't reviewed by anybody in government. they are giving cart lodge this power to blank. and they are telling the banks if you do not spy on your customer, you will be fined. they estimate that they spend $7 billion a year. we are having trouble with our economy. yet we are going to add $7 billion of cost to the banks to spy on their customers. now might there be an occasion that the bank transfer or bank activity could be a terrorists activity. yes, if we are investigating those, let's ask for a warrant. you say that'll be too slow.

we'll never get it. guest what, warrants are almost never denied. there's a special court set up for the investigation of intelligence. it's called the fisa court, it's been around since the 1970s. before the patriot act, the fisa court never turned down a warrant. you say these people are awesome. we just have to get them off of the street. doesn't matter, i just want it done. unfortunately, that's been the attitude of the majority of the people up here and the majority of americans after 9/11. people were so frightened. they said do anything. i don't compare. the problem with that attitude is even if you want to argue that it hasn't been abused yet, what happens when people are elected to your government who decide they don't like your religion or you believe in a certain kind of marriage, and you want to say this, they want to investigate you. there's no step to stop that. there's no step to say your church believes in the unorthodox believe or the belief that we don't call politically

correct or no longer acceptable. we want to investigate the banking records and see if they can take away the irs number or tax exception. if you don't have any restraint to these activities, some day we will get a government who has no restraint and goes forward to say we wanted to get that church shut down because they are saying something we disagree with. or the people reading the books that we don't like. this goes across party aisle. look at people that the library associatives -- association is concerned with this also. that people's books are being looked at. think about it, do you want the government to know what books that you read. do you want to be on a watch list because of the books they read? oh, there are provisions. we made provisions that won't happen. the only way you have a real provision or protection is if you have procedure real steps.

procedural steps that say someone has to review this. if we have someone that's is terrible and need to be get off of the streets, accused of rape, murder, robbery, accused of the most heinous crimes and it's 2:00 in the morning, we call a judge and get a warrant. it's almost never turned down but it is one step removed from the police breaking down every door they suspect and not having any kind of discussion with someone who has a level head who's not part of the investigation. now many up here will say we're in grave danger. if the patriot act expires, all things could happen and terrorism could break lose. what they are arguing though is that they are arguing that there is a scenario where we wouldn't get warrants to invest terrorism. that never exists. before the patriot act, we were not turning down these warrants. some have argued that masawi, he

was the 19th hijacker captured months before 9/11. if we only had patriot, we would have got him. that's untrue. there's the provision called the lone wolf provision. with didn't get him, because we didn't do our job. we didn't communicate well and the superiors to the officers and the fbi agents in the field did not even ask for a warrant. they turned down the request for a warrant without even asking the fisa court for it. so we have the 19th hijacker a month in advance, we have their computer. when we look at the computer on 9/12, we link very quickly within a matter of hours to all of the other hijacker. now it's easy in hindsight to say we could have stopped 9/11. to tell you the truth, we have to look at the rules and say would we have gotten that information? the answer is yes. the fbi agent in minnesota wrote 70 letters, 70 letters to the

superiors. the fbi was told that he was possibly an agent of terrorism, the french government confirmed it. that was all we needed with that information had they gone to the fisa court, they would have gotten a warrant. when the 9/11 commission report came out, they acknowledged. his warrant would not have been turned down and there's a possibility we might have stopped it. the suspicious activity reports are particularly galing because they are businesses who are forced to supply on their citizens. there's another form of supplying that goes on as well. these are called national security letters. these are like wart that is go after your banking records like the suspicious activity reports. but they are a little bit more targeted in the sense that the government asks for an nsl. but it's not a judge that asks for an nsl. the person who asks for an nsl is an fbi agent. essentially a type of police or law enforcement agent. the danger here is we've removed

the step where the police officer or fbi agent would then ask for permission from a judge. that's my problem with these national security letters. and some would say we are not doing that many of them. initially, we weren't. now we've done over 200,000 national security letters. one of my reforms if it were to take place would be to ask judges to review these. i see no reason why they shouldn't review them. now some have said, well, you have no expectations of privacy. the courts have already ruled that you have no expectation of privacy in your papers or electronic records. this is a way it's been interpreted. but i think it's been misinterpreted. i think it's been interpreted that your banking records do not deserve privacy when they are not in your house. i think that's an incorrect interpretation of the 4th amendment. the 4th amendment says in your papers, you will be protected.

it does specify whether the papers are in your position, -- your possession, or someone elses. at this time, i'd like to yield the floor to my good friend from south carolina. >> thank you, senator paul. i came down to floor to thank you for bringing up a number of issues concerns and being able to stand down and tell america what those concerns are. i also respect your demanding the opportunity for debate and for amendments of such an important bill. it's extraordinary, particularly after the majority leader had promised in february that the patriot act renewal would get a week of debate with the chance to offer amendments. after a couple of weeks of doing absolutely nothing here on the senate floor, that senator paul and others were denied the opportunity to overarms that would have brought up legitimate debates about the patriot act.

there are a number of things a lot of us would have liked to learn more about, heard some of the argument that is we have heard from senator paul here today. but unfortunately, that's been limited to a relatively small amount of time and that it's frankly stunning to me that the majority is actually willing to let the patriot act expire, rather than give senator paul a few amendments. that's an extraordinary situation for a senate that considered itself the worlds great deliberative body when one the most important pieces of legislation that we could consider is jammed up against a break with no opportunity for amendment. senator paul, i don't want to interpret your flow, i think a lot of things are important that we consider. unfortunately, they won't be considered. it doesn't sound like your debates will be allowed and for the amendments to be considered.

it sounds like what they are going to try to do is blame you for us voting late or early. but i want to commend you for standing for just good judgment and common sense that something this important is whether we agree or disagree with all of the amendments is not the point. it's too important to be handled this way. senator, i will allow you to continue. i yield back. thank you for what you are doing. >> yield for a question? >> yes, i will. >> not only are we not debating the patriot act, do you think we have given sufficient floor time as to how to deal with the debt problem? >> i think you know the answer to that. some of us had observed time between 2:30 and 3:30 for some give and take on the budget floor amendments or the budget votes that will be this afternoon. but that time was con selled by the majority. we have an impending debt that everyone in the world accept for

those inside this body here seem to understand. i mean we are in trouble as a country. the majority has not produced a budget and over 700 days, i think it is. at the same time, we're trying to negotiate how we'll move forward on this huge important point of raising the debt ceiling which none of us want to do. we are avoiding the subject of balancing the budget, this is the majority leader has said these kinds of issues are off of the table. so it is very frustrating that whether it's the debt ceiling, whether it's the patriot act in our homeland security, that we're spending weeks doing nothing, bringing up in some cases controversial judges with -- that should not have been nominated in the first place. others are spending day after day of floor time and not bringing up important issues. but we are all concerned here. i know america is concerned.

and again, the senator, thank you very much just for the willingness to bring out the point that we have something here that's very important to our security, to the privacy of every american that needs to be debated and amendments needs to be offered. yes this has been denied after a promise. i will encourage you to continue. thank you for your courage. >> one other question, we don't all question necessarily on the patriot act. the thing is even for those that feel it's important they not expire, why would they not consent to debate. i asked for three amendments and votes to do them. we could debate and have it done and be no exploration of the patriot who thinks it's expiring is a problem. >> senator, as you know, you had 11 amendments that you would have liked to have considered. so we could do that. they wouldn't agree to that.

you were willing to compromise for three amendments. it doesn't sound like they want you to offer those amendments. frankly, they don't want to take a vote on some of them that may expose what they really believe. it's a frustrating situation for you. they as a majority friends like to do cause the problem and try to blame it on us. within a few hours, this would be decided and over. we could pass the paid yacht act, and folks could vote for against the way they want. they could send it to the house. it does appear the majority is willing to let the important legislation lapse just to keep you from offering a few amendments. that's an extraordinary situation. again, thank you for yielding, i appreciate your getting this debate out on the floor. >> thank you. i don't quite gasp while we are so fearful of debate and votes they will willing to let the patriot act expire in order just

to prevent debate. and prevent votes. the sticking point turns out to be an amendment basically on preventing gun records from being shifted through under the patriot act. now people say what if someone -- a terrorists is selling guns illegally. couldn't we get them? yeah, get them the way they get everyone else. judges do not routinely turn down warrants. the 4th amendment protected us from an over zealous government and also got criminals. i'd like to yield to my good friend from utah. >> mr. president. >> senator from utah. >> i think the distinguished senator from kentucky for standing up for the 4th amendment principals that he's articulated today. this is an important issue to all americans. americans are one concerned about