create the most long-term deterrence. are criminal investigation is balancing things around money laundering, terrorist financing, preparer fraud, identity theft fraud and very specific tax fraud. we try to allocate the resources appropriately so the answer is yes and a lot of times you will see a scheme where one person with a bunch of -- puts a bunch of false claims in, files a return and comes back. usually individuals claim a 1000-dollar credit for themselves fraudulently usually they will be find it much more of a civil context than a criminal context that the bigger the crime, the more it happens and as you know in partnership with the justice department and local u.s. attorneys. ..

overseas and offshore tax evasion, people parking assets overseas i would say whether its complexity where people - and push the envelope. we've been focused around prepare fraud because it's a big point of leverage of a thousand taxpayers and encourages them to do something fraudulent a lot of times the taxpayer is unsuspecting we can walk that down as a plank in the system and then a refundable credit, places where you can get a tax credit that is large, so we did

a lot of focus on first-time home buyer where it was a big refundable credit that was temporary, the was quick, earned income tax credit we put a lot of effort there and around both civil and criminal follow-up and then this set of credits that you talked about is where we put a lot of effort. >> thank you. >> thank you for your patience.

now the white house nominee for ambassador to afghanistan testifies at his confirmation hearing before the senate foreign relations committee. ryan crocker served as u.s. ambassador five times, including a time in pakistan and most recently in iraq during the bush administration. senator john kerry chairs this two-hour hearing. [inaudible conversations]

[inaudible conversations] [inaudible conversations] elbe conversations [inaudible conversations]

>> of the hearing will come to order. thank you very much. i apologize for being slightly tardy. we welcome our friends and colleagues, senator john mccain. we are delighted to have him here for the purposes of making an introduction. obviously we are here today to consider president obama's nominee for ambassador to afghanistan, and i think we are very fortunate that the president had chosen one of america's most experienced able to platts to serve in kabul and we are very fortunate that ambassador ryan crocker has agreed to search. we are happy to welcome him again before the foreign relations committee. as everybody knows in his distinguished career he served as ambassador to five countries, including such challenging as

pakistan, iraq and lebanon. and immediately thereafter the taliban became in afghanistan reopening the embassy for the first time since 1989. so this is a man with experience in the region and in these complicated difficult tasks. i think he thought he retired from a quiet life in academia, the president had another idea, and i want to say on behalf of all of us how grateful we are, ambassador crocker that you and your wife were willing to agree to return to public service. obviously, you will arrive at this post in a pivotal moment in conflict when critical planning window in front of us right now, this is a critical moment. it's a moment where we have the ability to recalibrating if that

is what is needed, to redefine and do the things necessary in the wake of the success that we have had against al qaeda, which was the principal reason for being in afghanistan and the first place. so, in order to ensure a transition, i think there are a number of things that need to be thought through. last month we held five hearings on afghanistan and pakistan to examine all the assumptions guiding the strategy in the region and chart a path forward. in about two weeks, secretary of state clinton will testify on the administration's thinking and address congressional concerns as the president decides how many troops to draw down starting in july. needless to say it would be helpful to say if this committee and the senate can move rapidly on the nomination to put you in place to be part of those deliberations. to see very quickly - senator mccain is here and i don't want to truncate this but i will

say quickly - we ought to be guided by certain truths here. first while the united states is genuine national security interest in afghanistan our current commitment of troops and in her dollars is neither a proportional to our interest or sustainable in my judgment. second, our military has made significant gains clearing and holding in the south, but as the president said, they are fragile and reversible, absent continued u.s. robust presence there. we have not yet made a game in the east where the threat from the groups based in pakistan continues. and i will continue to be to this drum that the principle equation with respect to our capacity to resolve concerns in afghanistan still lies in pakistan and will fly in and our ability to adjust that

relationship, and indeed, to create a regional framework with respect to this conflict. i want to emphasize that regional framework. third, only a political settlement will resolve this. every military leader has said that. there is no military solution. reconciliation is not a silver bullet bill we are going to need to support the government of afghanistan as it tries to engage those willing to make some kind of acceptable agreement. and finally, we need to reexamine the current plan with respect to the afghan national security forces because there are serious questions about science, capability, sustainability, and i think we need to examine those very carefully. also today the majority of the committee is releasing the report regarding the assistance.

this is a report meant to be constructive. it's a report with critical observations, but observations that are made in the joint cooperative effort and we appreciate the administrator's responses and assistance and appreciate the administration's cooperation in efforts to address the concerns we have to read the report argues the u.s. assistant needs three basic conditions. before that money is dispensed. projects have to be necessary, achievable and sustainable. over the next few months there is a lot on the table for the congress and for the president and ambassador crocker is going to have an essential role, critical role to play in making sure the we get it right. senator lugar? >> thank you mr. chairman. i join you in welcoming a very distinguished nominee. ambassador ryan crocker returns

from retirement to again apply his unsurpassed experience of managing civil military collaboration in a dynamic conflict environment. i think him for his commitment and i know that he will be bringing in sight and informed judgment to the job in kabul. and as you pointed out this is the sixth hearing in the formulations committee that has held that to afghanistan during the last two months. we have explored not just what is happening in afghanistan and neighboring pakistan, but what they're our vast expenditures in afghanistan represent a rational allocation of our military and financial assets. argeo strategic interests are threatened not just by terrorism, but by debt, economic competition, energy and food prices, proliferation of weapons of mass destruction and numerous other portions. solving these problems would be much more difficult if we devote

too many resources to one country that historical is frustrated nation-building experiments. the question the president must answer is whether we can achieve the most important national security goals in afghanistan, especially prevented the taliban from taking over the government and preventing afghan territory from being used as a terrorist safe haven. at far less expense. ambassador crocker would be assuming his post collins event with the obama administration's review of afghanistan policy that is anticipated to result in some level of troop reduction. this opportunity should be used to do more than just withdraw an arbitrary number of troops based on political expediency. rather, the president put forward a new plan that includes a definition of success in afghanistan based on united states vital interest and the

sober analysis of what is possible to achieve. such a plan should include an explanation of what metrics must be satisfied before the country is consider secure. shettle so desiccate and eliminate those activities that are not intrinsic for decorah objectives. the administration ambiguity on the goal must be eliminated. in order to move effectively and more effectively address our national security interest and convey to afghans a continuing relationships we will maintain as in the region. despite ten years of an investment and attempt to better understand the culture we three man in a cycle that produces a lot of progress but fails to secure political or military resolution. in afghanistan measuring success according to relative progress has very little meaning. we will make some progress when

we are spending more than $100 billion per year in that country. moreh important question is whether we have an efficient strategy for protecting our vital interest has is not involved massive open-ended expenditures and doesn't require us to have more faith than is justified and afghan institutions. i would appreciate hearing the nominees impressions of the obama administration strategic review and how we can improve the afghanistan's capacity to defend and govern itself while reducing our own commitment and resources. i applaud ambassador crocker's planas once again to take on an extremely difficult mission, and i look for to his testimony. thank you, mr. chairman. >> thank you. as i said previously, it is a privilege for the committee to welcome senator mccain as the ranking member and the chair and so forth back-and-forth in the armed services committee, there

is nobody with more experience of these matters of who pays more attention to them in the senate and i appreciate taking the time to be here. to introduce ambassador crocker. senator mccain? >> thank you. thank you for your kind words and for indulging me to introduce this great american senator lugar and members of the kennedy. it's an honor to introduce the president's nominee to be u.s. ambassador to afghanistan. ryan crocker, a man who's still a record of service precedes him and speaks for itself. obviously i join the committee in recognizing to members of ambassador crocker's family joining him today. his niece, cameron, and of course the dedicated woman who has been by his side ever since they were young foreign service officers working together in baghdad in 1979. rollin and's wife, christine. understand the challenges of being a foreign service couple

and i know that ryan could never have enjoyed the many successes without the support of christine. those successes make the task of introducing ambassador crocker quite easy. the u.s. senate has had the wisdom to confirm him to the post of ambassador as the chairman pointed out five times already. lebanon, kuwait, syria, pakistan and iraq, and this is only a fraction of ambassador crocker's story. when the u.s. embassy in beirut was bombed, ryan crocker was a young officer with wounded colleagues from the rubble. the united states needed to reopen our embassy in afghanistan after the taliban were driven from power in 2001. the secretary of state sent ryan crocker a few years later facing the same challenge in iraq after the fall of saddam hussein once again ryan crocker was the only man for the job. it's nearly impossible to find other american diplomats who can

match his record. i met ambassador crocker in the earlier post but when i came to know him and respect him the most was during his amazing tour in baghdad. it's difficult to remember just what ambassador crocker was getting himself into when he raised his hand to serve in 2007. the violence in iraq was spiraling out of control. dozens of civilians were being killed every day. the ethnic and sectarian battle lines were drawn. iraq faced the real prospect of tearing apart and america faced the horrifying possibility of being driven from the country in the feet. fortunately president bush adopted a policy of all the consequential decisions that he made in january of 2007. to change the strategy the search of the forces, the nomination of general david petraeus, one of the most important and least appreciate it was the nomination of ryan crocker as his ambassador to

iraq. i'm sure if you ask ambassador crocker he will say he was just doing his part to serve his country where and when he was needed most. he would always say that. the truth is when ambassador crocker accomplished in iraq was nothing short of a miracle. general petraeus has obviously received huge praise for the role he played in iraq and he deserves every bit of it but as general petraeus would be the first to affirm, our military strategy in iraq would never have worked without ryan crocker's constant doggett and tire list leadership of the political strategy. ambassador crocker put the u.s. embassy in baghdad on the counter insurgency footing. he established a seamless partnership with general petraeus and his military leaders which set the standard for civil military partnerships at every level of our effort across iraq. he also established a relationship of trust with prime

minister maliki and his government and he used that to push, prod and courage and support the iraqi is in saving their country. throughout the struggle as they rush the beat to smash into baghdad ryan crocker performed his duties with courage the strategic vision of tactical effectiveness and a relentless work effort that literally almost killed him i commend the president for recognizing there's no better man for the job of investor to afghanistan and ryan crocker. i also commend him for again answering his country's call to service. afghanistan today a new generation of americans both military personnel and civilians is dreading the inspiring next chapter to the history of the great nation. the challenge for all of us in our time of service is to strive to be equal to these zero with fellow americans. and nominating ryan crocker as

ambassador to afghanistan the president's chose a man is worthy of the service and sacrifice of those he must lead. i hope all of you will reach a similar judgment voting him out of committee the commission quickly so the senate can confirm ambassador crocker as rapidly as possible. and i would like to finally had i think that the chairman and ranking member and others would agree we've had a great privilege of having so many outstanding american serve in our diplomatic service. and our state department and americans probably are not appreciative of the enormous sacrifices they make. there is no greater example of that kind of service and sacrifice that a man whose nomination is before you today. i think the chairman and power of choice for the length of my opening statement. >> welcome senator mccain, no apology needed at all. i think it is a very important statement. i appreciate both links and the thought that went into it.

i think it is helpful to the committee and important to the record, and i think it states in a very articulate and clear way that assets that ambassador crocker brings to the task and it's important that you have said those things and i've said those things so the message goes clear to president karzai and president zardari and others in the region we have confidence in and brings a great deal of experience and welcome. thank you. >> ambassador crocker, you're flying alone now. but you have done that a lot. so, we are delighted to welcome your testimony, and you to the committee. you know what works. if you want to put your full statement in the record will be placed there and if you want to

summarize, we can then have a good dialogue and look forward to the questions. thank you. >> thank you, mr. chairman. senator lugar, members of the committee, i appreciate the effort kennedy to appear before you today. as president obama's nominee to become u.s. ambassador to the islamic republic of afghanistan. and i am very grateful to senator mccain for his most generous introduction and for his recognition of the foreign service as my colleagues that over the years has labored hard on behalf of america's vital interest and sometimes paid the ultimate price. it also grateful to the president and secretary clinton for placing their trust in me. if confirmed, i look forward to cooperating with you to advance america's's interest in afghanistan. i had the privilege of opening the embassy in kabul in january,

2002. as you noted. i worked closely with president karzai in those early days and developed respect for his commitment to a stable unified afghanistan. if confirmed, i look forward to renewing our relationship and working together toward that vision. i also had the honor of serving as the u.s. and buzzer to pakistan from 20042007, which developed my understanding as a region and which is confirmed i hope will be a useful asset as we work for regional and international partners. as you know, our core goal in afghanistan and pakistan is to disrupt, dismantle and defeat al qaeda and deny its safe haven in those countries. osama bin laden's def is an important step, but much work remains to be done to ensure that al qaeda can never again threaten us from afghanistan

with of the taliban providing safe haven. our efforts to pursue this goal are focused on three reenforcing searches. military and civilian and diplomatic all aimed at stabilizing afghanistan so will not become a safe haven for terrorists again. the military and civilian surges as president obama announced in 2000 - allin momentum from the taliban led insurgency. today more than 1100 u.s. civilian experts are serving alongside of our troops to help establish the conditions for a sustainable and irreversible transition of security responsibility to the afghan government. if confirmed, it will be an enormous privilege to serve with these courageous and committed americans. working together with the government of afghanistan and our coalition partners, we've

made significant progress, but as you noted as the president has noted, this progress is still fragile and reversible. enormous challenges remain, governance, law including corruption which undermines the credibility of the afghan state, narcotics, sustainable economic development including employment increased revenues along with a capacity for the government to provide basic services such as education and health care. failure in some of these areas can mean failure of the state and the creation of an environment in which our strategic enemies can regroup. making progress on these issues has been hard and will go on being hard but heart does not mean impossible. the secretary of defense gates has noted we walked away from afghanistan once in 1989 with disastrous consequences. we cannot afford to do so again. ultimately all of us will be an

afghan responsibility realized through a responsible transition a key u.s. priority in afghanistan is supporting afghan lead a transition process that was agreed upon by the afghans and nato isf partners at the november, 2010 nato summit at listened. this will allow them to systematically assume full responsibility for the security across afghanistan by the end of 2014. the transition process will begin this july with the lead security responsibility to the afghan national security forces and seven provinces and municipalities which i understand contain roughly one-quarter of the afghan population if confirmed by will work hand-in-hand with our military partners as i did at the u.s. ambassador in iraq to continue this responsible conditions based transition to an afghan security leak.

alongside the transition process, the afghan government launched a peace effort to reconcile insurgents. president karzai informed the council that includes representatives from across afghanistan. united states supports this afghan effort. over the last two years, we both played out our ambiguous red lines for reconciliation with the insurgents. we renounce violence, abandon with al qaeda come and abide by the constitution of afghanistan and its protections for all afghans including women. those are necessary outcomes of any negotiation. if former militants are willing to meet these red lines, it would then be able to participate in a political life the country. if confirmed i will work closely with ambassador grossman, the special representative to afghanistan and pakistan and ambassador in pakistan among others to continue our efforts

to build support for an afghan let reconciliation process. i will maintain efforts to support afghanistans long-term reconstruction sustainable who economic development and the strengthening of key afghan institutions critical to ensure transition is sustainable and irreversible. we do look forward to a long-term relationship with afghanistan and initiated negotiations on a long-term strategic partnership declaration with the afghan government in march of this year. this political framework document will help normalize the relationship and provide a road map for our political economic and security cooperation. we respect afghanistan's history of independence, and we do not seek any permanent military bases in the country for the presence there would be a threat to any of afghanistan's neighbors. in closing i want to think this committee for the support that

it has provided and continues to provide for the vital work of the u.s. mission in afghanistan. as you know, mr. chairman, you have held a series of useful hearings over the past several months to examine our policy in afghanistan and pakistan. and if confirmed, i will listen to your guidance and continue a dialogue with congress on our progress on the ground and in that context, i would note i just received a copy of the report you site so if confirmed i think i know where the dialogue is going to begin. i will also ensure that the u.s. taxpayer resources being used in afghanistan are applied effectively, transparently, and with an eye towards the long-term sustainability of these efforts by the afghans themselves. as the secretary said in the february 18th speech at the asia society, the united states is

not walking away from the region. we will not repeat the mistakes of the past. our commitment is real and it is enduring. as we approached in the anniversary of the horrible attacks on the tender 11, it is a time to remember those who died that day and to honor the sacrifices that so many americans have made, military and civilian to ensure that afghanistan never again becomes a safe haven for terrorists from which they can attack america. thank you, mr. chairman, senator lugar, members of the committee, i look forward to your questions. >> thank you very much, ambassador crocker. that last sentence hit me and i want to come back to it in a minute, but let me say first of all that i support and agree with the transition process but will begin this july with of the lead responsibility to the afghan security forces in seven

provinces representing the sum of roughly 25% of the afghan population. clearly the taliban are trying to disrupt that with their increased violence of the last days targeting some of the governors and high-level officials. i also am particularly supportive of the afghan initiated peace process reconciliation president karzai initiated with his broad based jargon of last year and the things coming out of it that you mentioned in your testimony. my concern is a little bit sort of pinning down our own definitions here in the breadth of some of our when you said, particularly the sort of notion to ensure that afghanistan never becomes a safe haven for terrorists from which they can attack america. i think we have to really kind

of buried in on this question of what they're really entails. what is the safe haven, and how much guaranteed is there to the degree that there is a safe haven that's what we are worried about. and we want to spend dollars most efficiently. a safe haven is in the western heard of pakistan. we are spending $120 billion in the country where there is no safe haven, and about $2.8 billion where there is a safe haven today is the safe haven. the network of these folks are the problem and they are the ones responsible for most of the violence that is taking place in afghanistan. so i think the question is how do we get this right.

what i saw when i was there a few weeks ago convinced me that if all we do is the current paradigm where attacks are launched out of the western part of pakistan we are not going to find a very successful road. i would like you to comment on that. >> thank you, mr. chairman. these are very important points. i have said in testimony before this committee during that brief but happy interlude when i was out of the surface that you cannot really succeed in afghanistan without a fair measure of success in pakistan. that's why i think your legislation, the kerry-lugar bill orman legislation in the multi-year commitment was so

important. these are hard problems to solve. i wrestled with them as ambassador to pakistan. i had numerous meetings as you had with the pakistani leadership to press on the haqqani network, and clearly with the most limited of results. so again, that is why the administration has been right in talking about the two nations together, and having ambassador grossman now succeeding ambassador holbrooke said that you do have an approach that crosses the border because certainly that is with the militants are doing. how to crack that conundrum, i know you have made huge efforts as has secretary clinton, and mr. grossman in the recent weeks

we have to see whether the pakistanis take these actions and as i noted in my statement i look forward to working with the ambassador as well as ambassador grossman because we face the common problem. the last thing i would say mr. sherman is quite frankly the reason that most of the problem is in pakistan and not in afghanistan at this time is because we are in afghanistan, and as we go through the irresponsible transition, it i think has to be as the president and others have said conditions based to ensure that as we draw down our forces, and i am aware from my consultations of the mood both here on the hill and publicly there has to be a

transition, but at the end of the day, we have to be sure that the safe haven doesn't then who relocate from pakistan to afghanistan. as democrats and a stand that. the question is does it take 150,000 troops to guarantee that that doesn't happen? >> mr. chairman, again, that is a question that the president will b.c. stuff. i am not part of those deliberations or consultations. >> that is a question that is on the table. i want to put the question to you by a understand you're not part of those deliberations so i don't expect you to answer today. let me ask you this. in your testimony you say enormous challenges remain, and governments, rule of law including corruption, which undermines economic growth, credibility, afghan state, narcotics, sustainable economic development, including adequate

employment opportunities, increased revenue along with a capacity for the government to provide basic services, education, health care. failure in some of these areas can mean failure of the state. and the creation of an environment which our strategic enemies can regroup. can you narrow that down for us? and which of those areas means failure of the state, and essential to the accomplishment of our goal? >> i think clearly the issues of governance, rule of law and corruption have to improve if afghanistan is to go forward as a stable state charting its own destiny. spinner are you saying then that corruption is essential to our goal of preventing strategic enemies from regrouping? >> i think corruption,

mr. chairman, and i draw on my experience here, corruption totally unchecked becomes as the iraqi is putting it a second insurgency. it undermines confidence on the part of the people in their government, and it makes groups like the italian or defective -- -- look effective. we are not out to create a shining city on the hill. that is not going to happen. that would apply to all the sectors that i mentioned, but their needs to be progress. we went through the same thing in iraq. we chipped away at it. over time we got them to take some measurable or partial steps on the issue of corruption so you have a situation in iraq

today that is again, a city on a hill but where they have a good chance of carrying forward without u.s. forces on the ground. it is the same kind of dynamic i think we have to go through in afghanistan not to resolve the problems. >> do you think billions of dollars coming through america spent through contractors which don't have adequate oversight can serve to corruption? >> it is something i'm going to take a look at. mr. chairman, i worked with the state department inspector general, a day as you noted a recent report. we have your staff report, and i have spoken to colleagues in the government. it's clear that there is a need for more contracting officer representatives. state and the aid of recognizes this. there have been initiative that

you are aware of, and the staff report notes the accountable assistance for afghanistan initiative, the military's operation transparency. so, i think there clearly have been problems. i think equally clearly there is a recognition that we have to be part of the solution, not part of the problem and i am encouraged by what i heard of the steps that have been taken. >> ambassador crocker >> we have in the opening statement the possibility of passing over control for the military for the police functions presumably to step in the province has about 25% of afghanistan with a thought that this is the first of such large transitions in the next few

years hopefully occurring before 2014 as the current plan. i want to ask, however, about the whole conduct of the afghan state and really help the budget of afghanistan is put together. how this is paid for. in the case of the military and the police, the training has been paid for largely if not completely by the united states, and that would be expensive, but beyond that, in light and as a little bit more about the commerce and afghanistan. that is how ordinary people make a living, what kind of industries are there, what is coming into the country or has been generated by the profits or success in the country and the reason that i ask this question is that many stories about

afghanistan to fight economy indicate that the income coming into the government is pretty low, given the ambitions of afghans and the united states so that on the military side the expense has been calculated but with regard to the civil society and economy moving forward, the faults of come from even president karzai himself and personal visits with members of congress that afghan has remarkable natural resources that might be found, might be as a matter of fact exploited and sold to others in due course, but will require a considerable one of his investment and the safety to investors or whoever is coming into the country to deal with this, and of course many of the investors may or may not be friends of ours or have different foreign policy views. now i don't mean to make a

question and possibly complex but as you survey the scene, how is afghanistan going to raise revenue? and secondly, if afghanistan is not able to raise revenue, are you in your preparation for this ambassadorship working with our state department and our officials on some estimates as to what obligations the united states may have for many years to come? the military idea of 2014 or thereabout, but some with whom which raised this question in previous hearings is a matter of common sense, our obligations will last for a long time for as the case may be. this really has to be an important part of our calculations as members of congress working with the administration now on 54 tenure

budget plans for the united states. this could be a major factor, and if we do not get it right, it could have very great consequences on afghanistan with expectations the american support might be forthcoming. can you discuss this general area? >> thank you, senator. it is a very important and as you noted a very complex set of issues. and again, at this point i have shall we say and in perfect understanding of exactly how afghanistan works not yet been confirmed and not yet gotten out there but i did note employment and economic development because i think these are critical factors. how does the economy work now?

services or an important part, agriculture is an important part. i am told that the agricultural sector accounts for 80% of employment in afghanistan, which is why i think we have to continue to support its development in a reasonable way that leads to, again, ultimately an afghan capacity to carry forward. >> what part of that is drugs? >> i'm talking about the part that isn't drugs, primarily wheat. we would certainly like to see them move into as they want to do high-yield products such as fruit and pomegranate which afghanistan used to be famous for, and which provide a better return to the far actually i'm told them poppies but based on

what i know, i think the administration is right in dealing with the narcotics issue not to emphasize as we tried at one point eradication, but alternatives, economic alternatives that have caused afghans themselves to turn away from these kind of things. to make a couple of other brief points on the afghan economy, as you know, there are substantial minimal resources over the longer term these can be a significant benefit to the state, but this will take time for them to develop, and as you point out, it is going to require security conditions. the development of a robust private-sector is going to be important, and i am pleased to learn that opec is significantly

engaged in afghanistan working on upwards of 50 projects. i would like to see u.s. private investment come to afghanistan. i worked hard on that with some success. cut the revenues have to pick up and i know there is a major effort under way where our traders mainly from the department of homeland security are working side-by-side with the afghan border police. corruption gets into this, too, they've got to increase their revenue. the final point i would make is afghanistan as a country centrally located in an important region. i think the afghan pakistan trade and transit agreement was a very important step, please

understand president karzai will be visiting islamabad in just a few days' time, i think the day after tomorrow, which is good in and of itself. obviously as the leaders of the two countries talk through their issues. but understand one of the of objectives is to lay out the actual implementation of this agreement, because afghanistan as a trade and transit center through pakistan and india to the former soviet republic to the north of iran, i think all of that can provide a major difference for the afghan economic future. >> my time is expired but i just want to underline i think it is a remarkable fact you present 80% of the employment that by

understand is agriculture. that is huge and the success obviously of that is paramount. but i get back to the fact you are pointing out the development of the resources most of the estimates that are made to the congress or the public will have a better idea of the budget of afghanistan but it would appear that the revenues are in very, very small percentage of the obligations both from the security standpoint as well as a commercial standpoint we are talking about, so why go back to my problem and that is how long a stream of income from the united states coming to afghanistan is going to be required, or hides of morales people of collapse as the economy collapses and security collapses we are sort of back to square one again with or without the conflict which you are undergoing now to provide that security.

as you get out there you have more to say. >> i'm also going to pass the gavel to center casey because i need to go to another committee. ambassador crocker, i hope he will forgive me for that but i appreciate your testimony this morning. as i said earlier, we are going to try to move your nomination as rapidly as we can hopefully in the business meeting in the short order and get the senate to move on. we look forward to getting you there. and thank you again for coming and for your willingness to do this. senator casey. >> thank you very much and for this hearing. ambassador crocker, it's great to see you again, and we are so grateful for your public service and your willingness to commit yourself to yet another very difficult assignment, but i know that you're not only prepared, but i have confidence, total confidence you will be and

should be confirmed because we need you there. we need you on the ground. i wanted to raise a couple questions which you come and again i also commend the commitment that your family makes when you take on a tough assignment like this. i wanted to bring you back to a meeting that you and i had and i've spoken about this a number of times but i think i keep coming back to it because it has a lot of relevance to not in just our policy in afghanistan but where we are now this year, this summer making some difficult decisions. the congress, the administration and the american people, and i start with the setting. it was in iraq and was a small group of people and you were there in august 2007. and i was complaining at the time very bluntly about the

language that was used to describe progress and iraq, victory and defeat, win or lose. all of languages i thought was not only inappropriate, but frankly sometimes misleading and i hope not deliberately so at the time in washington. i won't cast blame on who used the language but a lot of folks did. and i asked you at the time what language do you think is appropriate to the mission? and you said at the time and gave a very cogent answer but what i remember most about it is that you said two words, sustainable, stability, which has stayed with me ever since. so i guess i would ask you in light of this mission, which is frankly in my judgment more complicated and difficult as iraq was more complicated, a

different set of priorities and frankly a different set of challenges in afghanistan, but i asked in light of some of the real numbers that folks in pennsylvania live with, and by no comparable numbers around the country. we have about 70 right now killed in action, 69 is the last number i saw but it could actually now be 70 which is about a third of where we were with regard to iraq. we fell just short of 200. 197, 198, depending what account, so about one third killed in action as an iraq and afghanistan now. the wounded members, my numbers in pennsylvania, for 55 and in afghanistan, 1233. so again, about a third of the number in iraq as it relates to the wounded. and i guess what people want to know, tax payers want to know certainly the families that have

loved and lost our families that are contributing at a minimum the time and sacrifice of their loved ones what was the mission and what is the goal. in light of the discussion we had an 07. >> sink you mr. chairman. i do clearly recall that conversation that was shortly before the september, 2007 hearings that general petraeus and i took part in command as again you may recall from that conversation, i was not among those who ever used the word of winning their victory, not to them, not now, so sustainable

stability or words or a concept that i would -- stood by them and stand buy now in the case of iraq. another way to put it, is good enough governments, governments that is good enough to ensure that the country doesn't degenerate into a safe haven for al qaeda, and that's what i was attempting to get out in my conversation with chairman kerry i think before you arrived there is no intention i would see in my consultations here. i certainly don't come with such an intention to produce the perfect society. we can't, but i think by a

judicious use of resources and conditions based free deployment and the transfers of responsibility as we will begin this july we can get to that sustainable stability. have been and always will be frank and open with this committee. it's my responsibility as an offical if you so choose to make me one again but even as a citizen, as i look at afghanistan's past, the 50 years of relative tranquility from a 2028 to 1978, afghanistan that require outside assistance, and we provided some very important contributions to the economic development that are still remembered through the .4

program which later became a u.s. aid. so in my -- well, not well informed enough to lay this out as a thoroughly considered view, but i would anticipate, and this gets a bit at what senator lugar was touching on, that beyond 2014, there will be a requirement for outside assistance from the international community. and i think part of our obligation is being sure that the international community continues to understand that they have a great deal at stake here. this is not an american problem only wore an american obligation. but that in short is how to do it. and it is going to be incremental, it's going to be kind of issue by issue, case by case as to what sustainable stability and good enough

governance is going to look like, but that certainly is what i see as my responsibility. >> thank you. i'm over on my time but i will ask a second round about how we measure that. and i think it is also something i want to allow the american people are concerned about. cementer menendez. senator cardin. [laughter] >> seniority, that's good. >> senator ben cardin, state of maryland, class of 2006. [laughter] >> investor crocker, first, thank you very much for your service. you have served our nation with great distinction, and thank you for that. and thank you for your willingness to come back into public service, and i can think of no one who is more qualified for the position than you and a very tough situation. as everyone is suggesting, afghanistan needs to change its u.s. role in afghanistan needs to change. i know that we can talk about the military aspects and the fact that we are looking to

words every deployment of our combat troops starting in the next month or two, and that we expect we might be able to accelerate that, considering the current status of terrorist organizations operating in the region. now, having said that, i want to concentrate on the other part of our role. we've had a military presence, but we also have had an effort to provide economic development assistance to the people of afghanistan. now i know you just recently got the report that was commissioned by this committee, but let me just share with you some observations that should not be a surprise. it's rather critical of the efficiency of the deliverance of our aid to accomplish any long-term economic stability for the people of afghanistan. it also questions as to whether we really are operating with our

leadership team in afghanistan that can deliver the type of economic promise for the people. and probably worse than that, we are treating an arbitrary economic activity in the country based upon the economy that will not be sustainable. and that we are in fact creating an inflationary situation within afghanistan that will cause a serious problem as we transition to a country that can take care of itself, admittedly with international assistance. i don't deny the long-term need for as a humanitarian and economic assistance to the people of afghanistan. ..

and transitioning to the next phase in afghanistan or >> thank you, senator. it's clearly an important question. i see my responsibilities at a number of levels. first, it is ensuring that we are properly organized as a civilian mission, as an embassy, to ensure that our resistance is accountable and it is effective. and the fact it for me means

it's got to be about transition, building afghan capacity, helping the afghans again carry forward without assistance at this scale in the future. so i know that administrator shot and deputy secretary knights have provided some responses are ready to this report. i have not had the chance to go through and do, i know it will be useful to me if i am confirmed out of post, looking at how we are structured and deployed, looking at our programs and being sure they are safe is. again, to this end, sustainable stability with the afghans increasingly taking the lead. so you know, obligation begins at home within the embassy.

the second thing that i clearly would be focusing on is developing a partnership with the afghan government. you know, our programs have to support derivation and have to be sustainable by then. and i know we are to have in place several mechanisms -- formal mechanisms that focus on transition. this is a major concern of president karzai. he has shown ashcroft -- ashcroft for yummy who had this up precisely so that we don't create that unsustainable wartime economy. i understand usaid and other donors have very taken steps, for example, to ensure they are

not inflating salaries. i think that would be very important. you know, for example, the worst thing we can do in competing with the afghan government for talent. it meets all it can get in a lot more to function as a government. so that would be another key part of it. it is their country and how it goes forward is ultimately the responsibility and i want to establish myself as a reliable partner, but keeping the emphasis on sustainable development and transition, you know, which is what they themselves seek. and thirdly, i would say i can this last consultation with ambassador grossman and others -- where the light of international part nurse engaged in afghanistan.

nato and non-nato united nations plays an important role in special representative of the secretary general performed the role in iraq cooperated closely with the name look forward to doing the same in afghanistan. as i said earlier in a slightly different context, afghanistan is not a uniquely american problem. it is a threat to international peace and security and requires an ongoing international commitment. so you know, what role they play in not is still something to be sorted out, but clearly i believe i will have a role to play. >> i thank you for your answer. i think it's going to be a real challenge. we are not necessarily paying salaries are competing with the afghan conference. we are plain salaries and giving

cash bonuses will of the reasonable salaries teammate friends of afghans, which ends up supporting a corrupt system. thank you. >> senator corker. >> thank you, mr. chairman. mr. ambassador, i am here out of respect for u.s.a. you as a personality fit in their foreign policy. we've had an extensive conversation in our office. you know, general petraeus has asked that we support efforts in afghanistan deepest fighting season. i think people generally speaking have been willing to do that, but i think you sent search than our conversations are probably among numbers of people here, works acting pretty dramatic changes that the end of this fighting season and expect the amount you hope that those changes into a different place. all of us know the model we have in afghanistan is not

sustainable for multiple reasons we talked about in detail and in private. under search thank you today for your willingness to do this. i don't know why you come back and do this other than you are a great american and we thank you for that. again, without belaboring numbers of questions you can't answer yet, but i think you'll know a great degree -- it's not impatience. a great degree of us knowing that what we are doing there is not sustainable, is greatly changing the character of a country that your knowledge they are hopefully help us in the partnership that doesn't exist the way it should and pakistan also. we thank you for that. i look forward to talking to on the ground in afghanistan and a thank you for your willingness to do this. >> thank you, mr. chairman. >> senator webb.

>> thank you mr. chairman. ambassador, let me pylon with everybody else. you're clearly a national treasure here and we are happy to see you going over into that part of the world. i think what my major concern is in you and i had the opportunity to discuss this when he visited with me is how we really define our strategic objectives in afghanistan and how that matches up with what we are able to actually accomplish in a cost-benefit way. i think that's what you're hearing from a lot of people right now. how much do we actually need to achieve in afghanistan with respect to our national interest? how much do people want to achieve that may be above what we need to and were getting into

this area is building. how much can we achieve? and how much of that actually benefit persecuted project is. that is what i've been struggling with for more than a year now. i don't know if you saw the column but taking your name wrote recently for "the wall street journal" a few weeks. i don't have it in front of me, but she clearly is not a radical. she's one of the private bytes in the reagan administration, which is very proud to serve. one of his strong comments she was making was that there is any nation in the world definitely needs nationbuilding right now, it's the united states of america. but we are putting hundreds of billions of dollars of infrastructure in another country, it is only be done if we can articulate a vital interest because they quite frankly need to be doing a lot more of that here. time is short obviously.

could you please articulate for us your view of the strategic interest of the united states in afghanistan and how a current military policy can help bring us to an endpoint and not strategic object to click >> thank you, senator. that is of course the essential question. as i said in my statement and does the president and others have said, our ultimate strategic object is is to disrupt, dismantle, defeat al qaeda and in the afghan context to ensure that afghanistan never again becomes what it was before 9/11, an area in which al qaeda can reconstitute it solves under protection of like-minded

elements. >> you could pretty well -- and mean, a watch or a new statement from my office and i don't disagree with the objective, but she can pretty well fight international terrorism without remaking the entire societal structure, would you agree? and i watched her comment about how they are not in afghanistan not because they're in pakistan because we're in afghanistan, et cetera, but you could end up in that region plan workable. so the real question is, what is the ultimate subject is with all of these ground forces about this infrastructure program in terms of the long-term advantage? >> again, an important and multifaceted issue. what we have seen with the

additional forces in the effort to carry the fight into enemy stronghold is i think tangible progress in security on the ground in the south and the west. this has to transition. again, we see a transition of seven provinces and districts to afghan control, to sustainable afghan control. so i think you can rdc what we're trying to do. province by province, district by district, establish conditions for the afghan government can take over and hold ground. and you're absolutely right. you don't have to, you know, build a whole nation i think to achieve that. >> international terrorism and global warfare in general is

intrinsically mobile. i've written about this for a long time, as you know. so securing one particular area doesn't necessarily -- i don't say this critically. i say this out of concern for this policy is going. it doesn't necessarily guarantee that you've reduced capability of those kinds of forces. they are mobile, the move. the reason they are international in scope as they don't want to align themselves with any particular governmental structure. i want to let that out as an area continuing concern. bummer question. i mentioned to you when you visit my office and that is we tend to speak out conciliator's in this region simply allowing the pakistan, afghanistan, india access when i believe there is a role here that china could play if they would step up to the mat

and be a little more overt in their willingness to participate in these types of solutions that are clearly going to benefit if there is more stability the region. what are your thoughts on that? >> it is a great point, senator. you know, as we talk about the elements of our strategy, the third one is very much involved in regional engagement. and i would join you in including china in that discussion. the chinese, as you are aware of the copper concession in afghanistan. okay, that's great. you can only really make that pay off for you if the conditions on the ground permit its extraction and its

transport. >> they also have a long relationship with pakistan. i know there are some people who say that is overstated, but clearly they do and in fact it, when chairman kerry returns here from pakistan the same day, it is here in a hearing where the prime minister of pakistan immediately made a state visit to china and was welcomed. the status was china with pakistan's greatest friend. i wish you the best. a grateful you you are undertaking this and i look forward to visiting you and perhaps continuing our discussion. >> thank you, sir. >> senator shaheen. >> thank you. ambassador crocker, i joined my colleagues and thanking you for your willingness to continue insert the country. i certainly stand ready to ensure all of this to to help you if you take on this new

assignment. i know you haven't had a chance to review the report that was released this morning from the committee, but i think it does provide renewed perspective on how difficult the challenge is our in afghanistan, particularly civilian challenges. much of that has been discussed by others here. but the report certainly underscores the need for our reconstruction projects in afghanistan should be necessary, achievable and sustainable. and i know there have been some concerns about the projects undertaken under the syrup program. i certainly share concerns about how those dollars are distributed. and i like others have called for a number of steps to train at dresdner accountability in afghanistan.

i'm very pleased to see the overhaul of the special or general for afghanistan reconstruction, something i thought also is long overdue. the appointment of the senior civilian representatives to serve as a counterpart to the military commander there. and i wonder -- i know you haven't gotten around there, but i wonder if you can assess this stage what difference that might be making in afghanistan and what you would expect your relationship as ambassador to be with those two civilian counterparts there. the >> thank you, senator. i join you any concern for accountability. it is ambassador in iraq as you know and i think we all learned a lot of hard lessons.

i would hope to see goes off in being applied now in afghanistan and i think they are through some of the initiatives you know, others i mentioned earlier, the usaid forward initiative, operation transparency that the military runs, the joint military usaid vetting mechanism for contract there's comedy accountable assistance for genistein initiative and so forth. one of my first consultations was that the state is your general. i had a very close working relationship with the head of seeger, derek bolen, who i have a lot of regard for. so again, i am pleased that

cigar seems to be moving forward with real capability. and if confirmed, i look forward to welcoming the gao, which i understand plans to set up a permanent staff in the fall. i think all of these institutions, the state ag and the usaid currently shells that are general come a gao i'll have an important responsibility in ensuring oversight and accountability. and you know the phrase. we are here to help. sometimes hope can be painful, but in my experience in iraq, i found that kind of oversight to be absolutely essential going forward and i will certainly have confirmed and employ the

same approach in afghanistan. >> and are their experiences from their time in iraq that you think can be helpful in terms of coordinating all the? because for those of us looking at what is going on on the ground, as you point out, there a lot of people they are trying to address oversight and accountability. but i was told that getting coordinated? you know we have general petraeus on the military side, but is very similar command structure and the civilian side and who is responsible? >> thank you for that question because it is an important one, senator. basically there are two in only two u.s. commanders in afghanistan as they were in iraq. when military and one civilian. civilian commanders the u.s.

ambassador. i would like to say that essay of consulted in red ink, they think ambassador eikenberry has done an amazing job in the swifter ramp-up of the civilian presence in ensuring that it has been done in an orderly and organized manner. obviously if confirmed it will need to make my own assessments, but my sense casillas handled a huge challenge with great care, thoughtfulness and ability. there are micro-coordination issues and this may be what you're referring to. i have an obligation to see that the entire u.s. mission is effectively carrying out its various roles. i also want to ensure that the accountability element of this,

the different inspection agencies are themselves quite needed. we have to wrestle with this abates in iraq. so we did not have different inspectors inspect them the same thing and not working in coordination. there is also of course the whole military inspection apparatus that also has to be woven into this. so i take it in iraq, i responsibility see the whole mission is operating effectively. to give huge credit to ambassador eikenberry that if confirmed to have a sense in going inheriting a growing concern, but also on the specific issues that accountability and oversight mechanisms are working as a team and not in isolation or competition with each other. >> thank you. >> senator koontz. >> thank you, senator casey.

i'll surely get their members for thanking you in your famous command of retirement to take on yet again a vital mission for the united states at this time and couple it. i'm very encouraged by your successful previous service in iraq in the circumstances he negotiated their. i was concerned that my one visit to afghanistan as a relatively new senator to see repeatedly about our generational commitment to stability and security of the nation of eight cannot stand. in your opening testimony cited secretary gates comments we walked away from afghanistan and 89 with disastrous consequences to make another four to so again. in the previous questions by senator lugar and others, a number of us are trying to get at the question of are not going to get away, hollinger going to stay and at what level? there is a lot of focus on immediate decision of a drawdown, but i really equally if not are interested in the

post 2014 structure and what it looks like in this very surprised to hear in country assertions that we were committed to sustaining more than 300,000 member afghan national security force, which meant paying for it into a sustained u.s. military presence for the foreseeable future a decade or more. you also made a comment that we are not seeking permanent military is in afghanistan. i wondered if my first question if you'd comment on the importance of achieving u.s. afghan strategic -- excuse me, in iraq you achieve a strategic treatment that allowed for long-term stabilization. what importance is there in afghanistan to our having a long-term u.s. coalition military presence? with you think are headed in terms of retaining strategic regional abilities and how sustainable do you really think

past 2014 assistants required to support a 300,000 israeli? >> a few questions. nothing difficult at all. >> these are shared questions i think many of us want. >> they certainly are the major questions and they are important ones. there once if confirmed it will be very much focused on conservative expect to be out there for a cup years. and i am not ducking by saying that i just don't know the answer now. you know, i do think that we have an interest, i can come in ensuring the country doesn't slide, that coming up on it just

is not again become an al qaeda safe haven. i think we'll would share that. the trick is kind you do it and how much does a coxswain helen does how i does it take? and these are questions my colleagues and i will have to work on and we are accountable to you as you ask them. i do think as we saw in iraq that by going in big, you can and cannot fall. now, iraq has oil and it always helps to have audio. they can pay for a lot of things that the afghans can. i do think strategic partnership declaration process is important as strategic framework agreement was in iraq. it lets both countries kind of know where they want to move in

the future. and obviously the spd is going to let different than the framework agreement in iraq. broadly speaking it's intended to serve the same purpose. in terms of the ultimate end state for afghan national security forces, the target is a thank you note to them police and army combined at the 300,000 level by vista over. to me that is not a number that's engraved in stone and wouldn't ever change. i think again and i'm speculating here. we just have to see how circumstances develop over time. as first transition of the seven districts and provinces takes place how they do.

and further down the road, 2014, 2015, afghans may decide that they really don't need a security force of this size. >> another key factor to sustainable progress in iraq was not just reconciliation, or reintegration of more than 100,000. so far reintegration is going quite slowly. it isn't preceding anything like the place you and others were able to accomplish in iraq. he takes reintegration the critical because frankly the size of the force is directly correlated to the size of the ongoing insurgency are taliban or other extremist activity. >> it's a great question, senator because you are right. and we haven't talked that much about this so far. the afghans are focused on two

elements to bring this insurgency to an end. when the second alleviation, kind of big part. any other, reintegration, which i guess would be little are. both i think premise on a concept we would all share, which is you can't kill your layout of an insurgency. there has to be has to be ultimately a political solution. i think reintegration is part of it. i am told that there are some 2500 former insurgents either processed or in process. it is an afghan process of course and i think afghan capacity is again an issue about how fast they can move. there is another element that i

think is significant and that is the afghans local police initiative, not quite like the sons of iraq. the sons of iraq, as you remember, was a pretty varied group. some of them were former insurgents. some were not. the afghan local police initiative focuses on individuals who want to stand up for their community into were not part of the insurgency. i think their numbers are 6000 i have been advised we expect to be able to continue to expand that possibly to 10,000 bicep timber. you know and the lessons learned category, the sons of iraq were never tied to the iraqi government until quite late in the process and the prime minister made undertakings to incorporates them into security

forces and provide employment for others. the afghan local police have started out linked to the ministry of interior. steve got all three of those and play. all three afghan support it in ascii mode, which i believe is important. clearly would like to see the reintegration process move more quickly. if confirmed, that is something that will have me focus because it can be, as it was in iraq, you know, can be a very important component of a broader process. unlike iraq, the ultimate solution will come three successful reconciliation process policy would affect the death of osama bin laden might

have on taliban leadership attitudes, to what extent the linkages personal rather than institutional. i don't think we know the answer yet, but it will be a very important question. >> thank you for your answers. >> i'd ask her member to a second round. i went to ask one question. i know senator sheehy might also have a follow-up as well as the senator kearns does. one quick question you can amplify this or you amplify this, ambassador crocker, with written responses, but i wanted to ask you about a related question about the questions i asked you about how the american people do the mission and goals and how we define it. one way to analyze that, not just for members of congress, but for the american people is to have metrics, measurement, reporting that we know we've had in place.

there is probably a good debate about whether they are adequate enough. with her delight in the conflict in iraq about how difficult it can be to measure into reporter, but i think we've got to have metrics like that in place. i want to get your assessment of kind of where we are but that in how you view that similar to what senator sheehy intact without in regard to accountability and have it come reporting because there's people have some way to measure progress. >> is the important point, mr. chairman. again, stripping as part of the accountability process that the nader shaheen was alluding to. how do you measure progress? as you point out, that can be heard in certain areas. in other areas, i get is easy. and education, for example, we

know how many afghan kids are in school. over 7 million, two and a half million who were gross. and again, as we consider our costs and her options, i just would like to take a minute, with your permission, to comment on growth and women in afghanistan. one of the first things usaa did what reopened embassy in january 2002 was to start educational programs for girls who were completely shut out of the educational system as you note under the taliban. middle of january 02 on a freezing day, i took been senator biden to visit a girls school we had just established.

we visited a first grade class that had girls whose ages range from six to 12 because the 12-year-olds had become of school age in the taliban took over. and i remember asking his 12-year-old with her father. i'll should be in there with the little kids. and she said they'd just so so happy to have a chance for an education. you know, i was touched at the time and i still am. as we consider again hard option , it certainly is my intention to see that there would be nothing in my recommendations and nothing in policy decisions over which i might have input or control that would put at risk half the population of afghanistan, the gross and women who still face

significant challenges, but who are in school, in business and in government. so i am sorry for a slight digression, but again, it does touch up my checks. these are things we can measure. and i take the point. i mean, i'm not far left into this to be able to give you large quantities of statistics and not everything is measurable that way, but i take the point that that which can be measured and mature sized should he so the american people and congress have a sense of what is actually happening out there and congress have a sense of what is actually happening out there and congress have a sense of what is actually happening out there and congress have a sense of what is actually happening out there thank you, ambassador kraut or for the commitment because that's exactly what i was going to ask about. how do we ensure that rights

aren't trotted away in any negotiations. for all of us who watched what happened in afghanistan, one of the biggest concerned as i think that what happens after the united states leaves is what happens to half of the population is women. i very much appreciate your commitment to ensure that those rights are protected. >> thank you, senator casey. if i might, one last question to take us back to the first point chairman kerry raised about pakistan and that this worship are significantly different investment we're making in prosecuting the war in afghanistan and trying to sustain this uneven partnership, relationship, whatever it is that the people of pakistan. as former ambassador, just like to ask your advice or input on

how you see the prospects of our ever been successful in persuading the pakistanis to change that will let us india as the primary source of threat to their nation and instead are their lap were with us in the war on extremism, particularly against teixeira in north waziristan against lec and what initiatives you think we can or should be taking to engage detailing this and helping realize strategic calculus in pakistan. >> thank you, senator. i would imagine that my colleagues from legislative affairs would say if you're not the nominee for pakistan be careful. but it was the ambassador for pakistan's and it is an important question. the pakistanis of course has

been engaged against militants on their soil and they have lasted very large number of forces fighting. so it's not like they're not doing anything. but it's lashkar-e-taiba, haqqani network, the shura as you know persists. just in recent weeks since the death of bin laden, of course we've had a number of senior visitors who have engaged the pakistanis, including the chairman as well as secretary clinton, admiral molin and merkerson. and they have made some statements that it's clearly going to be important for them to follow through on them. with respect to india, i am pleased to see from my past or future or spectate in

afghanistan at the dialogue between the foreign secretaries has resumed. i think that is an important step. i hope they sustain it and threaten its because clearly the degree to which india and pakistan start to see some capacity to work together to benefit the region and the benefit of us. but again that falls to the purview of feathers as that relates to others. >> thank you for your willingness to take on this vital mission. >> thank you, senator koons. >> ambassador crocker, i will be turning the gavel over to senator menendez. we are grateful for your service continue not for your testimony

today. but that it will turn to senator menendez. >> mr. ambassador, thank you for your service does unchain both past and one is to serve in the future. mit still pursue some of the things we talked about at that time. i know you don't determine where strategy, i do wonder what your role will be as the ambassador in terms of information to the congress about where we're at. i am one of those who believe they would be more successful in afghanistan by reducing our troop presence in the south and continuing support for institution building in the north. it seems to me counterterrorist strategy versus the counter assertions be strategy, fighting insurgents to get the government potential of the wherewithal to

stand up for itself, govern it of would maybe be a considered policy is made with a partner, which in my view, we do not have a solid partner in this regard. and so, that present policy has had an enormous toll on american lives, on american treasure and i don't think we've won the hearts and minds. so give me a sense. do you believe we are making sustainable progress in the south? after that, that is not a sustainable forest to be able to stay. what happens in the follow on? >> thank you, senator. and thank you for the chinese to them in your office. that is very valuable to me in trying to get my mind around the big issues.

as you point out, we are successfully clearing and holding in the south and the west. we're also going to be transitioning seven provinces districts in the month of july to ask a security control and i don't have the list right in front of me, but some of those are in these areas as i understand it. it will be an important step because that ultimately encircle and miracle for entire nation. they are assured that they can do this. but i understand from the briefings we are confident that they have capabilities in the seven districts to do it and be successful, that will be cannot head start to the transition we

and they are committed to cover the whole country. >> what role will you play in helping to an overpass chance and other groups in the south? >> again, this stage in the process, i cannot answer that with exact certainty because it will be part of a process of consultation with others who are involved in this matter. in particular, ambassador grossman was both a friend and a colleague. that said, as the afghans move toward the concentrated reconciliation effort, i would certainly see a role for the embassy is closely, as we do is

cautious of the south. my physician in iraq was basically over to anybody who attacked to us and not ask a lot of questions as they entered those conversations at least initially. now, whether he could get away with this in afghanistan or not i don't know. but i do think it is important to know what southern pashtuns are thinking as it is important, but it's important we understand what tajiks are all looking at especially as a tricky reconciliation process moves forward. >> when he turned to a field they think you do have a lot to say about. and that is, what is the continuing use of u.s. taxpayer dollars foreign assistance

mission? my understanding from the military mission to an assistance mission in afghanistan and that mission is to help rebuild lives and institutions to create a functioning government. they done this before, but with foreign committed partners from my perspective it in 2002 to 2010, we have spent $19 billion in assistance. 19 billion assistance. and much of which is not sustainable is subject to endemic corruption. i know there is a rep word about to release suggesting we have had only limited success, that this huge attempt at nationbuilding may not survive an american withdrawal. and it is a real concern to me. is this a good use of the united states taxpayer dollars?

[inaudible] >> sorry. i think we have had some significant successes with their assistants and i understand the report touches on some of those. i would certainly include education. we were talking about, before you came in and the provision of basic health services. i can tell you, senator is that, you know, i have committed to ensuring the assistance we provide a comment makes an important positive difference, yea, can be implemented in c. can be sustained. you know, i would agree personally but the three basic conditions that i saw in the

port, which i haven't had the chance to fully study, that her assistant projects should be necessary, achievable and sustainable. i know that administrator sean and deputy secretary nightside responded on behalf of their respect to offices. they're the ones who speak authoritatively on the matter, but i can tell you that if i am confirmed, going forward, rss stands has to make a difference in has to be sustainable. >> he said we had some success. quantified the $18 billion. what is the success? >> clearly in education, which was an early priority for us, the success of getting over

7 million kids into school, 2.5 of those teen girls, that would be a matcher eric of success. >> if we fitted dollar figure and not, what would it be? >> i can certainly get that for you. >> if he could get it, i'd appreciate it. i consider that a success. they punish the audience that we appreciate your attendance, but are not subject to comments. my point here, ambassador -- i'm going to support our nation. my point is you're going to be in a row that is just fun to see coming is foreign policy and yet i hope you look at as it judiciary to the american taxpayer. because right now i do not agree

it is a fiduciary from the site of the legislative process that we are being good fiduciaries to the american taxpayer at this point. and part of that is moving forward is, you know, do you believe that the karzai government is doing but it needs due to to be in effect to partner with? to be an honest partner? to be a transparent partner? >> there are several elements akin to a very important question. i will start with the last. i noted in a statement that i got to couple in the beginning of january 2000 to just about 10 days after president karzai had been named by the bonn conference as chairman of the afghan interim authority. and i worked very closely with him during those early days.

i believe he has committed to a unified, stable afghanistan and i look forward to renewing the relationship. i am certainly going to make every effort as the ambassador to have a project is working relationship with head of state to which i am accredited have we had differences? arthur dames at we wish you would or would not have done? arthur thinks he wishes he would or would not have done? of corsair. one key issue is corruption. for the sake of the state of afghanistan, the afghan government is going to have to do more. we wrestled with the same thing in iraq. and you don't get positive change overnight. for prime minister maliki in

iraq expressed an awareness of the problem in incrementally, some steps were taken. we have seen president karzai make the same commitments. for the account. use count for more. but i would start, if confirmed, from the assumption that we do have partners in the afghan government is certainly what i here in my consultations, sematech dave gubernatorial appointments and the provinces, some increasingly effective members of the karzai cabinet. that is a critical part of capacity building and transitions. i would see that is again a key responsibility to help them develop that capacity.

>> well, i will just say that when i see the reports but public and private, about where her money has gone, without correction is that. and when i see karzai talk about the united states as a non-pain for us, i have real problems having american might shed in having american treasure continuing to be shed. my understanding is for fy two to 10 can we spend $672 million on education. that is far from $19 billion a success. one must question in all turned to senator risch. what is the united states position or your position on the efforts to alter the un's 1267 list of persons associated with the taliban and al qaeda under the proposed anti-understand the two separate lists but he

created, one for each militant organization and the separation would likely provide the afghan government with a much greater say over which touted bandwidth and the new list and possibly allow them to remove more than 100 people on the 450 person was that presently exist provide and the freedom to travel, access to the banking system, do you support that effort, which will ultimately decide who stays on the list in who gets off? are you concerned potentially dangerous individuals can be removed from the list? 's! senator, this is one of many issues frankly that i am not fully briefed are fully up to speed on. i am aware of it. again, the policy of the administration has been for rick ilyushin to take place, insurgents, the television have to renounce violence, with al

qaeda and respect the afghan constitution. i can't speak for the administration on this matter because i don't know if they have a position. i would be concerned about individuals who have a record of extremist violence against us and against the afghans, having freedom of movement and inability to kind of do whatever they want. again, i cannot be authoritative in that matter. >> i look forward to pursuing a pity because i am concerned about were added. senator risch. thank you for answers. >> thank you, senator menendez. >> mistook crocker, first of all thank you for what you do for

america. certainly her qualifications are impeccable here for this job. i can tell you this. i do not envy what you're about to take time. i've been following this hearing electronically because i had other things going. let me just say that i shared some of the skip system that in fact it is probably an understatement. i share a lot of the skepticism that is expressed here this morning. and this is a messy situation that isn't getting any better. and since i've been on the take to the u.s. senate, people back home keep asking me what is going to have been? how is this going to end? what kind of progress is being made there? certainly militarily, we have done well it believes. but beyond that, this is very, very difficult to articulate what i reject that sadr and what our goals are and how this is

going to end with this achieving a is very, very difficult to grasp, let alone to convey to the american people. so i wish you well. the problems here are very, very significant in their pleasure at of going there because they think you are the right person to do this job, but again, and very skeptical about how we're going to be up to handle this. so thank you. >> thank you, senator. i am and it volitions of the difficulty of the challenge if iraq was hired, and it was hard on afghanistan in many respects is harder. i can promise to you and the other members if confirmed, i will give you an honest assessment of what conditions

and situations other than what are achievable ways forward in what may not he achievable. you know, that much i certainly undertake to do. >> and i appreciate that. your observation regarding iraq and afghanistan is appropriate. too often people try to compare the two and it is a comparison of apples and oranges. but we are giving to the afghan people at work that for 10 years in blood, setting tears coming to really wonder whether they want overtrained to get them. that's kind of wary on on it. thank you take care of yourself over there. >> thank you, senator risch.

the record will remain open for 48 hours. i asked the ambassador to respond to any questions as expeditious as possible to make a on to the nomination. [inaudible conversations] [inaudible conversations] [inaudible conversations] >> -- i don't know why they are talking about your great record in iraq. it's been an absolute disaster. since the invasion of afghanistan has led to the death of about a million iraqi displacements over iraq. >> the possibility for protest in iraq has to be fought for.

>> financial crisis at home. [inaudible conversations] >> is in a legal obligation. [inaudible conversations] >> now, what your reaction from the state department on a senate relation committee report on usaid to afghanistan that appeared in today's "washington post." ..

about some very profound concerns that senators have about what's been going on especially at a time they are looking at deciding to be actively approve a $3.2 billion apportionment for afghanistan and the coming fiscal year? >> that has a lot of elements to it. ambassador crocker i don't think was at all uncomfortable in his

confirmation hearing, and as i think he said if confirmed he will look at these issues more closely, and he takes the issues in the report of very seriously, and also concerns about the course of defective corruption and he would also seek to address that if confirmed. also just deputy secretary as well as our usaid at mms trader were given the opportunity to review the report and my understanding is that they did respond in a form of a letter to the committee, and i did want to before we are coming down want to see if we could make those letters available to you all because they would constitute a detailed response to some of the concerns raised by the report. but speaking more broadly we

welcome but do not endorse all the conclusions in the report. we believe the presumption applied by the "washington post" article the assistance has contributed little and that afghanistan has made no progress is frankly incorrect. afghanistan has made major progress. as president obama said earlier this week we've broken the taliban momentum. we trained and continue to train afghan forces, and we are preparing to turn an corner in our efforts. civilian assistance represents a small percentage of the cost of the mission in afghanistan but it's and a central component of the national security strategy in afghanistan, and as the report recognizes despite the many operational challenges we are seeing progress on the civilian side. >> do you contest the conclusion that once u.s. forces have

pulled out in 2014, and by extension there will be some sort of revision that the impact on the afghan economy would be such a shock that is what is essentially going to a depression because it just isn't robust enough right now to stand on its own 2 feet? >> will again i think it is obviously development assistance is a key part of the integrated civilian military plan for success in afghanistan, and you know, it's important here to recognize as we move forward that there is going to be clearly more afghan lead efforts in the military side as we head towards 2014. and on the civilian assistance side we are going to continue to put in place programs that we believe our sustainable. i believe that usaid is already

addressing many issues raised in the report concerning sustainability and oversight, and we have undertaken we believe in the past years some good efforts to change the way we do business. >> the senate armed services committee is holding a confirmation hearing tomorrow morning for william panetta to be the next defense secretary replacing psychiatry gates. he is the current cia director and served as white house chief of staff for president clinton. he also served in the u.s. house of representatives. we will have live coverage from capitol hill at 9:30 eastern on c-span.

the head of the irs said on capitol hill today that cutting $2 billion a staff writer at congressional quarterly, how did the senate vote on a proposed delay of the limits on that card user fees?

>> so the senate today rejected an amendment sponsored by jon tester, democrat of montana and bob corker, tennessee republican 54 period 45, and they needed 60 votes for it to be adopted. >> can you explain what are the fees'? >> sure. so every time a customer buys something at a shop with a debit card, a fraction of that goes towards the bank. merchants say that that has been taking in downsized cut. the banks say we need that for consumer protection and fraud and what not. so, that is what the debate was over. last year as part of the financial regulatory overhaul, the dodd-frank law, the senate agreed to a durbin amendment to limit the fees that banks can charge retailers comes of this was an attempt to kind of roll back that amendment. >> what does that mean the attempt to roll back mean for the supporters of the amendment

meanly as senators tester and corker? >> they were trying to find a compromise that could get 60 votes. initially when the introduced the legislation they said let's deily the new limits on fees for two years. then as they try to cobble together support, they changed it to a 15 month delay and the amendment voted on today would have delayed them for one year. >> will there be another way for them to get this issue through? >> this was really their best chance. i spoke to cementer corker after the vote, and he said you know, bridge now. this is the best chance. that people have spoken and it's tough to get anything through the senate, it's tough to schedule a vote, it's tough to find a bill that might get through, and this was probably the best chance. >> you mentioned senator durbin who was the original author of the language, the new restrictions. what were his arguments against the amendment?

>> well, she said that the banks were trying to delay, meaning kill. if you believe in regulating this interchange market, it's called then we need to defeat this amendment. senators tester and corker said no, this will kill it, but there was a disagreement there. >> how much of a lobbying effort occurred on this issue and why was that? >> this was a huge lobbying battle between the financial services industry and the merchants, and that's because a lot of money is at stake. roughly $16 billion a year i think an interchange fees, and so the banks are set to lose a lot of money and the merchants to gannet. they say they will pass on some of that money to the consumers, but the banks say we don't believe it. >> what is the next step for this issue? >> july 21st the federal reserve is expected to issue a final rule limiting the fees.

the proposal last december would have capped the fees at 12 cents per swipe. that is down from averaged 44 cents. so it seems like the fed is likely to issue a final rule next month, july 21st and we will see how much they give to the bank. >> ben weyl of congressional quarterly, appreciate your time. >> thanks very much.ficer: t senator from montana? m >> i want to thank cementer reat for his comment. t senator reid is one of theommen. leaders of the banking committee and i appreciate his comments.ao i do want to set the record straight on a couple thingsit'sn though. it's not a 12-month deily it is a six month study and then implementation of the rules. cin the senator said that chairman d bernanke had plenty of information. the problem is he doesn't have t t.ch information to the creditau unions, and that is what thise s amendment is about.sed amendment that we passedye lastl year called the durbin

the federal saand state level sd exemion work because market forces will determine where the customers fall.dent, i'm g madam president, i'm glad that o we are here to vote on v the amendment that senator corker and senator hagan, senator crapo and bennett and i have workedton te this afternoon we are finally going to have an opportunity to vote for an amendment that has been crafted the right wing. tor mnator kay hagen and crapo and benet came to us about on the go to share their interest in ago fixing the unintended consequences of that amendmentcf that was passed in the senate p about a year ago. the amendment directed the federal reserve to issue cts regulations limiting the cost oe the banks and retailers lincoln servers use their debit card ton buy things. based on law that the fed intends to limit the cost of 12

cost of transactions may be higher. han now the big wall street bankst, can handle that. live pey are not happy about it they can live with it. too they've got plenty of tools that will help them make up theunione difference.if the mafein street community bans and credit unions are a different story. finan these guys who have nothing to t at with the financial crisis doh not have that same flexibility deval st banks have. these are the banks in montana. these are the folks i want to mak se sure have a fair shake. t so, folks from both parties camt together and said how can ihi fx this to make this protect the nd credit unions? since the original amendment eaes not? two-y senator corker and i suggested e two-year delay, a study and then a more legislating to fix any s problems identified in thewith m study. we the senators who are here todayd with me thought we could do better and t we could and we die

after talking with our down colleagues, we worked together to reduce a study per go down to as i said earlier, six months.ld at that point the fed and other regulators will decide if theree rules can prevent the small get banks from getting hurt. find, a ind don't know what the study is going to find, and i don't think that anybody knows if the a agenciesll find the rules consil all costs, if consumers wouldn't were exception, those that appld to credit unions and community banks, if the exemption will a work, depending rules would move forward has passed, and all i tl would be the first person in line to tell senator durbin that he was right about the oth two-tiered system.that t if the fed and the othernsure regulators find the changes must be made to ensure the current s rules don't include the cost fos that small banks and credit unions and consumers might be w

harmed, then they will have tosx issue new rules within sixuld ho months. us every two years the fed will rus have to tell us in congress the whether these rules are still working for the small banks ande credit unions. that's all we are asking for. before the fed's roskam implemented, let's make sure that we have a correct. the good senator from illinois yesterday said that this wasn't but when you sit down with folkr who think you are on the wrong gr track and work togetherou to fit a middlehe ground, well, to me that is a definition of compromise.er some other changes have been made, somema other charges ide,d should say have been made about this amendment, and i'd like to some say it is a favor to the big bank. well, it's not. that onl in fact, this amendment corrects a very big problem that only affects the community banks and credit unions. from the senator from illinois saids

yesterday that he crafted this t amendment with the awareness that a major reduction interchange fees would kill for small banks and credit unions. deep harme no one denies the small banks and credit unions would be deeply harm if they are forced into a system no one denies that. this is why senator durbin tried to establish a two-tier system. under his proposal, big banks, wall street banks could charge s one rate at 12 cents per transaction, the small community banks, credit unions couldon, continue to charge a percentage of the transaction, 44 cents one .verage.an but there is a big flaw in the plan. the two-tiered system simplyt. will not work. let me repeat that.idn'take the two-tiered system simply ch

will not work and i didn't make that up."its here's the chairman of thehantsw federal reserve said. it is possible the merchants will reject the more expensiveis cards from smaller institutionst or because networks are not olling to differentiate the different size.ot it is possible that thein extension will not be effective in the marketplace. it was ben bernanke who saidecae that.l he went on to say that because the exemption will not be even effective, small banks could bei heard or even fail. said. requirg them t the community banks requiring them to increase the fees they charge for accounts is much greater than any time any benefit that the retail customem may get. fed r again, madam president, everyone agrees that the fed rules go a onto effect, the small banks ani

credit unions will suffer because the exemption simply will not work. sure tha so today we can stop and doublew check to make sure that thatflia does not have been or we can flip a coin and hope for the best and watch as more small banks and credit unions failng reducing consumer choice and reducing banking options especially as they currently a exist in a rural america. the the small banks and credit to sl unions are the ones whol make tn loans to small businesses inll rural america, and places folks. are still willing to put a thein money, they are the ones who the folks in montana still trust. te they don't trust the big wall we street banks. we probably want these meetings to washington, d.c. or chicago adamle but we will in a rural america. i don't want to see that happent th if.e will another good 1i heard this week is thd e argument that the to amendment will allow banks and

credit unions to factor executive compensation into thel cost of interchange fee is. will not. and in fact, the amendment regs specifically states the federal reserve and other bankingith regulators must look at the cost associated with that card transactions and program operations. it we also know how dangerous it ig to set a press for a product without understanding all of the costs that go into that producta home depot would never allow the federal government to set the price of a garde cn hose bycturn manufacturing that garden hosesi home depot charges usng for the cost of manufacturing at, tipping it, keeping it in and stock, having someone tell youn what ogle it is in and the list goes on and on and on.lating det likewise if we are going to deregulate debit interchange fees' we need to understand all of the costs associated with a t debit transactions and that itme

programs. on this amendment last year we g thought weht w were allowing, vr to allow the federal reserve to consider all costs. however, the three devotees last year's interchange amendment limited the cost that could be o included. some were allowed to be included and others were not. not. some technology costs were included but others were not.o if we are going to be regulatino this market, we need to be fair about it.t i so, the amendment directs theand e reasonable andfed proportional,a it gives the fed the discretion to look at all of the costs associated with debtthats not transactions that does not meanl executive pay.wards progr that damoesn't mean a special all iecod,sts still need to behl justified if and if they cannot. be justified it will not be considered. the fed has been very clear with me, no executive pay the bills and whistles.

the decisions about the cost of routing networks and the cost od lraud and other technicalnica details are much better left toi the fed then decided by the united states senate.s finally madame president some aid the amendment hurts consumers. it does not. tomeone who vote bd against thei wall street bailout, who wrote part of the credit card reform act and voted for the wall street reform bill, i can tell you if this amendment were somehow bad for consumers on one end of fer in fact the amendment requires regulators to certify c that the fed of rules addressthe consumer concerns. the current law does not require any one of, it does not require interchange fee regulationsha on conss. consumers. they are out of the picture. anc i'm not aware of any specific plans buy any retailers to lower prices are provide rebates at

interchange s.p.a. are lower. i know that one large store helm earnings at the beginning of thy with a company executive called a proposal to lower interchange5 fees' a $45 million windfall. would sound pretty good to mde but as a customer, it isn'ti una clear how i would benefit.fowh io understand there are some folks who wish the amendment would go further to includeencis additional consumer oriented agencies like the federal trade commission as agencies that will conducton the study. i'd be happy to work with those senators to see how we can protect those in the process buo the only way to make this happet is going to get this amendmentl adopted today. effec otherwise the rules come into effect july 21 with berkhout within the consumer thinks.thate

there's not a regulator the will tell you it will. a you theks will tell durbin amendment has an exception for community baunnks, under $10 billion in credit will unions under $10 billion, if a they think that will work, y thy there's not a regulator out theremp that will implement it the freesy market system willri. drive it to the lowest price so, i'm saying let's slow down a little bit.let's maksure let's make sure we get it right. if we are going to create regulations, let's do it in a fr way that is fair and consistent with the intent.ry to let's not try to solve one other problem and create three others. and let's not take shots at the folks in my neck of the woods te

financial meltdown. that's all i'm asking.ndment i'm urging my colleagues to p supporret this amendment. with that, madam chair, i yield the floor.i ri >> thank you, madame president.s i rise today to express myto the strong opposition to the testerc corker amendment number 392 to act.ti the interchange debate is not a new one for the senate.this i this is an old discussion withis both sides, financial the institutions and retailersable. i bringing their perspectives to ane table. binessm i should know why former small businessman and retailer.elt retail stores have been clamoring for years and feltank dgnored by the big bankcard care

companies. the smaller fry items are forcea to allow a sale to be put on a d dead or a credit card while some post signs the require a minimup purchase for violating the service contract.ees wer merel if the fees were merely apetage percentage of the sale rather than a minimum amount oruld percentage, whatever is larger, much of the argument would be gone. levage without the percentage fees, small businesses have no leverage for negotiation.d vending machines will allow you to kind of put your cellphone al the vending machine and click corridor soda and it will be built on to your jebel card. up that is the cost of making thatg purchase on the sale plus somees owners pocket every time someone buys a soda or a snack will the no.very you can't be in business if youn lose money on every sale, buts

the vendor has an option. they can charge as it though and every sale is a debit card sale and increase the cost of the ct item to cover whatever cost the enbit card company put on your purchase. when you have right now is this hidden fee that goes to a card h company if they lose the fee they have to charge another way is.idden the estimate to $150,000 of thew hidden fees that they are now receiving that customers have tr been payingch on the purchases d don't know about it. our hidden fees there? i fight them every chance i getl according to the wyoming retail federation, retail stores, hotels, restaurants and small businesses in wyoming that consistently report that credit debit card fees have tripled inb theec last ten years. these fees have become a majorun cost now surpassing of their ofi ueaditional costs of doing iss

business. this is a small business issue. smallcu businesses because they don't have the leverage to do any negotiating in this case neither do the big companies ofo the small businesses are paying two or three or four times and d sometimes more for credit and re debit charges. when i recently traveled to wyoming a businessman comparedse sis expenses in the last five years to explain the effects of interchange fees on his f asiness. sales for 2005 and 2010, 5 million to five and a half million per year. on crit % of sales made on credit cards, 15% in 2005, 37% in 2010. field in the last five years and increased 10%. credit card fees increased overd 100%. as credit and debit card fees are

the percentage of total sales 2005, and 1% in 2010. so the fees tripled in just five years. a the retailer has no control over that. its monopoly. about when your bank raises fees if you know about it, you can b change banks.he when the debit card increases to their fees the only alternativer is not to accept the card ase payment but the cards have become a way of life and they is know it.ustain these the profit margin of business is tooincr narrow to sustain these increases.er-cr amend this is why receiving the tester corker amendment means saving jobs in my home state of wyoming and around the nation, increaseu in interchange fees are cutting into resources that could be used to provide more jobs. during the financial regulatory reform debate last year, senator durbin offered an amendment that

passed the federal reserve, thec fed, with studying the actual cost of debit card interchange cost verses fees being charged.g i voted in favor of these durbin amendment hoping it would create a dialogue and a common sense os compromise on this issue. i was trying to force this dialogue in my shoe sailing day. days.idn' pay card companies didn't pay anyecn attention. i tried ever since becoming an t senator. i've been ignored. the durbin amendment is the onlt thing that has gotten the debit card attention.esolve but did they try to resolve the gerati stores?nd, the stores were generating the r sales and therefore collecting their revenue?o, again, a resounding no. ncey haven't met with them at ci all. they spent a fortune trying toky convince you that they're do monopolies is okay and that the, shouldn't have to do anything he about it.ight, but they've always been right, they are still riding going to be right and they don't have to talk too their customers which e

ian encourage banks to listen ad to negotiate, but they chose toe advertise the message to make stores look like the bad guys. they have spent a small fortune advertising and messaging.ce on my way to work i can buy a place they were giving outnsulad insulated coffee cups to giveere this message that the big banks were going to be pinut out of business by this amendment. of congress, but that isn't going to rectify the problem. i agree that government should fees'.eter say that again, i agree the fee. government shouldn't determine a set price on fees. but a huge segment in the economy makes a case for redresw it will likely fall wonder whatn i call the probable legislation will a number three. and that is whreyac it's reactio it is worth overreacting. that isn't a good way toate, legislate but unfortunately it n

happens a lot in washington. and it may have happened in thi, case.to the ret i worked for years to bring then retailers and big banks to the table to discuss and negotiate e interchange fees' to make the system work better for both hape parties. time.n since the passage of the bill last july, they're has been rets ample time for the banks anddiae retailers to work out a solution to the dialogue between the financial institution and retailers has to occur in order find immediate and a real solution to this problem. the interchange fee provisions an import tant issue that desern full attention and consideratiod of both intended and unintendeds but the nation's retailers and small businesses can't afford td continue delay and study because what we are doing today as if it passes kicking the can down they road to keep things just the wae they were. some yes, it looks like there's going

to be in our action there. if the big banks me today the customers of stores lose following the passage of the durbin amendment 5 es 75, whichr was introduced this year by the amendment by tester a and corkel is a stand-alone bill to delay l reserve rules until the impact of the fees can be studied forit another two years. that's the original bills with this amendment comes from. to a similar house bill proposedebt the delays and studied the dennett card deacons -- debitr card for one year to the corker changed their amendment so it's what we will be voting on today is a steady year of kicking the can down the road that even though it's beennot wo changed, my colleagues knew thal i wasn't willing to support the

original two year delay whichury would effectively bury progress made on the issues.kick a two-year study wasn't just ro. wn theg the can do road, indite it was making an indefinite delay on any changes and prohibiting dialogue between tee parties.timeine to decrease the study timeline from two years 12 months.llow the tester corker amendmentdy would allow six months to study the interchange fees plus an the additional six months for theveo treasury and federal reserve to draft final rules. accelerate this process. solution is too long for the merchants r and retailers. there's another problem, too th. fed will still be making the rules and you've got to realized banks work with the fed all the

time f. uerstands the fed understands the banks,f. retailers don't work with the fed. the fed don't check on thenk retailer's. re so how do you think the rule of come o the fed will come out if we kick the can down the road. i think the banks will have a degette zandt hedge, and whatisn listen to thecu customerswith retailers and come up with a workable solution because theis. fed isn't the right place for ad the decision.and, qte the banks decided they didn't decision and quiteks, there is frankly for some of the small banks, there is a problem because that was allowed for small banks to give them an edge is never going to happen because people will shop where itse wi cheapest with the big banks. it

i don't think the banks will get it right unless there is something that is real to them. july 21st, the current rule wil. go into effect. july 21st they will finally feel that it's real and that they ought to sit down with their customers, the retailers and get iti figured out.i i don't think it's that tough. o i know where the changes werent that i didn't represent thethere whole gamut, but there are a few associations that would beoesn'o valuable to work this out. it doesn't need to be done through legislation, but but if today we have the feet, if wehen pass the tester corker amendmeno there won't be any incentive to do anything for at least another year because the problems stille problem. eroblem.begi und ae retailer customers arestanes beginning to understand that there is a problem.

i just saw a survey from montana, and 75% of the peoplern were opposed in despite the work currently in place. 75%. you know, america is figuring wt things out faster than congress, and we've got to be with the people. we've got to take care of thees problems that face the majity. especially when it is that huge of a majority i don't like doing things based on polls but i do like poles to give me anng indication. i go back yto wyoming almosttate every weekend and i traveled a every weekend and i talk to then real people and i can tell yous that 75% is probably just about right it might be slightlyiren higher than that and wyoming.les so the bshanks and the retailera should get together and come up with a rule double look for bota of them not in monopoly.

when you sign onto one of thesee credit card agreements, and you have to do one of them to accept them and have the money work not through the system back to do you are not given any options. r there isn't anything you can shop around for because the and if you assign one of those i agreements, if you have to be te willing to accept it no matter what the size of the purchase. if you are selling soda for a yu dollar paying 44 cents, you knom that the soda company isn'tso te making enough to cover the 44ch cents so they have to raise their price which gets passed or to the customer. they've got to raise the price of that it covers the credit't e card. mo they aren't allowed to charge ag more for a credit card sales when they do a regular sale and they shouldn't so they build ind a fee and it ides just a hit in

payi see. you know that you are paying tht te but it's a huge fee, and its takes away some of the profits i on the small sales and that'ss one of the primary areas that ir driving this whole issue. there's other areas, too that is the s simplest one that could be figured out. so, both sides in this issue need to have a hand in the gives negotiating. defeating this amendment gives them both a hand and that is whe i believe two things are needed. to occur to fix the problem. one come in the study shouldn'tl be long belong to the drafting of the royal command number two, banks and credit unions must come to the tables with retailers and define some middle ground. that would be more workable of bankers and retailers sat down e to negotiate the agreement. they don't need a study. the retailers know what the problem is, and the banks knowpe the problem better than the the

retailers, so all they've got te do is to skip the study, work i. out. degette could be worked outfore before july 21st.a the deadline is always good. reo so, we really do need to defeath that. it's a toughbu issue for smalltm business owners and merchantsunc and retailers because many of the community leaders have come to rely on this interchange andt come. no good this comes from puttingn them against lenders in wyomingn or otherwise, and especially not in this economy. them to be reasonable fothe situation could have been solvee years ago back when i was in the shoe business, and i can tell you it's pretty discouraging that now at in the senate they , aren't listening, too but thishm bill has gotten them to listen so no more delays should occur.y it was overwhelmingly approved by the congress last year.addits the u.s. consumers don't need p additional studies to tell them

swipe fields in the world. nee deleting these reforms willican delay urgently needed relief fot consumers, relief that can't wait longer during this fragile economic recovery. so today i ask my colleagues to usde with their stores andherwij customers otherwise we will have done another bailout for banks.. in the balance of the time.: madami >> senators from illinois i from illinois. i the friendship has been growing over the years and i respect sof much as one of the real voices of retailers and smalltunity to businesses.ess sid you know it better than anybody that sits in this chamber.'t

talking with a solution to this problem i couldn't help but not affirmatively. reflect to establish this interchange fee it reflected the fact thats, retailers, small businesses, merchants, hotels, restaurants, shopkeepers across the board were literally t given no seat t fairness and propriety of the interchange fees. d and the point you made drives as home. w businesses in america theee highest interchange fees, thatou is the charge every time you swipe at plastic debit card of i any country.heir if the banks would come down our of their ivory towers on wall

street and other places and sit down, rolled their sleeves withy the folks running shoe stores and grocery stores and hotelssal and in restaurants and say allca right we are going to come up ss with a fair system if it is zere in canada and its 44 cents here there's a number in b tetween to could make sense to both sides.e if that were the case you and is would be working on other issuee today wewe have to defeat tested and corker amendment, otherwise we are sending a massive, on massive subsidy to the biggest banks on wall street, $8 billioe a year that if they collect on these debit card interchange fees. i think the senator for his support and notes at 2:00 we0 we face this its debt portion votes orr every small business in youf home state and mine as well.

i suggest the absence of a quorum.

a house proposal to cut $2 billion in the agency budgets would decrease federal revenue in the long run and the irs less effective. irs commissioner douglas showman testified before the senate appropriations subcommittee for just over an hour. the hearing is chaired by senator durbin of illinois. >> i'm pleased to convene the ceiling and consider the funding for the internal revenue service. the largest single account within our subcommittee. our focus today is on the president's budget request for the irs in annual funding

constitutes over half the total amount of discretionary funding under the jurisdiction. i'm pleased to share the dying is with my friend and distinguished ranking member, senator gramm of kansas and other members will probably join us. joining us today to present testimony about the resource needs of the irs is the honorable douglas shulman now in his fourth year of a five-year term as the 42nd commissioner of the internal revenue service. thanks for your service and helping for accepting the challenge to help lead the irs for good to great. i welcome the opportunity to conduct a critical oversight of the irs and its programs through our discussion today. congress exercises its most effective oversight of agencies and programs through the appropriations process. it allows operations and spending to complement congressional oversight the irs caught three of important watchdogs and keen observers including the treasury's inspector general for tax administration and the national

taxpayers advocate, the oversight board, the u.s. government accountability office and treasury employees union. lots of people are watching. i appreciate the contributions of each of these entities to help us prepare for today's hearing. the irs said ministers ball and collects revenue to fund over 96% of the federal government operations each year 95,000 plus employees hundreds of millions of contact taxpayers and businesses. the onerous represents the face of the government to more u.s. citizens than any other agency of the current. on a budget last fiscal year this fiscal year on a budget of 12.1 million the irs collected 2.54 trillion, 93% of all federal taxes this $194 of revenue for every dollar appropriated funds given to the agency. you processed 230 million tax returns, including 141 million

individual returns come 7 million corporate, 30 million employment tax returns the issue 109.5 million refunds worth $366 billion, and the list goes on. for fiscal year 12, the president's budget request funding a 13.2 billion represents an overall increase of $1.1 billion or about 9.4%. of the fiscal year 11 level for all irs accounts fiscal year 11 enacted bill maintains funding at the same level as provided in fiscal year 2010. i recognize this level falls over $487 million short of what the president requested for this year so there has been belt-tightening all around and it's affected your agency. we will talk today about the budgetary challenges you face in the upcoming year and policy challenges which drive spending in the agency and i look forward to hearing more about the challenges the irs faces in the

difficult budgetary times and now i would like to turn the floor over to my colleague. >> chairman, thank you for the hearing today, and welcome commission eshelman. understand the irs is tasked with the responsibility to collect the revenue the funds the government that administers the tax law. the ira's goal of increasing services making military compliance easier and enforcing the law to ensure everyone pays their fair share of taxes is all laudable. we all agree we should make sure our tax code and irs compliance efforts don't make it harder for taxpayers and small businessmen and women to meet their tax obligations to the as we know the american economy is facing difficult times and we need to get the economy moving again. americans are struggling and overly burdensome regulations and requirements and for the ability of the small businesses to grow and create jobs. i was pleased to see congress address the uncertainty by

passing legislation to repeal the unprecedented 1099 reporting mandate in the health care law. this marks a significant change in the health care law and the repeal of the 1099 requirement is good news for small business and agricultural producers who bear the largest burden under these provisions. i am interested in talking to you, commissioner, about the consequences of that repeal on your appropriations and budget request. i noted that the request for all irs the fiscal year 2012 is almost 13.3 billion so an approximate 1.1 billion over dhaka 2010 enacted level and the fy 2011 level resulting in a 9% increase. almost half a billion of that increase as requested to begin implementation in the health care law given the trend fiscal reality i'm interested to learn how they intend to prioritize the goal and carry out the

responsibilities and enforcement and taxpayer services and make progress on important information technology projects. i appreciate a sycophant complex responsibilities that the irs faces given our government fiscal constraints we must be careful, carefully review the agency's budget request to ensure the taxpayer dollars are receiving the best value for their dollars and make sure that we address our country's economic problems in a fiscally responsible way. mr. chairman, i look for to hearing the testimony and thank you for calling the hearing and i look forward to working with you on this committee's jurisdiction. >> thanks a lot, senator. mr. shulman, the floor is yours. >> thank you, a ranking member moran it's good to be here and i appreciate the opportunity to testify about the 2012 budget. this budget was crafted during the time of fiscal austerity and belt-tightening in the nation to be as efficient as possible and to spend taxpayer dollars wisely

this means in my mind finding savings or we can and continuing to invest in a strategic priorities to improve service and walter compliance. the fiscal year budget includes bugs 190 million in efficiencies savings and reductions and you've got my commitment to continue to look for ways to save the federal government money. against a backdrop it is clear that the irs is vital to the functioning of the government and keeping the nation and economy strong. the collected as the chairman noted $2.345 trillion in gross revenues to fund the federal government which is partially 93% of all federal receipts. and every dollar spent on all irs weep collect $200 of revenue. one of our duties as you noted

is conducting the filing season despite the tax law change it actually went relatively smoothly. as of the end of may we've got about 133 million individual returns. we did asia over 100 million refunds totaling 200 to $85 billion. we also answered over 50 million taxpayer calls this year. the irs program which is lauded by many as one of the most successful modernization programs and all of government continues to show a growth. this year we reached two major milestones. one is for the first time we had over 100 million people electronically file, and this year we started the final program in 1986 and crossed the 1 billion electronic filing of the tax return this year. clearly it's changed the way americans interact in the irs. it's a big deal for efficiency.

to process an electronically filed returns costs $3.66 to process a paper return and we've been reaping benefits and downsizing the operations ever since e-file started. we also try to help taxpayers who are struggling to regain their footing after the recession. this year we start of something we call a fresh start program which expands the offer in compromise program and it may lean withdraw easy for the taxpayers and to enter an installment plan and change the lurleen criteria. now in recognition of the critical role we play in the economy, both helping taxpayers file their taxes and also collecting the revenue and in the irs in the 2012 budget.

this is to the taxpayer service and compliance programs and our commitment to administer the tax law in the balance and fair manner. it also includes to finish for the 2012 filing season are key cord count database. if and when we have a fully operational account database it will mean faster processing of returns, expedited refunds for all americans, better customer service and enhanced data security. i also want to emphasize because of our unique revenue collection function of the investments in the irs more than pay for themselves by generating much more revenue than they cost. i would be remiss if i didn't mention the house budget resolution which provided a funding level for financial services in general government of approximately $2 billion below the fiscal year enacted

level because as you mentioned a majority of the financial-services bill cut the magnitude would be substantial and affect all operations from taxpayers' questions on of room to front-line compliance activities such as audit coverage. from the reduced tax law enforcement cuts in the house budget resolution would actually increase the deficit widened duties could decrease in revenues. and the cans in conspicuous drops in activities could have an impact on the longer-term voluntary compliance in the country. with that said what we conclude by saying i recognize that we are in a very challenging fiscal environment and that there's going to be a lot of difficult choices you and your colleagues are going to need to make, so i look forward to the constructive dialogue over the weeks and months ahead in this subcommittee and very much appreciate the support the subcommittee has given the irs.

as i mentioned in my opening statement, the irs deals with a huge volume processing more than 230 million tax returns and issuing over 109 million refunds. it is an indication of a challenge that you face and people you work with face on a regular basis. and of course there are going to be cases people set to defraud or cheat the government in terms of filing fees tax returns. i would like to call your attention to one that has received some attention over the last year or so. and this is dhaka providing of refunds to people who are serving in prisons across the united states. the treasury inspector general for the tax administration reported that iran is prisoner refund claims are on the rise, but up to 44,944 claiming

refunds of $295.1 million in the year 2009. even though the irs has been able to present large amounts of the refunds from being issued, 256 million have been rejected in 2009 and this year of the study. the amount of the falls refunds issued still hit a high $39.1 million. since 2004 when 18,103 false tax returns were filed, nearly $123 million in fraudulent refunds have been issued to those serving in prison. now, i can think of a situation where someone serving in prison may be eligible for a refund. it could happen but clearly in this case we are dealing with those ineligible to receive refunds who are trying to defraud the government. they aren't satisfied with being punished by sitting in prison, they are dreaming up new crimes to try to get the taxpayers' expense to try to defraud the

government. and so, let me ask at the outset, i understand you've spoken to the u.s. bureau to try to make sure we have the identification of the prisoners filing returns, but i also understand that when it comes to the state prison systems that your authority to have this kind of information transferred will expire at the end of this year. can you tell me what is being done to stop these false claims by prisoners? and what more we can do to protect the head tax payers in the treasury? >> mr. chairman it is an issue we take very seriously. and we've been focused on. the bottom line is when we have the name of a prisoner we can stop the refund from going out, and we do. the problem is getting the data, and with federal prisons signed last year in a memorandum of understanding we can put screens in place to block i sent letters

out to the governors of the ten states that have the highest prison populations and the biggest problems here. we spent that time signed a memorandum of seven states were in discussions with 17 other states, so we have seen some potential progress with states getting the information so we can block it. we have a bigger problem with the counties and municipalities because we need to get information from them. they've got budget constraints and we need to get it in a format in december so we can note into the system and put blocks for the filing season. but i would tell you and i think the inspector general realized this in the last report, we are stopping more, we are detecting more and screening more. estimates are we prosecuting those who file false returns? >> one of the real issues is the biggest hammer that we have is

sending someone to jail and these people are already in jail, and so actually what we've been doing in these memorandums with the states and federal government is and the authority talked about is allowing us to share tax data which generally we can't under 6103 the tax law so people can do things like have punishment in prison, wardens can put a prisoner in solitary confinement and things of that like. people we generally blocker people that are there for life. as you mentioned there's a lot of prisoners who are married filing jointly or who do a refund is what we need to screen it and make sure we are not hurting the spells of a prisoner. so i think we've made a lot of progress. this year we have actually process and on screens and follow-ups of 100,000 more. i added to the unit that does the screening so all of this is moving in the right direction and as long as we get the information we can properly block. stomach and the infinite om