.. military action in libya. before introducing the bill, to get supporters republican john mccain and democrat john kerry said libya and the war power act. this is a half hour.: mr. p >> mr. president, i rise to join the senator from massachusetts

who will shortly introduce a my product of many hours of fopartisan cooperation andautho negotiation and authorization for the limited use of military force and libya.ion, a tr introduced by my colleague fromi massachusetts will be as i menti mentioned above authorized the president to employ the u.s. armed forces to advance u.s.in national secteurity interests if libya as part of the international coalition that isl enforcing u.n. security council resolution in libya to limito this authority to one year which is more than enough time to finish the job and makes clear the senate agrees with the a president there's no need and no desire to commit u.s. forces conventional ground forces init libya. this i would be the first to admit

this authorization is not perfect and will not makeappy. everyone happy.ake it doesn't fully make me happy.i iswould have preferred that thim ithorization make clear our military mission includes the president's stat policyfi to objectives of forcing khaddafi to leave power. i would have preferred that it urged the president to commit u.s. strike aircraft to the mission and matteo so as to help bring this conflict to a close as soon as possible and a bit on preferred a call on the president to recognize thenatiol transitional national council as the legitimate vallese of the fe libyan people said to free up ioeze frozen assets for the nat transition and the national lib council to use on behalf of thee libyan people. dhaka called on the of administration to do all of these things for some time, and i do so now again.

that said, this authorizationipa has been a bipartisan effort. my republican colleagues and iae have had to make compromises frm just as the senator frommassachd massachusetts and his democratio colleagues have had to do.ult, i authorization that deserves thee support of my colleagues in theo senate on both sides of thefidet aisle and i am confident they will support it. i know the administration has made it clear that itd believes it does not need a congressional authorization sucs as this because it is their view that u.s. military operations in libya do not rise to the level i of hostility. i believe this assertion will ce strike most of my colleagues and fhe americans they represent aso a confusing breach of commonrcue sense and it seems to be undercut by the reports the administration sent to congress which makes it clear u.s. armedd

will continue to plan limited strike missions to suppress enemy air defenses to operate pr armed predator drones attacking forces in an effort to protect libyan civilians and provide the overwhelming support for the nato operations. from intelligence to a real we reviewing. i indeed, we read in today's "new york times" that since the april 7th date that the administration claims to haveash ceased hostilities in libya, u.s. warplanes have struck the defense is on 60 occasions and fired up 30 missiles from unmanned drones. mr. president, i ask conclusiond of the time in the record of the article of today's "new york u.. times" entitled scores of u.s. strikes in libya followed handoff to nado.object >> i certainly agree that

to a full-fledged state of wargi and i would certainly grant scholar, but i find lee it hard to swallow u.s. armed forces dropping bombs andnemy killing enemy personnel in aoest foreign country does not amountt to a state of hostility. what's worse, this is just the latest way in which the haned administration has mishandled s.s responsibilities with regars to congress. ask congress to authorize the intervention and libya monthsiei ago. h and i believe it couavld have received a strong dose of not ctanimous show of support. ele nhe administration's disregard o for the elected representatives of the america of people on thid matter has been troubling andanf counterproductive and the of failure of leadership is pleased to see in the full-scale resulta against the administration libya

policy in the house of now, representatives. our colleagues are preparing a for u.s. military operations inn libya and the plan to vote on it in the coming days. many were opposed to this mission from the beginning. with different aspects of the at and attrition policy and libya. but at the end of the day i believe the rpresident did the right thing by intervening to dr stop a looming humanitarian disaster in libya. ove tionmidst of our arguments overu the legality andtion's picy i constitutionality of the hat and attrition policy and libya we cannot forget the main point in the midst of the most ground advantage into decades as peaful were sweeping the middle east r

with force is ready to strike at the gates of the gaziano and arabs and muslims in libya and across the region pleading for g the u.s. military to stop the bloodshed the united states andr our allies took action and gadhafi promised to commit in a. city of 700,000 people. and by doing so, we began t creating conditions increasing the pressure on gadhafi to give up power. has been ower yes the progress has been slow as many had hoped and the ls administration is doing less toi achieve it than i and others lis would like. eat the bottom line is thiss mil gadhafi is weakening. clost his devotee leaders and was the soviets are abandoning himerfor

gaining support and performance morean effectively. and though the progress isositin uneven, opposition forces in libya to are making strategic gains on the ground we are all opinio entitled to our opinions about the libya policy, but here are the facts. gadhafi is going to fall. it's just a matter of time so i would ask my colleagues is thiso the time for congress to turn against this policy is this the feeling tyrant when the writing is on the wall that he will collapse. is this the time the congress to declare to the bold to gadhafi and his inner circle to all of the libyans who are sacrificingo to force gadhafi from power and our nato allies who are carrying

a far heavier burden in thisa military operation than we are is this the time for america to tell all these differentthate hi audiences that our heart is not in this and we need the will or the capability to see this mission to through that we would abandon our closest friends and allies on a whim these are themg questions every member of congress needs to think about long and hard but especially my republican colleagues. many of us remember well the way that some of our friends on the other side of the eye of savageq president bush over the iraq erything i war. pow they sought to do everything ins their power to tie his hand and pull america out of that conflict. condemn we were right to condemn thewe speaker then and we would be wrong to practice it to ourselves. because the leader of the occup opposite party occupies the white house. someday i hope soon republican

ull occupy the white house and the president may need to commit u. ts. armed forces to hostilits my republican colleagues are indifferent to their actions affect t this president i would urge them to think seriously hor refer to cut out funding for this devotee operation couldnt a come back to haunt the future or president when the shoe is on the other foot.e its s the house representatives will have its say on our involvement in libya this week. the senate has been silent foror too long.'s time f the it's time for the senate to hat t speak. when that time comes, i believe we will find a strong bipartisas rising our current military in operations in libya and seeing to success. through that is the message that gadhafa needs to hear. t it is a message that gadhafi's opponents fighting to deliberate

the nation need to hear and it't a message to america's friends and allies need to hear so it's to get the authorization but ths then let's vote on it as soon as possible. mr. president, i want to thankrm mccaul lead from massachusetts for his hard work on this resolution and a understand he t will be introducing itnt, i immediately and mr. president, i hope the majority leader of thed senate will schedule a debate on and vote on this resolution as soon as possible. floor. arizona i want to thank the senator from arizona for his important and tr counter to the political currents of the day some ofn which have been expressed in the other body and elsewhere and iio thank him for thinking about the

strategic interest of the country ahead of some of the political interest with respectt to the national election. there are many occasions where d differently when a president either republican or democrat has engaged american forces in one way or another without thetn authorization within that 60 of days or even outside of the 60-day parameters of the waract. powers act. the fact is we had a number of s military actions, panama, libyaa 1986, grenada, 1983, iran, 1981, to 1980, haiti, 1993, persian

gulf, 1987, 88, lebanon, 1982, and then subsequently kosovo, 1999, bosnia, 1992, somalia,whih 1992 which didn't have this fight about authorization and only iraq in 2003, afghanistan in 2001 and iraq and 99 prior authorized prior to our engagen. engagement. the fact is that four of thoseed that i mentioned in did before the 60 days that expired the others didn't.ia,osovo bosnia, kosovo and somalia went beyond 60 days and the issue wa. never raised so think it's for important for us to put this in the context of you will and the measure the realities of the c choices we faced with

perspectives of libya today. we will shortly this morning aa, little later be introducing this resolution. it is a bipartisan resolution, democrats and republicans joining together to put in a lid very limited authorization with respect to our engagement in ao, support role, not any direct any engagement but a support role o, only and it is limited to that support role. now mr. president, i am particularly familiar with the debate and the war powers act itself over these years because that was a debate that took place specifically in response to the war that senator mccainht and i were both part of, the the power was a direct reactionh

to that war which was at thatst time w the longest word in histy until now afghanistan ten years. in duration over 58,000 americans lost their lives and stance several administrations, kennedy, johnson, nixon and the fact is as a result of that ware which we n never declared, thees congress wanted to assert its appropriate prerogatives with clarat respect to the declaration of te war and indeed to the american forces and so the act wasth war passed. of the war manpower act veryspey specifically created thismic whe dynamic where the,% 60 days to e act, and the president couldiod deplore troops for a purpose of 60 days without their action ifi they hadn't acted the inactionou itself would require president to then withdraw troops and

didn't require the congress to act but created the 60 period. th the fact is in the congress anyr member ofes congress during thea days to bring a resolution den before denying the president the right to go forward nobody didtn that in the past 60 days i'm glad to say and we are noww beyn beyond the 60 days. it is not without precedentizedn incidentally behalf of christ the action much later. in fact, i think one action wasa specifically authorized about a year that was the action of lebanon about a year after theyw landed a was authorized. so we are in the days of that in terms of this discussion.what t let me read specifically with the war power act said. "in in the absence of a depletion of the war in the case in which the united states armed forces arerd introduced into hostilities thed

hostility is clearly indicated by the circumstances and the t critical words here are united states armed forces are i introduced into hostilities. like a large u.s. people are there's aarn article in "thertic washington post" today and othe. articles people saying of cours, we are in hostilities because hostilities are taking place, bombs are being dropped. n, but that's not in my judgmentsu even though ppi support the wari power act and i think and it president obama incidentallys ui supported it which is unique from the other presidents but the fact is just because of studies are taking place and we are supporting people engaged in those hostilities doesn't mean e

that we are ourselves in fact introducing troops into hostilities. s no american is being shot at.ont no heamerican troops on the grog or contemplated being put on the ground. fac so the mere fact that offers arn in a deutsch dan hostilities and we are supporting them i don't believe automatically triggers n what was contemplated in the. aftermath of the vietnam war. that's not the principal argument frankly we need to be eaving here.eed to b what we really need to be doing is looking at the bigger picture i don't think any country the or united states, the u.n., or any other nation ought to be drawn lightly into any of our militarg intervention. i argue that here there were powerful reasons. ner whereun the united statesoi

shouldd have joined in establishing the no-fly zone lya over libya and forcing gadhafi to keep his most potent weapons out of the fight and if you slice through the fog of benef misinformation and we the risks and benefits here alongside of our values and interests which are always at stake, i think thp justification for the president's involvement and fort our country's involvement and ae compelling and i think theyco we now could be the single most important geostrategic shift the since the fall of the berlin wall it has profound implications for the united states expenditures, for united states military engagement in other parts of a region, it hase significant impact on the threats that we will face on ths

potential strategic risks for f oeor country and for our interests in terms of thatreon. region. absent united nations nato tha resolve, the promise thedemocrah pro-democracy movement holds for transforming the arab world, the whole arab world and all that ta that could mean to the united states in terms of hopes for peace between israel and hopes palestine, hopes for a different set of relationships, for a restraining wahhabi is a manned for diminishing the levels of fr religious extremism, hopes for s reducing the amount of of terrorism, all of those things d are contained in this awakening in this transformation people i believe and others believe would have been crushed if the hopes of the pro-democracyent w movement wasere simply ignored d

backs o we turn our backs on them. i i can't imagine, just thinkbout gout the consequences.qadhafi m gadhafi says i'm going to show y no mercy. i'm going to go and we are going to kill those dogs with risen up and expressed their desire to fd have fundamental freedoms ands rights and he's going to go in opposition. we already saw him pulling h people out of the possible defense. we already saw him attacking of women, rape as a tool for not, n does honoring people in the m muslim world as a consequence for life. we saw what he was doing. are we really serious that in npell wake of the gulf states iu an unprecedented request sayingt to us we want your help in the wake of the arab league in an unprecedented request asking fon

u.s. and other western engagement pin their part of te world to stand up for these wous rights we would simply say to that, so sad we've got better things to new. the consequences would have been extraordinary. remember president clinton said the greatest regret of the presidency was that he didn'tgae engage in rwanda and prevent which we could have done that very low costs prevent what happened in the genocide in gre rwanda this the greatest regret elsen the where we say to people with respect to the holocaust never n again never again to the words only apply to one group of or people or to the words have

innocent people at the hands of. a dictator so is the cost tof less of this great effort to. uld i believe other dictators woulde have seen the failure to complee challenge gadhafi as a completey license to act with impunity against other people and any pl. other place the vast majority of protesters in the country isryi crying out for the opportunity to live a decent life, getting jobs, provide for a family, have opportunities and have rights to be abandoning them i think would have portrayed not only thepeope people seeking space freedoms, but it would have abandoned the aban core values ofdo the country ani can hear now, i can hear it some t the same people now complaining about the presidente being involved would have beenat the first people at the why barricades complained about whyp the united states didn't stand up for the values and how ofe wt reckless the president was he wasn't willing to stop themi at dictator from coming of thesey n

innocent people exactly where it would be.a legitate why there and what syria? legitimate question. there are different interests in different capacities.n. the reality is the gulf statesbd are supposed to come in, the arab league asks us to come in were dealing with risk respect c in the council and the playersea and there are a whole set of uncertainties with respect to syria even today that distinguish it both in terms ofr about what we can assert and ac. what we can achieve it ofticolic foreign policy and the domestic policy limited to what you can achieve and what is doable in a certain situation and if we simply turn our backs as some ag people are now arguing we ought to do now which ought to be the

most reckless and i've heard in my life at the moment where ssople are achieving the goals e where the pressure is mounting,n where gadhafi is less able to maneuver and his forces have been reduced. where many people in our intelligence community and western come into nato intelligence community are saying there is progress being made and the vice is tightening g out we would certainly paul a rug out from under that. that's extraordinary to me. froe snatched to snatch defeat from the withdrawal of victory. i believe, you know, i can'tteli tell you whent it might happen but i am absolutely confident that it is 'mgoing to happen.qah gadhafi is finished. asked the people in the countryo even his own supporters are reacting out this year.and and the truth is the vice is g tightening because every dayoe p that goeoss by the oppositionits goy, stronger every day that goes by he has less of devotee to manage the affairs of the country

itself. we if we simply send a message to the house of representatives is- dantemplating today it would beo a moment of infamy frankly with respect to the house and with respect to our interests because a would reinforce the all too eemmon misperception on the arar streets of america says oneng thing and does another.ing bil we are already spending billions of dollars in the fight againsty extremism in many parts of the didn' world.t we didn't choose the site. asigety knows that.it w it was forced on us starting to with 9/11. and to fail to see thehe opportunity of offering of the courageous demand of millions of disenfranchised young people whs have been the greatest recruit r for al qaeda for the extremism, any of the extremist groups, to not affirm their quest now to

push back against the repression and oppression and to try tos fr open up a set of opportunities for themselves for jobs,to respect, democracy to turn ourbs backs on that would be ignorant, irresponsible, short-sighted and it would ignore our realna nationalti security interest ani it would help extend theveentmet narrative of resentment towardsn the united states and much ofhet the west wrote to themd furthere colonialism and furthered by our own invasiond of iraq and mr. p, afghanistan. remember the pleas for helpcome didn't just come from the libyai rebels if this isn't something r we simply cooked up here at homt with some desire to go get engaged somewhere.ssistanc ask for this kind of assistance it came from the gulf states whr have never before said to the

west we need your help to come intervened. leader it seems to me if we the silently accepted the death ofst muslims we would have set back our relations for decades. instead of responding and giving the popular uprising a chance tk take power i think the united states and our allies send aionf message of solidarity to theple aspirations of people everywhere. and i believe there will be remembered for generations. e part the particular nature of thean s madman who was vowing to show nh mercy to his own people to his own fellow muslims, theular natf particular nature of this maner who was going to go after the dogs who challenged him and hisn role in the past i believedds we mandate we respond and respond as stunningly limited ways.ollee

new york and other stations in the leinwand need to reflect on the fact they don't really need the reminder suspect that the gadhafi was the man behind theof bombing of pan am 103, claiminge the lives of 189 americans andn the intervention in libya in m judgment sends acritical signal to other leaders in the region a assume they can simply resort of a large scale violence put down reforms without consequences. i think you and result in libyat can have an impact on the futurd calculations and indeed, i think the leaders of iran need to payi close attention to the resultesl that is exhibit a by the need t international community we to r think about the results in the c context of over interest in iran these career on.

senator mccain and otherely fnators is absolutely not a blank check for the president is not all. tha it is a resolution that american forces and in the emphe supporting role little tothere' emphasize that.n author there's only iniz authorization for supporting role. it says specifically that the senate does not support the use of ground force in libya and the prisoner as stated that is his policy but we adopt that policy in this resolution. limed use it authorizes the limited use of american forces for the limited year from the time of authorization. this resolution and action consistent with a letter the on president sent congressional me leaders on may 27 which he t specified that the u.s. lya participation in libya consisted

of non-kinetic support of the nato operation including intelligence, logistical support, and search and rescue missions. suc i ask for such time to tighten it up here.here. so, mr. president, the administration and from congress e st week it doesn't considerth the use of the u.s. forces tof rise to the level of hostilitied and i've already discussed thatt i think there is an important constitutional question here but it's not a new question. the truth is that presidents,det democrat and republican haveyonn undertaken limited military meni action.on i mentioned each of thoseces. instances. i think this deily is healthy. e but the words we use about it have consequences. they send a message. and i think none of us should cn send any message wifely. a the last message in the united states senator wants to send in

my judgment is that all he hast to do is wait us out. all he all he has to do is wait for the congress even as the progress is being made, the vice is tightening because we are dividee.d at home. i think the passage of this impr resolution would be an importana step in showing the country and the rest ohef the world andof td showing the market off evenhis llesident tar committed to thisa critical endeavor and i firmly strongest footing when the president and congress to speak. with one voice on foreign polics matters. s hope our colleagues will thi nupport this resolution.ee for 60 years mr. president we'vi been working to build a cohesivz and consistent alliance with partners in nato. many times our military and political leaders have have not carried their share ofs the burden and americans pay ton

high of a price in blood and treasure that we have little fo. while others follow. earlier this month secretary gates warned the alliance is atd risk because of european penny pinching and the front-line combat and he said the united ac states wouhald not carry the alliance. alliance meeting doing what weor wanted them to do for years and hear all of a sudden are membery of congress suggesting it's okay to pull the rug out from under the alliance. that what i think really pulledt the bellol for nato, and i think we need to see the reality of sc the strategic interest on therod table here and proceed forward. when we stand up for our values? and interests at the same time,e when we support the legitimate f aspirations of the libyan people come and i think our own security of the monthly would be

strengthened immeasurably if weo can assist them to transition te a democracy. ss tha the cost now will be far less than the cost in the future if we lose our results now. i think my colleague for his generous allowance of the extra time. thank you. >> mr. president, thank you very much. i feel deeply honored to be nominated to become the 24 directors

the economic committee held a hearing today on how the u.s. and other countries can grow their economies and create jobs by reducing federal spending and debt. the report was released at the hearing by the staff that identified experiences and reducing their debt and the impact on their economy hawks indeed cochaired by kevin brady he says the committee's vice chairman. this is an hour and 40 minutes. >> the members of the joint economic convened this hearing

because the once vigorous american economy is languishing. the recent public by harvard university professor martin feldstein entitled economy is worse than you think what the final sales grew an anemic annual rate to .6% when during the first quarter of 2011. the unemployment rate was rising above 9% in and and the collapse of payroll employment gains offers another wake-up call. president obama's ekimov policies failed to launch a vigorous expansion. the policies increase the cost of doing business, heightened the uncertainty and detour job-creating investment. moreover, his policies have burdened our children with an enormous federal debt that continues to grow vision of the economy. one of our witnesses at stanford university professor depicts

president obama's lost to spending proposals come his budget in february and his informal for in march and april with the house budget resolution. from this crafted as clear% to one and congressional democrats want to make federal spending a larger share of our economy whereas congressional republicans want merely to return federal spending to its pre-recession share of the economy. return in federal spending to the previous session share of the economy normally prudent. nevertheless, president obama and some in washington have embraced the radical historical wind expansion the size and scope of the federal government. let me be clear cut excess of federal spending is our disease. large federal budget deficits and accumulating federal debt are symptoms of this disease. if you cure our spending disease's symptoms will finish. if you treat a symptom may temporarily alleviate some of the pan the overtime our economy will continue to weaken the international competitiveness

will the road and our children will become the first generation of american history who is poor than the previous generation and with these grave fiscal challenges the house of representatives passed a responsible budget resolution the would bring federal spending in line with revenue over time and the senate failed to consider what alone pass a budget resolution. congressional republicans want to cure the spending disease in part by reforming the entitlement programs to make the unsustainably solvent and future generations. in contrast president obama and others have averted to the discredited notion and part of what programs can largely be continued as they are without reforms of tax the rich. congressional republicans are demanding that any debt inflation must contain substantial spending reductions in the new fiscal guard rails to ensure these reductions actually take place. in response, president obama and democrats in congress have launched all-out political

attacks asserting the cuts in federal spending would push the economy back in the recession and destroy social programs to read these false attacks must see americans are to come together to reduce federal spending and growing our economy. on march 15th of this year i released a staff commentary entitled spend less and a less, the economy. the study examined other defaulting countries. developed countries, international competitors that have large persistent government budget deficits in the high level of government debt. the study's other countries have adopted fiscal consolidation plans to reduce the government's budget deficit in and stabilize the level of government debt based predominantly or entirely on government spending reductions were successful in achieving their goal. countries included significant tax increases in their fiscal consolidation plan in failed to achieve their goal. fiscal consolidation queens prominently or entirely on the

government spending reductions not only increase the economic growth over the longer term but also provide a significant short-term boost in many cases. today, we are releasing other republicans have commentary entitled maximizing america's prosperity. this study examined what fiscal guard rails would keep the congress on track to reduce federal spending relative to the size of our economy. the study found several things. a balanced budget agreement to the u.s. constitution but not counteract the bye used words higher federal spending unless it contains explicit spending limitations. the federal government needs a statutory spending caps with the credible enforcement mechanism regardless of whether the constitutional balanced budget amendment is ratified. the - reduction veto has reduced the growth of the state spending by strengthening the role of the governor relative to the legislature and making spending decisions.

enhanced rescission authority would also help control the growth of spending at the federal level. sunset provisions which have been effective in eliminating inefficient and unnecessary programs and agencies in the u.s. states would be helpful with the federal level. so long as the president and congressional democrats continue to behave in a politically expedient but fiscally irresponsible ways american families and businesses will look to the future with trepidation. that is the concerns and issues and the reason we meet today to beat i look forward to hearing the testimony of our witnesses. thank you for joining us, congresswoman. senator casey will be here at about a quarter after to get an opening statement as well and we will recognize him as he enters. at this point i would like to introduce our witnesses and again, on behalf of the committee, thank you all for being here today. we welcome the honorable john taylor, george shultz senior fellow and economics at the hoover institution and the

raymond professor of economics at stanford university. he also taught economics at princeton, yale and columbia university. dr. tayler received a bradley prize for his intellectual achievement and the alexander hamilton award for his overall leadership in the international finance at the u.s. treasury. dr. taylor is a renowned expert on monetary policy and the trader of the taylor rule for determining what the target rate for the federal funds should be priced devotee for the treasury international waters and first term president george liu boesh. previously served as a member of the president's council of economic of pfizer's during five ford and george h. w. bush administration and the economic advisor in hammill. dr. taylor has a long list of academic publications to his name and a recent book entitled getting off track government actions and interventions cause prolonged and worsen the financial crisis.

he's a frequent contributor to the editorial pages to "the wall street journal" and other widely read publications on the state of the economy. he earned his ph.d. at stanford university. welcome, dr. taylor. sign and johnson is the professor of entrepreneurship at the sloan school of management at the massachusetts institute of technology. he's a senior fellow with the peterson institute for international economics and a member of the congressional budget office economic advisory panel to read dr. johnson held the position of economic counselor at the international monetary fund and was a verdict of its research department. he's a character of the national bureau of economic research projects and works with nonprofits and think tanks and the world. dr. john johnson is the co-author of 13 bankers the wall street takeover and the next financial meltdown. he's a regular bloomberg columnist and frequently publishes economic opinion

pieces in major national, international news publications such as "the washington post," "the wall street journal" and financial times. he's the co-founder of the blog of the baseline scenario in earned his ph.d. in economics at mit. welcome. kevin hassett is a senior fellow and director of economic policy studies at the american enterprise institute for public policy research. before joining the aei, he was a senior economist at the board of governors, federal reserve system and associate professor of economics and finance at the graduate school of business at columbia university. dr. hassett was it was a consultant to the treasury department during the george h. w. bush and clinton administration. he served as economic adviser to the george w. bush 2004 presidential campaign and senator john mccain's chief economic adviser during the the 2000 presidential primary. he also served as the senior economic adviser to the mccain 2008 presidential campaign.

he's a columnist for the national review. dr. hassett earned his ph.d. in university pennsylvania. welcome. our fourth panelist today, chad stone is the chief economist at the center on budget and policy priorities where he specializes in the economic analysis of budget and policy issues. dr. stone was the acting executive stricter of the joint economic committee here in 2007 and before that staff director chief economist for the democratic staff of the committee from 2002 to 2006. he held a position of chief economist in the senate budget committee in 2001, 2002. previously served the president's council of economic advisers as the senior economist and chief economist from 1996 to 2001. as other congressional experience concludes the chief economist to the house science committee. dr. stone worked in the federal trade commission, federal communications commission and the office of management and

budget. he's been a senior researcher of the urban institute for several years taught at college and co-author honest about include economic policy in the ronald reagan years. he earned his ph.d. in economics at yale university. welcome today. dr. taylor, we will begin with you and invite your testimony. we will reserve least five minutes for each of the panelists today. thank you. >> thank you very much for inviting me

line quarter by quarter. in contrast, during the recovery, from the 8182 recession, economic growth averaged 7%. some more than twice as high during that same corresponding purchase of time and those are the red bars you can see how much of a difference there is so this is a weak recovery by any definition. i think the reasons for this in my view our policy. fiscal policy, monetary policy and regulatory policy. and since the focus of this hearing is on the fiscal policy, i just mentioned i think the

$862 billion stimulus package did not stimulate the economy. the increase in spending, federal spending is a share of gdp from 19.7% in 2007 to over 24% now did not stimulate the economy. things like cash for clunkers if anything moved spending a few months further. instead, what these policies did along with taking our off the basic ball of controlling spending is to raise u.s. debt levels very high and they continue to go high in the future. i think these high debt levels raise a great deal of uncertainty. there's even concern of another crisis but there's certainly concerns about higher inflation, higher interest rates and down the road. so, i think solution to the slow recovery, the weak recovery and a nonexistent recovery is what i

call restore sound fiscal policy. i think it will bring attention and allow more private sector growth and that is where the jobs will come from. my second chart shows the quite striking correlation between private investment in the united states and the share of gdp in the unemployment rate. and as you can see, when private investment goes up as a share of gdp, the unemployment rate comes down. right now we have low levels of investment and high unemployment. in contrast, if you look at the next charge, the third chart to see the government purchases another component of gdp have no such relationship with anything. it goes the other way but i would say it's not exist and so you should not be worried in my view about a credible plan to reduce the government spending. and that brings me to the last part of my opening remarks. how do we restore a sound fiscal

policy. i think it's important to have a strategy to do that, a strategy bridges credible and understandable to the american public. i would say it should have four parts, first in game changer which demonstrates the different attitude about spending and bringing spending down starting in the 2012 budget. that's as published as credibility which is so important for the effectiveness of a program like this and out on a path for spending number three and to legislate what is required to get that have accomplished. don't simply rely on the promises of the future that doesn't restore credibility and as you refer to, mr. chairman some kind of cap on spending correspond to the path of spending reductions. the next chart basically you mentioned in your opening we just represents what i think this announced, it shows you the share of spending by the federal

government as a share of gdp and you can see gone up rapidly the last few years. the first budget the president submitted didn't really deal with that. that's the top line. the next line the crew as a cbo baseline. and of the line of the lower part is the house budget resolution which does bring spending down as a share of gdp to levels consistent with that in the taxes. so in my view it's clear the credible strategy is the one closer to the bottom which doesn't deal with the problems of the top. right now people are looking to negotiate something in between and if we do negotiate something in between, that will be an important step of progress but really not enough if it doesn't go all the way. thank you very much. >> thank you of a doctor. dr. hassett? >> thank you very much. i'd like to make three points i

made. i support the goal what i expected it to be everyone in the room would like to bring the debt to gdp under control in the united states. the trajectory that we face going forward if you look out of the forecast in 2016 or look at the cbo longer-term projections of 2013 or 2015, the numbers in the bass lines are not encouraging and we need medium-term fiscal consolidation meaning the debt to gdp level should come under control and be brought down. the second point vote vertically to the topic of the hearing is whether we can experience at this point in the u.s. cycle what is sometimes called an expansionary fiscal contraction meaning if we were to cut spending for example immediately this would stimulate the economy and actually help growth directly. this is a policy for a sample that the government of the united kingdom is attempting to pursue at this moment.

expansionary fiscal contractions from experience around the world is studied carefully by the international monetary fund recently such fiscal contractions can under some circumstances be expansionary but i do not think that we currently have those circumstances in the united states for three reasons. first is fiscal contractions can help the private sector economy if the restore confidence if there is either a high perceived risk of sovereignty or some other concerns weighing on either consumer confidence or on the firm's confidence, but i don't see evidence of that right now in the united states long-term interest rates remain low. there are plenty of problems with debt overhang from the credit boom and those are difficult problems and i think that is the main reason why we are growing slowly in this case but they will not be immediately directly addressed by cutting spending on fortunately.

you can combine a restrictive policy with a more expansionary monetary policy. i would expect if the u.k. economy slips back towards recession which are inconclusive would suspect the bank of england would cut interest rates in otherwise increasing its so-called quantitative easing policies. in the case of the united states i doubt very much the federal reserve would feel that had this base to do that in the interest rates are low and its intervened a great deal through quality defeasing in the long end of the structure. i also don't think it would be a good idea for the federal reserve to continue its innovation in the direction. monetary policy would not be able to offset fiscal policy. the third we fiscal contractions can be expansionary as if they contribute to the depreciation of the exchange rate so if the value or to fall that would halt exports and compete against imports and again i think that may turn out to be a factor in

what we will see in the united kingdom the next one or two years but in the case of the united states given the nature of the dollar and the way that the economy is developing in particular the problems in the year rose on which our sevier intending to push the reserve assets towards dollars not away from dollars its again on likely the dollar would depreciate what or not we have contruction mary fiscal policy. so taking all that together and comparing it with the cross-country evidence, i do not consider us to have circumstances that would allow fiscal contraction for example in the form of spending cuts kick. i do not think that would stimulate the economy. there's a third point i make in conclusion that we should not lose track of how we got to these problems with debt. as you said mr. sherman to some extent longer-term problems and i completely agree we must deal with those issues sufficiently

over the appropriate time horizon that the same time debt to gdp went up sharply in the pictures because we had a major financial crisis. big risks allowed to build up in the financial sector and i -- coming from the meeting this morning that the fdic, its new system a resolution advisory committee which is a public hearing, and i have to see the tenor of that conversation was not particularly encouraging. there are big risks around the financial sector that pose fiscal risks and threaten if there's another crisis or when there's another crisis to push the government debt relative to gdp. i hope we don't lose track of the fiscal damage brought by past and potential future financial crises in the budget discussions to date. thank you. >> thank you very much. dr. hassett? >> thank you, vice chairman brady. over the past several decades many countries have undertaken fiscal the adjustments and

attempt to reduce debt levels. the country's restructurings have varying degrees of success and failure and reducing debt and stimulating growth. the economic literature focused on answering to a man questions in this area what aspect of the fiscal consolidation producing lasting debt and what aspect some courage macroeconomic expansion. the answer to the first question a squier based on the review of the economic literature and analysis of the 21 countries to of my colleagues and i recently found cutting expenditures is more likely to produce a lasting reduction in debt and increasing revenue. it's also difficult that the more aggressively the country cut expenditures the more likely it is to successfully reduce debt into long-term averaging across a range of methodologies that the unsuccessful fiscal consolidation consist of 53% tax increases and 47% spending cuts the successful conservation consisted of 85% spending cuts. in particular cuts to social transfers and the government wage are more likely to reduce debt and deficits than cuts to

other expenditures. there's more debate of the second question what aspect of the consultation encourage macroeconomics penchant the essence of the debate hinges on the balance between the economic effect of the consolidation the expectation and the keynesian affect. the expectation is a positive effect on consumption and investment that occurs when policies put on a sustainable path. the search after consolidation because expectations of the future tax liabilities. in other words the consolidation will alleviate the according the company's years of largely texture from consolidation of the future. expenditures based consultations provide strong expectation affects because there's the chance successful reducing debt to read because higher near-term taxes are hardly designed to make my optimism the investors and consumers. the effect reduces the demand and therefore the gdp growth in government spending declines. the controversy over whether the expectation of of the fiscal consolidation can completely outplayed the keynesian affect

there's less controversy around the to the long-term benefits of the consolidation are substantial. two schools of thought emerged in the debate. economist alberto and the various cultures are due consultation especially expenditure cuts can lead to a burst of growth starting immediately. the team of economists however identify possible methodological flaws in the studies and claimed the typical fiscal consultation with contraction married. beyond the scope of the testimony to resolve the dispute between the two corners of the literature and of the arrests were correct and a fiscal consolidation will lead to a near-term growth. a pessimist would point to the alternative for the the volume of and are due to growth affects or more uncertain but it's important to note even in this case the imf study plans to positive growth effects of the fiscal consolidation is correctly designed to be that it is both sides of the literature find reducing expenditures will provide a better group come to an increase in revenues to reach although the imf and the tax base consolidation would reduce

gdp by 1.6 percentage points, three years following implementation defined the negative effect of the spending base consolidation would be small and insignificant. that is even the most pessimistic corner of the consultation literature there's little to persuade us from pursuing a consolidation today. moreover, they find spending these consolidations that focused primarily on the transfer cuts could produce positive near-term growth effects of the we should add those are statistically on significant. the ladder plans a special interesting since the study near-term cuts and entitlements one might expect these have a relatively large negative effect on the consumption behavior the fact expectations affect dominate even when entitlements are cut immediately suggest out of control entitlement spending has a profoundly negative impact on the consent and business and consumer confidence. this also suggests the policy opportunity given the massive imbalances that exist today is likely consumers have little faith the current programs will remain in place through the course of their lifetimes. cuts to entitlement phase-in

over time have little impact on the perceived lifetime as well as benefit cuts effectively already factored into the consumer's expectations. if consumers don't expect promised benefits to be paid, government can reduce promised benefits without causing today's consumption to go down which means of course the expectation will affect the fiscal consolidation could easily be expected to dominate and produce significant near-term growth but there are few immediate cuts to benefits but significant longer-term cuts. if an additional fiscal consolidation repaired with a tax reform to broaden the tax base and reduce marginal tax rates, the significant growth spurt would be the natural extension to draw from the economic literature. thank you. ..

with high employment and broadly shared prosperity. making smart choices requires differentiating between the longer term policies needed to produce sustainable growth and high levels of employment and short-term policies needed to restore high levels of employment in the wake of a deep recession. in particular, policies and reducing the budget deficit are a key ingredient of longer-term policy but are likely to be counterproductive in the short run ever implemented too precipitously. this is the mainstream economic position as enunciated, for example, by the federal reserve chairman. in the course of my statement he

observes fiscal stability is a long-run concept and achieving it requires a long run plan. in current circumstances and it granted to taking a longer-term perspective is that policy makers can avoid sudden fiscal contractions that might put the still fragile recovery at risk. the same time there are advantages to acting now to put in place the credible plan to reducing future deficits. the congressional budget office has made similar points, and we believe this is the right framework in thinking about deficit reduction and economic growth. i recognize that one of the purposes of this hearing is to highlight a different point of view for what i regard as the mainstream economic consensus. for the reasons that i will lay out i think that some of the arguments that are produced are unpersuasive. the premise is that we are suffering from an unwarranted

explosion of government spending that has produced an immediate debt crisis, immediate reductions in government spending is necessary and could even make the economy grow faster in the short run and that the reduction is more likely to be successful if it is composed floods this spending cuts. the questions about all three of those promises. first, policies enacted since the 2008 election are not the main drivers of deficits and debt. the u.s. fiscal imbalance problem is a long-term problem that has little to do with the short-term imbalances that have emerged as a result of the potential crisis of the recession. the main driver over the long term is unsustainable growth in health care costs throughout the u.s. health care system in the public and private sectors alike. as the charts in my testimony show, increases in the deficit due to policies enacted over the past few years are temporary. only the relatively modest and associated interest cost add to

the long-term deficits. the reason spending remains higher than it was is primarily longstanding trends in health costs and large costs among debt associated with deficit finance tax cuts from an earlier era, deficit finance horst ammon deficits arising as a result of the economic down turn itself. the cbo estimates discretionary spending as a share of gdp would be two percentage points lower than it was in 2008. that interest costs would be two percentage points higher. second, large intermediate government spending will hurt the still fragile economic recovery. we had discussion about the international evidence. but the international monetary fund and recently the congressional report have looked at this evidence. we have also looked at it. we were surprised to see the

extent to which when you look into the day that the examples have not conformed to conditions we have in the united states. the best circumstances are if you are experiencing a debt crisis, interest rates are high and monetary policy has the ability to react. the exchange rate can react. that is not the situation in the year and states. third, and i should say most importantly. when we have a situation of economic slack such as the united states, the degree of economic slack deficit reduction efforts that are short and sharp are unlikely to be successful. third, on the question of the composition of death is a reduction, international evidence has little to say about how much of u.s. deficit reduction to beat its -- should be spending cuts and how much should be revenue increases because it is focused on the short term and is not deal with the long-term debt reduction that we need.

it also does not come to grips with the fact that the united states is unique in the extent to which it relies on the tax cut to do with other countries directly through government spending. the trillion dollars a year of so-called tax expenditures which are a prime place to go to find worthwhile budget savings, not their whether they should be regarded as spending or as revenues. finally, it ignores the lessons from a successful longer-term deficit reduction deficit. brevity measures were a significant part of the 1990 budget agreement and the deficit reduction act of 1993 to august expansion in our history and a balanced budget by the end of the decade. >> thank you very much. banks for joining us. you're recognized for an opening statement. >> thank you. i have to apologize for being late. i appreciate the testimony of our witness, dr. taylor, dr. johnson, dr. kevin hassett,

and dr. stone. i no there are others who will be asking questions and making statements. i will be brief. i wanted to first of all make the following assertion. i don't think there is any disagreement on this committee and throughout most of the country about the need to reduce the deficit and have a strategy to do that. i think it is if shared in a bipartisan manner, and we are all of one minds to do that. the questions that we are trying to resolve year is about the timing of that and what policies yield the best results. on these questions i think there is honest disagreement but also significant disagreement. we are having a robust debate about it as we speak and throughout the next couple of weeks and months. today's hearing is part of that debate and is important we have this debate at this time. we have a lot of able economists across the country and several here today who offer their perspective. i want to provide a little bit

of context in terms of the way i see this in terms of some of the assertions that have been made and will be made today. one assertion is that government borrowing is interfering with private investment. the second is that deficit reduction can promote economic growth in the short run, short run. thirdly the deficit reduction is best achieved through spending cuts rather than revenue increases. i think a number of us would have significant disagreements with one or more of those or at least part of those assertions. but i think at the same time we can all come together and agree that we have to have more spending cuts, deficit reduction, but we also have to be mostly concerned, i believe, about job creation. my main concern with any strategy that might be discussed today or that we would enact into law is that we don't take a step that would derail the

recovery in what we do over the next couple of weeks and months. if we do that we take steps that will, in fact, the real the recovery or worsened the long-term budget outlook and reduced revenues and increased government spending on automatic stabilizers like unemployment insurance. the u.s. economy is recovering, and we have recorded seven consecutive quarters of growth. the rate of growth that we have achieved so far has been modest. then the first quarter of 2011 gdp grew at less than 2% annual rate. the reality is there are still major economic challenges in front of us. 14 million americans unemployed. housing prices continue to decline, consumers have been hit hard by rising gas prices. businesses are waiting for demand to return before expanding their operations and

hiring more workers. small businesses are struggling as well. the biggest challenge we face is job creation or at a minimum increasing the pace at which jobs are created. so getting people back to work has to be our number one priority. we cut this year's budget substantially by tens of billions of dollars. there is more to do. and there is waste and inefficiency that we must cut. rooting out the waste and inefficiency is of prime way to reduce federal spending in the short run. i was the auditor general of pennsylvania four years, state treasurer for a two-point lead in that decade has been a lot of my days, and my team did, locating and eliminating waste and fraud. so i know something about it, but i also believe that making deep indiscriminate cuts immediately, immediately to proven strategies that we know

will help our economy grow and create jobs could, in the end, be self-defeating. so i think that question of timing is critically important. let me wrap up for our reference to someone who has been a lot of time analyzing these problems for many years, chairman of the federal reserve. he said recently the following, and i'm quoting. if the nation is to have a healthy future policy makers need to put the federal government's finances on a sustainable trajectory. but, he said, on the other hand a sharp fiscal consolidation focused on the very near term could be self-defeating if it were to undercut the still fragile recovery. he goes on from there. the chairman has laid out the challenge that we must confront. we must have a credible plan to put our fiscal house in order, reducing the deficit in the medium and long-term. a strong economy is critical to sustainable deficit reduction.

we cannot reduce the deficit if we are not growing and creating jobs and getting people back to work. i am grateful for the opportunity today to be part of this hearing and grateful to chairman brady for getting this year. >> chairman, thank you very much. i appreciate the testimony of all four witnesses today. i recently held a round of town hall meetings with job creators, small and medium-size businesses asking for their input on how we jump-start this economy. end i set aside my debt crisis power point to focus on job creation going through a list of ideas that come from washington d.c. they said, put away that power point and go back to the debt crisis. in their view until we tackle the debt and deficit there were not going to make decisions to create jobs, at least in our 11 counties in texas. so i want test dr. taylor.

oftentimes you talk about a game changer to restore credibility in our financial order. we are oftentimes told that we are here today and can't do that. introducing a fiscal consolidation program would mimic that of the great depression where spending reductions, they claim, creates recession of the 1937 and 30 years and they use that analogy to apply to today. what is your assessment of that analogy and is it important for us to engage in a serious fiscal consolidation program now in order to spur the economy? >> i think it is essential to engage in a consolidation program now and it will spur the economy. since this recovery began, and it is quite frankly hardly a recovery, growth has only been to 8%.

so low growth is consistent with the pattern for the last few years as the recovery began. as i said before, you compare that. last time we had a big recession. the growth is less than half as much. 7 percent at that point. when i look at it i think that-difference, that low growth that we have now is because of all this fiscal activism. look carefully at the data, increased spending, and its huge over the last two or three years. it has not really stimulated. the weakest recovery we have had by comparison. there is no evidence. so if you start undoing that, after all, what is so draconian about bringing spending back to where it was in 2007? why should that be so hard? and a share of gdp. when we use the word draconian or deep think about, for

example, the 2011 budget which you agreed to recently. that did reduce spending in terms of budget authority from what was originally asked for. but the l.a., down by less than a billion, less than 1 billion. so the focus should be on how to give a game changer, get enough spending down that it is credible. the problem is trying to find ways to spend more but trying to find ways to spend less. the more you go in that direction the more you demonstrate to the country that we can get our house in order to which will definitely be beneficial to people who are worried about the debt or worried about inflation or higher interest rates down the road. so i think that i would emphasize so much just taking the efforts now to get started because if you don't it just promises for the future, problems. it will not be viewed as credible.

>> thank you. dr. kevin hassett, your study, what kind of cuts to government undertake that bolster the economy and the restored confidence for those making investments? what works? >> the two biggest components of successful consolidations were reductions and reductions in the government payroll. i think that both of those show a kind of credible commitment to getting this fiscal house in order. you both know, mr. vice chairman, and mr. chairman, how difficult such moves would be politically and require broad bipartisan consensus. to show that we can accomplish that would create kind of a celebration in financial markets people think, finally the u.s. has solved its problem. mr. vice chairman, we point to the beginning of my testimony and highlight the urgency of action. in a traditional recession that lasts 11 months of so and then

the recovery three 1990's that goes five or six or 7 percent in the year that we get out, if you have a really well timed stimulus you may take a person or to grow out of the recovery and moving into the recession. if you're growing five, six, 7% and that could be something that everyone would want to consider. the difference this time is that we know from the work that the recovery from the financial crisis lasts maybe a decade. if we take that approach what will happen is the hangover is going to be present in the slow-growth time and maybe even if you're an optimist about the effect of government growth it pushes down toward the recession and we might have to have the argument that we need another stimulus because we don't want a recession. i urge members to consider leaving the roller-coaster and thinking about policies that can put us on a sustainable growth

path without a hangover. >> thank you, doctor. >> thank you very much. dr. stone, i wanted to ask you a question that relates to part of this debate. as you can tell from my statement, i want us to focus more on job creation. tell me what your senses in terms of what is the optimal for even if you have away a whole list, the optimal way to create jobs in the near term, the next year or two, in terms of either a strategy that the federal government employes or just by way of tax policy. we have, as you know, a tax bill at the end of last year. elements of which both parties really disliked. other elements which they embraced. both sides were willing to look

past their disagreements or their objections to parts of the bill in order to keep tax rates where they were an attack ad payroll tax cuts which put a thousand dollars in the pockets of the average american family. when you think about either government action or strategy that has been tried or maybe has not been tried in addition to tax policy how would you -- what do you think the best approach is to job creation and how would you itemize those? >> sanders. let me begin by endorsing the idea that on the budget i game changer would be very good. my vision of a game changer is bipartisan agreement that recognizes the reality that the tax measures starting with going after the tax expenditures and spending cuts need to be part of a sustainable, believable, credible budget effort.

so, there is no disagreement on the panel about the importance of putting in place a plan to get our fiscal house in order and said that matters and it needs to be credible. the issue is if you do it too fast as that harm the recovery? my first answer to your question is, that hit the credit of. first, don't try to do too much too fast on the deficit reduction effort while the economy is still struggling to recover. that doesn't mean you can't put a plan in place that is serious and begins to take effect a couple years down the road. the most recent economic news has been pretty disappointing. therefore i think that we should be considering whether we want the allow the payroll tax holiday to continue and also the unemployment rate is still extremely high. on employment insurance is one of the most effective measures of injecting demand into an

economy that is suffering from inadequate demand. the unemployment insurance benefits are scheduled to expire at the end of the year. those are two things that are already in place, probably is worth while extending into next year. this is particularly true because the fed is not out of ammunition, but the ammunition it would have to use to provide further demands to the economy is very unusual measures that we don't have a lot of experience with. so i think that don't cut too fast, put a credible reduction plan in place and consider extending the payroll tax. >> very quickly, and i don't know if other seven opinion on this, but we had at least the really good private sector job growth months in a row above 200. one was, if memory serves, to

30, to 22, and the third that was higher than that. but to 25 or above for three straight months. and then, of course, every member is off. the overall job growth, private sector number was a lot lower. anyone have a sense of why that happened in that particular month? and, do you think that it will prevail? do you think that we can get back june, july, and august? >> i think that the important points being made is that this is a standard recovery from a serious financial crisis which is why it is so different that the employment patent is scope -- so shockingly different than what we have seen in all previous postwar recessions including the one in the early 1980's the dr. taylor was emphasizing. this is what happens when you take on a massive amount of debt, particularly in the housing sector you will have

some stop start on the job site. personally i don't think that you should be throwing more roller-coaster type stewart added. i don't think that works, but i emphasize that most of the increase in debt to gdp that was experienced in the short term is due to the automatic stabilizers. you have to let them work. by the way, or just to remind you, relatively weak compared to almost every other industrialized country which is the main reason why it made sense to supplement them at the beginning when the deepest part of the recession to be that is done. that is history. i agree completely. you don't want to derail the recovery now by overreacting to be sure we want debt to gdp to come down, but it will come down as the economy recovers. if you try and cut spending too much to send that will have counter productive a fax. can respond with the massive extension. i have not heard anybody yet. i don't think mr. burning keep would be inclined to make that

case. >> sure. >> i'm out of time, but mr. vice chairman, part of the record. i just wanted to ask that we did a recent calculation comparing the u.s. recovery to this financial crisis. it was studied. asking yourself. we have the typical experience of the country. but will the unemployment rate in the u.s. be in 2018. the answer is about 8%. we are in a base case. a really tough slog and they're really tough challenge for america's workers. if we don't get serious about doing something that isn't going to jack up growth for one year but really fix the problem, and i think we need both the fiscal consolidation and a fundamental tax reform, we are looking at a base case that is terrible.

>> thank all of you for coming. one the star with dr. taylor. what do you think would be the impact of a tax rate increase on our economy at a time like this one. >> i think it would be very harmful to have a tax rate increase. in tax, i think senator casey asked explanations about a hiccup in job creation that occurred around the time of december when the deal was made to postpone the tax increases. i think that was quite significant. it was instrumental postponed, but there were tax increases on the book. i was positive. it gives you some sense of what you can get not to increase tax rates. very harmful. >> what if we limited the tax rate increases to the wealthy. could be forestalled the problem by doing that?

>> a very important step. tax reform is also important, and i'm glad you are more interested in that at this point. but to me the first up is don't increase taxes. leave tax rates alone. >> even on the higher income brackets? >> across the board. no reason to increase. this phrase that people sometimes use, a spending problem and not a tax problem, welcome and that is the truth. if you look at the numbers carefully it is hard to convey that to people without looking at the numbers, but when you looked at the numbers that is really what it is, and you don't want to risk the disincentives. there are enough disincentives for firms to invest with the regulations and debt problems. for that matter i think monetary policy, but there are lots of reasons that investment is not as strong as it should be or could be. of course housing is part of that. unless we get investment moving

and firms start investing in in spanned -- a spending-employment will stay high. drive the private investment from whether it is equipment, structures, jobs are being created. >> less likely to occur when those would-be investors have the promise and assurance that there will be able to keep less of the money. >> yes. tax something more. to get less out of it. these days is a fear of increasing taxes quite a bit. that is part of the idea being credible and predictable. the best way to do this is by not raising tax rates. i don't think there is much interest anyway. >> would it be fair to conclude that the suppose it tax rate that affects only the rich is a misnomer because it would end up

impacting most acutely and severely those most vulnerable people, those people who most desperately need jobs it would be less likely to find them as a result of diminishing in investment. >> if you reduce the incentives for firms to invest and expand you're going to reduce the incentives for them to create the jobs, and that is where the jobs come from. they're not coming from more government purchases or even less government purchases. private sector investment which is where the data shows. and see the extent that you can encourage that by not raising the tax rates on those firms, a lot of small business firms, large and small business firms, to be sure. it will be counterproductive. we will have this high unemployment rate which is a tragedy. >> we hear a lot of talk about the debt limit and our failure to raise the debt limit resulting in this or that economic catastrophe. is there not also an economic

catastrophe that could and would await us if we were to raise the debt limit reflexively as it has been raised many times in the past? no significant strings attached without attaching it to significant spending caps. >> i think the timing spending reductions is very important. i read in the wall street journal about that a couple weeks ago. i think the position that has been taken there has been very productive. it is actually driving talks in a good direction. so i clean -- so-called clean debt limit increase without spending would damage credibility. especially at this point because we have had such a surge in spending. i have argued strongly for tying these together, and i can see why there would like to have a clean debt limit increase. but especially at this point in time it would be a mistake. moreover these negotiations, you

stand a good chance of time this together as a speaker originally suggested. >> thank you. >> thank you. but congresswoman sanchez is recognized. >> thank you, also chairman. thank you, gentlemen. though, gosh. i always am amazed at the difference of opinions that we get to whomever we speak about the economy. i am always amazed also at events and people come up and think they know all about the economy and try to tell us what we should be doing. what i have learned in the 15 years i have been here and in my studies when i graduated with an economics degree, an m.b.a. and as a former investment banker, sometimes you just don't know. you know, i would like to say something about the stimulus because i think that it has been maligned a lot here, the stimulus package or the recovery

act. yes, it was $800 billion. remember that a third of that was tax cuts to read it was not spending. it was tax cuts. say you can't have it both ways. you can't say that the renewal of the tax -- of the bush taxes in december were not spending. you just can't say that. you can't count spending, a third of the spending package that were taxes and spending and not count the bush continuation of tax cuts as not spending either. you can't have it both ways. recounted one way or the other. we are told in december that if we passed the package of tax cuts it would give us stability and businesses would start using

the trillion dollars they sit on their balance sheets. you know what, they haven't. it has been a jobless recovery. so, you know, we have all of these issues about keeping taxes low, don't collect. the fact of the matter of that bush's own comptroller stated 70 percent of the debt and the majority was accumulated under george bush. 70 percent of that was due to the tax cuts over and over and over during that time. then, of course, we had other things. a couple words i didn't vote for. a couple words i think we should be out of. a couple of words we keep spending money on more and more to the plan rate is ticking away from investing in the future of our military because it is operational and halfway around the world and not money going in our pockets but money outside of

our economy. so, you know, i am hearing all sorts of information out there, but the bottom line is i think we need a little above. we need to talk about some real spending reforms, and i think defense has to be on it. from the looks of the house bill passed on defense, that was increased significantly. everything else took a cut but defense increased significantly. it's not going to our people back at home, defense contractor is trying to build systems. there are in fact being cannibalized and not being paid. they're stopping production lines. it's going to cost us more in the long run to retool and reset our military. i want to ask each of you if you really think that it doesn't take a little of both, some spending cuts, may be in a moderate way, but without firm

commitments. some increase in taxes to stuck to get this back. maybe will start with touches down. >> we do need a balance that has both. i think one of the things that is problematic about debating over the debt limit which really has nothing to do with controlling deficits, it may be a way to get people talking. but when people are talking they have to be talking about something that could really happen, and that would require a balance of the two. when you ask businesses what the problem is they don't say the -- they always say it is taxes, but that stays constant. what has really gone up its sales. so to get businesses incentives to add to the capacity when the don't have customers in stores is problematic. the need to come in the store's first. >> thank you. it should be both. i recommend modeling it after

the difficult and successful consolidation which had a balanced budget. >> thank you, doctor. >> i completely agree with you, congresswoman. military spending needs to be capital of the long run, but particularly health care spending as a percent of gdp. if you look at 2030 or 2032. if you have the possibility of putting in place a credible limit on future health care spending as a percent of gdp, by all means tie that to the debt cap discussion or implemented in some other way. that would have a major effect on fiscal credibility and is mostly about spending. i emphasize it is not just federal government spending but a look at general government spending and you have to look at private sector spending. when i talked of benares, which i do a great deal, they are worried about health care costs that they will face in five years, ten years, 20 years. that is the major burden that we have not yet seriously addressed. i put that front and center of

the long-term fiscal consolidation. >> thank you, doctor. >> a couple of my charts to answer this question. i guess not. okay. one of my charts shows that if we brought spending back, the next-to-last one i believe. this one. so this is federal spending as a share of gdp. going back a few years. you can see how it grows a lot in 2008, 2009, 2010. it was 197% of gdp in 2007. and the house budget resolution which is the line that brings it back to about the same level of 197% of gdp. and that is roughly what you need, maybe a little bit less. that's what we think is

happening with taxes for budget balance. the deficit was 1 percent of gdp in 2007 are so. so that is why i think it is a spending problem. that is why i say. if you look at the next slide, the next slide, the first slide divided everything by gdp because i think that is what most of us like to think about it. in fact, we are not talking about cutting things. this is the total spending without just what it is piquancy where it has been, and you can see where it would go. you can see where it goes with the house budget resolution. they all increase. these are all increases. and so you have to put that in perspective as well. finally your question about the tax part of a are are a and the tax part of the 2008 stimulus is very important. when i looked at the impact of

that tax rebates or the onetime payments, they seem to do very little good in terms of stimulating consumption. both in 2008, february 2008 the economic stimulus act in 2009 the tax components of those were mainly just to send money to people, tax credits from previous earnings. mostly it was banned. it did not jump start the economy. you can see that in the economy degrees when we talk about tax rate increases that is a different story. that is what will happen if you created job or if you expand your business. the money you're going to get from doing that are the benefits from that, that is not a rebate from the past which tends to get wasted, unfortunately, in terms of stimulating the economy. what is so important is tax rates which is why an answer to the question i said raising tax rates would be a terrible mistake at this time. >> thanks you. >> thank you, gentlemen. >> thank you.

mr. mulvaney is recognized. >> thank you, mr. chairman. i will continue on with the congresswoman was talking about and see if we can't find some similarities of opinion among we're talking about today. taxes following up with what the senator said. bring up slide number one please which is the federal income tax revenue. this is a graph that shows two different things. once i get it up you will see is a red line that says the federal revenue as a percent of gdp and a blue line that says the top tax rate. as you can see, i think some of you may be familiar with this craft. over the course of the last 60 odd years the federal government has taken out between 15 and 20%. the averages roughly 18 and a half%. but during that time with the government's share of the economy was relatively stable, tax rates were all over the map.

what i heard just a moment ago from this panel as we went down and talked about the importance of having a mix between spending reduction and tax increases, i did not hear anybody clamoring for dramatic increases in the income tax. i heard dr. stone mention tax expenditures. dr. kevin hassett, you have done work and other fiscal consolidation is the focus on tax increases on consumption as opposed to productivity. i guess what i'm looking for common sentiment, is some consensus that as we look our handover and as we look at different options that are available to us, is it fair to say that increasing the top marginal tax rates is probably the least desirable way to go forward? >> i mentioned tax expenditures because that is something we want to be able to agree on. dr. taylor is talking about how government spending has moved to

a new higher level. i think that if we are realistic about the demographics in this country, rising health care costs, and the increased interest that we are now paying because of the debt incurred as a result of the recession we are not going to be able to go back to historic levels of spending as a share of gdp without more revenue. proposals, the proposals would move us back and include some increases in tax rates and income-tax. it would move us back to levels we had in the 1990's when we really did not have -- and we had our longest economic expansion and a balanced budget. is not prohibitive. very high marshall tax rates are discouraging, but modest increases, don't think we need to be so afraid. >> thank you, dr. stone. i've heard this before. i'm willing to give everybody a chance, but i looked at the rates during the late 1990's when there were increased.

while they did represent a slight -- they did lead to a slight increase in the government share of gdp it was not marked to all. in fact, you could argue that it was actually the gdp growth that was experienced during that time that boosted the government's share of revenues but not the tax increases. it was the larger share of the overall economy. >> don't disagree that the strong economy helps. importantly those tax rates did not interfere with that very strong economy. >> thank you. >> i agree, mr. mulvaney. i would add that it is especially urgent. in this room now to address the fact that we are going to have the highest corporate tax on earth. if you're wondering why it is that this has been a long time since any of us have driven down the road and scene and new building, it is because they are located offshore to take advantage of lower tax rates. as we think about the fiscal

consolidation, one of the urgent design problems will be finding space to get the u.s. in terms of corporate rates. >> dr. johnson. >> i completely agree with the need for for tax reform. i don't know the details of this proposal, but shifting away from tax and come towards tax consumption and doing it in a way to protect a relatively poor people which can be done. that is a good idea. however, with regard to what to do about martial tax rates within the existing code, two points. i don't think anybody paid a very high rates that we had in 1960. there were exemptions. and i don't think anyone is proposing we go back to those levels. i, for one, argued against expanding -- the standing the bush tax cuts. as far as credible measures you can take, if you have ways to control health care is spending i am completely open to that.

this would be better. but given the choices before us, addressing a little bit of discretionary spending is not going to make a big difference. addressing the bush tax cuts will make a lot of difference. >> you will be given up an opportunity. >> your chart is very important to take into account. history shows, especially. if they can avoid them or take action not to pay them it doesn't raise the revenues people think. i would also add sense spending is an issue out into the future spending just dominates. it's like this exponential thing

that needs your life. if you try to raise taxes it may take you up just a little. it's hard to notice. and so forgive them for a while. you know basically that is not the thing to do in a weak recovery. put that off to decide. look for tax reform. it's always good to try to do. at the same time it really seems like it is a spending problem. >> most of the health care spending. >> thank you, gentlemen. >> thank you. let me ask you, mr. mulvaney, we think that spending cuts will endanger this recovery however weak it is, but aware of this consolidation looking at our competitors around the world who over the last 40 years to come various forms of this consolidation as many of you mentioned.

and in 26 instances they grew their economy in the short-term as well. they spend less, controlled their fiscal policy, less and reduced their debt mainly through targeted spending cuts. they grew the economy in the short term. a great example 1% growth. high debt levels. they went on a conscious effort to reduce spending. they lowered the country's debt by around 12 percentage points. the economy went to three and a half percent and average sat for more than a decade. the same. more interesting along the same way. so to this theme that if we control spending it will harm this economic recovery, dr. taylor, do you believe that to be the case? to you think congress is capable of such severe spending cuts

that it will endanger this remarkable recovery? >> i don't think so based upon the 2011 agreement which was good. budget authority. plus 39,-39. discretionary accounts. but less than a billion. that is an example, i think, of why it is so hard. i would say, quite frankly, i think that the credibility is very important to make sure it does have a positive fact. willy-nilly unpredictable changes in government policy is not good. it makes for more uncertainty. so everything that you can do to say that what we are doing is part of this long-term path. caps on spending, tying it to

debt increases, putting it into legislation, everything that can make it a credible and believable deal will make it more powerful in a positive sense and mitigate the negative things that dr. stone is referring to. the credibility, to be able to plan for the future and know that this is what government is doing, at least it's clear that they're getting the house in order which will enable businesses to begin to expand. i put a great deal of emphasis on credibility. it is going to be gradual almost for sure. that is the nature of politics. to some extent this statement that it is going to hurt the economy if we go too fast, too draconian, i don't think that helps the discussion because it puts up this thing which is like a straw man. that's not where we are going. even with the most ambitious

budget there is not draconian changes. >> thank you, doctor. >> mr. brady, one way i like to think about the potential scale of the near term affect is in present value maybe we get all the things we're short, something like 100 trillion we just tried to at present value of what medicare run. if business expects to have to pay their normal share of tax increases to cover that hundred billion then we are talking a tax liability that is bigger than 10 trillion -- 100 trillion. bigger than 10 trillion. closing in. and so the scale of the tax shortfall is humongous, and it is really large relative to the scale of u.s. corporations. and so maybe they don't think that we are going to cover the whole thing with tax increases, but if they think even half of

it will be covered with tax increases and that is a significant liability. so i think the scale of the problems is such that the expectation could be large. >> thank you. i would point out, sometimes people look to the clinton years as the golden years of the economy. i would point out that president clinton working with a republican congress from 1993 tet 2000 lowered the debt to gdp ratio from over 21% to around 18%. the economy grew as we did it. so shrinking spending, hourglass

tends to put this economy very much in the right direction. >> excuse me. a couple of things. you point out what happened in the u.s. in the 1990's and mentions the canadian experience. i've won't ask the chart you brought up, but i have a chart that talks about the community experience. two things a notable. as the expression goes when the united states, you know, very sensitive. canada rose the expansionary boom of the 1990's, as he talked about. also, canada started with a higher level of spending and came down not all the way to the level of spending as us. and so i've would be careful about referring to canada as an independent successful experience. one other thing, you talked

about the 26 episodes of expansionary contraction. expansion was defined in that study. when you look at examples that were booked expense harry and successful in bringing down the debt to gdp ratio, there are only nine examples. this scandinavian economy is quite different from ours. >> i would point out, if we can bring up another chart, it shows canada's experience. there you go. total government spending where as you can tell, a struggling economy took on a debt, reduce the debt including spending caps on its budget area where agencies that were run in effect on members of parliament could not increase without the to

missouri spending cuts. under the caps the lower debt and grew the economy. it is, as a neighbor, a very keen example of how countries can costly control the spending and grow their economies over the short term. >> senator lee. >> they keep. several of you have discussed the importance of credibility in the eyes of the public as we approach the debt limit increase and other decisions that will affect the spending of congress as we move forward. a minute ago you referred to gramm-rudman hollings legislation. i was a big fan of that. i was in high school when it passed and had great optimism for it. i was disappointed when it ceased to do its thing because, as we found over time, congress has a certain tendency to be a

walking breathing living waiver until itself. one congress may not find another congress. we cannot speak now for the success of congress. agreed idea. wave so many times. it doesn't really do a whole lot. there is one way that we could bind a future congress which is amending the constitution to a cap of fixed percentage of gdp. what it would take to raise tax rates. what would you think about that in terms of the credibility with the marketplace? >> i would very much support the constitutional amendment. it could be impossible. so hard to change. >> nothing is impossible. >> but a constitutional amendment with a spending cap, especially if it were relative to something like potential gdp.

we didn't have of very pro cyclical affect. >> potential gdp, why don't you explain. >> so if we were at full employment it would be how much gdp we could make. if gdp collapse is spearheading the cap. we will have to reduce everything government does which to make it hard. >> just to reinforce that point. if you had an amendment that said you must sit and no. in terms of government spending and actual gdp, sometimes that might work fine. financial crisis. falls by 20 percent. this happens in many economies. the u.s. fortunately has not had that experience recently. if you had to reduce government

spending to hit constitutionally the target ratio, well, you would have to do all kinds of things including not raise taxes at the worst possible moment which would be in this economic free fall. so of course once you start to find potential gdp there are issues on how you define it, who will be the arbiter. the cross-country experience with very tough and hard budget laws is there are only as good as you yourself said, the congress or the equivalent body because you can always find ways to redefine the potential circumstances. a little more lose then you might think. >> sure. i understand why it would be difficult, and that's one reason why basically all the balanced budget amendment proposals including that sponsored by the 47 republicans in the senate have provisions and then allowing for these restrictions to be circumvented. it just requires a higher threshold. did you have something to add? >> one thing i want to add is that, as you know, there are a

lot of states, almost every state has a balanced budget requirement. they also often have things like supermajority rules to increase taxes. mechanically it is the case that a simple majority could vote to ignore the supermajority rule. it almost never happens. and so i think that if you're thinking about the constitutional amendment that could accomplish our objective you might try to think about whether something like a supermajority rule could create something that the senators and representatives would not want to violate. >> great. thank you. one final question for dr. taylor. interest rates are really low right now. they are substantially below the 4-year average as i understand it. as much as 350 basis points below. how high do you think interest rates could rise, let's say, in the next -- i don't know, 18-24

months. qeii and other factors. how much play do you think there is in this sort of intermediate term 24 months? >> well, right now the recovery that i referred to is one of the reasons why rates are low. hopefully we will get the recovery moving with some of these policies. we will go back to more normal levels. normal levels you could have a real interest rate of 2%. if inflation is too, and that's 4 percent on the short and. that is kind of a normal level. the fear and concern is we might get behind the curve on dealing with inflation. that means that inflation would, you know, go higher, overshoot any reasonable target which would drive interest rates up dramatically. that would be very harmful.

so we have not talked about monetary policy, but there is a concern with all this overhang of reserves and money that the fed will be a will to pull it back out and a sufficient speed was also being disruptive as it pulls it out to prevent inflation from picking up down the road. we have already had some movements of of inflation. i think there will probably come down a little bit, but the real concern is there going to go back up again which would be the main driver of interest rates down the road. it is a concern to me. ..

just want to read into the record that in fiscal year 2007 the total for defense spending was $110 billion at the base and $109 billion because we were in the wars brn. for a total of $218 billion. in the fiscal year 2012, built, nba fetishist approved in the last week or two, the authorized amount is 690 billion. 690 billion is wet they had sent it out from the house with a republican-controlled house, 219 billion are your 2007 numbers. there are a lot of numbers to

cut anything that would be one of those that we show credibility about how congress feels about some of the spending. that would also know for the record that with respect to paygo because it was part of one of my colleagues. when i first arrived in congress i voted for the paper will almost 14 years ago. as a blue dot, we're the ones who proposed it, helped get it through. cannot remind my colleagues that it was actually the republicans control both the house and senate that they let the paygo rules in the fire. there can be a lot of talk about what we want to do. we actually had it and it was working. but because of the large spending that happened when the republicans controlled both houses of the congress, they did not want to abide by pedro and they let it expire. and i just would like to have those comments in the record, mr. chairman. >> probably no chance i can deny that one.

mr. mulvaney. >> thank you, mr. chairman. gentleman, chairman of birmingham last of which ordinary is a bad thing, but it's good because he said i could have more than the five minutes of need be. it's a terminus opportunity for me to sit here gets you on on one of together. i'm a big fan of dr. hassett and dr. taylor's work. i'm looking forward to reading more about dr. johnson's work after today. we talk about canada, something i spent time looking. doctors don't come you mention something that they may have been a lot for the ride and the economic boom and that may have contributed to their success and i had not considered that it will going forward. i would encourage you to consider the fact they dramatically reduce their automatic stabilizers. the things they did, the two major reductions they had to spending was number one health care, but also unemployment benefits, which i though was

interesting and we've heard a lot of talk about leaving the automatic stabilizers in place, but clearly if we do that the candidate did, it's clear they actually reduce their automatic stabilizers. as i go and drive around and talk to employers, i hear often times they're having difficulty finding people to go to work because of the stabilizers. i have several examples of them going back to folks they laid off during the downturn, offering jobs back and being told the abatements of benefit left and to call them at seven and a half months. do you gentlemen not think may be extending its automatic stabilizers i think i heard mr. johnson's statement would have been negative impact of job growth. they are going unfilled at this point because they've essentially incentivized unemployment. dr. johnson can i put it to you to begin with. >> now come i don't think we incentivized unemployment. this is a tough place to be unemployed. he relatively low benefits for

relatively short period of time. while i am sure you read their employers who have trouble finding the precise workers that they want, in general the employment picture in the country is weak and that's actually another disconcerting parallel or comparison with other postwar recessions. previously, for example at the end of the s&l crisis, when texas was in big trouble, other parts of the country were booming and people were able to move. that's unavailable right now and we have the problems of the house mortgages and people underwater, making it even harder to move. i think overall are automatic stabilizers or weekend. with regard to canada, where was a couple weeks ago meeting with finance canada people -- department of finance, treasury and the central bank, it is true there were reforms. it's also true they had one of the greatest commodity booms at all times in the health care system is still far more generous, far more people and

i'm sure you are presenting country and proposing we go in the direction they go in health care. >> let's talk about jobs, gentlemen. i think that your hassett mention why you don't see the plants being built, there's a tax component. there's also bigotry component. i live in a textile area and a lot of phobias to do is simply illegal, especially during the chemicals and dyes and so forth. the regulatory climate certainly explains why we have seen my job growth. i had a discussion the other day with folks in the construction business. that's what i used to do. the list that they go through on whether or not to building new plants i i think is insightful. not only do they look at the after-tax felix at the net present value from which means they have to focus sharply on what the discount is going to

be. dr. johnson said one of the things they are worried about are the long-term implications of overdoing. she babri said in the discount rates. we assume inflation is zero-meter at dr. taylor says about some incipient and they think it's higher than reported simply because we took energy and food out. businesses look of overdoing it and recognize there is going to be inflation. businesses look and feel to, they're going to have to print money in order to get out of this. they're never going to be able to agree on tax increases or spending cuts and they'll end up printing money. as a result, the discount rate that businesses are looking at are dramatically different than we think from an academic standpoint. which you agree with me, gentlemen that i is continuing to run up germanic deficits we are discouraging investment in this country? is there anybody disagrees with that statement?

>> i agree completely. but the full cuts are ambiguous. 2030, 2050 we have much higher debt to gdp, including japan is mostly due to uncontrolled health care spending. thus the primary driver of federal government and the burden on the private sector and private business. if you can fix that, you're going to be here is what every side of the global spectrum you come from. >> can i also say something about the long-run? health care costs again. if i can control them in the economy the other thing driving those horrible long-term i guess so, but the long-term outlook tomorrow is if you run deficits now spending on interest payment

that he controlled the deficits now whether it's taxes or spending, you get rid of an awful lot of spending problems due to interest in the out years. >> lasley or at least i'm getting ready to finish if you could bring up dr. taylor's figure number three and i was trained as a keynesian to see the light and i disagree with you gentlemen could see out late but i can't not ask them to explain to me where canes went on this graph. the top one is the unemployment rate you can see unambiguously those two lenses together and they spend less, people go back to work. there is another grass by the way the committee has come up that shows the correlation between private and nonresidential investment and private payroll employment. those two numbers are perfectly correlated. what i have seen in the real

world and the reason i no longer keynesian when the government spends last, business spends more than people go back to work. the exact opposite is also true. why are we also claim the government needs to spend more they need to go back to work. >> well, you have to ask the question. i am not i'm not favoring fiscal stimulus. i am a fiscal conservative by any reasonable standard around the world. what happened in the united states in 2007, 2008 from the financial system is through the huge crisis and we can argue that's a fact of the matter. in every country in which that happens tricep unemployment and causes the economy to contract. dr. hassett told you completely accurately would you have a calamity to gdp full tummy go to government and a rise relative to gdp.

whether or not you stabilizers of them is going to happen. if you have reasonable automatic statements, then that the consequence. certainly the big change are seen here. i think it absolutely makes sense to keep tax burdens down to allow them to get a better return on investment, less uncertainty about the value -- the value of future taxes. >> i don't mean to interrupt you. you may have hit on exactly my point and the reason i no longer in money beer or cider doctors downside, but we have been doing this forever. we have been in a keynesian stimulus for the last 25 years. i guess i can agree philosophically once you save your short-term you can use a keynesian annulus in order to prevent the bottom from falling out. we have been pumping full of keynesian cocaine at the last

five years. >> we have went away for balancing budget towards big deficit. that is absolutely true. sometimes you hope administrations and sometimes there is no question it has outgrown the raven is in this country for a long time. and to be honest, the other point we haven't discussed is that we find out these deficit. now we run 11 nuclear aircraft carriers around the world. no one else has a single one. how does that make sense? if you want to make something taboo, i'm suggesting that taboo, financing the military because that surely is not going to prove wholesomely sustainable. >> i could do this all day, but the tapping sound means i've run out of patience with my chairman. thank you, gentlemen, it's been a privilege. >> you would have done that all day, i think we all would have. this is a great discussion. we really are all looking for a

theme changer i think in this country both the economy and how do we do it sprite layer of the best approach pretty well provide good ideas and input and insight as we go forward with that. thank you for the testimony today. thank you to our members for being here as well and went back, this hearing is adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations]

jonathan nicholson of bna news joins us. vice president back on capitol hill this week negotiating with house and senate lawmakers on raising the debt ceiling and spending cuts. how those discussions going? >> are still going, which most will say is some sign of progress. they keep saying as long as no one is on the table, they're in good shape. on the other hand committee faces self-imposed deadline of around july 1 to try and get ideas where they can reach a

broad agreement or whether they'll be unable to do so. >> you talk to members after that meeting. what are some of the serious ideas that are still on the table there talking about? >> the main issue at least on display has still to do with revenues. democrats believe congressman hoyer, one of the top breaking democrats hearts a hard time believing democrat will have some revenue increases that they are not opposed to increase revenues, but are opposed to increase taxes. and then today, house majority leader cantor, republican from virginia made the point that democrats have talked about that such as oil and gas industry tax subsidies, that those are relatively small in terms of your deficit impact compared to the trillions of dollars of spending cuts that republicans

are seeking out of this. >> republican leader mitch mcconnell the senate had opened the door for a possible short-term agreement to raise the debt ceiling. what are the leaders saying? is that a possible path quite >> it certainly seems that if a possible and almost even probably think unless there seems to be some sort of major breakthrough in the next two weeks. cantor was kind of dismissive of that today because he thinks there is no use putting on it more than once. will have some say in the final outcome if republicans are unable to negotiate within the house cockiest about the house conference themselves prefers a long-term solution, but he did see a short-term increase is better than nothing. so i think the longer -- the longer they are -- the longer

there's a lack of any sort of major people coming out of their insane okay, we're down to the last little bits here, the more likely some sort of short-term solution comes to the floor. >> especially if they want it to july 1st target date you just mentioned. >> yeah, they've got july 1st. the reason for that is they want to leave some time to put the agreement, assuming there is one in principle into legislative detail, which can take some time and they have to shepherd it through the houses. one of the ratings agencies said goodbye to see progress by mid-july or also put the credit rating on the u.s. government on credit watch. august 2 was when the treasury says they can't stay -- you cannot meet its obligation under the current ceiling limit. there is an aspect they are the basically all the treasury can't issue new debt of 2.92 trillion.

the august 2 deadline does not mean they could rule for existing debt, basically sell new issues as long as they weren't ordering more to retire those funds. >> this week, jonathan nicholson of dna news. thank you for the update. >> thank you.

>> president obama has chosen john edison for commerce secretary. if confirmed, he would place gary locke who has been picked as the next ambassador to china. mr. bryson is the former head of the edison international power

company. in the senate confirmation hearing, he talks about the economy and government relations. senate republicans try to block mr. bryson's confirmation until they get votes on several pending free-trade agreements. this is just over two hours. >> i'm going to give my opening statement. it's right up here, good. i would like to call this nomination hearings to order. there may be others who want to give opening statement. so we have to distinguish people this afternoon before us and the first is john bryson of

california. mr. bryson is nominated to be the next secretary of commerce. second, terri garcia of florida is nominated to be deputy secretary for the department of commerce. that sound like number one and number two. much of the conversation today is going to focus on mr. bryson and in fact, running an extremely large utility company california for a very long time. that background to me is more important than other. on the other hand, some have raised concerns about mr. bryson six he says that environmental organizations this time used tactics such as suing mr. bryson and has come to me and also having policies that don't necessarily comport with some help by others on the committee. others have raised concern about his support for a 2009 proposal to cap emissions, which was a possession widely held in the utility industry, wait the

universally held in the utility industry. but it was a bill but opposed. that said, need to tell you had a very productive and positive meeting with mr. bryson last week when he visited my office. and i have great respect for his desire to serve our country, but along with that i have enormous faith in his ability to create an ability to executive asked during to find ways to stimulate manufacturing, which this committee is dedicated to love too for the rest of the year and next, and that he is the kind the ability that will create jobs in america, something which we all talk about and nothing much happens about it. the nominations of mr. bryson and mr. garcia, an incredible crossroads of the country. high unemployment, slow recovery. commerce secretary deputy secretary played enormous role in supporting jobs in our economy if confirmed he would

face a very steep challenge. i have long thought for a stronger manufacturing sector in this country. manufacturing has been hit hard over the last decade, losing nearly one third of its workforce and the government's response has been piecemeal detected. this needs to change. secretary of commerce and deputy secretary can have a lot to do with that. if in the next decade the nefarious bad for manufacturing jobs as the previous one, we'll have little left in the site are in time is running out on this rapidly. this in turn has grave national security implications and could cripple our ability to out innovate and out innovate other countries. this has held two hearings on this issue. next week i'm holding a full committee field hearing in west virginia on exporting products

made in america. i'm also going to introduce a slew of bills in the next number of days, which are not point i believe. for the foreseeable future i intend to use this committee to find ways to make manufacturing a spark in our job creating agenda. finally, congress is responsible for much more than promoting business. for example, two thirds of our department's budget is dedicated to noaa. what you're about mr. bryson's views, mr. garcia's use on the reorganization proposal. noaa is not necessarily leaving a loud i think to a great disadvantage of our country. weather satellite in the department of security efforts. in any event, i look forward to hearing from both their nominees today.

>> mr. chairman, we have before us today at the two most senior positions with the department of commerce, which is cast with providing business, creating jobs and spurring economic growth. while this has always been important, it is most essential now with an unemployment rate of 9.1%. the administration has talked a great deal about job creation and the need for regulatory reform. the respectfully, the record has not match the rhetoric. since taking office, president obama has grown the size of the federal regulatory workforce by more than 16% by some estimates. there are now more than 275,000 federal employees whose entire focus is adding to the ever-expanding regulatory burden of america's job creators. so bought there has been talk about streamlining regulation, we see the federal register, and schedule every day with even

more proposed rules for innovators and job creators to negotiate. mr. chairman, this much is certain. we are not going to tax or regulate our way out of the economic downturn. so i will want to know about mr. bryson's business experience in a highly regulated market and as i've mentioned to him, his comments that seem to favor expanded regulation of the energy site here. i believe having a cabinet official committed to economic expansion, trade promotion and other policies that strengthen america's competitiveness is an essential part of that. i look forward to your mr. bryson told the committee some of his priorities in this area. he has made statements about cap-and-trade legislation and the use of regulation as an instrument to reduce what he

apparently believes is an overproduction of energy and to thereby reduce greenhouse gas emissions. i believe the question of whether mr. bryson will promote regulatory reform to eliminate the excess as president obama has promised will be part of i also will be asking nominees tax reform. the united states corporate tax rate in the world behind japan, which has said it will lower its rate, ultimately leaving the united states with the dubious distinction of the highest taxed state in the world. so, i would be interested in making sure that we have a voice in the cabinet that will encourage the president and regulatory burdens that will

jumpstart job creation and restore america's global competitiveness. i think the secretary of commerce is a bully pulpit. the ability to be a cheerleader for trade and commerce and promoting job creation and i hope that is what mr. bryson with that mr. chairman i thank you for having this hearing on the way to hearing from the witness is in moving forward. thank you. >> thank you, senator hutchison. it is the chairs wish that any member who wishes to make a statement about three minutes and i apologize, senator feinstein, to you, is free to do so. [inaudible] >> you know i don't have -- yes i do, which happens to be senator lautenberg.

[laughter] i didn't mean to interfere. you can about out the night before? >> i was here. tanks very much, mr. chairman. we have a distinguished colleague at the desk and i don't want to take too much time, but i've got to say we are so lucky to have some of the qualifications, but i've got to say we are so lucky to have some of the qualifications, but i've got to say we are so lucky to have some of the qualifications terry garcia bring got to say we are so lucky to have some of the qualifications terry garcia bring to this position. i met with mr. bryson last week. we have things in common in addition to being very proud fathers, were both former ceos and while we care about the environment and the well-being of our children. in order to try and beat a short time deadline, i introduce a letter in the business roundtable that was sent june june 21st in the right, john

engler, who is the president i believe that the organization. anyway, he says here that john bryson's extensive experience in the other as well equipped him to take on the many issues the department must address to support the u.s. economy and job creation issues like technology, innovation, intellectual property and trade and they remind us the business roundtable is an association of chief executive officers of leading u.s. companies with nearly $6 trillion in annual revenues and more than 13 million employees. it is hard to find something better than that. also the fact he has cared about the environment is deserving of credibility and support. so mr. chairman -- i thank you for doing this and as i look at mr. bryson's background of the

teen years, chairman, ceo of edison international, delivers power to nearly 14 million californians that holds the distinction of being a country's top buyer of renewable energy. friends, we are lucky to get someone like that who want to sit in here, do the job they have to do, sacrificed lots of things in the outside world that we have to just move on this thing and stop the obstructionism that so often invades the review of a person's qualifications without looking at the qualifications. with that, mr. chairman, i'd probably be the three-minute deadline. >> i did and i hope next you'll make her views were clear. last night with the permission of the committee, i am going to ask the senator feinstein be able to country go ahead and introduce john bryson and then we will return to -- [inaudible]

>> you want to do it from here or there? that's fine. okay. and that will happen. >> thank you very much, mr. chairman. i appreciate this because as you well know, the chair intelligent we are meeting on ac members said the intelligence committee here, so that i know they're not playing hooky, but it is good to be here. i had the distinct pleasure today to introduce to the committee, john bryson, a former chairman, ceo and president of edison international and most importantly, senator boxer and myself of california. on may 31st, john was nominated by president obama to service the 87th 87th 87th 87th is enormously well-suited for this role, particularly at a time when our economy remains flagyl and job creation isn't occurring fast enough.

john's experience running a multibillion dollars company, a very large utility, his success as a strong advocate for business and its readiness to advance the jobs agenda make him a strong and positive fit for commerce secretary. i first got to know john when he was ceo of edison international. that is the parent company of southern california and the income which provides power to 14 million californians in nearly 300,000 businesses. as the committee will recall, in 2,002,001, california was gripped by an energy crisis that resulted in rolling blackouts that left billions of californians in the dark. during that difficult time, john's company was under siege. i watched closely as he success only fended off financial disasters, it even has other

california utilities were not so fortunate. i met and spoke with john bryson often during the energy crisis and remember well his intelligence and pragmatism as utilities, state officials in washington work their way through the crisis. in my observation, he worked hard for the people of california, shareholders and the many businesses that provide unstable power grid. i believe john will carry the same, thoughtful, sensible leadership style within to the commerce department. during his years at edison international, john's leadership at this very large utility with strong an effect to. i want to give you an example. my colleague, senator boxer knows that i have work on a utility cap-and-trade bill. well, edison international headquartered in southern california at this time of their

portfolio that was 40% cold. as a result, he did not join in support for this legislation. as a result of this also, he had diversified investment portfolio of that utility. now why do i tell you this? i tell you this to demonstrate his fidelity to the causes that he is entrusted to serve. and i have respect for that. i could say i was a little deft with him at the time. that's fair to say. nonetheless, i respect that because he had such a heavy presence at the time. i california, but other states. i think he is going to carry the same style of leadership to the commerce department. simply put, he understands what businesses need to succeed and will bring that to determine if

confirmed. in addition, he has served as direct to your comic chairman for advisor for a way to save companies, schools and nonprofits, including many institutions with deep roots in california, such as director of a while disney company, bracer synergy, that we in asset manager kkr. the california business roundtable, public policy institute of california in usc's keck school of medicine and includes the council for foreign relations, stanford university, california and to the technology and the california endowment. i am also proud to note that he and i share the same alma mater, stanford where john earned his undergraduate degree. later he attended law school before returning to california. john's experience paints a picture of a leader who focuses on the gold and the achievable

and i think this is really his great selling point. so i believe if confirmed he will support measures that really meet these criteria. at this time in our troubled economic history, our number one priority as the government must be to grow this economy. it must be to get people back to work. in my view, john's combination of pragmatism, experience in the boardroom and understanding of the public sector will make him an outstanding secretary of commerce. i expect he will be a powerful voice inside the administration and a partner with the business community to grow our economy and open international markets for american manufacturers. i count on him to do just that. i am delighted he is here today with his wife, louise who sits directly behind me and i very much thank you for the courtesy, senator rockefeller and that of

your committee. thank you very much. >> thank you, senator feinstein for what is the introduction. i called on senator boxer so she can make remarks. >> thank you so much. i want to thank senator feinstein. i know she needs to leave and we wish her well and all of her hard work. i also stay at home and chairman of the committee and senator feinstein is on the differences i can talk about my work and she really can't be that much about hers because the intelligent committee of secret is that we wish you well. i want to say how pleased i am to have my voice welcome to the bryson, both in via she raised bracer hand-deliver her head celebrities who you are. we are thrilled to hear and they have four daughters. i like to say to my colleagues on both sides of the aisle, i think our country is better served when the people pay attention to the work we do. i hope they pay attention to this nomination and the way this particular nominee is treated.

i can speak personally to senator lautenberg is right when he says, thank you, john for accepting this challenge and i hope you'll be treated with respect. i hope you get a swift confirmation cannot tell you why. you bring a wealth of experience in both the private sector and public-sector. you get it. you understand that this means to meet a payroll. you understand what is to create jobs. you understand what it means when people are hurting. people are hurting and we all know that. again, were so glad to have you here. what i'm going to do, mr. chairman in the interest of time is to ask you to put my statement in the record. i would like to conclude with a quote from the "los angeles times," june 21st, a

wonderful -- a wonderful editorial and i'll close with that within my time. the headline says the commerce department nominee deserves this job with a rational universe, john bryson's credentials will bring him confirmation by acclamation. a longtime chairman and chief executive at edison international, he is the pillar of the regions business committee, admired her chambers commerce and its value executives. he also was the founder of the natural resource defense council, where his work earned him respect and appreciation from california's environmental movement. he has been president of the california public utilities commission and even served as director of boeing come into being is telling to the's military complex. he is us, the rare nominee and

that is why i say, i hope everybody follows this in politics, whether republican, democrat or independent because john is the rare nominee to present himself to congress with endorsements from the chamber, military suppliers and the nations meeting environmental organization. if ever there was a time for someone who can bring us all together, this is that moment in history. tom donohue said mr. bryson's extensive knowledge and years of experience successfully running a major company makes him qualified. the business roundtable, senator bob byrd read a quote. let me read another one. business around the table called mr. bryson a proven the table called mr. bryson a proven the table called mr. bryson a proven do the commerce department that includes technology, trade,

intellectual property and exports, which will be crucial to expanding economy and creating jobs. i noted in your opening statement, john, you talked about your work with colleagues and family and the nrdc. it was before richard nixon to clean their act and the clean water act and the first run fire. i want to thank you for that because i signed myself quoting richard nixon on the floor of the united states as they move to repeal this or that part of our landmark laws. so this is a man who should eat a unifying force and a thank you for the honor of being able to speak today. >> thank you, senator boxer for your words. your statement is entered into the record. we now return to the regular order of senator kerry. >> thank you free much, mr. chairman. i ask unanimous consent a full opening text replaces a record

is in full. nai said a letter to you, mr. chairman from congressman tierney and commerce than frank regarding fisheries be made part of the record. thank you, mr. chairman. let me follow quickly other words that are really well articulated by senator feinstein and her boxer. as it is partly to my colleagues on the other side of the aisle. i hope they will really take note of the extraordinary qualifications that this nominee brings to the table. one colleague mention the fact that he had been the ceo of a major regular -- regulating company. i would respectfully submit that i think my colleague is going to find this is a bold and creative capitalist who has served on more boards of major companies have diverse nature than all of the members of this committee put together. and i think he brings a very

level of business expertise at a time when we obviously know we have to create jobs and change the dynamic in this country. i think my colleagues will find both nominees have a strong sense of how to do that in the commerce department is going to be a critical player with respect to transportation, infrastructure, research in the information economy. a lot of the technology issues that we need to deal with. i think we've got a terrific spokesperson who is coming to a set of points in life for this is the last in the person do, but is doing it because the president is fast and too and he understands the challenge and appreciates the challenge. i think we are fortunate to get somebody to be willing to go through this unbelievably convoluted and demanding ethics process that requires you to

sell stock no matter what level it may be a loss and to put yourself through an incredible hate is simply to serve. i think my colleagues are going to find that the nominee bryson comes to the table is a bold advocate of america's interest and the free-market system. i look forward to his proving that two in the course of his testimony. i would say quickly that every secretary and i mention this to him when he came to visit with me, has always been surprised to find they have nav and they have been traced on the ocean as the commerce department has. i just want to say to secretary, this is a tricky time in our industry and an opportunity for the department of commerce, noaa

and fishing communities to come together again and i think that's going to be a real challenge of leadership for a new secretary. federal regulations have forced a lot of fishermen out of business, pushed many more to the brink. many of our massachusetts fishermen are doing all they can to keep a roof over their head and feed their families and they are very frustrated the department of commerce has made a series of decisions that seem to make it more difficult. so i look forward to working with the secretary designee and i hope you will be rapidly put in place. the country needs the commerce secretary as rapidly as possible to address many concerns about our economy, including relations with china and our intellectual property, trade and other issues. so mr. chairman, i am strongly supportive of this nomination. i hope my colleagues will discover what a lot of us feel very strongly about.

>> thank you, senator kerry very much for your statement. clear and thoughtful. >> thank you, mr. chairman garrett at the pleasure of meeting with mr. bryson. we share a mutual friend who told me at breakfast to tell you hello again. i want to be sure to send that along. i hear the admonition not to clear, but i am tempted to make one other admonition to all of these. it is a two-way street. these nominees deserve stability, their examination with expedited treatment. american business deserve the same thing and this shall amend was on the board of directors of the boeing co., which right now is the middle of a major controversy brought about by the nlrb what it's about to open a plant that will higher americans. i think it is fair to have stability on both sides of the issue of jobs. stability on the part of regulators to not continue to be on the backs of employers at a time we don't need it and

stability in our part the move on america to more trade, were commerce and more prosperity. so i will agree to the first part, senator feel it reached the second part. >> thank you, mr. chairman. >> thank you, mr. isakson. definitely kefir deal. senator udall is not here. senator to me. >> thank you, mr. chairman for conduct in this hearing today. mr. bryson and mr. garcia come out to thank you for your willingness to serve in this important post. i too had a chance to meet with mr. bryson and enjoyed our conversation very much. let me suggest mr. chairman essential to the mission of the commerce department come it seems to me is the vitally important job of encouraging economic growth and job creation. in my view, there are a number of ways they commerce secretary can help advance that, to obama that you touch on briefly her first to be a champion of the free enterprise system and to

recognize for it to really flourish in drive and create the kind of jobs our economy is capable of creating, the system needs to be sensibly the lightly regulated in a fashion in which the cost of the regulations don't outweigh benefits of those regulations. the second thing i would certainly hope to see in a commerce secretary would be a champion of trade. i think the united states could and should be the world's leading voice for expanding trade opportunities and expanding opportunities for terrific american companies and servicing manufacturing sectors to export our products all around the world. so those are two opportunities that seems to me fall squarely in the laps of the secretary of commerce. i will say i think this administration and congress in recent years has not done very well in either front. i think we have had excessive regulations, to many, too onerous and i look over to

hearing the nominee's thoughts on some of those regulations. and i think we've seen a reluctance to pursue a pro-trade agenda, one that would help encourage economic growth and job creation and so i look forward to hearing the nominees thoughts on how we can reengage, we accelerate the process of america leading to the global expansion of trade. so again, to thank you holding this hearing, mr. chairman in a state that candidates for their willingness to serve and look forward to their comments. >> thank you, senator to me. >> thank you, mr. chairman. i'd like to echo senator to me's comments about trade and look forward to hearing mr. bryson observations about what we do to trade. i do chance to see the u.s. trade representative ron curt the other night and i am hopeful as he is that we'll see the current trade agreements come to the congress and will see a not to the effort to be sure that we

open trade opportunities to americans. mr. bryson, mr. chairman as we all know has a history and energy to her. he ran an energy company. he chaired the california public service commission and certainly more american energies fastest path to more american jobs. there's no question that the energy sector can be acknowledged as a huge plus in a job that needs to focus on private-sector job creation. in 2009, mr. bryson gave a speech today united nations, where he said the way california uses energy is the word he used, a model for the rest of the nation to follow. i had turned about that. california's electricity rate rose 35% between 1970 and 2005. by comparison, the rest of the

nation utility rates increase by 4% during the same period of time and in just the first four months of this year, california experience the fastest rate of companies relocating outside the state. in fact, 69 different companies moved out of california. one of the reasons i think we're bad energy policies. i want to bring this up in the context that the thing i think the most important in creating jobs and certainly, mr. bryson knows a lot about, i think he has seen a model that i wouldn't want to see as the model for the country. i just really don't see why things that create massive increases in energy prices do anything to help grow jobs in our country. if there is one surefire way to create jobs in the country and

again some in the department is, should be hoping to do every day is more american energy company more american jobs. this is the job at a government that needs to be the most focused on how we create private-sector jobs and how we create a map is here with the private sector is willing to take the risk that is necessary to create opportunity for others. there's not a cheerleader and not for the department of commerce, the secretaries will, there's probably not a cheerleader for that very much needed focus in the federal government and i look forward to a chance to listen to the testimony and ask questions, mr. chairman. >> thank you on this urgent fund. senator klobuchar. >> thank you, mr. chairman. it was good to meet with you, mr. bryson and i'm impressed by your background. but we talked about in my office i would emphasize again. i think we are going to lose a real opportunity in this country

if we don't pursue a competitive agenda for america. i think the commerce secretary is in a unique position to do that. some of it is under eurasian he, but some of it should come with the need to have someone that brings agencies together and focuses on moving our country forward competitively. the things we talked about, workforce readiness, we have people getting degrees and getting trained in jobs where we need them. obviously that is working with the department of education. when they can't find a welder in southern minutes a day to work at five commitment places that are trained to find highly paid employees we've got a problem. small and medium-size businesses with experts are helping them to have the kind of resources they need, which can be very small investment that can make it working at the state department to large businesses are better able to get contracts and get a assist assist in on the pledge

double exported. the rules and regulations come with some of my colleagues that reference we no longer competing in a vacuum in this country. our businesses are competing against countries that have different rules and regulations and i think the commerce secretary can be a force to push for changes in that area and one specific area of the commerce department has direct jurisdiction over, where i think it is not just the low-hanging fruit, but the fruit rolling around on the ground and that is tourism. we talked about the fact we have lost eckstein% of the international tourism business in this country. it's not about the economy as the leading republican our committee, senator: does. this is about delays we are seeing in our embassies across the world. india, china or india takes 93 days average to get the visa

from shanghai to come to america and it takes only 10 days to go to great britain. that is a big problem. everyone of these tourist spends an average of $5000 they come to this country and we have been pushing this. every point we've lost his 165,000 jobs. if we want to meet the presidents: do something about jobs in this country, i started day once a month or change this visa the period not to change security, just to get compline off the that generate a million dollars in fees per person. i don't think their salaries that high. so those are things we can do that make fiscal sense for this country. a lot of this is about tapping toes. it's just about trying as hard as we can to make this country competitive with what we have. i want to thank you. i know you've achieved a lot in your past jobs and i know it is the positive lead out here, but i truly believe that's where we need to go in the country with the commerce secretary.

>> thank you, senator. senator snowe. >> will come either one a make a big deal, but i senator snowe and senator bennett. should you to make peace or do you want to yield to each other? you want him to go. senator demand. >> thank you, mr. chairman. i will try to be brief. thank you, mr. bryson for coming to my office. i appreciate your willingness to serve in a really have no question about your credentials. my question is about the environment to be working in and whether or not we'll have the courage to speak out against some of the most antibusiness policies they think we've ever seen in our country.

this is not political rhetoric as senator isakson already mentioned, the national labor relations board, the acting general counsel who has been appointed by obama to be the general counsel has accused you as well as bill daley chief of staff of the president for breaking the law. and somehow we have to resolve this duplicity. they are forcing a major american company to spend millions of dollars and put thousands of jobs on hold for what is an unprecedented violation of a company's ability to locate an expansion facility anywhere they want. the press is not speaking out. my question is, will you? i was on a $600 million drilling rig in the goals. brand-new, sitting there six

months. thousands of jobs on hold. cost $600,000 a day habit loot. issues because they check a person. and that may not be under commerce, but we need a commerce advocate in our country. as senator to me has said, there is a lot of rhetoric about free trade, but when agreements are supposed to be sent over, they are not sent over in one excuse after another. thousands of jobs, probably billions of dollars of inner being sidetracked into telecommunications business because the sec is violating congressional approval, court orders to move in and regulate the internet in a way that makes investors hesitated. the cpa is just amazing the companies that come through my office, whether they are in manufacturing or utilities are mining, the absurd regulations and great areas being created. of course, banks are free to make loans because regulators hanging over