some criteria and then you can debate what the right criteria is a setup. i'm not saying this is the right criteria but it's reasonable and that's in expectation of firm need enough capital to withstand the full blown crisis. this came up in the first session about procyclicality and this is in good times you want to make sure the firm has enough capital to withstand whatever crisis occurs down the road. what that means is it's expected equity capital needs to be above some minimum fraction of assets in this crisis. we do a little bit of math, a little bit of economics and you can get a current capital requirement today, that little equation. i was told to not have it out front because if you have a formula out front, no one would pick it up. [laughter] >> that's why we -- [laughter] >> we passed it out. ..

>> there's others in the room who have done it elsewhere, and we provided analysis of the last several years, and it does a good job of loading up on what happens. we can get relatively close to answering questions like that given public data on the firms. if you don't like statistics, you don't have to use them. you can estimate the quantity, at least from now on required by

dd-frank to estimate all the time. that's what a stress test does. it looks at the capital losses under adverse scenarios. you can put those into the formula and see what happens. if you take actually this framework and put the 3% hard leverage requirement that is now in basal iii, and we just use the estimates from nyu which range on losses across firms. in the cross section of large financial firms, we had capital requirements from 5%-11%, but the point is they vary with the objective criteria of a particular measure. you can have another criteria based on probability of default or something else, but it's not willie-nilly, but becaused on activity. that's what worries me in the end.

it's discretionary that tom talked about and not sort of deal with a little bit of harder facts. thank you. >> okay. thank you very much, and sorry for my lateness, but that was fascinating and i know journalists are meant to be adverse to equations, but i'm surprise your instruction was in a room like this, equation was dangerous. next we'll hear from the fed and get a perspective of how you're looking at this there. >> thank you. i'm nelly lang, direct of a new office created recently in part response to the dodd-frank and in part recognizing the financial stability mandate of the central bank, so i was asked to just speak on generally the approach we're taking at the fed, and no equations, but i do

have some pictures, and there was a handout on the front, and i don't know if that's been distributed. okay. just so -- just background thinking about systemic risk. so i think as we all realize once we're starting to deal with the complex financial system, services lend to each other for all reasons to manage liquidity and manage risk exposures, and it becomes easy to see how it's transmitted and amplified to other firms. we discovered that policies designed to ensure the safety and soundness of individual constitutions might be -- institutions might be enhanced when you have these linkages, and dodd-frank recognizes the interconnections and requires a bunch of new rules and

structures to mitigate systemic risk. that's sort of the way we're approaching it. we're defining systemic risk, and i think that's an important thing to do to establish what you're definition is so you can sort of build out the approach you're going to take. our definition of systemic risk is it arrises when firms or marketses have potential to promulgate shocks and district damage on the broader economy. there's a number of concepts here. it's firms and markets, not unique to banks institutions. much of the institution is systemic risk that surrounds financial institutions and conflicts significant damage. this is not about trying to regulate business cycles just per se, and it has effects on the broader economy so we have -- i don't think this is just the central bank

perspective. there's an issue about what effects it would have on real activity output and employment, so the counterpart, the goal of the financial stability authority is to improve the resilience of the financial system. it's ability to absorb the shocks and continue for the financial system to continue to allocate credit. again, we're not in the business of preventing all crisis. i think at best we can try to reduce the frequency and severity. okay. so systemic risk measures, different -- the focus of different systemic risk measures, there's a couple we keep in mind when developing the framework. one is the structural risk that come from all these links, these district and indirect links from institutions and markets. there's cyclical or other developing risks that might vary

with financial and economic conditions that could build up over time. they could include the buildup of leverage, mismatches, asset alignments that could build up and that could abruptly unwind. it could reflect the development of new products. we're trying to get a very broad scope in thinking about financial stability. so the framework that we were incorporating at the board is pretty broad, somewhat eclectic, tries to capture shocks and propagation channels. in three steps, it's, you know, just a simple way to think about it in three steps -- identifying possible shocks, two, assessing the vulnerabilities that transmit and amplify these shocks, and three, evaluating how they can disrupt financial intermediation and impair real economic activity. it's basically one, two, three.

it's very simple in terms of laying out a framework. of course, the science of trying to measure all the concepts is where the challenges are. i'm -- i'm just going to skip to -- and i don't know this is where a picture might be useful. what i tried to do today is just present a couple measures, and, again, it's just some examples, and it's just to illustrate the breath and scope of what kinds of measures could be useful here. it's going to reflect that we're not looking for a magic measure. you know, it doesn't exist that our approach is very broad reaching quantitative, empirical analysis of risk. let's see, on page 4 of the handout, i highlight a few. first measures, systemic risk measures from asset prices, so

these are measures that were built on the insight that firms of high covariance in vast states of the world are likely to be the most systemically risky. three measures here, maybe the authors of all three measures may be in this room. the first one is the conditional value at risk. this is a measure based on stock prices, reflects the losses of the financial system, conditional understress of a specific firm. more technically, it's the increase in the value of the risk of the financial system, conditional on sort of it bad tale event. value of risk, and you can see a time series of the picture on that chart by the green line for a sample of large institutions. the next two measures are conditional on the disstress of

the system so rather than being conditional on the stress of a firm, matt and brawl are the authors of the first one, systemic expected shortfall, losses to equity holders, conditions on the broad peal for the equity market, and another measure similar in concept is the disstress in insurance premium, the hypothetical insurance premium for losses of o portfolio of institutions and the importance of a firm is its marginal contribution to the aggregate premium. all measures are plotted below for a sample of large firms. you can see over time they suggest that the firms, if you look at the most recent observation -- april 2011 -- these firms now pose less systemic risk than in 2008 and 2009, but a bit more than before

the crisis. i think that's -- so criticisms of these types of measures -- they are based on market prices. question is what do investors know about thelingages? what do they know that they can infer? i think the answer, you know, there is -- well, we can try to do linkages, but as we know, sometimes market perceptions of how firms are linked can be just as important as the actual linkages. i think these measures have quite a bit of value. the next page tries to just illustrate something you might be able to get from linkages directly, and that's based on network analysis, and that estimates how the stress of a counterparty could directly affect other firms in the network, and then you can also do lots of simulations and these kinds of things we think are

fun. very limited data, you know, the big constraint here is what kind of data are available, detailed information about linkages to one another. i ill illustrated one example, and this is not from specific data. this is work being done at the bank of england in a working paper. they used the bis data, and they take country banking group data of 21 countries, and they map basically the capacity of these countries to transmit credit or funding stresses through the networks. the -- the sort of the idea is to yiech -- identify clusters and see if it's more likely once stress hits something, does it stay in or go out? you can come up with various measures. the charts at the bottom i just pulled from the most recent working paper. the chart at the left is 1989,

what the system looked like in 1989, and the chart on the right is what the system looked like in 2008. there's a couple take aways. in 1989, the cluster in the middle is much bigger. that was the u.s. and the cayman islands, u.k., and japan. once you were in there, you tended to stay in there and the probability of moving out was -- you can see by the size of the arrows, you do move out. in 2008, that cluster in the middle is smaller, and the arrows out are wider and fatter, and then there's lots of arrows between those outside pieces so this suggests that once something hits, it kind of moves around a lot, and that's in some sense more con they gent and

more systemically risky for an institution. one example is if you have a crisis in 2008, you have to have a lot more people in the room to have the discussion than you did in 1989. that's another way to characterize it. okay, two more measures i'll run through. the next slide. i think at the board we have not just again institutions and banking, but market and macromeasures. one example, the fed niche -- initiated a survey last year to get information on the valet in terms of credit for securities financing and otc derivatives. this was to gain a wipe doe into the -- window into the leverage of the dealers outside of the banking system. i think over time this will be valuable just like the senior loan officer opinion survey. two other measures that i show

here are, as i mention maturity mismatch and short term funding is a concern obviously with the major issue in the last crisis. one is obviously you use the w -- y9's that's fallen quite a bit. another concept is to implore a full funds framework and try to approximate the reliance of the non-financial sectors, this would be households and businesses on short term funding. for example, non-financial businesses, to what extent do they rely on funding, but even in the household sector, who holds the mortgage? how are they funded? who holds if the mortgage is an nbf, and who holds that? you can sort of map that short term financing to the ultimate holder, and that's some work we're doing. finally i'll say effects on the

real economy. this is a major research initiative at the federal reserve system. understanding the effects of shocks on availability in terms of credit for borrowers and adding richer financial sectors to structural models of economic activity. we have lots of macromodels like sigma and various models, but adding a richer financial model to the sectors is a key priority. okay. the last two things are quick organizational changes at the board. patrick parkinson was here earlier and probably mentioned -- i missed it -- we have a new sort of overhaul the way we supervise the largest most complex institutions, a very high level multidisciplinary group, a great focus on reviews of firms, greater use of quantitative

methods in centralizing it and employing a lot of resources to bear. we also created the new office of financial stability. as i sort of mentioned, the focus is on the comprehensive quantitative tool. quantitative analysis of risk and evaluation of macrocredential tools. this office is working with the supervision groups, the fsoc, international working groups. i would add it's not a large increase in staffing. it's not like we're going out and building a new -- a new, you know, i don't know, an ofr? we are really engaging the research economists and the analysts around this system to -- there's quite a bit of work that is ongoing. it's all being organized through this group.

i guess i'll finish with this approach that i think i started. it's really not based so much on sort of a unique ability to see the future, okay? it's -- it's -- we recognize crisis will happen. our goal is to reduce the frequency and severity. we're building on a lot of the macrocredential tools and structures that were created in dodd-frank. dodd-frank's not perfect, but it is a step forward, and, of course, i'll close with, of course, we need better data and greater disclosures. i'm a firm believer in being transparent about how we're trying to measure things and engaging the academic in the market communities for that, so looking forwards to working with you all. thank you. >> great. thank you very much, nellie. i like learning you guys have a

lot of fun with your network analysis. [laughter] it's good to know it's not all nose to grindstone. next we'll hear from richard berner. he won a contest of private sector economists who most accurately predicted what was going to happen so you're not safe from the sort of caveats that nellie offered to her predictions. he is someone building an office of financial research, and i hope we'll hear about that, and also for me very interestingly the perspective of being on wall street as well as now on the other side. >> thanks, and thanks matt and nellie. they made my job easier to talk about the office of research and goals and objectives and what we're trying to accomplish. i can assure you it's not just

me alone. we have a number of people not just in the treasury but in the oversight counsel contributing to that effort, and as nellie said, we need your help. we'll talk about the partnerships we're trying to forge to realize our objective. let me talk a little bit about the architecture, the government that is important that both matt and nellie eluded to. it's much more diffuse than monetary policy. monetary policy, you have the luxury of having targets that are quantity fiebl. it's -- quantity. it's hard to describe the cry criteria if success. overtime, for example, we hope that we in our successors put

less money into banks. that's one criteria for success. over time, we and our successors hope for a more stable financial system, but hopefully not at the expense of sub par growth. there's a balancing act that's difficult to calibrate, and that balancing act is something also that takes place over a much longer period of time than monetary policy. you're familiar with the lags in monetary policy in implementation and recognition. in macrocredential policy, we assess the success over the credit cycle and perhaps over more than one credit cycle so we hope that our critics and the people who are assessing us will have the patients to look at that, that effort over time. many other issues in governments

arise and nellie talked about the fsoc, a counsel created among nine financial regulators and the representatives of insurance specialists who vote on the fsoc, and you can nag that such a large committee that involves not only those ten people, but also five non-voting members can be a bit cumbersome. there's a lot of collaboration and cooperation involved, and doing that is part -- in parcel of what we're trying to accomplish. specific responsibilities have tube assigned -- to be assigned, and the fed has the mandate, but that's carried out with other agencies, many of whom are represented in this room as well. dodd-frank mandated that the office of financial research would facilitate that process. the ofr is a new entity

established under the statute to help promote financial stability with four goals in mind. first, measuring and analyzing factors affecting financial stability in collaboration with the other fsoc members. increasing the integrity, accuracy, and transparency of information that we share and that is reported to regulators and used by research communities so there's partnerships implied there. reporting to congress and the public on the analysis and significant financial developments, again in collaborate rations with the -- collaboration with the fsoc and collaborating with multilateral organizations to establish global standards for data and policies that promote financial stability so that all sounds like a big job, but when you stop to think about it, it's done in cooperation with the other agencies, the other members of the fsoc. if you think about it in these terms while we're staffing up

and we are a new organization, we are trying to provide the connective tissue among the members of the fsoc and the connective tissue where we think we have gaps in our data, gaps in our analysis, and where we can promote collaboration among all those nine members of the fsoc. our sole focus is to establish and assess along with the other members the risks of the financial system, and we have the authority under statute to collect data from anywhere in that system. our mandate is to improve the quality of financial reporting, and we're accountable both to the other members of the fsoc and to the congress. you can think about us serving four different constituencies. the fsoc and the members, the congress, and the public, and that -- that service or that accountability goes in both

directions because we node the fsoc to provide us with direction for research and data collection and similarly in the other direction we need to get risk monitor -- help with the direct development of the monetary monitoring tools and data needed to facilitate the use of the tools and the technical analysis for members of the fsoc. the ofr is divided into two parts, a data center focused on the standardization of data, the production of reference data bases, and the collection of data in the warehousing of the data and distribution of them. there's a second smaller part which is devoted to research and analysis which is devoted to risk assessment, forensics, looking at crisis and why they occurred, what went wrong, financial innovation and how it's affecting the quality and

character of our data, and the evolution of the financial system, and so on. the ofr will have a director and deputy directors who support each of those two sides of the organization so our goal in terms of research is to produce, promote, and sponsor financial research to publish non-confidential financial data, reference data, and i'll tell you exactly what that means in a moment, analytical tools, to establish fellowship and visiting scholar programs for people who want to work on financial research and collaborate with and provide data services for all the financial regulators and statistical agencies and finally to promote best practices in risk management for financial firms. we have underway several research projects in collaboration with other fsoc

members. nellie eluded to some of those we're participating in, and on the data side of the house, we are most advanced in our infrastructure because we think that that is the most pressing need, and it's the need to make everyone in the fsoc recognize and it's the least overlap with other members of the fsoc. now, it may sound odd, but our promise to the people with whom we want to form partnerships is that we're going to collect more and better data and reduce the reporting burden for the financial services industry. how are we going to do that? we are promoting a standardized set of reference data, one of which is called the lai initiative, the legal entity identification system where we go back down to bedrock and identify legal entities and the

transactions that occur between them and among them. we don't currently have such a system. there's a multiplicity of identification systems, and those exist in parallel with what we seek to set up, but the unique and enduring lei system we hope will serve as a set of standards which will enable researchers and regular later -- regulators in a way that's transparent and reduces the burden of reporting and helps promote better risk management by enail -- enabling them to devote resources to the other activities and only report financial data in the most transparent, streamlined way. in the data center, we are building up and organization

with strong data management. we are running the data center business technology center as a solution provider, we hired people from private industry and information technology. the information technology industry in order to set up the data center, in order to begin cataloging the data that we already have and deciding what else we need to make this happen. in our view, four partnerships are critical for the success, the financial institutions, the market data venders and providers out there with a business model for processing data, the exchanges and other depositories set up with the unique opportunity to collect and refine the data, as well as the global regulatory

community. in creating those partnerships to set up protocols to collect and share and safeguard the data so that they go to the right people and so they don't go to the wrong people so that the people who use and produce those data can trust the fact that they will end up in the right hands and not the wrong hands, and we don't have to negotiate every transmission on a case-by-case basis. that's extremely important on thinking about how we collect and district and safe -- distribute and safeguard the data. there's many challenges. we have to distribute that to the broader array of constituents, work to agree around the standards around the world. working hard on that. we have to prioritize the agenda with other fsoc members, and ultimately, we want to work to make the data that we have

widely available to a variety of constituents including the research community to develop better risk mop toring tool -- monitoring tools and have a much more transparent financial system. >> thanks. >> okay. thank you very much. i'll ask you guys questions for about 15 minutes, 10-15 minutes, and then we'll have 10-15 minutes of questions from everybody else. i wanted to start, matt, you are briefly disparaging remarks you made about basal. i wonder if you'd like to elaborate on those a little bit and talk about the impact of the latest basal developments on the overall situation here in the united states. >> perhaps the way to do that would be to take a little tour back of what we went through and link some of the basel requirements to that.

there's two examples. last night i mentioned them. i'll do it quickly. think of two of the largest financials in the crisis, and you think of fannie mae and freddie mac and iag. what they did is exploit the too big to fail guarantee or the guarantee of the governments for their behavior, but they were embedded in the financial system. it's not as if they were working in the shadows so to speak. there's the ample of aid. when you think of the aig financial prompts and the stories written about them and joseph casano with the picture, the only picture that existed, and we saw that again and again and again and the inference was a bunch of cowboys working outside the financial system, no one knows about them, acting

like a hedge fund taking huge bets. the truth is if you go to the courtly reports, end of 2007, and i mentioned this again last night, page 122 we studied this of the report, they describe the propositions of $530 billion and describe $189 billion of that is for regulatory capital relief of financial institutions primarily european and broker dealers as well. this is how it worked -- if you held a aaa security and took out insurance from aa rated entity, you had to hold no capital. that's why aig wrote $389 billion of cdf positions. it was not outside the system, but part of the system. we can thank basel for that. go to fannie mae and freddy

mac. you hold 4% capital. you sell those lopes to fannie and freddie and buy them back, the same loans, the mortgage backed security, the risk in the system is identical, and now the bank holds only 1.6%. my 7-year-old who i talked about in the beginning of the thing today, you know, he's not doing decimals yet, but if i ask him what would fannie and freddie hold, he'd guess 2.4%. it's 35 basis points, half the leverage, or double the leverage, and again they were part of the financial system. no wonder they dominated. again, we can thank basel for that. go dop the line and -- down the line and just see how when things are relatively arbitrary and relatively course

and set out without particular criteria. you have two io identical worlds, they should have roughly similar requirements, and if one is less than the other, not surprisingly, everyone's going to go to the one that's lower. that's not written as a goal or entity, and that's not in dodd-frank either. when i look at what's going on now with basel, there's a strong argument for having higher capital requirements. there's the story in our classes, but, you know, i don't know what the economic analysis that they provide that goes from 4.5 to 7 or graduate from 7 to 8.5 to 9. it just seems a little arbitrary, and there's tools being developed, you know, by

nellie and central bankers elsewhere and also there are data about leverage that's going to be developed eventually of the office of financial research that can really help pin point this stuff, and i just got a feeling it's going to be basel iv, people a little bit older sitting around the conference room in switzerland making negotiated decisions which i'm not sure is the right approach to these issues. >> okay. richard, is matt right in the denunciation? [laughter] >> i think matt makes a valid point any time you try to regular late one part of the financial system and another part of it is lightly regulated, than financial activity goes to the lightly regulated part of the system, and i think what we're trying to do in developing macroprudential tools is to create that with a holistic set

of tools that looks at not just capital and liquidity requirements, but tools that also enable us to reduce regulatory arbitrage and to reduce the implicit or explicit buildup of leverage in other parts of the financial system so the use of appropriate margins and haircuts in financial markets, financial instruments, the collection of data, and swap data repositories and other parts of the system will help us in doing that. we are at the very early stages iwould say in the development of those tools, but we recognize fully the need to do it in a holistic way that looks at the financial system as a whole and how it's evolving in response to financial regulation. >> i don't have anything to add. >> matt just a moment ago referred to and gave an example

of the gaming of the system. you, richard, were talking about how you need to have buy in from the private sector participants. how do you guys strike that balance? there was a really interesting essay by tyler cone at the gipping of the year about inequality, but one of the observations was inequality is bound to increase because the financial and intellectual fire power in financial services just so outguns you poor, underfunded, understaffed regulators that they will always run circles around you. you can devise the best data, but they'll find ways around it. are your systems vulnerable to that or are you finding ways around it? >> i'll start on that one. i think that's clearly a recognition of all lag laters -- regulators.

in fact, there's a great research paper written by adam maryland that just looked at the actual education levels of the financial institutions versus the regulators which is pretty eye opening and the gap has opened up a lot since the 1960s. i think that's also one the map reasons why we think this has to be a pretty open and transparent process, that it isn't about the regulators sitting in the room and not engaging the whole economic and market community in this so having data, making it valet to other -- available to others to use, promoting development of different measures, i think that's all part of the -- part of the strategy. >> you know, i think that's absolutely right, and when we talk about buy-ins and the proposition we're going to

collect more and better data and reduce the regulatory burden, i think that's essential for the regulatory process. >> your wall street counterparties, do they buy that? >> we have tremendous buy-in from the industry and others around the world and in the industry are leading the charge. in fact, i think they are somewhat impatient that we're not going faster in the process of entity identification and the process of other things that will facilitate reporting of data in an easier way and facilitates their own business models, their mis, management information systems, and the way they report data. if anything, i think they are trying to get us to move more quickly. >> if i can just add to that, you know, systemic risk is -- it's the public cost; right? it's actually not -- it's in the

it's it's within the incentive structures in many ways for the financial industry to actually support this. i think the problem is when the regulatory environment or the government gets all the popular gets too punitive towards the banking sector so i think getting a buy-in like dick's doing and it's in the their interest because the race to the bottom just because you're a better nature of making analysis so i think everyone prefers a little bit less systemic risk in the system, but you have to do it in a way where you're not picking favorites, and i think that's how you have to do it. >> and how about getting the right people? i mean, nellie referred to the great paper, trying to attract people also with skills not just in wall street, but silicon valley. how is that going?

>> frankly, it's not easy. we're looking for very talented people, and we're being kind of picky about it. we have started staffing up in a variety of ways, and so i think that the, you know, the allure is that we have really a historic opportunity to get the financial system and the regulatory architecture right to build institutions that are going to be lasting like the ofr and like what's happening at the fed so i think there are tremendous opportunities, and one way to do that is to make sure that we provide opportunities at every level of career development so that people who are just coming out offed gray school -- out of grad school can participate and people who are going to go into teaching can postpone that and go to the ofr, the fed, the new york fed and

other places and participate in the process of discovery that we think is so exciting. g so as i mentioned, we're not, by design, looking to, you know, build up a huge community. the ofr is -- >> [inaudible] >> i'll let dick do that. we are drawing on the whole reserve bank system. we have 12 reserve banks. we have economic research divisions and supervisors and other analysts at these institutions. those are critically important to how we function just like in monetary policy, they are all engaged in that, trying to bring them all into the financial stability. we are making an active effort to get out to the economic community. as you work, we engage the community monetary policy all the time. we have the outside in on that. we have criticism, you know,

suggestion; we get everything. i think in the financial stability, we can aim to do the same. >> i don't have anything to add. >> okay. shall we take questions? please. are there any mics? yeah, there you go. >> with risk management community -- riskmanagementcommunity.com, and it seems like the problem you face is your credibility is just one thin shot, and you can look at last week's round table at the fdic where simon johnson whose credentials are impeccable expressed frustration that he sees the prospect of 2.5 trillion banks come bined into 5

trillion franks and tries to bring this to the attention of secretary geithner to whom he has access, and he got nowhere. he was told this is a problem for the e.u. so i want to ask you how you overcome that because it's not something that you can really answer because people aren't going to believe what you say. >> okay, well there's your answer. [laughter] nellie, do you care to address and elaborate on, embroider on how to work when you have no credibility? >> [inaudible] >> journalists also, so there you go. [laughter] okay -- >> i'll just, you know, i think they in the crisis, i mean, we've been subject to the criticism of why could the fed

do something now that it clearly missed in the last crisis. i think the view is there's quite a few causes. it wasn't a simple cause for the crisis, the recent crisis. there was lots of blame so to speak to go around. there's the side of institutions, regulators, consumers, governments. i think dodd-frank does try to address some of the issues and one of its map features -- main features to define clearer authorities and try to clear some regulatory and information gaps. you know, there's a long implementation process, and the data, the council as sharing better information are all challenges, but i think that's

the road forward. >> please, sir. >> hi, dave henley of credit sites. can you review the phase-in period for both groups and any timelines for different things coming about? when do you have to have a directer according to dodd-frank, things of that nature? >> asking that about the ofr? >> yeah. >> we don't have any particular time frame. obviously it's the one year anniversary of dodd-frank that comes up in mid-july. there are a number of things that are supposed to be done by that time. the statute doesn't specify that we need to have staffing, but we're very much aware of the need to have our staffing in place, and that's an extremely high priority for us, and we're working aggressively to try to implement that.

>> in terms of critical mass output, when do you expect that? another year from now? >> when nellie talked about not building up huge infrastructure, it's accurate for the ofr. we're trying to build a big research community including all members was fsoc and create the connective tissue among the members of the fsoc and reach out to our partners in the financial services industry, in the research community, so that the output is already beginning and with a very small number of staffers. on the data side, we -- we're making a lot of progress in cataloging the data we have, and in assessing the data that we need -- that's part and parcel of the process we're going through to implement to other parts of dodd-frank such as the designation process that matt

referred to, and that is teaching us a lot about the data that we need and need to collect, and we're making progress on that as well so i think drawing on the resources that we already have, you're going to see in fairly short order a lot of progress that's being made on both of those fronts. >> and do you have any timeline questions for nellie? no? >> i have two reports due on weeps. wednesday. [laughter] >> you know, the thing about timelines is it's important to have them for implementation, but realize just as monetary policy is an on going process, so is the implementation of an accurate credential process is going to be op going. we're trying to build the institutions and frameworks to do that. the bad news is you want it in

those terms is that, you know, monetary policy analysis is far more advanced than what we're talking about here. the good news is that, you know, there's a lot of opportunity to discover and to move the ball up the field very quickly, and we think we're doing that. >> i think it's working. dave from university of maryland. not only the three of you, but earlier comments were remarks to the justice of which regulatory arbitrage is going to happen, but i put forth maybe the proposition to just to be discussed as to maybe from the point of view of systemic risk is good in theceps that what you can do with it is by burdening, and this is some dodd-frank does this a bit with the capital requirements, by burdening larger institutions, you actually then create pressures for those people that have

creative ideas to go to smaller institutions, and more smaller institutions is not only far less systemically risky, but is probably also a better market and would ultimately drive a better economy, a healthier economy. by the way, the benefits we didn't discuss at all partly because i think we can't quantify it, so i put forth the proposition we shouldn't be ringing our hands about regulatory arbitrage, but that's actually an ally from the point of view of managing systemic risk. >> well, i think you make an important point, and the important point is we want to create a regulatory structure that also embodies market discipline and market incentives, and i think that there are a number of ways we can do that. you referred to the salt sifi surcharge cor buffer as one

thing to help do that. there's others that i eluded to, and they are extremely important in promoting transparency, better price discovery and markets that have been opaque, better data so that we can all analyze that, and when i say "we all" not just the financial comupt, but the research community and the regulators themself to have market discipline agent as our -- act as our ally. >> i would tend to agree. i think an important issue is where that activity migrates to. a surcharge on the large institutions, if the lending activity that migrates to the next tranche of firms, that's one area of it. if it moves out to areas that may have -- it's not clear what the backstop is, then, i mean,

it's -- >> we don't know the margins. >> yeah. >> where do you think it's likely to move? >> for the capital surcharges? so lending activity -- so i think it's a little early to tell with the capital sur charns, the function is not entirely made explicit yet. the analysis has been thought about for the macro and the effects on the economy have been moving and lending activity staying within the banking sector largely, but it's hard to tell at this point. it's too early. >> i understand your point, but i'm not quite sure i agree with it in following sense. i think what you want is you want the -- you want to charge the systemically risky activities, you know, some kind of higher amount whether it's systemic tax or a capital sur charge or something along those

lines to move it out of the systemically part of the financial sector to a less systemic part, but i don't think size is the right criteria. you think of the insurance industry, you think of money market funds, lots of examples where things have been shifted to smaller entities that actually produce a lot of systemic riskings but i agree with the general principle that you can use systemic risk management to sort of push stuff away from riskiness. after all, the whole model of securitization in academia, not to be implemented that way, but it was basically to take a liquid asset, create gold out of them, make them liquid, and get them out of the risky popular financial sector to less systemically risky areas. of course, it was the opposite, brought into the risky part because of capital arbitrage. you have to be careful how you do it, but i think the overall

idea behind it is right. >> what's your prediction on how things are likely to go? >> you know, i'm not that confident because when i -- again, i look at the basel approach, and i do think that the dodd-frank has the opportunity to maybe take a different view, but i'm worried that at the end of the day, people sitting around the room are just going to relate back to that previous system even though nellie and dick are introducing wonderful things for us whether they are acted on by fsoc or whoever is in the room when deciding on the final decision making. >> are you guys worried about that? you'll have great data, but no one will pay attention to it? >> well, we'll have great data, but great analysis and nellie talked about the contribute similar the fed gets from a variety of constituents about

monetary policy. we'll get a lot of criticism from all the people in the room about macroprudential policy, and we welcome that because that's absolutely necessary to improve the kind of policies that we implement. >> i mean, i do think as i mentioned in the opening remarks, i do think five years from now, these activities are at the same level as the current done, and we'll have a much, much better understanding of what's going on and much better data to answer the questions. i just hope we agent on it. >> okay. another question? >> [inaudible] two-pronged question. it seems as the minute is we are doing two thing, getting a handle on the risk that we have and develop new data for the a future vision of how we might understand, measure, monitor a system going forward. against both those thingses, in

the first case, is it a riskier world than we were? is risk trending down? is dodd-frank actually reducing systemic risk at this stage or do we have to wait for full implementation? secondly, measures of systemic risk? what's your thinking on how to measure, not for financial institutions and their contribution to systemic risk which was addressed, i think, but more the state of the financial system as a whole. how do you expect to be able to -- do you have any initial hypothesis on how to measure that opposed to collecting all the data? >> okay, two questions there. nellie, you want to go first? >> i think in terms of whether you can say dodd-frank has contributed to less systemic risk, boy, a hard question. you taking it out of the context of the financial sector and the economy where every's inclination now is we're still cleaning up the past.

there's -- there's caution in terms of leverage and risk taking on the parts of all participants now. how much is that is just sort of up dodge nows -- indodge nows, and we're not in a position to answer that now, and you see quantities and prices, and you don't know, you know, the supply and demand shift. i -- in terms of measuring overall systemic risk? you know, there's some attempts to try to get a bigger handle on the concepts and get them all together. our approach is we're not trying to achieve a single measure -- >> [inaudible] >> yeah, so i think it's a pretty broad scope, i mean,

you've got -- you've got farms, you've got markets, you've got leverage. i mean, there's some con cements to con -- concepts to convey, it's difficult to get a single measure. on the other hand, i would say that i think the attitude, the risk, you know, in terms of pricing and the potential for systemic risk, there's less leverage, less short term funding, less maturity mismatch, and there's less innovations getting around our ability to understand, there's less of that than there was just a couple years ago. >> agreed. you know, looking at the agenda going forward, what we learn about how the financial system evolves will, you know, drive the way we collect data, and we need to be alert to the fact it will evolve and financial

innovation has subsided somewhat is going to continue to evolve, and one of the shortcomings of what we did in the past was to overlook that innovation which was partly driven by regulation, partly given by economic and financial opportunity, will continue to be driven by those factors and think of ways better to collect the data associated with that in the future and like wise as we think about the analysis to adapt it to the innovations in the financial industries which underscores the need for ongoing communications as i describe. >> i was going to say nyu's done interesting work. visit the website and get all the details. >> do you have a risk dash board to look and know where things are bad or good? >> well, the rankings are the concerns. we are working on indicators so

-- >> okay. if there's one super speedy -- thomas, your show, if you have a question? >> my quick question is just to say you can look on the website and see what matt set systemic risk to be across five firms and soon going to cover europe as well. soon there's more detail, at what point is the ofr or fsoc going to have similar public transparent assessment of systemic risk and markets available for everyone? >> [inaudible] [laughter] >> that's why it may not be soon. >> certainly, we're going to use the analysis that they are

developing and in other places as well, and that we develop ourselves within the members of the fsoc. how much of it we publish? you know, that remains to be seen, but, you know, there's always the question of if you identify a problem or an emerging threat or vulnerability to the financial system, you have to say what you're going to do about it, so that's really up dumb bent op us as policy -- incumbent on us as policymakers. to close that loop, it's going to be very important for people to understand what you describe as the macroprudential reaction function that has as many dimensions as risk. it's not going to be sufficient for us to talk about what the risks are of the it's going to be incumbent on us to talk about

what we plan to do about it. >> okay. i think our time has run out. i want a quick final lightning round of the three of you. dodd-frapping, what's the -- dodd-frank, what's the single best thing from it, the one change? >> introducing regulation to markets. >> nellie? >> that's interesting. all those great things. in some sense, the council to -- with all its shortcomings of trying to coordinate among 15 or 10 to address, to have information exchange and close regulatory gaps. >> i think the single most important thing is that dodd-frank has made people aware of all those gaps and it's made people aware that we have a very complex and evolving financial

system, and that we need to pay a lot of attention to the unintended consequences of regulation and to thinking about regulation across the entire financial system, not just for depository institutions or for one set of financial players. >> okay, well thank you to the three of you for a rich and provocative questions and great discussions. [applause] >> now we have an hour and a half for lunch. of that time, half an hour is to do what you want to do, bring your food in here, settle down, and start to eat quietly, and then at half an hour in, we'll be asking our lunch time speaker to step up. ..

you can the rest of our

discussion on our companion network c-span including the address of the federal reserve bank of kansas city that's scheduled at 1:30. >> next, we'll bring you more in the area of finance with securities and exchange chief mary schapiro, she said until all the provisions of the dodd-frank legislation in the law can be implemented it would be foolish to suggest everything is fine with the financial system. she spoke to corporate executives at a "wall street journal" conference and her comments will be followed with comments about the debt ceiling and the u.s. tax code. >> i'm francisco i'm the editor

of the magazine that you read first and you'll have to see me outside. and we have the pleasure of talking to mary schapiro, and she really doesn't need an introduction. the only thing i would point out just from the personal experience i was there reporting on the financial crisis and there were a lot of people, a lot of serious intelligent people says the sec will no longer survive the financial crisis. there will be no sec during the financial crises. the fact is the sec is still here. mary has done a great job of rebuilding it and actually expanding its capabilities and it's now tasked with a number of important crucial tasks including, of course, writing the detailed rules in dodd-frank. mary i would like to start out with a general question. do you think the financial system safer than it was during and immediately after the

financial crisis? >> it's a great question. and not yet. i think we have a long way to go. i mean, obviously dodd-frank is a tremendous step forward. we at the sec alone have 100 rules to write and multiple studies to conduct and we're well through that process. we've done about two-thirds of our rules but until we have a regulatory regime around derivatives, i think -- and until we have final rules around resolution and the tools that will be available to the fdic and the bank regulators in that context, until we have additional capital requirements actually in place, i think we're on the path for sure. but i don't think we can say that we've necessarily cemented the foundation of the financial system in a way that we all hoped would be the case in the not too distant future when some of these things are done. the one way i think things are better i do think there is

greater sensitivity in corporate management and in financial institution business risk. i think there has been a bolstering of risk management capabilities. i think that's a good thing. i think regulators are very much on point now, watching what's going on and being more inclined to step in and if not, push companies to at least use the bully pulpit and persuasive tactics to get them to make the changes that are necessary. so i think those things around the periphery are better. i think we're seeing some improvements in things like compensation programs although not nearly to the extent i think we need to in order to get incentives better aligned. but until we really have implemented dodd-frank and the most important provisions of dodd-frank, i think we would be foolish to suggest that everything is fine. >> so that could take years? so we'll be in limbo for a number years. >> it will take some time in

some areas, and rosario was just here to talk about the tremendous task and challenge really of taking a $600 trillion worldwide market, fully globalized, largely unregulated throughout the world but certainly in the united states and turning that into a regulated market with full transparency, reduction of counter-party risk through central clearing and business conduct standards for market participants. and those are going to take some time because we're going from unregulated to regulated and we're not riding on a clean sheet of paper because this market already exists. so there are a lot of challenges ahead. >> let's talk about dodd-frank, as you said you're tasked with writing 100 of the detailed rules that go with the bill. there's been a lot of missed deadlines as a journalist i'm very sensitive to that, missed deadlines and there's an

understanding of why the deadlines are missed but the question, is it inevitable there'll be more deadlines will be missed and we have to accept things will be moving slower than we thought. >> when the statute set out its deadlines, any one of them or any handful of them might have been very achievable but when we as an agency have to think 100 rules many of which were required to be done in the first year, it really became clear that it was a task that to do thoughtfully and carefully and have the kind of collaborative process we wanted couldn't be achieved within the year. just a measure of our process, we have engaged in hundreds of meetings with the industry and market participants on the rules. we have to go out for comment, you know, 45 or 60-day comment periods. we have to digest in some cases thousands of comment letters, turn that around into a final rule. there are only five people at the top of the securities and

exchange commission who have to approve everything and so we have to have had bandwidth to get through all of that ruling making so i think it was probably almost inevitable from the beginning. with that said we've made a number of deadlines. but our goal is to get it right, to get it done and as collaborative and thoughtful way as possible, to get maximum input and to work with our colleagues in the regulatory community domestically and internationally to make sure that we're not out of step. so for some rules, it's the asset securities markets and it's joint regulating with the regulators and with the joint rule of the federal and trading commission and the act requires us and the derivatives there in particular to consult extensively with our international colleagues. so all of that process which you should care deeply about should take a lot of time so we're doing it as deliberately as we can, trying to make the deadlines but also when we can't

we can't and not going to force through a poor quality result. >> one thing that you did introduce is the whistle blowers chart and i was curious to hear what the results are. this bounty payments with surging whistle blowers activity? >> we have a statute went into effect actually including for the whistle blower program almost a year ago now. even though the rules were not in place until a couple of weeks ago and they weren't effective yet. they will be very shortly, i think. and so we've seen some uptick in the number of whistle blower complaints. we've always gotten a lot of tips and complaints and referrals. thousands and thousands at the agency. the real thing we're seeing is a better quality, more detailed information, information that's clearly that has more direct knowledge of potential wrongdoing. we've set up an office to manage that information, the office of market intelligence within our enforcement division and the office of the whistle blower

both that will triage, bring in all that information, figure out how to assign it out to the right people within the enforcement program, to staff the inquiries and to keep track of the information. we have some new technology which is not a surprise to any of you. you have new technology every day at the fcc we don't have new technology nearly as often as we need it or should have it given the technological capabilities of the markets we try to keep up with. so all that is working pretty well and we have a new head of the office came from a corporate community with corporate secretary and we staffed that office. so we're moving ahead with it. but i wouldn't say we're inundated. we've seen some uptick but i think the real measure is the quality of referrals and tips. >> i guess the real measure is will you do it with a tip-off. >> exactly. >> your agency was criticized for, i guess, missing the madoff fraud. are you confident if mary

markopolos today your agency would be able to spot it and act on his tip-off. >> i think the incentive that whistle blowers will have to keep us with us because of the potential for compensation at the end of the day will help but i think we've done a lot of other things to try to deal with the fact that the agency did miss madoff including being incredible transparent about that in terms of reporting fully on all the failings within the agency. and then if you actually go to our website, there's a section called post-madoff reforms and you can see all the changes that we've tried to put in place including some new rules that require surprise examinations of investment advisors, custody, their assets of their customers and affiliated entities, restructure and the whistle blower rules and all these rules that we put in place that will make a difference of our capability to handle the information that comes in and

the new skill sets we're bringing into the agency. and if mr. markopolos can come in with the data we have the skill-set to tell us about the potential violation. >> so you're confident -- perfection is not possible but -- >> i would never say 100%, and i'm confident that we've taken really significant steps to bolster our capabilities. >> and let's talk about enforcement, the big area and not the only area. do you think the sec has done enough to hold company and individuals accountable since the financial crisis. >> i will say that at a time when we've been engaged in record rulemaking and interpretive we've done a record number of cases in 2010 compared to any year in the past 10 years and coming right out of the financial crisis we've sued, i

think, 60 individuals and entities including ceos and cfos i'm sorry to tell you. we don't have criminal prosecution authority. that resides with the state and with the justice department. and we work very closely with them on a lot of those issues. but we have a pretty full pipeline of post-crisis cases. you'll continuation to see our -- bring those out. they relate to disclosure failures particularly around structure products and accounting issues and so forth. and we've brought some very major cases coming out of the case, state street bank, mozi a mozilla, beach wide hopes, citi, jp morgan and a number of them. you'll continuation to see those cases coming through. >> is it fair -- is the

criticism fair that you didn't take action for big firms in the financial crisis but then when you came to individuals, all you could do was charge a junior trader and not senior executives in that respect. is that a fair criticism? >> well, you know, i don't know if it's a fair criticism but i will say that it's in the dna of enforcement lawyers to bring the possible case as they can and include as many individuals as they can so it is not for lack of will and desire they were not seen as many senior people named in these cases. if we could, we would be naming there. there is no question in my mind. and probably mixed news for this audience to hear that, but if we can name individuals, that's always part of our investigation. it's always part of our consideration both at the staff level and at the level of the commission when we ultimately approve an action and so that would be our desire whenever we can make that case. that said if we don't have the

evidence and if we can't prove the violation, if we're going to have to litigate it, we're not going to bring the case against individuals. it's just a matter of fundamental fairness. so we try to make those cases where we can, we do. we do name individuals. very often we name hundreds of individuals every year. we've got a number of officer and director bars in the last year but it's part of what we try to do but we will only do it if it's appropriate. >> do you think doing more against individuals again news for this audience but certainly would have a bigger deterrent effect than the traditional -- >> sure. all of our enforcement we hope to have a deterrent effect to ill serve our capital markets and investors and i think the insider trading cases are probably a great example of this. that this kind of conduct can lead you to serious personal jeopardy, whether it's criminal

prosecution or the potential for clawback of your compensation or your bonus. or for an officer and director bar and the potential to lose your position. if you're working for financial services you run the potential for being barred from the financial industry. those are important messages for people to understand and hopefully really do change conduct out there on the ground. >> and from a broader perspective and i'm not just asking about the sec in this case, but will there be bearing even a failure of enforcement if no action was taken by any regulatory agency on the lehman cases and nothing has happened on any fronts. >> i'd rather not speak to that in particular because, you know, we're, obviously, not in position to say the extent to which we continuation to have issues and look at the conduct there and there's a number of

other firms but i guess i'd go back to what i said before. our desire is where the facts and the law are there for us to bring the cases. and to bring them as inclusively as we can in terms of the people that we name. >> and because of the timing you hear a lot from the corporate community. when will they be finished? when can we move on? there's a cathartic element to this. >> yep. >> what do you think we will be done with the at least of the crisis time cases? >> it's hard for me to say, you know, these are complex cases in many instances, our products is incredibly complex which is contributed, quite frankly, to the crisis in some areas because of a lack of transparency and the regulatory oversight particularly difficult to put the cases together. so i can't really give a time frame for when we'll be done. but we continuation to work as i said very diligently on these matters and we have a pretty full pipeline of them still to come.

>> let's talk about budgets, something that is close to the heart of this audience. i'll say this, you don't have to say this, but the sec had a very modest increase in their budget for this year. is there a danger that faungd squeeze will hamper your efforts in some of these areas that you're pursuing? >> you know, it's a continuous challenge for us. we're a pretty small agency by standards. we have about 3800 employees. we have 35 regulated entity. the bank have a 1 to 1 ratio and we have a 1 to 10 ratio and we have to cover a vast array of issues and institutions in that so whether it's money market funds as you know most americans have the bulk of their investment dollars to public companies and accounting does 5,000 broker dealers 11,000 investment buyers and transfer agents which are very important

to corporate america. we have a vast number of majorities by a few number of people who have to specialized in very particular areas. we have worked hard to be good stewards of the funding that we have to grow our skill sets and our capabilities to try to do more with technology. but the fact is we have over-the-counter derivatives, hedge fund regulation, extensive oversight with respect to credit rating agencies and a handful of other issues like you and i were discussing contract minerals and contract disclosure and other things we were discussing and we need significant additional resources to do that and it's not at all clear what will happen to our budget for 2012, our fiscal year starts october 1st. congress hasn't made decisions but we have asked for a fairly significant increase dollars and head count in order to operationalize the dodd-frank rules and we've been very clear

that this is really going to be critical if we have these new responsibilities. if we're going to have clearing houses, for example, for over the counter derivatives where there will be an enormous concentration of risk we have to regulate those entities and we have to have the funding and the capability to do that. so we are anxiously watching the congressional process and we'll see. one thing i would point out is that we are deficit neutral. every dollar budgeted to the sec by congress is directly offset by fees paid on transactions. not giving money to the sec does not mean the money is freed up to -- >> you don't cost -- >> exactly. >> what are the agencies not doing it would not have been done if the full request had been budgeted. >> we can always do more. for example, we examine investment advisors on average once every nine years or so. that's insane.

six years ago we had 19 examiners for every trillion dollars of assets under management of investment advisors. we now have $12 examiners for every trillion of assets under management. so we would do more examination. we would do more analysis and study that would help inform our processes about what to do to try to stabilize our market structure and issue post-may 6th, this is a tremendous importance to public companies. we would do more in the enforcement. we would -- i mean, we would be able to improve our capabilities sort of across-the-board, i think. and that's all before, obviously, any of these dodd-frank responsibilities are fully visited upon us. >> and putting together some things we're talking about, the funding issues and the complexity of writing the dodd-frank rules, is there a danger that the whole post-crisis financial reform

would be diluted or even muted by this -- the problem so we get to a point where we actually don't do any of the things we set out to do? >> well, it's my hope it won't happen. it's my hope that we will have the capability. we'll have the resources to do what we will do. we will continuation to leverage third parties where we can. whistle blowers, accounting firms in a number of areas. we'll work closely with the fed and other regulators who are self-funded and don't have to have their funding appropriated by congress and so they're much more nimble in terms of ramping up. but at the end of the day, we will also be very transparent about what we're doing and what we're not doing so that the public understands. >> right. so before i go on to questions, i want to take a quick straw poll because i know the sec polarizes opinions in corporate america. so how -- to say the least. so how many people think the sec under mary is doing a good job. >> that seems a little unfair.

[laughter] >> you have no credibility. >> this by the way after she said that she's looking for big names to go after. [laughter] >> and she has your name. [laughter] >> be honest and we won't take your name. there's always the question are they doing enough or are they doing too much? who thinks the sec is doing a good job in corporate america? >> we can do an anonymous one. >> only one person? two, three, four. the rest is not doing too much. that's a good segue into the question. >> who has questions for mary schapiro? >> and i'm not going to comment. i think the sec does a fine job. [laughter] >> so there's been a general -- >> would you mind identifying yourself. >> i'm jeff campbell. there's more years to give more

shareholders more voice in corporate governance and certainly several provisions in dodd-frank further move in that direction. as a cfo one of the challenges i find is that when i try to engage our shareholders who are under tremendous pressure to financially perform -- when i try to engage them in discussions around governance and proxy issues, they're often not interested and they say, jeff, i'm trying -- i need to understand your company and your business so i can make a decision whether to buy or sell your stock. that's what i'm going to focus on. as a result, a lot of them outsourced to independent agencies or to create very separate groups within the larger institutional shareholders that's somewhat independent of investment decisions, make decisions about proxy and governance, so the question really is how you think of the dynamic of the independent agencies that increasingly play a very

concentrated role, a powerful role, around corporate governance but, in fact, are pretty insulated from people making the actual investment decisions? >> it's a great question and one actually that we have been quite focused on. and i've said that when we can catch our breath from our dodd-frank responsibilities i want to very much to return to the issues what we call proxy plumbing internally but very much associated with the issues about proxy advisory firms and the roles -- and the role that they're playing in corporate governance and we do have a number of concerns. we put out a concept release a couple years ago, raising a lot of issues about the role of proxy advisory firms and about a number of other issues like novo and the whole structure how proxy are and advises firms and the roles they're playing on corporate governance and we've gotten a lot of tremendous

comments from the corporate community as well as from institutional and other investors and the staff is working now on some proposals that i hope the commission can take up this fall that will try to clarify some of the issues around the potential conflicts of interests that exist with respect to advisory firms. how they function, how they're regulated or not. how they're overseeing their transparency. their policies and procedures, the accuracy of what they do. those are all issues that we're really quite focused on and again i hope this fall we can turn our attention back to it. if you haven't looked at the concept release and if you have comments, you know, we welcome them at any time and at any point in this process but we will have some proposals to go out for comments, again, i hope this fall. >> chuck? >> good morning, chuck nosky

from bank of america. looking at the title of this section "power of the shareholder" i'm struck by how much i read and have been reading over the years about the desirability of all of us moving to a set of accounting global structures and consistent with jeff's earlier remark, i'm not sure i've ever heard a shareholder come to me and talk about the desirability of moving from u.s. general-accepted accounting principles to at a global set of standards. and when you consider the array of challenges that this group and our peers face and the demands on the job, the demands on the financial status and the costs of some sort of a conversion over time, you sort of wonder is there really a demand poll from our shareholders? and is this a problem we need to solve given the compelling

issues that the commission faces. i'd be interested on your thoughts on how we might expect this to progress. and is there -- is there anyone listening to the shareholders on this topic? >> there absolutely is. and we're listening to shareholders. and i will perhaps take it a step further than you did, not only have we not heard from a lot of shareholders saying we've got to go to ifrs it's really critical we heard the contrary. we think u.s. gap is a great measure of u.s. companies and why would we take this step towards international financial reporting standards? and i ask cfos and ceos when they come in, whatever the subject is to talk about particularly from multinational companies is there a real desire to go to ifrs and even then there's companies that they have an international shareholder base. that it would be valuable for them to be on a system that allows greater comparable with

multinational peers but even some of the biggest multinationals had very little interest, frankly, in making -- making the big change to ifrs because of the costs because of the disruption. the sec started before i arrived down a path of convergence. the isb had multiple projects underway to try to converge in major standards leasing revenue recognition, hedge accounting, a number of others. and those projects are ongoing. we've heard the corporate community loud and clear, slow it down. because we can't absorb even all the exposure drafts and the necessity to comment on this and you've seen over the past year the fasb take a step back and try to put a little bit more due process into their convergence work with the isfb. we put out a roadmap a year ago and talked about how we would think of that ifrf and what was

important to us and ultimately making any kind of a decision to incorporate international accounting standards into the u.s. financial reporting regime. and if you look at that roadmap, you will see first and foremost we will be guided in any decision-making we do by what is in the interests of u.s. investors. and u.s. companies and particularly smaller u.s. companies for whom the costs and the burdens of this could be really quite extraordinary at a time when nobody really has the capacity to take on additional costs and burdens. but what we talk about is that we want to make sure that the ifrf standards or the converged standards really do meet the needs of u.s. investors. that the profession is ready. that investors are ready. that our fellow regulators that rely on gap accounting for regulatory purposes can accommodate this. you know, bond covenants and other contractual matters that have gap requirements built into

them are not going to be disrupted by a change to our isrf. so we have a lot of work yet to do on our end before we're going to be in a position to make a decision. when and if we ultimately make that decision, we recognize a very significant transition period would be appropriate. comment letters we've received suggested 5, 6-year transition periods. but we have a lot of work to do as we think about what this really does mean for u.s. investors and their protection and for u.s. companies. that said, we do think that there's a value to a high quality set of globally accepted accounting standards but we got to get there the right way and as we look around the world and see what ifrs china looks like versus ifrs versus ifrs in other countries this is not a monolithe reporting standards so

we're very cognizant about the differences around the world in this -- what is supposed to be a single set of standards. so a lot of work to do on our mart a very long answer to your question but i do think it's a really important issue for u.s. investors and u.s. markets and so we're continuing to execute on our work plan. and we will see where that leads us. >> we're just about out of time, but you have a very quick last question. >> after seeing some foreign registerants deregistering in the u.s. and talking about compliance in the u.s. and given the context of the reason why many of them would have listed in the u.s. stock market which is today with a lot of capital market developments has happened in some of those countries are changed. why has there been a lot of laudable reasons why the

whistle-blowing under the dodd-frank has been sort of being enacted? how do you like to assure the corporate world that is to say the very fact that there will be bounties in any of that escalation and it could result in unnecessary harassment under the corporate, you know, given data and so how do we like to assure the corporate world that there is adequate balance going to be in terms of a governance to have the information flow and not unnecessary harassment. >> with respect to the whistle blower rules particularly we worked very hard to try to get that balanced right. to build in incentives to encourage whistle blower to go to the company and not lose their place in line ultimately to be whistle blowers -- to receive a whistle blower reward from the sec if we were to bring an enforcement case at the end of the day. after lots of consultation with

lots of different companies, some of whom are in the room, we -- we really tried to build in that balance right from the beginning with respect to those rules. and we will see. but we think -- we think we struck a balance pretty well in terms of not diverting people from internal compliance programs that were so important under sarbanes-oxley for corporations to build and to implement in forthright way. at the same time, we didn't feel like we could say whistle blowers must go to the company first because there are companies that are not going to treat whistle blower complaints seriously and i see that from the enforcement cases that we bring. that there are instances of that. so we hope we struck the balance quickly. we're obviously going to be monitoring it closely and watching. as i suspect all of you will. if we have to do fine-tuning, that's something we're amenable to doing. i would say more broadly, that we've got to get this balance

right. we want companies, foreign companies, foreign private issuers to list in the united states. we think that's an important thing. bewe also want to make sure that u.s. investors have access to the information that they need to make the right kinds of investing decisions. and if people leave u.s. capital markets because the disclosure requirements are too great, you know, that's -- that's unfortunate. and that doesn't mean we shouldn't be looking at our rules to make sure we've got the disclosure obligations right. but at the end of the day we have got to make sure investors have the information they need to make decisions. the last point i would make on that we're particularly focused on this with smaller public companies and the burden on them. it is disproportionate from our obligations. we've created -- we're in the process of creating a small business advisory committee with terrific companies and individuals to help advise us on these issues. but we also have to recognize, i think, sort of a coming of age of capital markets around the

world. i mean, one reason companies are choosing to list in their home markets when they didn't before because the u.s. was the only game in town was that a lot of foreign markets are very well developed now. they have good corporate governance. they have robust shareholder bases. they have markets and infrastructure that now support the listing in the home market. and so we understand that that's a natural evolution in markets which is probably a good development for investors worldwide. >> mary schapiro, thank you very much. >> thank you. [applause] >> we're very lucky to have with us today dave camp who's chairman of the ways and means committee and a congressman from michigan. and he's got about a half hour to spend with us so why don't we dig right in. >> thank you. >> i'll ask him some leading questions and then i hope you'll be thinking of some. >> mr. chairman, i thought we heard this morning from among other people tim geithner who i

think sounded pretty optimistic about getting a deal on the debt ceiling and deficit reduction well before august 2nd. and i'm sure you've heard that kind of line he's using about how it's going to work. i wondered if you could give us is sense of how this looks from your point of view. is progress being made? are we going to avoid default? are we -- is this going to be the year we get a framework for deficit reduction? >> well, we need to because we can't default. and the concern is if you get close to that date without a deal, what the markets may do and talking to some very knowledgeable people about it, they're concerned if they bump up too close to that, you could have some market reaction so we got to do it before. as much as the media has portrayed, this is an important week in those discussions. i think they had three meetings last week. they've really gotten into detail. i think this is an important week to really -- to really make some progress. and so i think the discussions

have been continuing and they're getting deeper but there's not a deal and we don't have one and so we need to conclude that. >> what do you think -- what are the components of a deal that you need to -- for you to feel comfortable and the rank-and-file and the house to feel comfortable? >> well, i think the speaker laid out the markers we all need to see which is at least the same amount of spending reductions that you see in debt increase and then structural reforms, too, so we don't get back in this problem again. and i think those are really two the benchmarks -- >> is that in the 2.5 trillion, 4 trillion, what kind of numbers are we talking about? >> well, the only marker that has been put out there is more than 2 because the debt ceiling has to go up 2. now, there's talk is there going to be a short-term extension while these discussio

>> the secretary laid out a similar framework which is basically a down payment now and an agreement on a target and a kind of understanding that there's some things that can't be resolved by the 2012 election and we'll fill the holes later. is that your understanding -- >> well, one of the things you can get there's only so much you can do on the discretionary side so you have to do things that will have to take place and many are in the mandatory area but you can't do it all in one year. so it will take a series of years to really get to these target numbers. so it will take a series o >> do you think there's going to be legislative liang to tell us where we'll get $2 trillion of savings or to get 2 trillion

with a down payment first? >> you'll have to have a down payment but it's a 10-year budget window. that's how we do everything. >> do you think all the i -- will we have legislation that will tell us how we will cut medicare and medicaid? >> well, that part isn't completely decided and you're not going to have every detail completed in time for august 2nd so that's why there's some talk of maybe a short-term extension. how they deal with that exact issue you've raised, the committee -- well, the committees do some of this work. will that happen? and because this is going to take some time to do, you may see that. >> let's talk a little bit about the revenues that are under your jurisdiction. the white house says you can't get the deficit down to a sustainable level without increasing revenues and where are you on that thing and how do we come to a compromise here?

>> well, i don't want to see increasing revenues and when they start talking revenues eric cantor says let's repeal medicare. the problem isn't that we've not taxed enough. the problem really is spending. and we do need to get that under control and, frankly, if you raise revenues it will take the pressure off the spending side and we know spending has increased dramatically and frankly under the president's proposal we never get the balance or the primary balance and we never get rid of the debt. we never get the balance. i mean, so there really is a spending side issue on that. and the president even assumes -- i mean, and part of this argument comes because we have lower than, you know, historical revenues now but the president's budget assumes much higher historical revenue and again how much revenue is right pa of the economy ought to go to the federal government is very much an important issue. >> do you think we can get to

primary balance, that is, get spending equal to revenues which is a deficit of about 3% of gdp by 2015 without increasing taxes in some way, whether it's closing loopholes or raising rates. >> well, the house-passed budget does that. >> do you think the house-passed budget can get through the senate and be signed by the president? >> well, this is where we at least have a proposal and a plan. we don't see a plan on the other side to do that. but we do offer a path to do that. >> well, what is your priority? would you rather see reaching 3% even if it made -- required some revenue increases or would you rather hold the line for revenues and hold for a higher deficit. >> we would not like to have higher revenues because the issue is who's going to pay them and their idea is, quote-unquote, rich people over 250,000 which half of that income as we know is small business income which is the very sector we need to see some growth in.

and that is the real problem. it will really be counterproductive especially when we're not seeing the kind of job growth. it's more than just revenue. it's regulatory burden that uncertainty on health care businesses don't know whether to hold back and wait for the courts to act or move forward on health care so there's all of these decisions that employers are trying to understand and deal with. and they don't know a path ahead on so many of them. and the real problem on the revenue side is, again, we have uncertainty on the business side with the expiring provisions both at the end of this year and the end of next year. now we've introduced a new facet to this, uncertainty on the personal side. you've got expiring provisions again at the end of 2012. and, you know, just a few short years ago there were about 50 of these provisions. now we're up to 200 -- >> who's fault is that? >> congress. i'm for fundamental tax reform. i don't want to see the revenue side -- i want to see us do fundamental tax reform and deal with tax policy --

>> but your idea of fundamental tax reform is that you broaden the base, lower the rates and you end up with the same revenue that we would have under the current law? >> well, you do under our scoring system because, you know, our sort of -- what i call it the high school physics scoring system which first assumes there's no gravity they assume if you have a simpler fairer code you won't see economic growth. and what we want to see is the economic growth which our system doesn't score but we believe will occur, in fact, if you add our house budget plus the fundamental tax reform that's within the house budget, independent economists say a million jobs in the first year. >> if i'm -- i just came back from china and if you're looking the world from china it looks like a food fight where you say you won't raise revenues and they won't do anything unless you raise revenues and everybody says we'll do a down payment and we'll have a goal. at some point you're going to have to compromise with the democrats to get this done and i

don't quite understand how we'll get from here to there if this is more than a negotiating position on revenue. >> we would like much lower spending than they want. obviously, there's going to have to be some compromise there. i think the fact that the economy recovering and we're not seeing unemployment to go down to raise revenues on those small business owners i think is a big mistake. >> so if you had to raise revenue, where do you think would be the least damaging place to look. >> i can't think of a least damaging place. do you do it on -- you certainly can't do it on sort of -- and again, i think the approach they're looking at too is not just on -- what they call high income but they also want to sort of pluck out various provisions of the tax code and essentially end them, not really with an eye to what this means to a competitiveness. what this means to our ability to do business in a global economy. that, i think, is a very dangerous prospect. i think what we really need to do is do a fundamental tax

reform both on the business and on the individual level. >> i'm sure the people in this room cfos are interested in that. what would make -- what would -- what tax code would you like to see come out of this. what would you like to change? >> what i would like to see -- and we're working on a structure to do that is how low can we get rates? and that means where is the political consensus on how many and you can call it tax provision or loophole or expenditure, whatever you want to describe it as, how many of those can we change so we have a more constant effective rate and we also need, i think, to a territorial tax system so we can compete around the world. how can we -- and that's on the business side and on the individual side i would like to see the same thing and the reason you have to do the individual side as well as the business because most business is organized as pass-through entity now and they file as individuals so we really do need to get -- if you do just the business side, you don't really get at what's driving our

economy. you certainly do an important part of the economy but not when many people are organizing their businesses and filings. >> so let's take the corporate side for a minute. what would you give up in order to get the rate? >> well, we've had a lot of global companies come before the committee. we've had a lot of hearings in testimony. we're actually doing a novel thing. we're having employers and job creators tell us what they think we ought to do and we had a lot of good testimony. the uncertainty of things like the research and development tax credit has caused some very large businesses to say, look, we can't even count on this. we kind of discount that in terms of what we're going do what we want to do. we would rather have a lower rate, accelerated depreciation. where we would rather have a lower rate. and the repatriation is not one we should fix for one time. we need to fix that going forward as well. >> so we could see a corporate tax code without an r & d credit? >> you could possibly. i don't know if there's a political consensus there.

how low can we get the rate. and if this is a priority, then the rate is probably going to be a little bit higher and it may be a priority when we get to the end of the day. we have not got a bill -- >> are you going to in the foreseeable future put down a bill? are you going to wait for the administration to put down a plan or what's the game plan here? >> well, i'm not sure. i mean, what we're doing still is in the building block phase of, you know, having testimony, having hearings and trying to make sure we have consensus. we're doing joint work with the senate as well on this issue. >> how would you characterize business when they come to you? are they saying for the good of the country we'd like to see a lower rate and do away with some tax breaks or are he coming to you for the good of the country we would like lower rates but not this tax break? >> i mean, with any issue, as you know, it's not -- you get a lot of different views. depending on sort of the industry, the sector, what their business model looks like, i do

think there's a desire model to compete. and i want to see these companies who do business around the world headquartered in the u.s., i want to see them investing here, growing jobs here and i will tell you, the headquarters jobs in any community are the best jobs because those are people who lead the community, not just in terms of income and good jobs but they are the ones who head our united way campaigns. they're the ones who chair the boy scouts and they are the ones who are really trying to make sure we have the best schools. i want to see those jobs in the u.s. and i want to see the ability for us to compete around the world. so we hear different things, but i am hearing, even in those businesses that do very well with our system of tax provisions, they'd like to see a simpler, more competitive code. one business came forward and said they had 30 irs agents that lived in their business. there's a way we could fund the priorities of government in a less complex way and certainly on the individual level the complexity issue resonates very

strongly. >> just stick to the corporate, so what's the timetable here? is this 6-month project or 2-year project or what is it? >> it's like anything in congress you got to try to be ready and so what we're doing is try to do the work so we're ready if factors come together and i think they might. and this is why. first of all, as i've said a couple of times already, the economy is not doing what it should do. it's not recovering. the president is facing re-election and i don't know that he wants to go into 2012 with the narrative if we do nothing, taxes will go up as was the narrative in 2010. i worked very hard on welfare reform in 1996 and everybody said president clinton will never sign that. well, in august of 1996, facing re-election he did that exact thing. and we're not competitive. we are facing competition from around the world and we're really hamstrung in our ability. and when -- and i'm just really relating to you what business people tell me is when they make the comparison of what they have to do to get the rate of return they need in the u.s. versus the

other countries, we don't add up and yet we do have the ability to add up. it's just all of these factors i mentioned in terms of rapes, statutory rape complexity, all those factors, regulatory burden and uncertainty there make it more difficult for those managers who decide, are we making a long-term investment in the u.s. with this building, with these people we're hiring or are we going to look somewhere else? and we know there are jurisdictions around the world that are promising 20-year certainty in tax policy. look, i can't get 6 months certainty in tax policy in the u.s. and we want to make a more certain code. i think that's a real positive goal. >> what are the odds by the -- before the election we get corporate tax reform, meaningful tax report 50%, 80%? >> well, the odds now could be very different than the odds next summer and, obviously, now it looks like a very long-term project but you don't know that for sure.

that's why i'm not treating it as one that is maybe not going to be done till next congress or not till the end of the year. i'm trying to get the committee. i'm trying to get certainly business leaders to have an interest in what we might do to be engaged, to talk and come in and not only testify formally but come in and make sure we understand how these policy changes may affect them and their employees. >> and how do you increase the odds that you do something that lasts? it was the congress that passed tax cuts that expire. it's the congress that likes the r & d tax cut that expires which generates a lot of campaign contributions. it's the congress that doesn't want to take anything that's settled. there's no such thing as stare decis and what is the tax code that may look like the tax code three or four years hence?

>> well, one of the things that happens is all of these provisions -- many of them come in to find a way to lower rates for various sectors and my view is why not lower rates for everybody? why not give everybody the same shot at that rate? so this comes in incrementally and all these years we've seen these changes in the incremental and that's what the legislature does is incremental change. we really need an overview look at the tax policy we have. we need the administration to be engaged. secretary investigate has and i met with him frequently but we really need an administration to really turn the levers of government to help make this happen because it really is about the kind of future we're having and i think a big growth agenda is trade policy and when you look at the, you know, 40 plus, that are pending we have -- >> let me ask you in 1986 when

we had landmark tax reform, the landmark was different, there were different people. and people watching it for a long say there just doesn't seem to be the leadership in the congress to say we're going to get this done and we're going to have to be bipartisan and we're going to have to gore someone's ox and it's for the good of the country. are you confident that the country has the capacity to do something like the '86 tax reform? >> times do change. look, i don't know. but i can tell you we're working. we've had a lot of hearings. and senate finance is having hearings every week on this. senator bachus and their talking about this. house ways and means have had hearings on this. we've had private meetings and briefings with both parties, republicans and democrats together. and you just to have kind of every day get up and do your job and then, you know, at some point you may get there. and a lot of people come to me and say, gee, how do i get this bill passed? well, you got to go do your homework, build a consensus and try to move forward and that's

what we're trying to do right now but it is absolutely something we need to do. there are a lot of people who are calling out for a fundamental tax reform whether it's a business round table or whether it's individual companies or whether it's members of congress. i mean, there's a lot of things being said in the administration. the president at times says the right things about the issue. certainly the secretary of treasury has. there's a lot of that coming together. and i think really for me -- in doing this -- when i was ranking member before i became chairman, when i went through that sort of tax deal at the end of the year and there were 200 provisions on the table that we were trying to, you know, peel the onion back on each and every one of them and understand why do these get extended and what's happening, it just was very clear to me that is not a workable way to have, you know, employers and individuals and families understand, you know, what their responsibilities are. we got to make a change. it was crystal clear to me before but it was really driven

home in that experience and that's why i feel so strongly with that issue and it's something i'm working very hard to try to do. >> what's the holdup on getting the korea, colombian and trade and panama deal done? >> well, the president has -- >> and we do leave this now. you can find it online in its entirety at c-span.org. the senate is about to gavel in for morning business and at 4:00, a speech about the negotiations over the debt ceiling, the budget, proposed tax and spending cuts and the state of the u.s. economy. by senator bernie sanders of vermont. he'll take the floor at 4:00 eastern. the presiding officer: the senate will come to order. the chaplain, dr. barry black, will lead the senate in prayer. the chaplain: let us pray.

high and holy god, we extol and adore your name. lord, you shower us with love and forgiveness. you guide our footsteps through life's challenging seasons. today we pray that you would bless america, quicken the hearts of its citizens that they may labor to bring honor to you, redeem this land from coors secular prosperity and build it up in an ethical and moral fitness tha that will bless the world. use our senators today as your

choice instruments. may they not lose the vision of the goals of righteousness and honor, of justice and understanding, of peace and good will. we pray in your matchless name. amen. the presiding officer: please join me in reciting the pledge of allegiance to the flag. i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation under god, indivisible, with liberty and justice for all.

the presiding officer: the clerk will read a communication to the senate. the clerk: washington, d.c, june 27, 2011. to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable richard blumenthal, a senator from the state of connecticut, to perform the duties of the chair. signinged daniel k. inouye, president pro tempore. mr. reid: following morning business, the senate will be in morning business. senator sanders will be recognize the in morning business for up to 90 minutes at 4:00 p.m. there will be no roll call votes today. the first vote will they ca tom. we hope to confirm petraeus tray

to be director of the c.i.a. this week. mr. president, we have an idea of what we need to get done this week but it is up to members as to when we get it done. it is not magic that we don't finish thursday night. we should be able to finish thursday. if we don't, we're going to have to have this bill over until friday. if not, we'll finish the presidential appointment efficiency act. we need to do that. we have a number of nominee neighs we have to -- we have a number of nominations we have to vote on. we have to do petraeus tray. we'll need the cooperation of senators to get it done. mr. president, last thursday democrats sat down with the chief executives of successful corporations. the companies that are responsible for the jobs and livellivelihoods of about 100,00 american workers. one company makes medications

that help americans live longer and healthier lives. another investments in entrepreneurship bringing ideas to the production line. another employs scientists and engineers to make more efficient the things we use every day from jet ennines to home thermostats. these three c.e.o.'s understand what it takes to create jobs so we asked them what washington can do to help. it is what they told us, all democratic senators were there. first we must improve and reform our education system. from kindergarten through the 12th grade, so we produce the skilled workers of tomorrow. plus we need to train more scientists, engineers, and mathematicians so we don't risk falling behind china, india and other competitors. all three of these executives, all of them believe we must reform our immigration system to stay competitive. the brightest students from around the globe come to the united states to take advantage of our world-class universities.

unfortunately, our broken immigration system forces most of those students to go back to their home countries where they compete with american companies. we should be keeping the best here where they're educated so we can build companies who employ u.s. workers. of course we must simplify and streamline our broken tax system. eliminating loopholes so everyone pays his or her fair share. including corporations. this is what the three successful c.e.o.'s told us we should do to create jobs for american workers. i know these are big issues, mr. president. they're complicated and they're politically divisive. we can't tackle them all at once, but they are not the only solution. these three c.e.o.'s we met with last week said there are smaller, more manageable issues we can tackle right now. there are things we can do to help create jobs right now.

the faithful and small things because it is in them that your strength lies. end of quote. putting americans back to work can and should start with the small things. so this is what these three successful c.e.o.'s told us we should do to spur hiring. first we reauthorize a program to give grants to the technology companies that are inventing new products like the electric toothbrush, body armor for soldiers. these innovators can continue to grow and hire. that's what we try to do with the small business innovation research legislation. the republicans stopped it. second, they said we should modernize americans' air travel system making it safer and more efficient to fly american skies. that's what we tried to do when we reauthorized the federal aviation administration, which is lost in a republican-dominated house. third, we must reform our patent system and clear a three-year backlog of applications.

the next laptop computer or ipod could be in that pile just waiting to be taken from the basement to the boardroom. that's what we tried to do with the america invents act. senator coburn said he is going to stop this bill because it doesn't have the payment system -- we voted 95-5. it has been stopped by the republicans, our patent system. these three things i just talked about, that's more than five-- let's see. 585 jobs just for patents and f.a.a. and there's tens of thousands more jobs with small business innovation. these are commonsense steps we can take today. each will help put people to work across the country. that's just not what the senate says. it is what business leaders say. here's the catch:

congress has already taken up all three of these measures. not one has become law. why? republicans have killed or stalled all three of these important pieces of legislation, legislation business owners say they need to put more than half a million americans back to work. putting americans back to work must be our most important debt-reduction strategy. democrats know it is critical that we reduce the deficit and pay down the national debt but we'll never pall the budget with 14 million people out of work. democrats know how to balance budgets. remember when democrats in congress helped president clinton balance the budget in 1998. unemployment was 4.5%. now unfortunately it's twice that. that's why we must do two things at once: reduce the deficit and do whatever it takes to get the american worker back doing the things they need to do to bring in a paycheck. the business leaders we spoke

with support this two-pronged approach. democrats and republicans don't have to look hard to find common ground. they only have to be willing to admit it when we see it. i met with the president earlier today. we had a productive meeting. our republican counterpart will meet with the president this afternoon. i hope my republican colleagues will put the economy ahead of politics. i hope they'll join us to create jobs and set aside their desire to please the tea party and defeat president obama. this is the way forward. neither party should confront this crisis alone and no one will be successful unless we confront it together. we owe the country, our commitment to do at least the small things. and again i repeat, more teresa when he said it is in them -- that the small things -- that are strengthwise and they will fail but the big things will follow.

mr. mcconnell: mr. president? the presiding officer: the republican leader. mr. mcconnell: a little barrett today i'll sit down with president obama to discuss the raising the nation's debt ceiling. i intend to ask the president what he is prepared to do uds of raising taxes about the massive deficits and debt that have accumulated on his watch. i will tell him what republicans are looking for in this debate: to cut spending now, cap runaway spending in the future, and save our entitlements from bankruptcy. and to get our economy moving. and i will tell him the truth will requests by senator from his party that we increase spending and raise taxes, as a way of solving the detain and jobs crisis that precipitated the president's request to raise the debt limit in the first place. not only are they counterproductive from the standpoint of an economic

recovery, they're also politically impossible since republicans oppose tax hikes and democrats have already shown they won't raise taxes in a down economy either. so let's start by taking both proposals off the table and focus on what can actually pass congress and what will actually spur the private sector in our future and create jobs. those who are calling for tax hikes as part of these debt discussions either have am niece shah about the debate of similar proposals just six months ago when democrats controlled both chambers of congress by very large margins, as well as the white house, or they're antiquitying in bad faith since we all know that including massive job-killing tax hikes will be a poison pill. let's move past the tax hikes, talk about what's actually possible, and let's talk about what has and hasn't worked over

the last two years. on this second point this much is clear: if government spending were the answer to an economic slowdown, we'd be in a boom time right now. if government spending were the answer to an economic slowdown, we'd be in a boom time right now. instead, we're facing record deficits and debt and a seemingly endless stream of bad economic news despite massive spending increases by democrats, millions have lost their jobs. so the problem here is that washington spends too much. and that means democrats are simply going to have to make that tough choice about washington's budget that most other americans have been forced to make about their own budgets. last week president obama told a group of people he was prepared

to bring down the deficit by trillions of dollars but refused to list any of the ways he was willing to do it. all he did was list the things he refused to cut and this weekend the president proposed even more deficit-financed spending disguised as what he called "investment." you really can't have it both ways. at some point the president needs to realize that the reason our debt has skyrocketed 35 punish over the last two years and that our annual deficit is now three times greater than the highest deficit in the previous administration that they ever ran is that spending has spiraled completely and totally out of control. understand that the big-government policies of the past two years have got to change. just consider -- just consider the failed stimulus bill. when democrats passed it, they said it was a one-time cash infusion that was supposed to keep unemployment below 8%.

two years later with unemployment still hovering around 9%, they're saying we need to kipe the stimulus level spending despite its obvious failure. their commitment to spending and tax hikes is so deeply held, it seems, they don't even recognize the state of our economy or the fact that the tax-and-spend policies of the past two years have made matters worse. and that they have to change if they're ever going to get out of the fiscal mess that we're in. democrats seem to think that the solution to our debt crisis is to ask taxpayers and struggling businesses is to reward their economic stewardship with even more money to spend as they please. they don't seem to understand that the voters didn't elect dozens of additional republicans to the house of representatives last november because they wanted their taxes raised. they sent them here to reverse policies that had failed.

now, we've seen the consequences of giving washington a blank check. it's the reason we're in the mess to begin with. so my message to the president is really quite simple. it's time for washington to focus on fixing itself. it's time for washington to take the hit, not the taxpayers. mr. president, i yield the floor. the presiding officer: under the previous order, the leadership time is reserved. under the previous order, the senate will be in a period of morning business until 6:00 p.m. with senators permitted to speak therein for up to ten minutes each. mr. mcconnell: i suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

a senator: mr. president? the presiding officer: the senator from wyoming. a senator: i ask unanimous consent to rescind the quorum call. the presiding officer: without objection. a senator: thank you, mr. president. nearly every day we see scenes playing out around the world

whose financial security tph-r ruins. this is the last thing we want to experience in our great country. that is why we want to reform our fiscal policy in the way we've done business. mr. boozman: there's too much at stake not to take action. the international monetary action urged us to take action with regard to our investments. what is the majority doing to address this fiscal crisis? absolutely nothing. it's been nearly 790 days without the majority in this chamber proposing a budget, and it appears that the majority isn't anxious to work on one. the majority-led budget committee has failed to meet this year to begin working on a resolution. we can't even have an open debate in this chamber about the budget. instead of voting to start the

debate on budget measures last month, the majority squashed all the proposals, including the president's own plan. this failure to govern at the most basic level and the american people deserve better. we need a budget that puts us on the path to fiscal discipline. every week, we hear warnings of why this must be done. last week, the congressional budget office issued the starkest warning yet of the danger posed by our spending problems. our nation's debt will exceed the size of the u.s. economy by 2021. and will double the size of our nation's g.d.p. within 25 years. this is not the way i want to leave this country for my kids, my grandkids and the people of arkansas. in his state of the union address, president obama pushed for a conversation that will put us on the path to fiscal responsibility, but so far he

has been absent from the discussions. only today, 36 days before the deadline given by secretary geithner to raise the legal limit on federal borrowing is he beginning to take leadership in negotiating for spending limitations. our debt is slowing the economic recovery. the simple truth is higher debt leads to slower economic growth. we have seen this with the failed stimulus, but in the past week the senate-led majority is once again proposing this flawed strategy. this failed policy of borrowing, spending and taxing is just what the c.b.o. is warning us to avoid. it hasn't worked in the past, and it won't work in the future. what we need are debt reduction measures in the form of spending cuts. the c.b.o.'s last report shows that spending is the primary cause of our fiscal crisis and supports spending cuts rather

than tax increases to reverse this trend. i urge president obama to take tax hikes off the table. let's get to work reining in the reckless spending and putting our nation back on a fiscally responsible path. if american families ran their household budgets like washington runs its budget, the utilities would be shut off and the collection agencies would be knocking on their doors. the american people are now knocking on the doors of the capitol, demanding that the government limit its spending. we must rein in our spending to protect programs like medicare and medicaid and social security, for current recipients and for future generations. in order to achieve this, we must reform the manner in which we budget and allocate federal dollars. we need a mechanism to cap spending and force the government to spend within its means. we must act now to move our country off the brink of financial collapse, and we must make tough decisions because

that is what the american people deserve and expect of us. mr. president, i note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call: : mr. president, i ask

unanimous consent that further proceedings under the quorum call be dispensed with. the presiding officer: without objection. mr. kyl: and that i may speak for up to a half an hour, as if in morning business. the presiding officer: without objection. mr. kyl: thank you, mr. president. last week three events conjoined to i think elevate the subject

of the u.s. debt crisis in this country and should eelly energize us in the senate and our colleagues in the thousands redouble our efforts to find a solution to this serious problem. i'd like to briefly mention those three events and then talk about the problem from my perspective, some of the potential solutions, and put an item in the "congressional record" for my colleagues' review. the first of the things that occurred was a new report by the congressional budget office which was a new projection about u.s. debt as a percentage of our economy. one of the things they said was that our debt quo almost double by the year 12 2035, far larger than they thought it would be as a percent of our economy or the g.d.p. and they said it's going to exceed 100% by the year 2021. actually, it could get to that

point even sooner than that. it's approaching 100% right now. greece is just a little over 100%. countries that ghoat that 100% level of public debt as a percentage of g.d.p. have a very hard time ever recovering, and as a result the time is now for the united states government to act on our huge and growing debt. secondly, we had reports by the labor department, the commerce department, and others that just confirmed what we already know about the state of our economy, and the state of joblessness in this country. applications for unemployment benefits rose. it was the biggest jump in a month. you know, we're over 9% unemployment now. new home sales fell in may. the values of our homes in this country have decreased by than they did during the great depression. that's really been a horrible factor for millions of american

families. stocks fell last week. the fed -- the federal reserve board lowering its outlook for growth which in the last quarter was less than 1%. it was .9%. it's much lower than ordinarily recovery is coming out of a recession. confidence slipping among small business and households, higher gas prices, higher food prices. all of this simply confirms what most of us have heard from our constituencies; namely, this recovery is not much of a recovery, and we need to do everything we can to try to improve it. and third, of course, the news that negotiations with the white house over extend the debt ceiling had broken down. actually, as a member of the group negotiate that i wouldn't say they'd broken down. i think the vice president is correct that they moved on to a new phase, namely, the phase where the president himself, the speaker of the house, the two leaders in the house and senate are going to have to resolve some of the largest issues, the kinds of issues that the

negotiators in the so-called biden talks were simply not able to resolve because it would go against instructions from our principles. the primary problem there was the insistence by the democratic negotiators that republicans agree to tax hikes, something which we think would be inimical to economic growth, the very problem of the slow recovery in the economy would be exacerbated by, if we were to increase our tax rates. you don't add new taxes to an already struggling economy. and so the white house's insistence that this had to be a condition to approving the reductions in spending that we had been talking about made it impossible for us to go forward at that time. well, there's an old saying that there's a difference between a pessimist and an optimist. i usually think of myself as optimistic. the saying is the pessimist says things are so bad, they can't get any worse. the optimist say, sure they k

and they could. if the congressional budget office is correct about its predictions, we could #-b in a far worse situation than we are today, a situation which would make it extremely difficult for us to ever recover and essentially relegate our children and grandchildren to a stand of living far below that which we have all been accustomed to and which they deserve. so just looking at some of the other factors that should frame the problem for us. we've got over a $14 trillion debt and growing every day. we're going to need $2.4 trillion in increased debt ceiling authority just to get us through the end of next year. and you can't tax your way out of it. you can't borrow your way out of it. we've got to reduce the level of spending, which is now approaching 25% of our gross domestic product.

the average is around 20%. and that's where we were before president obama took office. we have to borrow now 40 cents of every dollar we spend, so when we talk about spending more money in a new stimulus package, another new idea to come out of the democratic congress last week, we're talking about having to borrow 40 centss of all of that money that would be spent. just think of it. now every program that we have here at the federal government level we have to borrow 40 cents of every dollar. dollar. i mentioned before unemployment is over 9% now and according to the c.b.o. projections, it is not going to go down by very much over the course of the next year, if if the all. so what's the solution. a lost our democratic grendzs have said that we need to have a

new stimulus program, we need to spend even more, notwithstanding that we don't have the money and that we should be raising taxes. as i mentioned, that's the reason why we terminated the discussion with vice president biden last week, because of the insistence on the part of our democratic colleagues that the only way they were willing to move forward was if we committed to raising taxes. and i mean by a substantial amount. there was $400 billion in revenue raisers on the table put there by our democratic colleagues. that simply won't pass the house of representatives but more importantly it would be the worst medicine possible for an ailing economy. we can't afford more spending. and even if we could, it wouldn't put americans back to work. jobs are created by private businesses, and the more the government taxes or borrows, the less there is available for businesses to invest and hire. so the answer here is less

government spending, not more taxation and more borrowing. now, we put forth a budget -- the republicans passed it in the house of representatives, we voted on it here in the senate -- and it didn't pass because democrats in the senate would not support it. but it's a a legitimate effort to allow job creation, economic recovery, and eventually get our budget balanced on -- at the federal government level here, back here in wawrchlt people have said it is a radical budget. it is not. even under the so-called ryan budget, we would go another $5 trillion in debt. you can't call that radically slashing spending if over the next ten years we add another $5 trillion to our national debt. that just shows you how hard it is to reduce spending. people say, well, you can't cut this program, you can't cut that program.

and you cut them in a way that still adds $5 trillion in debt over ten years and they say it is radical, you're slashing spend. well, the obama budget, by contrast, would add $12 trillion in debt. so both of them would add to our debt, but at least under the ryan budget that was passed by the house of representatives, over time we would get back into balance. in fact it would be in primary balance by the year 2014, meaning except for interest payments, it would be a balanced budget. and we would reduce federal spending from 25% of our economy back down to a little over 20%, which is the historic average. excuse me, it would be a little under 25 20*%, which would be close to our historic average of spend as a percent of the gross domestic product. one of the best ways for us to ensure that we are in balance is to adopt a balanced budget amendment to the constitution. all 47 senate republicans have

cosponsored the balanced budget amendment, and it's carefully written so that even though it requires balance in the budget, it does not easily allow congress to raise taxes as a way of achieving balance. that would require a two-thirds vote and it also contains a very important spending limit togs ages as a -- limitation as a percent of the gross domestic product. so we would achieve billion but we would achieve balance by reducing our apee diet for washington spending here and as a result could achieve the kind of balance that would promote economic growth. you could spend more money if we had more economic growth because spending would be tied to the gross domestic product. so it is a perfect solution for republicans and democrats alike. if you like to spend more money, there is a a perfectly good way to get to spend more money. do things that would enhance the recovery of ow economy because the bigger our economy got, the higher the percentage of money that washington could spend. the incentives are aligned

properly. we propose to promote economic growth and so this balanced budget amendment would accomplish that. and for those who like to spend money, the more growth, the more money you get to spend. we hope that that balanced budget will come to the senate floor in the next week or two or three. we certainly look forward to the opportunity to debate it and getting a vote on it. but when you look at the alternative that has been proposed by a lot of our colleagues on the other side, a new stimulus program and increased taxes, you just have to wonder: how serious are they about actually helping our economy recover? everything so far that the other side has tried under the leadership of the president has failed to work. in fact, it's actually made things worse. we're all familiar with the stimulus that didn't help, didn't bring unemployment down like the president promised. it made things worse. that's why i have this chart here that shows that the obama

economic record has not made things better. it's made things worse. just look at a few of the things that are afflicting our economy today. and you start with the inauguration day for president obama, where we are today, and what the change has been. if you look at unemployment, unemployment has gone up by 1.9 million americans. the unemployment rate has gone up 17% since the president took office. so this is not like a situation where you said, i inherited a bad economy, but i'm gradually making it better. he's making it worse. gas prices have gone up 101% under president obama. he won't approve the leases that would allow our oil companies to explore for more oil and gas, thus bringing the prices down. ththe federal deght has gone up 35% since the president took office. the debt per person has increased by $11,311.

it has gone up to over 46,000. that's the debt that each one of us have. so it has increased that much in just one year. by the way, health insurance premiums have gone up 19%, notwithstanding the passage much so-called obama care. getting back to this matter of debt, just to put it in perspective, if you took all of the presidents of the united states from george washington all the way through the presidency of george w. bush, if you took all of those presidents and added up all of the debt, the debt from the civil war, the debt from world war i, world war i i, vietnam, all of the debt that the presidents have accumulated, in one budget president obama will double that debt. each one of the years that he's been president we've had a deficit of over $1 trillion, closer to $1.5 trillion.

at the end of five years, he will have doubled the debt. at the end of ten years, he will have tripled the debt that all of the other presidents of the united states combined accumulated. it takes members of congress to do this as well. what members of the house of representatives are saying to the president of the budget is no. even the president decided not to pursue his budget. when that was offered on the senate floor, not a single member of the united states senate, democrat or republican, voted for the obama budget, because it takes us in the wrong direction. it would make things even worse than they are today. at least with the republican budget, you have an effort to begin to solve the problem, even though a lot of people say that it was not enough in the way of cuts, and they have proposed alternatives to reduce spending even more. i'm all for reducing spending even more. the bottom line is, however, we've got to get something passed that's going to take

democrats and republicans working together. so i'm happy to work with my colleagues on the other side of the aisle, but we have got to have some cooperation to reduce spending and not insist on tax increases. what we have said as a part of these negotiations to increase the budget deficit is some of us might be willing to increase the debt ceiling if we don't have to keep doing it. we need reforms that will enable us to not have to keep raising the debt ceiling, or at least not so much. the way you achieve those reforms is, first of all, to identify savings that can be made. and there's an enormous amount of wasteful washington spending. we've identified, i think it's closer to $500 billion. the vice president has said more than $1 trillion. the money is certainly out there to be saved. we need to save that kind of money on the front end as a down payment to let the markets know

and to let the american people know that we're serious. and that savings that we could pass could be locked in. and, by the way, there's a little bit of revenues involved in that. it's not just all savings. there are some fee increases, there are user fees, there are some means testing of various federal programs that can actually result in some increase in revenue. so when our democratic friends say there has to be revenue on the table there,'s revenue on the table but it's not tax increases. so if you're so ideological that you've got to insist on tax increases in order to cut spending, unfortunately you've taken yourself out of the game. the bottom line is there's somewhere between at least $500 billion and $1 trillion, probably more in various kinds of mandatory savings that we could achieve. and then we have discretionary spending. we need to set a budget number, since the senate has not passed a budget in over 700 days now, i think -- i forget the exact number. we haven't had a budget so we

don't have a number that the appropriations committee can deal with to appropriate funds for the discretionary part of our spending in this country. we need to set that number. the ryan budget set that number, and we were negotiating with the white house as to what that number would be. we need to set that number. and then we need to make sure that in the ensuing years congress will actually live with that number. the tendency around here has been to set a budget number, and then we have an emergency here and we need to waive it there, and the next thing you know we're way over the number that we all agreed to in the beginning. so we need something that will constrain both discretionary and mandatory spending over the course of the next ten years and hopefully beyond. a lot of us believe that the best constraint is the balanced budget amendment. but for colleagues who say, no, we're never going to agree to that -- and of course we'd have to get 20 senate in the colleagues here to agree to pass it, it takes a two-thirds majority -- to at least agree

with us to put handcuffs on the congress and the president, a straitjacket to make sure we don't spend more than the number we agree on for next year and the year after that. we could save well over $1 trillion, somewhere between $1.trillion and even $1.5 trillion in discretionary spending over the next ten years if we would agree to these so-called section 302-a, top-line budget numbers and constrain ourselves to sticking with these numbers over time. it's kind of like compound interest. if you set a level -- let's say we reduced spending in next year's budget by $30 billion over the previous year. that's not a huge amount of money, but that over a course of ten years when you set a new baseline translates into hundreds of billions of dollars if we really do it. the bipartisan congressional office, budget office says we're not sure we want to score that as real savings because we're not sure you'll really do it. but if we're able to pass some kind of constraint like the old

gramm-rudman bill, for example, then the congressional budget office, i think, will give us some credit for those constraints. the best proposal i've seen is one proposed by senator corker and senator mccaskill. it's bipartisan, a republican and democratic. and they have a republican and democrat cosponsors for the same proposals in the house of representatives. it is a cap act. once the spending is determined, they do it as a percentage of the g.d.p. i think that is the smartest way because it is an incentive for everybody to help the economy grow more, because the more it tkpwroz, the more -- the more it grows, the more the spending as a percentage can be. if you don't achieve the savings that are called for, there is an automatic sequester where all the accounts of the government -- defense spending, non-defense spending, mandatory

spending -- would all have to save a little bit. they wouldn't have to spend quite as much money so you can make up the difference between the target and the goal and what the law called for. there are other ways to do it as well. we were discussing different alternatives in the conversations with senator biden -- excuse me -- vice president biden. but the point here is that you can't allow waivers. you can't have exemptions and emergencies and all of that, at least not without a supermajority vote, like a three-fourths vote or two-thirds vote or else it will be too easy for congress to do what it has in the past which is to say this is too uncomfortable for us to comply with. we're going to declare this as an emergency. vote for it by majority vote and then it's done. if we mean it, we have to be able to abide by it. you have to have a meaningful down payment. we need to have a 302-a budget number for at least the number couple of years and a mechanism for enforcing that over the next decade and beyond.

and finally, we need to have a way to help the markets actually believe that we are serious about entitlement reform so that the biggest part of our budget representing two-thirds of all the money we spend, namely, the entitlements, are actually beginning to grow at a slower pace. we're not talking about drastic cuts, but we are talking about slowing the pace of growth. and you can do that without having huge benefit cuts or without slashing payments to the providers. i mean, the last thing you want to do for medicare, for example, you know i'm concerned my mother -- we could use any of our mothers or dads or granddads are on medicare. the last thing you want to do say you've got a great medicare program except for one thing, there is no doctor or hospital to take care of you because they won't because we're not paying them enough. so we need to be able to pay the people who rely upon for the medical treatment that we have promised. and we can't do that by slashing

payments to providers. too many physicians have already said we can't afford this program anymore and, therefore, we're not going to take any new medicare patients. we've all had that experience. nor should you do it by slashing benefits. but you don't have to do either of those two things to have reforms. i mentioned in these negotiations, we've been discussing a lot of waste, fraud and abuse type reforms. those of us in the senate and the house kind of smile because we always talk about the amount of money that can be saved because of the amount of waste, fraud and abuse in the system. but the reality is there is a lot of waste, fraud and abuse, and you can save a lot of money if you put your mind to it. what that means is, for example, you have to enforce the law. i'll pick a hypothetical program, because we're not going to be talking about the specifics with our negotiations. i'm assuming we'll get back to those negotiations at some point. but you have eligibility standards to receive a certain federal benefit, let's say. but 20% of the benefits that are being paid out are being paid out erroneously, to people who

don't qualify. they're not supposed to get the benefit. and so you enforce the law. you say sorry, you don't qualify for this benefit. this is a benefit for the elderly. or this is a benefit for poorer americans or for whatever. and if you just enforce the law, you can save a lot of money. and that's not cutting benefits for anyone. you can also do means testing. republicans for years have said -- and i think -- well, i'll use a couple of names because i think they both said we don't need the benefits of all these medicare programs. people like a warren buffet, for example, have made it clear, and bill gates have both made it clear they don't need to have the government take care of their medical requirements when they're age 65 or older. and there are a lot of americans that are in the position to be able to afford a lot more of

their own care, and they don't have to rely exclusively on the federal government. so through means testing, you can either provide that their benefits will not be as generous as for people who are less fortunate economically or that they'll pay a little bit more in the way of a co-pay or deductible or maybe even a premium. the bottom line is there are ways to ensure the future success of a program like medicare without affecting people who cannot afford to have big benefit cuts. one idea that hasn't been discussed -- i've heard it discussed -- is to simply conform medicare benefits to the same age eligibility as social security. that will save a great deal of money. it would represent a slowing in the time when you are eligible for the benefit. maybe some people believe, therefore, that it shouldn't be considered. my point here is that there are

a lot of ways that the entitlement programs can be reformed so that they will be there when you need them. if we don't, if we say we don't want to touch them, here's what's going to happen. i'll give you one program as an example. medicare part-a, that's the hospital part. the medicare trustees say by the year 2021, medicare part-a begins to run out of money. there won't be as much money in the trust fund and it could well, therefore, happen that in the following years, if you want to go to the hospital, the hospital isn't there anymore. if you live in a small town and it's the only hospital there and they can't afford to stay open, they're going to close. so you think you have medicare part-a benefits, but the hospital either isn't there or it can't take care of you because it doesn't have the money to do so because it's not being reimbursed by the federal government. so the choice is not to do something or to do nothing. if you do nothing, the benefits won't be there. the benefits we've promised to

senior citizens won't be there. doing nothing is not an option. we have to do something. so instead of demagoguing the issue politically, some politicians need to be responsible, get in the game, and say let's figure out a way to save these programs so that they'll be there when we want them. i also wanted to mention -- this is a little bit off point but it just shows you how some of these things work. i mentioned high gas prices before. ironically one of the things that the president has said we want to do is to tax the oil companies. well, of course, if you tax the oil companies more, then gas prices are going to be higher. the president just released some of the petroleum from the national petroleum reserves to try to bring gas prices down, and it will bring them down a little bit temporarily. but why would you then want to have those prices go right back up again by taxing the oil companies, which everyone knows will flow through to the

consumer. it doesn't make sense. there's something else, however, that does make sense, and this has had an impact on gas prices. the federal reserve board has been buying bonds under a program called qe-2, buying treasury bonds. and the purchase of those treasury bonds has made our dollar less valuable. that means that it takes more dollars to buy the same amount of gasoline. so ironically, this effort by the fed to put more money into the economy has had the pernicious effect of raising gas prices, raising food prices, raising other prices because the dollar isn't as valuable as it used to be. and to buy the same commodity, especially commodities that are bought and sold on the world market like gas, you have to have more dollars to pay for the same amount. so gas prices are increased. well, this program, this qe-2

program is going to come to an end at the end of this month. the federal reserve has already announced that. and what will happen as a result is that the value of the dollar will not be cut by the amount of this purchase of bonds -- or selling of bonds rather, and so the expiration of program lets the dollar strengthen causing oil to return to levels that we last saw at around the beginning of this year. that will have the result of you'll have more purchasing power with the dollar you have so you can buy the same amount of gasoline for fewer dollars, or to put it another way, the same amount of dollars that you have will buy you more gasoline. and that is one positive effect as a result of that change in policy by the united states government. but the key here is to allow our economy to work without too much government interference. that's a good example of government interference that

displaces -- or that reduces the value of the dollar and therefore hurts the consumer. i heard something my colleague -- our colleague from florida, senator rubio said the other day. this is reported on june 14. in his first speech here in the senate floor, he said -- and i'm quoting now -- "there is nothing wrong with our people. americans haven't forgotten how to start a business. they haven't run out of good ideas. americans are as great as we have ever been, but our government is broken, and a broken government is keeping us from doing what we have done better than anyone in the world for over a century, mainly create jobs." he's right. if the government will get out of the way, will not insist on burdening our economy with new taxes and will just let americans do what they have always been willing to do -- able to do well, i think we'll be able to come out of this economic downturn and come back to life as an economy, helping

our families, small businesses, and ironically by making more money and paying taxes at the same tax rate, the federal government will have the benefit of our increase in salaries and profits and so on, and we'll actually have more money to spend as well. spending more money, taxing more, having the government try to stimulate the economy has never looked. i'd like to put in the record a statement from the -- a quotation from the "wall street journal" of today, june 27, which is as follows. "with spending at 24% and debt held by the public at 70% of g.d.p., both modern records, the u.s. needs drastic spending cuts to head off a downward future spiral of tax increases and unaffordable interest payments.

as milton freedman taught, spending is the real measure of government's burden on the private economy, and reducing it leaves more resources for private actors to spend and invest." end quote. mr. president, i ask unanimous consent -- the presiding officer: without objection. mr. kyl: thank you. the point they're trying to make here is that government spending is a pretty good indicator of what is left over for the private sector to invest and spend, for example, on new jobs, and when the government spends more, inevitably it has to borrow more, 40 cents on every dollar or increase taxes. either way, reducing what's available for the private sector to invest and to hire. and as a result, we should be focused, this journal -- this editorial notes, we should be focused on reducing wasteful washington spending and allowing the genius of the american people to do what senator rubio has made very clear we have always had the capability of

doing unfettered by too much government taxation or regulation, and that is to create jobs. so we need to do away with those policies like the fed policy that reduce the value of the dollar. we try to eliminate as many regulations that burden american people as possible, and we need to avoid raising taxes. now, bear in mind, we're not talking about cutting taxes. we're not talking about cutting taxes for the healthy or cutting taxes for business or cutting taxes for people generally. just leave them alone. just don't raise them is all we're saying. so when you hear some politicians say well, you want to cut taxes for the wealthy or give oil companies big tax breaks, no, no. leave it alone. just don't touch it. let businesses and families, small businesses do what they have always done best. and if you want to mess up the economic growth, to use the

colloquialism, then just follow the policies that the administration has been pursuing since the beginning which have meant higher unemployment, higher gas prices, higher federal debt, higher debt per person and higher health insurance premiums, not to mention other pernicious effects here. those policies have made it worse, not better, and that's why republicans have said don't force us to raise taxes as part of this increase in the debt ceiling. let's reduce spending and let's enforce that through a balanced budget amendment and other kinds of spending constraints. we're not talking about drastic cuts. as i said, think about this again. the ryan budget that passed the house and that most of us on the republican side voted for over here adds $5 trillion to the debt over the next ten years. that's $500 billion a year.

that's higher than any other budget deficit in history until president obama came into office. we talked about the bush budget deficits. well, it's a lot higher than any deficit under president bush. $500 billion a year for ten years. that's another $5 trillion. you can't say that that's drastically cutting spending. the alternative, though, is the obama budget which would add add $12 trillion. at least the ryan budget gets us on a path where we can get back in balance and get back to the standard or normal or historical average of spending as a percent of our gross domestic product, around 20%. and if you don't like that budget, then produce one that you think will get us to the same place. we have laid that challenge down. our democratic colleagues have not produced a budget, and it's pretty obvious that they're not going to do so. that's why we have had to have these discussions with the vice president. at least perhaps in those -- as

a conclusion of those discussions that the president is now involved in, we can make a big down payment on spending reductions, we can set the budget levels for the next several years that represent a real reduction. it doesn't have to be huge. even a $30 billion reduction over last year will save a huge amount of money in the out years. we need to ensure that those reductions will be enforced, that we won't return to our wayward spending ways, and we need to deal with the two-thirds of the budget that represents the big money, namely the entitlements, and there are ways to do that that don't represent big benefit cuts and that don't represent slashing payments to providers so that we won't have any more doctors to take care of us. we can ee f.e.c. 2008 significant -- effectuate significant reforms that will send the right signal not only to our constituents but also to the markets that will have a lot to say about what kind of interest rates we have in the future, for example, and whether

or not they believe in the recovery that we would like to achieve. mr. president, i hope that my colleagues will be very open to the consideration of the balanced budget amendment when we bring that up. i wish the president and the leader, leaders of the house and the senate, all the best in their discussions now on how to deal with this problem. the president will have to make a decision is raising taxes more important than trying to get our budget back in balance through reduced spending, and i think that we will find there is a great deal of support on both the democratic and republican sides with the latter and that there won't be with the former. but by getting together and achieving those -- those goals here within the next four weeks or so, we can both meet the deadline of august 7 that he has set for debt ceiling increase and also get our country on the path toward more fiscal, sounder fiscal path. we can do that to give

confidence both to the markets and to the american people, and we owe our constituents and our children and grandchildren nothing less. mr. president, i note the absence of a quorum. the presiding officer: the clerk will call the roll.

a senator: mr. president? the presiding officer: the senator from utah. mr. lee: i ask unanimous consent that the quorum call be suspended. the presiding officer: without

objection. mr. lee: i stand to talk about a looming crisis in this country, a crisis that has the potential to affect every american from every state, from every political party, of every political ideology. that issue relates to our national debt. we've accumulated nearly $15 trillion in debt through the federal government, which is a lot of money, split up among 300 million americans it, works out close to $50,000 a head. a lot of people don't make that much money in a year, and yet that,'s what every man, woman and child owns just on a per capita basis the moment they're born. if it's calculated out on the basis of debt per taxpayer, the number is much larger; anywhere between $120 thousand and $150,000 per head, depending on how you calculate it. we're now approaching the august 2 deadline given to us by

secretary geithner that has been identified as the time by which we must increase our national debt yet again, a debt that has been raised time and time again, resulting in our accumulation of about $10 trillion of new debt in roughly the last decade. this is a problem, and it's a problem that's only going to become more severe the longer we kick this can down the road without doing anything about it to change the way washington brings money in and the way washington spends money. i want to talk for a minute first about how washington brings money in. there are those who have suggested in this town very recently that what we need right now is a tax increase in order to address the debt crisis. i could not disagree more, and i need to state with the greatest emphasis that i'm able to place

on this issue that a tax increase is something i would oppose, something that i would devote every ounce of energy in my to opposing. and the reason is we have in washington something that is not a revenue problem. what we have is a spending problem. the spending is the crisis that we need to address but on a more fundamental level. we have to remember what we do when we raise taxes, we chill investment. it's investment that we rely on for the creation of jobs because we have to remember the government doesn't have the power to create jobs, because it can't create wealth. it can create policies and it can adopt laws and regulations designed to promote or deter certain kinds of behavior. it can raise revenue through taxation, but it can't really create wealth. all it can do is set in place certain circumstances that might allow wealth to be created or in

other circumstances might deter new wealth from being created. to have true wealth creation leading to true job creation, you have to have a circumstance in which willing investors with capital ready to invest have the reasonable assurance and promise that if they invest their money and thereby place it at risk, that any gains result tpr-g that risk -- resulting from that risky behavior will be gains to their benefit and not taken away by some third party and not taken away by the government. when we raise taxes, in effect what we're doing is deterring investment, deterring investment at a time when we're hemorrhaging jobs and we can ill afford to lose any more. not one more job should be lost as a result of something that the government does. we need to find ways to get the government out of the way so that job creation can occur. but it can't occur whenever we punish the investor, whenever we

tell the investor invest at your own risk, because if you dare to make a profit we're going to take away more of that money than we have previously been taking away in taxes. for that reason, mr. president, i continue to emphasize the fact that i will oppose any attempt to address this debt-limit crisis by raising taxes. and i am continue to oppose any effort to raise taxes. spending is the problem. now, as to the question of how washington spends money, if the definition of "insanity" is the practice of doing something again and again, intending or expecting to achieve different results than we've achieved every time in the past, then we would be insane if we approached this debt limit discussion with the same kinds of tired, malfunctioning unproductive

strategies that have been employed in the past, strategies that focus exclusively on immediate cuts or even long-term cuts. let me explain what i mean. as we approach the debt limit discussion, there will be those who will want to focus a lot of the attention on long-term spending cuts. in other words, they might say if we're going to raise the debt limit by $1 trillion, we need to find $1 trillion in cuts that can be made. if we're going to raise it by $2 trillion, we need to find $2 trillion to cut. but of course we can't cut $1 trillion out of our budget immediately. that's not possible. we can't do that in one year. it would have to be stretched over a period of many years. most likely, in this scenario, as has been discussed, it would be stretched over a period of a decade or more. now, we do have the power to control what we do in this

congress, but we can't bind the congress that will take power in january of 2013 or in january of 2015 or 2017. every two years we get a new congress in place, and that congress has the power to make those decisions that will best fit what they decide is in order at that time. we can't bind them permanently. and so any promise that we make right now to cut, let's say, $2 trillion relies on the promise that that would be honored by future congresses. we can't bind them to do that. there is one way, however, that we can bind them. that is by amending for the 28th time that 224-year-old document that has fostered the development of the greatest civilization the world has ever known. when we amend the u.s. constitution, that is the one credible way, the one binding way in which one group of

americans can bind a future group of americans. and that's why i've said that the only circumstance in which i think it's appropriate for us to raise the debt limit is a circumstance in which congress has first passed a balanced budget amendment out of congress by a requisite two-thirds margin in this body and in the house of representatives and submitted it to the states for ratification. in that scenario and only in that scenario can we proceed with any degree of confidence that the commitments we make now to the american people to make not just immediate cuts but long-term changes to the way that we spend money, it's only in that scenario that those promises can be and will be honored because it's only this that scenario that we can bind a future congress. that's why i've pledged to vote against and to oppose in any way i can any debt limit increase

that involves something short of prior passage of a balanced budget amendment in addition to any caps -- in addition to any immediate cuts that may be made. we've got to have cuts, we've got to have some kind of spending cap where we cap spending as a percentage of gross domestic product every year, and we've got to have a constitutional amendment requiring that and requiring that revenues and outlays match each other from year to year. ie this -- if we don't have this, we're at great risk for the practice of perpetual deficit spending in which the congress year in and year out spends more than it takes in. now, congress can sustain this for a period of time, but where, as is now the case, the amount of money that congress spends is in excess of $1.5 trillion a year, more than it brings in, we have reached a certain point of unsustainability, a point at which if we continue with this

practice, we'll get to the point where a halt in borrowing will be much more immediate, much more draconian than anything that could be within our control. at some point, those who would be willing to loan us that money would be willing to buy u.s. treasury instruments of one form or another to finance our debt. we'll eventually start demanding a higher and higher yield, which means that instead of spending about $250 billion a year on interest on our national debt as we're currently paying, the time could very soon come in which we might have to pay something closer to $700 billion a year just to pay the interest on our national debt. in fact, if we were now required to pay interest rates on our treasury instruments that are consistent with the 40-year average, we would be about

there. now, $700 billion is a lot of money. $700 billion in a year is roughly what we spend on social security. it's roughly what we spend on medicare and medicaid combined in a year. it's roughly what we spend in national defense in an entire year. if we have to spend that amount of money every year as we could easily have to spend in just a few years' time if we continue spending at this rate, that's going to crowd out funding for every federal program out there. so whether you're most concerned as many conservatives might be about protecting national defense or whether you're most concerned as many labels are about protecting our entitlement programs, you ought to insist as i have insisted that we will not raise the debt limit until such time as congress has passed a balanced budget amendment to the u.s. constitution. that's why i'm pleased to support the cut, cap and balance pledge and why i will continue to take this position, in addition to standing firm on my

position that we ought not even consider any tax increase at a time when we can least afford it. thank you very much, mr. president. i suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call: mr. sanders: mr. president? the presiding officer: the senator from vermont. mr. sanders: mr. president, i ask that the quorum call be vitiated and -- the presiding officer: without objection. mr. sanders: that i be allowed to speak as if in morning business. the presiding officer: without objection. mr. sanders: mr. president, this is a pivotal moment in the history of our country. in the coming days and weeks, decisions will be made about our national budget that will impact the lives of virtually every american in this country for decades to come, and the time is

now for the american people to become significantly involved in that debate and not leave it to a small number of people here in washington. mr. president, at a time when the wealthiest people and the largest corporations in our country are doing phenomenally well and in many cases have never had it so good, while the middle class is disappearing and poverty is increasing, it is absolutely imperative that any deficit reduction package that passes this congress not include the horrendous cuts, the cruel cuts in programs that working people desperately need that are utilized every day by the elderly, by the sick, by our children and by the lowest

income people in our country, that the republicans in congress dominated by their extreme right right wing are demanding. america is not about giving tax breaks to billionaires in attacking the most vulnerable people in our country. we must not allow that to happen. in my view, the president of the united states needs to stand with the vast majority of the american people and say no to the republican leadership and make it clear that enough is enough. no, we will not balance the budget on the backs of the most vulnerable people in this country. on our children, on our seniors, on the sick. no, we will not do that.

working families in this country have already sacrificed enough in terms of lost jobs, lost wages, lost homes, lost pensions. the working families of this country are hurting right now. enough is enough. but, mr. president, now is the time to say to the millionaires and the billionaires in this country and to the largest corporations who in many ways have never had it so good that they must participate in deficit reduction, that there must be shared sacrifice, that deficit reduction cannot be based on cutting back on the needs of working families and the middle class, but the rich and large corporations have also got to participate in this process.

furthermore, it is absolutely necessary, if we are talking about a veteransible deficit reduction package, that we take a hard look at unnecessary and wasteful spending at the pentagon. and, mr. president, let us make it very clear that we will not be blackmailed again by the republican leadership in washington who are threatening to destroy the full faith and credit of the united states government so that for the very first time in our nation's history we might not pay the bills that we owe. that is their threat. we will destroy the wrecking of always paying our bills, never failing to do that unless they get everything they want.

instead of yielding to the incessant, extreme republican demands, as the president in many respects did in last december's tax cut agreement and this year's spending negotiations, the president has got to get out of the beltway. he has to connect with the needs of working families and ordinary americans, and the overwhelming majority of our people who believe that deficit reduction must be based on shared sacrifice. that the wealthy and the powerful and the large corporations cannot continue to get everything they want while we wage a cruel and unprecedent ed attack on the most vulnerable people in this country. it is time for president obama to stand with the millions who

have already lost their jobs, their homes, their life savings instead of the millionaires who in many cases have never had it so good. unless the american people in huge numbers tell the president not to yield one inch to republican demands to destroy medicare and medicaid while continuing to provide tax breaks to the wealthy and the powerful unless the american people rise up and say enough is enough, i am afraid that what will happen is the president will yield once again and the wealthy and the powerful will laugh all the way to the bank while working people will be devastated. so today i am asking the american people that if you believe that deficit reduction should be about shared sacrifice, if you believe that

the wealthiest people in our country and the largest corporations should be asked to pay their fair share as part of deficit reduction, if you believe that at a time when military spending is almost tripled since 1997 that we begin to take a hard look at our defense budget, and if you believe that the middle class and working families have already sacrificed enough, i urge you to make sure that the president hears your voice and he needs to hear it now. i would urge the american people to go to my web site, sanders.senate.gov and sign a letter to the president letting him know that enough is enough. i would also urge the american people to contact the white house directly through their

website and leave a message for the president there. as you know, mr. president, this country faces enormous challenges. in fact, we have not suffered through such a difficult moment since the great depression of the 1930's. the reality is that we don't talk about it very much, but the reality is that the middle class in this country is disappearing while at the same time poverty is increasing. when we talk about the state of our economy -- and it is important to talk about it within the context of deficit reduction, because when you understand what is going on in the economy, you know that you can't get blood out of a stone. you cannot keep attacking people who have been devastateed in the last few years in terms of unemployment, in terms of losses of essential, in terms of losses of health care. so when we talk about the

economy, we have got to understand that the situation is in many cases even worse than official statistics kate. for example, we read in the papers that the official unemployment rate is now 9.1%, but the truth of the matter is -- and no economist disagrees with this -- that that official statistic ignores the number of people that have given up looking for work and people who are working part time when they want to work full time. if you add all of that together, you're looking at a real unemployment rate in this country of about 16%, 16%. are those really the people that we should go to for deficit reduction? are they not suffering enough right now? young people graduating college can't find a job. let's hit them hard.

all the people have lost their jobs, can't find a new one or are working for half the wages that they previously worked at. let's go after those people. 50 million people have no health insurance. let's attack them. working mothers and fathers can't find affordable childcare. let's go after them. mr. president, we must understand that while we look at the economy, the middle class is hurting and hurting badly over the last ten years. on top of the high unemployment rates, the median family income in this country has declined by over dorks -- $2,500. the american people are angry because they are working longer hours or lower wages. and are those really the people that you want to ask to balance the budget? i don't think so. i think any sense of fairness,

any sense of morality that one might have suggests you don't beat up on people who are already suffering. you don't try to get blood out of a stone. mr. president, as a result of the greed and the recklessness and the illegal behavior on wall street which caused this terrible recession, millions more americans have lost their homes, they have lost their pensions and they have lost their retirement savings. we hear it every day in calls that come to our offices. and unless we reverse our current economic course, our children will have for the very first time in modern american history a lower standard of living than their parents. it's the american dream in reverse. kids are going to do worse than their parents unless we reverse current economic trends. mr. president, we can throw out

a lot of numbers around here, a few hundred billion and a trillion, but the truth of the matter is that kind those numbers, in my state of vermont and all over this country, there are real people who are hurting terribly. and as members of the united states senate, our job is to pay attention to those people and not just the well-paid lobbyists representing the most powerful special interests in the world who surround this capitol every single day. last year i asked my constituents in vermont to share some constituents with me. i asked them basically, you know, how are you doing in this recession? and the stories i got back from vermont i am sure are absolutely similar to the stories that you would get in delaware or anyone would get in michigan or any other state in this country p. country. but i asked them, how are things

going? and let me tell just you, as a result of the e-mail that we sent out, we had more than 400 vermonters responding to that e-mail. and what they had to say was poignant. sometimes these stories were so powerful, it was almost hard to read more than a few at a time. and the messages that i received from vermont, and i suspect similar messages coming from every state in this country, is that people are finding it hard to get jobs, they're now working for lower wages than they used to earn. they're seeing older workers who have depleted their life savings and they're worried about how they're going to retire, what happens to them when they're unable to work anymore, who's going to take care of them. we hear from young adults in their 20's and 30's who are deeply in debt from college loans, and they don't know how they're going to pay off those

loans. we hear from people of all ages, all walks of life, from every corner of vermont who have sent us their stories. let me just read a few of them, just to make the point, to put some flesh and blood behind the statistics that we often throw out. we go to a letter from a 51-year-old woman from central vermont. and this is what she wrote. "dear senator sanders don't really know what to say. i could cry. my significant other was out of work for a year. now he works in another state. i've been out of work since april. our mortgage company wants the house because we can't make the payments. i can't find a job to save my soul that will pay enough to make a dippers. how bad does it have to get? my mother went through the great depression and here we go again. figure that i am going to lose everything soon. i am a well-educated person who can't see through the fog." a gentleman in his mid-50's

writes from orange county, vermont. "after being unemployed three times since 1999 due to global trade greamentds, i now find myself managing a hazardous waste transfer facility that pays about 25% less than what i was miking in 1999." and, mr. president, you hear that all of the dime. yes, many people are working. but many older workers today are dealing with the humiliation and the economic tragedy of now earning substantially less than they earned 10 or 20 years ago. and he continues. "my wife's children have moved back in, unemployed, and we are saving very little for retirement. if things don't improve soon, we will likely have to work until we die. we consider ourselves lucky that we are employed. our children's friends ten to show up around mealtime. they are skinny. we feed them. this is no recession. it is a modern-day depression."

mr. president, are those the people that we really want to go after when we talk about deficit reduction? are they not suffering enough already? a woman in her late 40's from westminster, vermont, writes, "i am a single mom in verntle nearly 50. i patch together a full-time job making $12 an hour and various painting jobs and still can't afford to get myself out of debt or make necessary repairs on my home. no other jobs in sight. i apply all the time to no avail. food and gas bills go up and up, but not my income. i have mo retirement at all. can't afford to move, feeling stuck, tired, and hopeless." "stuck, tired, and hopeless." i suspect that sentiment reflects how many millions of americans are feeling tatted. another letter from a 26-year-old man from barre, vermont. he wroits, "in 2002, i received a scholarship, the first in my

family to attend college. on graduation in 200, i was admitted to the dickinson school of law at penn state university and gad waited in 2009 with $150,000 of student loans. $150,000. that's high. but there are people all over this country who have extremely high student loans, and they don't know how they're going to pay them off. then he continues, "in western new york i could find nothing better than a $10 an hour position stuffing envelopes. i live in a studio apartment without cable or internet. i've told my family i don't want them to visit because i am ashamed of my surroundings. my family always told me that an education was the ticket to success but all my education seems to have done in this landscape is make it impossible to pull myself out of debt and begin a successful career."

mr. president, on and on it goes. over the last couple of weeks we have been focusing on the crisis in dental care. in vermont and all over this country, millions of people can't find a dentist. i just want to give you an idea. many a raising these issues today and quoting from folks in vermont. and by the way, again these stories are not just from vermont. vermont is doing better in this recession than most states in the country are. so take what we're talking about here in vermont and multiply if several times for other states. but a gentleman writes to me just within the last couple of weeks. he says, "i can't afford health insurance, so dental work is definitely out. " and he talks about how studies have linked bad dental care to heart problems. but he can't get to a dentist. so, mr. president, the reason i raise these issues is to try to give us a better understanding of who some of the people are that will be impacted by the

draconian cuts that the republicans are talking about. let us be clear: they are talking about throwing millions and millions of people off of medicaid, and let me tell you what that means. earlier this year, as you know, arizona passed budget cuts that took patients off its transplant list. remember reading about that? most of the country read about that. essentially because of the financial reasons what they said in arizona is, yes, you need a transplant. yes, you are not all that old. but i'm sorry, we can't afford it to you. and you're going to have to die. and people have died. and in that state and in other states throughout this country, hundreds and hundreds of thousands of people are being thrown off of medicaid. so what does that mean? what does it mean if you are a low-income worker and you are

getting your health insurance through medicaid and you lose that medicaid? what happens when you develop a pain in your chest and you think you may be having a heart problem, but you can't get to a doctor? what happens? have our republican friends outs thought that through when they proposed the cuts to medicaid? what happens to the children by the millions who are thrown off of medicaid? we have 50 million people today who have no health insurance if the republican plan goes through, wooer a talking about tens of millions -- what happens to those people? as americans, are we content to see kids get sick because they can't get to a doctor, or people die because they don't get to a doctor on time? i don't think so. mr. president, i have learned and been told throughout my whole life that education is the

key to success. and we hear that on the floor of this senate every single day. education, education, kids have got to do w well in high schoolo they will he a be able to go to college. the rooltty right now is that -- the reality right now is that hundreds of thousands of bright, young people cannot afford to go to college because they just don't have the money and as a nation we are losing their intellectual capabilities to make us a stronger nation. if the republicans get their way and make savage cuts in pell grants, there is no doubt -- no one has any doubt -- that hundreds of thousands more young people will never be able to walk into a college or a university. and that is not only a tragedy for the individuals, for the young people themselves; it is a

tragedy for this nation. every day we are involved in fierce competition in the global economy, and we are not doing well at educational levels. we are seeing other countries graduate more of their students from college, and that gap is growing wider. and if you cut back on pell grants and other forms of college airksd it is clear that a bad situation will be made much worse. but let's get even more basic, more basic than health care, more basic than education. that comes to nutrition, whether people in larger and larger numbers in this country are going to go hungry. mr. president, according to a 2009 study, there are over 5 million seniors who face the threat of hunger, almost 3

million who are at risk of going hungry, and almost 1 million seniors who do go hungry because they cannot afford to buy food. and in that context, our republican friends want to balance the budget on the backs of the hungry, cut back on food stamps, cut back on other nutrition programs. so what happens if you're 80 and food prices are going up, and you don't have enough to eat? well, apparently there are some people here in the senate who don't worry about that, but i personally do not believe that that is what america is about, and i think the american people, by huge numbers, do not want to see hunger increased for our seniors or our children. mr. president, this is a lot of pain that the republicans are

tossing out while at the same time they are vigorously protecting their wealthy and powerful friends. in my view, the president of the united states has got to stand tall, he has got to take the case to the american people, and he has got to hold the republicans responsible, if in fact the debt ceil something not raised and all of the repercussions that will occur if that happens. mr. president, i've given you just an inkling of what is going on in the real world, and i know all over this country ordinary americans, working-class people have a lot more to say about what is going on in their lives. as we speak, people are fighting desperately to keep their homes, from falling into foreclosure. they're struggling with 29%-30% interest rates on their credit

card, which they're never able to pay off, marriages have been postponed because the young people don't have the money to settle down. lives have been derailed. retirement savings has been raided to pay for college tuition or to keep businesses afloat. or to simply put gas in the car at $3.80 a gallon in order to get to work. that is what is going on in the real world. that is what it means when we talk about the middle class collapsing and poverty is increasing. and, mr. president, while all of that happens, it is important to note that there is another -- another economic reality taking place in this country. poverty is increasing. we have the highest rate of childhood poverty of any major country on edge. we are seeing an increase in seniosenior citizens who are gog hungry, more and more families unable to send their kids to clefnlgt but there is another realty out there.

and that is that the gap between the wealthiest people in this country and everybody else is growing wider and wider, and it has not been this wide since the great -- just before the great depression of 1929 began. and let us be very clear -- and there's nothing to be proud about, but the united states today has by far the most unequal distribution of wealth and income of any major country on earth. today, mr. president, the top 1% earns over 20% of all income in this country, which is more than the bottom 50%. 1% owns more income than the bottom 50%. over a recent 25-year period, 80% of all new income created in this country went to the top 1%.

even more dramatic, even more incredible, even more unfair, in terms of distribution of wealth, which is accumulated income, as hard as it may be t to comprehe, in america today, the top 400 individuals own more wealth than the bottom 150 million americans. 400 americans own more wealth than the bottom 150 million americans. mr. president, given those realities, it doesn't take a ph.d. in economics to suggest that when we move forward with deficit reduction, that deficit reduction must include shared sacrifice, that the wealthy and large corporations also have got

to help this country deal with record-breaking deficit. mr. president, the reality is simple but unfortunate. and that reality is that the rich are getting richer, the poor are getting poorer, and the middle class continues to disappear. and that is what is going on in this country, and there is no hiding it. we have got to acknowledge it and we've got to go on from there. mr. president, everyone knows that in our country today, we are facing a major deficit crisis and we have a national debt of over $14 trillion. what has not been widely discussed and what must be discussed is how we got into that deficit situation in the first place. if you're going to deal with the deficit, you've got to know how you got into it. and what is very, very clear is

that this huge record-breaking deficit and a $14 trillion national debt did not just happen overnight and it didn't happen by accident. it happened in fact as a result of a number of policy decisions made over the last decade and votes that were cast right here on the floor of the senate and in the house of representatives. when we talk about the deficit and when we talk about the national debt, let us never forget that in january of 2001, a little over ten years ago, when president bill clinton left office, this country had an annual federal budget surplus -- surplus -- of $236 billion

w-rbgs project -- with projected budget surpluses as far as the eye could see. that is when clinton left office some ten years ago. and now we have a $1.5 trillion deficit and a growing national debt. it is totally appropriate as we talk about deficit reduction that we ask the simple question: how did we get to where we are today in terms of the deficit? what happened in that ensuing ten years? how did we go from huge projected surpluses into horrendous debt? and the answer, mr. president, really is not complicated, and there's not a lot of disagreement. we know exactly what has happened. the congressional budget office has documented it. there was an interesting article on the front page of "the washington post" on april 30 talking about it as well. and here's what happened, and i don't think there's a lot of

disagreement about this. mr. president, when our nation spends $1 trillion on wars in afghanistan and iraq and forgets to pay for those wars, we run up a deficit. when we provide over $700 billion in tax breaks to the wealthiest people in this country and choose not to offset those tax breaks, we run up a deficit. when we pass a medicare part-d prescription drug program written by drug companies and insurance companies that does not allow medicare to negotiate prescription drug prices and ends up costing us far more than it should -- $400 billion over a ten-year period -- and we don't pay for that, we run up the deficit.

when we double military spending since 1997, not including the wars in iraq and afghanistan, and we don't pay for that, we run up the deficit. now, mr. president, i always find it amusing that when some of my republican colleagues come down here on to the floor and they lecture some of us about how serious the deficit is and how serious the national debt is, and yet ironically many of us voted against those proposals which in fact cause the deficit crisis that we're in right now. and i paid a lot of attention during the debate over the war in iraq. i don't recall many of our friends on the republican side or the democrats who voted for that war saying, gee, we can't go to war because it's going to

cost this country a huge sum of money. don't remember hearing that. and when we bailed out wall street to the tune of $700 billion, don't recall many of my friends saying oh, my goodness, we can't afford to do that. and when we gave $700 billion in tax breaks to the wealthiest people in this country, where was the concern then about deficit reduction? and further, mr. president, and maybe even most significant, the deficit that we're in right now was caused by the recession that we're in which was, of course, caused by the greed and illegal behavior on wall street, which caused the economic condition of the moment: massive unemployment and loss of a very substantial amount of revenue that otherwise would have come into our tax

coffers. mr. president, the end result of all of these unpaid-for policies and actions year after year of the deficits i just described is a staggering amount of debt. when president bush left office, president obama inherited an annual deficit of $1.3 trillion with deficits as far as the eye could see, and the national debt more than doubled -- more than doubled -- under president bush because of all of these policy decisions made by republicans and some democrats. so the reality is, mr. president, if we did not go to war in iraq, if we did not pass huge tax breaks for millionaires and billionaires, if we did not pass a prescription drug program with no cost control written by the drug and insurance companies and if we did not deregulate wall

street, which allowed them to do the things that they did which ended up in wall street's collapse and the ensuing recession, we would not find ourselves in the mess we are in today. it really is that simple. in other words, the only reason we have to increase our nation's debt ceiling today is that we are forced to pay the bills that the republican leadership in congress and some democrats and president bush racked up. now, mr. president, given the decline in the middle class, given the increase in poverty, and given the fact that the wealthy and large corporations have never had it so good, americans might find it strange that the republicans in washington would use this moment to make savage cuts in medicare, medicaid, education, nutrition assistance, and other

life-and-death programs, while at the same time pushing for even more tax breaks for the wealthiest people in this country and the largest corporations. unfortunately, while the average american may think this is pretty weird, inside the beltway that is exactly what happens. and this is very much part of the republican ideology. republicans in washington have never really believed in medicaid or in medicare or in federal assistance in education or in providing any direct government assistance to those in need. they have always believed that tax breaks for the wealthy and the powerful would somehow miraculously trickle down to every american despite all history and all evidence to the contrary. so in that sense, it is not strange at all that they would use the deficit crisis we are now in as an opportunity for an

ideological attack against some of the most vulnerable people in our country. and that, mr. president, is exactly what the ryan republican budget that was passed in the house of representatives earlier this year and supported by the vast majority of republicans here in the senate just last month, that's what that budget is all about. let me just give you -- it's a long budget. let me give you a few examples of what the ryan republican budget would do. the republican budget passed by the house this year would end medicare as we know it within ten years. the nonpartisan congressional budget office estimates that under the ryan proposal, in 2022, a private health care plan for a 65-year-old equivalent to medicare coverage would cost about $20,500.

yet, the republican budget would provide a voucher for only $8,000 of those premiums. seniors would be on their own to pay the remaining $12,500, a full 61% of the total. now how many of the 20 million near elderly americans who are now ages 50 to 54 will be able to afford that? let's review what they have. let's say when you become 65 in ten years and you are living on $15,000 in social security, you are going to be asked to pay $12,500 more for health care than is currently the case. how do you do that? how do you do that? what kind of health care plan are you going to buy when you're

old and sick and are given an $8,000 voucher? how many days in the hospital will you be able to have? you can run up an $8,000 bill in one day, in two days. so this ending of medicare as we know it, forcing seniors to somehow come up with all kinds of money that in many cases they don't have will be a disaster for tens of millions of people. the republican budget would also force four million seniors in this country to pay $3,500 more on average for their prescription drugs by reopening the medicare part-d doughnut hole. and that goes into effect as soon as that bill would be passed, if it were to be passed. under the republican budget, nearly two million children would lose their health insurance over the next five

years by cuts to the children's health insurance program, according again, to the c.b.o., the congressional budget office. mr. president, at a time when 50 million americans have no health insurance, the republican budget would cut medicaid by over $770 billion, causing millions and millions of americans to lose their health insurance and cut nursing home assistance in half. right now medicaid pays the lion's share of nursing home care. you make savage cuts in medicaid. what happens to the elderly who are in nursing homes and what happens to their kids, their children in terms of trying to provide the help that their parents desperately need? the republican budget would completely repeal the affordable health care act, preventing an estimated 34 million uninsured americans from getting the health insurance they need.

and at a time when the cost of college education is becoming out of reach for so many americans, the republican budget would slash college pell grants by about 60% next year alone, reducing the maximum award from $5,500 to $2,100. mr. president, at a time when over 40 million americans don't have enough money to feed themselves or their families, the republican budget would kick some ten million americans off of food stamps. now what kind of sense of morality is that, that when people today are struggling hard in order to feed themselves, we throw another ten million people off of food stamps? mr. president, it is no secret to anyone that our nation's infrastructure is crumbling. the republican budget passed in

the house and supported by all but a handful of republicans here in the senate would slash funding for our roads, bridges, rail lines, transit systems and airports by nearly 40% next year alone. and one of two things happen. either, as a result of this our infrastructure continues to deteriorate, or else hard-pressed cities and towns are going to have to raise property taxes and other aggressive taxes in order to come up with a differential. yet, despite the fact -- now, we talked about cuts in health care, medicare, medicaid, education, nutrition, environmental protection, yet despite all those cuts, when it comes to military spending, which has tripled since 1997, the house republican budget does nothing to reduce unnecessary defense spending. in fact, defense spending would

go up by $26 billion next year alone under the republican plan. interestingly enough, at a time when the rich are becoming richer, when effective tax rates for the wealthiest people at 18% are about the lowest on record, at a time when the top 2% have received hundreds and hundreds of billions of dollars in tax breaks, at a time when corporate profits are at an all-time high and major corporations making billions of dollars in profits are not paying a nickel in taxes, my republican colleagues in their approach to a deficit reduction does not ask the wealthiest people in this country or the largest corporations to contribute one penny, one penny toward deficit

reduction. poverty is increasing. republicans cut programs for the most vulnerable people in this country. middle class is disappearing, in need of great help. republicans cut the safety line off from them. the rich who are getting richer and large corporations making huge profits and in many cases not paying anything in taxes at all, what their requirement is is to receive even more in terms of tax breaks. now, that may make sense to some people. it does not make sense to me. in fact, what the republicans want to do is provide over over $1 trillion in tax cuts to millionaires and billionaires by permanently extending all of the bush income tax cuts, reducing the estate tax for multimillionaires and billionaires and lowering the

top individual and corporate income tax rates from 35% to 25%. the rich get richer, they get tax breaks. poor get poorer, they lose the ability to send their kids to college or nutrition programs or health care. mr. president, the republican idea of moving toward a balanced budget is to go after the middle-class, working families and low-income people and ensure that millionaires and billionaires and the largest corporations in this country that are in many cases doing phenomenally well right now do not have to share in the sacrifices being made by everybody else. they will be protected. the republican approach to deficit reduction in washington is the robin hood philosophy in reverse. we take from the poorest people and we give to the richest people, and it's not as if that approach is good for our

economy. mark zandi, the former economic advisor to john mccain when he was running for president, has estimated that the republican budget plan will cost 1.7 million jobs by the year 2014 with 900,000 jobs lost next year aloan. the house republican budget is breathtaking in its degree of cruelty, but don't take my word for it. in a letter to congressional leaders after the house g.o.p. plan was introduced, nearly 200 economists and health care experts wrote, and i quote -- "turning medicare into a voucher program would undermine essential protections for millions of vulnerable people. it would extinguish the most promising approaches to curb costs and to improve the american medical care system." end of quotes. as a columnist at "the washington post" wrote last april, that and i quote "the

budget ryan released is not courageous or serious or significant. it's a joke and a bad one. for one thing, ryan's savings all come from cuts, and at least thirds of them come from programs serving the poor. the wealthy meanwhile would see their taxes lowered and the defense department would escape unscathed. it is not courageous to attack the weak while supporting your party's most inane and damaging fiscal orthodoxies, but the problem isn't just that ryan's budget is morally questionable, it also wouldn't work. mr. president, the deficit that we are struggling with right now has been caused by unpaid for wars, tax breaks for the rich, a medicare part-d prescription drug program written by the insurance companies, the bailout of wall street, a declining economy and less revenue coming in to our treasury.

the republican solution in quotes is to balance the budget on the backs of the sick, the elderly, the children and the poor, to cut back on environmental protection, to cut back on transportation while providing even more tax breaks to those who don't need it. that is unacceptable and that is what the american people have got to stop. mr. president, it is not just wealthy individuals who are making our life bad. as hard as it may be to believe, some of the largest, most profitable corporations in this country are not only avoiding paying any federal income taxes whatsoever, but they are actually receiving tax rebates from the i.r.s., and the republican response to this reality is to provide even more tax breaks to these corporate free loaders. that may make sense to someone,

it does not make sense to me. what i would want to do, mr. president, and i would ask unanimous consent to do this, is to introduce a list of a number of corporations who are making huge profits and who are paying virtually nothing in taxes and in some cases getting a rebate. the presiding officer: without objection. mr. sanders: mr. president, let me just briefly read this list of corporate free loaders. number one, exxonmobil, largest oil company in the world. in 2009, exxonmobil made made $19 billion in profits, and not only did exxonmobil avoid paying any federal income taxes that year, they actually received a $156 million rebate from the i.r.s., according to its s.e.c. filings. well, do you think maybe we might want to ask exxonmobil to pay a little in taxes so we

don't have to throw children off of their health insurance? maybe? bank of america, last year, bank of america, largest bank in america received a $1.9 billion tax refund from the i.r.s. even though it made $4.4 billion in profits and just a couple of years ago received a bailout from the federal reserve and the treasury department of nearly nearly $1 trillion. well, what do you know about that? we're bailing out the largest banks in this country whose greed caused the recession, and then they get a rebate from the i.r.s. rather than paying any taxes. and yet our republican friends think the solution to deficit reduction is not to ask bank of america to pay their fair share but to end medicare as we know it and force low-income seniors to pay substantially more for their health care. number three, general electric. over the past five years, while general electric made made $26 billion in profits in

the use, it received a -- in the u.s., it received a $4.1 billion refund from the i.r.s. i don't know. what do you think? do you think we should ask g.e. maybe to help us out just a little bit with deficit reduction? chevron, a major oil company, received a $19 million refund from the i.r.s. after it made made $10 billion in profits. boeing, last year, boeing which received a $30 billion contract from the pentagon to build 179 airborne tankers got a a $124 million refund from the i.r.s. and on and on it goes. valero energy. goldman sachs. in 2008, goldman sachs paid only 1.1% of its income in taxes even though it earned a profit of of $2.3 billion. gee, most americans would be pretty happy to pay 1.1% of their income in taxes, but then again they are not goldman sachs. citigroup, conocophillips, carnival cruise lines, on and on and on. you have got large, extremely

profitable corporations who either pay nothing in taxes or get a rebate from the i.r.s. maybe, just maybe when we talk about deficit reduction, we might want to ask those people to help us out rather than go after the elderly, the sick, the children and the poor. mr. president, large corporations today are sitting on a record-breaking $2 trillion in cash. the problem is not the corporations are taxed too much. the problem is that consumers don't have enough money to buy their products, and the republican agenda would make that far worse. corporate tax revenue last year was down by 27% compared to 2000, even though corporate profits are up 60% over the last decade. guys make more and more money,

their contribution to the treasury goes down. now, when we talk about how we can in a fair way, in a responsible way deal with our deficit and our national debt, man, here is one very clear example. now, here you have in the cayman islands, mr. president, a building. i think it's a four-story building. it looks like a normal sized four-story building. and yet it has 18,857 companies who call this building their home. now, one of two things is going on. either these guys are very, very crowded. 18,000 corporations in this one four-story building. maybe they are very crowded and we should call in the zoning people in the cayman islands to check that out, or maybe something else is going on. of course, what is going on is this is a total, absolute fraud.

this is a building that doesn't house anybody. it's a phony address that 18,000-plus corporations use for the explicit purpose of not paying taxes to the united states of america. there are studies out there which suggest that large corporations and wealthy individuals are avoiding avoiding $100 billion in taxes every year by setting up these offshore tax shelters in the cayman islands, bermd and -- bermuda and the bahamas. maybe, maybe, before we tell young people that they can't go to strej or single moms that they can't get childcare for their kids, or low-income seniors that we're going to cut back on their nutrition, maybe, just maybe, we might want to end this blat ant outrage which

costs us $100 billion every single year. mr. president, in 2005, one out of four large corporations paid no income taxes at all even though they collected collected $1.1 trillion in revenue. what about looking there for revenue? our republican friends say oh, no, no, we can't do that. we have to force elderly people to pay more in medicaid, throw kids off of medicare. now, what is a very interesting point, mr. president -- and frankly, we are all politicians. you don't get elected to the senate unless you understand something about politics. what i don't understand and certainly what president obama needs to understand is the overwhelming majority of the american people do not agree with the republican approach which says give taxi to billionaires and go after the elderly, the sick, the children

and the poor. that's just not bernie sanders talking. let me just -- i'm not much into polls, to be honest with you, but i think it is important to just try to get a little bit of a reflection of where the american people are coming from. according to a recent "boston globe" poll, a couple of weeks ago, "the boston globe" did a poll in the state of new hampshire and mostly interested in the presidential campaign, how presidential candidates are doing in new hampshire, but they asked some other questions. in new hampshire, i know, because i am a neighbor, they are the big antitax state. they are a conservative state in new england. here's what the folks in new hampshire said in that recent poll. 73% support raising taxes on people making over $250,000 a year. 78% oppose cutting medicare.