it would take 1000 years to reach t what we are spending jut fromth that one tax, to jack up enough money to pay for the deficit this year. this is how the senate democrats follow the president's lead.rede debating a nonbindingnt resolutn at the sides this leave me convinced the only real solution to our nation spending problem is a balance budget to the constitutional amendment. only a specific constitutional restraint will force congress to make the tough decisions necessary to restrain the size of government, restore the integrity of the state andtiesf protect the liberties of the american citizens and taxpayers. signed the cut, cap and balance pledge along with a growing number of my colleagues in the

senate, members of the house and grass roots groups and presidential candidates, i've committed myself to cutting spending, capping spending, and passing a balanced budget constitutional amendment as a condition for any debt limit increase. as this debate over how best to address our growing debt and annual deficits continues, i want to address a technical but critical matter in these negotiations. and i'm talking about tax expenditures. i'm working on the senate finance committee, and i know a little bit about these. over the next few days i'm going to discuss this matter of tax expenditures and debt. today i'm going to talk in general about what a tax expenditure is and what a tax expenditure is not. i will next turn to the tax policy areas implicated by current tax expenditures. homeownership is favored in our tax base with a tax expenditure. there is a deduction for home mortgage interest. a deduction for real property taxes, and an exclusion for

income from home sales. the tax code, these are tax expenditures. the tax code also encourages charitable contributions. charitable deductions are available to citizens when they give to a nonprofit crisis pregnancy center, when they put money in the basket at church or give money to their alma mater, just to mention a few charitable donations. in a third speech i will attempt to shed light on a widespread misconception about tax expenditures. that misconception that tax expenditures disproportionately benefit high-income taxpayers. let's not get ahead of ourselves. my remarks today are remarks about what a tax expenditure is. unfortunately, my remarks are also largely about democrats' plans to increase taxes. president obama and his liberal allies are calling for a balanced approach on a revenue piece to deficit reduction.

they want shared sacrifice. i want shared prosperity. we hear this from the press all the time. new revenues need to be a part of any deal to reduce the deficit. these are simply code words for a tax hike, and i guarantee you, if we raise taxes, my friends on the other side will spend every dime of it. that's how they kept themselves in power and claiming that they're helping the poor. whereas 51% of our households so poor that they can't participate in saving this country. it is clear that the professional left is insisting that president obama include tax increases in any negotiated agreement to raise the debt ceiling. threading this tax hike needle to an electorate resistant to giving the government more money to spend is no easy task. though his campaign team talks a big game about the popularity of tax increases, the president's own words suggest otherwise. last week in a shameful display

of class warfare, the president did specifically call for some tax increases on the rich. that includes 800,000 small businesses, by the way, where 70% of the jobs come from. but that is the exception that proves the rule. by and large, the president avoids the effectual truth of his mission to get rid of tax expenditures. massive tax increases on the middle-class american families to whom he promised immunity from tax increases when he was running for president. instead he and other members of the party of tax stph-rss every day -- tax increases as spending through the tax code. how serious should we take his rhetoric? when the president said he wanted to address the nation's debt by reducing spending through the tax code, it proved too much for even john stewart. this was stewart's analysis of the president's contention that we could reduce the deficit by attacking spending through the tax code.

quote -- "you manage to talk about a tax hike as a spending reduction. can we afford that and the royalty checks you're going to have to send to george orwell? that's the weirdest way of 'just say tax hike.' that's like saying i'm not going on a diet. i'm going to add calories to my excluded food intake." unquote. that was jon stewart. he hit the nail on the head. for sure it's easy to make fun but what the president is trying to do with tax expenditures is no laughing matter. liberals talk about tax expenditures as though they were just getting rid of wasteful spending. first, as a legal matter, tax expenditures are not spending. outlays are checks cut from the treasury department are defined as spending under the congressional budget act. that's what spending is. yet, most tax expenditures only lose revenue and do not include an outlay portion. tax expenditures that only lose revenue contain no spending as defined by the congressional

budget act and is scored by the official scorekeepers for congress. the joint committee on taxation and the congressional budget office. and second, as a policy matter twhe comes to tax -- when it comes to tax expenditures, one person's loophole is another person's opportunity to save for college and retirement, finance a home and ties to your -- taoeugts -- tithes to your church. reducing tax expenditures is a tax increase unless a tax cut of equal, of an equal or greater amount is enacted. one crucial myth i would like to expose is tax expenditures are spending. this chart revenue loss does not equal spending. the federal government cannot spend money that it never touched and never possessed. what tax expenditures do is let taxpayers keep more of their money, of their own money. the american people are the ones that earn their money through their ideas, their risk and their labor.

whether you are a successful business owner or part-time worker just starting out, the money that you earn is yours. it is your money. and only by your consent is the government permitted to take some of it in taxation to pay for certain public goods. but democrats have a different view, and it is this view, one that is fundamentally at odds with our classical liberal constitution and our founders' respect for property rights that contributes to the confusion over tax expenditures. liberals think that all of the money that you earn belongs to the government. you have no independent right to the fruit of your own labors because only by big government are you ever able to make something of yourself. this view is foreign to most americans, republicans or democrats. it is a view that alexander hamilton and benjamin franklin would take issue with. but this is the political philosophy of the modern left.

so when you hear tax hike proponents come to the senate floor and say we're giving these businesses and individuals all this money in tax expenditures, they're incorrectly assuming that the government has that money to give in the first place. the government does not have this money to give. that money belongs first to the people that earned it, those businesses and individuals that are american taxpayers. there are critical differences between spending and tax expenditures. for one thing, the government never touches the money that a taxpayer keeps due to benefiting from a tax expenditure, whereas with spending, the government actually collects money from the taxpayers and then it spends it. here's a more telling difference. reducing or eliminating a tax expenditure without lowering rates enough to reach a revenue-neutral level will cause the size of the federal government to grow. while reducing or eliminating spending causes the size of the federal government to shrink. now, i am open to looking at

eliminating or reducing some tax expenditures as part of comprehensive tax reform, but only if tax rates are lowered enough to reach a revenue-neutral level. alternativetively, reduction or elimination of tax expenditures could be balanced with new tax cuts that are of equal or greater value to the revenue generated by the eliminated expenditures. but if tax expenditures are reduced or eliminated without tax rates being lowered enough to reach a revenue-neutral level, that is a tax increase plain and simple. we have made clear that as a matter of law and political theory, tax expenditures are not spending. now, let's turn to an examination of what they are. fortunately, we do have the definitions available. the joint committee on taxation generally defines tax expenditures as deliberate departures from generally accepted concepts of net income,

usually by way of special exemptions, deductions, credits or exclusions. therefore, tax expenditures generally arise for individual income taxes and corporate income taxes. the treasury department differs from the joint committee on taxation slightly in how it defines a tax expenditure. for example, the joint committee on taxation labels deferral as a tax expenditure but treasury does not. but whichever definition one uses, it is clear that the president and the liberal proponents of tax increases are using their own politically motivated dictionary. tax expenditures have been erroneously described as -- by many as -- quote -- "loopholes "loopholes" -- unquote. this is deliberately inaccurate. a loophole is something the congress did not intend, would generally shut down at least going forward once it learned of the loophole. tax expenditures by contrast were generally placed by congress into the tax code

deliberately. for example, the largest tax expenditure is the exclusion for employer-provided health insurance and benefits. that's a tax expenditure. the second largest tax expenditure is the home mortgage interest deduction. we all know why they are there, and they are there for good reason. tax expenditures are not loopholes. we are not talking here about some fancy tax scheme that a lawyer or accountant has discovered and now promotes to his clients as a way to game the system. these are broad-based tax incentives that benefit many americans. the deduction for charitable contributions is not some loophole. it was a deliberate inclusion in the code that acknowledges the need for a religious citizen to contribute to their churches. even some of the smaller dollar tax expenditures were designed by congress to go to particular industries or types of taxpayers. for example, the tax expenditure to encourage the purchase of corporate jets that democrats

included in the stimulus and that the president is now criticizing. now, whether you agree with these particular tax expenditures or not, an honest debate requires recognition that they were designed by congress with economic and social goals in mind and are not inadvertent loopholes. as a matter of law, policy and constitutional government, i fundamentally disagree with those who are pushing these tax increases as part of a deal to raise the debt limit. -- or the debt ceiling. my problem is spending that has grown out of control, not the lack of revenue. according to c.b.o.'s june, 2011, long-term budget outlook, taxes are already heading higher than they have historically been. from 1971-2010, revenues as a percentage of g.d.p. have averaged 18%. since the post-world war ii era from 1946-2010, revenues were 17.7% of g.d.p.

yet c.b.o. also projects that revenues as a percentage of g.d.p. will exceed 20% by 2021. even if all the bipartisan tax relief contained in the 2001 and 2003 tax acts is extended, revenues as a percentage of g.d.p. will increase to 18.4%. so i ask the question, with taxes already going higher than where they have been historically, should we raise them even more? for me, the answer is no. i know that most utahans would agree, and i believe most people in this country would agree. i suspect that even most democrats would as well. they certainly would if president obama and the liberals who pose as advocates for the middle class came clean about just how high taxes would have to go on working families to pay for the hard-core less preferred level of government. the numbers don't lie. the deficit is a symptom of out-of-control spending that has grown dramatically in recent years and is reaching crisis levels. it is not a result of too little

in taxes. democrats can close all the loopholes they want and it still won't balance the books. and the democrats who are talking about the need to close loopholes and eliminate spending through the tax code need to be asked which middle-class tax relief they want to get rid of as part of their deficit reduction plan. do they want to get rid of the charitable deduction or maybe the mortgage interest deduction? maybe they want to go after people's 401-k's or i.r.a.'s or 529's. what's it going to be? let me just say something here. i'm really concerned about where we're going. we have risen this year to 25.3% of g.d.p. in spending. last time we hit that figure was in 1945 at the height of the second world war when the government was taking over almost everything to keep us from losing that war.

it's certainly over 23% right now. what's it going to be? at his press event/tantrum last week, the president answered absolutely none of these questions, none. he needs to otherwise -- he needs to get serious about cutting spending. senator from rhode island. mr. whitehouse: thank you, mr. president. i'm honored to follow my distinguished colleague from maryland into this discussion about our priorities as we address the debt limit that we're proasmght i think that the leader -- leader reid was wise to choose to cancel the scheduled 4th of july recess so we can continue to work toward an agreement to prevent defaulting by the united states on our government debt and the

financial consequences that would ensue here in america and around the world. as we negotiate an end to this debt limit standoff, we also obviously have to address our looming budget deficits and our looming debt which threaten to cripple our potential for economic growth in years to come. where we are on this, of course, is that president clinton put our budget on course to permanent surpluses. we would be a debt-free nation right now if the predictions that the nonpartisan budget office had put in place when president clinton left office had been kept. but, in fact, there were changes. president bush and a republican congress squandered away those surpluses with unnecessary tax cuts and unwise spending increases, and our multitrillion-dollar deficits have resulted. we must now fix the budget and bring it back into balance. so where are we in this standoff? well, we need to cut spending. democrats and republicans agree on that. we need protect ordinary

families who enjoy ordinary levels of income from tax increases. democrats and republicans agree on that. the disagreement is whether we also need to raise some revenues in other areas to help balance the budget. areas like oil and gas and ethanol subsidies, closing corporate tax loopholes, and putting an end to high-income tax dodge schemes. on that front, i rise in support of leader reid's resolution calling for a deficit-reduction package that includes a more meaningful contribution from millionaires and billionaires. the republicans are threatening that they'd rather let this government default on its obligations than to, what they call, raise revenues by requiring the wealthy to pay their fair share. just last week, senate republican leader mitch mcconnell called on president obama to take any raised

revenues off the table and to balance the budget solely on spending cuts that affect the middle class and lower-income families. in an opinion piece on cnn.com, senator mcconnell proclaimed tax hikes can't pass the congress. well, let's pull the curtain back and take a little glimpse behind the curtain at who the republicans are fighting so hard to protect. here's a building in new york stow park avenue, the helmsley building. because this building is large enough to have its very own zip code, we know from actual i.r.s. information -- not projections, not guesses, not conclusions drawn from rates -- from actual paid-in i.r.s. information, that the wealthy and successful individuals and corporations that call this building home paid a 14.7% total federal tax

rate in the last year that they've done the calculation, 2007. that is lower than the actual tax rate, on average, of the new york city janitor or doorman or security guard who would work in this building. it is upside-down. the people who serve the occupants of this building pay a higher tax rate than the occupants of this majestic building. the tax gimmicks that let those occupants pay a lower rate than the people who take care of the door and the cleaning and the security for them, that is what the republicans are fighting to protect. and this problem isn't just a fluke in the helmsley building. each year, the internal revenue service publishes a report that adds up all the taxes paid by the 400 highest income earning americans.

i spoke earlier this year, several times actually, on last year's report, which included data from 2007, like the same year as the helmsley building. in that year, these super high-income earners, making on average a third of a billion dollars approximately -- a billion with a "b" -- they paid a lower tax rate in 2007, the 400 of them did on average, than an average hospital orderly who's a single payer pushing a cart down the halls of rhode island hospital at night. in may, the i.r.s. published updated data on the top 400 income earners for 2008. let's take a look at the status of the top 400 earners in that more recent year. well, they're down from a third of a billion dollars, on average, to over a quarter of a billion dollars each. and certainly we can applaud that kind of success in america.

that's definitely the american dream come true. but, on average, they paid an average tax rate of 18.2%. that's what they actually paid. that's what they put into the i.r.s. once you get through all the tax dodges, all the different schemes, all the different deductions, all the different rates. when you actually put the pen to the paper at the bottom line, it's 18.2%. we spent a lot of time around here debating whether the top income tax rate should be 35% or 39.6%. folks, that is not what they are paying. the tax code is so filled with special provisions that tend to exclusively or disproportionately benefit the wealthy, that the highest 400 income earners paying -- earning more than of a quarter of a billion dollars in one year paid an average tax rate of 18.2%. the -- this means that the 400 highest-earning individuals in

the nation in 2008 paid the same effective tax rate as a truck driver in rhode island. according to the bureau of labor statistics, on average, an ordinary truck driver earns $40,200, which is about the place in the tax code on the way up where you first hit paying 18.2% of your income in taxes. so what the republicans are asking as part of the debt limit compromise is that we cut employment and job-training support now, at a time of record joblessness, while they continue to fight to make sure that people making a quarter of a billion dollars a year pay lower federal tax rates than average middle-class families. here's another building that has a little story to tell. this is a building called ugland house. it's over in the cayman islands. this building doesn't look like

much. it's pretty nontkes script but over 18,000 corporations claim to be doing business out of this building. 18,000 out of that little building. clearly what is going on is that those corporations are hiding through shell companies phony corporate identities that they and wealthy taxpayers use to hide assets and play tax games with the i.r.s. this kind of mischief down in the cayman islands and elsewhere through these tax dodges is estimateed to cost us as much as $100 billion every year. as part of a debt limit compromise, the republicans are asking us to cut america's investment in science, cut america's investments in technology. and at the same time they're fighting to protect corporations that hide in offshore tax havens so that the honest american taxpayer has to pick up the burden for them. that's what they're fighting for when you pull back the curtain

on this. when all is said and done, everyone, democrat and republican, agree that there need to be cuts. and everyone, republican and democrat, agrees that there should be no tax increases on ordinary middle-class families. those concerns are not at issue. where is the dispute? what is the blockade? again, pull back the curtain, and you'll see that the republicans are willing to let us as a nation default for the first time in our history on our debts, which would devastate our economy. all to defend tax rates for millionaires and billionaires that are lower than those paid by regular, hardworking americans. all to defend offshore tax havens that are used to evade taxes while ordinary families are expected to pay their taxes. all to defend corporate and special interest tax loopholes, earmarks for the wealthy and well-connected. that's where they've chosen to stand their ground.

that's where they've chosen to pick a fight. as our nation rushes towards the august 2 deadline and the agreement deadline before august 2, we have to have something in place in order to get the president's signature on a bill by august 2. as we rush towards that, as the world's economy and america's economy are imperilled by the threat of our debt limit not being lifted. what are they fighting for? that's what they're fighting for. for the superrich, for the super well-connected, for the tax dodgers they take advantage of. those are the interests that republicans are protecting when they reject any revenue increases to bring down our unsustainable deficits. they say it's tax increases that they're against. well, the answer to that should be americans asking the question back: tax increases for whom? because if it's tax increase for the guy who's making a quarter

of a billion dollars and is paying a lower tax rate than a truck driver, that's okay with me. that's a tax dodge we can get rid of. it's a tax increase for a company that's going to hide in this building in the cayman islands to shelter its income so that rhode island corporations and oregon corporations, american corporations have to make up the difference? american taxpayers have to make up the difference, and they can't hide their income down there any longer? that's a tax increase i can live with. i don't think that's what the ordinary american has in mind when they say we don't want tax increases. they mean we don't want our rates to go up. but ordinary americans know that our tax code is filled, riddled with gimmicks and tricks and loopholes and deductions that have been put in it over the years by lobbyists. they are earmarks. they just happen to be earmarks in the tax code. and they spend america's money through the tax code just as

much as if it was an appropriation. but what's the big difference? the big difference is it takes being a very wealthy individual or a very big corporation to be able to take advantage of those tricks, to be able to hire a lobbyist who can build that trick into the tax code and to have the revenues and the resources to be able to maneuver through the tax code that way. ordinary americans don't do that. you can ask pretty much anybody in rhode island, show them the thousands of pages of the internal revenue code and ask them who's got a special provision in it for you. nobody does. they're regular americans. they pay regular taxes. they do things the way they're supposed to be done. the gimmicks and the tricks are all at the upper end. and it's time to clean house action particularly now when we so badly need the revenues to balance our budget.

mr. president, it is inexcusable that our taxpayers allows billionaires to pay less taxes than truck drivers. even if we had no budget deficits, just being fair, just honoring the principle of equality would demand we address these inexcusable discrepancies that favor the wealthy and the well connected. our budget crisis, however, brings real urgency to the problem. so as we continue to work to avoid a debt default by the united states of america and to bring down our budget deficits and to reduce our crippling national debt, i hope senator mcconnell and the republican conference will revisit the potential to significantly cut the deficit by addressing the tax loopholes, tax gimmicks and, frankly, outright injustice to the ordinary american taxpayer that they are now defending here in the senate.

i thank the chair. i see the distinguished senator from alabama arriving, and i will yield the mr. president? the presiding officer: the senator from alabama. mr. sessions: mr. president, i understand that president obama has summoned certain congressional leaders to the white house tomorrow to discuss spending debt and deficits and the debt limit that we now operate under. the president has summoned congressional leaders to the white house on at least eight different occasions in recent weeks to discuss budget and debt issues not including the private talks involving vice president biden. yet, with only weeks fog before the debt limit deadline, we're told august 2, secret discussions have failed to produce any grand bargain.

talk is not an action. i do think that's a problem the president has. he thinks making a speech or having an announcement is something that actually involves changing course in america tanned has some effect when it's pretty clear it does not. we've had lots of talks. we've had lots of speeches. so i think we should stop paying attention to these private talks from which no details emerge and no public discussion occurs. we are getting much too close to the point at which it will be too late to involve the public and allow do think fulfill its constitutional duty on spending and taxing. in remarks yesterday the president" to truly solve our

debt problem, we need to take on spending and domestic programs and defense programs and entitlement program." well, i agree. yet, the only plan he's put forward proposed increases in his spending for next year in the budget he submitted. he submitted a budget earlier this year. he made a speech backing tpwrae it a little bit -- backing away from it a little bit but not a lot, because the speech when we carefully tried to study it didn't do much to change what the trajectory in his budget. but this is what the budget calls for next year, that we're supposed to be working on now, and are not. this budget proposes to increase spending in 2012 -- beginning october 1, 2012. well, the inflation rate is

projected to be 1.3%. it may be higher. defense calls for a 4.3% increase in spending for defense. energy department called for an 8.9% increase in energy department. that big bureaucracy that spends its time trying to make sure that we block, it seems, production of american energy. permatoriums and off limits to produce energy. it proposes for the state department 9.3% increase in spending and the education department a 13% increase in spending. at a time this country is in incredibly difficult straits, we're having double-digit

increases. and in the transportation department, he proposed a 62.4%. we've got to have high-speed rail of walking distance of 80% of all americans, or something like that. we don't have the money to do that. most of the high speed rails are not paying for themselves around the world. they can work in certain highly congested areas and good locations perhaps. but this idea we're going to have a mass napolitano interlocking system of maybe 7 billion of high speed rail is not realistic in the short term. but his budget calls for a 62% increase. we asked where the money was coming from. they said it's a tax. what kind of tax not a gas tax. what acts do you propose,

mr. secretary, about the budget committee well, we'll talk with congress about that. the congressional budget office, who is required to analyze expenditures against revenues said that's not a proposal of revenue, and they scored that as all expenditure without any revenue, because we're not going to pass a big tax to increase this kind of spending. give me a break. if we do we ought to use some of that money to pay down the debt. not continue to surge spending in this fashion. i would just again like to point out that president bush in his last year in office had the largest deficit, i believe, the country had had at least in modern times, largest he had was 450 billion. that was large and it was roundly criticized. it included a lot of the tarp money that they threw in at the

last minute. but what about president obama's first year? $1.2 trillion in deficit. the second kwraoerbgs $1.3b. and this year projected around $1.5 billion. $1,500,000,000. that's 2011 ending september 30. then september 12, he's got these kind of increases? what kind of responsible behavior 0 is that for the president of the united states to say that we need to truly solve our deficit problem, we need to take on spending in domestic programs, in defense programs and entitlement programs. and this is what we get as a proposal, to increase spending, double-digit rates basically?

what is this? and there's no proposal what whatsoever to deal with entitlements, those long-term unsustainable programs threaten the future of our country economically. we're in more trouble right now than a lot of people realize from our debt situation. so, the only plan that the president put forward, as i said, are increasing these expenditures and not kopbl fronting entitlement programs at all -- and not confronting entitlement programs at all. and when the house members passed a far-reaching, historic, honest, fact-based budget, they would actually change the debt trajection of our country over a period of years. it was considered to be tough, but even it didn't balance

within ten years. we're in a deep hole. it's hard to balance this budget. the house proposed that, and they laid out a plan after ten years for altering medicare, that would help put medicare back on a sound basis and all of it was just slammed by the president of the united states. he even had a speech at the white house, invited congressman ryan, the brilliant chairman of the house budget committee, to sit right in front of him and slammed his bill. why? he had courage and integrity and produced an honest budget that would have made an honest difference for america. while we may not all agree with everything in it, of course, but he didn't deserve to be hammered by the president of the united states -- united states. to begin to change the debt trajectory we're on, we need to

cut at least $6 trillion in spending over ten years. that's not enough, really, but we need to do that, and if we do it, it will make a huge difference. $1.5 trillion or $2 trillion in cuts will not be enough. it will not be enough. the president's budget that he submitted in december, the only budget we have gotten from the democratic side would increase the debt in america by by $13 trillion. $1.5 trillion or $2 trillion in spending cuts is not enough, so we're long past the point when the president needs to share his vision with the country and admit he cannot keep up this spending rate. his budget was quite simply a failure to confront the reality that we don't have the money to keep up on unsustainable

spending. according to bloomberg news, democrat officials claim that a deal will have to be reached between july 15 and july 22 -- quote -- "in order to write a bill and come play with the congressional rules requiring advanced publication before consideration." in other words, have at least three days to see the legislation. the presiding officer: the senator has used 10 minutes. mr. sessions: i thank the chair. i see my colleagues here. i would ask consent to have one additional moment. the presiding officer: without objection. mr. sessions: so i have proposed legislation that would say we ought to have seven days to consider this historic piece of legislation that would raise the debt ceiling. we want to see how much change in spending the bill would mandate. in other words, if we're going to raise the debt ceiling because we have limited how much debt america can accrue, congress has, and to keep

borrowing -- and we're borrowing 40 cents of every dollar we spend -- if we keep borrowing, we have to raise it. so what we're saying is -- and the american people i think are saying, okay, we don't like halving it, but if you raise it, you better show us that you have changed your ways, that you're not continuing this kind of reckless spending when we don't have the money. 40 cents, every bit of that increase is borrowed. every bit of it. we can't continue that. mr. president, i truly believe that congress needs to assert its role, step up and accept responsibility for the crisis we're in and begin to develop the procedures openly and the procedures openly and

>> good morning everybody. welcome to the international monetary fund and to the first press conference of our new managing director, christine lagarde.

we also have the first deputy managing director john lipsky, and i want to let you know that we have simultaneous -- so english is on channel 1. french is on channel 2. spanish is on channel 3, and arabic is on channel 4. and you will have headphones. i also wanted to let you know that we have some of mike's and they would be helpful if you would move up to ask questions. we have three mics in the room. because there is so much wireless technology now, it works better if you go to the microphones which are the equivalent of land line phones. madam lagarde will begin with opening remarks and then we will take your questions. >> thank you very much. bonjour, good morning to all. it is very very nice to be back in washington. my personal will has gone from washington to paris, from paris

to chicago, from chicago to paris and back to washington so it is lovely being that. i thank you all for turning up and being there for this first press conference. what i will do, i ask for your indulgence. i will concentrate on a little bit of the states of the world as i see it at the moment and as i take this job with great pride, great humility as well and some trepidation giving the incitement of the job and i will give you in a nutshell where i see the key priorities in terms of the france mission. before i do that i would like to pay tribute to the fund at large, to the nice lady who is bringing me some coffee. [laughter] and to the man sitting to my right, and.

john lipsky as you knows the first managing director. he will be completing his term on the 31st of august and he has been throughout his term a fantastic first deputy managing director. i was able to see that from a distance from where i was as if shareholder, client and a member of the firm. i represented france on many instances and other seminars and i can tell you john has been a fantastic advocate, spokesperson, personal charisma and joy in the last two weeks. ..

wherever you always turn, wherever you are located, whatever your articles will be, there are issues, there are concerns, and and when we look at the status of the world, we have clearly come over the financial crisis that hit all economies in the fall of 2008 and which continue throughout at least one to 2,009 in some countries well into 2010 and saw my or do it is continuing given the growth potential has not

been restored in many countries and that unemployment is still very high in many corners and therefore a lot needs to be done by the economy players. now obviously recovery has taken its course as well, and when we look at our focus for 2011, 2012, we are clearly on the rebound and things are improving and getting better. if we compare with the situation as it was an 2,009 and the height from the crisis, but that recovery is as people will say he will comment on the uneven. if the focus is in the range of 4.5%, looking ahead it's clearly unbalanced in the sense they are in the range of 2.5, whereas merging markets are more in the range of 6.5, some of them such as india and china getting higher marks, so we are facing a

turnaround which is very uneven with country's leading the charge and not those that were historic leading the charge and others advanced economies that are lagging behind in a way given the status of development. in the midst of that, we have clearly the two categories different issues to address but if we are to provide service and guidance, advice and recommendations and if and when necessary and if asked support. those are on the one hand the issues of sovereign debt and concerns all advanced economies ranging from japan to the united states, but clearly with a focus as you write about it as we know with a focus on the year autozone and in particular a country such as greece. on the other hand, when we look at emerging markets we have in some corners the risk of

overheating, and we obviously have the risk of inflation as well, and sometimes particularly in the low-income countries the risk of imported completion that results from a high prices of commodities and including commodities obviously both oil prices in general but of course agricultural products as well which is critical for the incoming countries. so that gives the fund a landscape to really excel in terms of giving advice, recommendations and analysis, ringing the alarm holmdel again and obviously providing support when necessary. so we are facing a landscape that is in a better shape than two years ago but was an uneven process of recovery and specific issues of a divided nature given the division that we are seeing between the advanced economy on the one hand and that emerging markets on the other, and the least it looked countries or high income we won't call them good specific issues and yet a

path to recovery that is of the pronounced. let me now turn and i assure you will have questions and i will be happy to take your questions, humble saying you don't know what i don't know because as you deciphered on the job in member of the fund i was a shareholder of the fund on the receiving end if you will find myself a managing director clearly on the sending and the giving and because we are here to serve the membership of the fund that is 187 members, for those of you who were eventually in doubt. the fund should focus on all i will address them in two

chapters, if you will. when the concerns the external election of the fund and the inside issues of the fund and i will take the latter and second because i regard them as important but not as a key priority. certainly my wish is for us, the fund, that is the executive director board, the management and the south, which i have suggested in the town hall meeting is the key asset of this institution, we need to focus on the outside. we need to focus on what we can provide. we need to be available for the membership and look at our bellybutton and wonder how we can best do this or do that. we will. but there is a lot to be immediate priorities in my view. and of those three extra chapters, if i may say, all began with a c which reminds me

the order i want to take them. the first has to do but cut back stiffness. we have seen during the crisis that all countries, all sectors, industries, services highly connected with each other and among themselves. and we need to address that interconnectedness, the interconnections, however you want to call them, with a view to refining, enhancing and improving the services to our members. for those of you familiar with the fund we have the bilateral work and to take a very traditional symbol of the article for review, the substantive work done to the fund to really analyze the quality of the economy and make recommendations. but we do not necessarily take into account this interconnectedness that is so

obvious to us and has been clearly it devised by the crisis. so first of all, let's focus on those connections and connecting points between economies within economies and make sure our services and advice are actually properly including that particular. my second c is credibility. the first one was connections, connecting points. the second is credibility. for the fund to be credible, its analysis, its work needs to be candid, needs to be credible, needs to be even-handed. there is no one category that deserves a special treatment and another one that will receive harsh treatment. even the level playing fields are worth what you will hear me say over and over. the third one is the

comprehensiveness, in other words it needs to be connected, credible and comprehensive, and by that i mean we can not only analyze the economy by looking at some of these traditional standard criteria is, we cannot be jordan by the hope to reduce fiscal deficits and organized fiscal consolidation and a different way make it sustainable. those are the key criteria as and the path that has been clearly opened to include such matters as employment, social affairs, peripherals components of the traditional economic look at the situation of the country needs to be taken on board as well. i'm not suggesting it should be

turned into a specialized boutique on the employment and the best way to reduce the employment. we need to rely on other institutions that exist and the work that has been undertaken together needs to be pursued, the same together with the wto. so the comprehensiveness of the approach must be enhanced. because ultimately we should never lose sight of what we are about. the international monetary fund is here to serve and provide services to its 187 members with a view to what? help restore stability where there isn't stability and there's plenty of that around. to help make sure the economies of the world work better to provide a better welfare for people come and clearly on an plant is a key issue whether you

look at the the evidence economies or emerging markets the issue of employment is a critical one and one that actually determines a stable social chemistry for the society so we should not lose sight of the overall main goal of the fund. i told you there were about three chapters that were my three priorities, connectedness, credibility, comprehensiveness. the two chapters concerning the internal affairs of the fund that reflect on the external as well where the substance are very closely interlinked the same is true for the fund what we do externally reflects on how we are billed internally and vice versa. to that end, we must continue to improve the legitimacy of the fund and that touches on the

government's, it touches on the appropriate representation and representative this of all members, which does not exclusively, fleet into quotas or seats of the board not to say that we must not quite to the contrary we must complete the reform approved in 2010 and i will see to that and i left and made sure our increase was wrapped up in the parliamentary process approved by my parliament so we must complete the 2010 reform and governments on the quotas must be adjusted to reflect the architecture of the world but that's to those who reflect the unemployment policies in our training policies and the way in which we build teams and the way in which we organize recruitment so people are not clones of each other and that the second aspect which to me is very important in addition to legitimacy, diversity is actually properly

taken on board. it's not just gender diversity for those the would worry about and feel excluded. it's about including, not excluding. it's about reaching out, about engaging, breaking down the barriers, removing the obstacles so that all participants can actually be at the table and it touches on geographical origins, it touches on culture, touches on the background, so as i said, we can to give vantage of the differences that we all bring to the overall table of the international monetary fund. with that, i will unless you would like to ask anything we will then open the floor. >> thank you very much. as i said it would be great if you could prove to one of the microphones to identify yourself

and your news organization and please, one question each. >> good morning. i am from brazil. for what you've seen in this very short period what time to get acquainted with the imf what would you review the most? >> it's been a force. [laughter] and i've had eight hours of preaching and was 24 hours so little sleep in the meantime. you have the pressing immediate issues that perhaps dewitt

sovereign debt. and as i said, it's broader than just of the year ozone. there's a tendency to focus on the year ozone because it is a mixture of various components that make it more critical and sensitive to add more difficult to address because of this sovereignty, yet the lack of political sovereignty in one single capital. but it's a very broad based issue that needs to be looked at as a matter of urgency. the second one coming from brazil you will be particularly aware of that is the capitol flow, and the fact that as a result of sovereign debt issues and concerns and doubt and

suspicion by investors there's a massive investment to areas of the world that are not wanting the and to spend or are not prepared for it or fearing the effect on the economies, so i think it is a combination of these two that are of immediate concern and that are pressing issues. >> thank you to read over here the microphone. >> [inaudible] i would like to ask about your personal feelings. this would be your second or third time leaving the area and high school and now you came back here as the head of one of the most prominent international institutions. did you imagine those kind of things, and what is your sense right now and expectationor thel

question. you remind me of something which is to recruit, the passing of time. while i look back i was here in '73, '74. washington did not have an metro. washington was a very reasonably quiet capital with not a lot of activity, lovely country club's. clearly the world has changed massively in the meantime. was i expecting i would return to d.c.? no. i knew i would have something to do in the world on an international basis because my american field service experience brought me up with a wide horizon than my home town or even my country, and i'm delighted to be back to reviving

the international monetary fund has exactly that set of both technical focus, rigor of expertise and analysis and willingness to confront and the eight delete to delete and be specific and controlled with very international background because it's not so much the smile on my like the background that really speak for the fund and its international nature. but for all of the young girls in school of the moment, i would like to say they should each consider that everything is possible. >> thank you very much. >> congratulations on a new job. you are obviously from the right from what i believe is the socialist should we expect any

changes in the spirit, the letter or the priorities of the policy to north africa in the middle east. >> you know, i tend to be very practical not to be as dearth and were labeled by particular certifications and i think you have to judge people by what they do what they propose rather than what they say, and if you look at the map of the world and look at the international socialists' around the world you have a massive range of views and opinions from the old marxist leninist to the much more free-market oriented so to speak socialists. so i think it's certainly not with that sort of cut occurs

asian and mind that i address the challenges ahead, and i believe that no one should be earmarked with a particular label. they started in our excellent reforms, and i would certainly consult on them and be very supportive of continuing the them. i think i've given you an example for instance when i speak of the comprehensiveness we should adopt embracing the employment and social issues as well as the economic trends that are more traditional, the reforms that he has started and that have culminated in 2010 are good reforms and must not only be implemented and forced in all corners of the world, it's not just a matter of paying some principle but back at home the principles are implemented but also pursued. the world is going to continue to change. we have this plant that is moving at the moment and that

needs to be reflected in the government's and employment and i would continue that. >> thank you. over here? >> from china media. about the spillover report recently i just want to accept for the current what else you plan to bring into imf to monitor the important country and what else. >> you're right to mention the spillover report as one way to address my first c, the connectedness, connection and the fact one particular policy will have willful affects and consequences outside its territories, and the fact the idf has embarked in addressing and describing and analyzing them is i think it important.

we need to take stock. we need to see how hopefully this, what we can offer to the members as a result of the effect. second, in terms of how can we constantly improve to the fund. as you know, my colleague and friend, the minister of finance for singapore to the imf see suggested and i've supported the proposal that many reports, whether you talk about the standard article or whether you talk about the financial report or five spillover report, it's better in aggregated so that there is a comprehensive analysis that can be offered to members. i fifa would be a very important improvement.

john is also suggesting he's right. >> there's the civilian report is coming up very shortly which will also help us determine to improve and drop, not against dropping it, for your information and is one of the common stocks we share with not only the management but the head of the department to work cohesively doing for many years and it's been like that so let's continue i will say if it is not useful or providing value then let's drop the and focus our immense resources and massive capital power on what's going to be useful for the members.

so that i began the job. >> thanks very much. >> first imf world meeting what is your strategy to the issue for the euro and my french question in france to the coverage -- >> what is your feeling regarding the latest events in this case? >> on the first one, there is an imf board meeting which is scheduled for friday at which we shall consider the fourth review the payment of the fifth tranche so that may be -- that is scheduled as a set for friday

and he will appreciate that i am not going to share however i appreciate the quality of the television channel, the conclusion that will ultimately take place. on the second question, as i said, the most important thing for me is to make sure that the institution actually is proud of its achievement, it has reasons to be proud of its achievements under the previous managing director and under the first one to acknowledge the quality of the work and the reforms that have taken place, and as to the rest we shall leave it to the legal cause it should take and i'm not going to comment on that. >> thank you. over here. >> i want to wish you all the best in your new job. >> thank you. >> ayman correspondent. i would like to ask you what are

your anticipations, what are your expectations from the government and major opposition political parties increase, and the social reactions if it would like to answer the objections of many analysts would say the primary spending is out compared to the last year they seem to support this creation of deficit. thank you very much for your attention. >> without anticipating what will be discussed for the board scheduled on friday, i would like to say simply that i hope the greek political parties altogether are in government or opposition can be inspired by the courageous decisions made by

political party in portugal. there comes a time when individual interests, political rivalries should be set aside when it's in the national interest of the country, and that was clearly demonstrated both in the case of ireland and portugal. >> in relation to the analysis conducted by the imf, and you can rely on me that the imf in its judgment will remain its dependence. >> thank you very much. leedy in the white. >> i'm jessica from german tv, and i would like to ask how

might a possible default in restructuring of kris's debt harm european banks, and is this something -- how likely is it you would support such an approach? >> i'm afraid i'm going to disappoint you because you have a lot of questions on increase and i'm going to either diluted the responses of these areas very sanitized simply because the matter is under review the board meeting is scheduled on friday. i have a briefing this afternoon on greece, and many issues and matters are under development as we speak including paris in the private sector involvement that was fought by germany in particular of other members of the heroes own. so let me comment actually on the questions.

it's clearly a matter that is high on our agenda and one that we will continue to work on the troika basis was now, and clearly with mind the ultimate purpose we all pursuit which is to restore the competitiveness of the country. >> thank you. howard snyder from the "washington post". >> won broad question if i could, now that you sort of switch perspectives, do you think the ec has been overstating the risk of an orderly before restructuring of sovereign debt throughout the continent? the feel like this would set the dominoes rolling. they've also got a lot of their own assets to play in the rescue some wondering if you think

because of devotee of overstated to risk and secondly, briefly i can't resist. do you think they are close of each other? do you think the staff here are clones of each other? [laughter] >> well, dealing with your second question, of course not. i attended the town hall meeting yesterday which you should have seen the room. your room here is full but the room yesterday was just amazing and what is even more amazing is the diversity that was clearly obvious in the room. but iiss is the diversity as multifaceted. it's not just about gender, color, religion, sexual preferences also about culture and economic background and i think that we need to draw on their resources and the intellect developed in many corners of the world because the

will make it better and richer. now, on your first one, have very clear recollection of the first days of september, 2008, and the last day of september, 2008 when some people at the beginning of the month pulled its okay it will teach those guys a listen. at the end of september was not quite on the same page, it doesn't hurt to be navy overly concerned but to try to anticipate consequences of any of the measures being considered i think we have been burned once, better be shaunna this time. >> thanks. i'm going to take a couple of questions. spec thank you. >> u.s. is highest diversity

several times. my question is in terms of the management reform, could you elaborate on the time line for this framework of management to reform how should we expect real change? thank you. >> i will be clear on that. and it's a twofold response. number one, about management style, and it's no criticism of my predecessors but my style is about opening up, reaching out in teaching people as a team. i can't do it alone, they can't do it alone. we have to prove the institution to get there and engage the stuff to make sure people are not only satisfied with the

work, but prowled with the results and happy with their work. so in terms of -- i'm not suggesting they were not happy or were not right, but my way to try to organize that is by working as a team so there would be the delegation of work, there would be regular meetings of the team so we can be on the same page and i mean the management team, the deputy managing directors but also the heads of the department. now in terms of physical changes, as you note the addition of the management tractor was being considered, not a bad idea and i'm going to consult the next few days on this matter. >> thank you very much. >> from the financial times let me ask a couple of issues i'm sure you've not expected to come

up. [laughter] as a lawyer how we counter accusations that you are one, not qualified to take positions on economics and to, but of interest with french banks and taxpayers at heart on issues like greece rather than those of the imf. >> you always ask such nice questions, allan. it's always a pleasure. [laughter] you know what, i'm not going to write about my qualifications or lack of qualifications. i think the true meeting as you say and we will see how it goes, but it comes to the job with an open mind, liability to draw their resources and willingness to contribute from all not going to second-guess on going to ask questions, i'm going to evaluate and rely on the advice of people who know well their area, and

you know, without being too political about, not all conductors know how to play the piano, the harp, the violin or the cello. so i would like to be a good conductor. as to the biased i would have to favor one or the other, certainly don't expect me on that particular. i will not be biased. >> it's too bad all of you couldn't have joined us at town hall to that scene and the enthusiasm of the staff in welcoming our new managing director. she brings many firsts, as i said many people say she's the first woman managing director, but she used to my mind a woman of firsts with a great experience, leaving large

international organizations, experience in both the private and public sector, the staff is 30 welcoming and very enthusiastic about the leadership christina's wing to provide the imf. >> thank you. >> the very long experiences as a lawyer, getting your experience as a lawyer in the u.s. are sometimes what lessons do you think ought to be drawn from the way the u.s. legal system handles the case -- >> the way the u.s. legal system handles its arrest in the subsequent proceedings and would listen to all the media learned from that and in a related question you talked several times about how it would power the certain reforms made what to consider that would differ?

>> you will appreciate why not to comment on the comparative study of the judicial versus the continental system as we call it. >> different systems and backgrounds and different ways of reaching what is critical in my view and i speak of a former lawyer that would eventually all legal systems and that. espinel quote lessons to be drawn on the media concern's the presumption of innocence, something that is highly valued the world over sometimes protected, sometimes respected and i think it would be the altar of the media to respect that as well and more broadly

actually this huge appetite the media's have in general for the new announcement, the new bit that you will be able to capture and made headlines with sometimes blurs the overall judgment that is often required to analyze for instance an economic or fiscal program. there are obvious examples that we can use. when a program is designed for instance, when the agreement is reached, the results cannot be acknowledged and computer the following day so the passage of time i was referring to early on which makes us look a bit older which lightens our hair is also something of use to better analyze the situation. >> how might you differ on a policy basis at the high yen

after mr. shrontz con? >> one difference that comes to my mind from the start this the management style because indifferent person and probably more inclusive and team reminded in terms of substantial issues allowing me to take stock and be properly briefed and appreciate the debt and the substance of some of the matters that are on our plate in the coming weeks and i will come back to you. >> i'm sorry, the -- >> i want to follow on the case -- if if you plan changes in them in light of the controversy over mr. strauss and is there too much pastoral in the

building would use a? >> could you just described, give your name -- thank you. >> i thought i was making it clear that the diversity and the value of diversity was the top of my list of priorities as far as the fund was concerned. together with diversity comes respect for everybody, and it's been the case in the past people have been respected and i will make sure we continue to be respected no matter what the differences are, and that goes to both of the substance of the analysis but also the individual says the stand. apart from that, i will very shortly be taking the training program on ethics, and i think it's a very good thing.

i have instituted such a thing in my law firm prior to my government life and i look forward to that. >> who's next? >> over here and this is the last. >> it's not the first time we see a french managing director and american deputy director. there's been talk about the will of emerging economies. what you consider changing the status quo right now, would you consider managing director from the emerging economy can i put that question to both of you? >> i think i addressed the question earlier indicating that the matter had been under consideration under my predecessor and i would consult on this and consult rapidly on this matter. otherwise i don't plan to change my nationality. >> thank you very much indeed.

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