happened. how we build that better future for young people, because, it is part of the answer. if you would like education and skills, new services and jobs, they are important for diverting people away from gangs, crimi l criminality and it does matter, it does matter, that young people think there is a grave risk to what i call the promise of britain, that each generation can do better than the last. and, as the prime minister said, too and i hope he'll say it gain, look, i'm wrong and hope and opportunity are irrelevant, let's have the commission of inquiry reach the conclusion and not be scared of seeking an explanation and hearing the answers and let's be brave enough to find the truth. and, it isn't simply a young people -- young people finding it hard to get on, it is something else, something else the government didn't talk about enough, this government doesn't talk about enough and that is the unequal society we live in,

about the gap between what young people can expect, and, what seems available to others. they see a society glorifying those who make millions while they struggle to keep up. and they see the cult of celebrity, replacing the ethics of hard work and these they're parallel lives we have in britain today, parallel lives of those who have so much and those who feel they have no stake in our society and, we all want the chance to get on. but, what is the -- if the chance to do that seems small and rewards for success seem distant and the rung on the ladder is so far apart you cannot possibly aspire to come up and, give the impression what we value, that what we exalt are things out of reach of so many people, it leads to frustration. and, never a justification, but a part of the explanation. a state in society requiring a

ladder that you can climb, and demands the things you value be within reach. so, i hope, as part of the national conversation we need, we look at these deeper issues of in equality, which scar our country. what i know is this: the most important thing for now is that we do not let these be the 7 days in august which shook our nation, and then our nation forgot. that is why our national conversation is so important. reaching across the gaps in our society, between the parallel lives i talked about. so i urge the prime minister, to establish this commission of inquiry without delay. if he does not do it in the coming days, i will do it myself. it is right for the victims, it is right for the country. and it is right to build the society we need. within recent years we have seen

three great crisise ecrisis in communities and now, we see a crisis affecting our great cities, the minority let down the majority of the decent people and which crisis showed a wider problem and each crisis showed a country in need of deep-rooted change. but, this crisis showed something else. our strength as a country, to come together and respond. the people who came together, to sweep our streets, show how our country can unite. the people who reclaimed our streets show the true character of britain and it is that spirit, that spirit of young people, at haverstock and the spirit of great teaching that can help us build our future together. it is that spirit which our national conversation must draw on and build for the future and it is that spirit that gives me hope for the future. thank you very much. [applause].

>> thank you. >> next up we take you live over to the heritage foundation, in washington and that is mike gonzalez, the communications director. he's introducing newt gingrich. republican presidential candidate. here at the heritage foundation, today to discuss an alternative approach to the newly created deficit reduction committee and over the weekend he finished 8th in the iowa straw poll. they are just getting started and it is live here on c-span2. >>... restore prosperity and you hear all the time it cannot be done without raising taxes and, social security, and gutting national defense and our plan ensures that can and we are proud of our plan and have it here for you. and we are proud of the work our sister organization, heritage action for america, undertook during the budget ceiling debate. speaker gingrich, with whom heritage worked in the past, on policy matters, such as the one the nation faces today, is eminently suited to give his views on these pressuring issues

and was speaker of the house of representatives during a time when the nation produced, a, a budget and b, one that was balanced. he served as the 159 speaker from 1995 to 1999 and represented georgia's 6th congressional district from 1979 to 1999, and in congress co-thundershowerco authored the 1994 contract with america and the author of 23 books and after leaving congress founded several organizations, to advance conservative and free market ideas. as always at heritage, we are here to discuss policy, and not politics or campaigns. his... his speech will be on policy, not on politics and this is not a campaign event. and we therefore will not entertain questions from whatever is happening on the campaign trail and those are really important issues. though not as important as the one speaker gingrich will address today. we look forward to continuing

the substantive discussion over the coming months and today we welcome speaker gingrich to the conversation. mr. speaker. [applause]. >> i want to thank all of you, and, to be clear about the... i turned off my blackberry and cell phone, and be sure and turn off your cell phone and blackberries. i worked with the heritage foundation for a very long time. and, it is a remarkable institution. i particularly want to commend heritage action for the work they that have done on the deficit and if you look over the years at the range of new ideas, the range of new proposals, the number of conferences that heritage has sponsored, it is a major force in the city and in the country. and has played a significant role and i hope will continue to and so i was delighted to have

the opportunity to come and be here today and to talk about what i think is one of the most important crossroads in american history. i have... just as background for a minute, because, i want to say some things that are very bold. and i'd like to somehow get across particularly to the washington elite, that boldness is sometimes exactly what we need. that it is not pie in the sky, not, you know, fantasy land, i have lived through two cycles of real boldness, in 1979-1980, the economy was collapsing, rationed gasoline, either other day based on the last number of your license plate, jimmy carter was giving a speech on malaise as our future and we had 13% inflation and 22% interest rates and were sliding into the deepest recession since the great depressions. and, the soviet union was on offense with everyone in the world an ronald reagan came again and he was bold and so bold the city thought he was

hopeslessly idealistic and it was impossible to do what he did. and ten years later the soviet union disappeared. and we have had a 7-year recovery in which translated into our current economy, would add 25 million new jobs, $4,400 billion a year of additional economic activity and $800 billion of more revenue per year and you find no one in the city, in either party, willing to take seriously what ronald reagan did and how he did that. i participated in that as a junior member of congress, and, turned around in 1994 and we launched an idea which no consultant would have approve of and no one in the press corps thought could succeed and had ten ideas, and made them a contract. and, we went out and campaigned, the largest one-party increase in the elections in 1994, 9 million additional people voted republican and two leading commentators of elections two weeks before the elections said highest number republicans can gain is 26 seats. and we gained 54.

people said, you can't balance the budget. within three years time, we had balanced the budget, and, stayed balance four consecutive years, $405 billion, left and they said you cannot reform entitlements and we reached welfare, 2 out of 3 people, went to school or went to work and we didn't just reform welfare, we did it in the open, in public, with hearings and the result was the american people concluded we were right and bill clinton vetoed it twice and the third time signed it. and the third time, the country was so solidly for welfare reform, 92% of the american people favored it, including 88% of the people on welfare. half the democrats voted for it. the house democrats split 101-101. now, that required the process of governing and i want to start with what i think is the biggest mistake both the president and the congress are making and, ronald reagan really understood and really taught me... you lead washington by leading america.

you don't lead america by leading washington. the entire process of legislating shenanigans, the stimulus package, no one read or knew and passed blindly and later, according to our president, that the shovel-ready jobs were not shovel-ready, somethings which probably would have shown up had they held public hearings. obamacare was passed in secret. despite the president's promises of being on c-span. and, speaker pelosi said we have to pass the bill to learn what is in it. we had the deal on a bipartisan basis, recently. the last part of the debt ceiling deal was cut overnight in order to get the final number of votes, which was passed without meeting any of the standards the house republicans set. it wasn't on-line for three days, wasn't out in the open, wasn't open for amendment and it was up or down, do it this way

or not and we have gotten into the cycle, where small groups of elites get together, argue with each other in secret, tell us occasional press reports of their version of the arguments, and, at the last minute come with a proposal that says, okay, we'll cut off your right leg or shoot you in the head. which do you prefer and we call that governing. the result has been that rasmussen reported recently, 17% of the country believes we have the consent of the government. that is a frighteningly low number. this is america. our whole model has been the opposite direction, we have had enormous turbulence in our history and passionate belief that power resides in the people and we favor government of the people. by the people. for the people. and what you see now in a bipartisan basis, in the city, is a desertion of lincoln.

government of the insiders, by the insider, and for the insiders. the federal reserve which spends hundreds of billions of dollars in secret. no understanding of the legislative process which makes a deal which is ostensibly going to produce $1.5 trillion of intelligence behavior or $1.2 trillion of really stupid behavior and that is what the deal comes down to. they tried to design a fall-back so disgusting that they will coerce a vote out of the congress in order to avoid the fall back and this wrote it, a voluntary fall back and it didn't come magically and no one went on the mon auntain and sawe burning bush and said, you have to be stupid and they did it voluntarily and lincoln was challenged to a duel once. late in the period... and he said should the guns at three paces. [laughter]. >> and the guy who challenged

him, said it would be mutual suicide and lincoln said, yes. and, he said i didn't want to do it anyway and the guy walked off and he made a pointe, if you hae a congress which has to invent a suicide mechanism to force itself to do something you have a total break down of the legislative process. and that is what they have done. they've also set up the exact wrong model. how do you say we'll cut $500 billion out of defense without knowing what you are cutting, what you are defending, who threatens you... i mean, if we are wasting $500 billion on defense, find it and cut it out and if not, how can we cut it? but to say mindlessly i want to threaten you by threatening all of america, this is a total disaster. a disaster in process, a disaster in constitutional means. and it is a disaster in solving our major problems. which, by the way, start with the economy and jobs.

they don't start with the deficit. the deficit is a function of the economy. if you had 9%-plus unemployment and that many people -- by the way, you have 16% of the u-6 number, unemployed, under employed and dropped out, not looking and, how many people on food stamps, unemployment, welfare, on medicaid. not paying taxes. you are not going to get to a balanced budget, when we got to a balance budget we brought the unemployment rate to 4.2%, which requires a growth strategy in the reagan tradition. and, so they are asking the wrong questions, and coming up with the wrong answers and, telling to us choose which wrong answer we want. so, let me start with the core of the critique. goes back to declaration of independence. we all remember, we hold these truths to be self-evident. important they use two truth" and all mean are created equal with certain unalienable rights,

life, liberty and the purr ought to -- pursuit of happiness, and, this is important, god gives you sovereignty and, power comes from god to you, personally and you are never a subject and the currents bureaucracy has to be overhauled, it is a european style bureaucracy which treats americans as though they were subjects and not treating them with dignity an authority of being citizens and it says to security these rights, governments are instituted among men, deriving their powers from the consent of the governed. nobody believes the majority of the american people would have voted for obamacare and nobody believes they would have voted for the stimulus. nobody believes the majority of the american people would have voted for the debt ceiling. so, we're pretty rapidly getting away from the consent of the governed. whenever any form of government becomes destructive of these

ends, it is the right of the people to alter or abolish it and to institute new government, laying its foundation on such principles and organizing its power in such form as to then shall see their most likely safety and happiness, and, the constitution gives us the right to alter rather than abolish the government and the american people keep trying to exercise their right, 2006 and 2008, they went in one direction and said not the guys who are in, 2010, they began going the other direction, saying not the guys who are in. but they are not getting the fundamental changes they deserve and so i want to talk about the super committee from three levels. the constitutional nature of it, the intellectual problems and the legislative process. constitutionally i think this is a truly bad idea. constitution provides for a legislative process. a legislative process should be out in the open. i'll give your two sets of numbers to illustrate how bad the idea is, the first is 535 to

12 and the other is 117 to 1. okay? the first is obvious, what is 535 to 12? want to guess? >> voting... congress versus the supreme court. >> congress versus the super committee. 535 house and senate members. there are 12 of the super committee. first question is, what are the other 5523 going to do? it will be an excuse to do nothing and, they'll focus all of the attention on the super committee and the lobbyists will focus all of their attention on the super committee and, it is truly a bad idea. because, first of all, it means the other 523, people back home should say to their members, what are you doing? where is my representation and why do the 12 get extraordinary power and the rest of you are basically in the course of the -- chorus of the opera? second, 117-to-1 is the number of standing committees and

subcommittees. 117 already existing. now, since the 117 are not doing their jobs, we now have one. which will magically do the job of 117. so, you have 12 members doing the job of 535. and, one select super committee doing the job of 117. it is fundamentally wrong as a model. second, it is intellectually wrong. the major problem in american government today -- and i know this is a hard thing to cover -- but the fact is, the major problem in american government today is intellectuals, it is not money or willpower. it is knowledge. i have been fascinated in iowa with a group called strong in america now, founded by mike george. mike george is one of the creators of the management system called, lean-6 sigma and that is, to some political writers, is -- their eyes glaze over, it sounds strange, and, well it happens to be the kind

of management system that ibm uses. the kind of management of the largest system in the world and boeing uses the largest manufacturing exporter in the u.s. and the kind of management system, motorola pioneered and they recently brought 1500 jobs back from china to arizona, using lean-6 sigma and actually are more productive in arizona with higher paid american workers than they were in china. and michael george believes, if you apply the concepts of lean six sigma to the federal government, save $500 billion a year and that over ten years is $5 trillion. over three times the goal of the super committee. the super committee will have enough time and energy to actually learn what this is, you think the staff will learn what it is? no, they are engaged in an i'mal fight. tax increase, no tax increase

and here, sitting on the table, ibm and dell and high-tech companies of the tech council issued a report last year and said, if you ran the federal government like a standard multi-national high-tech company, there is $125 billion sitting on the table. we did a book at the center for health transformation, called "stop paying the crooks" and thought the phase phrase was sufficiently clear and medicare and medicaid between 70 and $120 billion a year is stolen. and, with food stamps, there are comparable numbers as a percentage and supplemental security income, recent report, $10 billion a year. so, if you had a super committee, getting together and just -- the regular authorizing subcommittees, bring in experts who know how to do this, and, find out how to change the federal government, so it moves at the pace of modern crooks, and what we have today is a paper-based, bureaucrat from 9:00 to 5:00 versus an ipad

thief. now, there is no hope of a paper based bureaucrat keeping up with an ipad and, the thief stays up after 5:00 and, we have a senator in new york state what filed 992 procedures a day and got paid and ibm pays .03 of 1... american expresses. pays .03 of 1% to crooks, very sophisticated systems, and, have you ever been contacted because you wanted to be -- have you been contacted by your credit cords, virtually real time, right, to be sure you are using your credit card and .03. new york state medicaid, above 10% fraud, as a taxpayer you are 330 times, 33,000% more likely to pay a crook than you are as an american express card holder and now, an intelligent congress

in a city that wanted to be intelligence gentleman -- intelligent and, apply lean-6 sigma, the biggest single new idea in government, with running the government since the civil service reform of the 1880s, you end up having to fundamentally replace the current civil service rolls, because you cannot have permanent tenure, impossible to fire, you know, you can hold your job forever even if you don't do it, and have a lean-6 sigma company and, i went and visited the boeing plant in charleston where they are making the 787 dreamliner. and, it is an extraordinary example. think of that in terms of the federal government today and go and look at all of the huge high rise buildings sitting around here with people sitting in them. and, massaging paper. the 787 plants, they have four boeing 747, they have been

rebuilt to look like gup pies and they fly in entire segments of the 787 dreamliner. they are manufactured in italy, wichita, kansas, korea and japan. they stream into charleston where they are then assembled. and they were walking us around, the first composite based commercial airliner and substantially lighter and stronger than aluminum and a fascinating design, extraordinarily sophisticated. being built all across the planet. and being built so accurately, it fits together. and, they are showing us what to me would be -- i've studied under demming, the father of the quality movement and for whom the japanese award for management is named the deming award, their most prestigious management award and we were standing, looking at a particular work site and they said, this process currently takes 16 days. we want to get it down to 6.

with the same number of workers. and, if you can imagine going through the federal bureaucracy, for example, our league visa application system is a disgrace, and it is cumbersome and expensive and requires people to hire lawyers and takes an' norms length of time and -- an enormous length of time and says, if you want to be law abiding it will be expensive and time consuming and, for less money, higher a coyote and come across the border illegally, and that is the exact opposite of big government and can you imagine taking boeing model and, eliminating all the waste, all the red tape and all of the unnecessary financialality, of course you can't. because you cannot imagine real change and that city says, we'll we'd really like to do better but we can't do any better and we have to do what we are currently doing or raise taxes, since you don't want us to do what we a currently doing, we have to raise tax, because you scan not expect to us change and we expect you to change and,

change the taxes we demand from you but you can't expect your government to change and you can't get this kind of thinking with 12 people. the whole congress, i mean, every subcommittee should be assigned, learning lean 6 sigma and, holding public hearings and, everything they supervised and a got a study from the gulf of mexico that we simply went back to the pre-obama permitting system and would add 230,000 jobs in louisiana and texas. and, that is straightforward, because, we have been trying to build a pipeline from canada to houston to move oil and natural gas, which will be exported to china, all without a profit and the u.s. government spent three years stopping the project, and, the chinese are now talking about paying for the pipeline to go from central canada to vancouver, to skip the united

states totally, because we are not worth dealing with it and the dodd frank bill has so much red tape and regulation it will kill the small, independent banks in the u.s. and one major international bank is thinking of pulling all the operation out of the u.s. because we are simply -- too hard to deal with now. they don't make enough money to justify being hassled by bureaucrats. this is going on everyday. boeing is the largest exporter in the u.s., national labor relations board attacks... think if you were trying to create jobs as opposed to going on bus tours and were serious about creating jobs you would have to be for real change. so, my first challenge here, for the congress is, slow down, and think through how are you going to learn enough to fundamentally change the government, which doesn't mean a big, sweeping bill and may mean between now and thanksgiving what we need are 90, 100, 200 small bills. each one of them getting something good done, and then you add up the savings from 90,

100, 200 bills you actually could read and understand. and, it turns out you could probably, you know, let's say that you only say -- saved half the amount the lean six sigma say you could save, $2.5 trillion, substantially more than the super committee, the whole concept... you have a super committee. think of the concept. what does that imply? and why is it super, other than they've abrogated power, and will spend the next three months fighting. second, the number one challenge is job creation. now, i personally believe you cannot create jobs with class warfare and bureaucratic socialism. i think the idea of bureaucratic socialism, says you get to keep your company but you cannot run it. the bureaucrats will tell you how to run it. and, everywhere i go, every level of business, big and small, says, the level of aggressive bureaucracy is now a major problem, maybe a bigger problem than taxes.

so, if you really were serious about job creation you would repeal dodd-frank and, sarbanes-oxley, and, you would dramatically replace the epa with an environmental solutions agency. you would create a new 21st century food and drug administration whose job was to... assignment using lean six sigma as a way of designing it, to know about science in the lab and move it to the marketplace, as rapidly as possible and that would have two effects. you would dramatically accelerate health solutions for americans, lower the cost of health care, improve american lives, and, in the largest market in the world, what health will be, would make america the dominant provider of health services and information and create millions of new jobs, that are high value. but, that is literally the opposite of the current fda mind set. you are not just talking about changing the bureaucracy but the culture and people getting up in the morning, how can i help get these thing to the american people, not how can i stop them

and there is a terrific book on polio. and, if you read it you will discover that salk discovers his vaccine, gives it to his own family. to make sure it is safe. the following year, 1,400,000 americans are volunteers. and the year after the whole country is vaccinated. take the current fda model and lay that over the 1950s. you realize that he never would have had the money to go through the current process and, people would be in iron lungs and dying of polio but then they were able to waive and use common sense and say, how many people die from polio and what is the risk of trying this? and they moved with enormous speed and these were people who fought world war ii. they were used to the idea you had to be fast and get things done. we have to litigate and regulargulate. why would you expect to get it done? we beat japan in 44 months from pearl harbor to victory over japan.

44 months. hi mont 44 months, mobilized, nazi germany and japan. and, you start thinking about lean six sigma, you think about, not just -- it's not just taking out waste. it is defining what you are trying to accomplish. and, maximizing the rate of getting it done. so, it actually adds value, and if you were to say, what do is say by reforming the food and drug administration, it isn't internal taxpayer savings. what if you triple or quadruple the number of american jobs in the health field by making us the dominant exporter worldwide? how do you quantify the advantage to the u.s. as a country of a pro progress fda rather than anti-progress fda? there are all sorts of second and third -- that is ronald reagan's interest in growth was all about. not just what will you score in government but achieve for the whole society. let me suggest a grand package,

if you will. grand agreement. i am for revenue. i am against tax increase, i'm for more revenue by getting americans back to work which increases revenue dramatically and for more revenue by identifying federal access, and, using it. and i'm for more revenue by developing american energy. let me take the second and third and combine them for a second. if we had as a goal producing all of our own energy, keeping $400 billion-plus at home, the economic side effect of $400 billion that went to the united states, not to saudi arabia, venezuela, iran, iraq, the effect of the world market, that much additional energy, lowering prices, would be extraordinary. and, from a national security standpoint, it would be a terrific thing for us, if we could have iran getting a lot less money but from an american

economic standpoint, it would be important. it also turns out for example, if you are drilling offshore or drilling on federal land, they pay you royalties. so, it is a major source of additional revenue. a bipartisan proposal by senators webb and warner, actually partisan, the two democrats, but a bipartisan concept that would allow virginia to develop offshore, and would give 50% of the royalties to virginia. 37.5%, directly to the state government, as revenue and 12.5% to land conservation and infrastructure. so, you could literally finance the rebuilding of norfolk in order to handle offshore development. by paying for it with the offshore development. an old american idea, if you have more economic activity, and you get more revenue... and i'm for more revenue through economic activity, through more jobs, and, i'm for more revenue through the development of

american energy and remember, hydrocarbon, coal, gas, oil, we have more total energy than any other country in the world, much more than saudi arabia and much more than russia. we have an anti-american energy bureaucracy and anti-american energy government and these are important jobs. in pennsylvania, shale, they've developed technology which led to the development o shale gas, on a level nobody thought was possible and, they would build liquefied natural gas facilities to bring as if into the u.s. from the middle east and today they will tell you because of you our technological developments we can use shale gas at 8,000 feet or below and now have 120 year supply of gas, and we are talking of building liquid natural gas facilities to ship it out of the country to china as an export and the opposite, ten years ago, why technology matters and you have

to think dynamically, and not statically and-- bureaucracies are always wrong, their models are static. a good place for the president to go visit. and, in western pennsylvania you have 72,000 new jobs, since the last quarter of '09, and, the average salary, $73,000. in north dakota, with the formation which turned out to be 25 times bigger than expected, 2500% bigger, they now have 3% unemployment and you think some people in the city would say, gee, 3% unemployment would be good, what is the secret? it is partly energy and partly technology, and, they have a balanced economy and work hard between agriculture and high-tech and energy. but, there -- they've had 7 tax cuts, not increases and if you cut tax it works, when i was speaker we cut the gacapital gas

tax and, had 75% more revenue from capital gains at the earlier higher rate because the lower tax led to more people being active and more people investing, and, everybody agrees -- i think, literally everybody agrees the current american corporate tax rate actually reduces the amount of revenue we get. this is just asupplipplied in a practical way and if we went to a 12.5 corporate tax rate we'd actually get money out of ge, and we get no money from general electric today, they higher 375 tax lawyers, the largest tax firm in the world is the general electric tax department and it pays them to hire the lawyers to avoid 35% taxes and 12.5%, they would fire half the lawyers and, send revenue to the government and you'd see an increase in government revenue and nobody disputes this. the city can't do it. it gets locked up in politics and ideology.

and, in fact we know, about a trillion dollars of profits sitting offshore, that will not come home, at 35%. at 12.5%, probably 6 or $700 billion would come home, a tax holiday, almost all would come home. a fundamental difference, how you think of doing that. i'm for more revenue, part one energy, parted 2, putting people to work and part 3, assets. two examples, southbound should inventory everything owned by housing and urban development and ask, why? and we should frankly, privatize getting rid of most of it. and, you will find out, particularly, now, with the foreclosures there are huge volumes of property held by the federal government. many of which are deteriorating, because the federal government is not a good landlord. but we, the american people, own 69% of alaska. alaska's twice the size of texas. this means, we currently own 1.5 texases.

as governor perry will tell you, texas is a huge state. so if we have 1.5 of them, what if we took half of texas and said that is national parks and wilderness areas, et cetera, and, that would leave you an area the size of texas and you could develop it. what would the value of minerals, oil, gas, people believe maybe the largest coal reserve in the united states is in alaska. some people propose you could use the coal in alaska to actually create gasification and take care bonn recapture and use it to enhance recovery from the north slope. which would then extend the life of the current pipeline. it all requires creativity. and you cannot get creativity out of 12 people fighting politically. and, imagine you said to the interior committee, both house and senate, why don't you review

all american properties and decide which ones we could allow people to develop and we own something like 89% of nevada. now, some of it is military reservations. some of it is scenic. but, 89% of a state? surely, 25% or 30 or 40% of it could actually be opened up for development. the chinese have a major effort, worldwide to get rare earth, which is important in manufacturing and, we have huge deposits in california which are currently off limits and so, i'm for more revenue from using american assets, and i am for more revenue for american energy and for more revenue for getting people back to work. if you did those three things you'd dwarf any conceivable tax increase and at the same time i'm for fundamentally thinking of the current system and we talked of the legislative process and they have been going at it exactly backwards and i say this, as somebody who for four years as speaker of the

house got a fair amount of things passed. when you centralize in the grand bargains, you maximize the ideological conflict. one of the most important lessons i ever learned was to try to train people to say, yes, if, rather than no, because. and, one of the proposals i have, which will actually be in my news letter, at gingrich productions tomorrow is a proposal that the house republicans take up the rubber... webb-warner bill and pass it. don't amend it. they can do this the first week they come back, send it to the senate and here you have a bill that provides for off-shore development of oil and gas, offered by two democratic senators, one of them a former governor, endorsed by tim kaine, term governor and former democratic national chairman, endorsed by governor mcconnell -- mcdonnell, who, thinks it could

be a model for the country. the... look this is a jobs bill, energy bill, revenue bill, all in one. what does harry reid then do? does he say a bipartisan bill introduced by two of his democratic members is unworthy of the senate considering 1234 -- considering? or say, all right, send it to the president. and, there are enough democratic senators who have spoken out in favor of offshore development an you can get, i think a filibuster making 62 votes in the senate and at that point, what does the president do, come off the bus tour to say, let me veto a bill that will create jobs? i think, if the house republicans would focus on lt g legislating and not negotiating and, start in the morning, scanning what democrats

introduce and if they introduce a good idea, pass it. because, it starts to create a new rhythm. i proposed at one point in the middle of this mess that we adopt a principle that the first three days of the week you only bring up bills people agree on, just to force people into a habit of looking for stuff to agree on. the psychology of saying, yes, there is a way to do that. it is so dramatically different than, no, we can't do that. now, it also lets you side step the tax fight for a long, long time. and, i am with reagan, the lessons i learned from grand deals, watching him in 1982, in a -- democrats wanted to cut $3 in spending for every dollar of tax increase and as ronald reagan wrote, they got the tax increaseses, which were permanent and got a spending increase. and never again agreed to the deal, because it didn't work and 1990 we had the same thing again.

and, you saw the same thing happen the other week. these are really, these grand compromises don't work very well. but, a thousand small, smart things... actually would get more done. than trying to lump it into one grand thing and i file more comfortable if the congress set the following goal: by the beginning of november, we will have passed so many reforms that we will save more than the goal of the debt commission. so instead of the super committee getting $1.5 trillion, again, taking all the different things i have given you today, new revenue from energy and new revenue from assets and full employment. dramatic modernization of the system, dramatic improvement of capabilities to reduce spending. my guess is, you could be in the $3 trillion range, by christmas, score it over ten years. but it is a very, very different

model. and, so, i am speaking out like this because, as somebody both representing people around the country, that i listen to, who are very offended by the super committee, and, very threatened by it, and distrust it deeply, and also, somebody who legislated a fair amount, i believe the model would work dramatically better, and i really urge the members of the house and senate to look seriously at a model of legislating now, don't worry about legislating and, build up a good mound of good things and you will be pleased by thanksgiving, by everything you have accomplish. let me, if i tigmight, toss it questions. >> thank you very much for that. [applause]. >> if anyone would like to ask a question, the floor is open, introduce yourselves, before you ask a question. we have a microphone in the back. anybody?

did we scare everybody off... oh, right back there. >> speaker gingrich, part of your problem is that you are rational and logical, and, there are probably liberals up in congress, who will hear everything you said today and for all intents and purposes, come up with a super-duper committee and, those in the media who will simply echo that, simply because the liberals in congress came up with that. what role or what culpability does the media play in the kind of gridlock that you have talked about? >> i think fairly substantial. i mean, again, there are actors in the drama and they have impact on how they define and shape the drama. i find getting reporters to learn new ideas is at least as difficult as getting politicians to learn new ideas. but that is part of the process of a free society, talking with

itself and there would be great joy, between c-span, here today, and youtube and the internet and twitter, i mean, think about the total range of communication we have -- we have recently been doing google-plus hangouts and everything you can do to communicate in the modern era, you have an ability to have a conversation that is remarkable and i commend all of you as a great study. a book, called "lincoln at cooper union" which was written by somebody who had been -- bella abzug's -- and mario cuomo's press secretary, not exactly a gingrich conservative, it was remarkable, because lincoln believed in rationality and he was given an invitation to come to new york and give his first major speech in the east and spends three months at the springfield law library. doing his own research, writing his own speech and goes to new york and gives a 7200 word

speech which takes two hours to deliver. it was a different era, he goes to the newspapers and actually checks to make sure they got it down right. because he had given them all the text and repeats the speech, once in rhode island and once in massachusetts, and then goes back home, and, that is in february of 1860 and his next speech, the farewell address at springfield the following year and when reporters try to get him to comment he says, read the speech, and if i give you any other answer you will distort it and, yet, when you watch lincoln, a good book called "the eloquent president" by white, and, lincoln is fighting a civil war and suffering enormous casualties. people are deeply frightened and deeply pessimistic. and he is calling on the better angels of their spirit, calling on their mind. he's talking to them -- read the gettysburg address someday as a campaign document. that didn't quite work right. i like that. good.

i think you are getting it. but if you read it that way and there were a couple of studies of that as a campaign document and think about what he says when he says, this is a test to decide whether government of the people and... i'm told, he went up on the word -- of the people, by the people, for the people, shall endure. and what is he saying? he's talking to a nation at war, saying, if you quit you have given up on government by the people. so, i hope to some limited degree -- ronald reagan was the same way. i did a speech at -- great institution, and say, briefly, here, and, the 25th anniversary, in march of '08, of two of the great speeches, the evil empire speech and the strategic defense speech and i have been shaped by a remarkable book, called "the education of ronald reagan." and which i commend to all of you, and, i started by saying

the problem we have today is, elites in the city of both parties who want to lead the country by leading washington. and, there is a movie on reagan, "rendezvous with destiny" and when you watch ronald reagan, he is educating the american people and his speeches are dense and the idea he was a shallow, inarticulate person, is nonsense. reagan is -- actually reminds me have ed demmings and is creating a database to surround your mind. as a result of which you see this world differently and he described it simply as saying, i would show the light to the american people so they would turn up the heat on congress and what we have done today with the super committee, is the exact opposite, and we have distanced decision making further and further and further from american people. so now it will be 12 people, and, a nation of 305 million which, is absolutely, fundamentally, wrong. and, reagan would say the answer

about the press and everybody else is, cheerful persistence and eventually they learn it and pick it up. and eventually, you know, i... i guarantee you that lean six sigma which today is a joke in the press corps, will a year from now be a common thing because, mike george is right. he has over 20,000 iowans who signed up for it. i go out and see you people all the time -- we are doing a conference call tomorrow, and we already have over 500 people signed up. to talk about how you would redesign the federal government using lean six sigma. and, these things, they grow. they develop, and i was there when welfare reform was a really strange idea and when welfare reform was i universally accepted idea and when kemp was developing supply-side economics and i was a candidate, losing my second race in 1976 and talked to jack kemp in savannah, and he was an evangelical for supply-side economics. and by 1981, it became something which flipped the democratic party and a third of the democrats voted for the kemp tax

law. and ideas can grow and can develop. >> young man there in the yellow tie. >> thank you for your remarks -- >> a mere child when i first came to heritage. >> provocative speech at a lot of levels and you made one point about the concentration of the power of the committee, and 12 individuals, heightening the ideological differences and by extension, height then chances it will come to some kind of ideological gridlock and you referred to the question mechanism... the defense cuts especially, but, also, additional rounds of cuts on providers in medicare and other cuts to things that -- other politicians view favorably and what do you think the odds would be if congress simply, doing what it has done in the past with respect to doc fixes and amt patches and, waive all the consequences if it gets to that point or would they let those cuts actually go into place?

>> well, no one knows what they do, but i think, we are caught in a genuine bind now. one of the reasons that i'm engaged in the things i'm doing, is that you see us... let me say this right... we are sort of at the end of a road where there are fewer and fewer choices. okay? my guess is, if the congress were to actually just waive the bill, the reaction in the markets and reaction in our credit would be horrendous. so, on the one hand you have people saying -- think of the consequences. inaction means -- by the way, this is part of what makes it absurd. the current spending baseline is $45 trillion over the next ten years. the current projected deficit is $9 trillion. over the next ten years. they are not trying to get to a

balance. we got to a balanced budget in three years and they aren't even trying to do it in ten years and even the boldest effort, paul ryan's budget, which is clearly the boldest effort of any serious person in modern times, doesn't get to a balanced budget in the short run and he goes from 46 -- obama's 46 to his 39. and part of the reason is, people aren't willing to talk through the underlying contract that we have, what i find sobering about great britain, if you read analyses of who has been rioting, people rioting who never held a job. ever. or look at 45%, black teenage unemployment, in the country, you should be really worried as a social -- america only works when americans are working. citizenship requires the ability to take care of yourself. and, so, there are fundamental questions we have to rethink here and i think you could get

to the a balanced budget in five years if you were -- if the american people came with you. and, i think you will never get to a balanced budget if you try to do it inside washington. >> right here. >> mr. speaker, thank you for your comments, it is nice to see you again, i'm jack hill, a concerned citizen from centerville, virginia and you mentioned the balanced budget and do you have a comment on the balanced budget amendment? to the constitution? i personally would like to see an unbalanced budget in favor of reducing the deficit, but i'm interested in your comments. >> the balanced budget amendment would lead to a surplus and we had four consecutive years of balanced budget we paid off $405 billion in federal debt and presumably you will not balance at zero, you try to have growth that carries you into a surplus and ideally we ought to get the national debt down to 40% of the gross domestic product, a low enough number you could then

have huge reserves and capability if you got into a crisis or a big war or something. i favor a balanced budget amendment. and, in 1995, we passed it in the house and got a constitutional majority and i think we had 293 votes. and, the senate we came within one vote of passing it, got 66 and needed 67. we met at a dinner in which all the senior republican leaders of the house and senior staffs sat down for three hours and we said, okay -- think of where we were mathematically. 293 people voted for the balanced budget and 66 in necessity and we said, what if we pretend we passed it? we said we could balance the budget in 7 years. now, that was the transition, implementation for the balanced budget amendment was 7 years and what if we go ahead and behave as though it was passed and

after three hours, we unanimously agreed, we'll go ahead and balance the budget, and read the across, it was amazing and the white house said you cannot balance the budget in 7 years, maybe ten years, or we cheat on the scoring and, we went through a long month after month argument, and, finally, after the government shut down twice, and we had... by the way, we had the government shut down correctly. everyone was paid social security. everybody got paid in the military and everybody got paid, air traffic control. and i mean, you don't have to be insanely stupid. and threaten everybody in the country because you are incompetent. you can have very serious fights and do it in a way the country is not -- the only people that were irritated were those who came as tourists because they closed the washington monument and the smithsonian and the smithsonian, they probably have enough reserve money, and, they can be stay open. if you could make it legal and in that setting we finally got the president to agree and we worked together and, it was very

tough. the president and i negotiated 35 days of just hammering out different pieces, and welfare reform was a huge part of that and that was frankly handled, at a distance and, as i said, he vetoed it twice and, if you are the president and you sign the legislation, you have a right to say you did it. okay? if you are the congress and pass the legislation, you have a right to say you did it. and, so we both get to have a fair amount of bipartisan credit for getting things done. i would like to see, in december, whenever they have the vet, they pass the balanced budget amendment, and, my suspicion is you will find they won't. that the local democrats, particularly in the senate, will not vote for it but i would equally say, if you have a serious strategy for getting to a balanced budget. it would make it easier to pass the amendment. and, that is why i'm for having a strategic approach, that uses all 117 committees and subcommittees and gets all of them moving in the same

direction, moving towards dramatically decline in government spending, and dramatic modernization of government. >> hi, mr. speaker, i'm rebecca kaplan from cbs and national journey and i wonder, you spoke of the importance of republicans in congress passing democratic proposals, if they were good proposals and are there any proposals president obama has called on congress to pass when they return this fall, such as an extension of the payroll tax cut, extension of unemployment benefits, or an infrastructure bank that you, yourself, would pass if you were in congress? >> well, i would look at the three things, take the through you mentioned. i think it is very hard not to keep the payroll tax cut in this economy. i don't know what republicans will say but it is very hard to say no. we are going to, you know, end up in a position where we'll raise taxes, on the lowest income americans, the day they

go to work and make life harder for small businesses and i think they have to hold hearings and look at it but i think that it is a serious challenge to not extend it and unemployment compensation, it goes back to the welfare reform debate, i feel strongly, the key to passing welfare reform, people came to believe that giving people money for doing nothing is bad. that it destroys their independence and destroys their initiative and is a terrible role model for their children, and we now have 99 weeks of giving people money for doing nothing. and, i would say that any extension of unemployment compensation should have a ta-- attached to it a 50 state permission to running training programs as a mandatory -- not a federal program but say to all 50 states you may set up with businesses in your state training programs for everybody who is unemployed so in order to get unemployment compensation in

the future, you have to sign up to get trained and by definition you don't have a marketable skill and remember, unemployment compensation originally was in a cyclical economy where a steel worker or an auto worker happened to have 16 weeks off, often done, by the way, to subsidize the company while they retooled. well, that doesn't exist now. somebody is out of work for two years, we have a real problem with education, and a real problem with job skills, and so if you want to change unemployment compensation into a human capital development fund and want to say to people, we're going to expect you to actually learn things and you want to say to the business community, we want to match you up, for training with people who need training, so, it is actually -- not talking about a massive expansion of various school programs, for, you know, 50 minutes, once a week, i'm talking about actually having serious training programs where people learn serious things, to become employable. that makes sense. and, i think it ought to be modified to achieve that.

so that is how i'd approach that. on the infrastructure i have a tote toll different proposal. i would combine an american energy plan with a very large infrastructure program and have the new royalties from american energy subsidize it. if you develop offshore south carolina. if you took the formula webb and warner developed you have a 12.5% revenue going into both acquiring conservation land and infrastructure you can dredge the charleston harbor which needs dredging, using the money you are getting from an offshore development, so, at no tax increased to american people, you could begin to rebuild our infrastructure, which we do need to do. there is no... you go to china and elsewhere, and we are rapidly decaying, in terms of infrastructure. but i'd like to see a grand

coalition that everybody who wants infrastructure and everybody who wants energy comes together to pass a bill which uses american energy to generate the royalties to pay for american infrastructure at no additional tax increase. i think that would be the kind of thing you could do, and it would be very, very exciting and creates two jobs, one in infrastructure development and one in energy development. >> with the heritage foundation... going back to the points, assuming congress doesn't waive what the super committee comes up with, how likely do you think defense cuts will be, are they on the table? are you concerned about what that means for america? >> look, i'm extraordinarily concerned about defense. we have now undercapitalized at a time when the chinese are developing. we could easily face catastrophic results over the next 10 or 15 years and we are overly focused on the ability to

fight insurgencies. and, we lack the drive and the energy and the strategic thinking. i talked to former head of the central command recently who made the comment that our strategic deficit is larger than our fiscal deficit. we're not thinking seriously about what is going on in the world and i believe we are now entering a period of greater relative weakness than any time since pearl harbor which doesn't mean i'm for the current pentagon, i helped found the military reform caucus in 1981, because i said at the time i was a hawk but i'm a cheap hawk. and i am for applying lean six sigma tots entire defense department as much as anywhere else, and for rethinking troops overseas and i don't understand why we're in germany any more, i mean, i spent part of my life at stuttgart american high school and we were there because there was an inter-german border and soviet troops on the other side

of the border and if you were to list every place we have troops and say, how many of these are there because they are there because they have been and therefore the inertia keeps them there as opposed to why are you strategically doing that? and look at the civilian overhead in the pentagon. i would look at that seriously. you know, i think you would find that if you ran the pentagon the way you would run a modern, high-tech company you would have dramatic reductions in scale and i think if you rethought the entire process of procurement. the idea that now it takes a generation to build an aircraft. we built 273,000 aircraft in world war ii. and i told somebody yesterday, who is a real expert on this stuff, five years, build 273,000 aircraft. now, they winter eren't as compd as f-22s, but the relative complexity is not on the scale of cost and procurement. i think every american needs to

understand, if you don't deal with national security in a simple way, what threatens us, what is the risk if that threat occurs, what is it worth to avoid it? if you don't start from there and then design your defense system, and just design your defense system as an afterthought of some really stupid political negotiation, you are putting your country at risk of a catastrophic defeat. and that is where we are today. >> anyone else? >> let me say, if i could, i amount delighted to be back at heritage and am proud of what heritage action has done and continues to do and it struck me, as a key place to make the talk and share these ideas with people and i hope that you will tell the team that i am really grateful for your hospitality and i hope that this continues the heritage tradition of developing new ideas and new approaches and new solutions. thank you very much. >> very were very proud to host

you. thank you very much. [applause]: [inaudible conversations] >> live over on c-span today,

at 10:30 eastern, secretary of state hillary clinton and defense secretary leon panetta on a conversation on internal challenges facing the u.s.. at 1:00 eastern the brookings institution hosts a panel discussion examining how the country's current political discourse affects america's foreign policy strength and overall standing abroad. later this afternoon pakistan's foreign secretary will be at the johns hopkins school of advanced international studies talking about the strained relationship between the u.s. and pakistan. "the wall street journal" reported monday that the obama administration will start basing aid to pakistan whether the country meet as scorecard of u.s. objectives to combat al qaeda and its allies. live coverage of all these events today on c-span.

>> next, a senate

transportation committee hearing looking at ways to invest in rebuilding roads, bridges and railways. the u.s. currently invests 2% of its gross domestic product in infrastructure while europe invests 5% and china 9%. chaired by democratic massachusetts senator john kerry, this hearing is about two hours. >> good morning. this is one of those meetings which, hearings which can have a lot to do with the future of the country and i'm very pleased to see there are a lot of people here because often on infrastructure people hear the word and they chill out and yet it is probably about the most important word other than war and peace that we can be discussing right now. i guess debt ceiling would

fit in that category too. anyway, americans rely on railways. they rely on highways, on airways and on waterways and they do that so they can move goods efficiently and people, they have been doing in even better ways. states like my home state of west virgina need sound infrastructure desperately to boost economic development in rural communities. in fact throughout the state. that's true of any state. i think it's true of any state. massachusetts too i suspect. particularly western massachusetts but all of massachusetts. got a lot of crumbling bridges. >> [inaudible]. >> yeah. transportation is showing signs of wear and tear and frankly much of it is in disrepair. people don't notice that necessarily or they think, well, it won't be me but we're getting past the point. across the nation we're driving on more than 90,000 miles of crumbling highways.

crumbling is if you have a crumbled cookie you can't eat it. if you have a crumbled highway pretty hard to drive on it and struck structurally deficient bridges. traffic and congestion is getting worse. the infrastructure is e minus grade from a national rating group. even though mileage traveled by cars is increased by 9% in the last 25 years. -- 94%. maybe we're making too many cars. in 2009 alone, congestion caused consumers business well over $115 billion in wasted time and fuel. so it's clear that we have to rebuilt the infrastructure that so many american people depend on. your expert. some in the house actually are adamant about the need to slash funding for transportation. that is a problem. hiding under the veil, i

would say of fiscal responsibility. maybe i wouldn't even say that. acceptable solution to very real problem for every american. as i have said before, we need to smart and target spending cuts with smart targeted increases. they both have to go. given the harsh realities we're facing it is essential we look at new ways therefore to stretch the federal dollars that do exist. which is what this hearing is about. that is why i introduced legislation to create the along with senator lautenberg who is not here yet, a transportation infrastructure investment fund for some very interesting reasons which i had not been fully aware of which i now am, which we're going to discuss this morning. because they would leverage federal dollars and encourage private investment into our transportation network. private sector investment and this is what struck me,

have billions of dollars, billions of dollars, ready to be put to work on infrastructure projects and we should tap into this vast amount of capital. now ppp means, you know, we all do it together, partners. this will have funds dedicated to repairing rebuilding, expanding our transportation infrastructure. it is an investment that creates much-needed construction jobs, manufacturing jobs. engineering for out of works americans and at the same time support americans competitiveness. i look forward hearing from our witnesses today. you're a group of phenomenal experts and i would ask if the ranking member has comments? >> thank you, mr. chairman. i do and i appreciate that you're having this hearing

and also that we share a common interest in addressing the challenges facing our nation's aging transportation infrastructure. we certainly need a new approach. the society of civil engineers most recent estimate says that the u.s. needs to invest $2.2 trillion in order to keep pace with infrastructure needs. the federal highway trust fund is broke. it has been bailed out now three times at a cost of $34 billion. so we need to be looking for other, more innovative answers. more of the same is not going work. raising the gas tax is off the table from my standpoint and instituting a vehicle miles travel tax is also a nonstarter from my standpoint.

i think it is time to look for new solutions that don't involve higher taxes and i am supporting a infrastructure bank that would foster private sector investment in the nation's large-scale infrastructure projects and insure that the most cost effective projects will generate the most. i am going to leave the synopsys of that to its major sponsor, senator kerry, who has done an incredible job of pushing this and getting the support. i certainly worked with senator kerry to assure that it was something that would be a major down payment but revolving fund that would leverage the federal government and private sector money and make it go farther. i think our bill is the answer and i really want to commend senator kerry for

not only starting the ball rolling but also working with people who had concerns as i did, get a bill i could support and do wholeheartedly support. and with that i will let the senator who is the main cosponsor of our bill give more of the detail and, mr. chairman, i would love for this committee to pass our bill and i bet you probably want your bill to be passed and so maybe we can work together, or maybe we could report both of them. >> we usually work together. >> we do. we do. >> yeah. >> and so, senator kerry has really worked hard on it and i know you're working hard with senator lautenberg, so maybe we can do something together because i think, if it is a revolving fund, i think it could really make a

difference. thank you. >> just because of the positions they have and i know the witnesses barbara, did you want to say something? you have to push your button. >> i think i would just like to give you a two minute report on what's happening in our committee, environment and public works with the transportation bill. i think it would be instructive, if i could have two minutes, that's all. and i appreciate it. first of all, isn't it wonderful to see the bipartisanship behind the infrastructure bank. count me in. i think it's a wonderful thing. also count me in on enhanced t the fia program which we'll do on a bipartisan basis. even chairman mica supports it as a billion dollars. this is huge. it leverage as, it leverage as billion dollars, $30 billion. amazing, a billion doll laws of federal funds with other funds matching it. this is all terrific.

the one caution i want to throw out, i want to say that senators rockefeller and hutchison, i want to throw out one caution in terms of the highway trust fund. find ways to leverage our dollars we have to do it and we are so far behind. if i have my full statement put into the record it dick indicates how -- dictates how far behind we are. the states count on it and to walk away when it is short is shortsighted. that's with what chairman mica unfortunately did. he is not thrilled about doing it. but he is doing it. it is a 36% cult in our basic program. that is a loss of 630,000 jobs, is that right? 630,000 jobs. what we're trying to do in the committee and we have bipartisan support on a bipartisan bill which actually freezes the current

spending and says we need to find $6 billion a year for two years to keep the to plus infrastructure bank plus tfia to get this country moving again and working again. that is very key. and how do you do it? the finance committee is going to determine how we make that up. but just to put it into perspective and note without any prejudice whether we support it or not, we're spending $12 billion a month in iraq and afghanistan. that is what it is costing us. we're asking for 12 billion over two years. it's a small amount. we can figure this out. i don't support a gas tax increase either but there are other ways to do this and get this con. done. so mr. chairman, my full support go to you and these wonderful members of this committee to get our country moving again. we've got to do it. we're the greatest nation on earth but if we can't move people, we can't move goods, we're simply not going to be there in the future. thank you.

>> that's a pleasant thought. senator kerry. >> mr. chairman, thank you. i wasn't planning to but i wanted to incorporate some of what senator boxer said and also respond to senator hutchison. let me begin by thanking you for having this hearing, for, focusing on infrastructure and also for your personal efforts with senator lautenberg to introduce a transportation oriented infrastructure initiative. it's important. i'm confident we can find a way to wok together. we need to. the most important thing we need to get this done. i want to thank senator hutchison who stepped up early. worked diligently with us to fine tune a proposal so that we could build the bipartisan support we now have. we have senator graham, from south carolina and senator warner on our side. as original sponsors of this

legislation. and others on the republican side who are very supportive and hopeful for it. the bottom line is this. and this is why we have to get together. every expert in the country will tell us that we have a $2.2 trillion infrastructure deficit. we would have to spend $250 billion a year for 40 years, which we're not doing just to bring our roads up to par, up to par. and, trying -- china, meanwhile is putting 9% of gdp into infrastructure. europe puts 5% of gdp into infrastructure and has an infrastructure bank. the good ol' united states of america that we all love and enjoyed preemmens of puts less than 2% of gdp

into infrastructure and we're living off the infrastructure and having invested in for us. there are no great, enormous, challenging, infrastructure projects. there is some small ones. there are a couple, high-speed rail efforts out in california that are sort of starving and a couple of others but the fact is we're just falling behind. we have, we have a train that goes from washington to new york that can go 150 miles an hour. it goes 150 miles an hour for 18 miles of the trip because you can't go under the baltimore tunnel too face because the vibrations may cave it in or the bridges of chesapeake too fast because you may have a lot of passengers in the chest peek as a as a result. this is crazy. this is lunacy. we can do better than this. particularly those of us have privilege of trillion of traveling a little bit and going to china and

riding on 200 mile-an-hour train and o china maglev goes 300 miles from airport to downtown or the tgv in europe or bullet train. just run around the world and they're all making investments that we're not. this is the one way we are going to leverage private dollars to do what unfortunately too many people in washington don't want to do is invest in the future of our country. and so, by putting up a small amount of money, we can leverage money that will fund and create projects that will be attractive. that will bring sovereign fund, pension funds, private investment fund. to the table for revenue-producing projects. and what senator hutchison and i will focus how we minimize the governmental component of this. therefore we chose it not to put into it a department. we keep it independent, completely outside, not-for-profit, no stock

issued, unlike fannie mae and freddie mac. we learned the lessons of all of those things and we put together what we think is proposal that could fly. we want to marry it with yours and want to find a way to get everybody on the same plate here because this is too important for our country. so that's 'nough said, mr. chairman. i want to thank for focuses on this and your own proposal. i hope this is one way we'll get america building. my just comment. for a billion in infrastructure you get 20 to 30,000 jobs. when you have 12% unemployment in nevada and 10% in california and rhode island and other states, florida, and people are screaming about wanting jobs here are the jobs. with minimal public tax expenditure. we would be crazy not to do this. and i hope, mr. chairman, you and others will help create the critical energy here to get it done. >> that was a superb

statement, senator kerry and i guaranty you that --. senator begich, if you want to put it in the record you get a statement. if you want to speak --. >> mr. chairman, i will do that only because i want to hear from these five but also i'm going to be leaving in a few minutes but i'm going to be backing forward to this i like building stuff so i like this committee. >> we are privileged to have a incredible panel. >> [inaudible]. >> i will wait on the for the witnesses. how is that? and look forward to hearing from them -- >> put your statement in the record? >> i would be happy to put my statement in the record, thank you. >> miss poly trottenberg,

assistant secretary of transportation for policy, is what you're talking about here, let's start out with you. >> thank you. thank you, chairman rockefeller, ranking member hutchison. members of the committee. thank you for allowing me to testify at this very important hearing. president obama believes to compete globally the u.s. must innovate and invest in building and maintaining world class transportation system. innovative finance is a key part of that effort and an important compliment to robust long term surface transportation program. today i will focus what we're stoog at dot under leadership of secretary ray lahood to encourage that investment and i will discuss our infrastructure bank proposals. dot's credit assistance programs are essential ingredient in many of the innovative transportation public/private partnerships currently underway in the u.s. given the country's current fiscal situation our role in supporting these projects is likely to grow.

the infrastructure bank is one of the most promising ideas for leveraging more private sector dollars into infrastructure. president obama has been a long-time supporter of concept as many of leaders here on this committee and throughout congress the administration's fy 12 budget requests 30 billion over six years for a new national infrastructure bank. under the president's proposal the infrastructure bank will use competitive merit based select on this shun process to provide grants and loans to range of transportation and freight project to suburban and urban and rural areas. they will use analysis and performance metrics to select projects that will produce the greatest long term public benefits and project out comes at the lowest cost to the taxpayer. infrastructure bank will seek projects that create good paying jobs and support national economic goals such as boosting u.s. manufacturing, facilitating goods movement movement and doubling u.s. exports. we proposed a housing infrastructure within dot so they can build upon the expertise and experience we already developed through our existing programs

including tfi. tger, rif, private activity bonds. one of the most successful programs has been tfia. support boxer mentioned. since 1999 we used 604 million budget authorities to provide 8.3 billion credit assistance that leverage ad total of 31 billion in investment for transportation in the u.s. in the last two years demand for tfia far outpaced existing budget authority and the program is increasingly competitive and required dot to get creative in con biming tfia funding with other programs. at the moment dot is using tger and tfia to build a $1.7 billion rail line in los angeles linking the transit system to the airport. approximately 20 million in tiger funds quill support a 540 tfia loan in the project. tfia is leveraging into a loan for $1.1 billion port of the miami tunnel project, through p-3 a private

concessionaire is providing $80 million of equity and 342 million of private bank debt. to make the denver union station project, dot got really created combined a tfia loan with federal highways and federal transit grant funding and a loan from the rif program which provides credit assistance for rail projects. $560 million project will create reasonsnal transportation hub in downtown denver and light rail, rail and bus transit. while the denver union station had to work with each of the federal programs independently and comply with each program's specific requirement. s and deadline they none the lows succeeded in providing a viable financial plan. a infrastructure bank would allow dot to coordinate the assistance through one program which could save project sponsors sub sanction time and money. projects like l.a., miami and denver to require significant capacity and sophistication on part of the public. there is value for the public sector in innovative

p-3s there is also complexity increasing role and innovative plans and private sector transportation we must assure applicants of all sizes in all parts of the country have guidance and technical assistance they need to succeed and insure that the public interest is protected. we already provide some of that guidance through our program experts at dot and in the future we do hope to better collaborate and tap into the expertise represented here today from the private sector labor and other stakeholders. i have want to conclude thanking the committee for the opportunity to testify today at dot we look forward to working with you. i will be happy to take any questions. >> thank you. mr. robert dove is the managing director of carlisle infrastructure partners, the carlisle group. that is, you nodded your head when i said all those billions are available. so i want to hear what you have to say. >> thank you. mr. chairman, senator hutchison and members of the committee, thank you very much for the opportunity to testify and i commend you and the committee for holding today's hearing on

such an important issue. the carl lie group is a global alternative asset manager with approximately $150 billion in assets under management. cohead of the carlisle infrastructure fund, carlisle infrastructure partners a $1.2 billion fund that was raised specifically to invest in infrastructure projects here in the united states. i would like to highlight for the committee a recent investment by our fund that involved a participation with the state of connecticut. in this case, we formed a 35-year public/private participation with the state of connecticut to finance the redevelopment and operations of 23 highway service areas. we created a project that all sides of the political landscape include labor supported carlyle and our partners will support $180 million in upgrades over next five years. we estimate will create 375 additional jobs. in total the state is

expected to receive nearly 500 million from of of economic benefit from the redevelopment effort. our participation with the state of connecticut and innovative financing and delivery. completion risk, cost overrun risk, all been shifted to carlyle and its partners while there is ongoing revenue sharing agreement with the state of connecticut. i would recommend that the committee three general points. first, innovative financing, particularly direct private investment is essential to reforming our nation's infrastructure funding policy. this shift from how much to fund to how to create more funding is an important opportunity for this congress. by making programmatic and regulatory changes in the federal law, congress can encourage state and local governments to develop innovative financing models. this important to note that this kind of financing does not mean wanting to sell off america's public infrastructure to private investors.

the infrastructure projects must be either publicly financed or privatized is a false assumption. second, the establishment of a national infrastructure bank is a means to develop innovative financing and aid the delivery of infrastructure project improvements a national infrastructure bank can accelerate large capital projects by leveraging direct private investment into projects that are critical to the nation's infrastructure. mr. chairman, although i have lived in the united states for 30 years as you can tell from my accent i was not worn in the united states. i was born in the united kingdom. i have directly observe and work with a infrastructure bank in europe and i believe we can all learn from their experience. the european investment senator kerry referred to provides loans and guaranties. these loans and guaranties are expected to be repaid. the eib lends money for long periods of time, sometimes as much as 40 years, at

interest rates and doing so provides capital that allows for participants both commercial banks and private sector equity investors like myself to participate in a project that would otherwise struggle to obtain financing. importantly, the lending policy of the eib is driven by government but the actual credit decisions on specific loans and guaranties presented to the bank are determined by a professional staff operating independently within the bank. like the eib, in a u.s. infrastructure bank, the policies should be determined by congress, and other federal officials. you senators decide what infrastructure is to be built, roads, bridges, high-speed rail, alternative energy, water treatment facilities or whatever. the bank's function is only to determine which projects that are submitted for a loan or guaranty are credit worthy. its function is to make sure the projects that are consequence of the policies you have set on are

financially strong. the last point i wish to make a national infrastructure bank to be successful congress must provide additional reforms to transportation policy. the creation of a infrastructure bank should be a manifestation of a deeper, more profound change to our national transportation policy, specifically outcome based performance standards should be established by congress. for example, life cycle costs should be an established criteria when evaluating a major capital project. without it, a true comparison of the benefits of private investment, public debt financing is not a floor to cost of capital analysis but the private investment option is likely. mr. chairman, members of the committee, the need for investment in our infrastructure is significantly larger than any one revenue source. there is a need to design policies to access different funding sources while being a good steward of the nation's infrastructure. a national infrastructure bank by which private

investment can serve as one of those sources of capital. thank you once again for the opportunity to testify and i will --. >> that is excellent statement. i thank you very, very much. >> thank you. >> mr. managing director head of infrastructure investment banking for the americas. from a company called morgan stanley. >> good morning. >> food morning. >> good morning, mr. chairman, senator hutchison and members of the committee, it is my pleasure to be here this morning. my group at morgan stanley focuses on innovative transaction structures to utilize private capital to invest in infrastructure projects. focused on public/private participations or p-3s i appreciate the opportunity to share my perspective federal funds can be used to leverage and partner with private investment. morgan stanley investments over $300 billion of private capital to instress in

infrastructure projects. this capital is attracted to these investment opportunities give the potential to achieve long term and attractive risk adjusted returns. many of these fund typically pension, or infrastructure funds, have the ability to invest in various geographyes around the world, however they tend to focus on jurisdictions with stable, economic and regulatory environments such as oecd countries and can invest in very russ infrastructure verticals, transportation, regulated utilities and energy. as a partner can leverage and deliver a superior outcome for the project. for example, private, the private sector can often build a project more quickly and at a lower cost by providing efficiencies over time by introducing technology solutions. given the private capital can focus on a variety of areas outside u.s. transportation infrastructure, it is important to demonstrate

that a project is financially viable and has political support. because of the return expectations and a desire for stable cash flows, some projects might not typically lend themselves to p 3s such as many transit project he is. they could be strong p-3 candidates if the project is secured by some form of availability payment to protect against the risk of recurring operating losses. another challenge facing u.s. p-3s is convincing the private sector that there is political will to complete the p-3. give the high due diligence costs to reach a binding bid, private capital focuses early on regulatory and political approval processes. leadership from the federal government as been done in canada, australia and the u.k. can help attract significantly more private capital to a greater number of key infrastructure projects. while many states and local

governments are focusing on these matters, top-down leadership is also needed to apply a vision for the country and p-3 principles. currently no standard or government entity exists to share best practices across states and localitis. the creation of a nonpartisan infrastructure commission could help address that. in addition, states are in the need for capital to support projects. a national infrastructure bank could supplement the existing tfia, rrif and t tiger activity bond programs. in order for the nation to finance a wide variety of projects sponsors need to have access to a large variety of public and private financing alternatives. that could include grants, loans and loan guaranties, all of which i think are very important. in summary, the p-3 programs

developed in canada, australia and the u.k. have been very successful. they depoliticize the use of p-3s as a financing alternative. if the u.s. institutes similar programs at the federal level i believe p-3s can be more widely accepted as a viable finance ago alternative relative to traditional financing sources such as tax-exempt financing. thank you very much for the opportunity to testify here this morning on this very important topic and i'm, i would be glad to answer any questions you have. >> thank you, mr. offutt very much for that very helpful statement. mr. steve roe vice president of the brotherhood of locomotive engineers. >> good morning, chairman rockefeller and ranking member such son and members of the committee. as chairman rockefeller stated i'm steve bruno. vice president of the locomotive engineers and train men, which is a part

of the teamsters. my comments will be submitted for the record. everyone acknowledges that our nation's infrastructure is in dire need of repair and expansion. the safety of the traveling public and the jobs created by funding and maintenance, by funding the our struck tuck for everyone affected and nation as a whole. >> twice as much as 5% of the gdp and china invests 9% or three times as much as the united states relative to gdp. america badly needs the economic boost infrastructure investment provides. private investment dollars sit idle on the sidelines while unemployment subornly

remains near record levels. infrastructure investment is a proven economic stimulator and a job creator and it is an investment in the future of america. infrastructure investment creates jobs and grows the economy but we need to finance it. and for that, some would overly rely on the private sector. we believe there is a role for private capital and infrastructure banks but strong conditions must be attached and appropriate balance must be achieved. private funding must be used to supplement, not replace current sources of funds and certain questions must be answered before private funding sources are included, such as who maintains control of the infrastructure, who is liable if private entities encounter financial difficulty or with draw if rate of return is lower than expected. long-term costs to government and when does the public needs supersede the private investor's agenda and where will resources be applied. the leader of leaders of our country certainly recognize some projects are never

going to produce a profit. bridges, highways passenger rail and public transportation facilities are intended to provide for the public good, not-for-profit. the people of the united states are primary beneficiaries of any infrastructure legislation and not the corporate shareholders. a prime example of the right way and wrong way to pursue private funding exists in the competing northeast corridor plans put forth by amtrak by representatives mica and shuster. as amtrak president previously testified amtrak issued request for proposals for implementable business and financial plan for high-speed rail on the northeast corridor as part of their long-term vision. it has been fully vetted, peer-reviewed and properly balances private capital investment with public benefits. conversely the recent proposal by representatives mica and shoeser is shuster is wrong way to go. this would saddle amtrak with all its debt while removing the northeast corridor its greatest asset.

that would endanger passenger and commuter rail throughout the country and would cause significant job losses among amtrak employees. i liken that to locusts, corporate locusts. they swarm in. they acquire all the profitable asset and leave nothing but the husk to rot. which is what you find if the mica shuster proposal were successful. cost benefit analysis can not be evenly determinant for infrastructure investment. safety, and other public benefits must carry greater weight, frankly we're concerned that when private investment is the exclusive or even predominant source of financing, profitability is the deciding factor. inevitably, safety will be compromised with the end result being important safety projects, excuse me, important safety improvements or projects will be deferred due to lack of profitability. projects with the highest profitability will be pursued while other less profitable but nonetheless

essential projects such as there is service poor or rural communities will languish. the public good must always outweigh profitability of any infrastructure project which uses taxpayer money. and you, must insure this for the working men and women that i represent and the american people. so thank you for your time and i will be happy to try to answer any questions that you may have. >> thank you very much, mr. bruno. and finally mr. peter ruane. president and ceo of american road and transportation builders association. i assume you have no point of view on this matter? >> yes, sir, i do. good morning. chairman rockefeller, senator hutchison, members of the committee. thank you for inviting me to participate in this important discussion about employing innovative methods for the nation's transportation you can infrastructure needs. the pending surface transportation bill is commonly referred to as a jobs bill. while that is certainly true

this characterization frankly undersells the value of this critical legislation. certainly federal transportation infrastructure creates jobs in the construction sector and throughout our economy but even our industry's interests coincides with the public interest, it is not the federal government's responsibility to support my industry. however, it is the federal government's responsibility to insure that efficient commerce occurs among the states. in today's global economy, a country's transportation infrastructure capabilities are either competitive advantage or a stumbling block. it is something that our economic rivals as already pointed out by several senators this morning, already recognize. furthermore, every manufacturing plant in the u.s., every retail store, every service worker, and nearly 80 million total american jobs are dependent on our highways our airports

and our railroads for inputs to deliver products and services. the efficiency of the nation's infrastructure network, directly, directly impacts the health of these dependent industries. given the nation's vast transportation needs, we must utilize every available potential solution and that includes the private sector. for over 20 years, over 20 years, our organization has provided support for transportation public/private participations. through our p-3 decision we continue to, we continue to push reforms as detailed in our written testimony. that would further incentivize private sector investment and transportation i am problem. s. -- improves. potential contribution much the private sector is enormous. it must be considered in its proper context.

first and foremost private sector involvement requires the opportunity to earn a return. ironically in today's "washington post" front page of the metro section is a story of the hot lane project in this region which unfortunately the private company is going to withdraw from part of that because of their concern about its economic viability. secondly, the private sector will engage in transportation improvements based on their business objectives and not by some formula or some preconceived mechanism. finally, one. impediments to increasing private sector involvement in transportation improvements is the lack of legal authority in approximately half of the states. to conduct actual public/private participation projects. in an attempt to level public sector presources with private sector resources through proven programs like tfia, build

america bonds, and concept of an infrastructure bank. let's be realistic about the potential and recognize innovative financing is a supplement, a supplement to core public sector involvement. as pointed out in our written testimony the reality is there are not, there are not abundance at the moment of viable ppp transportation projects. in fact, the national forecast is some two to four projects a year, 5% of the market and i urge you to take a look at the study we commissioned. it is attached to our statement. that's looked at this sector over the last 20 two years and scope of 54 projects but only in half of our states. this should however not, this should however, not deter establishment of a infrastructure bank. while not a panacea, bank

projects could in fact be game changers. these projects could be catalysts to major productivity and efficiency gains for our national economy. mr. chairman, it is no secret that the biggest obstacle to moving the current multiyear authorization bill and surface transportation is the highway trust fund's financial outlook. the trust fund can no longer maintain current investments. in fact, investments in these programs also already been pointed out by chairman boxer, if the senate or the house does nothing, we will see a 35% cut in investments. there is no doubt that increasing involvement of the private sector in the transportation challenges can help when projects are viable. make no mistake about it. that we believe the congress must supplement highway trust fund receipts or thousands of jobs will be lost in every single state. we recognize this is a difficult assignment. it is not easy to write this

legislation but frankly the nation's long-term economic productivity as well as our jobs are at stake. in a little more than a month we'll be two months away from the end of our 8th extension. it is time to get on. it is time to get on with enacting a multiyear transportation reauthorization bill in a bipartisan way. as chairman boxer and senator inhofe are trying to accomplish, a bipartisan bill. the most important thing congress can do is to pass legislation and move this process forward. thank you for the opportunity and i look forward to ends aing your questions. >> thank you, sir. senator lautenberg has joined us and since he is the chairman of the subcommittee, frank, we have, you can say something now or i will give you an extra three minutes in your q&a. >> i will take the extra. the extra three, thank you.

>> okay. ok. number one, i may be a little naive but by the fact that i think i know it is true in the case of the commerce committee, it may be the that senator boxer had hearings on this we have every in had a hearing on the public/private participation approach. we just never had a hearing. and, then all of a sudden, i'm reading about a hundreds of billions of dollars and available and i'm looking at schedule of the people who are testifying and you get managing director, carlyle infrastructure partners. that says somethinging isn't it and manage director of head of infrastructure investment bank. more for morgan stanley. that sort of says a lot.

i'm not sure where we've been. but i can't worry about the past. i have to worry about the future. it's seems to me an extraordinary opportunity. there may be a number of other people also offered bills on this subject but i think it is imperative that we come together to make a common cause on this and i think it will happen. it will happen because it has to happen. i know, you know, bridges aren't made to last more than 50 years, are they mr. bruno? >> that's correct. >> yeah. >> some do, but today most of our bridges are over 50 years in this country. major ones on interstate system. >> believe me, i know that. let me give you a hypothetical. and this is not pack rok keel about my state, but it is sort of a complex problem. would you help me understand how you look at what you do. you and mr. ruane indicated you can't do everything.

maybe two to four project as year or more, whatever. but you can't do everything. i have been suffering for 40 years watching the building of something called corridor h. corridor h would connect to i-66, go right into the heart of west virgina, and would probably transform, in time, property values are increasing, neighboring counties, not just the counties where the road is built, is only 50 miles left to build. and it would transform the future of west virgina. i sort of can't help but be interested in that. and so, my question of you, and, whoever wants to answer, mr. offutt or mr. dove can answer, you have to see, things have to be paid back.

so in a sense there's a perspective nature to this. on the one hand, nothing will happen if we don't have this road completed, almost done. we've spent 40 years building it. cost $25 a mile. now. and, on the other hand if it is built, the world is going to open up in west virginia. and that is not a casual statement because industries are moving at a rapid pace from the congestion of the washington, d.c. area, into the eastern part of our state, which is where this would have the greatest impact. and so, i'm interested, how would you evaluate a project like that which didn't have like new york to boston but it's to a statewide open for development when businesses are wishing to get out of

the traffic congestion here. what are your thoughts? >> i'll start, mr. chairman. first of all, the way we would define infrastructure project is a one strikes the right balance between social benefits and economic benefits, and i think, the one you just outlined. clearly over the long run should generate a lot of significant economic benefits as well. then the question is, is how do those, how does the private sector get involved and potentially how does that turn into an opportunity maybe to get a return on the type of investment you've made. there are a host of ways that can happen. once you end up connecting let's say areas more rural to areas that are more densely populated. it is real estate development or potential revenue streams or investment opportunities that maybe don't relate directly to the actual road, that can develop a whole bunch of either jobs or

other types again economic benefits. so sit is always very difficult when we see projects like that it is always to very narrowly focus and say this road can generate this amount of tolls and therefore it's a good project. i think you have to look much broader. and if it can generate economic benefits for the state and for and create jobs and other things that have lots of other inherent benefits, then therefore we would define it as a very successful infrastructure project. >> you have ways of figuring out how large that growth in development might be? you can't do that out of top of your hat? >> that's right. and, professionals at morgan stanley can be helpful for a piece of that but inevitably there are people who specialize obviously in terms of trying to quantify economic benefits and i think those professionals can be really helpful to try to put a project like that in perspective. >> mr. dove, i've overrun my time. i'll be back.

senator hutchison. >> thank you, mr. chairman. thank you, mr. chairman. i would like to ask both mr. offutt and mr. dove the, differences in the two bills that have been introduced basically one a grant program in one and the other is a bank would be more of a revolving loan fund. and it would require a revenue stream. and my question is. my question to you either of you if that would fix a difference in projects that would be put forward and would it attract more private sector leverage funding, if you have the bank concept with the revenue stream as or can

there be cases where grants can be an enhancement? >> senator. good question. i think the important thing to understand you have heard from many people in the panel and indeed some, some of your colleagues, there is a need to generate difficult sources of funding for infrastructure. and the infrastructure bank which i propose around the sort of eib model is a bank which makes loans and guaranties and seeks repayments that is not to say that grants can't continue. the grants are good federal programs which our colleagues here have discussed but i think the idea of an infrastructure bank which could be used to supplement the chairman's particular project in west virginia is a way of providing a level of capital which will attract people like me as an equity provider and, commercial banks to come in on top of that to fund project which could not otherwise be

funded. i think you should see the infrastructure bank as a an additional source of, of capital for funding. >> i guess what i would just add to that too, i do see a benefit of having grants in some form, either as part of the infrastructure bank or separately through the tiger grant program because some projects i think require a piece of the project to be subsidized or supported with grants. and then, and then, once the project's built, then the project can support itself. it is a matter, in a lot of cases and rail has been one area that's been discussed where costs are such that you need to have a portion of it in grants to be able to overcome the overall capital requirements. >> thank you. thank you, mr. chairman. >> thank you very much, senator hutchison. senator kerry. >> thank you very much, mr. chairman. let me build on that because i think it's a key. >> we're going to break away

from this hearing for just a moment to take you live to the floor of the senate where the chamber is gaveling in momentarily for a brief pro-forma session. senators are currently back in their home states for an august break and will resume legislative work on tuesday, september 6th. of live coverage of this pro-forma senate session now on c-span2.

the presiding officer: the united states senate will come to order. and the clerk will read an important communication to the senate. the clerk: washington, d.c., august 16, 2011. to the senate. under the provisions of rule 1, paragraph 3, of the standing rules of the senate i hereby appoint the honorable mark r. warner, a senator from the commonwealth of virginia, to perform the duties of the chair. signed daniel k. inouye, president pro tempore. the presiding officer: now under the previous order, the senate will stand in recess until 10:00 a.m. on friday, until 10:00 a.m. on friday, >> the senate has just recess.

>> that is something that is of value to you, as you as a private sector investor think about where to take your capital. >> absolutely. i think it's very important the institution is set up, should first of all be seen as something which supplements the capital which is needed for infrastructure programs. so grants, tv, whatever they are are another form of coming into the project. but the basic capital structure from the national infrastructure bank ridge as i said would be very long-term debt, i'm talking

for your debt or even longer, issued very low rate of interest, so it's basically very long-term money. but that nix it retracted for me in private sector investor to know that i can get commercial banks in their on project financing bases and other equity people to comment to a project which otherwise would not be feasible. how it is determined has to be done in my strong belief i an independent organization. so this is an organization which is set up, the appointments are agreed by congress. the allocations which come in for the particular projects, whether it is a road in west virginia or a road in california or a road in texas, and they can evaluate it from an independent perspective and say, this deserves, to be given this opportunity to take 50 year

money plus 25 basis points. >> and the other point i just emphasize is that as currently constructed, we embrace water, wind and energy. >> the infrastructure, if i may, broader than transportation. it's included telecommunications, energy, water, water particular i think, levies, all these things are potential. but again, where the bank puts its money has to be determined by congress. congress decides the policy of what to be put before the bank. but the individual project, the sponsors, with a project which fit the criteria. and then the independent bank would then decide which ones are credit where the and, therefore, receive the loans. which have to be repaid. >> correct. and the judgments about those deals are made based on economic viability of the revenue stream,

the flow of the project, correct? >> correct. that doesn't necessary mean, if i may continue, tolls. the opportunity of some sort of availability payment which has been used in florida for the miami court donald and for the the ring road around jackson, jacksonville in florida. so it doesn't always mean you should be told. it could be some sort of other structure which would be put in place. along which would be appropriate for the west virginia project you were referring to. >> thank you very much sir. >> thank you, senator. >> i thank you, mr. chairman. i want to thank the witnesses for coming here today. i believe that we do need to take up for reauthorization, the transportation bill and we need to make some hard choices. so that people can plan on infrastructure across this country. and i also want to get back to some basics in making those are

choices. with respect to this fund i do have a question of ms. trottenberg come in speaking of the national infrastructure bank, representing a public-private partnership, i can tell you that i think the people are very tired of bailouts. and one issue that really leads to my mind in hearing about this that i think we need to have a very good answer to before we would establish it, how can we be assured that the infrastructure bank would not be the taxpayer on the hook for bad investments? what would happen if the projects fail? what would happen i suppose if it over extends this bank? what metrics would we use to measure success? how can we assure taxpayers that this doesn't just become another government entity that we end up bailing out that projects? and that we end up privatizing the profits while socializing the loss is? >> that's a very good question,

and i think it gets a little bit in part of the debate that obviously you are having and with that in the administration about whether you're locating it within a federal agency, you're making it separate, how independent its financial authorities are. it works with the credit programs at u. of t. is essentially congress grants us budget authority of the treasury are given a project with the possible risk is. and let's say it will give 100 million loan we may say the credit premium is 10%, we will take $10 million in basically the treasury will hold onto it. the treasury builds of the reserve and it covers the cost of any projects defaulting. so we do sort of very careful financial analysis and make sure the right reserves. i think one of the things that is sometimes frustrate our private sector partners is a takes us a long time to do due diligence because we are the public sector. we want to make sure the taxpayer dollars are protected. with the programs we've had a very, very good track record. but you're right, you have to

design carefully so there is no risk to the taxpayer. >> one of the things, i think this is probably for mr. offutt or mr. dove, when i think about a project, for example, of high-speed rail, why would the private sector -- projects around the world, i mean, can you help me with a project like that, a project you'd want to invest in? >> sure. i can start. when the florida high speed rail project was being considered, we actually had lots of conversations with construction companies, private equity sources and sword were very much interested in being part of that project. but the assumption was that ultimately it would be structured in such a way that when the projects first introduced, ridership may not cover the cost, the operating costs him and that ultimately overtime it probably would.

and it would be some bridge to make sure that they were not operating losses that would need to be basically covered by the private sector over that period. and there are examples where availability payments have been used to try to smooth that development out. and it didn't structure abruptly high-speed rail where it could work, but it is definitely a more difficult i project because it's in a very high dance area where you're trying to move people. >> if i'm removing -- remembering correctly, there's one place in the world where you've been able to break even with the passenger fare and rail. so this is an area where i would be concerned we are investing, if we're going to invest in other private sector join in, that we wouldn't be on the hook for something, and it's one of my concerns in terms of getting back to basics approach and

bridges in new hampshire, i can play this roads and bridges that need to be fixed. we start allocating money elsewhere. so, so this to me is in terms of how we would decide where the money is allocated. this is a very important issue i would think for the private sector on return of investment. >> that's right. in my tests but i highlighted transit because it's very difficult, transit projects to be able to demonstrate that the revenues from the fares does cover the operating costs and be able to ensure the safety. >> and one final question to ms. trottenberg, which is about, you know, in our state and i'm sure in many other states local officials spend a tremendous amount of time coming up with the transportation infrastructure plan, based on local priorities, stay priorities. and if we create a national, this would be done through the

bank in the d.o.t., how do we preserve that local feedback in terms of, i think the people of new hampshire make better decisions where to put the funding than someone in washington. and that's the concern that i have. so i wanted you to address that. >> i'll say a couple of things. first of all again, to reiterate i think these types of programs, these are to supplement regular highway and transit formula funds, the bulk of which go to the state agencies and are spent at the states and local jurisdictions. so this is not, it's not to replace the. out tdd example of the tiger program which is sort of a hybrid of grants and loans. one thing we did in tiger that have never been done before it is instead of just having state d.o.t. and transit agencies, we opened it up to all communities across the country. we actually got a flood of creative applications at the really local level. and over half the tiger grants

that would give for actually to local jurisdictions. so one nice thing that the infrastructure bank can do is opened the door up to all kinds of communities and different entities to apply. i think it can open the door to more local creativity, and the ideas are going to come from the local level. but it is true, you know, models were discussing, there is decision-making happening in washington. i do think it gets anyway to supplant the bulk of the former funds spent one concern i have overall, i understand this would be a supplement, but how do we know that it won't be washington's priorities versus the absolute needs within that state that you are making these decisions? can you comment? >> i think that's part of the hopefully the negotiations we will be having on capitol hill and within the administration. these are federal dollars, and typically federal dollars to 10 become with the priorities of congress. they can be frustrating.

it's usually a negotiation. i think and transportation we've done a pretty good job in a lot of decentralization of our programs, a decent amount of autonomy. but we are going to get that right balance. >> i want to thank all the witnesses for being here. thank you. >> thank you, senator, for your excellent questions. now senator lautenberg. >> thanks, mr. chairman. thank all of you for your presentations here. today, it does open up the subject of the public-private partnerships. and it appears that there are few other routes we are willing to take your now that will get us going on our infrastructure problem. railways, runways, keep our economy moving.

but much of the infrastructure is now so deficient. what we look at, a situation that escapes attention, in my view, and that is that in 30 years our population grew by 100 billion people. and it's expected that the next 100 thing will happen in shorter time. and infrastructure wasn't built for the present population, and you wonder how are we going to resolve it in the future. without spending -- that otherwise should take 15 minutes. across the country, one-third of our roads are in poor condition, more than a quarter of our bridges deficient. the transit system is outdated. in my home state in new jersey, more than three quarters of our major roads are mediocre condition. and one-third of the bridges are

in need of immediate repair. a falling transportation network, economic developer, productivity. and businesses can't succeed when the employees or customers are stuck in traffic, or when delay, delays prevent them from putting products in the hands of customers. investing in infrastructure is i think the primary goal for people to get back to work immediately. there's plenty of work to do, and that's why chairman rockefeller is creating a national investment fund that focuses on much-needed large-scale transportation projects. they are hard to get finance. this fund will offer loans and loan guarantees that complement existing grant programs. public funding by encouraging private investment. and it will give us i think a

much bigger bang for our federal dollar. the infrastructure investment fund will be a new vehicle to invest in america, to make sure we remain competitive in the global economy. i spent a lot of time in business, but an early lesson that i learned, if you want to be successful tomorrow, you better start laying the foundation today, or preparing the business infrastructure now to take care of growth and expansion. same principles arise here. of want to leave our children and grandchildren a better country, we've got to make smart investments. so i thank the witnesses for advising their suggestions on how we can finance these, to move our infrastructure repair and rehabilitation in a much better fashion.

the gateway tunnel under the hudson river between new york and new jersey, to increase high-speed rail. and this question is for ms. trottenberg. this project will create thousands of construction jobs, expand access to good bang opportunities throughout the region. can and infrastructure fund that combines grants and loans be used effectively to support the development of these regionally significant project's? >> yes, senator lautenberg, i think clear that's a project we have been hearing from amtrak about and talking with the delegation about and it's a very exciting project with a big price tag. it's going to take i think a lot of creative ideas on how to capture the monetary value of clearly the incredible economic opportunity and efficiency gained that project would bring. and bring that project to fruition. i think and infrastructure bank

could play very big part of that, and that could potentially be a piece to it and a grant peace as well. >> mr. ruane, our friends on the other side of the capitol have proposed slashing funds for surface transportation programs by 35%. what's the effect on progress, on job creation and our economy if the house republicans have their way? >> senator lautenberg, i've never studied economics and i don't have a degree in economics. things that i know, that i've learned over the course of my experience in life is that there's one basic of personal and economic and that's the supply and demand principle. and what i see is that there's a significant supply of labor out there for which there is no demand. and this particular bill

presents an opportunity to satisfy that antipathetic supply and demand back together. i think that as principle, eliminating or declining to utilize this opportunity is a bad idea for the american economy and i think it would be hurtful to ignore an opportunity such as this. infrastructure investment is a proven job creator. back in the '50s and after world war ii to develop the interstate highway system, and i think it worked very well in putting people to work and jumpstart the economy at that time. i think this is an opportunity, albeit not as grand a scale of that, to start that project or to start the economy once again in that direction. >> senator, obviously there is no action in the house and the senate, we are looking at a major, major dislocation in the construction industry, and every

segment, the number 600 plus thousand jobs cited by several senators here this morning, those are legitimate numbers. those are potential losses that could occur in the coming years if there's no action. that it's not just a house proposal. and i do not believe by the way that they're making such proposals out of hostility towards investing in transportation, you know, as they say the cards that were built. but nontheless, the thing -- the same thing can happen if the senate is unable to move legislation here in the coming days. the construction industry as a 16.3% unemployment rate right now as compared to a 9.2, vastly for the country, as mentioned by my colleague here, there's excess labor at the. there are opportunities to do more projects because of that. and so the inherited fear is to get timely action on this bill. the consequence, given the flow of money by the way, by the

highway trust fund, we are going to see cuts if the congress does not find a way to come up with this to keep the program stay. it's inevitable. >> well, in my state our governor chose to decline support to build the tunnel that would have created 44,000 jobs immediately, get 20,000 cars off the road every day. and he very shortsightedly decided to cancel it because of the possibility of overruns, which could have been taken care of through other programs, low-cost loan programs, et cetera. so we -- people are sitting on the hands waiting to go to work immediately. and to relieve the citizens in our area of access pollution, of cost of driving, of delay a

scheduled. so there's a lot of short sidedness going around. thank you all very much and thank you, mr. chairman. >> thank you, senator lautenberg. very much. you put more time and energy into transportation than anybody. >> thank you, chairman. ms. trottenberg, you said of course this would supplement the bulk of the foreign funds. i may have missed this in the testimony for the analysis of the bill, but what size infrastructure bank are we talking about your? >> well, the administration's proposal that we had in her fy 12 budget was 5 billion a year, over six years, so a total of 30 billion. really, dallas-based are proposing a very large six-year authorization proposal in area

550 billion. negotiations in congress is not clear. i think that circuit issued a sense -- >> was that you anticipated shortfall, the highway trust fund would produce and the needs out there now? how do you come up with that? >> no, we came up with that number by looking at the pipeline of projects that, based on her own experience are tiger and tifia and risk programs because a number of we thought captured the pipeline and it could reasonably be run through a program and handled to the personnel at d.o.t. >> mr. offer, the state so have the capacity to do this through the state bonding authority, or the difference, the percentage they would pay would be -- explained on 10 that to me a bit. >> states are doing very much with their own budget deficits. and the projection for the next fiscal year about the same of what the deficit they had to do

with over the last fiscal year. so they're very much focused on trying to close the gap. as a result, they issue more traditional tight bond is quite limited these days. so as a result -- >> why would that be? i don't quite understand why if they could retire bonds, they could retire bonds of the issued? >> i was thinking more in terms of net issuance of new bonds to support new projects. and with that might mean in terms of potential credit, credit pressure from the rating agencies. >> but they would have that same credit pressure from the rating agencies if they committed to pay back these bonds? >> i think a lot of these -- i guess it depends on a structure by the way i thought about it would be just like private activity bonds, where the government entity, when it comes down to the repayment obligation, it's the private sector that is responsible for that. >> and then the other term you

mentioned, availability payments? would you define that for me i can? >> sure. availability payments really is a payment that they can be, for example, the authority but department of transportation used it to fund one, a couple of its project. the idea would be to be making certain annual payments that would make up for estimated shortfall between the revenue and what costs would be. and there's way that can be phased out over time. in which there's more predictable cash flows and, therefore, it's easier to finance not only in terms of accessing funds like tifia, but also traditional bank loans from infrastructure, you know, commercial banks around the world. >> that sounds like to me in that situation, florida transportation authority would be a lot more than just intermediary, paying the bonds off and getting the money?

>> exactly. it is an obligation for them. that is definitely the case of how that deal was struck. >> are the other examples besides that would that you are mr. dove -- i understand totally and how that might pay for a bridge or pay for something, but i'm not sure i quite get this availability payment concept. >> sure. i will give one example that's outside of transportation. the long beach courthouse was a project in california built with the idea that the private sector could build it at a lower cost and operate at a lower cost. but in return for building the courthouse and operating it and being responsible for all of those ongoing liabilities, kind of shifting the risk to the private sector, the private sector would be able to get certain guarantee payments backed by the credit of the city of long beach. and so yes, that's an obligation for the city ongoing, but those

payments are less than it would have been if they were to build and finance it on their own and then cover the operating costs. so everyone do that and other deals that have been done outside the u.s., specifically canada, as an example where it is a win-win, something getting built that wouldn't be built otherwise and having efficiencies that may not have been -- >> are the examples in canada of somebody building a transportation system? i understand the depreciation and all that. i think there's some real merit to that, whether it is a college campus dorm or a courthouse or anything else. by don't quite see how that transitions to a non-toll bridge or express what of some kind. and i guess i'm out of time, mr. chairman, but i think i might've gotten my question and within my time. do either one if you want to explain it better to me, how a non-revenue-producing help the situation any?

>> senator, i use this structure in line for the london underground metro system in london, where there was a decision made by the u.k. government to hand over for capital projects, so that's the upgraded signal, new trends, refurbishing of stations, to the private sector. and in return, government would make these available payments on a fixed and regular basis. so long as the private sector complied with the documents which was deliver the upgrades in time to refurbish the station, to provide an environment for the traveling public which was, and that stands for the contract, then the government would make these available in payments. what the private sector took on was the risk of delivering those projects on-time and on budget. because if there was a cost overrun, that was taken by the private sector.

it wasn't delivered in time, then the availability payment would not be made. so that's the sort of structure. and what it's really doing is risk from the public sector to the private sector, in partnership with public sector. the partnership is key to making it work. >> thank you. >> that was an excellent question. senator begich, you have returned. >> thank you very much, mr. chairman. i will be quick here. first, ms. trottenberg, let me ask you, if i can, i know senator kerry talked about infrastructure proposal kind of real impact. can you tell me from an administration standpoint the rural and how you treat rural? >> yes. >> just to be frank with you from my perspective from alaska, unicom with small projects that can't compete against these large projects and we will lose every time spent and i think that's part of the reason, senator, some lessons we

learned, why in our infrastructure bank proposal we propose doing both loans and grants. because we do think him and this is true in rural areas and other areas that there are certain projects that clearly have social benefits that make them worth investing in but they're not going to generate a revenue stream. that's particularly true in rural, small populations were collecting tolls may not be feasible. one of the things we discovered in the course, i know there's been concern in rural areas, is this going to help us, we invested a lot of tiger fund in rural freight project. there's huge economic value to be unlocked or by investing in for a project. so i think something like an infrastructure bank, it didn't have a lot of value in rural areas and i think for some of the, let's say, speaking of roads can we get a high we can project that had tremendous safety benefits. you're not going to get toll

payers on a boat like that. not enough people use but that's a project we think with grants infrastructure banks would also invest in. >> is your style, infrastructure brink or grant program development, used as example in west virginia project, would that have to compete in this bigger pile with all these larger projects? my concern is not that you'd have some for rule, it's when a row project, a very intense project and we did a cost-benefit analysis on the people we serve, we lose. >> we require in our infrastructure bank has to be a geographic balance, and we also have a lower dollar threshold for rural areas. i know in some of the proposals there is a rule set aside. now in tiger. and i have to say we've actually found it's been very useful and it is helped us find some terrific row projects around the country. so i think that's a decision for you all. there are few ways you can decide so you're sure world

projects will compete. >> okay. let me ask if i can, and mr. dove, if i can ask you just general questions. i come from the background of being a former mayor, we build more roads, more infrastructure than the last two decades inner-city. everything from vertical to horizontal, you name it. we love building stuff but i like driving to work every day and seeing cones on the road, blocking off streets. that told me there was something happened to him because of that infrastructure rebuilt, repaired the city for this great recession we went into. it was business week that rated the city i was mayor, anchorage, as was most likely cities to recover the quickest. and forbes just rated it as one of the cities that has opportunities for jobs because of the infrastructure investment. it is a two-part question. one first is, in the process of private financing and partnerships, how will you

handle, i mean, in a lot of cases i will take the city i was mayor of, solid rating, solid everything, platinum clients, to any finance. how do you determine to make sure that the fee structures are fair for a client of that nature when you're doing these large projects? they are good money on your in so how do you manage that, for that, at the end of the day there is this policy on the private project? >> first all, -- >> his opera as mayor. when people came to see me, we love doing business with them. we sell more bonds but we were the platinum client and we want the best deal. >> first of all, i wouldn't expect you to negotiate a deal with me alone. you would want a competitive process. that would ensure you were getting the best market available terms to your particular project. i'm sort of emphasizing is maybe there is a bigger project where

the user fees or the tolls or the availability payment is not sufficient on a stand-alone basis to make that work. so maybe this bridge or development of the airport, or whatever it may be, needs a level of capital that could make that project work and make it more attractive to carlyle group. that's why i'm enthusiastic about national infrastructure bank as a provider of that level of capital for whatever the project is. but at the end of the day it will be a competitive process. >> very good. and last question i will end on this. saying all that of a good credit, based on the situation we're facing here in the federal government, can you just give me two seconds on, if we're unable to resolve this any meaningful way, the debt crisis and the deficit, how will that affect the market that you tap into in order to have a partner with

government sector who wants to build infrastructure? i will leave it at that. >> everything is priced of treasury so it will be the determining of where the market feels the risk for u.s. treasuries at that point of time and the rate, and they would expected to be a small premium over treasuries. i hope that answers your question. >> thank you. senator thune. >> thank you, mr. chairman. and i appreciate today's hearing. this is a critically important qqay we've got a 2.2 trillion dollary backlog of infrastructure projects, $12 billion projected shortfall in gas tax revenues versus current spending levels over the next two years. so our transportation infrastructure is in desperate need of a facelift but i appreciate the opportunity to get out some of these issues and

appreciate your sharing all your thoughts on this. because at the heart of the funding source that we can make available to pay for a lot of these needed transportation infrastructure improvements. are a couple of questions i want to ask, if i could, secretary trottenberg, it wasn't that long committee would have secretary lahood. and i asked him about any@x thoughts he had on long-term funding plans.@x anything specific that he how the administration intended raise revenue to fund our transportation infrastructure improvements. and my question is, since that he has the administration developed any specific ideas or plans on how we might raise revenue that is necessary in some of these infrastructure improvements? >> certainly there's been a lot of debate and discussion within the administration but i'll also say i think at this point that

discussion has caught up in the larger debate that's happening about the debt ceiling and even with all the issues we have there. i think we're hopeful in the course we will be up to put some of these ideas on the table. working with congress about the house and senate, find some bipartisan solutions. >> so they're still not really anything specific? >> not that i'm going to put on the table today. >> let me ask you, could you give us an assurance that some of those ideas that on the table but not obviously evidently ready to be made public, that generate them for transportation infrastructure projects will be used exclusively for that? one of the concern some of us have had with the rules that were used during stimulus was that they were not used more for infrastructure and got involved in financing all kinds of other types of programs. some of these ideas which i assume may include mechanisms

that are similar to some that have been discussed today, that they would be used exclusively to finance ever structure projects as opposed been used for other purposes? >> i think, i want to be cautious about prognosticating i think collectively how the administration and congress will tackle a lot of the spending and debt issues we have. i think we understand very much a desire that we are dedicated source of revenue for transportation, and that those aren't user other things and we put them toward solving what i think we all agree is that very, very big infrastructure needs in the country. >> let me express a concern i have about proposed creation of a national infrastructure bank. i'm obviously concerned that that type of fund would primarily benefit larger metropolitan areas, while ignoring the needs of rural states. in my own state of south dakota we have residents that frequently travel significant distances on roadways as part of their daily livelihood.

as such, they would be looking at paying a significantly large about and toll fees or other dedicated revenue sources so as to help repay the national infrastructure bank loan year i would ask this question and perhaps maybe others could comment on what your thoughts are on national infrastructure bank out my impact rural states, and what, if anything, can congress do to ensure that rural states are not penalized due to their small population size. >> as i was saying to senator begich, we did have a very much in mind when we're designing our infrastructure bank. it's part of the reason we chose to do both grants and loans because there are certain types of projects and the ones you referenced would be the case that have a lot of public benefits, but you not going to be able to generate whole revenue and maybe not even at the ability mr. cover the cost of the project but they are still projects we need to do. i think there's another category of projects, real projects that would do well in infrastructure,

under tiger grants we discovered when we look for projects all over the country that the were freight projects that scored well. as you only have a lot of other cultural and energy products and going to cost of getting those good to the ports and a population centers can have a tremendous economic impact in rural america. so i think a lot of those projects will compete well and can be monetized and the private sector cannot work on those. and then certainly i think for economic zone projects, some of those you probably want to use grants. you can design an infrastructure bank, lower the requirements of what the match, what might be. i think they're a bunch of different proposal on the table rural areas can compete and benefit from an infrastructureey bank. >> i see my has expired, mr. chairman, but it you would care to comment on that? >> no. i think having the rule set

aside, the proposal to $109 minimum, requirement for national infrastructure bank loan, having something a lot smaller than that for a rural is a right way to approach that problem. but each project should stand on its own and should be self sufficient on its own, and the loan to the project should be repaid by the funds generated by the project. >> thank you, mr. chairman. thank you all. >> senator mccaskill. >> thank you. let me start from this and look at this from a birds eye view. it appears to me that it's important for an infrastructure bank to be one of two things. either to shift risk, or to access capital. would anybody disagree with those two reasons why we want to do this in the first place? okay. is there another reason i am missing besides access to capital our risk shifting? >> i would say one more.

it gives us an opportunity to do a really rigorous competition and project analysis and use benefit cost analysis and the type of tools that i think, you know, senator rockefeller was noting in other countries they've been doing this for a long time. we been doing it less and just because import we had a highway trust fund until recently was pretty adequately funded. but this gives us a chance at the federal and state and local level to really improve our analytic skills and a better job of projects election and funny projects that will get the most value for money. i think an infrastructure bank can really help with that. >> senator, i would echo that because the expertise in the private sector in the past projects, they have been especially helpful in a very large complex projects, bringing in, particularly the financial sector, to the table has been a great assistance to the state d.o.t. and these projects. >> i am a little worried about that answer because that seems to imply that bring in other

people's capital allows us to have a more rigorous analytical process as to how we decide what projects to build. what is there currently that would keep us from having that kind of analytical process? why would we being doing that with all the money we spend an infrastructure? >> our traditional formula funds, that money is basically allocated by formula to states and transit agencies for the most part. >> i know the analytical thing in my state is incredibly intense, and we have required hearings, we have required input. we have all kinds of bit processes. we have all kinds -- it's not as if the states that are making the decision on this mine are doing it by some formula. they're doing it based on priorities and cost benefit analysis. >> i have to say, senator, a very squarely from state to state. some states are really in front of us. some states are not so far ahead on this. they been used getting a lot of formula for not doing some of

the rigorous analytic. it benefit the state level as well. it's not to say we are not doing it but i think an infrastructure bank gives us a chance to do it better. and i think usd at hearing the tiger grants program, we require benefit cost analysis for our the allocations and i would say the state of the art, some have done a phenomenal job and really made a great case. some very knew how to do it at all. we've been working with them and helping them get up to speed. it's sort of an ongoing national learning process. >> is this something we can do as we begin to debate and consider this infrastructure bank which i'm not saying in anyway i'm not not supportive of. i just want all the things you're talking that is what we should be doing anyway. spin it does nothing about a infrastructure bank, requirement for a highly analytical competitive process and prioritization of projects for public dollars. all of that, whatever we need to be doing, if it's all over the

map and if it's the tiger grants that are causing the discipline, maybe we need to make that requirement on all the money. >> i think that is right. and certainly the reauthorization proposals that we're looking at, we're trying to help the states and transit authority to do more of that, embedded in a plane process. but i think there's a real learning curve going on. some parts of the country are further along than others, but i do thing as we find ourselves in a highway trust fund is running short and we're taking a harder look at how we spend our dollars, i think states and transit agencies around the country are going to need to improve their game even more. and we certainly want to help with that. >> so from the government standpoint you think it will help tighten the analytical and selection process. but the private sector, there's only one reason to do this and that's profits, correct? >> correct. >> so -- >> i have to make a return for my investors. >> absolutely.

the reason the private sector is interested in this is not because they want to become part of government. facing opportunity to return by to the investment in form of profit. >> right. >> as i step back and look at this, that means that the way they make profit is going to be off of the government that hires them to do this, or it's going to be off the taxpayers that access projects, correct? >> if i may, i would also suggest there is an opportunity for a partnership between private sector and the government side, the public sector generally, to address an infrastructure problem in a different way whereby the capital is spent and deployed, and the risk of that spending is shifted in return for sharing of revenues going forward. >> i don't world without. i don't world there is something to the partnership. i'm trying to get out the

profit, they can only come from one or two places, right? it is is going to come from payments from the government or it's going, and the fact, the project is managed well so that there is a profit margin based on what you expect the payments from the government, or it's going to be revenue-generating from the people that are using one of the project is that is built. >> yes. >> that's what i wanted to make sure i understood. that's what i think it's important for us to keep that in mind because taxpayers will be paying one way or another. they would either be paying the money we pay to these companies, or they will be paying by total. and i think sometimes we get caught up in this new idea which is great, but i don't want to get away from the bottom line is, the folks that they're going to pay for this one way or another. they will pay for it. this isn't going to be a magic bullet that will all of a sudden take away the need for the public to pay for infrastructure. it's just going to shift how

they pay for it in a nontraditional way. and i just want to make sure we all examined it carefully as we move forward. thank you, mr. chairman. thank you all very much. >> senator klobuchar. >> thank you very much, mr. chairman. ñank you. we care about infrastructure in our state. that was brought home to us when we had our bridge collapse. but wasn't it is a big thing like that or a little rail spur. these things that are pics i want to thank you for focusing on this today. one of the goals, first of all, i want to thank you, ms. trottenberg, to coming to minnesota and speaking tour transportation allies last month. i heard it was a good conversation, so thank you for the. one of the goals of course for the national infrastructure bank is to give state and localities resources for projects that meet merit-based national and regional economic objectives. and i share some of the concerns that my colleagues about how

megaprojects could dominate over smaller projects. and how do we ensure equity of funding projects of different types and sizes across the country while still sharing -- showing the return ultimate goes toward national economy. >> i mean, again i think it's very, very important that you do achieve geographic and urban and rural balance in a program like this. you all here in congress will want to make sure that as you, you will craft legislation that you get that balance right. again, as we discover the tiger program and also through rif, our railroad credit assistance program, we have made some very big loans and we've made some incredibly small ones. we've made some very small grants. i think you can do both. there are serve slightly competing visions on an infrastructure bank. one is that it is funny tremendously large projects of national significance it and we need those.

we would be very, very hard for individual states to every make happen to existing form in front. but we think there are great ideas and great local needs, and we have funded through tiger answer rif some very small loca -- aara. -- i know there's efforts to authorize those grants but are there ways that tiger can be improved? >> i mean, i think, i think just going on our experience at d.o.t. in some the feedback we've gotten from around the country and members of congress, i think they're fine and sharpening in a consensual way with the goals of the tiger program are, and it gets at exactly what you're saying, how much is geographic balance, how much is economic return, how much is achieving social benefit, how much we want to do in grants, how much we want to

do in tifia loans. and you know we from the project, the program now for two years but we're starting the third. we're trying to refine on the processes and make them more transparent. but i think that's another area we would like to work with congress and make sure we get it right. >> very good. the twin cities areas in minnesota is considered to be one of the most liberal places in the country. now that senator begich is gone and done touting anchors. the way we run the bus system to the bypass around all the leaks, and it's kind of an incredible way it all works together. could you talk about how at the national infrastructure bank could fit into the overall goal of consolidating and streamlining the numerous federal funding silos that currently exist? >> it's a good question. one of the examples i talked about the denver union station project, which is a

transportation livability project that is all kinds of different element to it, and wound up drawing from four different pots at u.s. d.o.t. it was complicated and time-consuming, and in our vision of an infrastructure bank you could sort of encompass all those different elements, the applicant would have one point of contact and we could structure the best possible deal and hopefully in the process do a lot of streamlining and cut down on the time and money that takes for an applicant to successfully compete. >> otherwise you would run the risk of adding a new program and then add funding to the. >> in d.o.t. vision we would in overtime emerging into the infrastructure bank spectacle would be streamlining and making it easier for states and commuters out there that want to come to us and a plaque. >> very good. thank you very much. thank you, all of you. >> you have 20 seconds more. >> see, i was brief.

i was brief. and i have another hearing to go to. >> okay. >> thank you. >> so let me ask -- thank you, senator klobuchar. i think this has been an amazing hearing. it may not appear that way to you because you hear these things all the time. we have not. and i was the governor of my state for eight years, dealt with wretched transportation problems during 82 and 83 when there was a money for anything. and 76-80 windows a lot of money available. laying off 10,000 highway workers because we didn't have projects to pay them for. and all of a sudden, you know, in you walk, to my embarrassme embarrassment, not that you walk in, but the fact we hadn't told

you for three, four, five years ago, or 10 years ago, talking about the infrastructure to participate in this. and that it's something that you've effectively done. the underground railroad in london, that's a large statement. you were in heavily involved in the. that's an extraordinary statement. so to me this is been a very heartening, brazen hearing. and we've got, you know, a number of bills to i don't see why they can't be worked out and put together. because the cost of not doing it is not passing a bill, and i don't see anything that would prevent us from passing a bill on something which people care. you have a very large turnout. we ordinary don't have that many. so that people came in because of various committee meetings at different times, but they really

care about what you're talking about. and so do i. let me just ask one final question. and senator ayotte raised it, and that is the fact of having a group inside the department of transportation as opposed to quote independent outside, the department, the group inside would not necessarily have more people, but there was a hand into question, i think very fair, that having that would open it up to politics. and that's a very rapidly spreading concept that people don't like. and then on the other hand, if it was done on the outside and there were not, let's say, a lot of government people but people who were doing this, i mean,

wonderfully for the good of the country, but also to make sure there was return. wasn't my question. my question, sometimes, sometimes some barges are more important than others. and they may be cost effective. for example, in your projects that you of all done, you have come in, you always finish up on time. you've always finished up on budget. that's my general impression. it's been a very effective process. on the other hand, you want to make sure that you get the projects that are in the relative form of priority, the national needs. and so if you just for a moment discuss -- that may be a vote -- inside the department, or on the

other hand inside the department and then having this nationwide look at what needs to be done next. obviously, people apply to the department of transportation. that doesn't necessarily make it political. it means that they care. now, they could do the same with an independent group outside. and i'm asking this question just because i want to know. your views. i will ask that the review your views. i have to apologize to you, mr. bruno, i have a question exactly for you but i will not have time to ask is why apologize to you. what is that -- is that a bit of a scare tactic, politics? or is it, does it have truth to it? in your judgment. and if you're independent, would you be inclined to look at things that might make a return on investment, and be very, very

careful about that, because you have to be. and, therefore, maybe come up with projects that are very good, because any project is very good for somebody somewhere but not necessarily in the order of, you know, national priority list. and i think we're dealing here with that kind of discipline, simply because of the lack of money, even with you participating. so maybe the three of you. >> made i will start, because we had a fridge in a debate about this within the administration. i think there were people really on both sides about whether it make more sense to have a separate independent entity or housed within d.o.t. i think we're open to different solution. we're not dogmatic about it. i think a couple things in our thinking, one, is can you create a truly independent entity that is somehow completely detached from all political and geographic considerations? i think it's a question mark if you look at the history of some of our efforts to do that, some have worked better than others. i think for us also there was a pragmatic consideration, which

is in u.s. d.o.t. women running for tifia program since 1999. we do have a number of career experts and financial experts and project, delivery experts and experts in all our offices around the country. and we got just in terms of technical capacity and getting the program up and running, it really makes sense to housed in an agency that has a lot of expertise and a lot of people on the ground to help do the analysis. i think it does mean that at some point -- we structured in such a way we actually have members on the council from other cabinet agencies with the notion that perhaps would ultimately expand into other infrastructure and maybe even spin it off at some point. i think pragmatically speaking, we thought it made sense to start with india tea to get it up and running. i hope you feel that we have done a good job in picking projects are not being overtly political. that is a judgment all members here will have to make as to whether we have done right or not in that regard. ..