the combat exclusion policy prevent that. but we do have female information specialists and civil affairs specialists. we have created in the last year or so cultural support teams. the thirteenth of two to four women who are attached to a seal team or green beret operational detachment in the middle of nowhere. they are able to connect with half of the population we were not able to connect to previously. in the more kinetic side of it where they are not going on operational missions they're going after targets until they are secure talking to women, finding cellphone in places where no man would find them. that kind of thing that is very helpful to us. we are selecting them and training them.

not all of them make it through the training but we're getting the outdoor. we graduated 56 last week all of whom will be in afghanistan by the end of august. >> do you see a day when women are in the combat role with seals? >> i certainly think as soon as policy permits that we will be ready to go down that road. >> you would go right up and say they could do this? >> i don't think the idea is to select g.i. jane and put her through sealed training but there are a number of things a man and woman can do together the two guys can't. female operators are very important in those roles, very special women are carefully selected and highly trained to do that. i don't think it is important that they do a lot of pushups.

it is much more important what they are made of and whether they have the courage and the intellectual agility to do it. >> yes, sir? >> could you give us an update if there is an update to be given with regard to piracy on the high seas and do i read less about it because i have you and your teams to thank worse things just settle down a little bit? >> the reason you are hearing less about it is countries decided to group together to deal with policy. some maritime task forces are international in nature patrolling the area that had

some success including deterrent effect. there is less of that happening. the shipping industry itself has learned whether the savor routes are and techniques that will discourage parts from boarding their ships. the parts themselves go further off the coast and it requires more sophisticated equipment. we are seeing piracy made harder for the pirates. in the rare occasion where a ship is seized and held captive at see special operations may not be part of the solution. >> yes, sir? >> the military is mostly fighting people with bad ideas. to what extent does our

government miss allocate resources in the fighting ideas with violence rather than ideas? the military is uniquely positioned to help our government reprice or ties. curious to get your thoughts on that subject. >> mostly bad ideas are ones we don't agree with. they think the same thing about us. it is the reality that the department of defense has more money than any other organization in our government. we are more expeditionary than anybody could be. sometimes the military takes on roles that in a perfect world would not be a military solution. in many cases of battle of ideas escalates beyond an information

campaign because it becomes a military operation blue dye am all in favor of other elements becoming more expeditionary and being able to deal with a military solution. in general to the previous point people know more about us than we do about them. we are not very good at the initial balance of the war of ideas. >> one last question. >> you interestingly talked about how you and the cia worked together so well. with general david petraeus coming in to the cia and the cia taking more operational roles that were more military in nature, do you think special operations in the defense

department where mr. panetta will be going and the cia will in all their relationships so it is more a unified command? >> i don't think so. the authorities are very much different. if you look at the authorities under which the cia operates and the military operates there is a fuzzy area between them. if you are about to get on a subway in london there is a sign that says mind the gap. what we have between c r a authorities and traditional military activities is a gap, special operations that evolved into something -- the only recommendation the 911 commission was not implemented was united states special

operations command be the lead for pro military operations in the united states. we can support that and others didn't. the cia >> reporter: that rolled. there are capabilities we can contribute and at times we do that. the relationship is in a very good place now. the habits we developed when working with each other are pretty good ones. i don't see why that would continue. through the change of leadership. general david petraeus is not the first former military guy to run the cia and norman mineta is not the first to run the department of defense. the fact that they're doing it at the same time is interesting but this is a great working relationship. >> thank you so much. i want to ask you -- [applause]

-- you can all stand up. i just want to ask you one last time, for your mom, what it was like watching when you figured you had him, when geronimo was gone. what went through your mind as you are close in your career, this great success. we will send to the transcript right away. she is probably home streaming video we hope. >> my mother was told by a lot of other people. i haven't talked to my mother about that. and i think i have been -- not welcome in tacoma. someone asked me why i really like mexican food.

and i said where did you hear that i liked mexican food? we saw you were a taco man. if you read tacoman you get talk a man -- taco man. the moment we knew bin laden was dead by thought was what is the next item on the checklist? that is what it is. obviously you are pleased but anybody in this business of this long is conditioned -- >> but bin laden!

>> the very next thing could go wrong. are we going to get anybody hurt? what equipment will we find? you are on to the next thing. [applause] >> thank you, sir. as your mother said, everyone should appreciate someone who spends his career making the rest of us safe. >> thank you very much, and l.a.. -- enjoy. [applause] >> this week's events leading to the dedication of the martin

luther king jr. memorial include the civil-rights pioneer function at noon eastern. participants include attorney general eric holder, rev. jesse jackson, live coverage is on c-span at noon eastern. also live on c-span at noon friday is a luncheon honoring women and civil-rights. attribute to coretta scott king. these include denise king and deborah lee. the dedication ceremony for the memorial to dr. king ends 11:00 a.m. sunday. the 40 eighth anniversary of his i have a dream speech. thousands are expected to attend the event and hear from representative john lewis and joseph valerie, ambassador andrew young, members of the

king family and others. in a few moments a report on improving homeland security within tight budget constraints. in a little more than an hour the latest economic forecast for the congressional budget office. after that a debate on how teachers are affected by spending cuts. >> watch more video of the candidates. hear what political reporters are saying and track the latest campaign contributions with c-span's website for campaign 2012. it helps you navigate the political landscape with twitter feet and facebook updates, candidate bios and the latest polling data and links to c-span media partners in the early primary and caucus states at c-span.org/2012. >> the heritage foundation released its report on homeland security this week including recommendations for improving security within tight budget

constraints. this is a little more than an hour. [inaudible conversations] >> it is my privilege to welcome everyone to the lewis lerman auditorium and those joining us on the heritage.org web site and remind our internet viewers that questions can be submitted at any time simply e-mail and s speaker@heritage.org. we ask everyone in house to make that last courtesy check that cellphone they're turned off and we will post a program within 24 hours on our web site for everyone's future reference. hosting our discussion is

michael frank -- michael franc. he oversees our outreach to capitol hill in the executive branch. he has served as director of communications for house majority leader dick armey of texas and was heritage's director of congressional relations. he served in the office of national drug control policy and legislative counsel for former representative william daninmeyer of california. >> welcome. a nice august day. on september 11th, 2001, america experienced the worst terrorist attack any country has suffered in modern times. ten years later the nation is undergoing tremendous changes in how we safeguard the american homeland. there have been a number of successes that should be celebrated. chief among them is this 9/1140 terrorist plots have been

thwarted. this can be attributed courageous actions of ordinary citizens. others are law enforcement investigations that pre-empted planned atrocities. significant challenges remain. to stay ahead of the terrorists and build healthy homeland security enterprise capable of tackling frets that manifest themselves we need to assess where we stand. today the heritage foundation released a study homeland security 4.0. this is the third in a series of studies overcoming centralization, complacency and politics. as the subtitle suggests we must overcome the challenges. the first -- centralization to make it in washington. it does not just protect us from centralization of power in washington but also recognizes the reality that state and local governments possess resources,

geographic locus and experience to protect us from the threat. the second is complacency. if the united states becomes complacent or focuses on the past we will pay a heavy price. the other thing we must do a better job of identifying emerging threats, encouraging private sector innovation and breaking down barriers that prevent disconnecting about. politics. over the last decade political considerations have cost far too many political decisions. this has created oversight inefficiency and left america less secure. of politicians left politics at the committee or we could do better. to date we are privileged to have two preeminent experts in homeland security who are the authors of this study will discuss the findings. they go into greater detail.

first is james carafano who was a director at heritage at the alpha center and the deputy director of the davis institute. he is a historian, teacher and a writer. a prolific writer. his research focuses on national security required for long-term interest of the united states, protecting public and providing economic growth and preserving liberty. he is a columnist for the washington examiner. is op-ed columns have read in every major paper in america not to mention next year -- appearances on all major cable networks. in his spare time he has authored six books including mcgraw-hill textbook he offered on homeland security. he joined heritage as a research fellow in 2003. he is a 25 year veteran of the army where he rose to the rank of lieutenant colonel. he was head speechwriter for the

army chief of staff. he was executive editor of joint force quarterly. he is a graduate at west point and a doctor from georgetown creating strategies for the army war college. michael chertoff, the led security secretary was appointed to that position by president george w. bush early in 2005, he said james jay carafano said the original series was the first report on homeland security read in his new position. why? it was the shortest. matt mayer as are other speaker. he is a busy fellow. he was former u.s. department of homeland security official in charge of project evaluating how each state has met the threat of terrorism. he is the preeminent expert in the role of federalism and local governments play in homeland security. he is president of the buckeye

institute of policy solutions in the premier free market think-tank. he served as senior official in the department of homeland security under secretary tom ridge. he advised the department leaders on policy and operations and headed the terrorism preparedness office charged with meeting the demands posed by 11. he has authored a number of studies in this area including the 2009 homeland security federalism protecting america from outside the beltway. before joining buckeye he worked as a strategic consultant for international corporations to a elected officials and adjunct professor who taught a course on varied response to the terrorist threat among american allies. with that i will turn it over to jim first and then matched. please join me welcoming james

carafano. >> thank you for posting this and thank you for coming. i want to take a few minutes to talk about how we got there from here. is important to understand. i am proud of heritage. heritage was one of the first major think tanks in the united states to take homeland security seriously. the first major report on dealing with terrorism and homeland security after 9/11 came out of the heritage foundation. a lot of institutions, everybody did homeland security after 9/11. many organizations -- i am proud of the resources and staff dedicated to be serious on this issue. we published more on homeland security issues and research than any other think tank in the world and we have done it in a sustained manner over a decade and i am proud of the men and women who work on this and the support we get for folks like

mike and this reflects that tradition. this is the third report we have done. the first week to work in conjunction with the strategic international studies center. we did that for a specific reason. we thought homeland security is a bipartisan effort and the first issues we had to deal with were inside the beltway. the first report was done in 2004. it was a year after the department was established. like any organization created by congress in with a mess. it was the product of compromise. compromise is the enemy of inefficiency. the creation of the department of defense after world war ii first thing they had to do was organized. we took a hard look at the organization of the department and made some very clear recommendations about the

imperative to reorganize and strengthen various elements. secretary chertoff when he was appointed to replace secretary tom ridge and stuff you need to read before your hearing he looked at that and took the issue seriously. i think match was in the department. they made a serious effort in improving the organization and addressed many recommendations we made in the report. it ended the second report year or two later called homeland security 3.0 and there was a clear distinction between dhs n and hls. it is an international enterprise with international components. we wanted to make the case that we needed to look get this as a holistic enterprise and not just focus on the department and its

strength and shortfalls and weaknesses. in order for the department to play a leadership role it needs to play what does it need to do? what partnerships will it take on? one of the recommendations in the report was to do an analysis assessment the way the department of defense is required to do. that is the quadrennial defense review. we have been doing that for several years. every four years the department has to report to congress reporting their national security needs and going forward. we thought that would be appropriate for homeland security and that was the first recommendation on the report. a democratic house with the requirement for homeland security and that review did take place.

many ideas and concepts we argued for in homeland security 3.0 are reflected in the quadrennial homeland security review. we are proud of that. this report is different. we think the main issues are not inside the beltway any more. they are critical issues in terms of the role of state and local government, individual communities and international partners that require attention. we decided to really go beyond the beltway and engage with stakeholders outside washington who are doing this every day and understand their issues and frustrations and concerns and ideas and initiatives and make sure washington had a clear understanding of what this community really wants. the other thing that is

different about this report is that we know a lot. this nation has been doing this for ten years. we know a lot about what works and what doesn't work. we need to start paying attention and stop doing things that are stupid and counterproductive and blowing it money out the door for no pay back and things that have worked. we got something right. we need to strengthen what works right and stopped doing stupid things. that was the focus of the report. i will turn to matt mayer to talk about what is in the report. we have been working on this well over a year. matt mayer has done an amazing job. jenna is working with the key researcher and the amazing work in the outrage. there were three things we focus on. what is disaster preparedness

and responds. today we have could be a class 4 hurricane bearing down on the east coast of the united states. those who don't know what that is the definition is catastrophic destruction. if we ever needed a reminder to take disaster preparedness seriously we may get one if we are not lucky by the weekend. the second issue is immigration. last week the administration made a major statement about immigration policy. that has never been more timely. the final issue is stopping terrorist attacks before they happen. last week the secretary of homeland security said they were concerned about low walls -- wolf. these are front and center. we are talking about libya and the state of the economy and

french banks will collapse. these are not necessarily things on the front burner on our mind. the headlines tomorrow and the next day, never a better time to think about the homeland security enterprise and how we make it be the best it can be. i would like to ask matt mayer we are concerned about counter-terrorism strategy. the flip side is protecting the homeland. the idea of stopping the terrorists before they get close to our shores. in short order we will be releasing an alternative counter-terrorism strategy which argues -- argues against what the administration has done. that is the second in a series about protecting us shortly. with that i turn it over to matt mayer to talk about the report. >> thank you for having me and thank you to those who are

watching on line or came here today. always nice to have folks interested in this issue. i must thank jenna baker mcneill who was in heritage until a few weeks ago. a whole lot of work to make his report happen. we are at the tenth anniversary of the 9/11 attacks. that is a point of reflection in america. also eight years since the department stood up. we have a lot that has been done and a lot to look back on. let me tell you how we came to this report. i have been with heritage four years as a city fellow. my role has been to get out side the beltway and talk with state and local first preventers and responders to hear from them what is working and what is not. we have done town halls across

the country. we have done multiple surveys for the community. i have traveled tens of days to get their feedback and listen to what they have to say. over the course of the last few years we have been building upon that knowledge base and issuing reports from time to time and coming -- this report we are talking about today. the report had 18 specific findings. they are all in the report. you can get it online at report.heritage.org/sr00 report.heritage.org/sr0097. it covers a range of issues with 35 recommendations. we broke into three sections. the first is making a federal work. we heard about federalism in this ideological or ivory tower view of the tenth amendment and there are states and department

out there. we see it is more than a constitutional principle. we see it in the context of homeland security as the best way to protect america. that is because when you look at the resources the federal government had it does not have the same personnel across the country. there are 40,000 fbi personnel across the country. you have fema regional headquarters and a couple more. a million plus reside in work force law enforcement emergency management, fire service. those are the folks that have not just numbers of personnel or resources of money and equipment but also experience. folks who have been walking precincts for 30 years and who know their community in an

intimate way. when something occurs they are the ones most likely to help us prevent it or respond and recover in the most effective manner. we lost sight of that as the country over the last week in years. we kind of took federal government response. that was expected. the pendulum probably swung too far into washington and outside state and local government. this report is that we need to get the pendulum shifting back again to police and fire to take back the rules they had traditionally for the first two hundred years of our country history and get back to being in control and true partners in this initiative to keep america safe. key findings and recommendations

we made talked-about policymaking the. in washington the way policy gets made is washington makes it. they will send copies of -- to comment on and they can ignore that will end issue when they want to issue. that is not the right way to do things. if we respect the experience and resources in state and local government we need to give them a seat at the table to make sure their voices are heard not just because they're expected to do something but they have experience and can really way in to make the policy better so we don't call it a national policy because somebody used that word to describe it but it reflects the national consensus that will allow us to do a better job and doesn't get ignored and actually works. immigration is another area. we see a battle between states

and washington on immigration and the reality is the idea that immigration is a federal responsibility has no basis in history. the reality is you can't say to governor somebody committed the crime you are powerless to deal with millions and millions of people in your jurisdiction. that doesn't work. what we have to realize is their shared responsibility to not determined -- once folks are here there's a national shared responsibility to deal with this anyway that reflects reality that the issues are occurring within states and cities not in washington and reflect the reality of that. we have to make sure disaster response doesn't become a federalized entity. many of you may have seen what we put out recently where we update the number of declarations of fema and that

number keeps accelerating. the obama administration broke the single year record and we are not done with the year. as most of you know we have not had a hurricane strike in the u.s. or a single earthquake over 6.0 yet we already issued more declarations this year than any other year in the history of fema. they are on case to break the record last year on major disaster declaration which was 80. no hurricanes or major earthquakes yet we had massive declarations going out. we have hurricane ike been barreling down on us. reading usa today was interesting from my perspective because it noted we haven't had a hurricane in the u.s. since 2008 and we are on pace to have more declarations issued despite we have not have catastrophic events that seemed to be the role of fema. they have taken over the role of

not an academic issue. they have shifted resources to elsewhere and become dependent on its declaration process and on to other states like with federal money. we have to get back to states taking more responsibility to keep those resources and capabilities strong and deal with the disasters that happen every year that will come. we need to get back to federal agencies for catastrophic events. we know katrina and 9/11 and those types of things that have massive ripple across the economy. i spend time with top counter-terrorism experts and none of them live in washington. they have all lived outside washington. people like michael downing and folks in new york doing this

long before 9/11 back to the olympic games in 1984. experience after experience shake their heads in wonder at, why are we doing this from a fed said command point. we need to bring in folks to make sure they are in forming what is going on in the country. complacency is natural as time goes on. we have been fortunate that we have thwarted or not had a successful attack domestically in the u.s. since 9/11. that is a good thing but it also means we have to take advantage that folks are keeping us safe. that is the wrong way for us to realize italy takes one big strike force to see a massive amount of destruction and death so we have to keep our vigilance high. we do that by doing some

changes. we have to get past the interagency squabble that occurs in washington in high-frequency wear departments battle each other and white house elements battle the department's. they build their silo of power. that is human nature but we have to rise above human nature. we need a framework that makes sense, that is coherent and reflects the resources that allow us to bring our international partners but really gets beyond saying send your information and for a more hay on the haystack rather than saying we want you to send as the relevant stuff and we will share stuff back to you which doesn't happen -- sharing that information so what we don't have is another commission that looks at the next attack and

says we continue to create silo's between intelligence and investigation -- we have to see those before they happen. finally one thing we want to highlight is the technology director remains a completely broken organization that is not doing what it was chartered to do, what it could do and do well. we need to get back to the requirement focus serving as a resource for the department that allows us to utilize technology to pilot the test bed and experiment with the great things it could potentially have and that unit of the department operating in a way that makes sense. the third area is taming politics. we are not naive. politics happens in washington. let's try to make it happen less. we see this too often.

no one wants to give up their turf. everyone send their press release to their newspaper to say what money they got out of the department. that has got to stop because it doesn't keep us safe. we have 108 committees with some touch on the department. that means for men and women spend awful amount of time on useless bureaucratic report questions and answering instead of focusing on their mission and keeping congress of to speed on what actually matters. not whether we can play this game or that game but focus on what truly matters and the big issues that confront us. on homeland security grants in the next day or two we have a pork barrel major. we were happy to see the obama administration adopt an approach we have been the lone voice on which is get rid of the number

of cities in the urban area initiative. it has ballooned to 63 cities. that is an absurd number of cities to say there was enough high risk to define federal resources to help those cities when the risk curvature has to be minimal from city 63. the department cut that number down to 31 which when -- much closer to the actual number when the risk curve was visible. that is a good move and will allow us to focus where the risk is and we need to have capabilities with these issues. finally we have to stop doing things that don't make sense from a security standpoint. i tried to be a little more polite than jim but what this means is you see these pictures. the 4-year-old boy getting

patted down. the grandmother wearing themselves because they're bad is busted. this doesn't make sense. we have to be careful and there are issues to be mindful of but we can do a better job that allows us to make sure we have security without doing this current model we are doing. i remember in 2005 somebody in the audience probably remembers better than i do, we were confiscating razor blades and we stopped doing that because agents were spending 75% of their time on those little things at once we -- who cares? they will not overtake the airplane because we couldn't get to the pilots so we stopped doing that so they could focus on component bomb parts and other more important things than confiscating razors. that is the approach we need to

take more common-sense issue is. screening of cargo. we want to screen cargo but we are going to actually in an economical way that is efficient truly looked in every box and know what is in there is unrealistic and the necessary so we have to put more common sense in the system. that is the kind of context of the report you could look at. those are the highlights. we need q&a so we can talk that you. >> thank you. i will ask the first question. you touched on this tour they end of your comments relating to the cargo security issue. in a summary of our report you refer to how we have 35 specific recommendations to improve

homeland security while protecting individual freedom and economic vitality. this policy area has triggered some very tough balancing acts between those concepts. and the need to protect our homeland. could you address how some of those concerns are fleshed out in your thinking on this report and elsewhere? >> you want to do the civil liberties? great question. there's never a better time to do this than in the midst of the deficit crisis and government spending and looking -- this report is helpful. national security spending is not a problem in the aggregate. if you for a homeland security spending on top of defense spending you are still spending

half of the level of security spending we spend in the cold war. the level is not what is dragging this economy down. we double homeland security spending since 9/11 and the intelligence spending but adding those numbers on, historically speaking since the end of world war ii we are spending at a modest level. that is not the economic problem. you can take national spending to zero and in 40 years with entitlements growing at the current rate they will consume the -- if we spend not a nickel we would still go broke. this is not a growing part of discretionary spending either.

if you add up all the means tested for the program is bigger than the defense department budget and homeland security in the defense department budget, looking at security spending at the problem is it -- is wrong. having said that, there are clearly areas where fiscal responsibility and homeland security can be better addressed. i don't argue for more homeland security spending but i would argue for efficiency. this is where i go back to ten years experience what works and what doesn't. there is something we are doing that is literally stupid and wasting money. everyone who applies for a visa

requires an interview. that is not. we have to create all these resources and interview all these people so you end up spending very little time talking to people rather than focusing interviews and individuals that truly represents concerns. just stopped spending money on them because they are not efficacious. my favorite is the savor grant. they go to small fire departments. these grants are in the billions of dollars. they actually have no effect. agreed report by one of our analysts looks at the safety data. if you look at the communities that get these grants there is

no difference. no more people die from fire. there is no demonstrable effect. yet the budget proposal last year, they went in and cut operational parts of the department and brought up the grant program. the only value of the grant program is the press release people send out to say i got a fire truck or whatever. there is no more ill spend money in the department of homeland security than this grant program. fire departments love when i say that. there is another financial -- fiscal responsibility which is there are settled drags on the economy that are created by in the efficient homeland security programs that are important and worthwhile. they won't turn the economy

around in a day and they won't free up billions of dollars but they are perching on the back of a free and open economies that are unnecessary. these are self-inflicted wounds. there is something called the visa waiver program which is an ill named program. countries with a bilateral arrangement with the united states visit their country for 90 days. with those agreements come security stipulations. countries that are in the visa waiver program give better data to help stop terrorist travel and stop people violating immigration laws. it has a security benefits and the enormous financial benefit. countries in the visa waiver

program are trading programs. when people move back and forth it produces well for the exchange of ideas or scientific education. adding a country to the visa waiver program increases the wealth of the country so you would be saying if there are countries that are qualified or want to join this program and they are good allies of the united states why are we bringing them in? the answer is we have a law that says we can. it is just nuts. we have a lot on the books costing the economy money and forcing us to lessen our security requirements. i do think there's a lot in this report that talks about economic freedom in terms of we can spend our money more efficiently to make us safe and we can stop doing things and start doing

things that allow the flow of goods to people and services and increase without adding security risks. talk about civil liberties? >> definitely. i want to state the obvious. everyone looks at the political spectrum. political in terms of the spectrum in a straight line where you are left with disclosure to the right more than the middle. the reason i raise that is the issuance of liberty's both of left and right have done a fantastic job in the last ten years keeping those of us had had time in government accountable. things that started as good ideas when you expose transparency and accountability with the aclu or the tea party kind of say this is going on,

tool information and awareness. kerri names with kerri applications. they never went anywhere. that is great. if you step back a moment we are at a point in history when there's so much transparency more than ever before and the ability for folks to find information because of the sunshine act or the ability of folks to whistle-blower, ability of groups to hold folks accountable with the use of sold videos and pictures and all that media allowed us to hold government leaders more accountable than ever before. those in government -- you have a bad actor who rushes over civil rights or civil liberties. the vast majority of men and women i talked to in government

and i was one of them had no interest in the grading civil liberties. we didn't come to washington or go to work for law enforcement in order to the great liberty. we came because we believe america is a city on a hill and we want to preserve those liberties. those folks if you talk to them go out of their way to make sure they have always involved folks -- task force groups for oversight groups they bring in and reference and explain what they're doing to get feedback. whether the lapd has such a unit or washington focuses on this issue. the sincere belief of people trying to keep us safe supports civil liberties. sometimes things go awry. that is human nature. i don't believe for a moment

that many people have an intent to degrades those. they are there to secure them. because of some of the history in the u.s. with red files and the 60s and 70s, those things got shutdown. there are court orders that are still active in new york and l.a. where the oversight continues to maintain itself. we have civil liberties groups to thank for building that foundation that allows after 9/11 to avoid a lot of problematic issues that historically plagued these things. we have strong accountability measures to make sure we don't have degradation of civil liberties. >> we looked at a lot of

hot-button issues like the real id which standardized information on driver's licenses. we looked at these programs and came to the conclusion like the patriot act with investigatory tools. in every situation we came to the conclusion these programs can be managed in a manner that provides security value and protect civil liberties and we detail how we can do these things. that is the lesson we have. >> there will be occasions when it does happen but that isn't the norm. that is the exception. >> that rounds out part of the concerns here. now we go to the audience for questions. i ask you to identify yourself.

the gentleman in the front row? >> thank you. i have a question in relation to homeland security and the arbitrariness of customs agents. let me sketches for a moment. that traveled 20 or 25 times to u uad. people say they don't want to go to the united states and get a visa and arbitrarily be rejected as a businessman or family man coming in through new york and so forth. that is from the middle east. the others arbitrariness of visa applications from europe specifically germany. the pastoral visa application

that has been misused. so looking at how our customers are instructed, talked and so forth not to exercise arbitrary judgment in rejecting visitors to the united states. >> let me address two key findings in this report that go to that. one is the visa waiver program. travelers registers -- electronic system and travel authorization. this is the wave of the future. this was pioneered by the australians. as you enter your data on line you get prescreened. esta decreases the likelihood

you'll get turned back at the border. if there is an identifiable security issue is more likely to get flagged and you will talk to somebody before you come over. that is a significant way to decrease these false positives. predicated on that is entry into the visa waiver program is when a country joined the visa waiver program you get better data sharing and much more likelihood to reduce terrorist threats and more likely cause to reduce criminal travel and violations and increase the value to the traveler. that will address part of that. the main point is you will never take away the agent's discretionary authority because that is what the threat wants. they want predictability to figure out how to go around

that. you want to allow them to maintain flexibility but create an environment that is less likely to have false positive. the visa waiver program will help with that. i apply for a visa and get turned down, in my country $100 is a month's salary. in the visa waiver program you don't have to apply for short travel so that solves that problem. the other initiative we talk about in the report was a requirement called the cheese the security officer. homeland security representative working with the state department that identified risk and emerging trends to help them better identify people who should be interviewed or rejected.

this program has never gotten off the ground because there has never been the level of commitment from the department of homeland security which is supposed to speak on policy and the department of state which is reluctant to accept visa security officers. those two initiatives which are addressed in the report would address the causes. that is what this report is about. this is a boring report. >> that is madison avenue. >> this is about how to make it work right. this is the box guy running down and doing breaking news on somebody's 60 year car. is not exciting. this is about to make the system

work better. is not about solving every homeland security program. it won't tell you what to do about the next attack because it is about creating a system that is flexible and affordable. if we did what this talk about homeland security would never make it because it would be like dropping your car off. you pay for a service that you get. >> one other element is doing a better job on international appropriations those types of stories we can figure out what the issue is to address it. it is hard for anyone to sit in on an individual basis with those anecdotes and say that was

a bad decision. the point is to have a mechanism in place for that conversation that takes care of those issues, that person does that have access to terrorism and can come here because we don't have enough jobs to begin with. >> a follow-up question of the visa waiver program and the heritage foundation one of the lonely voices in washington fishing for that. we are encouraging during our presidency. one of the recommendations you

highlight is biometric exit system currently required to implement before expanding the visa waiver program but then you also recommend the program should focus when expanding the program on the overstay rates and not reach user rates. how do you measure the overstay of rates without the exit system? ..

>> we record all that data. that's not come it sounds like a commonsense idea until you think about the non-insignificant many tens of minutes of people who come and live everyday and how massive the databases and doing that in real-time is really a challenge. this goes under the category of wasteful spending. we spent the massive amounts of money studying this problem, you can go to department homeland security and they will give you 57 reasons why it doesn't work. this was really a poison pill those put in the visa waiver law. so what happens is when the departments can afford to expand the visa waiver program and bring countries on if they met the additional security requirements, and if their number for coming down, which technical issues, there was something, by the way, i think was in 2007 or eight, kerry member, if you don't have a biometric exit plan in place then you can do this anymore. and, of course, that kicked in and the biometric exit is not in

place and it's never going to happen because it's impossible and its unaffordable. and here's the terrible thing is it's completely unnecessary. so there to think you might want an exit program to do. one is to can't tell you who's obeying the laws around immigration laws. the reality is that data that we collect now tells you that. is it perfect? no. but doesn't tell you pretty reliably trance on who's doing what? which countries are following the trends, which are problematic? doesn't give you information you need to make a decision as a leader and manager about whether you want to change something in your visa program? yes. we have that data. we don't need that system. so it gives us the knowledge we need to manage our visa program. so what else would you want? i would want to find a terrorist in real-time. if the terrorist was leaving the country i want to know that so i can grab him. do you know what?

we've done that. right? the times square bomber was leaving the country. he was put on the no-fly list, right? and sec was put on the no-fly list, they saw he was leaving the country and we grabbed him. it wasn't the fbi. the fbi didn't hunt this guy again. the fbi missed them. homeland to go to grab him and the crappy because if there's somebody you're looking for trying to leave the country we have good mechanisms to do that. so you have to ask the question is put into both of the main tasks we would want pretty well, right, then why am going to shell out money for a system where, the story, some point in the curve if you get 80% of what you want for a certain amount, and then you spend, gazillions more and you just get like one or two more% inefficiency. we are at the knee and a group of enforcing. so the argument is why are we

doing this, why are we keeping from expand a perfectly good program and holding hostage to implement a program which, at the end of the day, we don't want because it is a huge cost with very little benefit. that's why we argue for changing the law, and using the existing data that hhs has. sorry for the long answer. >> i want to briefly comment on the comment you made. because i think it gets, that statement gets me too often in the context of homeland security which is we can put a man on moon, why can't we secure our border or why can't we do x, y and z. and i would argue, and i will probably not getting enough from some at nasa telling me i'm wrong, that the challenges that remain in homeland security are actually harder than putting a man on the moon because it's thrust in college math. whereas the things we have to do today, whether to secure the border, there are so many variables that go, including man-made sabotage, that have to

go with whether it is whether, environment, trimming, you name it. and i think we've done the low and medium hanging fruit in this arena. and the stuff we're trying to do not involve complex algorithms, really complex variables and it's hard and we got to have the patience to make sure that we are not expecting too much. and then throwing out the clicée of we can put a man on the moon, why can't we do that? that analogy only works because the moon doesn't shoot back. >> so i just think we need to make sure that we understand the true complexity of hardware, software integration and variables whether it's carbon security or border security, it's hard. let's not lose sight of how hard it is to do.

>> i write for frontpage magazine. for the people who work on the sharia law stuff, i wish i had it for me so i could recollect exactly the new efforts that are being implemented in dhs to the link and disassociate the ideology from the events that occur, like the times square bomber, the fort hood and all that. are people who are trying to connect the box so that we'll understand the lone wolves and all the. and i just think they want to keep an eye on lone wolves. but you have any comment on, you know, this administrations seemingly coordinated strategy to try to disconnect the dots? >> this is where i get to go because that's an uncharacteristic strategy and that report is coming out. [inaudible] [laughter] >> which is not boring.

[inaudible] >> i don't know. i think at the end of this week or maybe next week. but it is an issue that we have addressed. but i do, i'm going to make people come back. >> okay, all right. the gentleman down here. >> i want to make you feel good, because i think we're doing a hell of a job, progress in trying to put our finger on things that are not useful. i spent 35 years collecting a lot of information that was worthless. it never got process. no, i'm serious. it never got processed by the intelligence community never gave up because they wanted more and more. and if you could get a wider band, do it. i was responsible for wiring of los angeles in 1984. you mentioned 1984. we had a headquarters of there. it was like where the head the

helipads and everything. we had the harbor patrol. we had everything. all tied together. but we have the local people that were very professional, working with the fbi. it had been in munich hostage deal that prepped this and put this on forward in 1984. and when i was in the pentagon as the director of command-and-control, i kept trying to strangle all this unnecessary stuff that was going on. people wanted everything. they wanted the moon. and i got this answer time and again, if i can talk all over new york city, why can't i talk over in germany? there's a lot of different things that i could go into on that, but i just want to make you feel good. i think we are doing very, very good in our progression of how we are dealing with this technological stuff. i disagree with some of the

people that say we are in the stone age. i think we're not in the knowledge area. we're still in the information area, but i want you to go good with the fact that we need more people to say take this out. it's no longer worth what it's going. i watched the identification system at posts, camps and stations all over the country. we cannot give identified anybody that came in. now they know exactly who you are with your drivers license and with your plate. and you may not be able to match the two of them but they catch you, in most cases. so the local people are very, very important in homeland security. and they would even get better. my grandson is a bomb tech in tucson. i guarantee you he is on the job 24 hours a day. so i just want to make you feel good that we have come a long way since 1984 when the have to

sort of ad hoc and scramble to get together. and i had to let a big contract with motorola just to get radios that were compatible and we did talk to police, fbi, harbor patrol. so feel good, gentlemen. >> do you guys feel better? >> i do want -- i have another that later this week. we've done research, plots of enforcing 9/11 which i think we're the only database in the country that tracks that. and also we looked at trends against terrorist attack since the united states both at home and overseas the last four years. and i think both of those data sets are very, very constructive. a good companion piece talks about what works and what doesn't. and that event -- can't remember when that event is. is it wednesday or thursday? thursday. come back thursday.

>> show up whenever you want. >> the front row over there. >> i'm from the heritage foundation. i'd like to take it back to the biometric exit program and ask you a little bit deeper. you described as program that's neither cost-effective nor actually necessary. i think stupid might be one of the terms you either apply to it or would have. and my question is, we have been congress representatives who are a lot of things but they're probably not stupid, most of them. so why is a requirement like this in the law in the first place? >> well, that's part of a reflection of the dysfunctional, talk about, maybe different as their part of the dysfunctional oversight. what you have, the department of defense you basically have oversight from the armed services committee in the house

and the senate, little bit other issues in terms of intel, but that's pretty much it. and you have -- in homeland security virtually every major committee hasn't oversight authority, and many of the subcommittees have oversight authority as well. so what you have is you can have something which from your perspective seems just like fine and commonsense but if you're sitting in judiciary and you are responsible for immigration reforms, and yet no real technical expertise in a whole range of issues, the requirement may seem like perfect commonsense. but there's no check and balance on you. and the one thing we know congress doesn't do well, right, is congress doesn't, doesn't evaluate. when they put systems in, they have no way of evaluating the system requirements up front. think about that, right? if they want to see the cost of doing something, they can go to cbo, congressional budget

office, and they were monday the north on the cost of implementing this law, right? but they can't to you from systemic standpoint how all this going to work, what this is going to add up to, they can to systems analysis on that. the government accountability office, right, they can look at programs that are in existence and tell you how well it's going. so after they passed the law, the gop right all these come how screwed up it is by but the gop and a before and say we did assistant analysis and visibly kind of a dumb idea, right? and, of course, there is no real, there's really no technical advisory thing in the department. so there's nobody really, so you at all those things. it creates a perfect storm of coming up with good ideas, right? and then only finding out it's not a good idea when you actually go out there to try to

do. and it actually becomes the true perfect storm because you create the requirement which forces the government to do something stupid. the government tries to do it and, of course, it doesn't stupidly. then you have a hearing about how stupid you been doing this thing and you beat them up over that. so you have this endless ash that you require more requirements to do the stupid thing more efficiently. the requirements make them to be more inefficient. but here's the deal is because they're so stupid idea to begin with you can't write a law that says i refute my stupid idea, right? because that would make you look stupid. that is, if you look out, 100% cargo scanning is a perfect example. every responsible mystica analyst in the universe said this is a stupid idea because the only thing we are concerned about is too smuggled nuclear weapon. if someone's going to smuggle a nuclear weapon, the last thing we do is put inside a shipping container. we put this requirement in any way. who we are literally years later and the department, they say

this is simply not going to work. >> stupid is as stupid does. [laughter] the only thing i'll add to this because we're running out of time is imagine a fortune 500 company, many which are bigger than department from a market capitalization standpoint, having to run and be overseen by 108 different committees. right? that's the analogy. and yes, it's public money. we want oversight but there can be too much oversight because you reach, it's the bend any where we are overseeing so much that we actually lose sight of what's important and needs to be overseen that allows us to make progress. >> i think it's 100 a committees that are subsets of board of directors of 535. the isa control and design the budget in the first place. that's a recipe for this functionality. >> heritage.org.

my last commercial for the day. go read report for yourself. >> we have hit the noon hour, and a fortunate we will cut off the question she. thank you very much for being here, and please join me in getting the a warm round of applause to the panelists. [applause] [inaudible conversations] [inaudible conversations] >> in a few moments the latest economic forecast from the congressional budget office.

>> the congressional budget office says unemployment will remain above 8% for the next few years, and economic growth will be relatively slow. cbo director doug elmendorf spoke with reporters for a little more than an hour. >> good morning. thank you all for coming.

i'm doug elmendorf, i'm the director of the congressional budget office. this morning to cbo released this summer update to our budget and economic outlook. i'd like to briefly summarize the report and then my colleagues and i will be happy to try to answer your questions. the united states is facing profound budgetary and economic challenges. cbo estimates that the budget deficit this year will be about $1.3 trillion, which equals eight points 5% of the country's total economic output, or gdp. that deficit stems in part from the long shadow cast on u.s. economy by the financial crisis and the recent recession. although output began to expand two years ago, the pace of the

recovery has been slow. and the economy remains mired in a severe slump. cbo expects that recovery will continue, but that output will stay well below the economy's potential output, in an amount that corresponds a high rate of use of capital and labor for several years. coo initially completed its economic forecast in early july. we later updated the forecast to reflect the policy changes enacted in the budget control act of 2011. but we did not have time to include other news, including the recent swing in financial markets. on the basis of the data available in early july, cbo projects that real, many inflation-adjusted gdp, will increase by 2.3% this year and bike 2.7 present next year. incorporating the economic data of the past month at half would have let us to reduce expected growth in the near-term.

looking beyond next year under current law, federal tax and spending policies will impose substantial restraint on the economy in 2013. so cbo projects economic growth will slow that year before picking up again in 2014 and beyond. with only modest economic growth anticipated for the next few years, cbo expects unemployment default only slowly, and employment to expand only slowly. the unemployment rate, shown in the picture behind, is projected to fall from 9.1% in the second quarter of 2011, the 8.9% in the fourth quarter of this year. and 8.5% in the fourth quarter of 2012. and then to remain above 8% until 2014. although inflation increased in the first half of 2011, spurred larger by a sharp rise in oil prices, cbo projects it will

diminish in the second half of the year and then stay below 2% over the next several years. if there's emphasis, however, that the uncertainties running cbo's current forecast is especially great because the present business cycle has been unusual in so many ways. many development can cause economic outcomes to differ substantially from those cbo has projected. if the recovery continues as we expect and if tax-and-spend policies unfold as specified in current law, deficits will drop markedly as a share of gdp over the next few years. under cbo's baseline projections, which generally reflect the assumption that current law will not change, deficits fall to 6.2% of gdp next year, and 3.2% in 2013. as you can see in the higher line in a new picture behind the

average 1.2% of gdp during the rest of the coming decade. cumulative deficit over that decade will total three and a half trillion dollars under current law. and by the end of 2021, debt held by the public equals 61% of gdp. a bit less than it is now, but still well above what the country has experienced over the past several decades. cbo's baseline projections incorporate the assumption that current law remains in place so they can serve as a benchmark for policymakers to use in considering possible changes in laws. but those baseline projections understate the budgetary challenges facing the federal government, because changes in policy that will take effect under current law will produce a federal tax system and spending for some federal programs that differed noticeably from what people have become accustomed to. in particular, the baseline projections in this report

include the following policies specified in current law. first, certain provisions of the 2010 tax act including extension of lower rates and expanded credits and deductions originally enacted in 2001, 2003, 2009 and 2010 x. by her at the end of 2012. second, the two-year extension of provisions designed to limit the reach of the alternative minimum tax, the extension of emergency unemployment compensation, and the one you reduction in the payroll tax all expire at the end of 2011. third, sharp reduction in medicare's payments for physician services take effect at the end of 2011. fourth, funding for discretionary spending declines over time in real or inflation-adjusted terms in accordance with the casts doubt on the budget control act. and fifth, additional deficit

reduction totaling $1.2 trillion over the next decade will be implemented as required under the budget control act. all those are in current law and play a role in our current law projections. is instead some of those policy changes did not occur in current policies were continued, much larger deficits and much greater debt could result. for example, if most of the provision in the 2010 tax act that were originally enacted in 2001, and three and nine and 10 were extended rather than allowed to expire, if you'll be minimum tax were indexed for inflation and if cuts to medicare payment rates to providers were prevented, then the transport deficit shown by the light in the picture behind me would be nearly $8.5 trillion, rather than the $3.5 trillion in our baseline projection for current law.

under those alternative policies, debt held by the public would reach 82% of gdp by the end of 2021. higher than any year since 1948. beyond the next decade the aging of the population and rising cost for health care to push federal up considerably as a percentage of gdp. to prevent debt from becoming unsupportable, policymakers will have to substantially restrain the growth of spending, raise revenues significantly above the historical share of gdp, or pursue some combination of those approaches. thank you. my colleagues and i'm happy to answer your questions. please start by telling us who you are and what organization you work for. yes. >> my name is patrick. since cbo didn't take into account stock market volatility, so the economic indicators pointing downward in august, can

you be more specific about that? is the u.s. in a recession now? and will the lower economic indicators contribute to a higher deficit going forward? >> so, as a practical matter we can't update the forecast every day up to the presentation of this report. we build our budget projection on top of her economic projection. so we mostly settled as economic projections to early july. the one exception to that is that we need to have budget projections and economic projections that are consistent with each other. so we did go back and updated economic forecast for the fx we estimate from the budget control act of 2011. but otherwise we have not been able to take on board the news in financial markets, the latest data on nonfinancial economic activity, the annual revision to the national income private accounts have all come out since early july. if we had all the information on hand, when we made our economic

forecast, we would have ended up with a somewhat weaker economic growth in the second half of this year. and that would've meant somewhat larger deficits. but we have not been the work we would need to do to quantify that. we still believe taking on board all the information of able to today, that the economy will continue to grow up in the second half of this year. as i mentioned, however, and this is a good point to emphasize, economic forecasting is a perilous business. and it is particularly perilous when we have been through a number of years of economic developments that are nearly unprecedented in u.s. history. >> i am with npr. your forecast for the unemployment rate seems to show a very, very gradual decline, to back to what americans are used

to, to about 2014. i don't know the exact numbers. and a much more precipitous decline. can you give us a sense of the assumptions there and why those are what you think is most realistic expectations? >> so, the first crucial assumption to have in mind is current law fiscal policy. under current law, as i mentioned, a few moments ago, i could deal of lower tax rates and other changes in tax law from the last decade expire. so the tax burden rises considerably in 2013 relative to 2012. additionally, under the budget control act, there will be reductions in spending in 2013 from discretionary caps. in addition from the budget control act there will be some additional amounts of deficit reduction, the $1.2 trillion that has not been specified. and we didn't have a way of

determining what policy it might be undertaken. so we have done is to take a very simple approach of assuming equal reduction in the deficit for the set of years from 2013-2021. at that amount again, that accentuates the withdrawal of fiscal stimulus, the extra fiscal restraint in 2013. so and a port in part of what's happened is that we have the next few years, said the rest of this year and 2012 will we think the forces that have been weighing on the economy for the last few years will continue to weigh on the economy, think of the reduction of household wealth, the efforts by households to reduce their debt burdens, restraint on credit availability, weakness in housing sector and so on. we think it will take some time for those forces to be worked out. been in 2013 there's this large amount of fiscal restraint. so through 2013 we are really looking for slow growth in output, and from that slow growth in the demand of workers

began a slow decline in the unemployment rate. after that point, once the fiscal restraint has come on board, we think that the other forces that have been slowing the economy will be waning. eventually we will start building houses again, households will do more spending, business will do more investment, more hiring. so by the end of 2013, we are at a point in our projections where actual output is still well below potential level of output. and with some of those other forces having waned, we expect at that point that the economy will start to recover more rapidly the way that it has after some past business cycle downturn. so we are looking for more rapid growth in 2014, 15 and 16, and then a closing of the gap between actual output of potential output in 2017. and the unemployment rate comes back down towards 5% roughly.

>> and you said when you talk about the budget outlook you were talking about how, that there is a more likely path that there are things that could change that path, looks like a hurricane is headed towards us. what are the things that could change the unemployment outlook? >> well, that's a very long list. we talked into economic chapter in the update about some of the risks the economy faces. and i should say there are risks on both sides of her forecast. we try to set the forecast for the economy and projections for the budget that are in the middle of the distribution of possible outcomes as we see them. so are both upside and downside risks. i think downside risk, risks include stronger desire by households to pay off debt and rebuild there will. and we have anticipated what it could include greater uncertainty by households and businesses about the pace of economic recovery, perhaps about

government policies as well. we have a very un-self -- in european markets and with european sovereign debt, oil prices have come back down again, but could possibly go back up. so this is a tremendous collection of forces that could work to restrain economic growth, whether those cumulate enough, create a self reinforcing downward spiral that constitutes the recession is a different part of question. yes? >> as you well know, there are two parts to the budget deal this past earlier this month. one was -- [inaudible] the other is the supercommittee. according to projections, would there be a long-term difference, the budget picture, if the committee failed to do its work?

>> well, it's under current law don't be an extra $1.2 trillion of deficit reduction either through the enactment stemming from this committee or the automatic sequestration that was taken without action by the committee. but yes, our economic forecast would vary depending on the nature of the fiscal policy changes. if, for example, the deficit reduction committee put off the deficit reduction into later in the decade rather than beginning in 2013 in a way that we assume for this report, then that would strengthen economic activity in 2013. if the committee made a particular changes to tax policy, we would try to model the economic effects. so when we announce the president's budget our week announced this last fall for

different ways of extending the expiring tax provisions, we incorporated the effects a change in marginal tax rates on labor supply in savings. so, both the composition of the policy changes and the timing of the policy changes will be some imprint on her economic projection. which is to say we have to have some of the specifics that of changes in mind for us to do and economic analysis. >> this report suggests the supercommittee should go beyond its mandate and find a bigger outage or reduction of? >> it's not the role of the cbo to advise the congress on what policies they should undertake the budget picture as we have shown here in this report, and in a collection of reports, is bleak under current policies. if current policies are extended then we have very large deficits

and mounting federal debt. that's not news to anybody in this room or anybody on capitol hill. and i think it is the concern about that trajectory, and its implications of the economy that have led to the renewed focus over this past year on deficit reduction. but with the right amount is that the deficit reduction committee or others should aim for is not for us to say. [inaudible] you're saying as you for 2013, the deficit reduction, that will slow down. [inaudible] >> well, so we do think, and say in the report, and have said on a number of occasions, the past

several years, that reductions in government spending, over increases in taxes, in an economy with a lot of unused resources, and with monetary policy having already pushed interest rates down essentially to zero will slow economic growth and reduce employment relative to what would otherwise occur. again, let me be clear about that. under the economic conditions and the conditions for monetary policy that we now find ourselves in and that we project will be roughly still to for the next few years, reductions in government spending or increases in taxes, will reduce output and employment relative to what would otherwise occur. at the same time those actions by reducing government borrowing will lead in the second half of this decade and beyond the higher outputs than would otherwise occur and higher cost.

so there's a trade off there in terms of the effects of deficit reduction enacted and taking effect in the budget and the economy over the next few years. it's possible, and we talked about this possibility, a number of occasions, the structure deficit reduction in a way that does not have as large a dampening effect on output and employment in the near term, while still achieving significant at deficit reduction over the decade and over the longer term year and that amounts principally to having the policy changes take effect later. that's not particularly an argument for deferring the decisions about this policy changes, but it's a question at what point in time those policy changes should actually hit the

economy. the advantage to waiting is lower negative impact and economic growth in the near term, the disadvantage is greater accumulation of debt in the near-term. and that's the trade off that policymakers confront. >> damien with "the wall street journal." by spreading the $1.2 trillion over 2021, do you use something like a half tax increase, have to spin the california? where do you get that? in other words, how she would explain where the jolt from 2013 will come from? will it come from higher taxes or spending cuts, or from both? >> a good deal of the overall economic jolt comes from the changes in tax rates and other parts of the tax law, from the expiration of those provisions. and vendor some extra jolt from the caps on discretionary funding in the budget control act.

but they additional jolt, the additional $1.2 trillion, we have not allocated to spending or revenues because we don't know. and have no basis for making that determination. but what the law does say is that if the deficit reduction committee does not lead to legislation, that causes any deficit reduction, there would then be reduction in spending that would be constant amount in each of the nine fiscal years to which it applies. so for lack of a better alternative we have taken an equal reduction. i should say equal in terms of programmatic changes are tax law changes that builds up over time. so we just picked that as the most neutral choice we could make, and because of that we're not allocated spending or revenues. it is a bit of a complication in

reading the tables. you'll see a number of tables with there are spending and revenues and then something else if we get to the total. and i recognize that it's awkward in some ways but we just have no alternatives that we could really pursue. >> james with the financial times. your baseline projection now three and a half trillion over the next 10 years. that's about half of what it w was. and i understand about two-thirds of the reduction is from the budget control act. how do you account for the remaining trillion or so? >> most of the reduction in projected deficits relative to our march projections, as you say, comes from the effects of the budget control act. most of what's left comes from a downward vision to our projection for interest rates, both short-term interest rates and long-term interest rates. and that essentially follows the movements in market interest

rates. in fact, market rates have now fallen further so that our interest rates in this projection are above the rates that are prevalent in financial markets. for most of the coming decade. so the reduction interest rates has a large affect on the budget projection. the country has a lot of debt, and this means that lower interest rates can say the federal government a lot of money and means higher interest rates can cost the federal government a lot of money. just the movement in interest rates are going to matter much more percentage point for percentage point when debt is 60 or 70% of gdp than when debt was 30 or 40% of gdp. and there are also a collection of other changes, and we have a very nice appendix report that goes through them peace by peace. but almost all total revision is either the budget act or downward revision.

[inaudible] >> well, estimate the effects or effects of the s&p downgraded itself. as i said we do not take on board any of the financial or other news since early july except for the passage of the budget control act itself. and in general when we look at constructing our interest rate forecast, we look at models that we have of interest rates and with the interest-rate provision in financial markets, and it can help the process to understand how rates got to where they are. that's a pretty difficult, i wouldn't say we always work out some careful decomposition of that. the downgrade is complicated for u.s. interest rates. for most countries debt, when people become more worried about the state of that country, the interest rates on the sovereign debt, the debt of the countries

debt increase. in our case because treasuries have traditionally been, for people are been worried about certainty in the world, greater uncertainty can lead to some movement into treasuries. presumably at the same time people are concerned about the state of u.s. fiscal policy might be trying to move money out of treasuries. so it's a very complicated set of forces that work. and i'm glad that we just happened -- didn't try to some particular responsibility to particular events. what else? >> do you have a view on the question of deficit reduction based solely on spending cuts versus raising revenues as well? and how that might affect the economy. and also in talking about timing deficit reductions so you don't -- how long do you think congress should wait to impose

the cats without harming the economy? >> well, eric, use the word should a few times and should is not the word that comes naturally from the lives of cbo directors. we don't have a view about how the deficit should be narrowed. by that meaning a preference. what we do have is an analysis of the effects of alternative policy, and we've done some of this in testimony, and we did some of this and report last year on the cost of deferring action to narrow for future budget deficits. and we have a little of this qualitatively in a letter to congress that we wrote a few weeks ago. the composition of the policy actions to narrow the budget deficit can matter a great deal to the future state of the economy, and also of course matter a great deal to what sorts of public and private

goods and services this country has. so, i recognize we talk about the need to narrow deficits in general terms. that should not be interpreted as should not matter. and when we look at specific proposals for raising tax revenue, by raising tax rates we model the discouraging ethics of those increases on labor supply and savings. if one propose to raise tax revenue by reducing tax expenditures by widening the tax base, income tax by reducing credit reductions of various sorts, that might have a positive effect on the economy i removing some of the distortions to decision-making, and having those decisions being made more based on market signals rather than government subsidies. and on the government spending side, the nature of spending changes can matter. it's very difficult for us to model that well, i would admit, that certain sorts of government

spending reasonably provide greater investment in the country's future, others are more related to current public consumption. all those things can matter. on the timing, again, as i said earlier i think it is a widespread view that decisions about how to put the federal budget unsustainable path are best taken sooner rather than later. uncertainty about government policy is not helpful for encouraging helpful spending, business investment, plants and equipment, decisions to hire. we now have a tax code, very large part which are due to expire over the next few years. with uncertainty about what follows. we have potential for large changes in spending programs. without knowing what those details are. so again i think it is a widespread view among analysts that earlier resolution of the

uncertainty about how fiscal policy will play out would be good for economic growth in the near-term. and over the longer-term as well. and in terms of when policy changes actually take force, that's more complicated. and as we've said we think that given the current state of the economy and given the current posture of monetary policy, that reductions in government spending or increases in taxes in the next few years will reduce output and employment relative to what would otherwise occur. they would also benefit the economy in the medium-term and long-term by reducing government borrowing. unless one made other changes to fiscal policy in the medium-term and long-term. so if one coupled near-term increases in spending or reductions in taxes with the medium-term and long-term fiscal

restraint, then one would have benefit of a near-term stimulus in boosting output and employment. and if done in the right magnitude, one could then offset or more than offset the negative consequences for later in the decade. and i recognize that it may sound like a bit of a paradox that the economy can be strengthened the next few years by tax cuts or spending increases, and to be strengthened in the medium-term and beyond would happen more with tax increases and spending cuts. but it's not really a paradox. all it is reflecting -- reflecting his economic policy by the group has different effects under different economic conditions. and that's i think the lesson of the analysis that we've done. again, going back at least since i provide but i think a little before that, you can go back and look at the analysis we did in the american recovery and --

through the analysis of stimulus options that we did in january of 2010, to our testimony to the senate budget committee last september, different ways of extending the expiring tax cuts, and to the analysis in today's report about the effects of different policies. there is in that setup works, and i think and the consensus of you among economists who studied these issues, that the sorts of policies in terms of the overall budget deficit and overall levels of spending revenue, that are most advantageous for economic growth are somewhat different in the next few years than they would be later on. because of the protected state that we find herself in this economy. >> i don't see specific numbers for 2013, 2014, 2015. does that mean you expect it to be 5.3%?

>> it gives the year-by-year projections for the economy in both chaldea bases and fiscal year basis but so the unemployment rate on a calendar year average is 7.9% in 2014, 6.1% in 2015, 5.4% in 2016. and 5.2% after that in our forecast. >> just to go back to dave's question, i'm not sure i quite understood what you sing very well. are using the assumption is that there will be 1.3 trillion deficit and as triggers get polled, and that is how does that work in what effect does it have on the economic assumptio assumptions, or did you allocate that 1.2 toy anymore a good boy or something like that? >> okay, let me try to do a more clear job. the budget control act condition to the specific caps on

discretion is being and other changes that it imposed called for further deficit reduction from special committee. and the budget control act says that committee should aim to reduce deficits -- deficit by $1.5 trillion but if, in fact, it isn't $1.220 of deficit reduction achieved, then do the automatic reductions in spending over the course of fiscal years 2013 through 2021. the nature of the policy changes, the committee might decide upon and the congress might enact, is of course something we can't predict. nonetheless, we did need to take on more that amount of deficit reduction and a budget projections because it is in current law and within need of economic projections that line up with the budget projections. we needed to do something besides just the 10 year total. we wanted to do the least that

we could because we don't want to be asking what specific policies will take effect. so what we did was to see that in the law it's as if there's no action by this committee, or by the congress to enact from the committee, then they would be equal reductions in each of those nine years in spending. so we took the equal reductions. we did not classify it has been because the deficit committee made reductions as well. switch of the equal of year-by-year, which is specified in the law under some conditions, but also has the great virtue of a setting of neutral sort of associative we took the year-by-year and we did not fall on either revenues are spent that you will not find that affect in any other spending or revenue numbers. you will find out in the bottom line for budget deficits. in terms of economic effects that fiscal tightening in extra fiscal tightening in 2013, compounds the tightening that is

already will occur under the specific policies we know about for spending and taxes. and is part of why the further reflect economic growth is especially slow in 2013 in our forecast. >> how can you model that without saying it was either revenue raising or stimulus cuts? >> so for that purpose we did not, for example, as i said we have a specific tax proposal them or look at the effects of tax returns once a which is didn't do that here. so all we are really capturing is the effects on aggregate demand, and then played on the effects of additional government borrowing on the capital stock and output. we did not quantify the effects of that particular extra piece. we do report in chapter two in economic chapter, in the section on fiscal policy, that sentences

we estimate the fiscal restraint standing from the expiration of provision in the 2010 tax act and the enactment of the budget control act will decrease real gdp in 2013 i between about one and a half and about 3.5% compared to what it would have been otherwise. but we only did that experiment once for the body of those proposals. we didn't do it increment by increment. >> so how much would you estimate that could change, depending on what, i mean, what kind of sequestration actually happens? as i understand trish has a good deal input on what actually, what actually is done with the 1.2 trillion, so how -- >> so it could change for a variety of reasons. one possibly is the kerry will agree on some proposal that would than be enacted by the congress. sequestration will take effect at all, or they will bring a proposal that a compass part of

the $1.2 trillion but not all. and the sequestration would then be reduced in size. so there's a lot of possibilities like that. it's also, then there's also the further question of exactly how would the sequestration play out. that will not be up to us to decide. that is up to only be to work out if it comes to that. we have been asked we estimate the effects of sequestration would be a different parts of the budget and we're working on that analysis. but that's a budgetary analysis. affecting the economy, we could think further about. but i think, compared to all the other uncertainties in this forecast, the uncertainty about the composition of the sequestration is not particularly large. much greater uncertainty i think about the possible changes in

law. [inaudible] >> well, we only take request from the hills. happy if that serves other people's needs as well. yes? >> can you say come and i don't know if there's report, what has been economic impact of the cuts that have already occurred in the federal budget this year, looking at the c.r., and then the new lines that come for fiscal 2012, i don't know if that was an assumption you made. the economic effect on gdp. >> so, so we think from our analysis and say in a report that the waning of fiscal

stimulus, the current restraint from fiscal policy is weighing on output and employment. in the report we quantify the effects of the american recovery and reinvestment act, and as you know we report once a quarter on those a facts or and will be issuing another report on that topic this afternoon. we also quantify in the report the effects of automatic stabilizers, the natural response of taxes and spending, changes in the economy for 2010 and no particular smaller in 2011 and 2012. ..