the u.s. postal service its surplus in the retirement fund estimated by opm at 6.9 billion dollars. also proposes a restructuring retirement benefits at an estimated cost savings of $4 billion in temporary relief. additionally, the president's budget proposes streamlining fehbp pharmacy purchasing benefits, and we believe this could save the postal service an additional $300 million over the next five years. lastly, i would like to address a number of reports questioning whether the postal service has overpaid its obligations. moreover, i would like to clarify the term overpayment has been used by those who implied that there should be a change to the current allocation that is

mandated and the law. opm applies the method established in tech current law for apportioning responsibility for ses are as cost between the postal service and the treasury. after careful review by the office of personnel management general counsel, our inspector general, and our board of actuaries, they have all concluded opm does not have the administrative authority to make a reallocation of the cms rs cost based on the 2006 postal accountability and employment act. however, if congress determines that another methodology is more appropriate and explicitly establishes another allocation method, i pledge that opium will quickly and fully implement those changes. we look forward to working with

the committee and the postal service to develop a solution to this problem and in addressing these fiscal challenges. thank you for your time, and i'll be glad to answer any questions?? >> the thank you very much. it will be submitted. if we give you the authority to return the money that the postal service believes is an overpayment to the fund that opium will implement that rapidly to. i appreciate that.?? next we will hear from phillip? herr, the director of physical infrastructure issues at the government accountability office really here because under that general title he is the expert

on the postal service. thank you for your testimony. >> thank you. thank you for the opportunity to discuss the serious financial crisis facing the postal service. as volume has declined that service has not generated sufficient revenue to cover obligations. critical decisions by congress, the administration, and the postal service are needed to help put it on a path to financial solvency. first, by most measures the financial situation is grim. net loss of 20 billion over the last five years. a projected net loss of 9 billion this fiscal year, and reaching its $15 to have $15 billion borrowing limit on not making its retiree health benefits payment this year. the postal service has released several proposals to address these problems. one is to withdraw from the federal employee health benefits

program and create its own using the 42 and and a half million dollars fund set aside for future retiree health benefits. this proposal should be carefully reviewed as it is not clear whether the postal service can achieve its planned cost savings or what the implications are for employees, future retirees, and the federal budget. currently over 1 million employees participate in the federal health benefits program and 300,000 employees are eligible to retire over the next decade. this is a significant obligation. several proposals would defer as a way of providing financial relief. however, deferring payments increases the consequences should the postal service not be able to make future payments if its core business continues to decline, as expected. this increases risk to the federal government and taxpayers and possibly future retirees.

important that the postal service continue to pre find its obligations to the maximum extent its finances permit. the knowledge this will be difficult until its business model is updated to reflect current realities, however. some key questions to consider regarding the proposal to create a separate program include how it will acquire the expertise needed to manage health benefit programs, what would be the budgetary impact of transferring 42 and a half billion from the treasury-help fund to a postal administered program that could seek higher returns in the market with potential risk. can savings realistically be expected from restructuring its health benefits program? with such a change. if it defaults on funding or benefit payments to employees or retirees are changes significantly, as is possible, what would be the federal government's obligation to

1 million plus beneficiaries? the postal service has asked for legislation to access its surplus estimated to be about 7 billion. what is discussed last often is the postal service has an unfunded liability estimated to be about 7 billion. in june 2011 the postal service stopped making payments, meaning the surplus has been reduced by $800 million. the postal service has also proposed making new employees ineligible for annuity raising the question of whether other options have been considered. flexibility now accommodate different ecru rates for certain employees. the postal service also seeks to accelerate network and work force downsizing. we agree networks need to be realigned. frankly, network realignment is overdue and necessary, whether or not actions are taken on the pension and health proposals. when fully implemented estimated

savings could total $11 billion. several key areas include saving 3 billion by reducing processing plants from 500 to 200, 3 billion by reducing delivery from six to five days, reducing delivery cost drought consolidation and saving one-half billion by selling postal service to private businesses and closing up to 12,000 post offices. realigning will require trade offs in the postal service asking for legislation to eliminate the layoff provisions so that it can reduce its work force by an additional 125,000 career positions. if congress considers possible changes questions include, is six day delivery still appropriate? what changes to delivery standards are needed to realize cost savings derived from network optimization? our statutory or regulatory changes needed to permit postal

operations while assuring appropriate oversight. in closing, the stark reality is the postal service business model which until 2006 relied on continued growth has broken. the gap between revenues and expense of maintaining network has become unsustainable. difficult choices must now be made. members of the committee, this concludes my statement, and i'm happy to answer questions. >> thanks. i think you? have summed up th reality pretty well.? the business model, which worke? for a long time for the postal service, has not broken, and we? have to help fix it. thank you for being here.??ó? thomas levy is the senior vice president and chief actuary at the segal company which has done work relevant to our hearing. proceed. >> thank you. i was the principal author of

the 2010 report to the postal regulatory commission on civil service retirement system cost and benefit allocation principles and i'm here today with the encouragement of the postal regulatory commission to discuss the recommendations with respect to this important issue. let's make it clear. our assignment was to look from the current point of view at what is fair and equitable, not whether opm, in fact, and implemented the 1974 legislation correctly. i have not heard anything in our study to suggest that they have done otherwise. we do not suggest overpayment in the sense of not following congress's direction to the extent that i may use that word, it is in a standard of fair and equitable in 2010-11. when u.s. ps was established as

and entity in 1971 and important issue was the allocation of civil service retirement system costs between the work -- the federal government for worker service and the post office department and the u.s. ps. opm has consistently done this allocation in accordance with public law 93349 in 1974. the essentially allocating the federal government the cost of a frozen pension benefit for each worker as of june 30th 1971 based on service, rate of compensation, and the benefit formula at that time. the entire balance of that workers' pension over and above that frozen amount has been charged to u.s. ps. the benefit design is more generous in the later years of the worker's career. since it was always the second employer, the benefit accrual

charge was usually higher. because the benefit is based on the high three-year average salary for all years of service, usps is paying for the impact of post 1971 salary increases on pre 1971 pov pension accruals. in a report for the -- office of the inspector general dated january 11th 2010 actuaries' concluded that this allocation was inequitable in both respects. they estimated that an equitable allocation accumulated with interest would have resulted in did usps share of the csrs assets being lowered by $75 billion for past payments with about $10 billion of savings anticipated in future years.

usps requested the opinion on the fairness and equity of the opm method. after taking competitive bids the segal company was selected to analyze and make recommendations. we met with stakeholders and reviewed the actuarial and accounting standards, and we concluded that the most relevant benchmark was the accounting standard applicable to private companies. this was the only one that had as the primary objective the matching of revenues in the postal service's case, selling postage, with the labor cost to produce those revenues. that was our assessment of the appropriate basis for evaluating the fairness of the csrs cost allocation. the accounting standard provides clear and not discretionary direction with regard to plans such as csrs that provide non uniform benefit accruals, in

this case higher accruals in later years of employment. the expense charge requires following the plan cycle formula as opium was doing. it also requires the cost allocation for a final average salary plan like csrs must reflect the anticipated future salary at termination or retirement and may not be limited to the cost based on the compensation at the time the work is done. reflecting future compensation increases in the allocation would not part of the opm methodology. based on this analysis we concluded that the preferred method to allocate csrs benefits to the federal government was to reflect post 1971 salary increases with respect to up 31971 service, but otherwise to

follow opm methodology. we indicated we did not believe that the commission of future salary increases with respect to pico de services was fair and equitable. in effect what that did was gave the federal government a lower-cost because of the establishment of usps then it would have had had the pierre de continue to operate, and we did not see anything to suggest one of the objectives of establishing the usps was to reduce past pension cost, but that is, in fact, what the law has done. we also noted a pro rata reduction of accruals that did not follow the csrs formula was within the range of fair and equitable alternatives, but was not our preferred methodology. we did not do any calculations of our own, but roughly

estimated that are recommended allocation would result in accumulated savings of 50- $55 billion for past allocations compared to the opm methodology with an additional savings with respect to future payments of 6-$8 billion. that completes my prepared testimony and i'm pleased to answer questions. >> thanks. we will go now to questions.q let's do six minutes since there are a number of senators here. postmaster general donahoe, you mentioned that without some change by the end of this month the postal service would have to default on the five and a half billion dollar payment to the health fund. indicated the administration would seek legislation to delay that by 90 days, but assuming that is taking care of -- let me ask another way.

if nothing happens, you receive none of the relief we are talking about providing, by what e wi teach you thinkhe pos .. just have to default on the health payment but will begin to find it impossible to carry out its normal responsibilities such as delivering the mail? >> probably next august, september timeframe. what we are looking at is even if we push the payment off for three months, we have got the payment of over $1 billion due in october. >> what is that? >> workers' comp. >> department of labor. >> department of labor. then we have a couple of payrolls in october. we will be very close, even not paying the prepayment. now, over the course of the winter mail volume picks up and we will pick up revenue.

we think that by the august-september timeframe next year given no action we will be out of cash to pay employees and contractors.óóó >> and if for some reason you don't get that 90-day delay, what is the consequence? >> well, the delay one way or the other we will not make that payment. so the delay now, it does not really matter. if they delayed it makes a october more bearable. >> right. you are saying here, and i know you said it before. there is no way you will have the capacity to make the payment is. >> okay. let me ask you this, you made what we described as controversial proposals reducing the deliveries to five days a week. closing significant, over 3,000 post offices. reducing the number of distribution centers and ultimately, asking for authority to, for reductions in force comparable to what exists for other federal

employees up to 120,000. probably use it for that employ. help us understand th e help us understand the basis for those requests in this sense. why are you confident the result of those cutbacks will not lead to a further drop in business for the post office? in other words, why do you think those changes will not only save money but will really put the post office back on the road to being balanced, fiscally or even slightly in surplus? >> here's the way we look at this. there are two major things happening right now. one is the, is the decline of first class mail. i think that we could cut the price in half and not be able to slow it down all that much. >> that is really important. it is all the internet, right, e-mail? >> technology. 60% of the americans pay bills online today. that will not change. that will continue to move in that direction.

as a matter of fact what we're seeing now a number of companies requesting payments to have a hard copy statement mailed to one's home. >> that's right. >> banks are starting to charge for checks. you get five checks for free. after you've got to pay. all of these things will continue to push the first class mail volume down. so we think that is something that we'll try to slow but it will continue. where we see our business strength going forward, in two direct areas, one is, standard mail. we had the drop-off with the economy. standard mail has leveled off pretty well. i will tell you standard mail for the most part is an excellent investment. >> define standard mail for us. >> advertising mail. advertising hail. >> right. >> what happens is companies tell us over and over again they get the best return on investment because it gets in front of the customer's eyes. unlike internet or raid owe and tv. when it gets in your mail box the customer sees it w they think is strength there.

as long as we keep the price relevant. we can't let the price get too huy high. the next thing we have strength in is the package business. in e-commerce the offering we make along with fedex and ups, we're like the final mile for them. >> you're doing the last mile for fedex and ups. >> we have seen double-digit increase over the last few years. we'll continue to see that. our infrastructure is great. our people do a great job. it is very affordable and we'll see nice growth there. the third area we see growth potentially in the digital area. that whole area is open for the postal service, not so much bill payment as you see being done for free today we think there are opportunities to provide secured digital messaging. it will not make up for the first class difference but those are three areas. so given that, given that have plotted out volumes and revenues over the next 10 years, we are using that revenue line as the governor of our business. we do to the want taxpayer

money. we have got to get our finances in order to provide good, dependable service. i think if we provide, good, dependable service which we have an excellent history of doing on standard mail, on remaining first class mail and on packages our business will be fine the we will not have people moving away from us on account of these changes we are making. >> okay. thanks. my time is up. senator collins. >> thank you, mr. chairman. mr. berry, the failure of the postal service would be devastating to our economy. i see you're nodding in agreement. it would pose a threat to the jobs of millions of americans. today you have heard the postmaster general describe a crisis. he says that the postal service is on the brink of default. a year from now we will not be able to meet its payroll and carry out its operations. yet this morning or this afternoon, rather, you come

to us and tell us that the administration does not yet have a plan. you have opposed several of the reforms, the fundamental reforms that the postmaster general has put forth as far as separate retirement system and changing to a defined contribution system. you have asked for, or you say you want more time to study it. you have asked for a 90-day delay in the 5.5 billion. you haven't mentioned your position on relief from the no layoff provisions that are in the union contracts. you really haven't come forth with a plan other than to take a position in opposition to the repayment of the $55 billion to the csrs system that our actuary

here has described. i just don't understand why the administration doesn't have a concrete plan to put before us today, given the dire straits that we're in? senator carper and i have had bills out there for many months. they're not perfect. and frankly i think they have been overtaken by the rapidly deteriorating crisis that we face but why doesn't the administration have a plan for us today? >> senator, first there will be a plan, as i testified. the white house will have that submitted with the deficit reduction package within the next few weeks. and the president will meet his promise to give that to the congress. also i just want to correct, the administration has not taken a position on the postal services's proposal

on withdrawal from fhbp or the retirement systems. i am not here in opposition to those. >> but you're not supporting it either. >> all i did was to explain that we are, we will require further study but there is no formal administration position of opposition. so i want to be clear on that point. the other is, something we are supporting and it is in the president's budget and i think is reflected in a number of pieces of legislation is the overpayment, the surplus payment in the retirement fund of what we estimate to be the $6.9 billion. and the administration does support returning that to the pose al service. it will require legislation to do that but we are supportive of that relief. and i think that will go a long way in terms of helping some of the challenge that i know you all are wrestling with that we want to help. >> but, mr. berry, that 6.9

billion pales in comparison to the 55 billion that mr. levy described. and you said that you don't have the authority. i've gone back and forth with opm on this. i wrote the provision of the 2006 act that gives you the authority in section 802.c-2. it says that the postal regulatory commission can hire an actuary. that's what they did to take a look at it. and it gives you complete authority to then change the formulas. so i just don't understand why the administration continues to say that it doesn't have the authority. >> senators, i'm not an attorney and i have to defer to my general counsel, my inspector general and my board of actuaries and in their reading of the law, and i know there is a

disagreement in this, but with due respect, they advise me i do not have the authority to determine fair and equitable as mr. levy testified. that authority rests with you and you alone. with the congress. and what i am not here testifying against the siegel report. in fact we find a lot of value in the siegel report and believe might be a good basis for the committee, for the postal service and for us, to have our actuaries and staff to work with you to help determine what is fair and equitable but the congress needs to set that in the law. and there's, that's where i'm stuck. >> mr. postmaster general, my time is expiring rapidly but you did not mention the need for reforms in the workers' compensation program. this is an enormous expense. it is supposed to be a

safety net for workers who are temporarily out of work, and yet the postal service as the it has pointed outs, has something like 2,000 individuals over age 70 who are receiving workers' comp. mr. postmaster general, those people are not coming back to work. >> we agree with you, 100%. as a matter of fact i think it is in my written testimony but i'll double-check. we agree 100%. we need reform with workers' compensation. the proposals that you put forth make a tremendous amount of sense to us. we like to have that included in comprehensive legislation going forward. >> thank you. >> thanks, senator collins. for the information of members, according to our normal custom on calling on members who arrive before the gavel in order of senority and after the gavel in order of appearance, if they're here, the, we'll call on senators akaka,

moran, begich, pryor, carper, coburn, brown, mccast kel -- mccaskill. senator akaka is not here and senator moran is not here so we go to senator begich. >> thank you, mr. chairman. let me follow up if i can here with regards to mr. berry to follow up. i understand the 6.9 billion you don't question that? you want to give it to the post office, sooner than later? okay. we all agree on that. the 50 billion, give or take, do you agree on that number? >> i -- >> because, i understand you have got the process all convoluted between both sides here so do you agree on the number? >> it would take, we would need to get the actuaries on all of the parties in a room together to -- >> let me stop you there. but you had, you said you had acutarials do the work. >> the distinction, what's,

you know and i appreciate, mr. levy, your message, that you know, we are following the law because that's, that has what has driven our interpretation. is, applying the standard of the law. the law has us do this on an annual basis and not look forward in terms of the issues that you heard mr. levy discuss, on fair and equitable. >> so, let me try it again. the work that your acutarials did, did they indicate any overage payment, any payment above one million, 10 million, 30 billion, 50 billion, any number? >> we would agree there are many ways to accomplish the bowl of a fair and equitable -- >> that is not the question i asked you. that is not the question i asked you. let me ask you this. can you provide to us, the study that your acutarials did with regard to this issue? >> absolutely. >> can you provide also, i know we got a letter from

you about your legal interpretation, kind of from your counsel to you, to then us but i'd like the legal analysis that was given to you. >> absolutely. >> okay, so we'll get the acutarial documentation and will show how they did their analysis on this question of the money. not the process, do they believe or not is that -- we're clear on that. >> yes. and, senator, if i could, i don't, i'm not trying to avoid your question. it is, when you look into the future, you have to make certain assumptions. >> i understand. >> on inflation rates, on mortality rates, on the difference between genders, all of these other things that need to be accounted by acutarial. and that's where, in other words -- >> i understand that part. i will tell you, as a former mayor, i had to revamp several retirement programs, police, fire, our whole system, defined, for all of it. so i just want to make sure. i understand you will have a

basis of assumptions that will differ from his assumptions. >> absolutely. >> everybody's assumptions. but i want to see if there's a number and how you got there. >> gotcha. >> okay. then we can argue over assumptions, inflation rates, return on investment, all that stuff. >> and knowing of the importance of this, and both with senator collins and chairman and the whole committee and appreciating the criticality of this issue i can pledge to you our actuaries stand ready to be here to help inform your judgment on what is fair and equitable. >> i will tell you in all my years having to deal with this issue from a smaller perspective, still in the hundreds of millions of dollars, it took many years to resolve these issues between the unions and the individuals as well as the retirees out of the civil because there is no group representing them. the list goes on and on. i'm very familiar with how this works. i just want to see your assumptions. were you about to say something with regards to this also? >> yes. i want to make a quick

comment. the 50 to 55 billion relates entirely to past payments. it has no actuarially -- acutarial assumptions. it is 6 to 8 billion for the future that has actuarial assumptions involved. >> do you want to respond? the 6.9, no one disagrees with that, right? you will pay it at some point if we give authorization? okay. what i'm interested in is the 50 billion. >> the 50 billion number in '03, you all determined on past pave i don't remember -- >> i wasn't here. >> but there was a 7, there was a early did nation by the congress, senator collins was, there was an overpayment of 73 billion. you directed us to pay it and we paid it back. in '06 you did the exact same with military service credit, a $28 billion credit. and it was a determination of the congress that it would be fair and equitable to have that paid by the treasury, not the postal service.

it is reasonable that the congress might decide in this circumstance that a fair and equitable solution would require a new determination of that number and, if it determines it, we will quickly implement it and pay it. >> okay. mr. done a hoe, -- donahoe, let me ask you if i can, a few minutes left, in regard to eliminating saturday service. we sent you a letter. we're concerned about this, for variety of reasons. the rural component and also as small business person, what it will impact on small business owner depends on as much delivery time as possible. they are not corporate. they don't have mail runners to pack it up and ship it over to the post office. the owner has to do it. they have to do it and small business has to depend on delivery as well as making sure they get their mail coming in for supplies. how do you respond to that? that small business owner, and i'm talking small, 15

under, employees. not 200 as sbba defines. >> again we look what would be the best day if any to eliminate delivery, saturday is it. generally the volume is about 10, 15% lower on saturday than the rest of the week. we will keep post offices open on saturday, so people would have access to our 30,000 plus post offices. >> for shipping packages and so forth? >> right. and we would be able to provide that service. now we will not be running what we call outgoing mail that night. that mail would go out on monday but they would have being a he is is to our services. >> i have, my time is expired. i have several other questions. i will submit them from the record and go from there. thank you very much. >> thanks, senator begich. previously somebody mentioned a $3 billion figure, savings annually for eliminating saturday delivery. is that your number also? >> that's our number,

mr. chairman, yes. >> okay. next, senator pryor. >> mr. donahoe, let me start with you, if i may on the federal employee health benefit plan. i am curious about the numbers you think you could save if you left the fbhpb and went to something else. you probably covered this in your opening statement and tell the committee how much you think you could save. >> here's what we did, senator. we have been frustrated with the inability to resolve this retiree health benefit payment going forward. as i said in my opening statement any other company would be bankrupt. what we've done gone back and taken a different look. what we did was, we sat down, rather than arguing about whether or not we can get the money back from the opm, we'll present a different approach and that approach was, how do you eliminate the need for prepayment by changing the costs in your health benefit program? so what we did, we looked at what any other company would

do. this is the way it breaks down. number one, we think with one million people in that plan, we could pull costs down, our experts told us somewhere between eight and 10%. i'll write a check this year for $7.2 billion for health care without the prefunding money. with the prefunding money it is almost 13 billion. so you pull the cost down 8 t0 10%. second thing is, medicare. we are one of the largest computer, contributors to medicare in this country. we do not require our people to use medicare a, nor b. we have 80% usage for medicare a. about 75% for b. we know that current retirees and future retirees using medicare will pull those numbers, very to a tune of around $20 billion over the course of time. the third part of our proposal is, changing the way that we provide health benefits to current retirees. what we would do, we would not take anything away from current retirees but we would freeze them at a

certain level and we would increase their, we would increase the money going to them to pay retiree health benefits based on the costs for our plan. so we would have very good control over it. the fourth thing would be for people like me. cap payments going forward. so when i retire, i will not have that same percentage that you see in the federal government, 72%. it might be 60. it might be 55. the way we worked through this we have been able to completely eliminate the need for prefunding. it is about $46 billion and at the same time, pull our overall costs down. >> but as i understand your propositively you would actually leave the fehbp? >> that is our proposal. >> do you know what impact that would have on the rest of the fehbp? >> i would have to leave that up to mr. berry. >> do you know, mr. berry? >> yes, senator, i testified that in terms of dollar impact it would not be

significant. >> okay. and what about on medicare. tell me, mr. donahoe, again about your, the impact you think you would have on medicare? >> we think that, right now, we will, we will spend, we will add about $1.1 billion to the medicare fund this year. we spent, since 1985 about 24 billion. we know it will increase medicare but it is our feeling we're paying into medicare now. we should have full benefits of it. >> okay. and let me ask about workers' compensation. i think that's an important issue that sometimes gets overlooked and, you have many so ideas on workers' comp reform? >> we, we have, we are in agreement with what's being proposed by senator collins. we would also like to explore what a lot of the states do. if you compare us to fedex or ups, we, we are very proud of the fact over the last 10 years, that we have improved our safety rates.

we are the number one voluntary protection plan by osha, as far as, we have had more of our facilities certified. our accident rates have gone down. the problem is our costs continue to go up. we need some way to control those costs. what senator collins proposed would be very helpful. we would like to take a wide look just like looking at health care. how does the private sector do it? that's the way we would like to do it. >> on one bit of warning there, you would be have to always remember when you're doing workers' comp reform which people should, states and federal government should do from time to time, always the remember the goal of workers' comp is to compensate injured workers. >> absolutely. >> sometimes in an effort to find a lot of savings the workers can get left out. >> the key for us is safety. improve the accident rates. improve ergonomics. that reduces accidents and hopefully we'll have fewer people that go on workers' comp. >> sounds like you've had a fair amount of success reducing your accident rate?

>> yes. i think we've done a great job and a lot of good programs. we're very proud of that fact. from the employee standpoint that is great thing. when you have a perp come to work every day you want them to go home to their family healthy every day. >> we've been looking here in congress looking how to find savings and how to cut our spending. and part of this and senator coburn has been very adamant about this as well as senator mccaskill, part of to make sure every single thing is on the table. there are no sacred cows. >> yes, sir. >> from your standpoint is everything on the table? >> everything is on the table. >> including executive stuff as well asfa silts? >> yeah. >> vehicles, everything? >> we have a proposal, we're going to be implementing reductions in health care contributions for our executives. we will be at the federal rate in three years, 10% a year. that was one of the recommendations made where we could cut executive pay. >> i know there was a story, may have been on cnn, not

sure relocation expenses for employees. have you taken care of that? >> yes, sir. >> thank you, mr. chairman. >> thank you, senator pryor. now we'll go to senator carper and then senator coburn. unless senator carper would like to yield? >> there is no way. i would be happy to yield. i would be happy to yield. ask, do you have a meeting at 3:30. want to go ahead? >> [inaudible]. >> no, no. go ahead. >> please, go ahead. i know senator carper is in this for the long haul. [laughter] >> yeah he is. >> haul is the operative word. some things that i've heard today i just want to put back. restricted business model. you know i sit here think about we're talking about acutarial changes of $55 billion. over 40 years, how did it

take us 40 years to figure out we were $55 billion off in terms of what was compensated? i mean the absolute stupidity of congress in what we've done to the post office is just totally amazing to me. the other thing that, i've heard today, and i've had this discussion with every postmaster general since i've been in congress is the revenue estimates. the revenue estimates we had for 2020 are absolutely an exaggeration. that means 400 first class pieces of mail, nine years from now will go to every household in this country. i don't believe it. i don't believe it will be half that. unless you're going to double the rate on first class mail, the revenue estimates are totally bogus. and every revenue estimate that i've heard over the last 12 years has been bogus coming from the postal service. and so we're sitting here working at numbers at 39 billion pieces of mail.

first class mail. and i would, i would bet you $1,000 right now, mr. postmaster, that it won't be half that nine years from now. the technological changes that are coming. and unless we anticipate, we're going to be here six years from now doing the same thing again. the third point that i would raise is, standard mail and parcel service is important to your business and i know you're worried about the impact of pricing on that business. but the realization is first class mail is going away. and unless the business model adapts to that, doesn't matter what we do either senator collins or senator carper's bills, it's going to be a short-term fix. it will be short-lived and so i would just caution us to think, challenge the assumptions, that are being made, like mr. herr did. challenge the assumptions

that are being made and when we think we've figured it out, then go two or three measurements again before we cut, to make sure that we're not like we were in 2006. and i will remind my colleagues, in 2006, i predicted we would be back here. i actually voted against the postal reform bill because we did not anticipate, we did not fix, what we knew were the problems. as a matter of fact, joe said we didn't at the time. so here we sit, five years later, not having fixed the problem because we didn't measure three times and then cut. and i'm not blaming anybody for that. it is because the assumptions changed because the scenarios that we laid out were too rosy. we fixed a lot of things and we made some, if things would have been much worse had we not done it. now we find ourselves here again and so, just as you said, taking the economy out of the equation, first class mail will go away anyway,

regardless of recession, non-recession. the technological changes. so i would just caution us, i think we're going to come together with great bipartisan agreement on how we offer the things that are needed. i don't see this, there is not a partisan issue in front of us but i think we certainly need to think way down the road and we certainly need to provide the postal service with the effective means of running a business that allows them to make changes based on dynamic changes that they're going to experience in their business. and if we don't that, we will not fix the problem. with that i yield and will submit my questions for the record. >> thank you, senator coburn. senator carper. >> one of the great inhibitors to economic growth in our country today is the lack of certainty and predictability. great deal of uncertainty. a couple years ago when a lot of folks thought the auto companies, ford,

chrysler, gm, were going out of business, people stopped buying cars. at least they stopped buying their cars. first question i have, mr. postmaster, general, given the uncertainty and unpredictability, will the post office be around a year from now or three or four months from now, what do you think that lack of predictability is having on your business or ability to book more new business? >> i think that uncertainty has tremendous impact. just this weekend i got an e-mail from my chief marketing officer asking about a couple customers worried about doing business with us in the small package area. i told him, i said i will call these two companies and reassure them myself that we will be okay. your point is absolutely critical. we've got to get stability in our systems and we've got to address these issues long term to. to senator coburn's point i agree 100%. this can not be a short-term fix. we have not only look at revenue through 2020, we've

got to look at revenue out beyond that and make sure from a postal service standpoint we resolve this issue now and give the postal service the business flexibility to manage going out into the future. >> i just say to my colleagues, what we need here is not more process. what we need here is is not dealing with symptoms of the problem. what we need to do is solve the problem. >> yeah. >> as dire as the situation is i certainly believe this is not a hopeless situation. this is a problem that can be fixed and, there is certain certainty can be provided. to some extent by you and folks work with you at the postal service. greater extent to the congress and the administration and working with you and the other stakeholders. i will go back and talk about the auto industry for a moment and use some comparisons. it is not a perfect comparisons but there are some points that are relevant. number one, the auto industry two or three years ago had more workers than they needed given the demand for their product. number two, the wage benefit structure for the folks working for them was really

too rich, too high. and number three, they had more plants than were needed. and what happened, a lot of people think about the federal bailout to the auto industry. i think, as taxpayers we're getting back just about every dime we invested in chrysler and gm maybe even with a profit. we're not talking about a bailout here of the postal service. what we're talking about is whether or not the postal service will have access to 50 or 55 or $60 billion that it appears it overpaid in the civil service retired system and into the federal employment retire system. it is not bailout. should the postal service have access, very smart people from siegel and very smart people from the hay group believe arguably could be drawn back and returned to the postal service. allowing the postal service to pay down their very conservative retirement schedule for retiree benefits, very, very conservative approach. so, but here's, as i said

this before, just like three things the awe auto industry needed to do, there are three things that the postal service needs to do and the question is are we going to let them? are we going to let them? i'm not interested in, i'm not interested laying off you or anyone else laying oftens of thousands or hundreds thousands of plus postal employees, you reduce the workforce, headcount by a quarter over last six or seven years. that's a lot people. maybe 200,000 or so people roughly. you have another 100,000 folks will probably leave through attrition, for most part people retire say that is enough i'm ready to go on with my life. and you have 120,000 people incentivized encouraged to retire would actually retire. the question is are we going to make certain we have resources you need to incentivize those people? just run the numbers, think about this, just run numbers what it costs to incentivize 120,000 people to retire. probably look at auto

industry. they had a lot more people that took early retirement than they expected. they met their quotas a lot more easily than was expected. offer retirees 20,000, 10,000 over two or three-year period of time to take early retirement and go ahead retire if they're eligible to retire, how much would that cost? if you're trying to get 120,000 people to take early retirement and go ahead and retire. that works out to $2.4 billion. overpayment to federal employment retiree system is about $7 billion. it is roughly, what we're talking about using one-third of the overpayment to the federal employee retirement system that would enable you, arguably to reduce your headcount about another 120,000 people beyond the 100,000 you will going to amount ttrit that would bring the headcount down, if i'm not mistaken down to close to 400,000 people, something like that. my sense that would make you an ongoing enterprise much as the auto industry is going forward. the other thing the auto

industry has done they have put on their thinking caps. they figured out to innovate. how to come up with great looking vehicles, energy efficient vehicles and electronically much smarter vehicles. what we need to do, one of your points, last point i think in your testimony where you talked about, how to use, how to use digital approach. digital and things like that, that would enable you to actually capture some new business and my friend tom coburn who is gone talking about first class mail is going away and it is. it will probably continue to be. the question is are we smart enough at the pose al service to come up with new products new products new innovations and are we smart enough in the congress to let them market those and use them when they come to work. let me ask you, if i can, let me ask friend from gao. people from seeing quell -- siegel and company drawn into this. hah thank you, mr. levy thank you for coming and very short notice. when i was governor and treasurer of delaware we

used siegel and company a lot. great outfit. thank you for that. >> thank you. >> we used hay group a lot it helping a lot of our personnel issues in the state of delaware too. obviously they're one of the other companies along with siegel. so we have, here we have two independent sources, i think both highly regarded, siegel and hay group and we have the inspector general i think from within opm who has a different view of, there has been this overpayment. we have not asked, senator collins, we have not asked gao would you take a look at this. take a look at seeing bell has done. look at work hay group has done. look at work done by auditors in the opm? >> we would be happy to work with the committee and staff on that question. >> that is offer we might want to take advantage of. mr. berry, have you had the opportunity to meet with the folks from siegel and folks from hay group to understand

what their assumptions are? >> no. our staff has but there has been a lot of great communication not only with them but with the other studies that have been done. again, we in terms of, we welcome gao's participation in this and with the committee staff in helping the committee to decide what that fair and equitable standard should be. >> all right. mr. postmaster general, i'm over, i'm over. let me stop there and say thanks so much for giving me a few extra seconds here. thank you. thanks for the responses. >> thanks, senator carper. senator mccaskill. >> thank you. mr. donahoe we were in the middle of missouri on the 167 post office closing being proposed in my state. 85% of those are in counties of less than 50,000 residents. i spend a lot of time in my state going around outside of the urban areas over the last month and i guess i'm most worried about the transparency of the process and last time that you

testified before us, senator pryor asked a question, to my knowledge that question has not yet been fully answered. have there been times that places have been removed from the list following public hearing and comment? has the public hearing and the comment process ever had any impact on the decisions, the initial decisions to close? >> i would have to double-check on that but, i'm sure that there have been cases but i would, i'll double-check. >> if you would get back to us on that. i want to make sure this isn't just a dog-and-pony show for these folks. some much their hearts are breaking over this. that their post offices are going away and, i want to make sure this process is fair and transparent. the other thing i want to talk about is five-day delivery. i'm one that is in the camp that first of all, we've gotten several numbers about the savings. as you know there has not been a consistent number. you quote one number but the pose al regulatory folks said it was half that.

i'm somebody who is worried about the death spiral of a five-day delivery. it is a marketing advantage that the postal service has, a six-day delivery. and it seems to me that we ought to be focusing on how to take better advantage of that marketing advantage. that niche we have in the market that no one else has. that saturday delivery, is something nobody else can offer up. have you consulted with the newspaper and magazine folks about the impact that that five-day will have on their business models? >> yes, we've spoken to the, both newspaper and magazines and there is some concern on their part, especially smaller town newspapers that have saturday delivery, generally one day a week. >> the other thing is, and i know this may sound corny and naive and pollyannish and all of that, but i had the opportunity not too long ago to go through a box of letters that my mother had from my grandmother's house that were my letters i sent

to her in college. and as we went through these letters i remembered through history how many times in history courses i had taken that gaps in history were filled in with letters. i mean we have a lot of best-selling books out there just letters between everything from our founding fathers to soldiers in the battlefield and, i'm not sure that there has been a marketing campaign about the value of a written letter. and what it means, and how it is preserved and what it means it families. my kids are in college now. i don't have a box like that. in fact i had to impose a rule. you can not get money by text message. [laughter] >> make sure they write for that. >> i mean, you know, they didn't even, they weren't, we weren't even having conversations. i was getting like this gibberish spelling, need money, number two, day.

it is ridiculous. i think there is a longing out there right now, especially in these uncertain times for some of the things that have provided stability over the years. just as we have the place in our hearts about the reliability of the postal service there is also something special about that piece ever first class mail, knowing that it has come from somebody you care about. knowing that it is bringing you news. i think that while you guys have done a great job with your flat rate delivery, i'm sick of that guy, you know. >> we like him. >> you know, one price, one price, one price. it worked. >> if it fits it ships. >> hasn't your business model shown it worked? >> absolutely. >> haven't you increased the amount of packages that you guys are handling on that one price? >> absolutely. so i really believe if somebody would begin to market the value of sending a written letter to someone you love, you might be surprised what it could do for your christmas season.

i know the cards are going to help. christmas cards are still part of our culture in this country that we all value, but i really think, to give up, i disagree with dr. coburn. i don't think we should give up on the notion that we're going to sit down and write a letter and put in it thoughts and prayers and hopes for somebody we care about and that we're going to just be electronic from here on out. i refuse to let go of that. i don't want you to let go of it. i think if you do that you might be surprised how you could stablize some first class mail. it is more than bill-paying. >> absolutely. we agree 100%. let me say, moving away from any of the traditions we have, six-day delivery, small post office, these are all terribly hard decisions. we do, we touch american lives every day, six days a week. we have programs. we deliver is one we run in schools where we try to teach the kids how to write letters. it has been successful but

it is something we have to keep pushing on because a lot of types schools are interested in teaching kids computer skills versus writing skills. but i will take that under advisement and continue to push on that. the other thing, we will be advertising mail this fall. we're going to put some advertisements on tv talking about the value of male, the physical connection. the fact that somebody comes comes to see you every day and there is lot of value in that. the unfortunately thing we face is the technology behind bill payment, bill presentment that pays so much of our overhead and some of what we do we don't look at all these changes that we will never be able to recover financially. >> and i get that and i know we have to make painful decisions but i just think it's important that we continue to look at the processing network and maybe moving to the curbside delivery. that is a huge amount of savings

estimated also. i would rather be eliminate everything we can that is realistic before we get at the essence of the six day delivery and i feel strongly about that and i know others disagree but i want to go on the record i feel strongly about it. thank you mr. postmaster. >> thank you senator mccaskill. we are open to all suggestions and yours is wonderful. passionate letters for those we love. >> [inaudible] [laughter] ing to the . .

that was meant to be positive actually. we had a great time in the last committee for your efforts there and i don't know if it was mentioned i've been wrapping up meetings in my office but i think it's important to note the devotee of the postal employees eem toe work they do eer d. >> they seem to be getting lost t this whole mess.ost inthis mi i think it's important to note that we have a lot ofl hard-working people ino my hometown, i know every person there. i've knownow them for 22, 23 years. 23 ye i've been too many retirements.r i've been to other communities,e new post rspatches coming in ang being there. t they are so thrilled to go up throught the chain and the ahead of something a something special.ial, and i don't want that lost inwa th everything we're trying to do. i understand the challenges.hal. we have met anybody here who is involved in this, we met in my office about the very real fiscal challenges. unforunfortunate.

it's kind of sad, and i feel melancholy in that we have an institution like the post officf going through these changes. but here we are.re anthat and that being said, i'm dendering, mr. donahoe, if 2015 deadline that you've given yourself to make a lot of these changes is too ambitious? do you feel it's just about right?nd what type of pushback do you wi think you'll be getting along the way? >> first of all that me justt comment on your statements about our employees. joey do a great job. people would've looked just theo past couple of weeks with hurricane irene, irene came through and we people of thegi e next day and offices with noing power making sure the mail got delivered, process. they did it through the winter.d i appreciate your comments.ppree that is something we take very seriously. from theerious standpoint of oup we have laid out a plan that includes changes both operational changes as well as

some changes in compensation and benefits. it is an aggressive plan. what we are looking at, senatorl is trying to get profitable byog 2013. when i say profitable, it'sut a maybe like a billion, maybe by i $2 billion. pin what that does is allow us to u start paying debt down andwhwe allows us to eventually get in t position where we will be able no make some very important investments. need to do something aboutvetm vehicles. there are some other investments kebuted to make. but the probably more important than that is the fact we want to stabilize our finances.ces. a a good stable postal service asi i testified is critical for then american economy. it's critical for the way people feel about the postal service.ea every quarter i go through the same discussion. they can't get their head aboveh water. there and acquitted.d management. none of that helps. none of that house because it potentially scares business away.used so i am very focused on gettingn

profitable, getting these changes made in our networks. le getting changes made in our emoyees. flexibility with employees. it's critical that we get to the point as quick as wegethat po cn the revenue line will continue to go down. rtant we get to the t where we can stabilize and then continue to work the way forward from that point. spry i appreciate one of the things i'd appreciate about this issue and i've only been here about a year and a half now but i have appreciated the full full approach and i just a lot of tough questions privately in the office with folks that have come in and i feel very direct dancers and it's important to have that coastal's to understand the problem and get up to speed so we can make a proper decision here. do you think a lot of these changes will such as eliminating the saturday service will prevent -- i want to see because

it is on my notes a death spiral or just such reduction in consumer usage it will get out of control and you won't get to the profitability breakeven point? >> i think the failure to act on these issues to get stable will result in a death spiral. i think that if we continue to try to make incremental changes going in with one swoop and making big changes we will cause every year we will be in the situation we are reporting losses said you have to make this cut and move on from there. >> thank you for coming today. how do you view the postal service proposed plans in line with getting the network work force and competitive do you think based on the volume of the mail and etc? >> we've been talking about the need for the network realignment

for several years now and that's an important step in the proposal to cut plans from 500 to 200 is a noteworthy step. >> is the time for inappropriate for the aggressiveness? >> it's going to be tough by 2015. a lot of stakeholders are involved, a lot of plans. it will take a plan and everybody coming together saying we think this is important and we are all going to get behind it. >> the timeframe and anyone can ship them on this comegys think we need to move? i've been here a year and a half and i discussed about the way things are done here, the lack of bipartisanship and come artery. it's gotten better with certain people but all in all we should be doing a lot better. what is the time frame? i don't see us moving too quickly on the host of things and i hoping it doesn't come down to -- from all the postal service shutting down and we are going to be in the tenth hour

1159 trying to ram something through that doesn't make sense to you have an indication mr. chairman or ranking member what is your time frame that you need to get this done? >> as we proposed, we would like to see the long-term comprehensive legislation by the end of september. we have asked for the ability to take over the health care benefit we can resolve the pre-funding issue that way. it's a tough decision but it has to be made. let us move to get our money back. it will stabilize the finances. i'm offering right now with a week's worth of cash a 65 billion-dollar business. nobody would be doing something like that. >> you need congress to move by the end of this month. so mr. chairman whatever we can do. we have to figure this out to the line type of waiting until the last second. i hope we could work on a bipartisan manner and in a

manner that the president will sign the bill to get this done. come on. this is a no-brainer, folks. >> i agree with you don't know that we can meet that schedule will the postmaster has given that is you have that comprehensive legislation by the end of september and i don't think we can and interested he said in his testimony that the president will submit a plan to meet the postal service fiscal crisis along with his recommendation for the joint special committee of 12. i still would like our committee to market a bill that responds to both with the postmaster has proposed and other proposals because i feel we've got particularly but senator collins and senator carper has much or more expertise as most people in the congress to and i know that you're the ranking in the subcommittee, so i am committed

to moving this along and the postmaster has been pretty clear that even assuming that he defaults on his 5.5 billion summer, 2012, he's not going to what i'm saying is i agree. we should put together the legislation, pass it and give before that so you are not the point we are saying tomorrow the male is not going to be delivered. >> are we going to fight by the post office, too? >> i hope not. on the agree. >> i know you agree. you are one of them trying to work together as was the gentleman to my left and the leedy to my left. so we need to kind of push our colleagues and leaders to put

this and make this a priority. thank you. >> thank you i know if you had another hearing and i appreciate that you've been able to return to ask questions of the panel. >> thank you very much, mr. chairman. i will say a few words before going to the questions. in 2006, congress passed a bipartisan legislation to modernize the postal service. now as the economy faces the challenges nearly $5 billion per year, pre-funding payments required by the 2006 law threatens the postal service with insolvency. the core of any proposal post service must address the refunding issue while eliminating or offsetting the

payment. other reforms likely will be needed, some of which are under the postal service's control and some which we may need to enact the legislation. i express my concerns over the past proposals including delivery reductions arbitration changes and facility closing. s chairman of the federal work force committee i also have concerns over new proposals released by the postal service on health and retirement programs and lay off. congress must be cautious when affecting contracts negotiated in good faith. the house oversight committee is also released legislation. however, i do not believe it is a responsible way pleasing one of the nation's largest employers into receivership by

stripping the postal management of its authority will not address the fundamental problems. the postal service needs more flexibility, not more bureaucracy. the postal service is operating on borrowed time because congress has not yet acted on any proposals. failure on our part to the enact legislation could have negative consequences affecting the nation's economic recovery. i remain committed to ensuring a viable future for the postal service and i look forward to continuing to work with my colleagues to craft legislation to achieve those goals. i have a longer statement, mr. chairman, which i will submit for the record.

director barry come in the 1980's the six federal agents have had their own health insurance plan available to employees in addition and eliminated their plans most notably the federal department insurance corporation in 1998 the fdic had to pay millions of dollars to bring employees back to the sehb after they found that the plan was more costly. my question to you, director, is how feasible is breaking the postal employees breaking off from the sehb and what would be the consequences if they ever wanted to come back?

>> mr. chairman, think you for your question and it's always good to be with you serve with the agencies that you described that of broke away from the fbhp and came back and found that the savings they projected or not to be had this is one of the reasons that the administration is proposing that we move extremely cautiously and carefully in this area. the administrative overhead cost of our .08%. we provide choices and plans in all 50 states and including urban and rural areas. to provide health care. currently, the co-payment cost share for the postal service is

less than provided by the federal employees for the same plan. so that is negotiated, but it is a 10% differential. in other words, the postal service pays 10% more than the federal government pays. the employees in the federal plans pay a higher co-payment percentage. so when you look at all those choices i fink we need to move very carefully before we would remove. we have over 9 million employees in the market pulled now in the federal plan. each year we consistently deliver a rate increase that is below the market rate increase in the country and we will do that again this year. i don't see how with 600,000 to

a million employees going off on their own with an age that is higher than the pool they are going to achieve the savings the postmaster general with all due respect has projected so i think we need to move extremely carefully and be very cautious and study this extremely carefully before we would recommend moving forward. >> the postal service also considered leaving the program in the 1990's but nevertheless my question is didn't the postal service leave at that time? and what those reasons apply today? >> thank you, senator. in the 90's we looked at leading but there was a decision i think it is pretty much the same

decision that happened to the fdic the fasb economy rules would have required us to put the health care cost on our books. since then the fact that we are pretending, that issue is no longer an issue than it was back then. what we decided to do with exploring the option is to see if we would be able to take the cost down through the plan. i do not disagree at all with the director. this is something we have to study carefully and i think we have to study it jury quickly because what we are proposing is not unlike what any other large corporation does when you go out on to the open market and get the best price for the health care plan. let me assure you this i do not want to do anything that would have a negative effect on the employees or their retirees. we want to the right thing and we are trying to figure out how to manage the cost going forward and this is one of the ideas we had.

>> i know my time is expired. i have one more question. >> how can i say no to you, senator. >> thank you. your testimony once again brought the issue of modifying the collective bargaining process to require that they consider the financial health of the postal service. the cbo analysis in the last conference continued this provision did not project any savings on this issue. my understanding is that the trade is routinely considered the postal service finance. my question is how has the gao done in the analysis suggesting there would be cost savings from

this change to the arbitration process? >> in the work i did not refer to it in my statement today but we did in the business model issue dillinger rego we said that would be an issue for congress to consider going forward as it thinks about collective bargaining agreements, what's affordable for the servicing the situation where the contracts go to arbitration to ensure that would be put on the table because the precedent in the past has been that there is in mail volume and revenue to pay for the cost increases and things of that nature. we are looking at a very different scenario now and it is s testified as the postmaster general testified has been discussed here today that we look forward as a bright one there would be the letter-writing campaign and people would begin to write more letters that the fact is many bills are now going to be prepared and distributed electronically and that has been the lifeblood and a lot of the financial literature as well, the czechs and things of that

nature from the banks, those are all moving digitally now, so it is in that spirit we made the discussion for the congress to consider. >> thank you very much. >> thank you. finally, senator moran. >> i know you're disappointed i returned to the committee. [laughter] >> it's always a pleasure to see you. >> you're so kind. >> i can't speak on behalf of the witnesses on the second panel but no, we are glad you came back. >> i have been to a corporation subcommittee hearing on the homeland security, and do want to ask the postmaster general a couple questions. first i would like to commend him for his efforts to find solvency in the united states postal service and want to be an ally working with him to do so and hope that he is asking his staff tall levels of the service for suggestions about efficiency many times i think the best and

brightest ideas come from the people who work at the postal service for their suggestions about how to improve the bottom line. 3700 post offices is something certainly that caught my attention 134 of them are in kansas and i don't want to be overly provincial here but i always want to make certain that rural america doesn't get just forgotten decisions made in the nation's capital. .. >> the postal service comes in, explains the plan. in many instances kinds of encourages the audience to contact their congressional delegation, to encourage others to vote for some of the things that you've outlined in your

proposal today, particularly related to the refunding of the unemployment, i'm sorry, the insurance and health benefits. not that i mind that but what ii would love to know is if there are things that community members can say, evidence thata, can be garnered, facts that cann be told that we didn't alter the decision made by the postal service as to whether or not this particular communities post office is going to continue to be inrticu existence. existence. my impression that many people who have attended those meetings is almost without exception the postal service has made up their mind. they go through the motions. they are in the town to pretend to listen to us, but we never get indications that there's anything we could do to reach different conclusions than closing the post office. but adenosine or what am i missing quite >> i think the key thing is to make sure that our people understand exactly what the

community would pace with change. i think that when you look at what we got proposed, we are looking our criteria is that of less than two hours of work on a daily basis. and generally, it is under $20,000 in revenue. one of the things have got to keep our eye out and make sure we don't do is make access impossible for people in states like kansas because you don't want to have two or three post offices within a certain area that get changed and become a village post office circuit consolidated and have to drive a 20 or 30 miles to get postal services. that is the key thing. i think constituents need to make sure whatever we are proposing is reasonable for them and reasonable meaning a couple miles, three, four, five miles to a post office. we take universal service very, very serious and want to make sure we are not setting our customers have.

the other thing i encourage that customers have ideas, we are all gears. we have been encouraging businesses to step up and say hey, will write a contract, but the village post office is we can provide access seven days a week, but they may only get a couple hours a day. so those are a couple things i'd encourage. if there is written criteria, a checklist when postal employees come back to the community meeting they met this, but not as commander to see what the criteria is that there is an opportunity for communities that matters to the postal service. as you and i said before the hearing started, i'm an alley of the earth in signing the win-win combination in which there is a village post office saving space and personnel with a check store pharmacy. those things matter a lot to the community. i wrote you a letter, postmaster general. on august the 10th he responded in a thank you for

that. one of the things i want to raise that i didn't understand or didn't see the answer to it is the united states code permissions is postal service shall provide the fact that reiko areas, communities and small towns are post office are not self-sustaining. no post office shall be close solely for operating a deficit, it been the intent of congress the postal service be insured to residents of both urban and rural communities. when you're out having hearing for the list of 3700 post offices, my experience in 14 years as a member of the house and just a month as a member of the senate is the post office as i worried when i walk in and discover the postmaster is about to retire but the building has deteriorated. what's the criteria now? what do you expect to be able to do with this legislative language? one of the things you might be

asking is to eliminate the legislative language. and the essence of this, how can you close 3700 post offices? >> one of the things we don't want to do is ask any changes in the language. your post offices out there that lose money that are large post office is insert dozens and dozens of people. most of our offices to lose money. but what we are looking to do from a standpoint of reviewing offices is to come up with a very fair in standard criteria. that was the idea of post office is that of less than two hours with a business, less than $20,000 worth of business coming across a counter. when you have that criteria, and then you cannot get it very objectively i'm a candidate like we mentioned earlier about what is the geography? is there a place to consolidate? is there a story can contract with? that's the way we want to approach it. but we don't want to do is have

a situation where postmaster is afraid to retire. what do you not have to did things like that. we'd rather have a much more transparent criteria so that anybody out there that the same these kind of changes is exactly where we are coming from. >> i just came as a set from a homeland security subcommittee, where we worry about the relief of people suffering from disaster. read incoming kansas is a construct a tornado, never in a list of 3700. out of the building is damaged they are having a community meeting. this is the wrong kind of message on how to recover from a tornado at that because we suffered this natural disaster come the postal service is now contemplating closing our post office. >> i'll look into that right away. >> thank you, sir. thank you, chairman. he might do much to make a brief

statement before we move onto the next? >> thank you, mr. chairman. i know all of us have so many more questions than we have a panel that we've been waiting for for an hour. i just wanted to make a comment and also give another assignment to mr. trini. -- mr. herr. first, it's important to realize that if they postal service defaults on the $5.5 billion payment for what the retiree health benefits fund, that unfunded liability does not go away. and in fact, there is an unfunded liability in the fund that i believe is in the neighborhood of $56 billion. and i think that is important because even if we restructure

and they really salute the postmaster general for his sweeping proposals. i think they are very construct days. whether i agree with them all or not, they are very construct it on what they need. but the fact is that postal service has huge unfunded liabilities and i can see general agreement with that. so, my assignment or request to you, mr. herr is, if we were reinventing the postal service from scratch, a de novo approach, how would restructure? would we have a chilling with the federal government's retiree health programs, employee health programs, pension programs? would we give it access to prior work to $15 billion from the treasury, which is obviously an advantage that private

enterprise doesn't have. would we give it hard to launch in setting rates and if they deemed who it delivers to acquire i would like you to help us figure out what would be the ideal while still ensuring that we are providing this absolutely vital linchpin to our economy, a linchpin that is not only important to the 8.7 million people who work in the mailing industry, but also has to bring this together as a country. after all, that is why the constitution mentions the postal service. so i would like your ideas on if we were starting from scratch, how would we sat forth this vital institution?

thank you, mr. chairman. >> thanks, senator collins. i will send a request to gao. thank you to the panel. you've been very informative and very start. i want to say again, there is a clock ticking. $5.5 billion, the postal service owes. you're not going to be sued clearly today that by next summer or, if nothing else is postal service, you're going to effectively have to start delivering the mail. and that should get a spyware can come even across party lines. thank you very much. second panel please come to the table. cliff guffey, president of the american postal workers union. louis atkins from the postal

[inaudible conversations] [inaudible conversations] [inaudible conversations] >> in an election marred by moral scandal and political corruption, james plane lost in 1884. but he change political history. he is one of the 14 men featured in c-span's new weekly series. the contenders, live from the blaine house in augusta, maine. learn more about this and other upcoming programs at

c-span.org/thecontenders. spent on this constitution day a reminder that our new student can competition is underway. the topic, the the constitution and you. open to middle and high school students. $50,000 in prizes. the deadline is in january but you can get all the details now at student cam.org. >> this weekend on american history tv on c-span3, celebrate constitution day with richard dreyfus.

>> last week posted a policy conference on the impact of 9/11 on coalition building. and grassroots organizing here in the u.s. analysts address such issues as workplace and discrimination, school bullying and racial and religious profiling. this is about an hour and 45 minutes. >> all right. thank you for sticking with us through the day as we approach our last panel, probably the most significant panel i think of the day, with a lot of information of what's been affecting us over the past 10 years and that is her civil rights. and civil liberties. we have faced many challenges. needless to say we've had many piece of legislation, the patriot act, we've seen a change in immigration laws.

we heard earlier about that employment discrimination problems we're facing as a community. and we will continue to address these issues but moving forward this panel will take a closer look at how these issues may change and really the work we've done in the past, 10 years and the challenges we faced in the past 10 years. we have a dynamic set of speakers with us up here. we have ms. sahar aziz, the associate professor of law and the legal fellow for social policy. mr. raj jeev singh, the director of law and policy. and mr. ehsan zaffar, advisor at dhs for civil liberties. and we were supposed mr. mazen basrawi from doj ig may be running a few minutes late. the format of the panel will be opening remarks, introduction

with civil rights issues we face, and how we move forward and engage in a conversation and discussion with the panelists. so if we have enough time, let's get going. dive right into it. so therefore, do you want to start off? >> thank you. spent thank you so much, try one, for inviting me. it's always a pleasure to be at adc. this is an organization i support and have benefited from frankly directly as an arab-american. so despite the challenges that we all face, we are lucky to have adc. so i want to use my time today to really make two significant points, or two major points. after reflecting on, what do talk about 10 years after 9/11, 10 years ago i was hoping we would have nothing to talk about and 9/11 would fade into history and we could just move on. but, unfortunately, that doesn't seem to have happened, at least

in the civil rights civil liberties perspective. so the to i guess me take ways i would like you to have it, first i really now have come to believe very generally that eternal vigilance is the price of freedom. it is not a cliché. especially, i've learned in my work over the last 10 years and every i think the next you i don't have to work as hard, we don't have to keep pushing. it's going to get better. and in some ways it does, but you have to be eternally vigilant. and the second point is after witnessing the responses to many of our community groups, the attacks on our communities, kind of ebb and flow but the last year have been acting on the uptick, is i'm storing to recognize that there seems to be a model that is i think troubling. and i think it's taken over the generation of 30 and 40 something leaders, and i think it is a failed strategy. i will go into more detail on that.

so first, let's talk about the cliché eternal vigilance is the price of freedom. i think we learned over the past 10 years that everything the government tells us and every time they tell us or not they are not violate our constitutional rights, and we don't, we believe in, we eventually have surrendered those rights. unfortunately, and i say this having worked for the government, not believing very generally they are very good public servants out there who act in good faith, but, unfortunately, the government has shown to be duplicitous and has said things that have been completely contradicted by their action. and that's both been under president bush and president obama. and so the onus is on us and it's a reality we have to face. whether it is -- primary as americans and a talk more about how that spread beyond just opportunity, the violation. and we're going to have to be skeptical of them. promises will have to be critical government programs and

hold our government accountable. and if we don't do that i think that we're setting ourselves up for losing our rights. and i know that sounds to some people very obvious but, unfortunately, i think to others i don't think they realize it really is a burden you have to bear. unless you're ready to give those rights up. am i taking that offensive you, i have been accused, and those who agree with me have been accused of exaggerating, outlandish, illiterate, troublemaker. but the reason why i find that, and that goes into the model, minority syndrome, and is that if you accept that, if you accept that by having to play the model minority vote that you are, in fact, a belligerent or disloyal, then you're playing into the prejudicial narrative of muslims. in other words, if i have to prove that i'm a good american to prove to you that i deserve my rights, then that is a fundamental problem.

that's not the narrative that we should be basing our civil rights and advocacy on. it should be based on i am presumed innocent. just because another person that happens have my ethnicity, my race, my religion, by gender commits a crime including terrorism doesn't mean that i have to go and incessantly condemned terrorism but it does me i was have to osha might have on i have nothing to do with this person, that i don't agree with this person. you should just assume i don't agree with this person. unless i've shown you otherwise, you should assume as much i don't agree with that person as much as i don't think another white man who's a christian agrees with what timothy make they did. and there are a lot of people that i've spoken to outside our community when i did in that analogy, a lightbulb goes off. just because the unabomber is, just because joseph stacked the airplane into the irs building

in austin, texas, to protest taxes. so it's a very logical rational point but it's not sinking in. to mainstream america. so i just make that point to say that i don't think the model american senate is going to work. but let's first before you go there, as a model citizen strategy will work. but let's go back to okay, transit, here you are taking this very confrontational adversarial role towards the government. it's been 10 years. this strategy doesn't work. now, why am i taking this position? because the government has lied to us many times. i'm going to call it a fib so i don't mitigate the offensiveness. so give number one, we do not spot on mosques. never have, never will. we do not lie -- spy en masse but we have no problem with

muslims practicing their religion. i've heard that so many times. out in the government and outside the government. by very well meet him at who i do believe they believe it. and then what happens? not only to get complaints coming to the adc, the aclu, the muslim advocates, name the organization, which when they file their reports and when the issue them they still get domestic but then you get reports from "the associated press," the center for investigative reporting at berkeley, "mother jones," harper's magazine, all that in the last month. and what does it say? it says that the new police department has become one of the most nation's most aggressive domestic intelligence agencies that is targeting ethnic community in ways that would run afoul of civil liberties roles. if practiced by the federal government. so now we're talking about the nypd. what a dentist they dispatch dispatch undercover officers known as rakers into minority neighborhoods as part of the human mapping program. they monitor daily life in bookstores, bars, cafés,

nightclubs and mosques. they are called mosque crawlers. they monitor sermons and see what they are saying. then there's also the informants. they have done our rundown from the taxi commission of every pakistani cab driver in dixie. beverages reported every mosque within 100 miles. a former cia officer, david cohen, create a secret squad within nypd that would infiltrate muslim neighborhoods. ethnic bookstores on the list where rakers would go and see what people were is sifting through end of bookstore. if you're looking a radical literature then they would instigate further inquiry and essentially target them for investigation. and then when there was scrutiny of this program, it's discovered the police regulation of the documents that discuss these rakers.

so, what a coincidence that all the evidence is gone, yet the department says look, we have all these lawyers, we haven't done anything wrong. we check you. why did you have to shred the evidence? by the to shred all the information? her house there's a legitimate excuse but usually when you're in litigation and someone is destroying evidence, it's usually a destruction. so something is going on data showing there's a contradiction is my point. and these are all from non-muslim, non-arab mainstream news organizations. some of them are liberal. some of them like the associate press, i don't know what you think it may be there in the middle, but these are not people who have necessarily an agenda because they're not within our community who are very upset about what's happening to them. these are people posting what's happening to this country? and who is bearing the burden? okay, the second lie is we do not spy on her gather intelligence on americans ordinary activities. we are not interested in your

illegal activities, we only go after terrorists, criminals and people engage in illegal behavior. i don't know how many of you are watching "the pbs newshour" yesterday. i don't think that's and al qaeda news agency, or some conspiratorial news agency but they aired a segment on the creation of suspicious activity reports at the mall of america and many fusion centers across the country. they interviewed many individuals who got caught up in the suspicious activities reports were you've got police, local police, starting, writing of suspicious activity reports that some it takes a picture, it's a what looks suspicious, if someone is nervous. that's going into databases which instigates interrogations and questioning which mixes people feel awful because they haven't done anything wrong. then after that, they -- a little bit of activity in the back. as long as everyone is safe.

anyway, and so that after that it goes into a database. it goes to different police departments. it goes to the federal bureau of investigations. there was a seven your pakistani man -- 70 year-old, forgot his cell phone in the corporate allowed 70-year-olds do that. my father loses his cell phone all the time and he's about that age range but i don't think it is in thing with him being a terroristic that essentially lead to a very traumatic team of events with the fbi went to his family's house, his sons have come as for a voluntary interview. asked about what they're using their charitable donations, where they were traveling, what their political beliefs were. and essentially of course completely assembled them and made them feel like they had no right. and interestedly the former assistant secretary of into governmental affairs was interviewed on "the pbs newshour" and she stated that during her 10 years as a high level dhs official under the obama administration that she

had yet to see any evidence that the suspicious activities reports actually lead to foiling a tangible terrorist events. so, there's a disconnect between the rhetoric and the action. and, finally, and i won't, shortage of time. i would just recommend you is to go and look up the missouri, florida, pennsylvania and massachusetts fusion centers because they have all been discovered as essentially spying on political activity, usually anti-tax protesters, first amendment rights, peace activists, and speakers before me had reported on that. so the evidence is there. that there's something arise. and then finally, lie number three pick we do not use informants to -- we would never do that. that's politicizing criminal justice. and that's an appropriate.

"mother jones" and harper's magazine recently published very extensive investigative reports that talk about the pervasive use of informers by the fbi, many of whom are in mosques and preying on vulnerable mayors of the community such as young men with mental health problems, ex-felons have major financial problems, and just other individuals. they usually try to flip someone who is facing criminal charges. sometimes they'll go and if they want someone to be there implement they will go get ice to go look in their immigration records but if they can find one little thing they will expedite prosecution and then they will tell the guy or the woman, issued a guy, we can clear you come we can make sure you don't get deported if you workforce to a lot of people feel very coerced and they agree because it's a difficult choice to make. so, you've got $3.3 billion over the last 10 years of the fbi's resources going into these types of activities the catechism.

that's compared to 2.6 billion for organized crime. you have 15,000 informants, 15,000. some of them are paid up to $100,000 by? the informants most of the demographic are ex-felons, really down on their luck, really poor and really desperate to be relevant. not all of them that enough of them to cause a major concern. that's not is a informants shouldn't be used or can't be his in law enforcement. not calling for a categorical elimination. i understand they are important, but the fbi has a lot of explaining to do. if you look historically in context, if you put those numbers in context, in 1975 the fbi had 1500 informants. remember, 15,000 today. 1980, 2800 employees. 1986, 6000 informants. and now we have 15,000. what are the 60,000 in a didn't informants going to do? they want to make sure they get

paid. and how are you going to get paid? you've got to show some work product. and it's usually pretty easy to pick on the hapless and the meek and the unsophisticated. and if it's your son that is out there who is being manipulated, you're not going to have a lot of sympathy for the use of informants and you would think if my son is mental health problems or if he is misguided on something, why don't we seek some kind of counseling? why do we figure out a way to rehabilitate instead of be punitive. but, of course, that wouldn't help the statistics. so i will and with my model minority critique. so, what i think has happened, i've listed all these things that to me are just clear as day. there is something going on. it is tenuously and we're still talking about this topic these reports got last month. not five years ago. not in 2002, 2003 we have some

legitimate explanation that it is a backlash can be poor to. it is 10 years later. there's no excuse. so what is the response of the communities? most of them are saying we just need to explain ourselves better. made we need to be not as belligerent if we need to show go out there, six-point people go out to 294 million people, 309 people in america. about six-8 million arab and muslim. they'll never get to all those 200 i 4 million. statistically impossible. that's not to say you should to outreach, you should do anything, do all that. but you have to do it in a way that is not, let me prove to you that i am innocent. no, you walk in there with a sense of entitlement as first class citizenship. you say i don't have to prove anything to just like you don't have to prove anything to me. i'm a citizen. i have right. i'm going to expect that you accept those principles because if i don't then i'm essentially turning you into, i'm turning this country into a tiered

citizenship country and i am facilitating that to my detriment. and i think it's even equally, i think it's more offensive for those of us who are children of immigrants are immigrants were born abroad that raised here, is our parents, and i think we all feel this way, those of us who fit this demographic, contributed to this country. they have mastered greece, ph.d. they sacrifice for their children. they have businesses. these people are not free riders by any stretch of the imagination. they send a chill into harvard and to yale and the best university can get into and they can afford. then you dare to come and tell us that we have to prove our innocence wax we have to prove our loyalty? that we have to be different types of americans? i find it really offensive, and i think that's the message that i would rather tell my fellow americans who are not of my demographic and said, you know, you should never let me treat

you that way. and i'm never going to let you treat me that way. because that's the american patriotic thing to do. it's not, the american patriot is not, we all know this if you read history, is not the groveling, baking, and drink, please let me configure i made good person. no, it is the proud, confident, dignified person who says, my freedoms are might be inalienable rights, and i'm not going to give them up, and i don't have to prove anything. and so i guess i will end with a note to all of you and myself is that i think this 10th anniversary is the time when the west needs to look to the peace. that when we look at the east, no longer can we build by them as terrorists. we actually, they deserve our praise. they are the ones in egypt, in libya, and syria, in yemen, in tunisia, who are fighting for

their freedom and they're sacrificing in criticizing the government and they're not believing the hype and not believing state sponsored television and media here and they're holding their governments accountable. so i think it's, if there's one lesson i've learned 10 years later is it has now, for the west to look to the east, to run about democracy. thank you. [applause] >> thank you. ehsan, if you want to go ahead from the government side of things. >> can everybody hear me? business on? well, thank you, abed, and adc, for having here today. it's a pleasure to be here and speak to all of you. i only started working for the

department of homeland security. i met the office for civil rights and civil liberties. and like a lot of the distinguished panelists here, i was also thinking on my way here about where have we come in the last 10 years after 9/11. and i think a lot of the panelists have done an excellent job laying out the current state of affairs in terms of what's happening and what's going on in the south asian arab american, and everything to me. they've also done a good shelling out a lot of the challenges. so i'm going to do is briefly talk just a little bit about the work we do in my department, why it exists. some of the challenges we face, and maybe also talk a little bit about the good things that happen after 9/11. i will give you an example. i, like some other people transfix was briefly mentioning, and many of us and our families, i came here about 21 years ago

during the first gulf war as a refugee. and my family was a victim of discrimination. and i muslim, and back then there was no word of islamophobia. the american public didn't have a concept of this issue, what is islamophobia. my name wasn't always ehsan zaffar. it was ehsan hussein. and when i came here, because we were the victim of intimidation and threats and violence, my father decided to change my last name. and now we have a president whose middle name is hussein. right? so yes, 9/11 happened. yes, there was a lot of tragic events that happened, and to continue to the issues of racism, racial profiling, intimidation. yes, we have a long way to go. i agree completely with sahar that we need advocates like sahar and herself to continue to

talk to the government, question policies, engage with us on a regular basis. we have also come a long way. there's been a lot of net positive impact. i wouldn't be in this country, i would be working at an agency, or sahar or rajdeep, or the sikh coalition wouldn't exist because of 9/11. are the issues? yes. with a beer for a while? yes. someday will advocates like abc and rajdeep and sahar there to continue watching out for issues that are plaguing our communities. also my office poppe wouldn't exist were it not for the tragic events of 9/11. the office for civil rights and civil liberties is to my knowledge the only civil rights office in a national security agency in the world. you know, we started off with about five people in 2005, and now we are up to 130. we are to my knowledge the

fastest growing per capita department in the department of homeland security. and, you know, dhs is a large agency. it was 20 to agencies that were kind of put together and formed into this one massive agency which is now the second largest in the country, with over 250,000 employees. we are not the fbi. the fbi belongs to the bartman of justice, or the atf. but we do include i.c.e. in which is the immigration, folks at a lot of the immigration investigations, customs and border protection. fema, which is disaster relief. not a law enforcement agency. the coast guard which is an arm of the military, arm of the armed forces. the tsa which does transportation security. and we report a 108 different congressional committees and subcommittees. in fact, i was looking at assist us in a few weeks ago and dhs spent something like 66 work

years in 2009 alone respond to congressional questions. where as most agencies talk to maybe two to five congressional committees. so there's a lot of challenges facing us, facing the agency, but our department over the last few years, because of input from advocates such as adc and others, and from individuals i could traveling public, have worked to fix a lot of the issues. you know, it's a fine line protecting the nation and also ensuring that the civil rights of the people that we are protecting, including us, are not violated. there was a controversial program called nseers which was a registration program of all the countries were recently delisted because of the efforts of our office. the program is a longer being enforced. we start something called secure flight which when you book your flight it will ask you for your gender, it will ask you for your name or your birthdate.

and it will give you a place to put in a we dressed number. and what that does is it crosschecks your information against pre-existing watchlist information to ensure that, you know, because people who travel, that may want to harm our country will not travel with her name. they will change their name or they would use an alias. this system tries to ensure that false positives are lessened. and i travel around the country are not for the work i do, and that's one of the things that's done a great job of reducing domestic travel issues. me personally, i used to get pulled over for secondary screening quite a bit when i used to travel. and after secure flight, as dramatically lessen. none of my travel for my agency, they do not entirely on behalf of the agency for on my own has resulted any kind of problems. so there's been other things at

our office we redo intelligence that comes in the intelligence are classified to the general public but we redo for civil rights issues, terminology. that plays a large part in how our agency and how the general public views south asian arab americans. we want to make sure that the term can just last week i was talking with people at our office that were conducting surprise visits at immigration facilities, due into a monarchy with doctors and physicians, ensure that the way that people that are being held in facilities of law enforcement related facilities are being treated with her constitutional rights impact. ..

continued talking with the federal government to insure these issues keep going forward in a positive way. [applause] >> i will turn it over to rajdeep singh who is a strong advocate and we are very proud of the coalition as well. >> thank you. can you hear me in the back? thanks so much. we are good. >> thanks for hosting this. is a privilege to be here in such illustrious company. i want to tell you a little bit

about the sikh coalition. the sikh coalition was founded on the night of 9/11 in response to the torrent of hate crimes and reports of discrimination which we received after the attacks. as you know sikhs are disturbed -- distinguished by turbines and the prevailing stereotyped in america that you have a turban on your head or facial hair you must be an extremist. as it turns out most people in this country and perhaps in the world who wear turbans all day every day r sikhs. we are from south asia and our religion is five centuries old. there are five to six million arabs and that is a generous estimate. i would say it is a generous estimate to say there are half a million in the united states. so we really constitute a very

negligible percentage of the country's population. nevertheless we are proud of what we stand for and in light of post 9/11 challenges such as hate crimes and discrimination, i can tell you with a lot of confidence that our spirit won't be broken. notwithstanding this rosy optimistic declaration of mind i am going to tell you two ways in which our government that the federal and state level can strip us of civil rights. very subtle insidious ways in which they can do this. sahar aziz helped us with this effort. many of you may not know this but in 2009 the state legislature of oklahoma and minnesota through state law attempted to prohibit individuals from wearing any religious items in a driver's

license photos. this was done reportedly for safety reasons. the idea being that forcing everybody to be there headed in an identification photographs would facilitate identification by law enforcement but more than that, muslims, sikhs and others are as a matter of religious mandate required to wear religious head coverings every day. that is their identity. nevertheless the state legislature of oklahoma passed this prohibition law by a vote of 88-8. it was an overwhelming vote in favor of this measure. when one of the lead sponsors of this legislation was asked why it was needed he said this was captured on tv, you will probably find a newtube, if you go to another country and they have got some customs or mores you are expected to abide to you

abide by them. similarly if someone comes to this country and they were something on their head and are prevailing way of doing things you shouldn't wear anything on your head they should abide by our rules too. there was some biased motivation to that legislation. nevertheless the oklahoma legislature -- minnesota within a matter of weeks also attempted to pass a similar law. why is this significant? apart from being offensive and even and essentially challenging to individuals like myself or religiously required to wear turbans every day who would not stoop so low as to remove our turbans to get a driver's license, for our communities, a rule of this nature can have a deleterious impact on our ability to travel and transact. think what life would be like if you didn't have access to valid identification or the implications it would have for your ability to get on an airplane and get a bank loan and

purchase goods and services to drive to work, make a living under a livelihood. imagine a situation where the oklahoma legislature was successful. you being sikh or muslim or an observant jew were forced to move out of state so you can preserve the dignity of being able to practice your religion on your own terms? imagine what it is like to be a refugee in your own country, in the united states. that is what is at stake. surprisingly laws of this nature can pass constitutional muster. that is the scary part. that is the scary part. the first amendment of the u.s. constitution has in the last 25 years been misinterpreted some would say in ways that make it not so potent with respect to its ability to protect religious freedom. according to the current interpretation of the three exercise clause of the first

amendment of the u.s. constitution, what we colloquially regard as freedom of religion is a state legislature passes a law that on its face is neutral and generally applicable. isn't targeted at a particular religious minority or muslims or sikhs and jews and has an incidental impact would pass constitutional muster. it would be perfectly constitutional under the first amendment. i won't bore you with the details. in 1993 congress tried to to overturn or mitigate the impact of the misinterpretation of that constitutional provision through legislation known as religious freedom restoration act. the problem is in 1997 the supreme court held that it does not apply to the states so if a state like oklahoma war

minnesota or any number of states attempted again to pass a law that would prohibit individuals from wearing religious head covering the driver's license photos that you filed suit claiming it violated the constitution, unless your state had a state version of the religious freedom restoration act you would be in bad shape. you would lose and would be nothing to do about this very sad situation. last time i checked six months ago, sahar aziz is more expert than i am something like 37 states in this country do not have staged versions of their religious freedom restoration act. something like 37 states in this country. the vast majority follow the u.s. constitution. the prevailing interpretation means that if any of those 37 states pass a law that says you can't have anything on your head in a driver's license photo you would have to choose between your religion and the ability to

travel or transact and participate meaningfully in the social and economic life of our country. a very easy way for bigots and state legislatures and a subtle and insidious way, very simple way, nonthreatening way for them to complete the ruin your life on account of your religion. that is festering as we speak. i would like to tell you about another problem we are working on to address. most of the main not know this. you would be shocked to hear this. title vii of the civil rights act of 1964 which prohibits workplace discrimination on the basis of race and sex and so forth has in the last few years been misinterpreted by at least one court in ways that empower employers to physically

segregate religious employees from customers and the general public. in practical terms this means if you are a muslim who wears a head scarf or a muslim man who keeps a beard or sikh who wears the beard your employer can say to you we have a corporate image policy which forbid employees from having facial hair which provides them wearing anything on their head. under title vii of the civil rights act we are required to make a reasonable accommodation of your religious practice. we have to make an effort. a good-faith effort to meet you halfway and accommodate your religion. here's what we will do. here is a reasonable accommodation. you can work here. we will pay the same amount of money or even more money. here is the condition. you have to work in the basement where nobody can see you. some courts in this country in the last ten years have said

that is perfectly legal and consistent with title vii of the civil-rights act. if you know anything about the civil-rights act of 1964 that is among the most seminal civil-rights laws. the purpose of title vii in particular in the civil rights act would integrate. it with a response to segregation and jim crow laws. it was an effort on the part of the federal government to in short public and private sector work places, york race, religion and so forth would not be decision factors with respect to employability. as we speak is perfectly legal according to some courts for employers to segregate you based on the way you look. i have a parade of horribless to tell you about. perhaps we could do this during the question and answer period but i would like to end on this note. i agree with sahar aziz about the need for eternal vigilance

and if you would like to join us in efforts to combat workplace segregation which is a subset of workplace segregation would join our efforts to combat efforts by state legislatures to use loopholes in constitutional law to slam religious minorities please let us know. we work in concert with other organizations that have been named here this afternoon. please partner with us if you are so inclined. [applause] >> thank you. we start with a few questions to each panelist. i want to start with dhs. not to pick on you or anything. you mentioned the country's

where the impact were but the regulation itself continues to stay in place meaning at any point in the future we can fill that regulation with arab countries or european countries. we don't know. what is the hesitation from dhs in not getting rid of the regulations released or assurances that we will not face a similar issue in the future? >> one of the reasons--there were a variety of reasons. one is it was no longer an effective program for bubble that were set for the program. i don't know if my mike is on or people can hear me. many regulations are left in place and that is a decision the secretary made to leave it in place. effectively the entire apparatus of the program has been

dismantled. there are far better ways to achieve security goals, national security goals. i don't know what the second question was. >> the answer is the program as a whole, some assurance -- we have individuals -- >> to your second point there are residual effects. we recently held a meeting with margaret who was on the previous panel and attended that meeting to discuss the residual effect and what we can do about those and the department is working on those resolutions. >> i want to note in credit to many organizations and this creates your tenure, all these spend nine years pushing for this getting everything they wanted but i believe had they not done that, a think it would

still have been there. maybe it would not have been used but still on the books. to me it is not necessarily a victory for those who oppose -- further evidence that if you don't push for a government. if you don't force them to be the public servant, none of that will happen and sometimes for bureaucratic reasons or political and ideological, nt r nteers is proof -- it is a long battle. >> if anybody wants to go upstairs, we have many files. definitely one of the primary issues. but i am looking forward to the next ten years. what do you think our issues

this community will be facing? >> a much harder question that i would have thought two years ago. there was a time discrimination was finally slowing down and in the last two or three years it boomed unfortunately. a neck-and-neck it to the election of obama. once he started running for president, it started to increase. anti-black racism was failed and anti muslim racism was politically correct but it is not politically correct to be anti black. from there it got out of control. he was no longer necessarily the target but for the questioning of his birth certificate by the birthers which was clearly based on bias and when it went to

other public forms that we have been seeing. moving forward, it is definitely the phase where institutions need to be institutionalizing. after 9/11 everyone was in shock from mainstream society to muslim arabs who had a double shock of the terrorist attacks and the backlash. there was a lot of reactive defensive behavior that is completely expected. ten years later we don't have that excuse. don't let your guard down because of what i talked-about and everyone else. institutionalize. if you think you can do it by yourself you are woefully misguided. institutions are what mobilize and empower communities. you have seen it with other minority groups. the next step also, this is related to the paper i am working on, it is time to start

talking about women and gender in the community. it got put on the back burner because of the existential problems we were dealing with. we were being attacked by so many sides that we had to unite which in some ways is good for the community. there were a lot of gender issues that were made, pushed under the rug. an internal discussion needs to happen. it is not an imperialistic or external imposition. we continue to have to pressure the government. it has become clear to me it doesn't matter if it is republican or democrat. that has been a harsh realization. over the last two or three years. i like obama's personality are disappointed in him on national security. security letters are still out

there. the watch list has major data integrity issues. obviously these informants -- this is under his watch. one question i have for the civil-rights division is why they didn't file an investigation into nypd's activities. they file into the prosecuting puerto ricans police department. i want to know if it is legal they're working with the cia and mosque crawlers to listen in on religious sermons just to listen in. imagine if you are the imam and thinking everything i am saying is recorded by the government. that is not religious freedom. you will feel censored and your congregation may not come anymore. they will come for ten minutes to pray and then get out because that mosque is an invitation to be prosecuted. nobody wants that trouble.

that is my suggestion for the future. >> two part question. first question is in terms of school boy. an issue we worked on in the past and that we are definitely addressing in the future. and talk a little bit about the work you are doing with doj but if you want to address the issue about the school bullying and the second part of the question the issue you are dealing with particularly with the military and the work on that issue. >> with respect to school bullying. you know that in recent months in the last couple years it has become an issue which is put on

national radar. unfortunately it happened because of a spate of suicides by young students who were accused of being gay. even in some cases when they hadn't formed a sort of sexual orientation. it really came out of tragedy that this heightened awareness about school bullying certainly at the federal level. but sikh coalition between 2007-2010 conducted two major surveys of students. one was in new york city. one was in the bay area of san francisco, nine counties in san francisco. what we found in both cases is 60% to 70% of sikh children are bullied and harassed on account of their actual or perceived religion. in many cases they are slaughtered as osama bin laden and told they are terrorists.

in a quarter of the cases in both cities sikh students were physically assaulted. in new jersey the turban was set on fire by one of his fellow students in the recess yard. another sikh student had his hair forcibly cut. as you know sikhs are religiously required to maintain their hair. another had his orbital bone fractured by one tempting to remove his turban. what is interesting about the survey results is although in other respects because we did not just conduct a survey of sikh students but adults as well to get a sense of what their most pressing issues were and although there were differences with respect to economic issues, access to health care and language access between new york city and the bay area, the school bullying statistics were

uniform in the sense they were -- really crisis in the sikh community and we know from our friends in the muslim american community that muslim children are brutalized at school on account of their religion. students who are arab american are harassed and lead because of their ethnicity. there is legislation in congress pending which might help address these problems. you should take note of it. is the safe schools improvement act. you should take a look at that legislation. if you like it you ought to contact your legislator and ask him or her to co-sponsored. any of us will give you more information about that legislation if you want it. very briefly to the sikhs in the u.s. military may not believe this but until last year or two

sikhs were prohibited from joining the armed forces because of the army and particularly the army's appearance regulations. this is ironic historically speaking because sikhs have a reputation for martial prowess. sikhs comprise 20% of the british indian army despite being 2% of the population. they are then the armies of the united kingdom, canada and india until recently the chief of staff of the indian army. the notion sikhs can't serve in the military and would be substandard soldiers is absurd. demonstrably so. we had to struggle hard in an organization to gain admission on behalf of getting sikhs into the army. notwithstanding our limited success and the effect these gentlemen have been admitted and have been allowed to wear their

turbans and keep their beards in fact the army and the rest of the armed forces so far refused to change the policy on paper. what has happened is we are relegated to being exceptions to a general rule. we're looking for a situation where as a matter of right presumptively if we are able and willing to serve we can do so without having to hire lawyers or consult with organizations to achieve the same rights any other person in this country enjoys freely. >> thank you. i want to welcome mazen basrawi, counsel for the department of justice of civil-rights division. along with his colleagues in the civil-rights division have an open line of communication and dialogue between the community and a d.c.. as you can imagine at times we

tend to disagree more than we agree and times we allow more issues that may be sticking points between the two entities but we have -- mazen basrawi is a strong advocate for civil-rights and civil liberties and we are proud to have one of our own community members in the government serving. we have been talking about issues that impact us over the last ten years and the issue is moving forward over the next ten years. the general idea within doj particularly your division addressing civil-rights concerns of the community. >> let me apologize for being late. i recently started a special assistant u.s. attorney in alexandria and between the

weather and the distance i wasn't able to be here on time so forgive me. but i want to take the opportunity to talk about the work we in the civil rights division have been doing to protect those affected by what we call post 9/11\. what we mean by that are groups of individuals targeted as a direct result of perceived association with those responsible for other terrorist activities. before 9/11 the universe of civil-rights complaints the department received and the department had taken action on was not on the charts at all. no significant presence for muslim americans or

arab-americans or southeastern americans in terms of civil rights and that is across the board weather is hate crimes or educational discrimination or housing discrimination and that could be attributable to a variety of reasons. my own guess would be lack of awareness in the community. what 9/11 did was create state of consciousness in a large segment of these communities that gave folks access to dealing with problem they have been facing before that they might not have realized that they had recourse to address. in the days after 9/11 we saw a

dramatic number of hate crimes reported. in three months after 9/11 there was something on the order of 300% of hate crimes that we receive now. we're talking 500 reports within the first few months following 9/11. and the assistant attorney general at the time to his credit instituted and initiative to combat post 9/11 backlast. was addressing hate crimes from the first day. there were reports of individuals who were targeted. our first prosecution was a of a man who went to a mosque in washington state and started shooting. the good news is nobody was

injured but many people could have been injured or killed. he was our first prosecution. it wasn't the first back/event. i am sure this has been mentioned but the case from arizona who was the first unfortunate loss of life after 9/11 as a result of post 9/11 backlast. that was our state prosecution. since then we had over 800 investigations of alleged hate crimes against arab-americans and southeastern americans under the gamut of post 9/11 backlast. we are up to 53 prosecutions. the most recent of which this year we had a man who pled guilty to having burned or attempted to burn a mosque. he only succeeded in turning

down the playground outside the mosque. the good news is he decided to do that at 3:00 when no children were playing. it is a serious offense that ten years after 9/11 people continue to want to in the words of the attorney-general avenge an attack on innocents with another attack on innocents. it is an unfortunate case we are having to deal with with hate crimes up until this day. as we are committed to enforcing hate crime laws generally absolutely committed to enforcing hate crimes in the post 9/11 back/universe. as i mentioned we had an indictment as recently as last week for a man who wanted to burn down the mosque in oregon after hearing about the

attempted bombing of the christmas tree lighting ceremony in portland last year. this is likely an ongoing phenomenon. as unfortunate as it is. despite many efforts folks from the president on down have made in speaking out against any association and any attempt of vigilante justice we continue to see a steady stream of hate crimes against these communities. that is not all of the story of the civil rights division. we have across the board seen an increase in violations of the religious land use and institutionalized persons act which protect against discrimination for communities that wish to build houses of worship. we have had an ongoing project

since the passage of the act and its enforcement. it was passed unanimously by congress. almost unheard of vacation. but in 2000 congress passed the act which banned discrimination against minority communities and religions. and religious institutions in general. in the last ten years we have had over two dozen cases involving mosques in particular. in the last year, 16 matters we have opened have been involved in mosques. 26 cases that we have opened since 9/11. it is sort of the opposite of the hate crime situation where we saw a significant number of hate crimes in the months after 9/11 but a decline yet steady stream we have seen an increase in the number of reports of

possible cases of discrimination against houses of worship. in the last week, we have filed complaints and settlements with two municipalities. one in virginia. [inaudible] these are places we care about. discrimination against other religious communities but we recognize the post 9/11 backlashed, as tom perez likes to say, facing the wind tunnel. as rajdeep singh mentioned we have seen an increase in

bullying and our educational opportunities section has been committing resources to address the problem. we settle the case in minnesota involving a school district that tolerated a climate of bullying against some of the americans based on their national origin. we succeeded in a settlement against the school district there and hope that will serve as an example to many other school districts of their obligation to prevent illegal bullying and harassment on the basis of race, religion, sexual orientation, gender or disability. in the area of housing discrimination we have seen an increase in reports of housing discrimination cases. it is an area i think the

community may not fully be aware of their right to pursue recourse against discrimination and we have heard stories from people who tell us they go to rent an apartment and when i went it was fine but when i brought my wife who happened to be wearing a head scarf suddenly there happened to be no vacancies any more. those are instances that are clear violations of the fair housing act. is something we can do a tremendous amount about ee while individuals complain with the muslim housing authorities for possible discrimination. these are just examples of areas the civil-rights division has been committed to combating discrimination. i want to end with one final thought. we have been leading an effort

to engage the arab-american leaders the muslim american, sikh american community with the government since 9/11. attorney general eric holder has made it a priority for the entire department and we have seen united states attorneys from around the country increase their existing engagement programs and begin engagements where some have never done so before. we are really excited about the work they are doing around the country because we as a department and the government are here to serve the people of the united states. that includes all people of united states. it is not just in the area of civil rights. the communities that are represented in this room and at this table care about all aspects of law enforcement and we believe it is important to have their voices at the table.

i will pass it back to you. [applause] >> very appreciative of the good effort put forth by doj. i have a question about the nypd issue that is in the media lately. >> part of my presentation discussed the concern about the report that came out by the new york times about the nypd/cia relationship and more specifically about the allegations of credible evidence of mosque crawlers and raiders without any individualized suspicion. my question is do you know if

the civil rights division received a request and if it has with the response is to initiate an investigation into the nypd practices to ensure they are not violating the constitution in a similar way they were accused of profiling. more specifically a religious freedom issue. has the civil rights division been absent and investigated and what is the response and the position of this shocking discovery? >> we are aware of requests we through the media. we are aware of the associated press reports and we are reviewing those matters. i can't comment beyond that.

>> i apologize about the mike. if somebody could grab a battery from the back. we will use this hand-held. a follow-up question for rajdeep singh. talking about the bullying aspect. what is the take on the national security issue? are they impacting, what seems to be the big issue? or is employment discrimination the hot line issuig >> so many. i don't know where to begin or what to tell you. honestly we donan' get a lot of

in takes relating to immigration. in the context of national security we get reports of racial and religious profiling. people who miss sikh shrines in pakistan are often questioned in a very brusque way by officials. the majority of reports we receive come from airports particularly tsa check points objected to secondary screening 100% of the time even if they passed through metal detectors or whole body imaging machines. the explanation for this is turbans are bulky and incapable

of being penan' rated by the crk aig machine the ploy nationwide at a cost of billions of dollars. with respect to immigration issues we donan' recincave -- w are not receiving reports. if i had to rank the issues would it be emphinoyent discrimination or school bullying? or hate crimes? it is an attitude problem. is entrenched bigotry which has

been mentioned already. which it is school bullying and so forth. the bigotry and the attitude that is the fundamental challenge and the biggest nemesis. thank you. >> this seems to be working so my next question is we have seen -- we heard earlier today some of the obama administration has taken office we have seen more deportation than any period prior to that. we are receiving a number of cases of individuals who have lisa overstay or detained for a period of time. we're seeing a backlog in the immigration courts, visa delays are made to your office and typically what is done to resolve these issues? oftentimes we get comments that

they made the report but after that they got a form letter. what is being done to address those issues and what is being done on the policy side of things to change the way immigration matters are being handled and so forth? >> just to address the policy side briefly president obama as well as secretary janet napolitano recently if you have been reading the news, dhs is reviewing 300,000 cases currently in court to assess liability for deportation or whether there is extenuating circumstances to allow them to remain. that is a large number of cases we are working through very quickly.

in terms of complaints, the dhs is the second largest agency in the country. federal agency. each agency has its own office, internal affairs office. specifically relating to civil-rights which is the work my office does we have a complaint department that handles a lot of immigration issues. i mentioned last week a number of my colleagues routinely visit a lot of detention facilities where they received complaints to conduct investigations. we have an immigration policy section at the department to refuse immigration issues. if any of you have issues i encourage you to contact me personally and i am happy to address the issues. >> i have a question about something that has been on my mind. i know there was an issue that predated you and predated

margaret's are rival. there was a really big frustration for lack of transparency for what they call the letter people get which was i would file a complaint and been misidentified on a watch list. i believe my rights have been violated and eyes and a report for a complaint and what would happen is crco would send this cookie cutter boilerplates and responsive letter that says thank you for sending the complaint. we have dealt with it. good luck, goodbye. people were frustrated and many of them presumed either nothing was done or not enough was done or their rights were not being vindicated which caused them to question. i heard she was going to address that. has that changed officially?

what does dhs gifts to individuals when they finish investigating their complaint? do they tell them the outcome? do they tell them the remedy? >> absolutely. i am not familiar with the exact language of the letter and how that change but i have seen different letters go out to people and you are told the disposition of the matter if it was resolved and investigated. you are more than welcome to contact me or any of the folks at our office to find out what is going on. >> quick follow-up question to what you mentioned about the review of the 300,000 plus cases. what is the discretion? how do they determine which cases move forward? constitutional discretion or guidelines? how do they determine which cases move forward? have the policy been put in

writing or are there guidelines given to them? >> general prosecutorial discretion issue. there are 300,000 cases. there are hundreds of mitigating factors. you are more than welcome -- as a prosecutorial discretion memo from director morton that lists examples of issues that may encourage a judge to apply the question. the length of stay of the individual in the united states whether they have done in college for whether they are witness to a crime or serve in the military. there are a number of effects they can apply to that discretion. >> we will open up to some

questions from the audience. >> to the panel. i am an egyptian american and very proud of that. i served in the united states military. in my younger days. where do we draw the line of ethics with the media? i was involved yesterday or the day before and came up with bigger stock about 9/11 and the experience and the united states was under attack. where do you get this figure? why is it always just the arabs or the middle easterners or of ethnic southeast asians? how come we don't talk about others? have they been active? why just concentrating -- why do

we not say to the media be responsible. not just focusing on the middle east or arabs or other ethnic groups. we are americans citizens and we need protection. that is what you are doing by announcing that we are. i apply for airline jobs. i picked up the phone and the woman said could you spell your name and told you how and she said you speak english. right under my name, i work for agencies in the united states government. she didn't even read it. where do we draw the line? >> you bring up a good point. [inaudible] a great point hi ray is often. you have been to the prejudice and stereotypes.

is a terrorist act defined by the identity of the perpetrator, the race or religion of the perpetrator or the act? we all think it is the act but in practice what is happening? i think it is two things. one is you have stereotypes that need to be addressed. we can have all conversation about how to do that. there are multiple strategies for litigation to public education. we have to acknowledge them and deal with them. it is not just the community. just like americans had to deal with a racism problem during the civil rights movement. before they acknowledged that nothing would be fixed. the second issue you have is the government is to blame. the rhetoric of the government. for example somebody just had a shooting spree a week ago in colorado in a store. there were actually military

personnel. national guard. i don't know what the race of the shooter was. don't think he was arab or muslim or salvation or you would have heard about it. that is a terrorist act. if it was the person from fort hood, he shot a bunch of military people. we could go into whether it is terrorist or non terrorist but let's say terrorist because it was a political agenda. it sought to influence government policy and intimidate a population. let's say we will accept what is a very broad and problematic definition of terrorism which is not consistent in the statutory code. putting that aside it is not applied equally. joseph stack flew an airplane. he was very angry with the irs. staunchly anti-tax. had written much on the internet about it. wrote a suicide note.

take my blood or take me and floodplain into the irs building. the old the reason it didn't create a huge death toll was because he did it at noon when there was only one irs person there who was african-american and was a military veteran and he died. his family lost a husband and a father. had he done it one hour later or one hour earlier there would have been a lot of irs employees that. you saw the building. it was on fire. the government is not going out with the same zeal say we will fight terrorism when these things happen. sending a message to the public that that is not what we need to worry about. when an arab or a muslim does it the government is on guard showing the public your money and taxpayers and billions of dollars in fbi and local and state law-enforcement use properly. don't worry we are keeping you

save. i think the media is more of a symptom because the media panders to the public and exacerbates the problem. the root of the problem is the entrenched stereotyped and it is a vicious cycle and i think the government has a role to play. it has a responsibility. it will be consistent or not and it is not going to be consistent that needs a lot of explaining to do. [inaudible] >> i just happened to be there. non-partisan. new york or nypd and cia. if you have received that demand you will. it is imperative that there be an investigation. and talking about the turban and the way states got involved, in

the states that don't have it it is a different conversation. i never made those connections but i wanted to ask about something i don't usually think about which is the list. not just that -- the other list. they put you in a room and all that. takes a lot of people in the community. is there any progress on that at all? >> i will talk about it with the caveat that the department of homeland security doesn't create those lists. just a customer.

those lists are managed by the fbi. there are ways to insure those lists are accurate. that you are not unduly arrested or pulled over in screening. we have a program we started year-and-a-half ago which i mentioned it briefly where you go on line and submit information. if you have issues with domestic travel, we have limited whatever we can do in our agency we try to do. unfortunately if data comes in internationally that puts surnames back on that list. we don't have any control over that as an agency. i don't know if you want to contribute to that. >> that is a great point. you should read the department of justice inspector general

glen find's report. he did two on this issue. he critiqued it from a more practical perspective. if it is not accurate it doesn't make a safer because it wastes time. from the civil liberties perspective. it is still problematic. the problem -- can't put the burden on the fbi because there are a bunch of agencies that feed information to these watch lists and this process based on his report is sloppy, not monitored. they are not doing what they are supposed to be doing and this is probably the fbi and agency's fault making sure whatever data they put in has been filtered. it is based on reasonable suspicion and individualized suspicion indicative of criminal activity as opposed to profiling

or some other noncriminal related criteria. the burden is on these agencies and the fbi and dhs does in put. they are more of an implemented although i don't think that lets them off the hook. you have an interest in the watch list being accurate because you get blamed because you want to implement it. >> absolutely. the reason for starting dhs/trip is we deal with the american public more than any agency. any time you travel you're dealing with tsa leaders the we are 99% of the time and implementing of that list. the idea was to have this

redress' process and do the best we could as an agency on the front end of the operation to insure the customers of the american public were safe when traveling but also not having a hard time traveling. i encourage you to approach me afterwards to talk about this. .. what assurances other than verbal assurances are evidence that show it is a functional redress program as opposed to

just on paper? >> i encouraged you to read a report which will be out on our web site dhs.gov/chc r. l. and will list the metrics behind trip. it will be out in about three weeks so it will be updated. and yes, the initial process we were dailies with a lot of complaints obviously with people having issues and it didn't start out a full-fledged department, and over time it has gotten better. i was just in houston a few weeks back and people were telling me their complaints are getting resolved a month or two from the point of inception to the end and then we also have the redress process so that doesn't keep happening over and over again. we will get a redress number the first time you have an issue with travel with trip and if we can do something about it on our end is an agency we will give an number in the next time you fly you put that number in right when you are booking your flight so we know that this -- so we have a record so you are not lost in the daily ship millions

of people in travel. anyway. >> a follow-up question to something you said maybe you are mazen said and you our customers to the list. when you hear something that like that you wonder these liz shared with law enforcement or are these lists within federal agencies or how do you -- what assurances do we have again that these lists are within the federal government also and who contributes to these lists is often a question within the community. >> just from my perspective, i don't think i would feel comfortable with me talking on their behalf, and they would probably be the agency that would know more about who the list is shared with. the reason they use the customer analogy, we are not buying the

list. it is just that we are in that role as it were beginning to product of not creating the product. >> i don't really have anything to add since this is a question for the fbi and i have no information as to the creation of the list. >> i think we have time for one or two more quick questions. >> not being able to have a job because of his name. i send all my money to send my kids to college. do you have any recommendation?

>> i'm glad you brought that back nick has there is something i wanted to respond to the gentleman who asked that question which is i hope that he filed a complaint with the equal employment opportunity commission, because an indication of any treatment, improper treatment on the basis of race, religion, national origin is a violation of federal law, of title vii, and you know that is a low which law which we enforce when it comes to public entities and a law in which the eeoc enforces and i'm sure you have heard about that earlier today. so you know it is a question of demanding that your rights are respected once you are aware of a violation and the first step toward that is filing a complaint with the eeoc.

secondly, you know, i would like to take a moment just to talk a little bit about the bright side of this, which you know we do face a headwind of intolerance in many cases but we also face you know, a universe where diversity is valued in government and it is valued in the ear. it is valued in academia, and it is something which i think is an asset to our country and is something that is a real blessing for us here and it is not true in many parts of the world that have similar demographics to the united states. i think it is something we ought to be proud of. yes there is absolutely work that needs to be done and you know, as reverend king said, and injustice anywhere is a threat

to justice everywhere, but let's not lose sight of you know, the blessings of living in the united states and in the diverse society in which we live, where we can say a man by the name of a rock hussein obama is the president of the united states. [applause] >> there are other quick questions. >> post-9/11, seeking individual muslims, the sikhs and south asians has it increased by governments and agencies? i didn't do the search on that so what is your observation? >> mason and i are here but i don't have any statistics on hand to be able to answer that question. i don't know if anyone else does

here. >> i would like to answer that question sort of rhetorically. seikhs are not permitted to -- permitted to serve in the u.s. coast guard which i believe is a subsidiary of the department of homeland security. we had to sue the department of homeland security several years ago as an organization to win the right of a sikh to serve as a federal security officer so at least from a sikh perspective i can tell you there is either underrepresentation because there aren't as many applicants as there should be or there are barriers in place that prohibit us from serving in those capacities. >> i think based on what i have read in publicly available information and there has been some reports by advocacy groups as it seems the primary concern is with the fbi, and to some extent the local and state law enforcement is working with federal agencies on either immigration or counterterrorism. the problem is it is very hard

to get those statistics because it is not transparent and there is usually classified information or over classified information and it is unfortunate we have to rely on investigative reports to find out about programs that i think the public has a right to know about it is they are problematic. i think peter king needs to have a hearing about the nypd/cia program and that would be good times bend spent of our tax fire and money spent than to have a hearing about muslims and anyone with an orthodox religious view or a political dissent whether or not they qualify. it is hard to find an answer because there just isn't enough transparency and accountability but i think it is safe to say unfortunately it is still at least add a volume that still causes concern, and they just want to make one comment to the woman. you are free to do what you want with your children but i would be very distraught if after 10

years of being a civil rights advocate for the community that you felt the only way that you could protect your children from this information is to have to change their name. it is a shame and i mean if that is how it is then it is obviously still a state problem. i think hopefully with the alternative is you know your rights. they are the best they are in the community group such as edc and many other advocacy groups including non-muslims to step in and defend your rights with this is not a country where you have to come and change her name. to a name that has nothing to do with your identity. religiously or racially. that is not america. that is not america. >> thank you. [applause] >> there are no more questions one more closing thoughts for each of the panels if you wish.

>> now i just want to reiterate that you know, we are here to serve the needs of the community and you know by lines are always open and my colleague eric train who is our special counsel for religious discrimination, you know, this is practically a full-time job or us, and so we are at your service and if there are issues you would like to bring to our attention, you know our doors are wide-open. >> i just want to make it very clear, i am very proud to be an american. i am lucky to be -- [inaudible] i just wanted to make clear the fact that maybe i wasn't clear on what i mentioned that last year -- but we only hear the heirs. i just want to make sure the former panelist said it was also mentioned there was so much what

we hear is only domestic group so i just wanted to clarify that was my point. when are we going to stop this and go to the grassroots and tell people there are americans who come from different parts of the world and landed on the shores. >> just to weave into what you are saying about that, our office said dhs conducts now 16 roundtables at in 16 cities eight times a year and we don't just meet with south asians. we also meet with arab-americans. we don't just talk to muslim americans or even latinos or even somalis. we we we talked lgbt groups and women's rights groups. we talk to african-americans. i mean we talk to white people. we talk to anybody that is left and we do it eight to nine times a year in 16 cities. there is no department in the federal government that holds this kind of face-to-face

engagement with the community and guess what? we are a national security agency on top of it. so, well to my knowledge no department does 16 roundtables on a regular basis with the same guy showing up and talking to communities and large roundtables. we have 100 people show up to those committees including people like mazen. we have fbi, i.c.e., cbt, fema officials, heads of local cities that show up and talk to community advocates and leaders, and like mazen was discussing it is important to engage with your federal government including people like mazen and myself. we can only do what we do if you file a complaint. if you give us a call and you talk to us. we are here to serve you so the more you can do to make our jobs easier in this vast bureaucracy that better. thank you very much. it was on our being here.

>> thank so much for organizing this again and it is an honor to be here. i really don't have much of that. i would encourage any of you who are impacted community members and even if you are not to remain optimistic. i think fundamentally and i don't mean to be too philosophically, fundamentally have a choice which is my area. you can be an optimist and look at things with a sense of hope or you can live your life in despair and sort of drop dead in rollover. in reverse order of course. i don't think that is really an option. it is sort of a false choice and never let your experience be broken. don't feel like you are an american. be proud of who you are, hold your heads up and everything else will follow. thank you. [applause] >> i will just end by emphasizing that the gentleman in the back did not have to caveat his comment when i am

proud to be an american, because that proves my point. we can criticize the government. we can hold them accountable without having to caveat anything, anymore than anyone has to. the way i look at it, if you want to believe my passport is a prima facie case that i am a loyal patriotic american. you have the burden of proving whether i am not. i am just going to sit here and assume that i am an act as if i am. so i would just end by saying that the tea partiers can do it, we can do it. we can be -- you can be just as critical and just as you know, tenacious and just as questioning and be a muslim and be an arab and be a south asian and be very very american at the same time. [applause]

>> thank you. thank you to the panelist. i want to close out by recapping on what we learned today. there were a lot of issues we definitely discuss. we spend three, four, five days maybe even a weak conference to talk about all the issues in the community. the importance of coalition building and the importance of working together with other minority groups and working within the arab-american community moving forward within the next 10 years. i know we definitely still have our issues. we still have concerns over the mosques and the concern over the fly list issues and we will have these concerns but we'll keep pushing forward and trying to alleviate these concerns. i think moving forward at least from the adc perspective, engagement is good. engagement is always good but we will need to start seeing some results and we will need to see them quicker than what we have

seen. results are going to be needed. the community is much more matured now and we need to see progress on issues and we need to not conflate how we see discussions with public outreach. we need to separate these and really work hard and hit these meetings hard and work with the agencies in resolving these issues. the next 10 years is going to tolerate -- fly list issue has really been getting much more organized and moving forward in a very good fashion. to touch on your comments, think we have to define what the american is. i grew up in detroit. it is just as american as to somebody else so we are here. we are not going anywhere. we are going to stay here and play a role in defining what being american is and we are going to keep pushing our

americans. that is what abc will continue to do in the next 10 years and we will start seeing a lot or discussion on issues like the jobs matter, the economy, health care so we are not going anywhere. the tea partiers and people who want to start politicizing us and using us as political favors and putting us up there is the bad guy, think they have another thing coming their way. we think we can do that in 2012. again i want to thank you you guys. keep motivated and keep in tablet what adc is doing. log onto the web site and please take this bulkham. there are great articles and there. distributed and share the information and share what you know, and keep pushing and fighting the good fight and hopefully in 10 years we will be talking about something else. i again i want to thain for coming. we have food in the back and you know enjoy the evening and feel free to ask us any questions.

thank you. >> we do have an event coming up, actually a few events coming up in november. the cultural show and orchestra will be held in d.c. and we also have the lecture series coming and it will be held in our office. discussion topics such as silver rights so things that are upcoming in the media. we are trying to discuss the policy issues and bring forth the cultural issues and keep moving in the drive direction. i want to thank you again and hope you enjoyed it. enjoyed. thank you. [applause]

>> nearly 50 million americans lack health insurance according to u.s. census mattair report released this week. earlier today we spoke about the new figures with charles nelson the assistant division chief of the u.s. census bureau social economic and health division. ei >> mr. nelson what did you find about uninsured in america today?t >> guest: we foundnj in 2010,

16.3% of all people did not have health insurance, which is it is actually about the same percentage as 2000 rcentage as 2. the number of uninsured nine rose million to 49.9 million between 2009 and 2010. host: do you doubt why the number rose? -- to you know why the number rose? guest: to put the number in context, this is a year when the number of people in poverty rose by 2.6 million people, percentage rose from 14. three to six -- point whatrose -- r ose from 14.3 to 15.1% th%. health insurance is a reflection of people's economic well-being. host: demographically, how does

that uninsured 16.3% break down? guest: there are groups with higher rates than that. one of thing to look at is children. children have a lower rate of uninsured that the overall population. their rate was 9.8% in 2010, not different than 22009. children actually have a higher poverty rate than the overall poverty rate. their poverty rate is around at 22%. but they have a lower uninsured rate, and we think it is because there is a safety net out there, programs like medicaid and children's health insurance program, that keep the rate relatively low compared to the working age population. host: does that rate changed geographically? guest: there is certainly a regional element to the

uninsured in the u.s. for example, in the south region, the uninsured rate is around 19.1%, and in the west, 17.9%, both higher than the national average. in the northeast, 12.4%. below the national average. host: mr. nelson, you also reported on the type of health insurance people are getting. we have a chart from the u.s. census bureau that compares 1987 and runs through the grass to 2010 -- through the graphs to 2010. 1987, 75.5% at private coverage of some type. today, 64%. 1987, 62% had employment-based coverage. today, 55% have that trade

government coverage has gone from 23% to 31% of those who are insured. by their any trends behind these numbers that you want to speak to? guest: certainly that has been the big trend in health insurance coverage, and certainly over the last decade that has been true that we have at dropped in employer coverage, private coverage, partially offset by this increase in government coverage, particularly medicaid. meditate between 1999 -- 2010 medi -- medicaid between 1999 and 2010 rose to 15.9%. the children's health insurance program has been the one that has grown particularly fast over the last decade. host: two more charts i want to

quickly point out. you divide it by race and income. what did you find by this? guest: by race, you can see that the health insurance is kind of aspect of economic well-being. groups that have the higher poverty rate also have the higher uninsured rate. the other thing to point out is that since 1999, both the rates for whites and blacks have increased in this country. host: charles nelson with the u.s. census bureau, thanks fo the head of the nonpartisan congressional budget office douglas elmendorf testified tuesday before the joint deficit reduction committee. that committee is tasked with finding at least $1.2 trillion in deficit reductions by november 23. mr. elmendorf said the committee would have to come up with a

plan by the beginning of november in order to get the cbo enough time to assess its impact. automatic spending cuts are triggered if congress fails to pass the committee's recommendations by december 23. here is a two hour and ten-minute portion of the hearing. >> with that we will turn to our witness for today, dr. douglas elmendorf is the eighth director of the congressional budget office and his term began on january 22, 2009. before he came to cbo dr. elmendorf was the senior fellow in the economic studies program at workings institution. the edward m. bernstein scholar he served as coeditor of the brookings papers on economic activity and the director of the hamilton project and initiative to promote broadly shared economic growth. he has served as assistant professor at harvard university, a principal analyst at the congressional budget office, senior economist at the white house council of economic advisers, deputy assistant

secretary for economic policy at the treasury department, and an assistant director of the division of research institutes dates at the federal reserve board. in those positions.realm in darfur has gained a wide range of expertise on budget policy, social security, medicare, national health care reform, financial markets, macroeconomic analysis and forecasting and many other topics. so i'm very glad that he has agreed to join our committee here today. dr. elmendorf thank you so much for taking the time and helping us get through this and we look forward to your testimony. >> thank you senator murray, congressman hensarling and the members of me. i appreciate the invitation to talk about the economic and budget outlook and about cbo's analysis of the fiscal policy choices facing this committee and the congress. the federal government is confronting significant and fundamental budgetary challenges. if current policies are

continued in the coming years, the aging of the population and rising costs for health care will push of federal spending and a measure of the share of gdp well above the amount of revenue the federal government has collected in the past. as a result, putting the federal budget on a sustainable path will require significant changes in the spending policies, significant changes in tax policies or both. addressing a formidable challenge is complicated by the current weakness of the economy and the large numbers of unemployed workers, empty houses and on used factories and offices. changes that might be made to federal spending and taxes could have a substantial impact on the key pace of economic recovery during the next few years. as well as on the nation's output of income over the longer-term. i will talk briefly about the outlook for the economy and the budget and then turn to some key considerations in making fiscal

policy. the financial crisis and recession have cast a long shadow on the u.s. economy. although it began to expand two years ago the pace of recovery has been slow and the economy remains in a severe slump. cbo publishes most recent economic forecast in august. that forecast was initially completed in early july and updated only to incorporate the effects of the budget control act. in our view incoming data and other development since early july suggest that the economic recovery will continue, but at a weaker pace than we had anticipated. with output growing at only a modest rate, cbo expects employment to expand very slowly. leaving unemployment rate as depicted by the dots in the figure close to 9% through the end of next year. i should say all these figures are taken from the recent testimony and merrily in the order in which they appeared in

the testimony. as a result we think a large portion of the economic and human costs of this downturned remain ahead of us. the difference between output and our estimate of potential level of output shown by the gap between the lines in the figures have accumulated so far to about $2.5 trillion. by the time it is back to his potential which will probably be several years from now, we expect that cumulative shortfall to be about twice as large as it is today or $5 trillion. not only are the costs associated with this shortfall and output in men's, they are also born unevenly falling disproportionately on people who lose their jobs, are displaced from their homes or own businesses that fail. i wanted to emphasize the economic outlook is highly uncertain. many developers could cause economic outcomes to differ substantially in one direction

or the other from those we currently anticipate. if the recovery continues as expected and if tax and spending policies unfold as specified in current law, deficits will drop markedly as a share of gdp over the next few years. those baseline projection shown by the dark blue portions deficits fall to 6% of gdp in 2012 about 3% in 2013, and smaller amounts for the rest of the decade. in that scenario deficits over the decade total about $3.5 trillion. but as the number of you have said those baseline projections understate the budgetary challenges. because changes in policy that will take effect under current law will reduce a federal tax system and spending for some federal programs that differs sharply from the policies that many people have become accustomed to. specifically cbo's baseline projections include the

following policy specified in current law. first, certain provisions of the 2010 tax act including extensions of lower rates and expanded credits and deductions and acted in 2001, 2003 in two and 2009 all expired at the end of next year. second, the two-year extension of provisions designed to limit the reach of the alternative minimum tax extensions of emergency unemployment compensation and a the one-year reduction in the payroll tax all expire at the end of this year. third, sharp reduction in medicare's payment rate for physician services take effect at the end of this year. fourth, funding for discretionary spending declines over time in real terms in accordance with the caps established under the budget control act. and fifth, additional deficit reduction of more than a trillion dollars will be implemented as required under the act. changing provisions of current law to maintain major policies in effect that would produce markedly different budget

outcomes. for example and shown by the full bars in the figure, if most of the provisions of the 2010 tax act were extended, if amt would index for an inflation and medicare's payment rates for physician services were held constant, then deficits over the coming decade would total $8.5 trillion rather than the $3.5 trillion in the current law. by 2021 debts held by the public would reach 82% of gdp, higher than in any year since 1948. yesterday cbo analysis of the enforcement procedures of the budget control act. as shown on the sly, we estimate that if no legislation originating from this committee is enacted, the following would occur over the next decade. reductions in the caps on discretionary appropriations for defense would cut out waste by about $460 billion. reductions in the caps on

discretionary appropriations for nondefense purposes would cut out waste by about $300 billion. reductions in mandatory spending would yield a net savings of about $140 billion. the total reduction deficits would be about 1.1 trillion. the estimated reductions in mandatory spending are comparatively small because the law exempts a portion of such spending from the enforcement procedures. as a result about 70% of the total savings would come from lower discretionary spending. cuts in defense and nondefense spending of that magnitude would probably lead to reductions in the number of military and civilian employees and in the scale and scope of federal programs. beyond the coming decade as you know, the fiscal outlook worsens as the aging of the population and the rising costs for health care was significant and increasing pressure on the budget under current law. when -- issued his long-term outlook in june debt held by the

public was projected to reach 84% of gdp in 2035 under current law and about 190% of gdp under policies that more closely resemble current policies. although new long-term projections will differ because we would incorporate the latest 10 year projections, the amount of agro borrowing that would be necessary under current policies would be clearly unsustainable. in some the federal budget quickly heading into the territory that is unfamiliar to the united states and to most other developed countries as well. as this committee considers its charge to recommend policies that would reduce future budget deficits, its key choices fall into three broad categories listed on the slide. how much deficit reduction should be accomplished, how quickly should deficit reduction be implemented, what form should deficit reduction take? let me take up these questions briefly interned.

first, regarding the amount of deficit reduction, there is no commonly agreed-upon level of federal debt that is sustainable or optimal. under cbo's current baseline debt held by the public is projected to fall from 67% of gdp this year to 61% in 2021. however stabilizing the dead at that level would still leave it larger than in any year between 1953 and 2009. while it may be determined that it may be reduced to lower than those shown in the baseline and closer to those we have experienced in the past, that would reduce the burden of debt on the economy, relieve some of the long-term pressures on the budget, diminish the risk of a fiscal crisis, and enhance the governments flexibility to respond to unanticipated development. of course it would also require lower turner amounts of deficit reduction. for them or lawmakers might decide that some of the current

policies scheduled to expire under current law should be continued. in that case achieving a particular level of debts could require much larger amounts of deficit reduction from other policies. for example, if most of the provisions in the 2010 tax act were extended the amt was indexed for inflation and medicare's payment rates for physicians were held constant, then reducing debt in 2021 of 61% of gdp under current law would require the changes in policies to reduce deficits over the next 10 years by a total of $6.2 trillion rather than the $1.2 trillion needed on the committee to avoid that budget cut. in 2021 alone, the gap between federal revenues and spending of those policies were continued and no other budgetary changes were made, as shown by the right pair of bars in the figure, is projected to be 4.7% of gdp. putting data on a downward

trajectory relative to gdp in that year would require a much smaller deficit. reaching that objective from that starting point would require reduction in the deficit of about 2.5% of gdp or $600 billion in that year alone. the second set of choices involves deficit reduction which involves typical trade-off summarized in the slide. and hand cutting spending or increasing taxes slowly would lead to a greater accumulation of government debt and might raise doubts about whether the longer-term deficit reductions would ultimately take affect. on the other hand implementing spending cuts or tax increases abruptly would give families, businesses and state and local government a little time to plan and adjust. in addition and particularly important given the current state of economy and made it spending cuts or tax increases would represent an added drag on

the weak economic expansion. however, credible steps to narrow budgets over the narrow term would support output and employment in the next two years by holding down interest rates and reducing uncertainty and thereby enhancing confidence on businesses and consumers. therefore, the near-term economic effects of deficit reduction would depend on the balance of terrain changes in spending and taxes that take effect quickly and those that take affect slowly. as shown on the snacks like credible policy changes that would substantially reduce deficits later in the coming decade and beyond without immediate spending cuts or tax increases would both support the economic expansion in the next few years and strengthen the economy over the longer-term. moreover there is no inherent contradiction to train using fiscal policy to support the economy today or the unemployment rate is high in many factories and offices are

underused and imposing fiscal restraint several years from now on output and unemployment will probably be close to their potential. if policymakers wanted to achieve both the shirt term economic boost and longer-term fiscal sustainability, the combination of policy that would be most effective according to our analysis would be changes in taxes and spending that would widen the deficit today but narrow it later in the decade. such an approach would work best if the future policy changes were sufficiently specific and enacted into law and widely supported so observers believe the future restraint would truly take affect. the third set of choices involves the composition of deficit reduction. federal spending and revenue affects the total amount and types of output produced, the distribution of that output among various segments of society and people's well-being and a variety of ways. in considering the challenge of putting fiscal policy on a sustainable path, many of the

observers have wondered whether it is possible to return to previous policies regarding federal spending and revenues. unfortunately they have passed combination of policies cannot be repeated when it comes to the federal budget. the aging of the population and the rising costs for health care have changed the backdrop for budget decisions in a fundamental way. under current law spending on social security and medicare and other major health care programs the darkest line in the figure, is projected to reach about 12% of gdp in 2021, compared with an average of about 7% during the past 40 years. and increase worth 5% of gdp. most of that spending goes to benefits for people over age 65 with smaller shares for the blind and disabled people and for nonelderly able-bodied people. in stark contrast under current law all spending apart from social security and the major health care programs and

interest payments on the debt is projected to decline noticeably as a share of the economy. that broad collection programs includes defense, the largest single piece, supplemental nutrition assistance program, formerly known as food stamps, unemployment compensation, veterans benefits, federal civilian and military retirement benefits, transportation, health research, education and training and other programs. that whole collection of programs has encourage spending averaging 11.5% of gdp during the past 40 years. with expecting an proven in the economy of any caps on discretionary spending, and our projection by 2021 to less than a percent of gdp. the lowest share in more than 40 years. under current law in our baseline projections. putting those pieces together including interest payments, between 1971 and 2010 as shown by the bars in the figure,

federal spending averaged about 21% of gdp. under current law for 2021, as shown by the right pair of bars, cbo projected to grow to about 23% of gdp. alternatively if the laws governing social security and a major health care programs were unchanged and all of the programs were operated in line with their average relationship to the size of the economy during the past 40 years, federal spending would be much higher in 2021, around 20% of gdp. that amount exceeds the 40 year average for revenue as a share of gdp by 10 percentage points. in conclusion, given the aging of the population and rising costs for health care, attaining a sustainable federal budget will require the united states to deviate from the policies of the past 40 years in at least one of the following ways. raise federal revenue, significantly above their

average share of gdp, make major changes in the source of benefits provided for americans when they become older, or substantially reduce the role of the rest of federal government relative to the size of the economy. my colleagues and i had cbo stand ready to provide analysis and information that can help you in making this important choice. thank you and i'm happy to take your questions. >> thank you very much dr. elmendorf. as we begin the work that has been outlined for us as a committee under the budget control act it has been helpful for us to have a clear understanding of the scope of the problem and you lay that out clearly for us. i think we all agree this task is pretty enormous and we have to come together around a balanced approach that addresses our fiscal situation but also focuses on making sure that we remain competitive and look at our long-term growth. so i wanted to start by just asking you to spend a little bit on what you were just talking

about and talk to us about what we should consider in weighing the trade off between helping our economy in the short term to help create growth and not causing significant harm in the long term. >> in our judgment, and this is consistent with the consensus of the professional opinion, cuts in spending or increases in taxes at a moment when a lot of unused resources in the economy, unemployed workers, empty homes, unused factories and offices, and when monetary policy is finding it difficult to provide further support for economic activity because the federal budget is already close to oh, under those conditions, cuts in spending and increases in taxes are -- cuts in spending and increases in taxes will tend to slow the economic recovery. they will tend to reduce the level of the output of employment relative to what it would otherwise be.

at the same time, this is also quite consistent with the consensus professional opinion, overtime is our economy moves back to work with central output, and of those unused resources become use to get under those sorts of economic conditions, cuts in spending or increases in taxes they reduce outside the budget deficit are good for the economy both for output and income. it may seem like a paradox but is it really just reflecting the view that the effect of federal fiscal policy on the economy depends on economic conditions and on the ability of the monetary policy? that is why in our judgment and also we have presented to congress on a number of occasions in the past few years to provide the greatest boost to economic activity now and over the median one and long one the combination of fiscal policies that might be most effective would be a policy that cuts

taxes or increases spending in the near term, but over the medium and longer term move in the opposite direction and cut spending or raise taxes. >> thank you. dr. elmendorf come as you know several bipartisan groups have released in the last nine months recommendations for reigning in our debt that it -- deficit and stemming the rights of federal debt. all of them came with a balanced approach and i am concerned that congress has not yet included revenues or entitlements as we have focused only so far in discretionary spending cuts and caps. when i think we need to be looking at allen's approaches. summit made it clear that they want entitlement across the table and others have made it clear they want revenues off the table. unfortunately that leaves only a relatively, very small amount of discretionary and mandatory spending that member so far have been willing to focus on. would you agree that while cuts and caps within the budget

control act can help somewhat with the long term, what we really need is a comprehensive approach that does address both revenue and mandatory programs? >> senator, as a matter of arithmetic, there are a lot of different tasks to reducing budget deficits and it is not cbo's role to make recommendations among those alternative paths. i think the crucial.though is that the more large pieces of the puzzle one takes off the table, then the greater the changes will need to be in the remaining pieces. now you can see this very clearly in this picture for 2021. this picture shows under current law the revenue being 21% of gdp. if one instead wants to -- >> we can hardly say. >> this is figure 14 in the

written testimony if you have that in front of you. exhibit 14. figure 14 in the written testimony. the left-hand set of bars shows the average is averages over the last 40 years. the far left bar is revenue, revenues averaged 18% of gdp. been the right hand bar shows the major pieces of spending. the bottom chunk is social security, and major health care programs. >> page 42. >> the left-hand piece as i said as revenues. the average 18% of gdp. the right hand bar shows spending. social security and the major health care programs like medicare, medicaid now chip, and the future including subsidies

to provide new insurance exchanges. in the past that is averaged about 7% of gdp. all other non-interest spending, they're mandatory spending, defense spending, its nondefense discretionary spending, is averaged 11.5% of gdp. interest payments of averaged 2.2.25% of gdp. for 2021 under current law revenues would rise to be about 21% of gdp. social security and the major health care programs would be a little over 12% of gdp. that is 5% of gdp more than the average for the past 40 years. and that is the essence of the point that the aging of the population and rising costs of health care have change the backdrop of the decisions you and your colleagues make. if those policies continue -- those programs continue to operate in the way they operate in the past they will be much more expensive than they have

been in the past because there will be more people collecting benefits in each person will be collecting more in benefits. and that is the crucial driver of the future budget trajectory relative to what we have seen in the past. the other category, other noninterest bending you can see is already much smaller and 2021 under current law and our projections than it has been historical he. that is a combination of improvement in economy which we think will reduce the number of people on food stamps and collecting unemployment insurance and so on but also discretionary spending cap that reduces both defense spending and nondefense discretionary spending in real terms. thus reducing them fairly sharply as the shares of gdp. >> dr. elmendorf i'm out of time. as chair i'm trying to keep everybody to that but i appreciate that response and i want to turn it over to my cochair. >> thank you madam cochair and

dr. elmendorf we will continue on this line of questioning. is it possible to pull up your figure 12 from your testimony, if somebody could help me with that? >> figure 12. page 39 of your testimony i believe it is entitled, figure 12. as i understand that this chart is a chart of historic and projected growth for social security, medicare and other major health care programs. you wouldn't happen to have bess chart plotted against growth in gdp, would you? >> these are shares of gdp. these are spending on these programs expressed as a percentage of gdp. >> okay, but historic average post-world war ii gdp has averaged what? roughly 3% annual economic growth? >> i think that is about right congressman. i don't know for sure.

>> on your figure 14, social security and health care programs of averaged 7.2% of gdp. current logged going to do 12.2% of gdp in just 10 years, so from 7.2 to 12.2, not quite double but certainly that could be described as explosive growth, could it not? >> very rapid congressman, yes. >> we won't parse terms. as i'm looking at some of your cbo data just do the last 10 years, apparently social security is groaned at an average of 5.8% and medicare 9.1%, medicaid 8.8% in the last decade. and again, we now have the revised gdp growth outlook coming out of your august revision of your baseline, so is it a fair assessment that we

have social security and medicare and other health care programs that are potentially growing to win three times the rate of growth in our economy? >> they grow much faster in the past and our projections are for them to continue to outpace economic growth. of course the exact amount is uncertain, but the gap in the growth that we have seen historically has been very large, as you said. >> now, senator toomey certainly has talked about the current law face line and although an important exercise is certainly not dispositive to the task in front of us, but under a current law baseline, medicare physicians are due to take potential a 30% pay cut next year, correct? >> yes, that is right. >> does cbo -- i believe recently you testified that cbo did not have a model to really

impact, to show the impact of such a cut on health care delivery. is that correct? is cbo developing a model or is that the on the scope of what you do? >> it is in a long-term plan, congressman. we and others have raised concern that lower growth payments relative to the private sector could affect the access to care and quality of care received by the beneficiaries but we do not have a model and are not about in the near term to have a model that would enable us to make any more specific rejections on those lines. >> what i'm trying to get out is clearly, and again i quote a president who i don't often in our last organizational meeting where he said quote the major driver of our long-term liability as everybody here knows his medicare and medicaid and our health care spending. nothing comes close, and i take it you would agree with that

assessment as well. >> yes, that's right. >> but i'm also trying to get to the qualitative aspect of this too in our current system and you say cbo is developing a model. i know that actuaries have said, as essentially, that under the current baseline, that medicare beneficiaries would almost certainly face increasingly severe problems with access to care. that is the medicare actuaries, august of 2010. the medicare trustees 2011 report talking about the growing insolvency quote in a fishery access to health care services would be rapidly curtailed. the president -- press administrative for centers of medicare and medicaid services has said the decision is not whether or not we will ration

care. the decision is whether we will ration with our eyes open so to some extent dr. elmendorf if cbo doesn't have a model where looking at not just programs that are driving the insolvency of our country but in many respects reform is also shortchanging the beneficiaries as well. would you agree with that assessment or again do you have your model? >> i think i'll i can say congressman, the extent of the pressure on providers of care may depend a lot on the time horizon of which one looks. when the actuaries make rejections for 75 years into the future, they have shown pictures that i've seen in testimony about the relative payment rates to providers, many decades into the future. barrett changes for the coming decade that might affect that policy as i've said that would be much less severe and those effects than the same policies

with the remainder of the 75 year period. so, but beyond that, we just don't have a way of trying to quantify for you the extent of the impact of beneficiaries. >> apparently the trustees and cms so far in attempt to lead by example and follow the lead of my cochair and i see my time is done now. >> representative becerra. >> thank you very much for your testimony, and you focused quite a bit of your time on what is coming up which if we are not careful could he -- but we are dealing right now with a 14 trillion-dollar national debt plus 14 trillion-dollar plus national debt and fairly massive deficits today and we have been charged to come up with savings from these current and past

deficits of at least $1.5 trillion, so let me ask that if you charge that i have. the first chart actually is a chart of cbo's work in 2001 that i would like to have raised. it is called changes in cbo baseline projections of the january 2001, and what i would like to do in that chart if we could give that up, just point out what was being projected by your office back in 2001? and then analyze, and they think all of my colleagues have copies of those charts with them, analyze that. it is very difficult to make out these tables and make much sense of them, but for those who can make out the line, the numbers on those charts, the very top line, the total surplus projected -- go. >> could you tell us what page that is on? >> should be a separate package that you got. a separate handout, that's

great. >> this is a table that cbo has published on their web site but not included in the testimony that i have brought. i only owe make a couple of assertions. >> the first one is the top line there, total surplus projected january of 2001 projected that after from 2001 to 2011 you totaled it up. we have surpluses of $5,600,000,000,000. .. >> by the second year, by 2002,

we were already beginning to run deficits, not surpluses. so we knew well in advance of the year 2011 that the federal government was beginning to run deficits, in fact, record deficits, that could ultimately harm our economy. i have another chart that uses the data from the cbo that we just discussed and tries to put it in a little easier form to analyze. and the pew center did this chart taking the data from the congressional budget office to try to segment out where that change from surplus to deficit went, all those dollars that were spent, all the revenue through the tax code that was, where did it go? and, obviously, the biggest piece of the pie on the right technical and economic, that's what i think you described earlier as shortfall in nation's

output. in other words, all the things that have caused us to have less output than we expected, the recession and so forth, probably constitutes the biggest portion of that. after that the second biggest slice of the pie that drove our deficits you can see are the tax cuts in 2001 and 2002, the bush tax cuts. actually, you could put together our defense costs which are here in the very bottom operations in iraq and afghanistan at 10% and other defense spending a little bit further up to the left at 5 percent, and you have 15% of the pie due to defense spending and so on. and interestingly enough, increase in net interest, money we pay just on the interest we owe on that national debt, is one of the largest items as well. so nothing productive comes of making those payments. i raise all that because as we talk about where we should target our solutions, we should

know what has driven us most toward these large annual deficits that now give us this over $14 trillion national debt. and the final chart that i wanted to raise because it also points out the actual discretionary spending pot of the pie which you spent some time on -- not the tax expenditures, not the spending we do through the tax code which is the largest portion, but through the allocations we make every year through the appropriations process. hard to tell again unless you have a chart in your hand, but the largest item shows the change in spending from 2001 to 2010, the greatest percentage of that added spending in those ten years was in the department of defense. much of it because of the war in iraq and the war in afghanistan, but fully two-thirds of the costs or the extra spending that was done from 2001 to now, 2010,

has come in spending done in the department of defense. you could compare that to, say, the veterans affairs department. the share of the new spending over that ten-year period that went to veterans was about 5%. education, you can see further down the list, the new spending beyond what was expected in 2001, it's about 1%. and i think that's important to sort of gauge that. and as much as i hope we have a chance to get into some of this and talk about where we have to go, i think it's important to know where we're coming from. and so i thank you for being here to help us gauge those responses into the future. yield back. >> [inaudible] >> thank you, madam chairman. rather than make a speech which would probably have the effect of dividing us if i responded to my colleague, i'd like to focus on areas where we might find agreement. going back to my opening statement. let me begin with a quotation from the president. in march of last year he said, and i quote, it's estimated that

improper payments cost taxpayers almost $100 billion last year alone. if we created a department of improper payments, it would actually be one of the biggest departments in our government. well, this committee can address the question of improper payments, but i think we're going to need cbo's help in order to do that. for 2010 gao estimated total improper payments at over $125 billion, and according to its report medicare, medicaid and unemployment insurance ranks one, two and three in total improper payments. their figures were slightly below those i quoted earlier, but the bottom line is that if you had $100 billion as the president says in overpayments each year over a decade, that's a trillion dollars, more than a trillion dollars when you compound it. it's an area we need to address. and since it doesn't involve cuts in benefits or fundamental reform of programs which i happen to think we should do, but i'm trying to stay on areas where we can reach bipartisan

consensus here, we're going to need help in scoring how to approach this. my first question, i guess, i should ask is do you agree whether it's with these specific numbers or not with the president's contention let's just say that at least there's a significant amount of inappropriate payment for some of the programs that i've mentioned? >> so i agree with that. i'd offer two quick comments. one is there's a difference, of course, between improper payments and fraud. fraud is a much nay roarer -- narrower category. some improper payments people didn't put social security numbers into forms where they should have and so on, and if forms were filled out properly, the payments might still be made. people should understand when they see some of these largest of numbers, that's a much broader sort of situations than the sort of thing we read in prosecutions in the newspaper. second point to make, of course, is not just whether the

inproperness or fraud is out there, but what policy levers the government has to go after that. of course, these programs are not trying to encourage improper payments or fraud. there is an active effort to crack down on fraud, and you do see stories in the newspaper about prosecutions. so the question that we can help the committee work on is what policy levers are available that can try to wring some of that money out of the system. >> exactly so. and that's where we need your advice. and the comment about fraud is, obviously, correct. i think fraud is not the most significant part of these overpayments, but it's important. one question is would we benefit in a cost benefit analysis by devoting more resources to try to root that out? we should deal with that. another would deal with whether or not hire -- hiring additional people to check before the check goes out rather than audit after

we find the problem would be beneficial. the prompt payment requirements represent part of the challenge that we have here as i understand it. so, now, is it true that cbo has -- well, let me just -- has cbo itself done an analysis of these numbers? >> um, i don't have numbers comparable to the ones you quoted to use, but we do spend a fair amount of time, um, working with members of congress, working with the people at cms and so on to think about ways that policy bees could be changed -- policies could be changed that would try to reduce the level of those payments. and as you know, the budget control act, in fact, included provisions for raising the caps in the discretionary spending to cover some of those increased efforts that you described. >> right. >> and we included in the our estimate the savings that we thought would accrue in terms of reduced payments. >> quell, just to summarize this, will you work with us to help identify the potential

policy that could result in, on a cost benefit analysis significant savings if we were to implement it? >> yes, we certainly will. but can i also caution, i'm not against working with you on any issue you want us to work with you on, but there is no evidence that this sort of effort can represent a large share of the $1.2 trillion or $1.5 trillion or the larger number that some of you have discussed as being the objective in savings for this committee. >> well, if gao report is right, if what the president said is right, if there's over $100 billion in one year alone, then even if we get 25% of that, it's a significant amount of money. it's at least something that i think on a bipartisan basis we can agree on because it doesn't involve fundamental reform of the program, it seems to me. now, there's a second area i wanted to raise here, too, and that's asset sales. there are a lot of different reports, crs, for example, in 2009 said the government held well over 10,000 unneeded

buildings spending $134 million just to maintain them. the president's budget assumed savings by selling property and so on. one of the things we'd also like to ask you to do, and i know you've scored the president's proposal, but that was a proposal that relied on incentives to sell property. if we simply mandated the sale of property, i think we would need your advice about how to structure that so that we would get the best return for the sales that we would want to accomplish. will you work with us on that potential area of -- that's revenue rather than savings, but it all amounts to the same thing in terms of helping us with our problem. >> yes, senator, of course we will work with you. i will caution again, we've done a fair amount of work, we've given testimony on this topic, and there is no evidence that the amount of savings that could be -- or extra revenue that could be reaped by the government through efforts in this direction could represent any substantial share of numbers that begin with t for trillion.

um, the base closure reea linement -- realignment effort has not yielded significant amounts of money for the goth in themes -- in terms of selling the property, but not much has been sold. and if one, when one sees these numbers of thousands of government properties not being used, many of them by number are shacks in the middle of nowhere that don't have market value. and the properties that have the most value there's been some back and forth i've seen in the newspapers about properties in los angeles, then the people who live around it are fighting very hard to prevent the federal government from selling it not to discourage you from passing law toss the contrary, but what happens are the things that are most valuable is that the people who are there are using it or potentially using it or wants the area to stay that way tend to push back very hard. and as history suggests, very little money is actually reaped, but we are certainly ready to work with you on policies in

that direction. >> senator bachus. >> thank you, senator murray. um, again, i want to follow up with senator kyl's questions. i think we should explore this much more vigorously than we have in the past, and i think he and i and others will work with you to try to find some solutions here. on the version i have of the statement, it's page 5, you're talking about the timing of the deficit reduction. and you state that according to analysis, essentially, credible policy would substantially reduce deficits later in the decade in the longer term, cuts in spending would both support economic expansion in the next few years, my basic question is could you give us some examples of how we can achieve both goals, namely jobs and deficit reduction? that's really one of the key

questions here is how do we do this? there are probably several ways. you mentioned the deficit reduction has to be the longer term credible, um, we can't do something that's not credible. it's got to work, but we've got to find a balance. and i wonder if you could give us a couple for examples on how we accomplish that. >> well, there are a number of possibilities, senator. we released a report in january of 2010 that analyzed a set of alternative proposals for purring job growth. um, we looked at increased transfer payments, we looked at cuts in all sorts of different types of taxes, we looked at other types of government spending increases, and i don't want to be appearing to steer the committee in any particular direction among those choices because the choices involve not just the effects on the economy, and we did estimate

quantitatively the impact on output unemployment. they also involve choices about what you want the government to do, what sorts of activities it should be engaged in, what the role of the government should be relative to the private sector. so senate choices in making, um, stimulative policy in addition to doing deficit reduction policy that are far beyond our technical role, um, i think the crucial, i think the crucial points though are that cuts in taxes or increases in spending in the near term will spur output unemployment in the near term. but just by themselves they will reduce output incomes later on because of the extra debt that's accumlated. >> right. >> one wants to, also, improve the medium and longer-term outlook for the economy, then one needs to have deficit reduction that offsets the extra costs in the near term and reduce the deficit further relative to the unsustainable path of current policy. >> and i appreciate that.

the fact, i think i have your chart, your title that's titled estimated effects of policy options on output and employment, and i applaud you for it because in that chart you, for example, with respect to jobs as the cumulative effects on employment, in 2010-'11, you have highs and lows that you rate. this creates more jobs than that, so you give us a sense of, for example, unemployed is very high in terms of its economic effect in helping people without jobs but also with respect to the economy and gdp. so i appreciate that, and i'll work with you on ways to try to find ways to address that. i'd like to turn to another question, and that's -- i don't want to steal from my good friend, rob portman, he can follow up a lot more, but it's sort of the baseline question. and, um, you say in your -- that, um, we can get to 61% of

gdp, um, in 2021 under current law, but. i think most of us here in this room don't think that current law is very realistic. there's going to be changes, and you list some of the changes, um, in your statement, namely the tax cuts, 2010 tax cuts, amt, inflation, medicare payment rates, so forth. and if we were to assume that those provisions are going to be extended, there's something called current policy, that instead of trying to get at one point $2 trillion as to 6 is % of g, the p in -- gdp in 2021, the figure i have is -- >> yes, that's right. the cost amounts to about including the interest costs that would result amounts to

about $5 trillion over the coming decade. so that, the choice of the congress about those policies, um, is much larger an impact potentially than the stated target deficit reduction of this committee. >> all right. so let's say we want to reduce the deficit by, what, 6.2, five plus 1.2 is 6.2, for example. >> okay. >> what would the composition of that reduction be if we reduced the deficit somewhat parallel n tandem or proportionate to the causes of the original five trillion? >> well, most of the extra $5 trillion under your scenario comes from a reduction in taxes, so the if one wanted to you have set that, that's what you're suggesting, one would have to raise tax revenue through some other channel. i mean, i think i understand the

purpose for this hearing -- talking about the history of debt and how we got here, and i think you're extending that a bit into the future looking at what changes would get us in a certain place. but i think really the fundamental question for you is not how we got here, but where you want the country to go. what role do you and your colleagues want the government to play in the economy and the society? >> that's right. >> and if you want a role that has benefit programs for older americans like the ones we've had in the past and operates the rest of the government like the ones we've had in the past, then more tax revenue is needed than under current tax rates. on the other hand, if one wants those tax rates, then one has to make very significant changes in spending programs for older americans or other aspects of how the federal government -- >> that's exactly right. i don't want to take time here, but it's really the question, where do you want to go? and do we want to have amt index, for example, do we want to have sgr, the payment rate,

do we want to increase taxes for middle income americans beginning 2013 or not? i mean, these are basic questions we're going to have to ask ourselves, and they all have consequences. and the consequences if we want to do all that is what we agreed on. but, in addition we have the president who's going to have us do this jobs plan. >> yes, senator. >> representative upton. >> well, thank you again, dr. elmendorf. i want to underscore what our friend, mr. kyl, said about fraud and abuse. i mean, there's nothing more irritating to any of us here or certainly our constituents and any help you could give us on that i know would be low-hanging fruit in a major way for us to include as part of the package. let me ask just an early question as to timing of this whole event. we're tasked to have a vote prior to november 23rd.

what is, what is the time, i mean, other than as soon as possible, what is the realistic date that, truly, we have to have our documentation submitted to you? i know sometimes a lot of our members are frustrated trying to get a cbo score. i know that there's not a higher priority for you all to do this, but what is really the date that you're going to want the material so that we can complete the work by the statute? >> as you know, congressman, from your work on the energy and commerce committee there's often a process -- >> enter the queue of ways and means. [laughter] >> as an iterative process in which we often see preliminary versions of ideas and offer some preliminary feedback, but if this committee intends to write legislation that would change entitlement programs in specific ways, that process usually takes weeks of drafting to make sure

that the letters of the law that you are writing accomplish the policy objectives that you are setting out to accomplish. and as part of that drafting process, it's our estimating, ultimately, the effects of the letter of the law as it's being written. so it'll take us at least a few weeks. i have a terrific set of colleagues who are incredibly talented and work unbelievably hard, but we need to do our jobs right, and that means not just pulling numbers out of the air. so we've said in discussions with some of the staff on the committee that with all respect your decisions really need to be mostly made by the beginning of november if you want to have real legislation and a cost estimate from the cbo to go with that before you go to thanksgiving. >> i want to get a better understanding of some of the estimates and the cost impact of the affordable care act. as we know, the bill increased taxes on some of our nation's most innovative job creators, reduced medicare spending

significantly. the tax increases in medicare cuts were traded to create three new entitlement programs, and according to our staff's projections which are based on your most recent baseline, those new entitlement programs will cost the nation nearly $2 trillion over the first ten years from '14 to 2023. so question one, have you all estimated the full ten-year costs for each of these entitlement programs; medicaid, health coverage subsidies and the creation of the class act for the '14-'23 period when they're fully implemented? >> no, congressman, we have not. >> do you anticipate doing that at all? >> no. as you know, we produced estimates for the ten-year period that was under consideration when the law was being considered. and then we provided a rougher

sense of what we thought would happen in the second decade from that point in time. um, as the time moves forward and the budget window moves out, we will ultimately end up with a ten-year budget window from 2014 to 2023. but even then it's not obvious we'll have an estimate of the effects of that legislation by itself. some pieces of that legislation create new institutions, new flows of money that didn't exist before, insurance exchanges and subsidies. and those lines about a cost estimate will, in some sense, become real flows of money at that point in time. but much else may change in existing programs and payments through medicare and so on. and we will never know for sure what money actually is flowing differently because of that piece of legislation. we'll see flows for certain purposes through certain accounts, but isolating thefects of that legislation won't really be possible. the prescription drug benefit is one of the few pieces of legislation where we can look back at how we did, um, in a

sense because much of that legislation -- not all, but much of it, the big part -- created a whole new theme of money. so we can see the difference. but for most legislation that the congress passes, one can never really go back and tell. that's the risk of the table that we gave to congressman becerra and others, one can never tell what happens. so the legislation will be like that at some point. >> is there a way that you would take the percentage of gdp and try to match that up with the out years and look at nine, ten, eleven, twelve years out? is that a thought that you might take up? >> well, so we did -- we can talk with you further, congressman. we did do an estimate of the net effect of the law, the share of gdp, um, over the second ten years, and we talked in our estimates at the time about some of the biggest pieces of the legislation, things that were growing rapidly, more slowly or so on. that sort of calculation is not really possible to do on the level of little, specific

provisions. um, it's just too, um, just too broad a brush we need to paint with given the uncertainty involved. um, but if there are other ways of looking at those pieces that would be helpful to you, we're happy to try to do that. i think we made it very clear, i hope no one's confused about this, that legislation created significant new entitlements that raise federal outlays. it also made other reductions in outlays and raised revenues in ways that on balance we think and still think reduce budget deficits. but that was a net effect of very large changes with different signs. and that increases the uncertainty surrounding those estimates of the net effects. >> thank you. >> thank you. representative clyburn. >> thank you very much, madam chair. dr. elmendorf, since we've been sitting here have we received

notice that the nation's poverty rate has increased to 15.1%, up almost a full percentage point. finish um, now back in the i think it was in september 2010 in testimony before the senate budget committee, you said this: regarding structural changes, the end of the housing boom and the recession have all induced a reshuffling of jobs among businesses, occupations, industries and geographical areas. those developments suggest the gains in employment in the next several years will rely more than usual on the creation of new jobs with different businesses in different industries and locations and require workers with different

skills. do you feel, still feel that to be true? >> yes, we do, congressman. we think that much of extra amount of unemployment we're seeing now is what economists would call a cyclical response to a weakness in the demands for goods and services. but some of the extra unemployment we see now is more what economists call a structural problem which involves, importantly, the mismatches that we discussed in the passage you read, also relates to unemployment insurance benefits and other factors in the economy. we made a rough attempt to quantify those pieces in our august update, but the upshot of that is to say that we think there are, a current piece of unemployment that relates to this kind of structural mismatch that would, makes it harder, um, for those to go back to -- for those people to go back to work because it's not so much going back as going on to something

else. >> then that means in your view is there's not much that can be done in the short term to attack this? >> i wouldn't quite say that. it's challenging. i think what i would say is the cyclical part of employment, the part that responds to the weakness in demands for goods and services can be addressed through aggregate economic policies. the people who are unemployed for structural reasons in a sense because of the sort of thing that they knew how to do and the place that they live isn't being done there or anywhere anymore. that isn't amenable to broad macroeconomic policy. it might be responsive to certain types of more focused policies. training programs, for example. i think the broad brush summary of training programs is that it's hard to make them work. um, but not impossible. i don't want to suggest that. but i think it's just a

different sort of policy that would need to be considered in order to help some of those people find new jobs, to help other people create jobs that those people would be able to do. >> well, just let me say to be certain i am just as concerned as my good friend senator kyl is about fraud and abuse. i i want to cull that out of the system as well as we possibly can. the problem i've got, though, is that with these kinds of numbers and with what you have just laid out, it means that those in are increasing rapidly. and the question then becomes is if you look at the median family household income, decline in 2.3%, that means that

irrespective of what may be happening with people who may not be deserving of the assistance, there are increases occurring among the needy very rapidly. .. if more people are unemployed, so some of the automatic features of entitlement programs end up helping those people, but i don't want to suggest that has inoculated them against overall

problems that they face. >> that means, the burden of doing smart cuts is greater than what it may appear just looking at the numbers. that means we really need to look into all of these programs in c. in fact where cuts are to be made rather than just dealing with the numbers? >> yes. >> thank you very much. i yield back. >> senator portman. >> thank you. building on what my colleague congressman clyburn just said, and what cochair hensarling talked about earlier in terms of the deficit and debt on the come to me and dr. elmendorf have you got the reaction to the reinhart studied which is 90% of gross debt which we are already, it would have an impact on gdp and

therefore jobs on the kinds of issues that congressman clyburn talked about? >> certainly familiar with that work, senator reinhart is a member of our -- i think the thing to note about the study first of all it was said that they are looking at gross debt so those are larger numbers than you will see from me. we focus on debt held by the public. the thing to say is they divided the world into buckets in a and a sense of different levels of debt. that doesn't prove that there is some particular tipping point at 90%. it says that above -- the evidence shows that above that level of the economy tends not to do well. we have said in an issue last year about the risk of a fiscal crisis and other things we have written but we don't think it is possible to identify a particular tipping point that there is no doubt is debt rises risks of fiscal crises arise. the federal government loses the flexibility to respond to

unexpected developments are problems because of this looming debt, and we are as i said moving into territory that is unfamiliar to most developed countries for most of the last half-century. >> as you look around the world and this recent report by alberto of harvard university showing the most pro-growth deficit reduction took place in countries relied chiefly on austerity programs, spending cuts and nations that relied on tax increases were less successful in reducing the deficit and its slower economic growth. heavy look at some of these countries that have gone through the same process we are going through now and what comment can you give us today on what we can learn from the experiences in those countries? maybe if you know are besser besser alejandra's study? >> i do know his work. there have been a number of studies, as you know looking at the international experience of countries that have faced fiscal

crises and have undertaken austerity programs. the imf look that's a very similar set of data to the work of alberto and came to a different conclusion in fact. their conclusion was that in countries that really set out bit results tended not to be good in the short-term. the principle lesson of looking at countries like greece and others it is a terrible situation to end up and where one has to make drastic abrupt changes in policy. but if you look at greece or ireland or the experience in the u.k. which is not in such a crisis but has made a very determined pivoted in its policy, those economies are not doing very well right now. and, i think they felt they had no alternative given to what they have gotten to give in to a point where people were not lending the government money anymore or about to stop lending the money and the government had

to make drastic changes. but, that is not a situation that we would like to find ourselves in as a country. >> it appears as though we are heading there as we look at the current policy baseline and some of the more realistic substances that my colleague senator baucus talked about. if you look at your chart with regard to baselines, you say that we have about a $3.5 trillion increase under the current law baseline but under current policy a half trillion i would add tax extenders like the tax credit and others and possibly up to 9.3 trillion so again the 1.5 trillion is relatively small part of the problem. it is about 17.5% of your 8.5 chilean number. so i do think that as we look at our work we are going to need your help on looking at a more realistic baseline. we are making very difficult choices on things like alternative minimum tax, as

t.r., ending the ui extension and payroll tax and so on. in terms of what drives that, your figure 14 i think is very instructive which talks about major health care programs. earlier there was discussion about president obama's comments the major driver of our long-term liabilities everybody knows medicare and medicaid and health care spending nothing comes close. assuming you agree with that, which i assume you do -- what do you think ought to be the primary focus of this committee? >> again senator it is really not a place of me or cbo to offer recommendations of how to proceed but there is no doubt that the aspect of the budget that is starkly different in the future relative to what we have experienced in the past 40 years is spending on programs for older americans and spending on health care, and the reason those programs are so much were expensive in the future is partly due to changes in policy over time but most due to a

greatly increased number of older americans and higher costs for health care. as a matter of arithmetic it is possible to raise taxes or carve away at the rest of the government in a way that can support those programs and this forum for some time, but there should be no illusion about the magnitude of the changes required in other policies to accommodate that. if one really leaves those programs in place, then the fact under current law already the rest of government would be smaller relative to the size of economy in 2021 historically, and one would need to raise revenue substantially. this is 5% of gdp increase in the cost of social security and major health care programs in 2021 relative to the 40 year average. 5% of gdp is a very big number, and that is why i think many people think there should be changes in that part of the budget. >> so, the 22.7% of gdp spending

in that 2021 estimate under concurrent law and not even policy, is the major driver is social security and major health care programs. as compared to the historic average by 60 years of 20.8%. revenues dare go from 18% historic average up to 20.9%. my understanding is even under current policy, revenues go up above the 18% level, so the 9.3 trillion which i think is more realistic estimate includes a slight increase of revenues? >> a slight increase, yes that's correct. i am not sure exactly but yes. i would add one fact here. number of americans over the age of 65 will rise by about one third in the coming decade. one third more beneficiaries of social security and medicare a

decade from now, roughly than there are today. and on top of that with higher health care cost per person one can see why these programs in their current form are becoming much more expensive over time. >> senator kerry. >> thank you madam chairman. dr. elmendorf i want to try to move through a couple of things very quickly if we can. you said a moment ago that the aspect of the budget is starkly different is i think he said the number of older americans and the cost of health health care,t correct? >> yes, that's correct. >> those are the two things he said her starkly different about the aspect of the budget today. >> and in the future, even more so in the future. >> isn't it accurate that we have talents the budget i think since world war ii five times, and that each time we have talents the budget, revenues

have been somewhere between 19 and 21 plus percent of gdp? is that accurate? >> that sounds right, senator. i'm not sure exactly. >> assuming that is accurate, we are currently at 15%, 15.3 i think is your prediction for this year, of revenues to gdp, correct? >> yes, that's right. >> so is not fair to say that in fact there is an aspect about our budget today that is starkly different, which is the level of revenues relative to gdp? it is starkly different, is that? >> yes, that's right senator. >> it is starkly different and that it is well lower than the historical average of when we balanced the budget or not balance the budget? >> yes, that's right. >> so, let me ask you, given that reality, and given the reality that you and others i think last year the committee on fiscal future in the united states which is a joint effort

of the national academy of sciences and the national academy of public administration developed for budget scenarios. they have one budget scenario where you have nothing but cuts and another budget scenario where you had nothing but tax increase and then two in between. only be -- the only way they could keep the revenues of historical average and keep the spending at a decent level was basically through cuts. but, that doesn't get you where you need to go in terms of, so this historical average and not winding up with major, major cuts in terms of benefits of medicare or medicaid. so, if you want to avoid -- he made the statement to us a moment ago that we have to make a decision about what we want to do. most people have accepted that we don't want to have major reductions and we have performed, yes.

we need to do a better job of making it fiscally sound that i haven't heard anybody stand up on either side of the island say there ought to be huge cuts in benefits. if that is true, then onto we forced into a situation where we look somewhere near the historical norm with respect to the revenue to gdp? percentage? >> so, if one wants to leave spending on social security and a major health care program roughly in line with what would happen under our current law, then one needs to either further carve away at all the other functions of the government or one needs to raise revenues above their historical average share of gdp by a significant amount. want to do combinations of those. but, there is no way to simultaneously let social security and major health care

programs grove the way they would under current policies are even close to that and operate the rest of the federal government in line with its economy over the past 40 years and keep revenues the same share of gdp they have been on average in the past 40 years. the reason those things are inconsistent even though they worked in the past 40 years is because the number of people will be older in and the number who will be collecting health benefits will be so much larger. >> as i said, have to agree with that judgment you have made and i think it is a very important one with respect to how we approach this. i also want, we will obviously have some time to discuss the health health health care piece, but isn't it true that -- well they medicare access cost, how does that compare to the excess cost growth in overall health care spending over the next decade? i think in recent estimates, that you found that medicare in

the excess cost growth was actually lower than historical average now. isn't that true? >> yes, so excess cost growth meaning not necessarily excessive in a judgment till sense but just to faster growth in benefits per person and in the growth of gdp per person, that excess cost growth in medicare under current law is pretty close to zero for the coming decade. that will be a very sharp change on the experience of the past four years. >> so what do we attribute that significant reduction in the medicare growth to? >> so importantly to features of the law, like the cuts in payment rates to positions due to take effect at the end of this year and like a number of the other cuts in provider payments enacted and last year's major health legislation. >> so that has had a beneficial

impact in terms of restraining costs in medicare costs? >> yes, that's right. >> i will reserve my time. >> representative camp. >> thank you. director elmendorf, i am sure you remember last year he testified before the president's national commission on fiscal responsibility on the topic very similar to what you are covering today. it seems as if your presentation then said that in and now that we need to get control of the automatic spending increases that have been built into the government's budget. is that a fair statement of your testimony then and now? >> again, i think we said those pieces are growing very rapidly and to accommodate that as it stands would require very large changes in other aspects. >> those are the significant drivers of our current situation.

so what the programs in particular are at the core of cbo's projections for the long-term government spending? >> which programs are responsible for the largest increases in government spending >> if one looks at figure 12 from the written testimony on page 39 and coming up on the screen with those -- for those with very good eyesight, one can see this picture shows growth over the next decade and social security and medicare and other major health care programs. >> the other major health care programs include all of the health care act long-term care and other medicaid increases? >> the other major health care programs or medicaid, the children's health insurance program and subsidies through insurance exchanges and some relief of smaller spending. the long-term care entitlement, you recall actually raises money for the government in the first

decade of its life and i don't know if that has been fêted out here or not. i don't think so actually, congressman but one can see from this picture of the largest increase as a share of gdp over the coming decade among these three categories is the other major health care programs. followed by social security and medicare. and that is principally i think because of a great increase and the number of beneficiaries from the expansions enacted last year and continued sharp increases in costs for beneficiaries in those programs. >> in your prepared testimony before the presidents commission you also included a charge which, if we could pull that up now, and everyone has a copy of this chart at their desk in their packet, which showed real gdp per capita under different economic conditions. you will notice under the alternative fiscal scenario come the line stops between 2025 and 2030. can you explain that line stops with the economic growth collapses and that it simply

can't handle debt loads that high. is that an accurate statement of what you testified before the president presidents commission? >> yes, that's right. we have updated this picture in our long-term projections from this year, but similarly congressman, not a quite the same.. the amount of debt in the alternative scenario becomes so large that a model doesn't know what to do with it. i don't think the economy would actually get that far because the people will be looking ahead and for saying what is happening and i think in fact much more serious problems would come sooner than would showing these pictures. >> and i think you said this government debt has become so high you don't know what to do with it, because private investment ceases to function and the economy ceases to function under that scenario. is that correct? >> ceases to function at some point. again i think the freezing up would probably come sooner than what we show in those pictures because of an anticipation of that problem. >> i think that analysis really

does go a long with what other analysis have said of the country's debt-to-gdp ratio when it exceeds 90%. i'm talking total debt-to-gdp ratio, that it reduces economic growth as others have said in their time by about 1% at that level. >> yes, think the models we are using here are consistent with the consensus approach in estimating the sort of issue. >> am i correct to say that our total debt-to-gdp ratio is over 90% at this time? >> yes, think that's right congressman. >> and, what impact do you think these massive levels of debt relative to gdp have on the economy in general and specifically the prospects for job creation? >> the levels of debt are a burden on the economy. they reduce our output and our incomes relative to what we would enjoy if we had less borrowing and had done more

saving. >> this committee has been passed under the budget control act with finding 1.5 trillion up have visited reduction over a ten-year period. what is the size of the economy over the next 10 years? >> the gdp today is about $15 trillion. we think it grows over the course of the coming 10 years. if you have done that calculation congressman -- . >> just assuming over 10 years, 150 trillion we are talking about 1% of our economy are we not? in terms of rough numbers? the reason i want to point out those numbers, you mentioned the impact of us making decisions about spending that might have impact on the economy and i just want to put into perspective over the next 10 years these reductions that debt roughly represent about 1% of the economy. i'm talking very rough numbers. >> so, i think that sounds about

right congressman and i agree that the problem is very large by the incremental policy decisions that the congress normally makes but it should not be viewed as unsolvable. changes in policy can put us on a different path. >> in terms of outlay, think this amount over the next 10 years represents about 3% of our outlays, and i think senator portman mentioned as well. so i think we need to put into perspective while i am not underplaying how difficult this might be but in terms of impacting the economic trajectory of the united states economy, we are not over the next 10 year period insignificant percentages of either economy or outlays. most families and businesses have had to do with less than 3%, and i think it is something over a ten-year period. i just realized my time is expired. i do want to just ask you one

quick thing. we may come to agreement on impacts within the ten-year budget window but we may have decisions that are outside the ten-year budget window and i just wanted to ask if he would be willing to work with us to find ways to measure the impact of policies outside the traditional budget window and if you would commit to helping us do that? >> yes, absolutely congressman. >> thank you very much and i yelled back. >> representive van hollen. >> thank you. let me just start dr. elmendorf by thanking you for your testimony and just say and this goes for republicans and democrats alike. we are all entitled to our own opinions, but not to our own facts, and the last time that our budget was balanced was back in the eighth 2001/2002 time period and in fact during that

time revenues as a percent of gdp was 20.6% in the year 2019.5% in the year 2001. and the last time spending was 18% of gdp was about 1967, and it has risen since then, largely because we as a nation decided to make sure that older americans and their retirement had the health security they needed her go so it is important to keep those facts in mind as we go forward. now you posed a very fundamental question. and, let me ask you this. if we were to try and continue with current retirement and health care security programs in the future, we would need significant changes to revenue beyond current law, would we

not, in order to fund them and balance our budget assuming we kept the rest of government constant? >> yes, that's right congressman. >> and if we were to try to preserve those -- let me ask you this. if we were to continue current revenue policies, without any changes, it would require very deep cuts to those retirement and security programs, would it not come if we were to try and bring down the deficit? >> if you also maintain the rest of the government in accordance with this historical pattern, yes congressmen and as you pointed out in her testimony over the next 10 years as a percent of gdp that is going down. >> so that is the fundamental question and i think we recognize we have to deal with the out-year issues. we have a demographic challenge.

we have more and more people retiring but as you just pointed out, if we want to avoid huge cuts to medicare and to social security, we also have to deal with the revenue piece. in other words we have to increase revenues beyond current policy if we want to avoid very deep cut so i think it is important that we look at the revenue side of the equation right now and you presented that to us in your testimony. i think it is time for this committee to get real and recognize that yes there are spending issues especially in the out-years, but there is also a revenue issue. as you point out, under current law, the ten-year cumulative deficit is $3.4 trillion, correct? under current law? >> i think it is $3.5 trillion. >> $3.5 trillion as you point out on page 19 of your testimony, if we continue current tax policy and the

current physician payments under medicare, that will rise from $3.4 trillion to over $8.5 trillion. that is there in your testimony. now you mentioned those two factors together but i think it is important to point out that of that over $5 trillion, that huge bulk of it has to do with continuing current tax policy, does it not? >> yes. >> in fact by my calculation you get just under $4 trillion in revenue and if you add the debt service associated with that you are talking about $4.5 trillion of your $5 trillion dealing with current revenue policy, is that right? >> yes, that's right. >> so just to be clear if this committee were to adjourn today in the congress were to adjourn for the next 10 years and go away, we would actually achieve greater deficit reduction than if we went and took the simpson-bowles advice and went big, is that not right? in other words we get over it for trillion dollars over the

ten-year period even if we fixed, if we fixed the doctor physician reimbursement, right? >> so, let me make sure i have is right. to extend the expiring tax provisions, index and p. for inflation than that would halve the deficit i-4 $.5 trillion or so. that would be larger than the amount of saving. >> it is simple math, right? so, i think it is important as we look at this challenge to look at both sides of the equation bayer, and what we are talking about, just so we can translate this into what american people have experienced, what we would be talking about is essentially going back to the same tax rates and tax policy that was in effect during the clinton administration, period of time and 20 million jobs are created and the economy booming.

i'm not suggesting we go back to that reticular tax policy but if you look at simpson-bowles, compared to current law, they provide about a 2 trillion-dollar tax cut compared to current law. as opposed to 4 trillion. if you look at domenici they propose a 1 trillion-dollar tax cut compared to current law. so, if we are really going to address this challenge, let's recognize that if we don't deal with the revenue piece as dr. elmendorf said, you are talking about dramatic cuts to health and retirement security for american seniors. we have got to take a balanced approach. that is why the other bipartisan groups took that kind of approach. thank you madam chairwoman. >> senator to me. >> thank you madam chairman. since my colleagues have raised this issue i just want to touch on a couple of things that didn't quite make it into the

conversation so far. is the true that as recently as 2007 the current tax rate structure yielded revenue that was about 18.5% of gdp? >> i think that is right, senator, yeah. the current level is low because the economy is very weak. >> exactly in the main reason total revenue as a percentage of gdp is so much lower than historical levels is because we have an economy that is effectively in recession, very high in employment and very weak lack of growth, is in that right? >> yes, that's right. >> as recently as 2007 the deficit we had that year if i remember correctly, was less than 1.5% of gdp i believe and if we could get to the point where we consistently had deficits of 1.5% of gdp, then our debt as a percentage of our economy would clearly be declining and we would have to a very large extent, solve this solves this problem is not completely. >> that's right, yes, that's