help me, help me and all the other hand canceled my money, take your hands off of my safety net. is this cognitive dissidence or is it sensible in fact for people to have a sense of what the promises the government has made to be there for me when i retire but also want a space i can make my own personal investment decisions. this is the proper support from government. >> i'm not so sure that the results are as on the floor and conflicting and the study this morning there are copies out. i'm curious in contrast to your bleak somewhat bleak prescription for the future. in the study was the cross-section of all americans and 67% said that they feel like they have the sole response to

the for their financial security. now in contrast, and also acknowledging what you said, clearly there is a feeling that the government needs to provide the social safety net and so at the same time recognize the importance of this providing for their financial security they also want social security, medicare, and again, to your point, protections for the investors and it's encouraging that two-thirds clearly want to and need to read part of that is they are making their plans with the security [inaudible] >> we need to get to a microphone. >> i want to talk with another generation, want to talk about young people in education and what we can do to make education

work better. so the people that are basically going to have to be paying with their tax dollars a lot of the income and medical security for the generation apple local level what are the major problems in paying for and creating the quality education and what are some of the best we to address the problems at the local level. >> i want to follow-up one thing cavan said, it is a quandary because first of all, we can't really listen to the polls because the as the question that they often, most often don't ask a follow-up question. do people believe they have the sole responsibility for the financial future? yes. but the same people believe in medicare and social security can be there? 70% of the tea party does not want the government to change medicare. 70% of the tea party, folks.

keep the government hands off of my medicare. we have to understand, we have to ask 67 questions to get it true. we need a medicare to the sound of social security, so, much to my democrats we have to change the entitlements. we have to reform the system, we have to make the common sense changes that take into account we are living longer, there are all sorts of things and democrats would react reflexively and say we can't change anything that's wrong. president obama in the health care bill took half a trillion dollars every ten years out of the bill by changing medicare in this case the relationship to pharmaceutical companies so it didn't have any impact on the beneficiaries but we have a whole lot of that stuff. we have to do all that stuff and be reasonable and we've got to understand, and we have i

believe a five month window after the november election and the middle of march if we don't get things done in the country that means tax reform and raising revenue and cutting entitlements, it means an investment strategy. if we don't do that in those five months, we are cooked. now to go back to your question. [laughter] education as part of the investment strategy. in my judgment there are three absolutely four crucial things we have to invest in. one is infrastructure and hopefully we will get back to talking about that infrastructure. the study the stimulus and have the economic activity far greater than tax cuts on the payments to individuals like food stamps, infrastructure is

crucial so with a low-paying jobs and inspecting the construction and manufacturing. second, we have to continue investing in the research and development. research and development is what made the country the leader of the world. third, we have to invest in the alternative american energy strategy home and as the president is fond of saying everything has to be in the plan. everything. everything. but fourth, we have to invest in education. because in the end will be the human capital the decides which is the most viable economically but that human capital the smartest ph.d. and you name it in the world. let's keep the students who come here and get ph these to start businesses, let them.

i don't care how you do it. let them stay here and open businesses here. number two, but in the greatest post secondary education in the world and what we do in the case through 12 is stunning. we have to invest as best as we can and federal law investment has to be there as an incentive. we've got to start certainly pre-que and i would say for 3-year-olds make sure that our three-year notes by the time they hit kindergarten have the great skills and the basics of reading and socialization. we have to start early with that. then we have to make sure that our teachers are trained and paid a decent salary so some of them go into teaching science as opposed to the private sector. you have to find a way to incentivize the scientists and educations to stay in the classroom, and then we have to

make use of technologies. one of the best things we did is invested $220 million for a laptop and every one of the four curriculum -- basic curriculum courses in - through 12, we have the teachers and trained them on how to do that because our kids are ready and then lastly in addition to college we have to make sure that our technical schools and community colleges are the best they can be and we have to spend money. we spend money to make money. every business understands that if we stop investing in ourselves we are truly cooked. >> i am you have a very different take on the economy for the rest of the i want to first make this is the cover of the new atlantic to. it says the hero and the hero on the cover is ben bernanke. peter in the greenroom just outside their you told me and i believe this was on the record,

is now. [laughter] if it was my contractual obligation to do everything possible to wreck this economy what i would do is go back and follow every single thing that ben bernanke, the hero, the atlantic did in the last three years. explain that. >> first you mentioned you think the government needs to protect investors. investors need protection from the government and from people like ben bernanke. he is the greatest threat to american investors and has them artificially low which is robbing them of their return and is destroying the value of the currency and the dollar and the government is forcing americans to participate in the world's biggest ponzi scheme. so we need to be protected from government, not the other way around but the reason that i am criticizing ben bernanke is

rather than learning from the mistakes of his predecessor alan greenspan, he is just repeating them on a bigger scale. greenspans policies created for housing bubble. yes, fannie and freddie created entities were a part of the problem but take the fed out of the picture, those artificially low interest rates, the 1% that we had for years we never would of inflated this puzzle or have had teaser rates on adjustable rate mortgages all of this was the creation of the fed and the need these mistakes to try to artificially stimulate the economy from the recession and when the bubble burst in 2008 and we had that financial crisis which was clearly a creation of government what did ben bernanke do? did he learn from the 06? no. not only did he not raise interest rates come he brought that to zero. even people that didn't see the financial crisis coming and

domestic. even some of those will say that a part of the problem was that the kept interest rates too low for too long. what is he doing, keeping them at zero even longer and they just announced these tests it cannot in the papers today. they ask the federal reserve to run these. well, under the stress test the assumption is that interest rates at zero and the treasury yields stay below 2%. why didn't the fed asked the banks to run these on a return to normal interest rates? the reason is because of the banks would fail. ben bernanke has the whole economy at work now on the credit and its masquerading as economic growth. if you look at the trade deficit that cannot last week it was exploding and getting bigger. the jobs we are treating our making the sport, not richard. what we need for economic growth this saving, investment and production. we are not getting that. all we are doing is spending the borrowers money and just when we spend this money we can

temporarily create some jobs likely create some jobs during the housing bubble but when that bursts all of those jobs disappeared and what you're left with is a gigantic coal which is what we are digging for ourselves right now so this panel is but growth. we don't have any growth. our economy is getting sicker because ben bernanke refuses to allow the tours. what we need is higher interest rates. the biggest problem is that rates are too low. the federal government is not flooding the market determine interest rates so because interest rates are too low americans spent too much, consume too much, they don't save enough for invest and the government is enormous. if you want to know why the deficits are so big it's because of ben bernanke putative he is cutting interest rates go and refuse to modernize the government debt, the congress would have no choice but to cut spending but because ben bernanke has given a way out he gives them an easy way out because he was all that paper the government gets bigger and bigger and bigger but these same mistakes took place in europe.

look what is happening increase right now. a few years ago greece had a very low interest rates almost as low as ours and then they went up because the creditors got worried that they were not going to get feedback. we can't pay your creditors that peter and pretty soon they are going to figure out and people think well, we are different than greece because we have printing press. welcome zimbabwe has a printing press. that doesn't make things better, it makes it worse. what good is it you get your money back and it has no value? that is the crisis we are heading for we'll have a sovereign debt crisis, currency crisis, and this next class that is coming and it isn't years away, it is coming soon is going to be much worse than what happened in 2008. spec things, peter. sherle, -- >> peter -- [laughter] >> peter seems to think that ben bernanke thinks -- might be right, he might be wrong. you take a different view. you think the u.s. government or

the u.s. economy is in a ditch in a downward spiral with or without the help of the fed. we were talking a little bit earlier about the best way is to think about the problem the united states faces and the way to get us out of the problem. can you help us raise the way you think about the u.s. current deficit both fiscal and economic and a way out of that? >> i tend to sign on this argument about the fed with the line of the cover story but may be for different reasons. i actually see an optimistic path for the u.s. economy going forward. we are still dealing with three of serious deficits that are holding us back. the first is a demand deficit that has been partly filled by the government transfer payments presumption and there are limits to that particularly if you are going to get to a sustainable

growth path or getting a little job creation as you pointed out now that helps boosting incomes but we are facing a global headwind. we have another we have faming the demand deficit that we have supply outstripped demand is globally which will get worse with the economic crisis in europe which will eventually hit asia emerging china because they are dealing with their own type of leveraging problem. the second deficit is a jobs deficit which we still have a long way back to anything approaching for employment. the most important deficit however the when i think that responds to peters concerns is we actually had an investment opportunity deficit. we have too much savings and ogle capital that is looking for too few good investments in the u.s. and the world economy as a

whole. as soon as a result, these ultra low interest rates just isn't ben bernankes policy although he has helped. it's because there is too much money looking and not being able to find much investment been part fixed-income because of the resistance to taking this on at this point. >> so the challenge is how we put -- encourage both the tax and other free market to put this idle savings and capital to work making real investments that create jobs that produce a more effective economy in the future come and governor rendell i think pointed in the right direction, and to do it in the way that gives returns to all these aging future retirees that right now are getting less than

one or 2% of their fixed-income investing in pension funds were having enormous difficulty meeting the returns because of this low yield. the answer in my view is we need to invest in the missing piece in the new american growth story. there is a powerful new american growth story that is the emerging in the oil and gas revolution which with of the new exploration trade deficit in three to five years if we develop these resources, the rebirth and revitalization of the manufacturing sector partly made possible by the chief energy. we have had a huge swing in the chemical manufacturing sector because judge dramatically lower cost of the natural gas feedstocks compared to the middle east and asia and europe.

third we are beginning to talk up the conversion of large parts 25% of our fuel consumption is by certain delivery vehicles, trucking and whatever all of which can be moved from diesel to natural gas in a very cost-effective way. now if we get serious in investing the infrastructure what is missing is on the federal framework to make this happen so that it spreads out to the white population but we have enormous infrastructure problems, with all this oil sitting in the middle of the american gas not being able to move it to other places. but if you get serious with the plan about building out the infrastructure for transportation, for the congressional transportation to the natural gas network distribution for all the other infrastructure of roads in the waterways, then at this new

emerging american growth story that is fighting against the deleveraging becomes a dominant reality and may even be able to insulate some of the slow growth in the rest of the world. >> governor, one to come back to you saw you nodding when the mentioned manufacturing. on the one hand, the manufacturing has declined significantly since deployed 40% of all workers in 1950 and now and was closer to 10%. at the same time health care education services. these jobs quadrupled in the last 50 years, so on the one hand, i see that manufacturing is in its own structural decline and seems to be recovering some of the jobs it lost in 2000 while the service economy really seems to point towards our growth. d.c. it differently or do you see that manufacturing is having a kind of revival that could have a multiplier effect that could really jump start this

recovery. estimate in the short run i'm sorry, sherle set of slightly if we develop our own energy here, the big issue in pennsylvania and it remains a big issue and i'm a great supporter of extracting the natural gas from shale and i do believe it can be done in an environmentally sound way. we have to master that, but i am -- in this an enormous job creator in itself, construction of the wells, the natural process, but it is a great manufacturing boost. the single biggest advocate for the industry in pennsylvania other than the companies themselves is the u.s. deal because of the drills require a significant amount of steel. it is true for wind, wind energy, with the turbine is a tough, so if we develop our own energy in the infrastructure for

natural gas, just think of all the new type of gas stations that can be constructed, so there is an infrastructure itself. the big secret about the infrastructure is not just for the construction sites. stimulus according to the economic report produced 1.1 million jobs on the construction site, 400,000 jobs back in the manufacturing plants asphalt, concrete, steel, you name it, so in the short run as we build up our economy, infrastructure and energy i think manufacturing can play a big role in the recovery. i think it can -- those things obviously are going to become more automated as time goes on, but we also already looked to the advanced manufacturing, the advancement ephedrine in pennsylvania has the lowest unemployment rate of any industrial site and has over the last eight years, but in my

doing we have comfort to the southwest and the pittsburgh area in the southeast and the philadelphia area where we do a lot of pharmaceutical manufacturing. those viagra pulse someone has to manufacture them. [laughter] >> i think that there is no significant member talking about raising the wages, we talked about raising the wages i will take in manufacturing job against to service jobs anytime, any time. >> let me say something about manufacturing. first of all of we are ever going to have a recovery not a stimulus to every test the lead instructor in because of the government policy we now have more people that work for the government than in manufacturing to read and the reason we've been able to get away with it is because the world has taken the money we print in the stuff they

produce. we have run enormous trade deficits because the dollar is the reserve currency. we have abused that and are going to lose it and when the dollar plunges americans are only going to be able to consume what we produce. if we want to import something we are going to have to export something of equal value not just money and then have to have a lot of manufacturing but that isn't going to happen unless we have a lot less regulation and a lot less taxes that drive them out of business and it is going to mean we have to spend a lot less money on things like education and health care and services. we spent too much money thanks to all these government subsidies. we waste so much money on education. talking about education, we've got kids borrowing hundred thousand dollars plus the stock based on student loans to get liberal arts degrees that have no marketable value when they could be out blurting real skills and the real world but we stick them in these universities, so we can't think it sounds great politics we need

to spend more money on education, we spend a lot less money on education and a lot of other things because family we spent all this money on education and 15% of the population is unemployed and we have a $50 billion a month trade deficit because no one is making it. >> can i just respond? [laughter] does anybody know the visa is? it's where the american industry goes and asks the congress for temporary visa to come in because we can't find americans to do it? we think that is just about taking, it's about software programmers. we bring about a million a year into the united states because we don't have young people trained enough to take those jobs with benefits. >> study and liberal arts courses its stake in humanities and sociology. >> and the bottom line is there are tons of 23 to 24-year-olds in every american city who would

love to have those jobs but we didn't educate them well. we didn't show them how to use technology. we didn't train them well. it's not just about spending their money. >> get the government out of it and they will get educated. islamic about to move the conversation a little bit down here. >> on the subject of education, this is a topic i want to discuss so i'm pleased that this is where we've landed. [laughter] you know, you're talking earlier about the guiding principles of public policy come and one of them was education, and it's interesting to me because of the one hand it is hard to see what is the real education crisis? is the 40% of people that don't go to college, the half of people that go to college but don't finish, is it the college premium seems to be flat lining and people who do get a degree

are not seeing the same sort of benefit that the pri getting and the rising benefits they were getting in the 50's and 60's? which of these is the lowest effective -- the most effective way to place our attention when we are making public policy? >> please been in this town long enough i'm going to agree with everything said. [laughter] think the challenge is the fact that we are especially in many of our large metropolitan school districts generating enormous social and economic and certainly not preparing for being able to see the college level to consider any of them are not graduating and when they do graduate the than to borrow a lot of money. and actually i want to say that for financing of education needs a serious -- with a student loan

portfolio and that it revocation that looks like fannie and freddie all over again, so we have the problems but i think that the one that is about skills and the ability and he 12 and then we have to figure not help to the college financing because we've turned the u.s. university system into the mirror of the health care system where they deliver products where the cost is enormous. >> i do want to talk about the kind of investing families talk about it they are going to send kids to college because you reach a point where even with more and more people went to school, middle income wages flat line which means the rising cost of college people have to borrow more in order to get this mess is to become arguably, degree in order to advance to get the kind of skills whether it's to be a designer or to be a software engineer. is there a smart way for families to think about better

ways to invest that they can afford college for their children? and is there april for the government to play in order to help families to this? >> welcome a first of all, when we are talking to the financial planners around the country, what we are hearing and what we saw in fun research results, there is a conflict with middle-income families being able just to meet the short term obligations like paying the mortgages and filling the tanks of gas and at the same time, preparing for the retirement. and, you know, it wasn't surprising that 82% of the folks said they needed a financial plan. i think one of the things that you mentioned but was a little bit in conflict with what the governor said was that it's not just college, i think it's finishing a training program of some type. i think the acknowledgement that we have all come to is that a high school diploma alone does

not. that doesn't mean that it is not a fancy liberal arts degree that it could be eight additional training to be a plumber or electrician or secure trade. >> surer. we have had a free-flowing conversation so far. i do want to impose a small restaurant which is is it possible? right now washington and washington, d.c. could fit inside a peanut. but what do you see as the most likely and most important low hanging fruit that this congress in either the next six months or even as the government in the first five months to speed up the administration that we should focus on what is going to give us our biggest bank for the buck for getting the right kind of productivity and the right kind of growth to the u.s.? >> i think the republicans are moving to pass the version of

the transportation infrastructure bill which is terribly important for the macroeconomy but the little twists could be put on that. and this is where i think some also space concessions, the obama administrations concessions on speeding up environmental approval, which i know the governor rendell has spoken about for the certain transportation infrastructure projects, regularizing the environmental oversight in the approval of the oil and gas industry i think we are beginning to pinpoint the problems are with certainly deficient welds and not the

fracking. .. for a retrofitting of utilities to convert from coal to natural gas even though there is major cost advantages so i think by tapping a couple of add-ons add-on soon even the republican-led transportation and infrastructure bill will

give us a lot of bang for the buck in terms of both offsetting the headwinds but moving us forward with what i call the potential very important american growth story to emerge. >> that is one thing we haven't talked a lot about yet is financial reform and the steps we still need to take to make sure that happens three or four years ago doesn't happen again. what are you looking for washington d.c. do in the next year that gets us closer to a point where you feel like the banks are safer and the government is more responsible, more aware of the kind of risks the banks are taking? what are the steps you are looking for over the next few years? >> i think as everyone knows we are in the implementation phase of -- and to a large extent i think that legislation is to the full

extent that is possible at this point. a number of the issues that were determined to have problems and the causes of them, both financial difficulties and -- but even that is not going to be enough. obviously with dodd-frank we are going to see substantial reform at the banks on the capital side and with prudential regulation and also with regulation of the derivative is market which really was -- but i think going forward there is still so much there will be left to do if you really take it down to the individual investor level. to some extent a lot of what needs to be done is with the bandwidth issues because i think there were a number of reforms that mary schapiro came to the fcc and the reason i'm focused on that is because i was a

former fcc commissioner but i think she came in really wanting to improve the kinds of disclosures that investors will see so that it's more informative and i think what we have now are individuals who are barraged with information about products than they don't really know what to to do it and to some extent a lot of the information that they get is more developed from a litigation standpoint than it is as an informative standpoint and what we really need is a complete rethinking of how we deliver information to investors so that they get information that is useful and obviously the other thing you need to do is to continue to work on ensuring that investments are protected. >> is it possible to sort of twitter size thoughts?

>> peter will disagree with me but we think one of those protections is holding anybody who gives financial advice to a fiduciary -- >> yes and i was going to say that. i agree with you that one of the things that again i think would have been higher on the list of priorities but for bandwidth implementation issues of dodd-frank is creating a uniform standard, call it fiduciary standard come across the area so the intermediaries, whether they are investing or broker-dealers have the same obligations to the investors. >> that would most likely force me to close my broker-dealer ship at that as a whole different subject. i want to get back on two dodd-frank because you know i said earlier that the architect of the housing bubble was greenspan and the ensuing financial crisis but it did have help in congress and to its biggest helpers were chris dodd and barney frank. they are probably the most

hopeful bling congress so it's only fitting they should've written financial reform which did nothing to get at the underlying causes of the financial crisis. they actually had a commission and congress to study where they had the financial crisis and of course i tried to get them to call me. i wrote a book and of course they didn't want me to testify. they didn't want somebody that predicted the crisis, saying why it happened. they were looking for a reason to justify more government. they did not take power away from the fed and fed in and effective fed cup more power. they didn't even touch that he and franny and in fact they are insuring more mortgages than they did before the crisis and nothing has been prevented and of course the bigger problem too was the moral hazard that is inflicted and how did the f. v. ac and charlotte-based banks quests if the fdic didn't ensure these things they wouldn't have done all the risky stuff because of the potters was not of let them. put their money in any bank you

want it doesn't matter what they do because the government will bail them out if they fail. that is the problem and he made they made it worse in the financial is worse. we haven't prevented it. we have guaranteed it. >> we have one more brief comment. >> to clarify for the record i was a member of the -- and it was a great accomplishment. but, it had nothing to do with it. they went ahead with the legislation before we did any of our hearings or delivered any of our bad reports. [laughter] >> yes and show i think we have time for questions. >> we covered a lot of ground soak presumably there will be thoughts. as i survey the room.

>> we will start with you. >> some education because i've been with the work horse development and it was clear that there are 600,000 jobs out there right now that we cannot fill and companies like boyd having to go from a seven week seven-week training period to a 14 to 16 week training period to train folks to be able to fill jobs in their company. i think the education process and what we are doing in terms of, what we what we are doing wh education is not focused in the right direction. community colleges are not connecting with the industry to find out what it is, that knowledge that is needed for these new jobs. >> i think that is on porton. we had 10 different regions of the state. we would make sure we had private sector people on and we would survey the private sector in each region and ask, what do you need?

to do it without doing that makes no sense at all so what do you need? we then start putting in training programs and in our community colleges and technical schools, to fill the needs there. there is no question about that. we worked with live industry and the allentown area, it's a big ups area. ups actually came in and it is one of our trade schools and set up the equivalent of a ups facility and trained kids right there on the job. so yeah they have to not just anticipate that have to survey and find out what is the need out there because 600,000 jobs and my guess is it is more, it's probably a million things that could be filled by americans. it's a sin what's going on because there is and that type of coordination. >> thank you.

>> i am an economist with the center of economic justice. i would like your thoughts on broad capital ownership as a basic means to distribute new wealth, capital assets, to promote real economic growth not just increasing wages as a way to create demand for purchases of goods and services. >> i think that is an important issue and not so much on the growth part but we have seen across the globe these trends in both commonwealth quality over the past couple of decades and it's real clear what's going on. with entry of the china trading system and the return to low-skilled labor. in the u.s. the reflexes been to try to fix this with after-the-fact distribute tory policies, higher tax rates and

things that will just never work. you are swimming against the tide which is just too strong. the answers to give people skills on the education agenda and capital i having them save for their retirements more successfully and that is the only way we are going to ever stop this awful land war in asia approach to getting income distribution in getting ahead of the curve. >> is about creating demand. you mentioned that earlier. demand -- we have supplied and we can have legitimate man because there something to buy but until we produce something it doesn't matter what you want, it's not going to be available to you and the reason we have a shortage of supply is because we don't have enough reduction and what interferes with that? its regulation and taxes and bad monetary policy and all the things the government does to interfere with capitalism which would produce more products and we can create that demand.

>> that the new america foundation we have looked at this issue for more than 10 years and generally came to the conclusion that has to be part of the toolbox of addressing and maintaining a quality of life standard of living particularly in light of the trends of rabbit -- rapid productivity growth, many of which for a variety of reasons don't, will be relatively low productivity and won't pay relatively good wages so it has to be part of the toolkit. the question has always been how do you structure a much broader array of capital ownership that just doesn't mean people trying to save for retirement because that really doesn't get you very far. unfortunately we haven't had a serious conversation. we had the flirtations with the ownership society in the '90s

and the early george bush years but it all got caught up in this financial services liberalization. i think we are going to have to go to the drawing board to have more serious ideas put on the table because it has to be an inevitable part of addressing the quality in the future. >> thank you. >> tom from research pays. i think you are doing a great job, by the way as moderator. my question, i want to bring in a live wire here which is the teachers union which hasn't really been touched, and i think many of us know that the pension, the cost of the pensions for the teachers hired and what is being spent on education so obviously there is a disconnect there. the question i have is, if we are not looking at that or should we look at that. if you were given the opportunity to redesign how education would be done in this

country, what would it look like? i have heard so far first get rid of liberal arts. and then i heard you know, go become a ups driver or whatever. and i don't really get a good feeling with that solution. i am just saying, we have some smart people in this room. what would you do? how would you redesign our educational system and i just threw in the variable of the teachers union if you choose to touch on that are not. >> first of all i don't think people that work in the government should be allowed to -- the whole thing is corrupt in the beginning. and the biggest losers of course are the children who get a lousy education and their parents often get stuck with the bill but that is the thing to do. if you got rid of government

subsidized loans or any government direct loans for higher education universities would have no choice but to/their tuition and college would be affordable again. the people who didn't go would get a decent education and it wouldn't cost them -- you graduate with a mortgage but no house. if we have vouchers and we have some wind so that there is some competition with with these government created monopolies. in every of the government monopoly is not going to be sufficient. everything we get from the free market such as cell phones or computers or televisions, the quality keeps going up in the price keeps going down but everything the government gets involved in the quality goes down in the price goes up. >> thanks peter. i do want to recast the question as understanding education is important if not crucial to getting ahead in the globalized economy. are there good ideas, good

realistic ideas for bringing down the cost of higher education and as you mull that i will move to cheryl. >> i was going to say that it's a mistake and i think you do have to separate to some degree the k-12 group from the college community college, college and graduate schools. those are two separate problems. with the k-12 i don't think it makes sense to talk about it as a purely education issue. james traub did a very important article in "new york times" a number of years ago that says it's the neighborhood and local economy problem. so until you are able to be able to create workable schools that come out of healthy communities and neighborhoods that you are not chasing housing values and kids into a better neighborhood, think you have to think of the

k-12 as a larger economic development issue. in the case of the higher education, think obama has sent, started an agenda that is very important and that is that our colleges and universities are horribly inefficient. they have tuition that goes far beyond the values that they are providing the schools and we have relied also on this 1990s paradigm that they are going to be flexible enough to respond to the training needs of our workforce when in fact my experience with educational cetaceans and the higher education, they are probably the least flexible institutions i have ever worked in, much less flexible to government and governor rendell i think did an impeccable job of trying to put private-sector people on the

advisory, but we have a major -- there are two mage or sectors of our economy that have to undergo major restructuring and productivity gains. one is the health care sector and the other is the higher education sector and i think we need to begin to move some more vigorous experiments of what kind of restructuring of those experiences are required and also begin to offer also that to some functional equivalent of on-the-job training because companies training their own employees may be better than the community college model which we seem to try to subsidize community colleges for 10 years. that may be a successful model. >> thank you. [laughter] >> we could be here until 2:00 just asking -- answering your

question. by the way don't demean ups driver jobs. there a lot of americans who would love to have a job with a company like that with a decent benefit package and there are a lot of americans that are not going to be computer technologists or science teachers. >> or economists. >> or autonomous, right. that is number one. number two, colleges do better? of course they can. when i became governor the first year the university system of education, 14 colleges came to me and said they wanted my permission to raise tuition 11%. inflation was about 2.5% that year. i said, are you guys kidding? why? we can afford, blog, blog. they raise tuition. was the government, you raise

taxes. is the easiest way. it does not take a lot of work. i made them go back and do escrow and every single building that they own and we saved millions of dollars on their energy costs. resourced are purchasing and we saved millions of dollars systemwide. we wound up with a 3.1% tuition increase. tuition increases were lower than inflation. the educational remained high. we have a pretty good system and it did not affect at all but you have to force people to do the hard work in cutting costs and most of the universities don't do that. they don't do that at all. leslie just very quickly, k-12 i can tell you whom portrait is to start young. start young, start before kindergarten and when we get into kindergarten and first grade and have small class sizes. do things where kids can get excited about learning. we had a science program that

came out of the -- where we actually have the kids as third-graders do experiments in the classroom. little experiments to learn how rain happens, by heating up water and a plastic 10. they never forget that stuff. they loved science. if a lot of kids were interested in science down the road. so many things we can do. is just a question of having the ingenuity to do it and having the will to do it and having the willingness to do difficult things. if we are going to succeed in this country we have to go back to what jfk said. we do these things not because they are easy but because they are hard. >> i just want to make this observation now. [applause] when you think about these issues, hold on. their art to unproductive backwaters,, one is health care and the others education both are characterized by fee-for-service operations where we are paid for doing stuff.

open and government subsidies and both need to see a future that has a real budget, payment on the basis of outcomes versus accountability in providing people with more choice and competition. >> we have time unfortunately for one more question. seriously, 32nd answers. everyone else on line, and i'm sorry. you can ask questions over session for jumpstarting economic growth. >> my name is fred singer and i'm with science and environmental policy project. my question, how important is low cost energy and jumpstarting the economy and is the administration doing enough to promote low-cost energy or are they moving in the opposite direction? >> quickly, the biggest problem with the cost of energy right now is not our energy policy which i don't like. it's her fiscal and monetary policy.

the reason gasoline is so expensive now is because we are printing all this money to buy government bonds. gasoline production and america's highest it has been since 1993. demand for gasoline is the lowest it's been since 1997 because so many americans don't have jobs. the reason gas is so expensive is because we are printing so much money and if we keep destroying the value of our money than the price of gas will go up but if you take a look at the price of gas in terms of real money, back in the 1950's to the bike gallon of gasoline for 25 cents. you can still buy gallon of gasoline as for 25 cents and get change. is made of silver so you have the real money prices go down when you have funny money and fiat money to prices go up. that is going to further undermine our confidence. >> as i made the point in the introduction, low cost energy is a big boom towards

revitalization of parts of our manufacturing sector. that is happening. is happening even after a coherent federal policy. the advantage of low-cost energy doesn't necessarily apply when we are able to produce more of our own energy because more of the income and multiplier effect stays and economy so i think the goal would be more of an optimal energy policy that allows us to produce the operable price of energy that allows us to have revitalization of manufacturing. if we are able to be able to produce more of it in the united states to improve our income and wealth posture. >> that is all we have time for. i want to thank our great high energy panel. [applause]

is

>> house armed services committee chairman buck mkeon called for millions of dollars in additional military spending and he said president obama's pentagon budget would mean think slips for soldiers instead of the ticker tape parade. congressman speech at the ronald reagan presidential library in simi valley california was almost half an hour. >> the beauty of this whole structure is phenomenal and he just can't help but think about president reagan and it's timely

given the political season that one of the most famous campaign ads in history was president reagan's bear in the woods at. during the race, the reagan campaign was having trouble explaining their peace through strength foreign policy to the american people. the electorate at the time walter mondale simple deferential approach to the soviet union. so the campaign caved in what reagan was best at, they simplified the message as john just so aptly put. in and they add there was an ominous reference to the soviet union as the narrator gravely warned, there is a bear in the woods. the point was that unpredictability was a dangerous, of a dangerous the dangers enemy is a threat that must be taken seriously.

today's world is rife with unpredictability and america's 21st century strategic outlook is a tangled mess. a senior military leader recently told me, in my 37 years of service, i have never seen a time as dangerous as today. we live in a globalized economy where all use of commerce and communication are networked. violence or conflict in the remote region of the world can ripple across borders, faiths and economies. i am concerned about our world where the flap of a butterfly's wings can create a tornado. that means we must make preparedness a top national security priority. the price of liberty thomas jefferson once wrote, is eternal

vigilance. dwight eisenhower echoed that sentiment. everyone knows his remarks about the military industrial complex. let me tell you another thing that he was famous for. he was a soldier that hated war. i quote what he said about these. the vital element in keeping the peace is our military establishment. our arms must be ready, must be mighty, prepared for instant action so that no potential aggressor may be tempted to risk its own destruction. to broad oceans, one protected what reagan called the shining city on the hill. today our economy grows -- draws its strength from critical geographical choke points. one of those, the middle east, is undergoing and historic shift. iran's quest for nuclear weapons is perhaps the gravest threat to

the global order we have seen since the collapse of communism. as populism realigns the muslim world, the lines between sects of islam are sharpening. sunnis and shia's have fought for centuries. now iran, the world's most prolific exporter of terrorism, wants to throw nuclear weapons into that mix. people often ask, would iran dare to use the their weapons? i ask you, can we afford to believe they won't? can we afford to believe that china, which just this month announced a 12% increase in military spending, will allow our pacific allies to live in peace? reagan mastered the art of keeping this nation out of hostility, but today we tend to forget, we are a nation at war.

though the mission is in a far-off land and among an unfamiliar culture, we also forget the sacrifices of a generation, our new greatest generation that have kept us safe since the september 11 attacks. californians have led the way in our attempts both at home and in the field. duncan hunter, the son of former chairman of the house armed services committee, joined the marines right after 9/11, leaving his wife and children at home. he served three tours in iraq and afghanistan and then took his seat, his father's seat in congress and now sits on the house armed services committee in maine. like congressman is simply meant jeff morrell jeff morella navy officer who just returned home safely from camp leatherneck afghanistan. we are lucky as californians and

as americans to have these men and women, who have taken the time and are defending our freedom and representing our values. they are story has been repeated over and over. citizen soldiers who have given up time with their families and their careers to deployed into harm's way. it is tragic that they are story can be subdued when a lone individual commits horrible acts. this past weekend it appears we lost a soldier to the demons and it cost many afghan civilians their lives. people that we have tried desperately to help recover from three decades of comp lit. when you look at the war through that terrible violent at, it seems hopeless and lost. i know that the mark and people are heartsick over what has become of the afghanistan

mission. i share their fear that we may be addressed, and i'm certain that we are suffering from a lack of commitment at the highest level, but the recently liberated afghanistan in 2001 was right then, and it is the same reason we fight today, to keep it liberated. and we overlook the fact that for every one chaotic event that moves endlessly in the media, there are infinite tales of heroism and courage, selflessness and integrity that are never reported. president bush gave over 40 speeches about the war on terrorism and the importance of victory, updating the american people. president obama has given us three. we must do a better job of communicating the importance of this fight. we must do a better job

highlighting the stories of courage and daring of our military and what they have etched into the stone of history. our troops have turned that on her and our troops deserve that honor. our principles have not changed. we reject those who would kill women and children. we reject those who use violence to intimidate free people into submission and compliance and we reject those who would convert afghanistan back to a launching pad for terror. we reject them and in our national interest we must meet them with force. now there are risks and results take time but asking if afghanistan is a winnable fight is the wrong question. what we should be asking ourselves is if we still believe

that the greatest force on earth is american resolve. we should ask if we believe in imposing limitations on ourselves and an insurgent is the toughest kind of opponent a democracy can fight. routing them out takes patience. over the past 18 months we have knocked the taliban on their backsides. we demonstrated that like in iraq the ample force levels can lead the toughest insurgency drive some we must be extremely cautious when we discussed polling surge forces out before we have secured our gains. we can still leave afghanistan with their heads held high and the taliban defeated but it will take resolve and patience. as president reagan demonstrated, americans excel at both. that is worth mentioning but

aside from conducting oversight of the war one of my chief responsibilities as chairman of the house armed services committee is building the defense budget. for fiscal year 2013 the budget we received from the president was really concerning. the budget cuts $43 billion from a wartime military. it cuts 23 ships from the navy's fleet. many senior flag officers have testified that the fleet is already too small to fill its operational requirements. it cuts 150 planes from the air force despite the tragic nature and urgent need for tactical airlift in places like afghanistan and it cuts a whopping 80,000 soldiers from the army, 20,000 marines. instead of coming home ticker tapes, these brave men and women

will come home to pink slips. instead of marching in victory parades, they will stand in unemployment lines. that is shameful. these cuts are real and we will all start feeling them soon. they will affect every american base, installation and military unit in the world in some way, shape or form. and a bomb they bombed just heard our national security. these cuts will be damaging to everyone associated with the military. the families from camp pendleton that have endured extensive to claimants for the past decade, the teachers who educate children of deployed heroes, the civilian workers who do maintenance at edwards air force base, the taylor's off days who men sailors uniforms at.lejeune

and they simply line worker who turns -- and bombed out. our national defense, the most sacred and righteous responsibility of the federal government is larger than just those who wear the uniform, but when we cut the services and support that keeps our military potent we hurt ourselves in ways beyond maximum security. let's not forget that when we must take up the fight against freedom's enemies, it is congress's job to make sure it is not a fair fight. the cuts that i outlined take us right to the limit of acceptable risk. because the congressional supercommittee failed to reach an agreement on a mandatory spending, a sequestration mechanism will kick in next january 1. sequestration takes all the cuts that i outlined and doubles

them. it pushes us far past the limit of acceptable risk and would put this great country in grave danger. of the joint chiefs has much to prepare for the tough reduction in the budget control act but sequestration does not afford them that luxury. the cuts are blind. that means that the defense department will have to go line by line through everything in the budget and take off eight or 12% depending on what they do about personnel, from each line item. as one admiral testified in our committee, how do you cuts 12% of a ship? if sequestration passes unscathed we will begin the process of cutting approximately 100 lien dollars a year from the military for the next decade. the cuts will force another 100,000 troops out of the army

and the marines. we will shrink our navy to its smallest size since world war i, and the air force will be its smallest in history. we will not modernize their nuclear deterrence, which hasn't seen replacement systems in decades and is the smallest since the early 1950's. active duty military, reservists some of federal civilians and contractors will be laid off. some assembly lines in shipyards will close. we estimate that around 1.5 million people will lose their jobs as a result of the defense cuts and sequestration. we will go through not one but two brown's the base closures. southern and central california would be particularly hard hit. the economic areas around ella terry bases, the ones that survive, will experience a decrease in business.

we should all be alert and aware of what could happen to the military, our parents and grandparents built and the armed forces that reagan refined. president eisenhower said that values, that a people that values its privileges over its principles is doomed to lose both. we should ask ourselves, will this be the moment right now when america abandons its special role in the world and transforms its special, and transforms itself from a superpower to a regional power? is this the point where americans put their privileges and entitlements ahead of their principles? in the latest budget the administration increased spending in nearly every government department while the

military absorbed massive cuts. they do this knowing that our debt is sinking this in a shin and sinking it fast and they think that if they toss the military over board, they might able to stay afloat. that is a bunch of alone. if you cut the entire defense department, we would still be running huge deficits. that is how much our entitlement programs cost and that is how expensive these programs have become. they now threaten our first and most sacred entitlement, the right to safety, life and liberty. despite this gloomy strategic outlook, i am not so pessimistic. i believe we can first protect and then restore our armed forces. i will not be a partner to the management of this great nation's decline. i will not the complicit in the

dismantling of the reagan military. my priorities as chairman for the coming budget are straightforward. eye i have a three pillar philosophy towards revitalizing our military forces. they are first resolved sequestration. second, reverse these massive defense cuts and finally, restore and rebuild america's military. the first have been saving the dire sequestration scenario is lying is sometimes to move past the election where we can look at this in a reasonable way. i've introduced a bill that would pay down the first years of sequestration by naturally shrinking the federal workforce. that workforce has grown exponentially since 2009. while the president proposes laying off war than 120,000 troops, he has hired 120,000 new

federal eurocrats. this bill does not fire federal workers, but decreases their ranks naturally. if one person quits or retires, two others must quit or required -- retire before an agency can hire another worker. this was actually a bipartisan solution that came from the president's own debt commission. it pays for the most damaging europe's sequestration next year and moves the budget debate into calm her waters. while this is a simple acceptable solution to a tough problem i am open to any compromise or any plan that pays down sequestration in a responsible manner without crippling americans with tax hikes during this fragile recovery. from there it is my concern and hope -- my sincere hope that

congress can work in a bipartisan manner on a year by year basis thus reining in spending without cutting our national defense. the second pillar is reversing the first triage of defense cuts that we enacted as part of the budget control act last summer. i voted for the bca. i did so because we were facing a government default that would have among other things, cut off salary payments to our troops. as chairman i could not let our military go without pay. i held my nose and voted for the bca with the hopes that we could fix the serious problems with the bill shortly thereafter. that is why one of my top priorities is getting that half trillion dollars back. the taxpayers rightly demanded that everything should he on the table for deficit reductions.

i agree. if we can't find savings and a half trillion dollar budget, shame on us but explain to me why defense is less than 20% of the federal budget that is accounted for half of the spending cuts to date. taxpayers said cut the fat out of defense. we did that. we are past cutting the fat and passed the muscle and now we are cutting into the bone. and the consequences are being felt. look no further than the historic strategic shift we were forced to adopt this year as the president gave his speech. as many of you know, the administration's force reductions mean we can no longer sustain the strategy that has kept america safe for decades. because we will no longer have the forces to stay strong in critical regions the administration announced a new

focus on the pacific rim. i am also working hard to ensure that the hitherto asia is not an empty one. now the administration calls it a strategic pivot. i call it a -- a pipit implies that you have some body weight behind a movement. though the administration says we are shifting to asia, they are actually reducing the number of ships and planes we have available to respond to crises anywhere. we will do our must to ensure the strategic shift is viable and does not place our troops and unnecessary risk. there is no disagreement that it's a vital region. we should be worried about china when they just announced another double-digit increase in their defense spending. we spend about half of our base defense budget on personnel, investing in their health care,

education, living allowances for our troops. china buys things they shoot and they can buy far more of that for their dollar then we can. so we must do our a must to reverse the defense cuts in the budget control act to help ensure that hitherto asia is not -- that means reinvesting and modernization for air force, our navy. we will seek to modernize airlift including c-130's mc fives that predate the reagan administration. we will try to hold back the cuts for the navy's cruiser forces, finding the money for cruisers to undergo proper upgrades instead of mothballing ships needed to sustain the shift to asia before those ships reached the end of their lifespan. we will hold the administration accountable on the promises they made to modernize their 18 nuclear deterrence in exchange

for ratification of the s.t.a.r.t. treaty. we must also allocate resources for contingencies like iran. we will be looking to place emphasis on vital weapon should the iranians determined that a peaceful nuclear preexistence is not in their best interest. our defense bill this year will reflect appropriate resources for things like bunker buster munitions, countermeasures and appropriate sensor and intelligence platform. we will continue to focus heavily on countering anti-access systems like iran and china would use to bring transit to the international community. my obligation as chairman is to ensure that if the president uses the military option against iran, that option is a credible

one. because what happens to the world's economies if we can't ship a strategic resources out of the persian gulf? what happens if we can't stop iran from closing the strait of hormuz? there are too many trouble spots in too many regions for us to abandon the two conflict strategies. because the first round of cuts forces to abandon the undoing reductions in the budget control act would allow us to intern for their proven strategy. the third and final pillar is to restore a military chewed up from 10 years of fighting. is the longest war we have had in our history. when we increase defense spending during the bush years we spent money on things like body armor and armored vehicles. what we did not do was upgrade

replacement systems that were canceled during the clinton years. today's military is by and large a smaller version of the reagan military. most of the planes, ships and tanks were built during his administration. we must and this unofficial german holiday and get our forces the tools they need to win the current war and the turf future wars. that means repairing and replacing equipment that was lost, damaged in places like iraq and afghanistan. it means of grading and restoring our nuclear deterrent which is falling apart after two decades of neglect. and most importantly, it means we take care of our people. and last year's defense bill, we acknowledge that modest increases in certain areas of military health care were appropriate. those fees were both reasonable and small, but recent proposals

to pump up military health care by up to 300% is absolutely on except the bowl. when our troops made the decision to volunteer for service, they entered a sacred agreement with this government. part of that agreement was that their medical needs would be met. we made a solemn covenant with them, we cannot, we must not rake it. because to maintain a strong america, we need our all volunteer military. are we ready as a nation and a people to embrace the concept of helplessness on the world stage? are we prepared to accept the possibility that someone other than us can shape our destiny? we will do what we can on the committee and with this defense bill but it's not going to be easy. to put it plainly, we need your

help. we need your help in restoring the concept of the reagan military. just the name invokes the concept of strength and certitude. i need you to be advocates for the principles of president reagan. i need you to stand with our troops. i need you to reject intervention, government intrusion in our lives and refocus this great republic back to constitutional obligations to for the common events. these cuts can be stopped, averted, held off but it requires view, each of you, to be involved, to be vocal and to be strong. how can we call ourselves reagan republicans if we sit quietly during the most systematic and catastrophic cuts to an institution that reagan helped

build? remember the triumph of the reagan military, the cold war, the great threat of our time ending without a single shot being fired. the gulf war where we decimated the world's fourth-largest army in less than a month. remember reagan's three-legged stool, the compass that keeps us focused on our conservative principles. when we are strong, and when we stick to those principles, america does wonderful things. we cannot walk blindly through this defining period in in our nation's history. we cannot ignore the lessons of the past. i believe in optimism. i believe in confidence, and i believe that with your support, we can stage a resurrection of this great country. we have taken our in this past

decade, but we have endured a revolution, a civil war, a great depression, two world wars, and the cold war. every time we take one on the job, we climb back up. my job, our job, as californians and as americans, is to stiffen that resolve. the ability to control our own destiny is what makes us americans. the power to guide our destiny is what makes us great and our determination to protect that destiny is what makes us great. together, let's determined to be masters, not victims of our faith. thank you. god bless our armed forces, god lest the great state of california, and god bless

america. [applause] >> our ancestors came across the ocean and sailing ships you wouldn't go across the lake and. when they arrived there was nothing here. they built their tiny little cabins and they did it with neighbors helping one another, not federal grants.

>> this is also the time to turn away from excessive reoccupation overseas, to the rebuilding of our own nation. america must be restored to her proper role in the world. but we can do that only through the recovery of confidence in ourselves.

>> time warner chairman and ceo jeffrey bewkes spoke of the economic washington about visual media and energy in journalism. david rubenstein at the carlisle group private equity firm as president of the economic club. he introduced mr. bewkes. >> tonight we are very privileged to have as chairman and ceo of time warner, jeff bewkes with us and i want to thank jeff for making time to see us. jeff is, has been chairman and ceo since 2009. he became chairman in 2009 and ceo in 2008. previously he been president and

team operating officer of time warner and rows up through the ranks there at the home box office, hbo. he joined there in 1979 and ultimately became the head of hbo during one of its most profitable periods under his leadership. just prior to that at work at citibank and prior to that he was a graduate of stanford business school at yale it deerfield academy. jeff is a person was involved in a number of villain topic activities but also very involved in his school affairs and on the advisory up award at stanford business school and also at yale corporation. we are very pleased to have you here today and appreciate your taking the time. the company that you right now is one of the largest media companies in the world and as i understand it it's about 29th 29th -- about a 35 billion-dollar market cap, 34,000 employees.

34,000 employees and about $29 billion in revenue. >> it 30. >> sorry, 30 billion so running one of the largest media companies in the world, there is a lot of pressure on you and you are a major figure in the entertainment world. is reported that when you were a boy you said your parents, want to be in the entertainment world than your parents said that is not possible because you are not jewish. [laughter] is that apocryphal and why did you want to be an entertainment? >> that was a

you have better producers. why does it make a show so popular? >> you are on a key question because we are not trying to actually make the shows because we are not getting paid based on

how many people watch the show. it would be the other television ratings based television and there's a lot to that because what popularity does what viewers expressing your desires shaped tecum and it should. but in the case of hbo, we are trying to make program because we have more movies that we body in a series that we make. we are trying to make things in your mind that are worth paying for where you don't care how many ratings points, how many millions of people are watching and if you think about the variety of hbo shows from in today's world, game of who throwns which is very popular and is coming back shortly, so stay tuned. or, "luck," the new series custom hoffman is playing the lead in that tv series. these are not the need to draw the maximum audience but need to

make an interesting show that really stands out and is different. >> but you must show what shows have the highest ratings. what is the highest reading shows ever on hbo? >> it is a draw roughly the same between "sapranos" and its fifth year, "true blood," now so those have been the highest rated. but we don't compete based on whether you watch those shows. we get paid if you sign up for hbo and there are other shows, think of "entourage," "east bound and down" and the last elections those don't necessarily have the highest readings but because they are on the network hopefully you will subscribe to the network and we have about one-third of the citizens in the united states subscribing to hbo every month and we use that money to make what we hope is a good program.

estimates you were the head of hbo when the aol deal was announced? >> yes. [laughter] >> and what was your reaction to the deal? [laughter] >> well -- >> you what my next question or -- >> we are in washington which is all we've aol. >> aol steny great thing. i think we all know the deal was in 2000. aol was the famous internet portal. everyone was signed up to it and the concern all loveless had one that was announced because we didn't know if it was going to work out well or badly but if you were concerned because aol was basically valued equal time warner. time warner had six or seven big companies, seven or $8 billion. aol was a new company making 2 billion, value the same. the question really was ortiz internet stocks and in this case the portal companies like yahoo! and aol -- are they going to

justify the valuations or are they going to grow into the always harder to tell internet future? and how come if you take a and aol or yahoo! or microsoft network and put it with the content with -- what does that do? is it going to work? i mean, what is the point of that? i think what became clear, not just with aol but also with yahoo! and msm is that it is not that easy to rationally connect and internet service like the portal or on psp with somebody that makes movies and tv shows and magazines. it isn't clear exactly what the connection is. >> that deal was behind you now and it is time warner. you still are a major magazine publisher. what is the future of magazines and the era of technology and people reading things online, why are you still in the magazine business? >> welcome the magazine is not the business, the magazine is

you'll hopefully read this every day. that's the content business. that's both true in various types of entertainment. think of style and celebrity magazines. we have everything from news to people with celebrities. all of those are quite strong in readership. there's no -- magazine readership is holding up, and it's migrating to the web. is migrating to the tablet. so, if you pick up any tablet that's in this room and you push a and "people" you can read a magazine for free because you paid for it on a tablet and we have put all our magazines that form. we are the first publishing company to do that. and we see the future of magazine basically as not just printed words on the screens and in print, but also moving pictures, because if you go to

the sports illustrated ad you go to the people application and you look for your going to find moving pictures of the golden globe and if you to go deeper into a story or person you can do that. so the power of all this journalism that we collect, which we can't print in every magazine the we put on the truck, we can still give it to you as a reader or subscriber to that magazine. >> years from today we will still be printed magazines, you and everybody else, you think you will still be printed magazines? >> we will be giving both but he will have your choice of whether you want to read your favorite magazine and paper or have it on your screen. some of the most profitable magazine i fought in the country is people magazine; is that the case? >> yes, it is. going up. >> you are a religious leader of it, i assume? >> yes, right away. [laughter] >> succumbing you are the

biggest producer of content i think for television; is that true? >> yeah, we are. at warner brothers making television shows to sell to cbs, abc, nbc and all of the networks and we have tnt, tbs, true tv and then we have hbo and cinemax. so basically the biggest parts of time warner, united states and globally is to television. >> cnn was started many years ago by ted turner. the time it was considered to have all news that work. today cnn seems to be in the middle. there are cable shows on the left and some of the right, cnn tries i guess to be down the middle. is it difficult to be down the middle when so many people want to have cable shows on the left or the right? >> you know, we don't -- i think most of us understand it that way, but maybe that isn't the full weight to understand it. so yeah, when we are down the middle, when we manage not down the middle without clouding opinion or the examination of

all the different points of view. we think it is journalism. so our company whether it is cnn or the print magazines, what we are trying to do, what we all grew up thinking journalism was, which is something that is objective that gets you all the points of view so the idea to us of shrinking what we do down to one or another political point of view because that is not the only issue of the political spectrum. there are a lot of different things happening in the world, and if you are going to cover them objectively, you need to cover them across the spectrum. but there's tremendous amounts of things affected not really by political thinking or political action for policy but happening either as technological developments, demographic developments, cultural developments. it's not to reduce it to politics and then to decide. to us, it's really abandoning what we set out to do.

stomachs on cnn you have larry king for quite awhile, and now you have a new host. how was that working out? >> it's working out very well. there's been a lot of coverage it appears that more is done. think of the arab spring last year. it's pretty lively when we have celebrities on. we are in these shows depending on the events of the day, we are mixing either some cultural or celebrity eve ensler mabey news events that happened in the world. he has a very good range to do both. so cnn itself if you think of the anderson cooper show every night there are that show now at 7:00 is we think it's broadening out in terms of what we are covering in the death and an .... >> the question i wanted to ask before, you say the ratings are up. but that's not hbo. that is a subscription supported

thing and an ad supported thing and the ratings are up quite well this year and the year before. there is some which we get from that. when you were watching that elections return flight to the of the channel to see what people are doing? >> absolutely. life with her now. dewaal probably do, too. you should, i think. and you get a fair view. so, i guess i travel overseas of it and want to ask about this, i wanted to ask again when i go overseas i like to know what is going on in the united states so i turn on cnn but i always have on something i call cnn international overseas which is telling me about rugby and soccer and things i don't care that much about. [laughter] why don't you just broadcast cnn that's your overseas. but cost less and most of your viewers probably americans traveling. what's wrong with that analysis? [laughter] [applause] >> there's nothing wrong with that analysis, and a lot of our viewers are americans traveling,

but the debate we have -- osnos stranger to that -- we've got a lot of people that are coming you know, resident of all the countries. cnn is one of the largest along with abc -- dtc. tv news sources and on the line it is the largest news source people turn to. so you have people of all nationalities all over the world watching it to get a view from the states and some of you but not exclusively so if we are reporting on what serves the american audience on cnn domestic and overseas, we would not be serving those people, and in fact, you said it very well. but we also get the other half of that to be is people saying colin you know, when i go on to watch the international and i am in india or nine in hong kong and i hear all this stuff about some municipal thing in the united states, why do you go on about this? this is all the world. i want to hear about your view

of what happened in the election in russia. that's what i want from cnn. so it's, you know, it's -- you can't please everybody even though we try. >> let me ask you today you are seen as by some people a large media company based in the united states and many of your best customers are the biggest business year. are you doing things outside the united states? how much activity to you have outside the united states? what are you doing in china were year and a flexible? >> we have about 40% -- 29, 30 per cent of the revenue of time warner is the united states, so it's quite international. and that's a mix of activity. think of what we do, we have the world's largest studio, warner brothers, producing both films and television shows, and half of what -- have at least, a little more than half of what warner takes in revenue for tv and film lies outside the united states. so, that's that part, and then if you look at the networks with

its cnn we just talked about or hbo, tnt, movies, channels we own specific to europe or latin america we have a lot of television channels all over the world. when you go to china this is actually less business done by american media companies because china as the developing countries we do not have a lot of unregulated or on edited content and not just news, but entertainment, and there's a pretty vibrant piracy market in developing countries, china and east asia, where people are watching the american producers movies they just aren't paying us for them. is it is a great business for somebody if you can known that. [laughter] >> is there any legislation you

have in mind that might -- >> i didn't really want to mention it. [laughter] we don't, you know, there should be some very considered work and thinking done by not just the media companies bhatia trent companies and the pharmaceutical companies, really every industry that produces intellectual property or high-value products that depend on patents or rights, and we've got to figure out how to have those be valued and not hollowed out by what is essentially otherwise would be a criminal activity for profits, it's not an altruistic sharing. this is people stealing drugs or media products or whatever it is. so we are made by microsoft, and essentially, consuming it for free or paying the unorganized crimes, and while there is a lot

of controversy is not so easy to figure out how to do that and make sure that in doing it we don't infringe on the freedom of the internet make nobody wants to do that, but they're ought to be a way to create a vibrant internet and preserve it years as the avenue for every kind of taking away of the product people are making. the aggregation of many companies, it was warner communications. they bought time and aol opened up. since you have been the ceo you have also divested some things, so you tightfisted your cable business and you have interest in making acquisitions soared a real would you like to grow by acquisition on this specific ones right now? >> you know this from carlisle.

what we've done and whether it is the by mr. side or acquisition side, we have tried -- with a lot and strengthen support our position in content creation, we moved would have been a bit of a conglomerate and cable distribution to what we know how to do, which is to make a really high quality movies, television shows, television networks, branded magazines, and so whether it is journalism or entertainment products, we have a pretty good now experienced management system and people that know how to do that at the cutting edge and to create evolution in the business models because we know how the film's start or tv started and in magazines. all of that has to be involved in today being on the internet

have a network for the viewers and consumers that have the business model to pay for it and we are in the forefront of that whether it is in publishing networks or the movie studio so when we look about the acquisition if we ever need any of those we are basically thinking about what do we need to help that transition and digital or to help us geographically take this capability and make it stronger somewhere else in the world. the man who put time warner to get there was steve ross and you worked there when he was there. what was he like and was he a brilliant dealmaker? >> he was a very forward thinking dealmaker having started in the funeral business into the parking lots coming into the media business. some people would say that sounds like it's all the same. [laughter] which continued that although --

>> how would you compare him? >> he wasn't a deal maker, he was an innovator to create companies to rethink what he created. he created to your local broadcast station put it out over the satellite in every cable system in america. that's how you could get mayberry on the superstation and your local channel. that's how that started. then he figured out how to create 24 hour news channel, cnn, and if you are in the business side you know 24-hour news. the real issue on the business side if you're a cable network person is how do you get that distributed and get the money from the cable operators in the subscribers to support cnn? then he took a hanna-barbera library and take the cartoon network's and so on so they grew

turner that way by the in house invention. secure in the entertainment business. it's often said that the ego is large in the movie business or the tv business. how would you compare and you go to hollywood to see your movie production people with your television people and your magazine people who are the easiest to deal with? >> i probably shouldn't answer that. [laughter] >> i didn't say it was the hardest. >> i would probably insult the movie people if i didn't give them the big ego award. [laughter] >> very diplomatic. now we are in washington today and i understand you had a lunch that hosted by the vice president with vice minister cameron and i assume you can't tell us what he told you but by

the fact in washington you spend a lot of time here and does the government affect a lot of what you are doing? >> we don't spend as much as we did. we used to have a regulated business on the cable company which when we were the biggest media company we spun off to our shareholders and if any of you ask shareholders time warner, cable and time warner you would have done better in any of the media company because the accumulative performance cited to pay that out so that it happened but since we now have content companies, magazines, networks and studios, we are not regulated per say, we come back in order to try to understand what a regulation is going and what the view in the public sector is how the media should default because there are various calls for intervention

that happen and we want to make sure that everybody is educated before some unintended consequences haven't. >> would you ever consider going to the government yourself if you could be appointed a cabinet position? >> i think it would be better for everyone if i stayed in the private sector. [laughter] trying to produce high-quality journalism and create an independent viewpoint in entertainment. to keep up with your employer of the world of technology devices to use comedy you use the ipad, the iphone, blackberry what is it that you walk around with and carry? >> the blackberry, ipad, cellphone more than just the apple phone. >> our company uses twitter and

cnn i think is the number one site. cnn has more twitter followers than any of the news. i don't think that they are allowed. it doesn't seem like a good idea. [laughter] stomachs and your job is you're willing delete kuran and one of the largest companies and when you are not running that, would you do for the relaxation? ar yighal fer, hiker, anything? >> i go sailing or skiing, try to hang around with my kids. spikelets suppose you are hiking when you come back to the house and come back to the tv and see somebody doing something you don't like to call up the show and say i don't really like this

how do you convey your concern about the show's? >> i would like to understate my involvement on the manners but a journalistic and entertainment understate. [laughter] here's what we try -- we try and this is serious we think it's important, and it's basically how we deliver the quality that we do in journalism at time and cnn and it's how we deliver the quality that we do to commercially recognize because we tend to out compete most of the other media companies in the movies, tv shows. we have the usual earnings in theatrical films and tv shows we sell to the networks and our cable networks and we are the lead share in the magazine businesses in which we operate. so, that's pretty good, and the way we do that is we have a very strong commitment to equality

and autonomy of our editorial people, creative people, and that doesn't mean that we have no supervision or involvement in how they try to create that quality. but obviously wouldn't work given the size, scope, diversity of what we do if we had political power coming down, second-guessing and punishing things that don't go well. so why try to support people and in trying things out and giving them the resources to do breakthrough things. and so far that's not just me, that is everyone in our company. that is the culture of time warner. >> since you have been ceo of the company would you think is the biggest challenge the ceo runs in the company today? what is different than what you thought it would be? >> there is coming you know, there's so much, and it's a good

i guess, there is so much to differ that flows around which that part is good. but it's hard to get people because everyone is kind of skittish and insecure about sticking to the more long-term program with averted is, whether you are trying to aim for a certain brand you want to create or to get a certain voice in a tv show or magazine whether you are trying to get results over the long run instead of the short run and this is not the first time somebody has said this. there is so much confusion out there that currently i would say the biggest source of the kind of strange and not particularly logical fact that you all here is connected to the development in the internet, because we all know that there have been so many breakthroughs and kind of stunning the get going because the nature of the internet connects to 7 billion people.

so it's it's got any application it takes off very fast, so everyone has gotten used to thinking my gosh, you know, maybe this thing is going to take over the world. so everybody gets excited and they don't sit down and say what is this new fifa look met? how does it work? it doesn't mean it won't be a new thing that has lasting power but the idea that everything is "game of thrones" role in normal things will not be overturned every thursday is about what happens, and clearly we are seeing so many of these. now the market wants to turn that because pro cyclical pushing on that can make you money on the wheel that the way down. it's one of the reasons why it all kind of runs away. but you've got to know, you know, which things are real developments and which are kind of fear and paranoia. >> the vice president pulled u.s. side today and said the business community is always

asking for something from the government. what would you like the government to do to help the business in the united states help your company or what would you think the u.s. government can do to help your company and other major companies what what you have said? >> i hope it's true, i don't like to say if we haven't -- i don't remember anything where we have the occasion where we have asked the government for anything specific to our company, and we don't think of that as appropriate for getting something -- >> generically. >> yeah. what we think strongly, not just our government, but the developed countries, we should support protection of intellectual property and try to do it in a way that is equal to how we support physical property and figure out how to do that because intellectual property is increasingly important to maintaining the most important human activities on the planet. and if it works for the physical

economy, it all to work for that. and then the second thing that goes with that, and all i will say we ought to try to keep putting forth a free trade regime in the world. and i know that means different means to different people and there is a lot to be worked out, but it's very much in the interest of, you know, freedom generally tough political freedom, freedom of expression, prosperity and the ability to develop things that tour the material needs of the people on the planet to have property protected and not stolen and to have free trade rather than, you know, arbitrary political units distorting what people want to do. estimate your in so many different areas of our economy and others say you get numbers presumably every month, may be daily about tv, sales or ratings or magazine sales. how you think our economies are doing now? are we growing at two, three, 4%

based on what you see? the united states, what is your biggest concern about the economy in the united states? >> the total is around three, maybe a little bit longer. the debate is where it is going to give under. in the businesses we are in -- and i would just take the television business as a bit of a positive marker on this -- the television business in the united states and across the world is very strong, and i'm not saying that so much as my interest in eight, our company's focus on it, it's not so short term this year etc. from the long term where is the business devolving, what business should we be in? the business across the world is one of the strongest businesses in the world. of the viewership and in america of the viewership and the number of people subscribing, the amount, the number of hours people want to use their tv, the budgets for programming and the quality of programming is up

dramatically. the earnings of all tv companies, producers were networks is up and that same thing is true in every continent in the world and in most of them at higher levels even, so tv is a bursting industry, and the big thing about which is even more positive than that is the television certainly here is going on the internet, and i think we have all seen how powerful the internet is and the devices you have connected to it pity that you can get things for the last 40 years drive by houses there is a blue screen running in the house, that screen is now falling you wherever you want to go, and we can talk about what is good or bad enough that, but it means of the things you choose to watch are now available to you whatever you want and whenever you want on whatever device you want, and it's getting cheaper

all the time. so the quality of it, effectiveness of that is going up, the price is going down. that is a fantastic business. it's basically the internet and television are the same thing. >> you don't care whether people are watching your content on the ipad or sony television to be the makes no difference based on -- >> do you care when you watch your favorite show whether the television -- under the screen you'll get a sony phillips i don't you do. estimate in your business career with is the time you are most worried about that you fought i made a mistake and i might not be around much longer? did something happen and you were really worried about? >> the whole thing has been fun for me, there was -- hbo was in the early years. they were in numerous ceo that

went over the side and then time warner was pretty turbulent during some of those mergers and the time at warner had a lot of predictions that all of the people would be killed and so on. all that happened. and then the hbo merger also think the biggest merger in dollar terms, to under 65 billion, when it went through in 2000. and the aol site, which was 165, ended up the value that less than ten, which cost 100 billion of write-offs the next year. which is more than what time warner was before the merger. and then the next couple of years after that on the third or so, that is not a success. [laughter] >> what happens when you're in a company that happens, that causes tremendous -- think of all the pressures and strains on

the good and bad behavior in a political organization like the company. you throw that into it, and really tests everybodys personality had relationships and confidence, and so from the management wondering who in the hell was responsible for this, up to the board, which came from both the original company's come to put a strain on everybody it's been interesting. >> as to the difficulty of running the company are their role models you tried to follow, people that you really admire that have run the companies and have done well? >> i didn't know many of them personally. succumbing yeah, i've had -- the way i think of that life had so many mentors throughout my time at time warner, and i think, i'm not acquit to name names on this but even some of the people that ran parts of our company for who

worked who did things that are not good or made mistakes, you can learn from that. they also did a lot of things that were good, too bad. so i basically tried to learn from everybody how did this happen, and why did this person get in trouble and, you know, connive are not to do that. islamic what would you like your legacy to be? at some point you will leave this position, may be many years from down the road but when you are looking back what would you like people to say that you did, and was your legacy? >> i really would like for the leadership and quality and authenticity of time warner journalism and entertainment whether it is our movies, shows the networks. i would like us to keep come stay and continue beating, being a top in terms of the quality

and not failing on the fundamental mission of using our mechanics to make interesting content for people and affecting the world that we which is what we have been doing, and in order to do that, and this is really the business part for the management, we need to evolve the business models that started in print magazines, tv over the air, movies on the screen in the theater, we need to involve those so that they work to support that creative enterprise the internet centuries so that everybody gets our products the way they want. but it's affordable for everyone on the planet to get it so there it increases that, you know, kind of civic aspect of what we do. >> and we need to keep the business viable, so we need to preserve the economic support and to say specifically i don't want to be vague about it there is a tremendous freedom that

goes with being able to pay for content i'm not saying it's the only thing i'm saying that it's great you can have advertising supported. some things think of the broadcast tv can be 100% advertising support, but there is a big misconception that have to leave to having things be free with some business model to leader be described usually it means advertising which usually goes to the massive scale and the low common denominator. that is not the answer to that. that is one of the things we should have in the mix, but there's given the huge advance just think of television if you open the world in the broadcast networks we all remember that. and it was good commercial stuff. but in order to select those shows, three networks divided up 90 present of the audience. if you showed in the 30% of the

american people watching, it wasn't a viable. shows did not get made and that was the world that we were in before we had the freedom and the choice to pay for what we wanted to watch and that was started with hbo and now it is 100 other channels from discovery channel to fox news to mt now you have quality and distinction because you are not stuck with just a scale business run by a giant platform that consolidates the ads. that's in progress in the television business and if you go to the internet, which allows all of us to get all the different channels and 100 new channels from netflix to youtube and to have more choice and diversity, more business models to support its, remembered as you go to that world there are some platforms that are essentially gigantic consolidated commercial platforms that is essentially

the internet advertising is concentrated in the hands of three or four companies let's understand what that means if you don't preserved the model of being able to pay for what you want to read or watch and if it goes in the ads of a platform that not only takes the audience that tracks everything you do and uses it in ways that the public is going to have difficulty keeping track with how as i information being used these are important questions and you asked what do i care more for our company to evolve in that speech and still provide the choice and quality of entertainment and journalism that we have up to that. >> we have time for one or two questions from the members.

question, one or two. >> how are you doing to the figure for the presentation. i'm struggling with your business model because if someone purchases hbo just as a network and as a series of different shows that show on hbo as the model asked if you are not concerned with readings how do you determine which ones you put in and out of hbo because you've taken things on and off during the evolution how to make that determination? >> if you are buying of the whole service and its after the shows, which it is, how we pick which ones we keep and that we produce from scratch? >> in the ratings construct. sprigg that is a very good question debating with each other should we do this or that and we basically try to put

together a total service of shows some of which are great hits that we think will be appealing and some of them are fairly narrow because we'd that story for that kind of audience group hasn't been served and they've never seen anything focused for them and we put it together in a service you all decide whether you want to describe to that service and you are not going to watch everything that is on hbo. it's the question of whether you value that choice of having those kind of unusual troop to the potential kind of stories brought to life and what that does, because it is quite a different model than say mass advertised ratings only which by the way i am not against that there are some big appeal shows that are made for the maximum audience, and there's nothing wrong with the commercial supported show, nothing wrong

with a huge commercial movie, it's just different kinds of needs in the audience, and what happens as you go through the spectrum is that the creators that have this idea or the directors that bring it to life for the actors who have to choose am i working on a movie or a show for hbo? and they now have a much richer choice than they used to about a lot of diversity and what they can do. we never saw this ten years ago. for big movie actors to be on a television show you've all seen that and so there is a lot of going on between the television business, and really an excellent movies and shows come and the movie business, which has anything from "the artist," to leave freely popular, you know, designed for the world movie.

>> all right. one more question. >> my question is what is your favorite show on television when you're watching television? >> i can't answer that because -- [laughter] first of all it's got to pick one to watch. >> it is our shows but secondly, then it's between our networks, which won't do. and then third, warner produces shows we sell to other networks that are really good to begin so, i'm sorry. [laughter] i love all shows. >> final question to be easier for you, do you ever get complaints about who is the time person or a man of the year and would you do? >> we always get complaints. [laughter] and we get more than complete. >> you get cancellations? >> we get voice mails, we get people that are really upset about this, which is probably good. it means they are still paying

attention. space i mention that time magazine was named the hottest magazine by and week last year? o'reilly plugs stuff on his show. [laughter] >> one more thing. every year when you have the sports illustrated swimsuit issue you always get the next week mother's writing in saying they want to cancel the subscription for their children or something like that. you actually have cancellations the week after the swimsuit issue or that is just not true? you actually have increases? >> there is the mother's canceling and the father is signing up. [laughter] i want to thank you very much. [applause] this is a map, the original map.

>> thank you thank you very much. [applause] [inaudible conversations]

if there's anything that concerns the american family today it's this colin cone our government hasn't caught up with the new fact of american family life. finally, some change. so why can't washington? new facts, mom is working. nearly 65% all mothers are working, part-time, full-time,

all the time. keeping the family together. making ends meet. making america more prosperous. working mothers need affordable daycare and the pay they deserve. too often they can't get either. a year ago

the keynote speaker today's atlantic magazine for them on the economy was former federal reserve chairman paul volcker. he said the tax code should be overhauled and the u.s. should consider a consumption tax. [applause] >> good afternoon. my assignment, my privileges to introduce paul volcker. i can see you slowdown, david, don't be in such a fresh. tell us how you're doing. [laughter] you're good to ask.

thank you. i'm fine. i have the honest thing i want to tell you about to get i want to tell you about the occasion when my wife and i moved from my bachelor's apartment to our starter home. it's 1986, and we are of the closing of the selling of my apartment, and i was introduced to the real-estate agent by the department and was told her name was jean dixon. in a break i turned to my real-estate agent and i said is there any way this is the jeanne dixon and she said yes, she is a parent who knew that she is a capitol hill real as the agent. there was nothing interesting about that, but when we finished, we are saying goodbye to ms. dickson and she took my 22 year olds wifes hand, put it in hers and turned the palm up words and said my darling you're going to have the loveliest life

full of prosperity and then she dr. palm, face up, turned back to just shaking hands and she said i do so hope you enjoy your new house. [laughter] so the connection between paul volcker and my starter house in the 80's, directionally i don't know that i would have been buying a house in the 1980's. i didn't know if many of us would be and i don't know how much of the housing market there would have been without paul volcker. 1979, december of 1979 jimmy carter appointed chairman of the fed. what i would like to do is read to you a bloomberg profile of that moment. so october 1979 after the appointment was controlled by the senate, he convened a secret saturday meeting with governors some will be offices they were going fishing for the weekend.

you convince me to switch the agency to the interest rates surged from the economy into a recession. the new medicine has to be painful to work said fred ed schultz, vice chairman of the fed. there were demonstrations of reading in some of the buildings in washington by the groups ranging from home builders to car dealers. volcker received car keys in the mail symbolizing so the full country slaughter to read the products were almost 8% in one quarter, yet the remedy worked 1986 inflation fell to its lowest level in two decades. as of october, 1979, this sighting of the story, inflation was 1.1%. when i was married in september of 1986, it was 1.5%. the canadian theologian who thinks the finest quality character is what he calls a long devotion in one direction so we are in our six the decade

of the teaching and public service. remember 1962? some of you remember 1962. gary powers released by the soviet union. johnny carson takes over the tonight show, they exculpate fidel castro and at the treasury department's 63 the deputy undersecretary of treasury in the nixon administration is undersecretary of the trade for international monetary fund affairs. 1975 the chair of the new york said, 1979, chairman of the u.s. fed until 1987. five presidents in a row, ronald reagan by kennedy, reagan, a 20 year hiatus largely teaching finance work in new york and then the return to the national spotlight in 2008 with the interests of barack obama and subsequently his role in the

economic recovery in four years. there is the felker rule but for this moment a good thing when you get to introduce paul volcker to the podium. so here is paul volcker and steve clemens who is my colleague of the atlantic media. [applause] >> thank you, david. it was wonderful. >> ladies and gentlemen, that was a paulson introduction. part of the introduction that made it quite elegant and not the only store in the room. [laughter] i will say one thing about the introduction, david. i've heard of a lot of thought extended into those years and that stands out as the most recent we have quite a challenge

here today. i have, you will have but my account when i look at the program, there are plenty strong minded economists in the program and they come from across the intellectual spectrum, they come from a range of occupations, and then of course only a sampling of all the professional tolerance that is in this room right. collected many years of active duty could academic learning and experience to draw upon and you would think that that would count for something. it keeps coming to my mind with all this collection of wisdom available, i have to ask how did we ever get into this economic

mess? what is even more in doubt is how we get out of it. now maybe i'm wrong because i'm told that at the end of this program larry summers will be here coming and he has the responsibility to qualify all of the analysis and what we should do and we should not do and then go out and do. my assignment is a little different. i'm here to be a little provocative, and i do want to emphasize a longer-term perspective, and i do have some idea about how we would approach that longer-term perspective. what we all know is the world of political economists has lost the self-confidence that it once had. i entered the united states

treasury in the midst of the keynesian thinking. the consensus then was, and i can give you quotes from some of the leaders then who have conquered the business cycle. instead, we ended up with a long period of stagflation more recently in the 1990's we had those years of the washington consensus of rational expectations, of the deficiency. we even for a year or two managed to balance the budget. and then without much anticipation, it all went bad.

we have any oil in pressing approaches in the policy. the period of success seems to read over confidence in the excesses as the excess produce the next crisis. it was little then and not little-known the cycles and to the theory of the seemingly inevitable repetitive financial crisis that nobody was listening. the economy has spoken of the last few months. my impression is that before we

can claim anything like success, the rising consumption partly based on the proceedings, and the kevin inventory is not a strong and lasting recovery. housing and commercial construction remaining flat business investment has come up from below level but is still around under previous people. exports. i don't have any silver bullets for the short term gross profits. i do know that we have to do what we can to sustain a recovery. another is maintaining.

that isn't a recipe for this stand economy over time the question stimulus to long will be counterproductive. now i suspect to the sustainable growth in the economy. we are in an environment of well-financed resistance to change, and a deep-rooted political polarization. now i could speak at length about the needed reform in the financial system. i had an all of lot of opportunity to that recently. so let me say of financial reform as worked halftime.

some important elements you've talked. with both the accounting and the money market funds to mention some importance that so far have received very -- it is difficult to implement the new standards. important parts of the derivatives dealing with too big to fail and yes, the paul volcker rule as well. but i want to emphasize something different today, the problems of the financial system, but the in balances in the real economy and what to do about them.

the simple fact is the united states is a high consumption economy. that has been true for years, and it's been true recently even when the income has lied. .. but instead we have had concentration of income growth at the very top of the

population, 1% or less. the income distribution that has not been seen so top heavy since 1929, which is that kind of interesting point of comparison. something similar went on with the federal budget. we reduced tax rates and increase both military and mandated spending. its natural manifestation of those private and public deficits with rising indebtedness. the nation as a whole is inexorably led to net darwin from abroad, as high as five to 6% of our gdp. and nothing appears to threatening in the surplus countries were easy to sell manufactured goods to us to

satisfy her consumption desire and to accept payment in dollars. interest rates were low, but lower overtime and for the time being given the problems in europe and japan. in the absence of any strong alternatives to the dollar in the american world, our ability to borrow cheaply abroad remains but i also think it's true that borrowing is symptomatic of an underlying disequilibrium that simply can't be sustained indefinitely. who could have imagined china during this century would accumulate $3 trillion in reserves and other foreign countries are in effect financing a large chunk of our budget deficit as well as our

balanced payment deficit. the inescapable conclusion to me is that it's not too soon to think hard about the medium and long returns, even as we continue with the stimulus right now. now i know there is no political consensus today. strong forward-looking action appears beyond reach, at least in this election year. but the electoral process does not produce some common ground for constructive policy decisions, then i fear that sooner rather than later unbearable pressures will come to bear upon monetary policy and some combination of a weak dollar and rising interest rates. our national institutions and markets, even if we implement within again be in jeopardy. none of that i suspect is new to

most of you. that budget deficits certainly grab our attention day by day, year by year in these political processes and otherwise. i think the result has been more political posturing then thoughtful reform. i wonder in all my own naïveté that he whether he even in this so far contentious and demeaning election-year we cannot clarify the issues and it least lay the groundwork for needed reforms. we have to start the proposals of the rightly named the two little respected national commission on fiscal responsibility, a long name for the simpson-bowles commission. after domenici commission had

the applauded budget agreement last summer in the midst of the debt ceiling debacle, and all of that suggests some grounds, some common ground. but my point is, none of those approaches went far enough in terms of the economic program we really need. to set the stage, let's start by setting out some points that seem to me to command support in general terms if not in detail. right across the political spectrum. we want a strong military and national security system. if so, and i think we do, we have to resume for the time being cuts in those areas will have to be reasonably limited. do we need to pay more attention to our infrastructure and if so

and i think that is correct, think that means more spending rather than less, much of it through state support and states are very heavily challenged at the moment. we do need to sustain our much admired systems of higher education in particular but education at all levels. higher education piece in particular is being threatened at the state level by extreme budgetary pressures. we do need to bring about a financial balance in the social security system in the decades ahead and we need to do it without significantly adding to the reliance on the already high payroll taxes. and of course there's the bigger challenge of all in the health care expenditure pattern. i have nothing to add to that

particular subject, the health care side, but i do want to point out that i have seen no new proposals that do not conceive that it will continue to rise faster than the gdp deflated. it's just a question of how much. now today the federal government spends close to 25% of its gdp. that's well above any previous peacetime amount. some of that does reflect stimulus spending which should diminish over time, but even taking literally the most extreme proposals of the simpson-bowles commission, the spending level will only go down to 21% of gdp. that is well above past levels and under their own planning would take years to reach that

goal. so even then, we look at that spending level and look at the present tax system and we can't come close to balancing the budget. in fact the revenue system is so full of exemptions and credits that it is so complicated that it's on comprehensible. as things stand the tax rate is unlikely to regain and maintain its historic average of 18.5% of gdp. nor does political reality administrator capability for economic analysis suggests marginal tax rates to be appreciably increased across the board and still generate enough revenue. the implications of this very

large change is necessary. we need to be structural, we need debating and this is the year to pursue that process. debating even beyond the simpson-bowles approach. that commission and other informed discussions tend to take a page from the reagan era reforms of 1986. ronald reagan approved taxes three times after the initial reductions in tax rates. in 86th -- were in many instances reduced and in some cases they were ended and the resulting revenue increases it was argued with permit lower marginal income tax rates consistent with a net increase in revenues, making a

contribution toward reducing the budget deficit. so a simplification of revenue enhancement, making it be possible in one fell swoop. a complementary approach of simpson-bowles is taken with respect to the corporate income tax. now all that seems to me part of the constructive debate, perhaps politically possible in time but i don't want to stop there. my plea is for -- we do need tax reform. we need to think hard about how we rely more on consumption-based taxes, avoiding to move business abroad and think about possible integration of corporate with personal taxes. we need to consider the impact

of federal spending policies on state finances. with consequences for infrastructure support and medicare responsibilities. i might remind you that between $50,600,000,000,000 each year go to the state. we need not do incidentally for those of us us of advanced age, clarity and consistency and estate taxation and what everyone says about that debate, clarity and consistency do not apply. we need to consider how all tax spending decisions bear upon the desire for energy independence, bear upon the threat of global warming and the environment. so all of that is a call and i could go on obviously much longer. is it impossible to do?

all i can say is i hope not. better to set out a long framework band settle for inadequacy before the debate even starts. consider where there are not in fact areas of common concern and possible consensus upon which to build. most important, we need to understand how much is at stake. the united states cannot be an isolated island. we live in a world of swirling concerns, economic, political security and that poses large opportunities but also with perfectly obvious grave threats. one part of the problem is the united states can no longer

claim almost unchallenged leadership of the world economy. decades after world war ii it was the american strength that shaped the world economy. the economy increasingly was market-driven, open to international trade and investment, with unprecedented standards of living and whole nations rising from poverty. in relative terms we have lost economic position, but we are still the largest, richest, most innovative economy, able to develop and attract the best talent, so we can still bring our influence to bear. and for that, we have to do

better. there is no way the united states can charge in isolation. we want to help shape those forces in the world and we want to shape them in the direction of democracy and prosperity. we can't do that with military force or political influence alone. indeed, only as strong economy can support and assure our national security, maintain a sense of global leadership and provide a bulwark against opposing systems. a strong attractive economy is worth the effort that it will take to rebuild some sense of common interest and to undertake economic reforms we need. that is a big challenge.

it's a challenge that may seem at odds with reality but when we sit back and the election is over, then we had that or be prepared. as was said not so long ago by those in the new administration, let's not let the lessons of economic crisis go to waste. let's hope that can be a slogan for the next administration as well. thank you very much. [applause] >> paul thank you very much. for those of you who don't know him, the editor-at-large of "the atlantic." it's a pleasure to have all of you here. yoolasee when we do events it's

like flying on united airlines. you don't usually let people leave their seats. we will let you do it all at your seats and we'll do that as we are discussing. we are not taking a break after this so thank you very much. paul the first question. today "the atlantic" issue is what i like to call it money issue. they call it a finance or economic issue. ben bernanke is on the front and i was talking to some other people out in the room who are basically ones who see bernanke as a villain as opposed to a hero and they see bernanke is a bill in for keeping interest rates so low that either inflation or other bubbles are being creative so if you were fed chairman today would you have the fed rate where bernanke does? >> i'm not there so i don't have to make that great judgment. [laughter] and i have a regular practice of

refining. when i saw that bernanke is that he wrote, bernanke as a villain, it reminded me even today somebody in the street comes up to me and says he know you are that sob that's presented my four -- poor mother and father from buying a house in the early 19 80s because interest rates were 15% and then i go on a block or two and someone says oakley you are paul volcker. thank you. my father bought securities act 15% that put me through college. thank you very much. >> let me provoke you for a moment and ask you up at your view about what happened during the financial crisis and the creation of financial instruments, derivatives which you have said it created a lot

of confusion and opaqueness and distance essentially between regulators and those playing in the markets. some might say mr. volcker, you are well-meaning but you don't understand the new math and bad just like steel getting totter and stronger, that you have a generation of people that decide what happen with the financial crisis nonetheless there is strength in the kind of leveraging that is out there and there has been an overreaction to financial innovation. >> i heard all those songs about the benefits of all this very complex financial engineering and how it was diffusing this. the impression was risk kind of disappeared and if we only can solve derivatives to people who have use for them that's fine but for some people who want to

gamble with them as well, you have a situation. some of these numbers are kind of enlightening. before the crisis, credit default swaps did not exist. they were only invented in 1997 for something like that. they just didn't exist earlier. by 2007 or 2008, 10 years later, there were $60 trillion worth of credit default swaps outstanding a credit default swap is supposed to provide the kind of insurance policy. you get one of the swaps to protect yourself when you hold a security against default. case in.right now. how do you have $60 trillion of credit default swaps outstanding to ensure $6 trillion of the

total debt outstanding? it suggests that something is going on here that didn't have a very close connection with the real economy. it was elements of the casino, very complex casino with all sorts of intricacies and when i came under pressure and the system came under pressure it collapsed. i like to use a kinder word then collapse and i suppose most bankers would not say collapsed, but collapsed is a pretty good description when it took hundreds of billions of dollars of government support in the united states, in u.k., in europe, to japan to support the system. that is not a viable dynamic private enterprise system if it's relying upon that kind of government support when it came under pressure. that doesn't save the financial system was responsible, but what

you do know is that it fell apart when it came under pressure. >> today, the remarkable op-ed in "the new york times" via gentleman who just quit goldman sachs today, maybe then last night and orchestrated his resignation letter along with the lines essentially as an indictment of this person of goldman sachs for playing in a casino economy in what he considered to be a responsible ways in ways and ways to really did undermine the interests of the country. do you have any thoughts on this piece? >> is rather a strong piece but it is a reflection of a change in market mentality over let's say the past 20 years or the past 15 years. goldman sachs has long been the most respected of the investment

banks. it's very sensitive to avoiding conflicts of interest. two things, just to take the example of the firm. i don't want to pick on them but their partners were at risk earlier. in the mid-'90s they went public and bought a big trading operation and back, like other investment banks, became a trading operation rather than a largely underwriting operation. and that changed the mentality and i'm afraid it's a business that leads to a lot of complex of interest. it leads to enormous compensation when you are doing well, and that is obviously very attractive to very young people. all these firms can attract the

best of american graduates whether philosophy majors are financial engineers. it doesn't make any difference if they are good. a lot of that talent was siphoned off into wall street but now we have the question of how much of that at david he is really constructive in terms of improving productivity and the gdp. these were brilliant years for wall street from one perspective were they brilliant years for the economy? there is no evidence of that. the rate of economic growth and the rate of productivity did not pick up. as i noted earlier, the average household had no increase in real income during this period math, virtually no increase so we had an unbalanced economy and since you have given me the opening to have a few advertisements, the so-called

volcker rule and dietary aiming aimed at speculative trading, not in general but speculative trading by commercial banks by the nature of protecting the government and directly subsidized by the government and should the government be subsidizing, protecting institutions that are engaged in essentially speculative at david he often act basements of customer relationships. and does it lead to a culture? does it lead to conflicts of interest that we would just as soon do without? so, i hope the reform will make progress in getting a little rebalancing of incentives in the financial system and return, a full-throated return to old-fashioned concerns about lending to small and medium-sized businesses and taking care of your deposits and

a critically important function of the banking system is making payments rapidly, accurately, all over the world. that is a chopper commercial banks. it is not a job in my opinion or special institutions. hedge funds, people can speculate individually or whatever they want to do but they shouldn't be protected by the government. the difference is, those firms are going to be speculating and doing proprietary trading should not be vesting by the government when they get in trouble. that is their own responsibility. [applause] and most of it, take the hedge funds, they are largely in the past finance by partners, limited partners and finance big wooded -- not basically buy equities as they should be.

>> let me ask you a question about the volcker rule. is a rather volcker rule you were hoping for a more robust version of this family ended up with. is that an accurate? >> i don't think the question of robustness. in fact all this fighting about response from from banks and so forth is that it is too robust and they are complaining that -- >> they want to make it a little thee and not a big v? >> that's right. they say with all the detail you're not going to give us any room to breathe so to speak so it's really a reaction. this gets into a recurrent philosophical question about winans for regulations. if you put out some broad principles, try to make sure

that the banks or whatever understand the principles, then you check up on them later, without trying to mastermind all of the particular transactions, that sounds sensible but it goes against the regulatory philosophies in the united states and particularly the philosophy of those regulators. they say exactly what you mean by this? exactly what you mean by that? if we hold a security for three days, is that okay but four days not so are you telling us? obviously you don't want to do that. that is what this argument is all about. >> and a little while we are going to have larry summers and bob rubin is going to join us right after you. their line of people who have been key economic advisers to presidents and one of the people is coming up is the one that has the key job now which is gene sperling the national economic adviser to present on the.

when i looked at the jobs and infrastructure proposals that they put forward and as i dug into it look like a lot of those pieces were things that you in austan goolsbee had worked on, thought about sometime earlier and so my question is, do you think the president is three years too late with the jobs infrastructure proposal? would you have sequence, what the obama administration put forward differently? would you have done more on jobs and infrastructure in the front and? >> i have to say with all respect to the united states i would have had a sophisticated program. we haven't got that kind of a problem. what we have is the back wash like a tsunami hit us in the financial system. i did a lot of damage. we now have to recover from that. this tsunami was was dead or good dead in this economy relative to the size of the

economy doubled and increase in increase by two and a half times they think. relative to the size of economy over a 15 or 20 or period and at the end of the day it strangled us. as soon as the prices happened whole building prices cut down and we could not handle the debt. people had to save during this period math because it was so nice to borrow, barro on the mortgage and you have a home equity loan and then you got another loan on your credit card and it was all great until the music stops. so, we have been living, i understand it, living in a situation where as i said some people said this morning, there is no magic bullet. someone is going r