and some real meat in the recommendations. isabella mroczkowski will speak about the peak a 0 --pko. isabella will let you know those and mike and i will wrap up and we will turn it over to you and there will be three microphones around with in turns running around with microphones and you can stand up and identify yourself and ask your questions and i will ask mike green who knows most of you to sort of amnesty themcee that aspect of presentation. this report comes at a time of drift in our relationship. we are not assigning blame. we do note that kurt campbell who is an excellent assistance secretary for east asia and pacific and his colleagues in the department of state and colleagues have done their best to keep this relationship stable

at a difficult time but because of this rise in china and the difficulty emanating from north korea and the dynamism of asia and because of broader security concerns and i mean iran and others. staying in the same place is not sufficient. we have got to move forward. from our point of view for an alliance such as ours to exist and thrive we have to approach it from the perspective of a tier 1 nation. my point of view a tier 1 nation has economic weight capable military forces, global vision, and is willing to take leadership on international concerns. it is clear as you read our report that we think, u.s. can better support this alliance and we should do so but there is not a question in the minds of most of you and certainly none of us

about the fact the united states is going to be a year 1 nation and will continue to be a year 1 nation. but japan, however, time for a decision. japan has a decision to make. does japan continue as a tier 1 nation? or are they content with tier 2 status? if that is okay with the people of japan and the government of japan recommend you close the report. don't read any further. there is no need. from our point of view, we say japan is capable of remaining 81 nation but we have questions about japan's this position. the u.s. needs a strong japan. we believe japan needs a strong u.s.. for japan to remain standing shoulder to shoulder with the

united states she is going to have to move forward with us. you will see at the end of our report we have recommendations for the united states. recommendations for japan and recommendations for our alliance. let me read from joe nye and turn things over to mike green. he has asked me to say the following. for two decades i had the pleasure of working with richard armitage to promote our view the united states alliance with japan is the essential bedrock of a stable and prosperous prosperous east asia. this is the third in a series of bipartisan reports designed to develop better understanding of the importance of that relationship to the united states, to japan and to the world's and we are appealing to americans to rise above any partisanship in reaffirming the importance of our relationship with japan and to our japanese friends to elevate their sites

in thinking about strengthening japan's positive role over the long term. some recommendations will be welcome. others not. all are offered in the spirit of friendship and concern for our future together. thank you. >> thank you for coming. let me say two things before we turn to specific assessments and recommendations. first, what distinguishes this report and the two reports this group produced previously in 2000, and 2007 is the premise that the united states as an asia pacific power is right to enter a strategy in an alliance with major maritime power on the western side of the pacific, japan. and this is not a question of choosing between japan and china and northeast asia or southeast asia but how you approach the region which is why in 2007 the

title of the report was u.s./japan alliance to get asia right and we had to get the alliance right. this has a long pedigree in the american strategic fought for data. 200 years ago in the midst of the war of 1812 captain david porter on the uss essex was cut off from the eastern seaboard by the royal navy and called his officers together and announced an audacious plan to round the cape and attacked british shipping in the pacific. the first u.s. warship ever to enter the pacific. merchants from new york knew about trade with china but porter came back and said as our maritime power we have to anchor our presence in a relationship with japan. that influence commodore perry which influenced the great naval strategists -- joseph crew and others said we did not have a punitive peace. we needed a piece where japan would be an anchor of stability.

our cold war alliances were on that and when rich armitage was secretary of defense in the reagan administration the maritime strategy for dealing with the expansion of the soviets was premised on its maritime approach to the region. when joe nye took over as a sins sins -- assistant secretary 90s it has been a bipartisan approach ever since in the clinton/. /obama administration that recognition of our role as the asia pacific power but importantly as a maritime power. that is the premise from which we started these reports. the second point is the united states has an interest in friendship with japan and alignment with japan but we have a national interest in japan being as secretary armitage said a first tier power and one of the assumptions we brought into this report was that japan can

achieve that. and unleashed sources of influence on the international scene. japan for example in the area of what we call soft power. i finished a pole with chicago council that will be announcing soon. japan is the most -- the u.k. and canada. japan is consistently ranked number one or 2 or 3 in the world in terms of respect. samsung economic research institute of a global survey on national brands around the world. after march 11, 2011, and the response moved up, in soft power japan had enormous potential. how do you cap that's? and was sufficiently utilized. self-defense forces are usually listed as the most trusted

institution in japan. resources and capabilities are there and as we suggest in the report loosening some of the constraints would give a real asset to japan and the world. the role of women goldman sachs has done studies that suggest in their modeling that if japan had participation in the work force by women that gdp growth would increase on an annual basis by something like 0.3% which is considerable. trade. korea for example has 36% of its trade covered under free trade agreements. real dynamism in that economy. japan the number is 16%. joining into free trade agreements not just the fda or the scheme that david described, would unleash competitive forces in the japanese economy and give japan real influence in shaping

regional trade and financial architecture. not just about bilateral economic relationship with the u.s. but japan and powering itself economically and internationally by being a leader in forming trade agreements. these are some of the areas and there are others where despite the well-known challenges japan has with demographics and energy and so forth there is real potential and part of our purpose is to explain why it is in u.s. interests that the potential is there. >> thank you, secretary armitage. good morning. the importance of energy in our economy and national security is often overlooked but cannot be overstated. something we took on board when our group did this project. in the context of the u.s./japanese clients we identified several major energy challenges and opportunities that are emerging. i would like to review four of

them. first, nuclear-powered. we are very mindful of strategies of march 11th, tell -- extend our deepest condolences to those affected by the earthquake and tsunami and subsequent nuclear shutdown. the fukushima disastrous setback for cause of civilian nuclear power in japan and elsewhere but we applaud prime minister noto's decision for a cautious restart with two reactors so far. before that japan was the world's third largest consumer of nuclear energy for a good reason. nuclear power is the only substantial force of emissions free electricity generation. its resumption is critical for japan to sustain economic growth and meet reduction goals. the nuclear shutdown is starting to reverse japan's extraordinary progress in reducing its oil use. 1970s 80% of the use was oil driven down to 42% in 2010. last month fuel oil consumption

in the regional utilities is up 64% over a a year ago burning more oil to reduce those electrons that nuclear no longer does. a permanent shutdown would stymie responsible international development of civilian nuclear power. as china plans to join russia, south korea and france as major vendors of nuclear power japan cannot afford to fall behind. these plantss will be built all over the world and the world will benefit from japan's efficient and reliable reactors and nuclear services. for our part united states we need to remove uncertainty surrounding disposal of nuclear waste, through our permitting processes and tokyo and washington must take on board the lessons of fukushima and resume promoting safer reactor design and sound regulatory practices. natural-gas, and how it can surprise you. who would have fought the united states as an exporter of natural

gas, large increases mainly due to hydraulic fracturing being deployed turned the united states and the world's fastest producer of natural gas and make substantial exports possible. and begin exporting in 2016. when we widen via panama canal it will allow 80% of the tanker fleet to pass through. the opportunity is obvious. japan needs natural gas and we have it. the country started natural-gas trade going for the united states can and should increase exports to japan. three things are necessary. the united states must reject calls to limit exports of energy. this is not a time for resource nationalism. time for resource alliance. we should not be inhibiting

private sector plans to build export projects. next the united states should put japan on a level playing field with international customers. anytime of crisis japan should guarantee no interruption in supplies barring a national emergency and previously negotiated commercial terms. the third area is protecting international energy security and global energy comments. the vitality of modern civilization and future global growth will depend on increasing access to fossil fuels especially oil for longtime. as the u.s. and north america are less dependent on imports the economy will rely on energy supplies from the persian gulf with nearly half the world -- persian gulf is a crucial supplier of lng and the liquefaction facility provides 1-third of global lng supplies. as china and other nations follow in our footsteps and become major importers of crude

from the middle east global peace and prosperity will depend on stability of the region and security of the sea lanes in between it and respective markets. japan joined the anti piracy missions off of somalia in 2009 and this year cut imports from iran by one third in the first five month in compliance with sanctions. going forward tokyo's increased participation in multinational efforts to combat policy and protect persian gulf shipping and confront regional threats to peace posed by iran's nuclear program and secure the sea lanes will be needed and welcome. fourth and final area methane hydrates. this is longer term and inspirational. methane hydrates are natural gas crystals in deeply buried ice formations. and south central japan at ten years of japanese domestic consumption. globally the resource has been estimated to be as high as seven hundred thousand trillion cubic feet well over 100 times current proven global natural gas

reserves. like shale gas several years ago we know it is fair but haven't figured out how to get it out of the year's crossed safely or cost effectively but these are technical problems countries with skill and motivation can eventually solve. japan and the united states cooperative research and development of large-scale methane hydrates production. in may u.s./japan fuel trial successfully extracted methane hydrates by pumping in and sequestering co2 demonstrating energy security and environmental benefits. in light of the transformational potential united states and japan to accelerate progress on researching and developing cost-effective and environmentally responsible production of methane hydrates. a cautious restart of nuclear power. a new chapter in bilateral natural gas trade, enhanced protection of global commons and methane hydrates appear to our group as worthy and promising areas for the alliance to deepen

and succeed. thank you. >> thank you. can i ask? >> my gratitude to to csis for hosting a san you for organizing this effort. in trying to say where we are in the global economy and comparing it to the moment when we were last together in 2008 what a difference four years makes. we were in the trough of a u.s. financial crisis that had morphed into a global economic crisis with the unthinkable happening. contraction in world trade. where we are now and while it is certainly not the optimum moment in the u.s. and the global economy we have the lowest consumer debt in decades. the u.s. exports have increased 43% and they are on target to

hit president obama's aspirational 50% growth in u.s. exports. american companies as opposed to four years ago are sitting on top of more cash than at any time in history sins 1963 positioned to take advantage of economic growth. bob has described very dynamic energy situation. i would submit there is as much dynamism in the manufacturing sector with 3d printing and other technologies offering significant pharmas to two countries that are the absolute leaders in innovation and productivity in the u.s. and japan. what do we do with this? how do we stepped out of the shadow of 2008 and where do we take our shared future? as we -- i should say on the investment side we have seen some largely and chronicle music

on investment that is very important sins 98 to 2010 last year 2010 available. we have seen a doubling of u.s. investment in japan. really good news. we haven't seen corresponding movement in this direction. what is clear is underneath the surface for companies when we wring our hands about some features of the relationship, that anxiety, not shared by a lot of corporations. they see the promise and want to act on it. as we started to assess this and come up with recommendations, we were challenged not to think about to use the oldest man for in trade how to keep the bicycle upright moving forward but to how to create a new paradigm that not only operating u.s. and japanese advantage but improved outlook for trade for the

region. i will ask david to talk about where that thought experiment is. >> japan is a nation in great challenge. tremendous prospect for opportunity for economic advancements. japan is a country that has never captain to the service sector prospects, as a country that faces its most rapidly declining working population, debt and deficits we frequently look at the prospects japan may face but we don't pay attention to the opportunities for japan to advance. we forget that japan is the

second-largest economic partner in the united states especially if you account for japan's productive this in china. the armitage nye report recommends that agreement with japan that would cement the relationship not just between the u.s. japan economies but between canada, mexico and north american free trade. the context of this is japan already has the free trade agreement with mexico. japan has announced in march the agreement that will negotiate for free trade with canada and there really is no reason the united states should be left out of the process. what we see is an opportunity for japan to address its

long-term investment in economic prosperity by creating a much deeper stronger relationship with the u.s.. taking advantage of the huge economic opportunity for investment returns on capital are very strong. we see free trade agreement as a way of increasing the sense of confidence between our countries that will allow japanese investors to flow into the u.s. and north america writ large in a more unfettered fashion. we particularly see an opportunity for japan to invest in the energy sector. bob mcnally talked-about natural gas. the u.s. is awash in natural gas. prices are washed out. there is relatively little investment going on because of the signatory. japanese companies have an

opportunity to take advantage of canada but also in the united states itself to increase their investments. the u.s. has to change its policy and make sure japan's investment in security and safety in american natural-gas energy opportunities and the only way to do that is through a free trade agreement. see the bottom line is free trade is not as complicated and equations for japan to solve as people think. working population among farmers, japan, alarmingly in decline. the agriculture issues blocking free trade for years, really not that substantial. japan negotiated free trade in many countries. the united states -- people thought they couldn't. including mexico. i think we need to break the

barrier, the sound barrier of free trade with japan and move forward in a way that will take our alliance for the next 59 years. >> thank you. will you make a few comments leaders led 18? >> i will. i really liked that sound bite david gave about breaking the sound barrier in the main deck of this section is japan and korea share extremely important trilateral national interests. are defined issues as important as how do we together approach the rise of china and how do we

deal with the issues of north korea. these are very difficult issues that are key to the stability of asia and the piece of the region and the growing friendship between the united states and china and japan and korea and china and we really have to focus on these issues together and we can't achieve our common interests and goals unless we all work together. there are lots of areas to build trilateral cooperation. we talked about energy cooperation in japan in the midst of nuclear incident and issues resulting from that and the cutback from its nuclear power position. may be tempted to not recognize it is very important worldwide roll in the promotion of non-proliferation and safety of nuclear power. japan's role in that is well recognized and respected around

the world for japan to retreat from that position and not move forward would be a big mistake. likewise south korea has important nuclear safety track records and its role of transparency and together the three countries, united states, corey and japan and continuing to promote the safety of nuclear power and also continued commitment to non proliferation. the secondary at is overseas assistance, where we share common interests in japan and korea are supportive and instrumental promoting objectives common to us including iraq and afghanistan as this area of cooperation can continue to be a model. the third area we will get into in more detail is u.s./japan

security cooperation. and with korea. there has been a lot of bilateral activity going on between corey and japan below the radar screen that can be built and promoted and encouraged and together we can move forward and having crossed servicing agreements between the two countries, japan and korea and having a sharing of information. and a long way to promoting the interoperable liddy and cooperative spirit we share. i am really a product of the korean war literally and figuratively. my parents met in japan. they were married in japan and i was made in korea. i was conceived in pu sahn. i was born in america. i can really empathize with japan and cory and all the

emotions that go on in the national interests. both countries have legitimate steaks and legitimate questions involving historical -- it is really emotion and gets to the depth of what it means to the japanese and korean. and these were issues were addressed by the people themselves. the japanese government and korean government, going against public opinion. and a little bit far-fetched. and these entrenched and heartfelt positions. we are asking for in this report is we look at encouraging

dialogues that exist between the countries and historians get together and get to a point of consensus where people talk openly and broaden this into a public -- we are interested in this, facing a very difficult future in northeast asia and we need to go forward together. united states, japan and korea to address these issues. thank you. >> randy, could you in lightness on the rise of china please? >> just a few comments on china. as secretary armitage noted, it is the backdrop to everything we are talking about. certainly inform the administration's policies. we would be talking about a rebalance if china wasn't on the current trajectory she is on and our report would look different.

this is a central theme -- this has been favorable for china. china's meteoric rise was made possible by peace and stability and the regional presence our alliance provided and that will continue to be the case in the future. this is an implicit rejection of what we hear from some chinese friends that the alliance is no longer appropriate for regional security going forward. we think china can continue to benefit from the alliance as long as we continue to have the right mix of hedging and engagement. that is what our policy has been historically both as respective countries having this blend of hedging and engagements but also as an alliance. this will continue to be the case going forward but that means certain capabilities will

have to be maintained and acquired and our policies will continue to be closely coordinated. the notion of keeping this blend appropriate and right of hedging and engaging means we need a dynamic process in our alliance to talk about necessary capabilities and talk about policy coordination. ..

certainly we also note in the report that china's trajectory upward is not 100% assured. china faces exextrordinary challenges and we list several in the report. these would not be unknown to you but, the energy situation, and the increasing demand that china faces, the environmental degg a dpags, the -- degradation, the widening income gap, the demographic challenges and of course the cross cutting issue that really challenges china, corruption, all will make china's rise all the more difficult to sustain going forward. the other big question of course is about the economy of china. questions about whether

china can achieve its own stated goals of transitioning from an export-driven growth model to one that's more driven by internal consumption. the jury is definitely still out on that. in fact, more recent signs have, really shown that china is sticking to the old playbook, the recent moves on the currency of course are designed to increase exports. that is the model that they have succeeded on so far. transitioning away from that could create winners and losers, could create political tension, that china doesn't certainly need right now with its leadership transition coming up. but at any point going forward it is a difficult transition for china to make. so, again, just to close, the alliance, we believe will continue to be of benefit to china and china's own stated goals as long as this mix of hedging and

engage is done correctly an appropriately and that requires the acquisition of certain capabilities which think zack will talk a little bit about but it involves a die namic process of policy coordination. >> thank you, randy. the security issues you if please. >> thank you. i want to add my thanks to csis for being a big part of this but to secretary armitage and joe nye for having me be a part of this panel. the security section the report addresses six sections, inneroperability, research and development technology, cyber security, extended deterrence, prohibition of collective self-defense and finally peacekeeping which is as bill will address following me. as i think my colleagues have made clear, the security environment that

japan and the alliance must deal with is significantly changed. at one time the alliance focused on the defense of japan. there was a roles and missions review in the '80s, the early '80s, that changed that, that expanded the thinking or the area of interest for japan and the alliance and it expanded it north, south and strengthened or added roles and missions to what operationally the alliance could do. that was followed up by a review of roles and missions specifically, the guidelines review in the late '90s which added the, the other roles and missions especially regional security. and so the trend is pretty clear and the trend is, also, that the distinction between the defense of japan and regional security is very thin. i think now, now, that when

you look and you consider what japan's national interests and the scope of regional interests are, it goes north, further south, and much further to the west. and we would argue it goes as far west as the middle east. and, if you can imagine that the straits of hormuz, the strait of hormuz were closed and or if there were a military contingency in the south china sea that would have a pretty significant effect on the security and stability of japan. and so that thinking needs to be become more and more a part of the context of the alliance. in that regard i won't go through all of the recommendations but let me highlight some specific ones as we go through the security section. at the first sign of any

closure of the strait of hormuz japan should, unilaterally, dispatch mine sweepers to the region. right now the u.s. and japan through osd and japan's mod and mofa and state department are considering proceeding with a roles, missions and capabilities dialogue. that dialogue should include extending and strengthening intel, surveillance and reconnaissance or isr capabilities further to the extent of going down to and including the south china seas. we also recommend that usfj should become more a operational headquarters. i will speak a little bit more about that when we get to the last section of prohibition and collective self-defense but in that

regard, usfj should be given more specific responsibilities operational, mission oriented responsibilities for the defense of japan and at the base or at the foundation of this dialogue that osd, well let me just say, both governments are about to have on roles, missions and capabilities should be addressing more intimate service to service cooperation as we move forward. i used to be at the, at osd office, secretary of defense policy desk with paul over there and paul is navy officer and i was an army officer and he would lord over me, hoe chrous, how intimate, how effective the navy to navy relationship was in japan and as an army officer of course that bugged me but he was right and the navy to navy relationship in our alliance is the model and it's been

that way for decades. the air-to-air and u.s. army, marine corps and japan ground self-defense force relationship needs to be much closer. they need to catch up to that. it should be much more intimate and japan and especially the usmc have a lot to share when it comes to things like amphibious operations and capabilities. let me switch now to research and development. i'm sorry, before i depart that, with regard to the sword and the shield analogy for roles and missions, that is an overly sim policic way of -- simplistic way of outlining what the alliance should be doing. it fails to address the offensive responsibilities that japan should have when it comes to the defense of japan. so that relates to the amphibious operations capability but other areas as well when it comes to the

defense of japan. let me transition to the r&d. especially in this environment of shrinking resources we need to become more effective as alliance partners and this is one way to do that. japan has recently adjusted its arms export principles and that's a welcome change but the thing is, the alliance has yet been able to figure out how to implement that. how do we move forward with that change, that opens up a new opportunities? one way is, pretty obvious, that is we should open up the pipe of japan exporting technologies and military arms and, we should welcome that on the u.s. side. the days of u.s. concern of japan threatening military, our military industries and defense industries, excuse me, are really past and we

need to open up that pipe. but the different area is, one that missile defense is really emblem matic in my mind where both sides took a very complicated, very expensive program and found a way to have codevelopment, coproduction and coemployment of the system. we need to find more areas for those kinds of opportunities. with regard to cyber security, the u.s. side has established a cybersecurity command that is not yet something that japan has and we should find a way to establish a joint cybersecurity center where we focus on research and also an exchange of information to stay up-to-date with those challenges. with regard to extended deterrents, let me make a couple remarks. deterrents includes or requires two obvious factors. one is, capability and the

other one is credibility. that's kind of the standard and the concept of deterrents but with extended deterrents and with an ally we need to continue to work on the assurance that the u.s. provides japan and that requires a dialogue of what direction that thinking is going in on the u.s. side and we need to continue to do that. now with regard to the prohibition on collective self-defense, let me raise as backdrop 311 and the operation and how u.s. and japan deployed forces. both sides we believe rightfully recognized that crisis as one of humanitarian assistance and disaster relief, and specifically did not have component of a external adversary that we had to deal with regard to defense. so swept away the prohibitions on collective

self-defense and worked much more intimately on how to get the job done. a couple of examples are u.s. warships went to hakado and moved japan ground self-defense forces to northeast japan. another example is how both forces worked to make operational the airfield in sendai, which became the center of how to provide relief and response in the crisis to that area. and those are great examples but it also shows, it also brings out an irony and the irony is we did well in an hadr scenario. an hadr crisis, by sweeping away the prohibitions on collective self-defense but in a scenario where it's

much more severe, where there is an adversary that we have to deal with, we're prohibited from that kind of intimate cooperation and the recommendation is we should find authorities. japan should find authorities to allow both forces to deal more intimately without the, the constraints that prohibition of collective self-defense brings to the operational forces. and that should apply to the full security spectrum that forces must deal with, which means, peacetime, tension, crisis and war. so that's again another strong recommendation that we raise. and with that let me pass to isabella to address peace-keeping operations. >> thank you, sak. thanks csis for hosting us and thank you secretary

armitage hosting this report. dr. green mentioned that the self-defense forces are one of the most trusted institutions in all japan. however japan is the only country in the world that regards weapons use during peace-keeping operations as a exercise of military force. currently there is a bill to possibly revise this, the peacekeeping operation law. the current law doesn't allow sdf to use weapons for, doesn't allow weapons use, only for the case of self-defense or when danger is imminent. the new bill would revise this to include, to allow the self-defense forces during a peacekeeping operation to defend civilians outside of the peace-keeping operations or peace-keeping operations area. this essentially would supplement the security of the host nation and it's likely that this bill might

not make it to the current session and likely that might get watered down. our study group, and participants of this report recommend that a more forward-leaning revision to this law. we recommend that japan not only defend civilians in danger but also protect and defend with force if necessary, other international peacekeepers from other nationalities. we believe that, i mean japan is currently on self-defense, on peacekeeping operation missions in haiti working on disaster reconstruction and human, humanitarian assistance, specifically right now they're containing infectious diseases. this mission was extended until 2013. they're in the golan heights. they're in south sudan, the world's youngest nation. they're in jit beauty on a anti-piracy mission. we believe japan's

self-defense forces on these peace-keeping operations are making tremendous military contribution and the law should reflect that. we hope that, the bill does go through and that it is a little bit more forward leaning. so thank you. >> thank you, isabella. i'm turning it over to you in just a moment. i just want to make a very brief concluding remark. it should be obvious to all of you at least this panel, does not believe that decline in japan is a foregone conclusion. mike has already mentioned several of the hidden strengths that japan has if japan will employ them. still a large economy. an economy that can be made even more robust if it was reformed, particularly rela competition. if there was more openness and free trade as we suggested in our report. immigration change. greater participation by women in the workforce.

that also would add a lot. the national brand that mike discussed of japan is fantastic. let's use. let's get some oxygen from it. let's have some pride in it. your allies take pride in the fact that japan has such a robust and well-developed national brand. and as was alluded the self-defense force is now the most trusted organization in japan. operation tomaduchi all bought us some time. we did our duty. supported our allies through that terrible tragedy but that will not carry us through the challenges of the future. it ought to be clear to all of you that we hold a very strong view that the world is made safer and more humane by the united states and japan with robust, strong democracies and further that we have the greatest possibility of a

peaceful rerise of china if that rerise takes part or takes place in an area of strong, vibrant democracis. in that regard we also include the republic of korea and of course of course indonesia and australia and india. we want japan and the united states who have come to the conclusion that we can share, not only the burden but share some of the decision-making. we want the japanese hand on the tiller along with us. we know who we are and what we are but we can be very much assisted by a strong and vibrant japan. now japan which is a place which young japanese can actually dream and not just exist. so we've got a lot of, we've thrown a lot out at you. i'm going to hush up except to try to respond to questions or some of the people will respond to questions. we'll turn it over to mike green and he will identify

people and pass you the microphones and we'll get on with this. >> i think we have microphones around the room. let me quickly thank nick and the japan chair staff and the ellen kim and the can rea chair staff for getting us organized in the middle of the summer. put your hand up, i will call on you. identify yourself, you can direct it to the panel or to someone. microphone, right here. >> my question is, is the tension over the island arises, and to defend japan as it is obligated by the alliance treaty, will the u.s. risk confronting or conflicting with china? and if it will, is it prepared for the consequences? thank you. >> let me put this in context. we are under the, our treaty

obligation, required to defend the administrative territories under the japan, that is includes the senkaku. but it is impossible to answer a question like that and the reason is, what is the issue, what is happening? is something happening because japan is acting in provocative way? has japan changed the status quo in a large way? that might prompt one sort of response from the united states n a wanton place where the areas under the jurisdiction of japan were attacked that might have another response but impossible to answer that hypothetically. however, it is very much in the u.s. interest to make sure that we exert every ounce of our eninfluence to keep that event from occurring. and i think that's where the diplomatic energy of the united states is going to be applied. >> okay. thank you. yes, sir, right here.

>> hi. my name is penn. i'm in the u.s. navy. we talked a little bit about some legal changes for a more expensive definition -- expansive definition of what the self-defense force can do. what i haven't heard, i understand for historical reasons it is a self-defense force but why not a unified command? why not take the brakes off of the force completely and let them really be a full-on military? what are the concerns that we might have the in doing that, given our current considerations? >> well, we make quite clear in our report as we have in the past that first of all, a decision to remove article 9 is a japanese decision, not a u.s. decision. but, we further describe this as an impediment. the article 9 prohibition is

impediment to alliance cooperation. i don't think one can argue that fact. we also have an interesting footnote in our report. the footnote refers to the 2006 commission which was put together to study the whole question of article 9 collective self-defense and they came to the conclusion that a prime minister could by fiat, do away with a prohibition of collective self-defense. the united states would be fine with that it is not us holding it together or holding it down. >> let me just add a little bit and that is the goal is to have more intimate cooperation so that we can work together, together better than dealing with the constraints now. we are not, that is the goal. we are not seeking changes of the constitution. we're not seeking unified command for example. we're not seeking for japan to become a more mill at thatriesic in character.

so the aim is we need to get rid of the impediment so our forces can work together more efficiently, more effectively. that's the goal. >> back there. hello. from the state department, public diplomacy. phil karoda, state department public diplomacy bureau. if japan does not choose to step up to the plate and lets the alliance wither, what are the most plausible consequences that you're concerned about? thank you. >> make sure i understand your question. if japan and the united states aren't moving forward together, what are the consequences? >> if the alliance withers, what do you think -- >> well, we're going to have an alliance because one of the most important features of our alliance is the fact that the government of japan, the people of japan allow us

the use of military bases in japan. without which, the tir rooney of time and distance for our navy would be such that it would, really make it difficult for us to have meaningful security cooperation. as long as the government of japan were willing to allow the use of u.s. bases that our alliance would continue but it won't be what we need it to be. it won't have the vibrancy and it is not something, i think, my colleagues can answer for themselves, it is not something that, if japan doesn't move along that is not a situation that is actually supportive of the people of japan. i use the term deliberately. we want a japan which young jop fees -- japanese can dream, not just exist. we want a japan not so say, what would you say? inward looking. that is the japan we need and i think, the americans think that is the kind of japan that japan should need

and want as well. >> i would just add, i do not personally think that we're at a fork in the road where the alternatives are a robust, strong, u.s.-japan alliance or a divorce and a collapse of the alliance. in some ways we're talking about an alliance that muddles and drifts. because there is broad consensus in both countries we need each other. it is either that path or the robust alliance. i think if we end up on the path of continued muddle and some drift several things could happen. one i think that the u.s. and other powers that are aligned closely with japan are going to start hedging, and that will weaken japan's influence and frankly take some of the energy out of the jointness and cooperation we need from both of our countries to be more influential. it would be an unfortunate outcome. would not be in the u.s. interest's and certainly not the japan's interests.

and that would be one danger. the other danger, a shifting power in asia, the impression, there are fissures, there are cracks, there are vacuums and at a time you want to discourage countries changing the order we now benefit from, you want to discourage countries from forced coercion, mercantilism, just at that time, that is the worst possible time to create the impression that one of the most important bulwarks of stability, support for democracy and an open an inclusive trading system in the region is going wobbly. it is not so much a binary love or divorce choice. it's how much we're able to continue maximizing the benefits to each of our national interests and regional stability. kevin? >> just to say i think, i don't believe there was any subtext in this report or its two predecessors of alliance at some essential risk. i do think in this third exercise, one thing that

became clear in our conversations, at least to me, was that the, among the greatest threats is a failure of imagination on the economic side. to be blunt, we look at the energy that's spent on, on free-trade agreements and even on the tpp process, which could to be clear i think is terrific. has a lot of authenticity and might well be the next thing that keeps the open trade regime in the pacific on track but i note with interest and frankly, i'm simply puzzled by the idea of a japan, korea, china, fta. really? really? i saw that announcement two months ago, and i was trying to figure out how does that work as my 19-year-old daughter would say? it's frankly puzzling. we, at a time when, let's see, ira shapiro is sitting here and meredith broad bent,

who i shiver because they're authentic experts in the global trade regime. when there is no next obvious tinge, for us to be, to spend time and energy i think diverted from the largest free-trade agreement in the world, nafta, and adding and enriching confidence and having some cooperation with japan, in terms of what's next, what's chiefable and what bolsters the alliance, that seems, that seems an obvious and important bit of signaling that for the rest of the region, currently in doubt because of the background noise from europe, about the future of export growth, well, that could be, we think, vitally important signaling. >> on energy, were our alliance to wither i can think of at least one opportunity japan would forfeit and one additional risk it would take on. what we're suggesting is that we leverage the

alliance to remove japan's second class status when it comes to being a customer for our lng exports. were our alliance to wither i think that opportunity would go away. also with regard to, again, japan's growing dependence on the stability of the middle east and the secure flow of hydrocarbons from the middle east to asia, were our alliance to wither, we would lose the opportunity to fully utilize our of. >> pan's assets there and would frankly, exacerbate this tension, you start to see in the united states, this pernicious potential for resource nationalism. as our imports go down and america starts to realize we have all this oil and gas under our feet, we could be, some people, believe, self-sufficient, our hemisphere any way in 10 years, starts to feed the that we don't need the middle east and sending troops and blood and treasure and prestige overboard the a weakening

alliance would send the resource nationalization and isolationism and could result because of the abundance of energy here in our hemisphere. >> good question. yes. . . because these are u.s. designed and some of them, help general lack of plans, which in retrospect have flawed designs. and i say flawed designs because

they self-destruct when the plumbing sales, nothing else, just a circulation of water, for whatever reason failed, it melts down within 24 hours and then it contaminates the environment for the remaining 30 years. and this has happened in the u.s., too. and so i think the united states should pay more attention. japan should have a scenario not that the plant, but what should the plant melt down the way fukushima did. and this again i think is something that u.s. should also be concerned, as much as the japanese except that japan cannot afford the loss of 900,000 square miles of real estate away u.s. might be able to afford.

>> your point is well taken, sir. i hope my remarks did not sound like. if you read a report, certainly what i hope to convey as we applauded the restart, only two reactors down. we understand japan is setting up a regulatory agency that will take on board the lessons of fukushima, so we very much are just applauding what prime minister know it has done. it is entirely appropriate. again, we go back to the fact that nuclear energy is the only admission is free source of baseload innovation. we.c. and i think the most thoughtful observers and economic future would agree that without a restart a safe nuclear power, it's hard to see japan

reviving its national economy, much less be coming back one partner of the secretary armitage is talking about. >> my understanding is none of the reports commissioned by the government or independently in japan concluded dge design was the cause of the problem. however, i do agree the general point that the u.s. and japan should do a lot more to think about the future of nuclear safety. japan played a big role of sending engineers to help us at a really critical time. a letter to u.s. engineers from department of energy have been in japan. we didn't go into detail in a report, but one area where we could step up is in learning from the experience of men together with other like-minded states, korea, for example, pushing for higher levels of nuclear safety, global come at a time when we are looking at a future where most reactors in the world are built by russia,

china and other countries that may not have our same standards. so you're right there's an opportunity there as we go forward. >> yes, secretary of war stanton. >> it seems to me the alliance is in pretty good shape, but obviously you can afford to stand still, particularly in the context of so many game changers demilitarize the chain of being and foremost. but the relaxation of the three arms export control principles, david, how can you see that changing is a game changer at least potentially, how can you see that changing not only the security relationship, but the economic relationship? >> well, there is no doubt that the united states and japanese industrial sectors involved in national security writ large need to integrate themselves

much more substantially. our budgets just can't afford to be in an independently minded for the long-term. and our alliance allows for us to be basically comprehensively involved in each other. and we should be. but we're not. was i sense a lot of technology. with limited coproduction with never really embraced the opportunity of a recall economy of scale and economy of force between us. it lowered the cost of our defensive and procurements, which are ridiculously high, frankly and creates the affection and shows our adversaries and our potential threatening nations that surround us that we are integrated for the long-term. we are integrated in terms of military production and national security production that goes well beyond the military and involves economic security, which is critical. people won't be thinking they

can take a damage. it's economic security that they pay much more attention to in the context of the alliance. >> my name is morimoto, writer for my newspaper. i am gathering the u.s.-japan trilateral relationship, this report of commands, the united states should not render judgment on the fence a database of these issues. that is quite understandable. at the same times it stays other recommendations should confront the issues. there's a stand point on this

issue should have some programs. if i understand. could you elaborate what this means that japan should come from -- >> what is today? >> what is august 15th? [inaudible] yes, he did. we didn't have this proposal unveiled today by accident. we dealt painfully with our historical issues. that is why my comments -- my colleague's comments about the difficulty of these historic issues were heartfelt and we know how potent they are and how powerful they are. and the united states is not going to make a judgment on these issues, that the united

states should be using all of our diplomatic energy to try to help the two sides resolve these issues. how they are resolved in one manner is something that has to be acceptable to people as both sides. right now they are in both require a pay and in japan at grave matter of populism involved in these issues. and that further muddies the water spirit but we have suggested in a report perhaps to step up track to discussions to try to bring the united states is not being judgmental as we have come to a conclusion the rare and painful experience. >> affected briefly add to that, i think he would be useful as political figures in japan and in other countries in the region

stop and ask themselves before they speak or before they take trips to certain places whether what they are doing is in the national interest or whether it is designed to gain domestic local popularity. is that in the national interest to antagonize a fellow democracy in a time which shifting power. that is probably too tall an order to expect politicians in any country, including her to stop and think about the national interest before they speak or act. but for those aspiring to higher office are to be statesmen or state women in the future, that would be a good test to be a good test for the media to think about as well. >> i think we should take one more quick one. since you came all the way from tokyo.

[inaudible] the report pointed out really the problem violence faces, which is dominance of a third order issue, dilemma and he talks about. the government decided to do you think this issue from the rest of the roadmap agreement to focus on other issues. but the reality is that we have another third order issue, which is osprey deployment in japan. it seems to me we never can recount this issue the third order reshoot dominance. my question is, why do you think we continue to have this problem of third order reshoot dominance? is that a japan problem? is this a problem which comes with the nature structure for deployment and how can we overcome this? thank you.

>> yes, we did describe by extension osprey is the third order issue. the third point being that we start and hope college expendables of what is in the long-term national interests. we are not virgins appear. we understand that in many cases the military, u.s. military occupational bases in japan is a burden, particularly in okinawa. we understand that appears at the burden is on us to be extra thoughtful and cautious in our consultations with the government of japan. but for too long come to these third order issues have taken all the oxygen out of the room. and whatever secretary of state, secretary of defense of the united states and colleagues in japan would start to talk about the interests of the united states or the interest of japan

and rewrites of china, it would evolve to what i call the afford. and as soon as the afterword came out, that is all anybody wanted to talk about. so what we are trying to do here is a let's not let the tail wag the dog. don't let futenma and osprey take our larger alliance. in our view, there are always ways to work this out, but it's going to take some real thoughtfulness and probably, would you say, compromise on both sides given where we are now. >> good morning. thank you for having me. matt cromwell, u.s. house. let me just start by saying i

spent a great deal of my formative years in japan and the ability spector. how do you think someone would do, obviously if he had to rearrange his cabinet and replace the 18 ministers and replace with morimoto. how do you think he will pan out as a defense minister? he's known for being worked in academia than politician. my second question is to the gentleman in regards to your seamen on a rant and japan being on the sanctions list, recently japan has been importing arabian oil. do you think that affects the u.s.-japan alliance? if so, how is japan planning on joining a unified sanctions run? thank you. >> if i could take the first part of your question, i think he'll do fine. the tough part for the u.s. side

is how these positions continue to change. you know, with prime ministers are within an industry should. and i think the current defense minister will be fine. it is just that we need to have some stability with that regard. but again, the report is looking at longer-term and it's not focused on individuals and players in the appliance for today, but a longer-term is what is the key part in what is important here. >> with regard to iran and sanctions, the u.s. sanctions policy requires that importers of iranian crude make substantial reductions in the centaurs. that substantial reduction is not defined precisely so the state department finds that a substantial and what is not. as we know, your pass your pass on the list at importing iranian oil, but japan's battle may make substantial reductions in the

view, but also early on in the process showed respect for what the sanctions policy itself to make sure the plan reductions coming down year-to-year would reply the u.s. requirement, which it did. an environment where brands uses the rising overall. it's remarkable and assign it the strong nature of our alliance said in this environment, japan implemented these difficult reductions in iranian imports. now going forward, there is this issue of how to ensure the tankers that are bringing iranian crude back to other countries. he was putting in place an ability to ensure tankers because that was withdrawn due to european sanctions. the u.s. again is not asking japan to completely halt its imports of iranian crude, just to substantially reduce them and

has been doing so and i would expect japan will continue to remain in close contact with the united states to reduce imports and thereby contribute to the economic pressure is being put on the machine. >> thank you. we did the first of bipartisan reports 12 years ago. a lot of us -- some of us had more hair then. we took that reported 2001 and a list of documents used in the situation room for the deputies committee meeting to decide on policy towards to japan andi to pitch and others for calling bush administration. we're not certain whether this document will have a similar role in the situation room, the part of the purpose is not to give our ideas on what we need to do to revitalize the alliance, but to stimulate a debate in the discussion. we didn't answer every question by any means and hopefully this

will spark get some feedback, but will generate some attention to add vitality as we have in the past. all of you attending today it's real encouragement for us that there's interest in that. thank you very much for joining us. [applause]

>> last week the independent institute hosted a campaign of alcohol tobacco and firearms party in colorado through speakers discussed the government speculation that those products about what some called the nanny state, including new york city's ban on trans fats. >> psychiatrists will tell us a brain chemistry as some of the best tracks they can get out. even better than the healthy foods, it's true. so where did all these nanny state's command-and-control stuff come from? they came from a modern public health, the public health movement and more often than not the public health movement is just a complete man is an obstacle. officially the public health deal is all about. academics. but a hundred years later, you know, we cured and eradicated polio, measles, mumps, black plague, something that killed

millions of people and is now almost unheard of. so you're the public health establishment, you have to reinvent yourself because there are millions of government grant dollars. if you price yourself out of the market had been a relevant, the money dries up. the public health people had to find something else to do. they're still part of the public health establishment about aids and cancer and that's good. but the public health had become a social time instead of a hard time and that's the problem. so you've got a lot of quasi-academics that can't cut it in the laboratory. subset of doing hard time, they are regulating and shrinking our dessert portions because that is all they know how to do. so you know, used represented organization called the center for consumer freedom which is a nonprofit industry funded and they tell me now that there is a professor at you see san francisco, of course san francisco who's on tv claiming

that sugar -- a prayer, the stuff that a spoonful makes the medicine go down, sugar is so dangerous and toxic the government should regulate it like alcohol. and on cnn, sans jake group to nods in approval cookies received some information like the great man on the mound. he's seen them airbrushing cigarettes out of movies. i can't wait for the next remake of willy wonka appeared were all going to be eating broccoli.

>> on thursday, the brookings institution hosted a group of education specialist to discuss student literacy and retention policy. a number of states and school districts that require the students who have not mastered basic reading skills at the end of third grade be retained in giving remedial instruction. this discussion once an hour and 45 minutes. >> we also run something called budgeting for national priorities, which thankfully is not part of the agenda today. iowa to begin by thanking our sponsors, the annie casey foundation for grade level reading and the birth of five policy alliance. and i also want to thank the planning committee. we've done a lot of a lot of events at brookings. many people have been here, probably 10 or 15 events here, but i've never been at an event that so many figures in the pie. and despite that, we got a log and make good decisions they think and i was really pleased

with planning and the planning group included rob smith of the campaign for grade level reading, lisa climbed at the birth of five policy alliance and barbara o'brien and a great comments from leah pfister has not part of the group, but she read the policy brief and made really excellent suggestions, so i'm grateful to all of them. i'm now going to summarize why we organize this event and seven propositions, most of which are facts. first, individuals need a sound education to prosper in our 21st century. i can't, we are an undereducated nation. our students do poorly in international comparisons and despite huge increases in per pupil spending, our students learn about as much as they do two or three decades ago. third, we have had some in the gap between black and hispanic students on one hand and why do

nations on the other, but meanwhile the difference in achievement between kids from wealthy families in poor families have increased substantially with direct effects on children's prospects in america. so are claimed to be the land of equal opportunity has a gaping wound. fourth, literacy is the key to education. fifth, it follows the school system must ensure that all children can read and can read to learn. sixth, the question for this event is whether great retention can be a construct as part of a plan to ensure that all children are reading by third grade. here is our agenda. after my brief comments, we're going to the keynote by barbara bryant and then we'll have an overview by martin weisz. and then we will have a panel or people will react to the policy brief in the general issue of retention and then i'm going to

play the famous brookings game of stump the panel and asked him some questions and then we'll give the audience a chance to ask questions. the keynote we are very fortunate to have barbara o'brien here. you have a lot of biographical material about every person purchase of paving and we don't usually read things you can read yourself. so let me just make a few comments. first, an illustrious career and child advocacy and politics. she's at her child that actually rose to elective office and she's the former lieutenant governor of colorado who last electoral politics at the height of her power and she now continues to think and read about education is the senior policy fellow at the piton foundation and is the national policy director for the campaign or grade level reading. but a personal note, i have had a lot of experience in the last say two or three decades advising policymakers and i had the highest admiration for any

politician who gets out before they allowed their desire to work their views and values. [applause] >> thank you, ron. and i should say my house and is also grateful because i left while we were still married. i consider that quite an accomplishment. i also want to thank everyone at the center who helped organize this. there were a thought of moving parts because we had so much interest in partners and you did a wonderful job of coordinating, so thank you. i am here today wearing two hats, as you heard firmer on. but both of them come in the campaign for grade level reading and the piton foundation are focused on helping two vulnerable coming young children good opportunities in life and for the piton foundation, it is

to improve school readiness first already children whether to try and connect best part is public policy and we see this event as one opportunity to thank deeply about is the right theme for the whole country and matching about growth development and learning of young children. the campaign for grade level reading is based on the belief that schools must provide effective teaching for all children in every classroom, every day. ms direct or of the national policy group is part of the campaign for grade level reading, we have tried to put that into concrete action at every level of our communities and states. we believe that yes, schools must be accountable, but it is not just up to schools. it is going to require engaged

communities that are mobilized to remove barriers, expand opportunities and assist parents in fulfilling their roles and responsibilities in order to be full partners in the success of their children. so this topic today about how to address reading proficiency and what to do for kids who are behind this perfectly with trying to mobilize parents communities and policymakers around the challenges facing vulnerable children. we have focused in particular in three things. one is the readiness gap. children from low-income families are less likely to read or to be spoken to regularly or to have access to books, literacy rich environments, high-quality early care and prekindergarten programs. these children may hear as many as 3 million fewer words than their middle income peers before

ever even teaching kindergarten. the second focuses on the attendance gap. one intend kindergarten and first grade students nationwide misses nearly a month of school each year an excuse to an absences. these students cannot afford to lose time on task, especially in the early grades, when reading instruction is an essential part of the curriculum. and third, the summer slide. children from low-income families lose as much as three months of reading comprehension skills over the summer. and by the end of fifth grade, they are nearly three grade levels behind their peers. so, these three pillars of the campaign for grade level reading clearly involve what happened in the lives of children to be ready for school, but then what can communities do to help schools do a good job of

teaching reading by addressing absence this summer and their readiness. we are also here today because sponsoring an event like this is an opportunity for people who care deeply about kids to not only engage and discuss difficult topics, but to come together at least around a consensus that we have to make grade level reading, reading proficiency at the end of third grade and national priority. martin west who will speak in it and it has raised what i find are two very important questions in his policy brief as retaining students in the early grades self-defeating. the first question is if we take academic success seriously and are convinced that reading by the end of third grade is critically important to academic success, how do we prevent sudan's from ever falling

behind? and second, how do we respond when they are still behind and about to go into fourth grade? these are typical questions because if we are serious about the importance of third grade reading, proficiency, we must hold ourselves accountable for increasing the number of students who achieve it. if we are serious, what are the matcher x for a meaningful state, city and district investments in preventing young children from falling behind in the first place? how do we evaluate and continuously improve efforts at helping students catch up? how do we respond when data systems identify students in preschool, kindergarten, first and second grades who are not on track? was our attempts at intervention have a word? i am worried that it's going to

be easy to make promises and set new goals around reading because after all, who doesn't want children to learn to read? but will we have the intestinal fortitude to make tough decisions about budgets, programs and policies? everyone in this room knows that high-quality childcare would make a huge difference in the school readiness of vulnerable young children, get most childcare for vulnerable children is mediocre or worse. how many cities and states have subsidized childcare at a level that allows low-income parents to purchase high-quality? how many states tolerate waiting list for preschool for low-income children despite overwhelming data on the return on investment by none other than the federal reserve?

ben bernanke recently said at a meeting of the children's defense fund, economically speaking, early childhood programs are a good investment with inflation-adjusted come in your rates have returned -- the only an economist at red lake this. annual adjustments and annual rates of return on the funds dedicated to these programs estimated to reach 10% or higher can the very few alternative investments can promise that kind of return. notably, a portion of these economic returns accrue to the children themselves and their families, but studies show that the rest of society enjoys the majority of the benefits reflect dean's the many contributions that scales and forgot the workers make to the economy. when you have ben bernanke talking like that, you know that we have a place where country

could put much more attention and were failing to do it. we are here today to talk about when and if to create retention policies as one tool for improving student reading proficiency. but long before having to make the difficult decision of whether to retain the student in the early grades, we should have done everything in our power to give that child a good start in life, to have prevented preventable delays and eliminate the effects of poverty on a child's growth and develop and as many other nations already do. to have prepare children for school through high-quality early childhood programs and preschool, to have provided good instruction in every classroom and to ensure that every child has high-quality teaching and every setting every day.

to provide intensive, customized intervention to students who are behind. we're used to saying that children are our future, but state and national budgets tell a different story. we have failed time and again to deliver on promises about child health, early care and education level playing fields. instead, we have systems that can't change the fact that children who are behind almost certainly stay behind. the current fiscal distress and federal government and state required cuts in many programs over the next decade and beyond. how long will they continue to do more with less? this is unacceptable. we start by putting a stake in the ground and the importance

that is the foundation of school success of students take on more challenging material. we have the first eight years in the life of every child to help him or her get ready for school, driving school and was reading by the end of third grade. the question is, how serious are we? thank you. [applause] >> usually we have to have some intellectual product that sets a time and the issues. we do something called a policy brief but not pussyfoot around and say but on the other hot and

we still come out and make a recommendation. usually people have been around a long time to want to do that because they might rule in the reputation. but marty is beyond and willing to take a chance. so martin west of harvard wrote the pre-chorus. we're very pleased and it's exactly what was on it. it takes a clear position and will induce some serious discussion during the panel. in addition to being a professor at harvard in the education department, he associate deputy director of the kennedy school program on education policy and government and executive editor of education connects to journal known to express an opinion or two. it's not in any of your papers that describe this background and i don't think you'd even find it on the internet. marty was a champion high school wrestler. and i have been informed that when he gets in a tight debate, he could put his opponent in a

headlock from which position they can't breathe, let alone talk. he wins a large that way. so marty, glad to have you. [applause] >> thanks, ron for that introduction. not what i expected, but brings back good memories. it's a pleasure and an honor to be here today. i think were all here because of the growing recognition of the importance of early reading the two students future academic success, not just in reading, but across all subjects and in their probability of graduating from high school and going ons to college and a successful career. this growing recognition has already begun to inform policy in many ways. we've seen it at the federal level to the good federal income is scientifically-based early reading instruction under no child left behind to reserve reading first programs in the

obama administration followed up to put reading first in its blueprint for the reauthorization of the elementary and secondary education at. of course that when it comes to real action and innovation in particular in american education, that happens at the state level, but it's interesting to save 32 states and the district of columbia have policies directly aimed at promoting third-grade reading proficiency, often requiring students be assessed early on in their educational careers and intervention is offered to those students at risk of reading deficiency. there's been a flurry of activity in this area just in the past year. 13 states have enacted or modified policies in the past are already in 2012. so all this activity is very encouraging, but also raises an uncomfortable question. that question is what should be done with those measures fail to occur are proven successful?

should students be retained and provided with intensive remediation before they move onto great for? or should they be promoted along with their peers? and increasingly, states have been answering in the direction of retention. 14 states now require to some degree of attention for students with low reading test scores and grade three and similar policies under debate in many other states currently. these policies vary quite a bit in their particular is the definition of what is our test scores and the exemptions they offer opportunities for students to demonstrate proficiency to other means and what services are required when students are retained, but despite these differences, the debate over policies follows a fairly stable contour from place to place. proponents argue first of all that these policies are largely intended not to increase retention per se, but rather to use the threat of retention to

create incentives for educators, parents for students themselves to meet performance expectations. but they also can be expected to increase retention rates and proponents argue therefore retain students will benefit the opportunity for additional instruction before moving on to more challenging material as well as the improved matches their ability to the content of curriculum exposed to as well as abilities of their peers. the enactment of these policies has not been without controversy however and so critics have a response to these. first of all they point out retaining students is a educational intervention. if students is intended to spend an additional year of full-time public education as a result of being retained, then we need to have an additional year of funding for that education. it also requires that students if they remain in school for girls a year of earnings before interest the labor market, something that needs to be incorporated in the analysis of

these policies. these are clear costs. critics also say there aren't even benefits for the students who are retained that would offset those costs. rather retain students will be harmed by the trauma or stigmatization of being retained, perhaps reduce expectations on the part of parents and educators and simply the cost of adjusting to a new peer group. so what does the research say it? if we are looking simply at the volume of published research, then we would come to a fairly clear conclusion. there is a massive literature of observational study showing retained students achieve at lower levels, completely schooling and have worse emotional outcomes than observably similar students promoting. indeed, ernest housed at the university of colorado in 1989 said it would be difficult to find another educational practice on which the evidence is so unequivocally negative. to the extent of studies on a

given topic however suffer from a common plot, consistency of findings should not increase confidence in their validity. when it comes to studying the effects of grey retention, the key challenge is to separate effects of retention from the effects of other differences between students, other characteristics that led them to be retained in the first place. what triggered the retention decision? the most common approach in the literature to studying this is to find students who have retained and compare the row comes to observably similar student similar in terms of demographics and prior achievement who happen to be promoting. but i think the likelihood of selection bias in making these types of comparisons makes the city is quite unreliable for a guide for policy. two examples of what could go wrong when you take that approach could mean that educators are more likely to retain a student when they see a tennis court and know that that

score reflects the student through achievement rather than simply the fact that the student had a bad day on the day of the test. if that is the case, retain students to be more likely to have bad outcomes regardless of the retention decision. similarly, more involved parents may be likely to repeal a detention decision. the nice thing about test based promotion policies, whatever their merits as a matter of public policy is they provide researchers with an opportunity to provide more rigorous evidence on student outcomes. they do this because they create a situation in terms of routing performance. some are slightly about the promotion cut off, some are below the promotion cut off coming up their exposed to a different treatment. some or all of the students below and below the cut of that now they can cut off both these groups performing what is known as a regression discontinuity

evaluation that provides unusually for causal effects. this approach to setting free retention is pioneered inciting retention effects in chicago, public schools, a policy in place in the 1990s and it's been used in a series of studies, some of which i participated in conducted in the state of florida over the past several years. the florida policy has been the most far-reaching, the first real active statewide promotion policy and since emerge as a model for many states have enacted policies in recent years. evidence on its design, implementation and impact on students is that considerable interest. so that's going on in florida? since 2003 the state requires third-graders at the lowest level on the aft hat reading be retained. i put required -- required may

not be exactly the right word because there's a variety of extensions in the policy. for example, limited english proficiency, students who received less than two years of instruction in english are exempted from retention requirement as are most categories of special education students. students have the ability to demonstrate proficiency on an approved standardized tests. they can also demonstrate proficiency three portfolio aligned to the state content standards. as a result of these exemptions, calling the policy test based promotion is something of a misnomer. it would be more accurate to say that about test scores changes the default decision that would be made for the student is such that an affirmative case needs to be made that they're ready to be promoted to the fourth grade. the policy doesn't simply require they be retained. it also requires facing additional services during the

retention year. they need to be given the opportunity to attend a summer reading came to be assigned to a paper for me teacher and receive intensive reading interventions during that retention year. that means that we studied the evidence of the effects of the program, those will reflect the fall cottage of retention and these additional requirements. despite the exemptions i mentioned earlier in the fact that roughly half of low performing third-graders are actually given from the policy, this is amounting to a major change in the approach to early grade retention in florida. the number is retained increase to nearly 22,000 as the policy was implemented in 2003 up more than fourfold from the number in 2002. the show shy of 14% of third-graders in florida, initial third-graders retained

in 2003. it has fallen significantly in significant years. most of the reduction reflects a reduction in the number of students failing to meet the promotion cut off people is difficult to attribute that the incentives created by the policy definitively, it is consistent with the idea that educators and students of florida have responded to the policy by improving their performance. so what happens to students in florida when they retained? the most recent research on the question examines effects on 2003 for six subsequent years. first of all reading and math among students compared to their promoted peers when those students are at the same age. for example, after two years after the initial retention decisions, a retained student will be in the fourth grade most

of their promoted students will be in the fifth grade if we compare their performance, when tested at the same age, the retain students actually outperformed their promoted peers by almost half of the standard deviation in reading and half that much en masse. this amounts to equivalent in reading and half that amount is matched. these are quite substantial effects despite the fact the retain students are a great level behind their peers. these achievement effects however fadeout gradually over time and become statistically insignificant within five years. this is a common pattern in educational intervention, especially those in the early grades to see the achievement effects large initially, but fadeout over time. this is a common pattern even in many interventions that despite the fadeout of test score impacts that have enduring effects on students long-term

outcomes. in the case of retention, especially likely you could expect to see positive long-term effects because retained students, despite the fadeout of the impact are still outperforming peers in both reading and math when tested at the same grade level. so what if we rather than compare students the same age, compare students at the same grade level, we find retain students doing much better than promoted peers. another interesting consequence of the florida policy that's just emerged recently as there is very clear evidence retained students are less likely to be retained in later years. so as a result of this, after five years to retained students are only .7 grade levels behind their promoted peers despite the fact the initial treatment of retention was to become a full grade level behind.

what you see here is most of that effect comes in the first year when students are much less likely to be retained again in the third grade than their promoted peers are to be retained in the fourth grade. but those effects continue for several years after the initial retention decision. this means one of the key consequences of the florida policy was to expedite the retention of many students who would otherwise have been retained in later years the most decisions were made early at the discretion of local educators. so what does this mean for policy? to think these results in florida means a relatively encouraging picture, certainly much more encouraging picture than that which is available in the dominant observational literature on this topic and i think a few things for policy. first of all, and this is just to acknowledge the test based

promotion policies are not presented by anyone on the panel today as a silver bullet solution, the only thing to address concerns about early grade reading skills. we need comprehensive strategy. in my view, and prevent early grade reading skills as a national priority that will require that states do a number of things, including ensuring at risk students have access to high-quality preschool programs, that they develop early identification systems and target struggling readers for intervention and that they improve the general quality of instruction in the early grades. some of my research suggests that districts are especially likely to take their least effect to teachers and least experienced teachers and place them in grades k. through two, perhaps because of the presence of state testing systems in higher grades announces an early grades. that's the type of patterns that will undermine efforts to address the situation.

test based promotion policies are no substitute for that kind of comprehensive strategy to reduce the number of struggling readers. however, testing is promotion policies i would suggest can be a useful component of such a comprehensive strategy. to the extent that states want to go in this direction they are most likely to succeed when they are accompanied by specific requirements for additional reading instruction inadequate funding to support the implementation of those requirements. the florida affects that we've observed reflect the complete package of the intervention, both retention and additional requirements, not just a of retention on its own. and showed him play an attack if it didn't work the first time, try something different. test base also need to balance the desires to draw on local

knowledge of students abilities to get them decisions that are in the best interest of the students to ballot that desire with the goal of increased accountability and access to focus support. research in florida suggests retention can be useful more often than local educators often tend to think it's the case. some measure of exemptions will be included in policies that are at the right way to handle that. what kind of research would i be if i didn't conclude in tuesday at stake to call for more research. we need to continue to study the effects of policies on the long runs are constantly stained oftentimes the discussion on retained students because that's the date of great interest but we need to have understanding in

which they been implemented. so thanks for your attention and i look forward to the discussion. [applause] >> okay, the panel will come up without a break, will proceed.

[background noise] >> okay, we are working on a machine that when all the panelists come up, the machine will grab the mic and stick on

the lapel and i'll have to know when time. we we will say three minutes from our discussion. so be ready for that. so we have a great panel. we don't necessarily agree with everything in the policy brief. i'm really pleased variable ticket the quality of people we have. first, karen schimke whose early learning project manager for education commission of the state played a huge role in elementary school policy and she's author of a terrific race, which picked up the materials on literacy policies. next we have russ whitehurst, education policy and former director of the institute for education scientists. and in a previous life, he did research on breeding, so another appropriate reason for having him on the panel. and then we have shane jimerson, university of california and

highly acclaimed researcher and education issues and has an amazing background that you can read about if you have 15 minutes on the material in your folder. and finally, mary laura bragg comest a policy foundation for excellence in education. we were intent on having someone from florida because florida has done so much in this area, so we're glad that you can come and be part of this panel. our format will be each speaker will have eight minutes for an opening statement, which they'll get from their shared and then i'm going to ask questions in the audience saw the chance to ask questions. we will begin with karen schimke. >> good morning. as i was anticipating getting ready for this discussion i was reminded of my own experience with reading proficiency. my twin sister and i were in the first grade in a small town in western nebraska and i don't think her teacher really understood that there were two of ice.

[laughter] so one night my mom pulls out a book and says okay, we're going to read tonight. and so she handed me the book and i read what i suspected and then she hands it back to carol and anne caroline looks at the book and she said, while i don't read. and i said i read for her. and that was the end of caroline's tourney to non-proficiency in reading. unless my mother came down off the ceiling. so my mother was as concerned as any parent of having students read proficiency -- proficiently by the end of third grade. and frankly in the journey up to the end of third grade, moving along in the proficiency pathway. i think we are well aware of what happens to kids who are breeding proficiently are four times more likely than their

proficient fears to drop out at the end of high school. it is pretty clear and a world where we need well-prepared workers and adults that proficiency. i think the concerns about a proficiency is relevant in an era of common corestates standards and no child left behind and the renewal of the fda, said they are trying to create a sense of urgency and clarity that in reading proficiency they mean business. well, the coverage is around retention provides a comest states in general have not had strategy, but have a package of comprehensive interlocking well-connected strategies, all of which are critical if we're going to be serious about third-grade reading proficiency is. in some ways, talking about retention, at least me as sort of a shorthand way of talking about a whole package, a much

broader package. we've heard about for some of the research that about retention. much of the research doesn't hack it up. ..

and maybe i just haven't found them and there were appeared and were they going to do any more studies? thing to do. guess what? it was about money, which was again a common experience. separate retention is a strategy. far more completely the early intervention, and prevention

that is so critical and in general apartheid state strategies. rnc since at ecs has been on early identification. when we talk about early identification, i think sawada in this business we talk about in kindergarten, maybe first-grade community second-grade attack about it in pre-k so that we would really be saying and certainly those of us who worked in pre-k for a long time now that in the pre-k classroom, teachers know that when things are going to be problems for children. they know not so much because a child is or is it reading. you wouldn't expect a child to read in kindergarten. whether they know because they see how a child manages the rest of the functions, how they manage waiting their turn, sitting still, being part of a classroom discussion, working with other kids, interactive

environments. we are putting out, ecs is putting out a fourth in the literary document in the next bed that is going to focus on what state policy should think about is the roadmap. it's going to have to component. a section on systems a section on classroom of school activities. systems is quite to look at program implementation, system oversight, ongoing assessment of children in classrooms and effective and immediate intervention. having to do with classrooms and schools will have to do it redefined adult capacity, teachers, principals, superintendents, but they have to be like, what they have to be prepared to do to provide the instruction like this to the kids need. second is the language and content of rigorous and engaging curriculum and finally partnerships with families. i think we could spend this entire day talking about the role of families in and in

partnership with families as decisions are made about third-grade reading proficiency. we take this concern states have been schools and families had very, very seriously. states are making -- taking steps, taking action on this and we think that is appropriate. the most important being however is that this is about early comprehensive interlocking strategy. no simple strategy could possibly lead to the kind about, by itself. thank you. >> thank you. very nice. [applause] >> and your watch works and everything. russ whitehurst tiered >> i'm pleased to be here. this is an important topic to me. i want to first congratulate marty west on bringing a rigorous piece of research to this debate. i think it does raise the level

of evidence that's relevant to what we're talking about. and i could spend my seven and a half remaining minutes talking about research methodology, but i will avoid that temptation. >> a decision. [laughter] and try to kick it up a notch. what is this debate about? 25% of youth in this country do not graduate from high school. let me describe to you a conversation i overheard a few years ago. a young woman who graduated with honors from high school here in the district of colombia. she gone to salisbury state college and she was dropping out. and i heard someone talking to her. why are you dropping out? i can't pass the course is fair. as with 25% of students who

don't have the skills to graduate from high school. we've got a lot of kids graduating from high school with a meaningless credential in that it does not signify that they've acquired the skills that make them ready for the world of work or further education. and so we have a system that is massively failing. what are we to do about it? are we to promote students socially all the way to the system or give college degree space and social promotion because people with a college diploma to better than this is not. those who do not have a diploma i think not. the question is when is the system to be made accountable? to get the skills nearly all the research on their grade retention and social program has focused on the particular cohort

of students who are affected by the policy. you saw that in those research today. for the students who are retained but as a consequence of next year and the hereafter. that's an important question. but i think the larger question is what are the effect of the system of the retaining those students. imagine for a moment the irs function and retaining those taxes? imagine a new emphasis on offshore bank accounts. and a few people are caught. they have to pay a lot of back taxes in front-page stories about questions. embouchure they'd be effective that that is that people are

backing off of that tax. imagine enforcement of driving while intoxicated. year on july 4th the police are going to be out of forests. and if you're drunk, you're in serious trouble. we could do studies to look at the effect of these policies of the people directly impacted by the policies. that is if you're caught drunk driving can when they find a certain consequence. the real question is what is the effect on the people who are exposed through observation to this policy? there are hints in the slide that marty put up and of the policy brief at the school systems in texas and kids in responding to this policy if we knew we were doing something but they differ in impacted us are doing better, children are less likely to fail the third-grade

exams and they were in the past. we don't know if the florida is causally connected to that, but they're certainly a suggestion that it might be. i think we desperately need research that looks not only at the impact on the street at, but the impact on those on the whole system, on its ability to provide in learning to read. have one of the things i learned from doing work in this area both as a research of federal for many years as we really don't know yet how to accomplish this task well. if you look at reading scores on nape, and they are essentially flat for 20 years. if you look at studies that examined the impact of accountability systems, you will see sizable impacts on math,

suggesting that once people in schools and teachers are accountable for results and math , they do things that know how to get kids better. you find little to no effects on reading. you take the federal reading first intervention, which was a massive federal at tom to inject a scientific instruction in reading and the beginning grade and the large federal evaluation of that, for which i was responsible found no impact and reduce skills. and so, you can expect some impact, i think from well implemented school retention policies coupled with early identification and better intervention. but i would say we still have a ways to go in understanding how to take children who start school for kindergarten and even pre-k substantially behind in

the skills and abilities to predict later reading vocabulary and particular letter and sound recognition. we still don't understand well how to engineer curriculum and provide structure and that is regularly and predict diddly going to get those children on grade level by the end of third grade. so my view of retention is important pressure point on the system. i am convinced that it can produce as a short-term positive benefits for kids in a broader policies, but i also think we have a ways to go in terms of understanding how to get this task accomplished. i think what we've learned from presentations today is at peace and the very important puzzle that we've gotten to solving the nation's interest as soon as possible. thank you. >> thank you.

[applause] speenine gene simmers san, thank you or come in this way. >> , to thank the brookings institute for inviting me to participate in this important discussion including ridding on retention policy with a particular emphasis on what is best for kids. and i say that because i have spent my career investigating them advocating for what is best for kids. okay, i want to begin but that is the process. just a show of hands engaging participatory activity here at. show of hands, how many are engaged to help children learn at school? just a show of hands, how many are engaged in scholarship? good. how many here are directly involved at the school level developing policies that help children learn? of the school level? we have folks here, fantastic. how many of us are directly

involved at educating children at school at least once a week? fantastic. all right. and know there's many others that come from various backgrounds and have various motivations to be here. but just for the sake of the spirit of voting, how many will refuse to vote to matter what questions i asked? last mac is a chart question. i appreciate your honesty. all right. came here today and compelled to continue to advocate for children to emphasize the importance of using science to inform policy and is to advance all the social and cognitive competence of children. during the past 20 years i have carefully reviewed over 100 studies examining grade retention completed during the past when trying to gears. this includes all of the published studies as well as many reports and thesis products, which are not

ultimately published in journals or books and such. .. how many have you already been immersed in this? fantastic. that's a good place to start. all right, the first pointer the empirical evidence fail to support effectiveness of grade retention. among over 1000 analyses of achievements and adjustment outcomes over the past 100

years, there are few that reveal significant positive effects associated with grade retention. in the handout that is provided you see the summary of sizes and meta-analyses. we don't have time to explain the process in such, but note that none of those results in any of those meta-analyses reveal a significant positive effect. okay, you can look at it. it's right there for you. i'm not making this stuff. up. whereas short-term gain during the repeated year and possibly the following year are occasionally documented, as has been noted, long-term effects through middle school and high school are either neutral and/or deleterious. furthermore, grade retention has emerged as one of the most powerful predictors of high school dropouts. in addition, part of the discussion today is to focus on reading and retention. does it is notable if you look carefully on that handout, a negative effect sizes for

reading are among the highest in two of the three meta-analysis detailed in the handout. again over 1000 analyses from over 75 years of research specifically captured in those meta-analyses. the negative effects on reading actually borders a significant and since you are upwards of .4, .5 in terms of the effect factor. related to this first point regarding the lack of evidence supporting the effectiveness of grade retention, the recent analyses of the florida context as has been noted conflate grade retention and several other empirically supported interventions. in particular, for instance, summer school, intensive reading intervention and high quality teachers, as was other processes that are part of that florida test promotion legislation. these other processes are also linked to effective intervention strategies. for instance, some of these have been mentioned. assessment, progress monitoring, parent involvement.

whereas other scholars have completed analyses to examine the relative effects of summer school and retention when used with the same students, for instance, in chicago, colleagues have done this to each of the analyses that i have personally reviewed addressing the florida context have not. why is this important? because the previous analyses at these include both revealed that the summer school yielded a favorable effect whereas the retention did not. this idea of toppling them and making the case for retention plugs is not well found within the empirical literature, hence the statement that the analysis of the florida context conflates grade retention and several other empirically supported retention. moreover, as related to the first point the florida legislature for the company is a program for student progression. this is section 1008.25 that has a bunch of subsection. comprehensive programs for student progression, with many of the other components include

in this comprehensive program our empirically-based and laudable, the retention component is contraindicated. is anyone familiar with the 2009 book that reviews 800 meta-analyses, and includes a rank order of 130 a specific factors associated with student achievement? anyone? okay. it includes factors of multiple levels, students homes, teaching, curriculum, school. this is the book here actually. the comprehensive review reveals five factors associated with negative effects of the 138. retention is one of those five. retention is placed at number 136 of the 138. followed by, would you like to guess what number 137 and 138 our? i think we can all agree that number 137, television, and number 138, mobility our associate with the deleterious effects for student achievement.

okay, retention was 136 followed by television and mobility. considering the research for the class -- last 100 years, we must move beyond grade retention and social promotion. by a show of hands how many are you aware of supported interventions help children learn at school to promote reading, math, science, social skills? all right, fantastic. the second point, there are numerous and extensive studies that document effective interventions specifically facilitate development in areas such as reading, mathematics and behavior adjustments, some of the core elements that are often based retention decision. educational professionals must focus on intervention that build upon the strengths of students and target their needs. attending to the empirical evidence in farming targeted intervention with specific challenges within specific context. these include individual, classroom, and school district level strategies. and you can see the handout, for

instance, i've listed several of them and reading intervention and summer school and ongoing formative evaluation are just some of these. those are just for examples. okay on to the third point. when the participation question. how many of you are confident the current established possible posted learning and success in schools? who is confident the polities are there to make this happen? all right, one person, very good. the third point is policies that emphasize specific evidence-based interventions to promote the academic success of students are essential to meet achievement standards. about 15 years ago secretary of education richard riley highlighted that, this quote, taking responsibility for ending social promotion means ensuring that students have the opportunity and assistance they need to meet the challenging standards in the eight years prior to the decision being made, and in some instances and certain policy. indeed, it is imperative that

policymakers, educators and others focus on important question. the question is not to retain or not to retain. the question is not to retain or promote. the question is how to promote the social and cognitive confidence of the student. more specifically, given the individual and contextual consideration up on identifying individual needs, what specific evidence-based strategies will be implemented and monitored in an effort to address the needs and to facilitate the development and academic success of this student outside briefly hired lighted today in my brief comment, consider the collective evidence is is imperative that we move beyond grade retention and social promotion, instead must implement policies and practices, predicated on empirical evidence linked to promoting learning outcomes. that you for participating and considering these three points. [applause] >> thank you. other than that, how did you like the policy brief? [laughter]

mary laura bragg. >> i don't get an introduction? >> i already introduced you. what do you want me to say? mary laura bragg, a famous person from florida. [laughter] >> that i am the cleanup hitter. thank you for the opportunity to be a part of this discussion but i was on the team that wrote florida's policy, 1008.25, as you pointed out, and i was the person responsible for implementing it in florida. in florida. i am a high school history teacher and i've witnessed firsthand the vacant stare of a 10th grader when that student is asked to read out loud or discuss something that they have read. i've been a recent been of victims of social promotions. our foundation, the foundation for excellence in education has worked with many other states that have been the past year

worked to tackle this problem of k-3, free k-3 reading. the foundation today linking dropouts, was not around when governor bush and the florida legislature begin crafting this policy. but we did crafted around three points of research that existed in the early 2000s. that 75% students reading poorly at nine years old would continue to struggle throughout their adulthood. that 80% of kids identified with a specific learning disability are struggling reader seven because they have not learned how to read. and the work that was published in the 2000 national reading panel report. so the policy we created is pretty simple. our law requires prevention and intervention k-3, retention for third graders who are not ready to handle the text required of them in fourth grade and beyond, and an additional intervention

for retained third graders. so three basic parts. schools must begin notifying parents in kindergarten if their child has a reading deficiency and is therefore at risk of retention in third grade. schools must build individual reading plans for the students aimed at removing that deficiency, and we know this in the first 30 days of kindergarten. i can talk about what we do literacy wise in preeta, but can save that for the discussion be. third graders in florida who score the lowest level on our state tests are retain unless they made a good cause exemption. one of the things i would point out from the brief is that any student on any special education students lord who takes the state test is subject to the policy. so there are a significant number of students with disabilities who are subject to the policy, the only ones who are exempted, if they don't take

the state test or if they had been previously retained. it if you are retain to get intensive intervention. our approach works. i saw in the four years that i was in charge of the policy, and i went back to teaching after i left the department, a sea change in reading instruction in grades k. three. i will give you some examples of the impact on human behavior that we saw. for several years before we enact this policy our assessment office had a pot of about $2 billion, and we have a lot of students in florida. $2 million for reading diagnostics, k-3 reading diagnostics and assessments. and districts to purchase basically received those tests for free. it was a state appropriations. and every year may be a quarter, a quarter of that money was drawn down in the first two years of the policy, that money was gone by september. that is human behavior changing. we also, before the policy,

would get periodic requests from districts for professional development, random professional development in the region. in the first two years of this policy the requests were tenfold. they were specific. we want professional development on hold group and small group instruction. we want it on data-driven instruction but we want it on specific interventions aimed at specific deficiencies. and the number of calls and e-mails we got from parents asking for help, and the number of calls and females from community groups asking how they could help skyrocketed. the data that is included in ine packet shows the impact of the policy. retentions increased at first, but they declined because the number of students reading at the lowest level on our state test decline. the other thing i would like to show, well, there's a chart in your head out, the retentions in the kindergarten, first and

second grade increase because it was a k-3 policy. our goal was not retention. our goal was good, strong initial instruction in grades k. two and three, and then intervention as a way to stop retention. but the last resort of retention was retention as a last resort was the goal. to me, when it principle realizes that he is four years to ensure a child is ready to move on to fourth grade and that the parent of his children will know in the first 30 days of kindergarten that the child may have a region deficiency, the school is going to organize around reading. we saw the best teachers in an elementary school move to k1 and two. the sea change in making sure that schools organized around what they need to organize around, it's kind of ashamed to

me that the threat of retention is what got elementary schools doing what their primary focus is, which is to teach kids how to read. our nape data shows the last chart in the packet, shows that even in 2011, our policy is still working. we have more kids reading on grade levels, fewer kids reading on the lowest level, and our fourth grade, nape, that chart is broken down into subgroups in every subgroup outperformed the national average. also to speak to african-american and hispanic students. the number of florida third graders going at the lowest level have declined by 41%. that the percentage of vatican american and hispanic students scoring at that level has declined by 37 and 46%, respectively. and regarding, one last thing about special epic we looked at 300 of our lowest performing title i schools from 2003-'04,

to 2009-'10, and without of the percentage of third graders identified with a specific learning disability was cutting have. during that time very. and the percentage of first graders who were identified with a specific learning disability was cut by 75%. that is huge. i think if you fund your priorities first to get to costs, and i would say, we spent a lot of time talking about the costs of retention and nothing about the cost of dropouts, and the cost to the country in health care, and the lost earnings in students who drop out. i think that that is an important point. and if you fund your priorities first, then you can prevent the additional cost of retention in later grades. so thank you. [applause] >> very good. thank you. great bill. i'm going to try to deal with

rethink the i heard there are people in the audience who would like to be gone by lunch, so we're going to deal with these in an expeditious fashion. racial this commission a cessna planes and then we will deal with this research issued about when the witch doctors disagree, which is what you just heard on this panel. let's talk first about racial discrimination but my understanding is the recent study from department of education says that there is a distant portion impact on blacks and hispanics. however, if you adjust for achievement scores, the disparate impact disappears. so yet more black and hispanic kids retained, but if you match on their test performance, then it's the kids who have the lowest test performance and since blacks and hispanics have lower test performance, they are more likely to be retained. does anybody disagree with that? or is there other evidence there is, that this policy is a disproportionate racial impact? >> i am not sure we can agree with everything that you said, or establish it definitively at

the national level. so we know that black and hispanic kids are disproportionately likely to be retained at the national level. that comes out as an data collected by the office of civil rights and the department of education just recently. we can't take that same data and do the type of adjustment or achievement that you have mentioned. what we can do is look in florida, what's happened to black and hispanic students where you see similar patterns, then the more likely to be retained. but if you control for their actual reading scores, then they are sluts -- less slightly to be retained. so in the areas will receive discriminatory implementation, you don't see it. but i'm not sure that we can establish that as a fact on a national basis. >> so does anybody think this is racially disproportionate and unfairly so? >> in terms of why it happens or that it happens? >> let's leave aside though the

why a site. we don't like a policy. if it unfairly discriminates against any group can but especially the group, the very groups that have the most trouble in our society, the blacks and hispanics. so is this policy of grade retention were to unfairly retain kids on basis other than something reasonable like a test score or a teacher assessment or something like that, then we should be opposed to the policy. so i think the first thing want to establish is, is there evidence that this policy is unfair to any groups? >> when you say unfair, that sort of a loaded question, but is it disproportionately used? yes spent is effective? no. so, therefore, i'm exposing a certain unrepresented disproportionately disadvantaged population of our youth to this particular demonstrated in effective strategy? yes, that's the answer to that question. >> okay the answer is yes, because you think the policy hurts everybody who was

subjected to -- >> i didn't say that. >> i thought that's what you said. >> we were looking at popular assistance is, the type of analysis we've all completed, there have been some data followed individuals longitudinally over time. but in general i'm speaking about interventions, which is the same if you do a reading intervention. rarely are you -- your typical get the 100, 200 or 1000 your discerning effects based on your population statistics. again i don't want to be put in a position where i've been suggested say that every single child is -- >> i withdraw that. what i meant was that this policy, according to your review of the literature, and a lot of other people, too, it's not just you that feels this way, that retention in general has some harmful affects. not that it harms every single kid, but on average it doesn't have good benefits and it has harmful effects. so even if you have more blacks and hispanics subjected to the

policy, which is definitely the case, that is to be i don't think anyone denies that. and because the policy does not help them, and hurts some kids, it's likely to have a disproportionate negative impact on that. thatcher position? >> yes. >> but that's not because anybody intend for more black kids and more hispanic kids to be heard in some way. it's because they made a mistake in a judgment about the effectiveness of the policy. so we come back to the main question which we will return to a just a minute about whether, what the evidence shows, because witch doctors have got to be called to account here. so the assessment point. i'm aware of a lot of situations where assessments are lousy. how serious is the assessment problem here? can we really identify kids who don't read well, in can we identify kids who do read well? are the tests useful? even if we have good tests, not everybody necessary uses them.

do we have to caution states or school systems about the approach they take? and i assume it would not be just tests. they would be other element as florida has, like teacher evaluations and what did you call it, a portfolio of evidence about whether the kids should be promoted? so how big a problem is assessments hear? >> it's not a problem. a variety of test of reading skills. i can show you correlation between reading skills at the end of first grade and 10th grade performance, single, strongest predictors of 10th grade performance. florida has a good assessment system, among the best in this area. so when you're talking about the classification of individual students, and whether a student just on one side of the promotion versus retention line has been reliably identified, that is a different issue. there's air around the cut

point, but in general the assessments are good and the concert to discriminate between good readers and for readers. and let me say in response to your previous question, that the discrimination here is the provision of education to minority and disadvantaged kids, that is of low quality and leaves them damaged for life. i think we need to focus on that as the discrimination that we all should be ashamed of and do something about. >> i just want to say a word on assessments. assessments say in first grade, are different than the assessments in kindergarten or in prekindergarten. one of the things in talking to a colleague he was pretty much an expert in the assessments recently, he highlighted the fact that is not only which assessments are used evidence-based nationally norm and so forth, but when they are given and where they're given.

and that assessments to their young children that are given before they have had a chance to acclimate to the bottom, that is too early in either kindergarten or first grade, will be less reliable. and what they tend to do is over identify kids with needs. maybe that's not bad because then they get some service. but the truth is it may waste service dollars. >> so there's agreement on the panel, and no one is disagreeing so far, that we do have good assessment instruments and that states could design a very reasonable way to identify for readers. so leaving aside the issue of whether they should be retained or what should happen, we can identify them and we out of a program. we all agree on that, yes be? one comment about assessment, i think assessment, and thank you, i think florida has a very strong assessment system as well. the key is the next that, what the teachers do with the information that they get and the need for really good professional development for teachers to understand what the

data around a student shows. and then how to attack that deficiency that is there. that is key because assessment by itself is not going to -- >> correct me if i'm wrong. i think a lot of test, a lot of people agree that the tests that identify a poor router is not this is a diagnostic test. it's not necessary useful to plan a program intervention for a kid, right? but all i'm interested in him is we can identify for readers if we have a special treatment for them. that is not a big issue. i suspect it might be an issue in some cases because states and localities might not do it exactly right. but anyway, we can do that. final question now. so this is the one about the witch doctors. this happens all the time in social science. and i think we got to try to bring some resolution on this. we have a stark difference here. some say, it's bad to retain.

that every kid that on average and the evidence that it produces positive impact is nailed and that's based on over 100 years worth of research and meta-analysis and so forth. and in the policy brief, and marty claims, that the florida evidence shows that it can be part of a plan. so first before i ask you a question i wanted to see if we can reach some kind of agreement here that a figure may be more agreement than meets the eye. we are all in agreement, i think, that if a school system really wants to attack this problem of insufficient reading or by the early grades, that they need a multiple part strategy. and definitely should include preschool education, diagnosis, lots of extra reading and so forth. so there's a lot of agreement about how to do this, okay? now, the position on a policy brief is as part of that multiple part plan, that retention makes sense. and shane is saying that goes in the things of a lot of evidence. so what's the resolution here? how can we resolve this

difference for our audience of people who is not going to read, you know, three or four, 500 studies on meta-analysis. this happens when you go to policymakers. researchers don't agree, so what's a policymakers supposed to do? what's the answer? >> can i try and analogy? thinking on my feet so this may not work out. i'm not an epidemiologist, but my guess is that coronary bypass surgery is strongly negatively predicted -- predictive of health outcomes. if i compare people have a coronary bypass operation to everyone else in the population. my guess is that that still holds true even if you match the people you are comparing, based on a cholesterol level, based on some measure of their heart strength. my guess is that if he did a meta-analysis of that relationship, it might even be 136 out of 138 of the many

relationships we can study in this type of meta-analytic way. that doesn't mean -- that means that you should do everything possible to avoid a situation in which you might use coronary bypass surgery, and you might be exposed to it as an individual. but that does not tell you that for those people who are exposed to it that it causes their worst health outcome. and in order to answer that question we would have to set up some sort of a situation where a researcher could take people are equally likely to be exposed to the intervention that we are interested in, some of which get it and some of which don't come as result essentially of chance. we can't randomly assigned students to be retained or not to be retained, but we can take advantage of the situation that i discussed created by these test days promotion policies to compare students who are exactly

similar, save for the fact that they scored one point if only on the state reading test. and that provides unusually strong opportunities to make causal inferences. and none of the other research that's reviewed in these studies comes anywhere close to that level of rigor. and so, in my view we should pay attention to the highest quality evidence, which includes studies of chicago and of florida, and not turn to the larger, older and in many cases, al qaeda literature. and can i -- the only other point i would make is that -- >> wait, don't leave this one because shane is, i'm sure, wants to respond. so shane, respond. >> yes, there's a lot of elements, and with all due back, the idea that we're going to embrace in isolation the regression discontinuity analysis, which frankly the

articles that have been published relative to the reports that have been generated have gone much further in acknowledging the fact that it's not looking at, it's not looking at retention throughout, throughout this article we refer to the treatment under florida's policy as retention if only for the sake of brevity. understanding that, it's conflated with someone the elements that it's just shameful to pretend that it is systematically examining retention. now to be fair, i acknowledge and embrace and, frankly, most of the analysis i've completed have been regression analyses, utilizing longitudinal studies, prospective longitudinal studies. granted they are not experimental brand design, which we both know is not going to happen and is not possible. but, so i applaud the initiati initiative, and it's not to say that marty is the first year so

it's not to put him on the spot but i applaud the initiative of those who have utilized the regression discontinuity analysis in an effort to obtain samples that are able to be examined subsequently. so i applaud that. however, i take issue with the ongoing rhetoric about isolating, isolating causal effects and then suggesting that it links to retention. because it simply doesn't come and that's, it's too strident, it's too myopic, and it's fallacious. it simply does not reflect what is happening in those analyses. moreover, i want to be clear. this is not, i'm not suggesting that it's my research, my particular studies that are revealing this. what i'm suggesting is that we look at the collective of all the assorted strategies, of which there are many, many. and i'm not as willing to dismiss the previous 80 years or

90 years or 100 years of research for the recent five studies, that franklin again the chicago doesn't reveal what you found in the florida context because they can plug in the effexor summer school. they have demonstrated using the same precise analysis that you folks have with the exception that florida context evidently, and this is an issue for further research, although i'm much more ambivalent about the need for further research. i suppose having been active for 20 years, i'm at the point where how about we attend the last 100 years before we continue to advocate for further research, albeit my point that we haven't historically been attending to it. i'm not willing to dismiss that literature that is very multidisciplinary in nature, very multimethod. and i rate statistical procedures when, in fact, we always need to look forward in advance of science, always take a look at those analyses that are being done.

but those are some of the key elements that he believed distinguished our perspective. >> someone is dying to say something here. i'm going to give us the last word. >> one of the things as the director of the institute of educational sciences were have the responsibility for vetting research on what works in education, is pay no attention to meta-analysis because garbage in is garbage out. what you need to do is look at the methodological quality of particular studies and determined what can be reasonably concluded from them. frankly, 98% of the research in education has been conducted over the past 100 years does not need a methodological standard that allows any reasonable conclusions about what works. so i would -- i was certain privilege in terms of conclusion about policy the storm did --

strong smell the logical research rather than the mass of research that has been conducted but i think what we can conclude your is that the florida policy, which had many elements, had at least for a few years a positive impact on kids in florida. and probably, a system impact on behavior was system and the people responsible for getting kids to learn. whether a policy with the same label would have a similar effect in north carolina i don't know. it would depend on the details and that's why we very much need additional research. and research tied to particular policies. it's very hard to make conclusions about meta-analytic conclusion based on 100 years of research about what's likely to be the impact of a particular policy that has seven different elements that differ from the elements that have been using any other particular research. so again, there are always

differences among researchers. it's hard, hard to resolve those differences in less you just believe me. [laughter] >> by the way -- >> let me see if i can summarize one thing. >> a very important point you made, that rascal he agrees with. and that is you cannot single out any element of the florida policy and say this cause the effect. it's the whole thing. [talking over each other] spin it is possible. it hasn't been done. >> here's the point. i'm sure the audience here wants to know what kind of resolution here, and from the florida study we could not conclude, okay, anybody disagree, say so right now. we cannot conclude that grade retention per se is an effective policy. what we can conclude is that

grade retention as part of a broader policy can have positive effects. the whole thing taken together. you couldn't single out anyone else, correct? isn't that what -- >> that's what the analysis -- although it would take the hint position if you take the reading interventions and such without the retention policy that i based on historical evidence look at the effectiveness of direct reading instruction, that you would yield those effects. >> this i know for sure. we will never get to answer that question because we're not going to do that experiment. and less you are dying we need to get to the audience. >> i am dying. and tens of meta-analyses, the best meta-analysis is likely going to systematically document which studies have high quality based on what parameters in a very similar way to what's been done within the clearinghouse. in the sense of you reveal a lot of studies, and you end up identifying what are their

control parameters, what is the degree, and each of the high quality meta-analyses i have seen action report that information in addition to the affected site. because within a meta-analysis you would need to build to look at that level of detail. we agree we can't look in a single study in isolation but we also ought to be up to look at the relative strength. >> i was wrong. you get the last word. make it quick. >> i don't think we should try to separate the pieces and parts of the policy. the pieces and parts of the policy our prevention, intervention and retention. and pace of student performance in florida, it has made a huge difference. >> and if i perhaps -- >> that was very short, thank you. [laughter] >> and if i had put the title together for today's session, it would not have been retention. it would've been third grade reading proficiency, for the same reason that mary said, they are in several the. the second thing want to say is if you look at the document in your folder, about all of the

states and you look at state policy, you see a wide array of things with a stable have abcd. some will have dest and so on. the state which some people say are kind of the basic place where stuff happens have done lots of different things. most have not been studied. >> okay, questions from the audience. have a succinct question and succinct answers. right here in front. >> i'm mid-see with the naval postgraduate school. you might wonder why i'm here. my mother was a pioneer pilot psychologist. i want to ask you about the bell system. if i was available in schools early on, and i say because my granddaughter did it and it made an enormous difference, but

without cost and is there a way to do it? >> it's been 10 years since i was at the state level, but in a broader context, we, we, we put out requirements as to what has to be any good reading program and we loved, we left the purchase and the decision to use that up to the district because that gets kind of to what marty said about some districts ability to make decisions based on the needs of their kids. but from a state policy perspective, we were very specific about research-based programs and not market research. because every program that came out at the beginning of the 2000s had a stamp saying

reading approved. so i am family with many of the programs that cost wise i can't speak to. spent right in the back on your right. >> for children who are victims of violence and bullying and day attend summer program in class, should the schools and the state be more compassionate of them? and what do you recommend? >> let's have a quick answer. what are we going to do about bullying? bullying? catch the bullet and throw them off a cliff. >> teach them how to read. >> that will sal boling. next question over on the left. >> yes, thank you. myriam.

one question about the florida study, is there anything in the study or any other research that gives us the answer to absent retention? or is there any other than that retention made a significant contribution to those outcomes? >> relative to the full package. >> increase teaching and intervention at all the other things that florida was doing that sounded really great. >> yes. it's not something we can address definitively for the reasons we just discussed. we don't have data, foreample, on summer school. many of the additional requirements were later expanded to all kids in the great. so for example, one of the requirements that they have won consecutive, what is it, 90 minute a day, i'm interrupted reading period. so some of those were later expanded to all students and so they shouldn't be something

that's different for retained and promoted students. but it's really hard to separate it all up at one of the things we do look at is the difference between affection reading and in math. in all of the additional interventions were targeted toward treating specifically, yet we still see some benefit in math. and so that makes me think that there may be some independent effective retention itself, but there's no way to say for sure. >> said entry to your question, no. right there in the back on the left. right there, yes. >> tom shultz with the chief state school office. i put, and then the question. the comment is, among the things that can be done in terms of enhancing reading proficiency, it seems that retention is one of the most expensive things that you can do. to illustrate the data from florida's -- it cost more than $10,000 per child, whereas in terms of the preachy program

they're currently spending less than $2500 per child. and it seems to me a problem, the cost of that is hidden. it doesn't get debated in terms of is this a good way for us to spend public dollars when we in peace the percentage of kids who are retained. the question is, looking at the data that mary provided, the concern i have is that in spite of this ambitious effort in florida, over the past seven years, according to this data, there's been relatively little progress in reducing the percentage of third grade readers out the lowest level. you are kind of joint 18 and 20% for the last seven years. where the schools have been going at it as hard as they can go. so what would people on the panel recommend? what next has to be done? what else has to be done beyond what's been done in florida. >> great question. >> one thing that i would say just to go back, we have a fair amount of literature and researching out on the impact of high quality prekindergarten.

and florida has had a prekindergarten program for quite a number of years, like the rest of the states around the country. the quality varies a good bit. and, of course, lots of kids are not a preachy. there in -- they are in other childhood settings. if you look at the work, there's a mountain of evidence on preachy and what impact it has. >> and you are saying that evidence shows that preachy, a high quality pre-k can make a big difference because it can make a huge difference. and lifelong difference. >> so the answer to this question is more and higher quality pre-k? >> that's one answer. spent can i jump in? >> go ahead. >> i think what we've learned down from 15 or 20 years of a fullbore effort in terms of learning about what it takes to get kids to be able to read is that we know for the first time

how to systematically get children to break the reading code. ..

>> full disclosure here, i gave russ $10 to make that each. october 2nd edstrom, we will release the future of children covered entirely about literacy in exactly the rest of the issue just mentioned. >> i would like to make a comment to your comment. first of all, our pre-k program has only been in place since 2005, so we are just seeing those students in third and fourth grade and there's not enough data to draw any conclusions there. we too are very hopeful that it

will make a difference. i would disagree that we haven't seen a decrease -- a steady decrease in the percent of students reading at the lowest level. we have seen many kids move from next to the lowest level to grab the ball and above. so i think i will continue to say it is definitely made a difference. to wrap up the point about a retention policy unfair in terms of race, i would say that the numbers show that are african-american and hispanic students had an accident the most from this policy. for whatever reason, they were not, but they were struggling readers, they had benefited from intervention and retention. and yes, there were more likely to be subject to the policy, but they're also more in need of the interventions received.

>> one more question. on the right here, a couple rosette. >> hi, lisa guernsey, director of the initiative of the new america foundation. tanks for airing a lot of this really important conversation to have. i'm frustrated another researcher with the inability to deal with the conflation issue, the fact that this is a package of intervention and prevention and retention and yet the fact we keep just calling at retention is the answer. one of the things i'm wondering is whether there is maybe now she is theoretical, but anything to just a simple select of retention that is adding to the ability for the intervention to work. and if that is what people think might be happening here, is there a less costly threat to

using less costly children perhaps if we seen other research of negative impact of that. so, thank you. >> this is an interesting question. in articulating the threat or motivation component of that comment is warrants further consideration. i would notably -- i don't know the precise answer to your question, but i have a reflection. there've been multiple studies historic weight that afflicted children's perception of greek retention is a stressful life. there's been multiple studies done that ultimately when they look at a list of stressful life experiences, children historically prior to the florida chicago context had already been indicating that when they report their perception of great retention and 20 other life experiences come at a great retention has

been masters death toll from a child's perspective by six grade as going blind and the death of a parent. for those of you like to know how stressful it is from a child's perspective to go to a dentist that's about 19 to 20 on the list. it's a relatively speaking, great retention being a stressful for children. in terms of motivation from a child's perspective, i see it the children have perceived this historically. we focus a lot of energy today on the achievement component and we're not talking so much about the social, emotional consequences of long-term commotion i believe in what advocate are equally important as we look at development of a child over time were promoting the social and cognitive competence of the chad, not simply the academic achievement. >> karen. >> clearly an issue that's come up is the question of retention of heightened awareness made everybody serious about this issue urgency. there's got to be one more way to achieve urgency. one of the challenge for us and

whatever will we have in life is to say, setting targets, as she urgency. a public commentary on how we've done on the targets and the urgent need and so on and so on a way to come up with a array of ways. >> two things to my husband who i know it's not watching refers to himself as an academic redshirt. he was retained later elementary school and living with me while this is going on company said this is only happening to me earlier, that the other -- the other point i would make us again human behavior. the increase of parents, the number of parents -- teachers always a wish list. engagement until parents get engaged. the fact that parents -- parents of kindergartners were saying, i

want to know what it is i can do. i want to know which are doing for my child. and i was not happening in the beginning of third grade. i was happening in kindergarten. and the fact that a parent would not find out until the end of third grade that their child had a reading difficulty, that is educational malpractice. they should know as soon as we know. i'm in some instances, pre-k. so, to your issue of the threat of retention, i certainly understand having had to deal with it as a high school level as a threat and the impact it has socially. i again will bring up what is the impact of self-esteem and a high school dropout? i think that warrants as much consideration in this conversation. >> please join me in linking the panel. [applause] and if you haven't gotten enough about literacy, come back on

october 2nd. [inaudible conversations]

>> you want to come to america illegally, don't waste your time going across the border into the desert. it dangerous. just get in an airplane, fly here and overstayed her visa. we have no way to check what you are and get you back. the total number of undocumented in this country has been going down for a long time. to resolve the problem?

we have our economy created. people don't come here to get their feet up and collect welfare. they come here to work. if there's no jobs they don't come near. if there's a chance to go back home because america is not a very good place to sit around and think the state is going to support you. indicates that your son, somebody has to create the business that he's going to go to work for. and all of the numbers show, and ripper pointed out, immigrants and i think it is because it's a self-selecting thing. it can't be easy to beat australia, come to the other side of the world, literally give up all your friends and family and everything. everything you know and start from scratch. that is that people are willing to do. so of course immigrants are more aggressive. of course there's more risktakers. that's why they come here. >> mayor bloomberg is joined by rupert murdoch. you can watch the entire discussion tonight at 8:00 eastern on c-span.

>> this weekend on american history tv, 75 years since amelia earhart's failed attempt to do circumnavigate the club on the u.s. air force flight surgeon and aircraft crash investigator, dr. dwight all of the her life and disappearance. also this weekend, more from the contenders. our series looks at key political figures are meant for president in life, to change political history. >> i tried the line in the dust and toss it, before the feet of tyranny and i say segregation now, segregation tomorrow and segregation forever. [applause] >> which is more important? walther iyer? it is not as they sat by the big

as four years ago, the economy. it is the kind of nation we are, whether we still possess the wit and determination to do as many questions, including economic questions, but certainly not committed to them. all things do not flow from wealth or poverty. i know this firsthand and so do you. all things flow from doing what is right. [cheers and applause] >> look at what is happening. we have the lowest combined rates of unemployment and inflation in home mortgages in 28 years. [cheers and applause] look at what happened. 10 million new jobs over half of them high wage jobs. 10 million workers getting the raise they deserve with the minimum-wage law.

>> the nation's top public health official, u.s. surgeon general, ritchie and benjamin spoke at the podiatric mental associations annual scientific meeting thursday in washington d.c. this year marks the 100th anniversary of the organization. dr. benjamin talked about the importance of foot care in treating diabetes is closer experience as a doctor. this is just under half an hour. >> -- caporusso. [applause] >> thank you. thank you very much. welcome to the 2012th annual scientific meeting. what a great meeting. now?

[applause] this meeting will be unlike any other apma event you've ever attended. not only is our scientific program the most medically advanced it's ever been in her exhibit hall completely sold-out. but as you just saw in the videos, we are celebrating a 100 year anniversary of podiatric medicine. [applause] in july, 1912, 225 members gathered to organize the national association dedicated to the needs of sharad but is. today, what they started has become the premier association for more than 12,000 podiatrist, physicians, surgeons and specialists at the foot and ankle. we are today's podiatrist and will continue this long and proud history of podiatric

medicine. i am honored to serve as apma president during this time in our profession and officially welcome you to the national today and our nation's capital. i hope the next few days are both educational and celebratory for you all. we start this hundred year anniversary celebration with a very special guest. i am honored to introduce, dr. regina m. benjamin, the 18th surgeon general of the united states. [applause] as the rope and session speaker today. as america's doctor, she provides the public with the best scientific information available to how to improve their health and the health of our nation.

dr. benjamin also receives the operational command of 6500 uniformed public health officials who served in locations around the world to promote and protect the health of the american people. dr. benjamin is the founder at a rural health clinic in alabama. but she kept in operation despite damage and destruction inflicted by two hurricanes, george s. and katrina and a devastating fire at 2006. today, she is a leader in the worldwide advancement of public health care peer dr. benjamin has forged a career and has been recognized by a broad spectrum of organizations and publications. dr. benjamin has a bs in chemistry from xavier university in new orleans and an m.d. from university of alabama birmingham and an mba from tulane university. she attended morehouse school of medicine and completed the family practice residency in macon, georgia. dr. benjamin holt 18 honorary

degrees. please help me welcome your surgeon general, regina benjamin. [applause] >> lau, good morning. glad it's kind of bright, so it's hard to see, but i can see a lot of people. lots of people. thank you, dr. caporusso. it's really wonderful to be here with you today at the largest gathering of podiatrist in the world. that says a lot. i have one job i have to do before i start talking to you and that is his. on behalf of president obama in

the entire administration, congratulations on the 100th year of the profession of podiatric medicine. [applause] you really do have a lot to be proud of. the apma has been maintaining the integrity and the quality of the extensive education and training the podiatrist receives and this has led to the success of the profession of the podiatric medicine. you really do have a lot to be proud of. i was talking with some of the board members earlier and i realize i wanted to share with you just how i got involved because many of you here or here for the same reason. when i was an intern, i attended the medical association of georgia's annual meeting. one of the intense issues debated once that disease is needed to be taught in medical

school. while i stood up in a room with maybe 15 people are so then i said i'd never seen the diseases except in a textbook. the resolution passed in the georgia delegation forwarded that resolution to the american medical association. and they sent me to the ama to speak to the resolution. and it also passed. and what they've fixed month, every medical school in this country was encouraged to include diseases as part of their curriculum. i learned one person can make a difference, whether it's in medical policy or medical practice. i learned that i can make a difference in medical practice. it's a pretty place, but it's a poor place. i found a community too poor to afford medical care, but too rich to qualify for medicaid. i like the people. i like the community and i

wanted to practice medicine there, but i quickly learned for practicing medicine wasn't just sewing up the shark bite. i had to do with the land sharks from the regulators and reviewers with red tape that all the things we go through. but i also learned that my prescription pad wasn't enough. the patients had problems that went beyond that. for example, i had a patient, donna who has seizures and for a long time or seizures were under control. she came in and said, i'm starting to have seizures again. i asked her, digi mr. madison? she said now, so she took out a piece of paper and drew for me. i ask patients to write down things for me. she said jim our pharmacist used to give her these pills that were solid immodesty stripe. now she gets to stripes. and i realized that donna, who is in her 20s could not read.

no matter what i did, i had to find some sort of service to help her read. it was just as important as keeping her blood pressure under control. and another patient, ms. smith, that is her hipaa name by the way. she called her and bash me on a saturday because many of my patients need you on the weekend. they call you. they don't abuse it. she called me and said dr. bennett's men my back is really hurting. i went to the specialists and he told me i needed to lose weight and i'm really trying, but my back is really hurting in the ibuprofen is not strong enough. can you call me of something stronger? and i said sure. i could hear her pain in the voice. i said, that she need to come see me monday or tuesday. i'll call your prescription that you need to come see me.

sure, i'll be there. sure enough monday a walk in the exam room and there she was, leaning over the exam table in so much pain she couldn't sit down. i said ms. smith, you know, did the medicine i call you and help at all? she said well, dr. benjamin, i didn't get it. what do you mean you didn't get it? she said i didn't have the money. i said but you have insurance. you work at the school system. in the janitorial department. you have insurance. she said yes, but i didn't have the co-pay. but i get paid on friday and i promise you'll get it. and so i stepped of the room and it went to my nurse and had her go across the street to get her medicine. and when i came back to win in the room and he said ms. smith, here's your medicine. i can see a really hurting and i

want you to start taking her medicine. and at that moment her eyes welled up with tears and she said dr. benjamin, i'm so embarrassed. i didn't want you to have to do that. and every last at that moment i had taken her dignity. and i also realized that by the way, i didn't tell you she's like five-foot four african-american lady, really sweet baby about that tall. i realized at that moment though, but the fact that i'd taken her dignity from her, the cultural competency has nothing to do at the color of her skin. it has to do with allowing people to keep their dignity. so i did figure out how to get out of that, so i told her the fact that we had a few people that would send us a small amount of money, donations and

recalling her medication fun for people like her and if she wanted to pay up that capacity she got paid on friday she could, she didn't have to and she was okay with that. so as i was leaving the room, and many of you know this she goes by the way. at her by the way was connected to work excuse? and said sure you can get a work excuse. i said today is tuesday. you want to go back to work on first or friday? she says no we have to strip the? off the floor tonight. i have to go back tonight. here is a woman who was in so much pain she can't even sit down in the exam room, but she's willing to strip the? off the floors so our kids can go to school in a clean environment. so it was for people like her that i was going to come and take this job, so i could be a voice for her.

it was so gratifying for me than the affordable care act passed and preventive health services are not required by insurance companies and they're also required no co-pay. so i called that my mini skit. [applause] you know, one of my most important aspects of foot care that you do as a podiatrist and that you provided to those with diabetes, including today's podiatrist in the diabetic management as part of a team as a vital step in preventing ulcers and amputations. i have been a longtime champion of the power of prevention and is the foundation of my work as surgeon general. you know, help does not occur and the doctors' office in hospitals alone. help also occurs where we live, where we learn, where we work,

where we play, where we pray. i believe that prevention offers the greatest opportunity to improve the health of america's families now and for decades to come. i also believe that prevention is the key to building a stronger and more sustainable health care is stoned. prevention is not new to the national dialogue. however in recent years it's become more vital and more relevant than ever before. it has become an imperative and that is largely due to the changing dynamics in the demographics as more americans families struggle to deal with chronic illness such as diabetes and hypertension and cardiovascular disease. impacting people of all ages, at their cities and economic strata. in the case for focusing more of the nation's attention and resources on prevention is more than a theory. it is a reality that is grounded in science and experience.

we know that what better health children attend school more regularly and they're better able to learn. we know that with better health, those are more about work and they work more days. and with better health, seniors can better maintain their independence. on the other hand, we know that the lack of prevention takes a devastating toll on patients, their families, their communities and the work place. it was interesting that much of the illness and early death is related to chronic disease is caused by just four modifiable risk behaviors. the lack of physical activity, poor nutrition, tobacco use and excessive alcohol consumption. almost 50% of adults have at least one chronic condition. this year in 2012, more than a hundred thousand americans will die from heart disease. in the overall cost resulting

from cardiovascular disease has estimated to be $444 billion each year. diabetes is a major cause of heart disease and stroke. 26 million americans have diabetes and 7 million of them don't even know they have it. diabetes is the leading cause of kidney failure, nontraumatic lovers and amputation and new cases of blindness among adults in the united states. type-2 diabetes is an emerging health of the menu, particularly minority youth team driven by her obese epidemic. i've got some more statistics for you. according to the cdc, if current trends continue, as many as one in three u.s. adults could have diabetes by the year 2050. up to 25% of those with diabetes can develop a portal server. and more than half of all foot

ulcers will become infected, requiring hospital intervention and one in five of them will require amputation. and also, people with a history of diabetic foot ulcer are 40% more likely to die in 10 years than people who have diabetes alone. so it is so important that quality podiatric care must continue and must continue to it and spirit by preventing amputation and hospitalization, podiatry's not only save lives and limbs and health care dollars, they also help patients preserve their dignity and quality of life. we have to make prevention part of our everyday lives and empower people to make better health care choices. so i am pleased the obama administration has launched a spot agenda to help americans get healthy, live longer, stay well and thrive. as surgeon general, i had the

privilege of sharing the national prevention help promotion of public health council was established by the affordable health care act, also known as health reform. this council is composed of 17 cabinet level heads of federal agencies such as the department of transportation, agriculture, labor, environmental protection agency, hut, department of defense, all 17 coming around the table to talk about prevention. and last year, the council released the first-ever national prevention strategy. well, next slide if you've got some slides for me, please. the national prevention strategy was released last year and our vision is to move our health care system from from a focus on sickness and disease to a focus on wellness and prevention. if we truly want to reform health care in this country, we need to prevent people from getting sick in the first place,

to stop the disease and illness before it ever stars. so in addition to the state-of-the-art medicine, we need a new approach to promoting prevention in our community, sustain healthy depends on other factors, like housing and transportation. education, a lability of quality of food, work pace and environment. we want to change the way we think about health in this country and that calls for the nation to take a more holistic and integrative approach to community health. something that she vardy been doing. we need to do that is the nation. everything from safe highways and worksite wellness programs to healthy food and good schools, good rooms. now i'm going to figure out how to work to size. there we go. so, the goal of the national prevention strategy is to in

recent number of americans who are healthy at every stage of life. you know, whether you are two or 92, when should it be healthy. one of my patients that i want to get old, but i want to be afraid. we have four pillars. healthy and safe communities, clinical and community preventive services. empower people and the elimination of health disparities. and i know that you've been working all of these things. we just need to put them altogether. if we follow the recommendations and we have several of what we call our priority areas around their pitch you can read them. but if we follow the recommendations of the national prevention strategy, we can prevent or at least significantly reduce the five leading causes of death. so we have been working with partners like you as well as partners and industry corporation education philanthropy, local and state

and tribal governments to bring this prevention strategy to life. we need to have a northstar, a place to follow the strategy to put that together. it gives us a direction to go and is available to you at our website, surgeon general.gov if you want to look at it. well, to your community and talk to you a lot more about it. but the biggest challenge that we've seen has been in lifestyle changes. but lifestyle changes can make the biggest difference. and leaders, we can make been healthy fun. we can make health behavior joyful. we have to put the joy back in the house. you don't see it anymore. there's no joy for the individuals. the health professionals don't have the joy. we have to find their own joy. you can't underestimate how important it is to have joy in health care.

you have to find your own joy. what brings me joy and health care may be different than your joy. maybe one person wants to run a marathon for whatever reason they might want to run a marathon. another person's choice may be to fit into an old pair of jeans. and yet another one may be to set up long enough to play with the grandkids that evening. whatever your health care joy is, we particularly in government want to help you get there. once you identify what it is, our road is to make it easier and affordable ticket there. we have to stop telling people what they do and what they can do, so i called this a certain journey to joy. we started doing things whenever i give talks. i do some walks and activities than walking is something i think you know a little bit about them i want to make sure

we promote walking and i actually wanted to walk at this conference afterwards, but i have to catch a flight, so you get out of it this time, but not next time. so this is a walk in north carolina back in north carolina and had a meeting and anyone who wants to walk with us show up tonight after the meeting, about 5:00. it was the wintertime, so it was that night. it's a really nice trail with a couple hundred people came and walked with us for their babies, kids, strollers and dogs. it's just a lot of fun. we also do zumba. dance, while, by kos and white sneakers with the physicians in this area. so we were going to do that with you. so we'll do it next time it will come out in your community if you invite us. it basically, have fun.

enjoy doing what you're doing. making a phone with the family, with everyone. i did another walk, which i don't really call a walk. i don't know what i called it, but it was the grand canyon. it is 26.2 miles. 3000 feet down, three dozen feet back up. and it was a challenge, but it was fun and it has been out there come a been in the community -- not in the community, but actually in the grand canyon. some part was woods, the most of it was sad. and it wouldn't have been so difficult except i had cameras following me the whole way. you're huffing and puffing in the cameras. but the point is that i can do it, anybody can do it, so that was the whole idea. but walking and enjoying an aching health care fund. and people when you ask them why they don't walk often times see their feet her.

sober looking to you to make sure you hope what i and not not be the reason not to walk or if you're walking poorly, encourage people not to like and you can do that with your patient. another thing is to do zumba. it doesn't take a lot to dance. were asking radio stations to help us with what i am calling 30 to 62nd dance breaks. they play music and you just stop what you're doing and its employees in monday's rock 'n roll and maybe another day soul and added a country. you stop what doing, unless you're driving, and just dance. you may not burn a lot of calories, but it's very good mental health. the idea is to have fun.

before i stop, i want to tell you about one area i'm certainly interested in an every other surgeon general has been a major help with that, too. and that is smoking. you know that smoking really affects the peripheral circulation. but we just released a surgeon general this spring on smoking and youth and young adults. every single day, 1200 americans die from smoking and each of those deaths is being replaced by two young smokers. we call them replacement smokers. 90% of all smokers start by the age -- they start by the age of 18. 99% by the age of 26. in the surgeon general was 800 pages, 100 dirty fix binders

went into putting together. so everything i say about it has to be scientifically factual. over $1 million an hour speed marketed on tobacco and tobacco products. that's $27 million a day. if we can just get her next generation not to take their first cigarette before the age of 26, we can make that next-generation tobacco free. so it's real important that we look at our young kids, particularly college-age kids. they are the ones starting to get out. we've had wonderful strides in smoking, but this is an area we still have a ways to go. i hope you'll follow me on twitter in our journey to joy. i want to particularly commend you for the important health care services you provide to millions of americans every day. as america's doctor, i want to tell you though, we need you and

therefore we need you to take care of your own health. i'm going to be getting on the plane a little bit and that flight attendant says, put on your own face mask before attempting help others. we need you to push her face mask on. we need you to do your own exercise and take your flu shots, do the things that we need to show examples. make sure you take care of yourself, exercise, eat right and get enough sleep. and finally, i want to end with a quick story. and that is there is a young girl who was jogging along the beach early one night -- early one morning she was jogging along the beach early one morning. and she was jogging. there was a star fish in the water one of the time. and as she was doing a run

commissioners tossing the starfish and the water. and when she finished a run, she just couldn't take it anymore. she says, why are you bothering to toss the starfish and the the water one at a time? there's hundreds and hundreds along the beach. as soon as the sun comes up, they're going to dry out and die anyway and it's not going to make a difference. why do you bother? he reached down, picked up a starfish instead because it makes a difference and tossed it in the water. i hope the next few days as you attend this conference to learn as much as you can commit is to go back home and find your starfish and that you continue to make a difference. thank you so much and congratulations on 100 years of podiatric advancement. clap back [applause]

>> if you want to come to america illegally, don't waste your time going across the border into the desert. it's dangerous. getting, flyover and overstayed her visa. and the total number of undocumented in this country has been going down a long time. we solve the problem by having our economy created. people don't come over here to collect welfare.

they come here to work. there's no jobs they don't come here. america is not a very good place to sit around and think state is going to support you. in the case of your son, somebody has to create the business he's going to go to work for. and all the numbers show is rupert pointed out, immigrants and i think it's because it's a self-selecting thing. can't be easy to leave australia, come to the other side of the world, literally give up all your friends and family and everything and everything you now and start out from scratch. and that is what people are willing to do. so of course so of course immigrants are more aggressive. of course more risk takers. that's why they come here.

>> i draw the line in the best and tossed the car met before the feet of tyranny and i say segregation now, segregation tomorrow and segregation forever. >> which is more important? wealth, or honor? it is not as it said benedict was four years ago, the economy,

stupid. it's whether we possess the wit and determination to deal with questions including economic questions, but certainly not dedicated to them. all things do not flow from welfare poverty. i know this firsthand and so do you. all things flow from doing what is right. [cheers and applause] >> look at what is happening. we have the lowest defined rates of unemployment inflation and home mortgages in 28 years. [cheers and applause] look at what happened. 10 million new jobs, over half of them high wage jobs. 10 million workers getting the rates they deserve what a minimum wage job.

>> on tuesday, the cato institute hosted a discussion on taxes and income inequality in america. panelists at the inequality research, the causes of my proposals will reduce the gap. the event runs just under an hour and a half. [inaudible conversations] >> all right. ladies and gentlemen, thinker ready to start. and dan mitchell, senior fellow at the cato institute and its my honor and privilege to moderate today's panel. but to start by welcoming everyone to her hayek auditorium here at the cato institute.

both those of you in the audience and our friends watching a c-span. were going to be discussing today the issue of inequality, which i think actually is behind almost every controversial economic issue that we have today. it's fundamentally i think in my simple mind the way of looking at it, an issue of whether or not the pie gets bigger over time. if the pie gets bigger over time, we should get bigger offers. the pie doesn't get bigger, one person is becoming wealthy must mean other people must become poor. but on the tax policy you don't want to hear from me. but i'm going to do is introduce all three speakers in the order that they are going to speak and then they'll come up, give their presentation, hopefully 15 minutes or less each, which will be this time for q&a afterwards. we're going to start with brian denature vague, chairman of san houston state university. i like him a lot because he

bought a book called b., class, the rebels to start the supply-side resolution and restored american prosperity. that was sort of my coming of age interest in public policy. he got his education from harvard and columbia. we'll then be hearing from alan reynolds, senior fellow here at the cato institute. he was formerly director of research at the hudson institute, research at the national commission on economic growth and most importantly for today's topic, the author of income and wealth from greenwood press in 2000. and then batting cleanup committees of the third, a scot winship come a senior fellow in economic study at the brookings institution. before that, research manager and economic mobility at the trust and senior policy adviser for third way and was educated at harvard and northwestern. so without further ado, i'm going to turn the program over to brian.

>> thanks very much comedienne. it's great to see you again and it's great to be here at this institution, the cato institute, which in my mind just becomes more and more relevant with every passing year. it really is amazing all the challenges we face are the ones that cato has been studying for a long time. four years into the failed recovery from the great recession, we now know what the 2012 election is going to be about. incredibly, it's going to be about -- incredibly it is going to be about economic fairness. that's right, not recovery, not growth, not about solving the problems which is the 800-pound gorilla in the room. namely the puny state of ex-government expansion not to mention jobs at this nation has been suffering with this horrendous run of five quarters

since the collapse of 2008, 2009. forget all that. although stroke concerns, even if they are great as it is for three generations. the question at the end as the two parties nominate their candidate and the incumbent president is whether they are getting more than their fair share and circumstances. until republicans to your economic growth we are heading for a referendum come october. how we could possibly come to that is a story for another day. it does not jarrell represent a great episode of changing the subject in recent american political history. instead, we come here today to talk about the research, the academic research that lies at the bottom of the consensus on inequality at the center of the president's worldview and the democrats expect the electorate to take as a given. i speak of the academic research but unlike in the opening passages of president obama's first budget of early 2009.

the research that actually came to skewed so far out of the ivory tower dedicated to float into the occupier wall street movement. a slug in being, we at the 99%. i speak of course of the iconic modern research on in some inequality that put out in 2003 by the french economist thomas to cattiness counterpart, emmanuel syed in an article in the quarterly journal of economics called incoming equality in the united states 1913 to 1998. here it is. now on the release of that research, they say many formidable challenge in the form of alan reynolds relentless counter count of who gets what in the economy. income and wealth. in the years before the great recession without a landing all necessary patches. but who knew dan that the paper

would soon take on a huge new life of its own after the recession had fought by progressive presidents who needs a security blanket of the movement since the 1960s and the former occupier wall street. because the piketty saez researcher taken on the social life, far beyond our recent years, i took it upon myself to add to al's critiques and emphasizes essential corrections in the paper just issued with the laffer center for supply-side economics. the paper i wrote last month is thick with historical narrative about how inequality has always been well understood in american political economy, actually better than today, even in the battle days of robber barons and andrew mellon. indeed, my paper is at pains to point out the country was pretty good long before the income tax with a rolled around in 1913 at crafting public policy that made

sure the baby was not thrown out the bathwater. pollution is constructed such that inequality would be kept at bay as growth is maximized. the results were too shabby for the ratification of the constitution to the foundation of income tax in 1913, we've got 100 fold real increase in christian mystic product coupled with invention of the mass middle class. please do cancel my paper for this historical explications brought on by the lifestyle piketty and saez brought on to make historical generalizations about social norms, and their turn, been at the bottom of the uptown inequality trend they perceived over the course of the 20th century. there rather than being the historian here today, i want to underscore one terribly fatal methodological weakness in the piketty-saez research that had never been corrected, let alone addressed and even by emmanuel saez's own submission to the

simple fact that piketty-saez used pretax income as their central data, their analytical preference point. pretax income. here it is in the piketty and saez's own words. quote from income according to definition is computed before individual and can tax an individual payroll tax, but after employers payroll taxes and corporate taxes. let's forget about the latter part of that definition having to do with corporate income. john cochran referencing as he calls it the piketty-saez sausage factory has explained why computing are but income is one tricky endeavor. anyway, corporate income tax rates haven't changed all that much over the decades. to take online and the piketty-saez definition is this, quote again, income according to our definition is computed before individual income taxes. now, the big discussion in the piketty-saez research was over

the course of the 20th century , income inequality has followed an uptown of pattern in the teams in the 1920s, income inequality was high. it came down by the 1940s to mistake though the 50s, 60s and 70s and shot back up to the 1920s levels in the 90s and 2000. the correlation that piketty-saez were able to identify with what this pattern was that the marginal rate of the income tax between firstly within the quality of this. when the marginal rate was low, 25% in the 1920s, inequality was high. when the martial rate of income taxes have between 70% and 94% in the 40s, 50s, 60s and 1970s, inequality was low. when the martial rate as though it so again, 50% in the 1980s and beyond, inequality bounce back. the intuitive collusion and in piketty-saez it is explicit,

could not be clearer. in high taxation cut of the income of the richest disproportionally down in an series of low taxation, the income of the richest disproportionally. somehow it is god lost in the shuffle, then no difference has anythingo do with rich individuals paying taxes. it seems that what the piketty and saez telling us, because the government expects the richest money for public purposes. and it seems in piketty and saez the government refrains from laying hands on the rich income and therefore make out with and it. but none of this was the weather has taken place. given that fateful definition of income that piketty and saez are using. their pretax income. when the richest income fell in the 40s and 1970s that wasn't because the government was taking a 70% or 94% income

rates. it's because income is not reported to begin with. conversely when the richest income is sorting the 1920s in the 1980s and beyond this tax rates are lower, this represented an enormous fair presentation of income to the government on the part of successful individuals. indeed it became available for taxation. see the deadly problem with the piketty-saez if it is compromised by bias and errors of high taxes on the rich, the ritual obviously scrambled to arrange things such that their taxable compensation comes in low. after all, if the arrange things for taxable compensation to come an high, though get nailed by tax rates north of 70%. and vice versa during periods of low taxes. then the rich will not bother so much to prevent drilling comes are being presented as taxable income because income is taxed so much anywhere. income, the bias in the piketty-saez is this. high tax areas make the richest taxable income far less than

their real income and low tax areas make the rich is real income far closer to their taxable income. therefore, comparing taxable income to real income over the decades tells you nothing. now, you may say, isn't very nice device and economics that tells us how much the richer hiding income from the u.s. over here? will do is of course in something called the elasticity of taxable income for eti. studies of the elasticity of taxable income strike to determine the rate at which the rich take their income in nontaxable fashion given the tax increase. the field of several decades old and fairly venerable. the consensus has been for years that for every 10% increase in the marginal rate of income tax and which are prone to suppress taxable income by that sme rate of 10%. the underlying phenomenon being studied is with the rich are able to absorb really come in

tax benefits, i realize capital gains come alone and lost write-down of its profits in all such that advanced as a way to manipulate taxable income. obviously the value of taking real of her taxable income goes down at the marginal rate of the income tax. but the marginal rate was down by 66 points as it did from 1944 to 1988, you can be taken at the ratio of real intent to taxable income on the part of the rich down to something by two thirds. the manual saez inanity 90s to inelasticity of taxable income research. he inexplicably dropped in the decade of the 2000th as he concentrated on taxable income inequality datasets. the obvious question is, why not marry the two? if we have decent methodological means for ironing out the kinks and the taxable income timeseries, why not go ahead and apply them? i did actually make paper, using

consensus eti animatedly back of the envelope way doing some very serious econometrics. but the basic pattern that emerges is this. the real income of the rich and in particular the top 1% like piketty and saez in their research has been flat to the 20th century. that's right, flat. not u-shaped, not in first u-shaped, not uptown, not to comply, but he's chosen recently to do something else. he hasn't said attacked the literature. the paper earlier this year, saez said he had a propensity to overstate the eti for the topping come by big orders of magnitude, upwards of seven fold, but tellingly, saez concluded by saying we need our time to sort out eti effects. ..

>> the strange thing these last nine years since 2003 is the intransigence piketty and saez have shown, the obvious point that work needs be fortified by degree difficulty. pretext income is a terrible measure of the fluctuation of the risked fortunes over tax rates on the rich change. in fact, the particular weakness that their achilles' heel's, as

a measure of inequality is the fluctuation and the martial income tax. only if that rate were stable but pretax series of any provisional validity. no matter to piketty, and saez, they always go the deep and expelled at the client of labor unions, new social norms and all this stuff is responsible for the rise in inequality trend since the golden era of the mid-part of the 20th century. the thing about science in general is if you have poor data but it's the radius data available you should go ahead and use. at the same time you should be exercised in to potential shortcomings of any conclusions based on the acknowledged limitation. you should welcome in improvements and when they come, be willing to toss the original evidence to begin with. here's what we need to do. assess the site of a form economic commentators, this is realized, economists as it is practice in its advanced form today, there's no license to accept claims -- on inequality.

rabbit economics today only judge to piketty and saez any code on the 20 century is grossly exaggerating and growth judge rating of those. this research is now moving our politics as well as the segments of our youth occupy wall street. mean this is becoming far more now than just an intellectual curiosity. [applause] >> we will hear from our shy, retiring, bashful and retiring college. spent only if i can figure this thing out. >> the title of ms. hughes -- by the way, insightful history can you should read the history i'm naturally going to focus on the numbers because that's what i do. misuse -- let me give you an

example of misuse of these numbers. i'm going and to is nothing ubiquitous, but on not going to misuse them. in this use would be joe's new book, the price of inequality. chapter one is called america's 1% problem. he doesn't present much data. he sort of talked about the data, and then he concludes quote a simple story of america is this, the rich are getting richer, the poor are becoming poorer and more numerous. and incomes of the middle-class are stagnating or falling. why is that a misuse of the data? because the numbers only cover the top 10%. they are as the authors admit silent on any of the part of the income distribution. the congressional budget office does a much better job of in putting everybody. what different is the average incomes of the top 1% fell by 37% from 2007-2009, as increases go that's pretty rough. they also found a real meeting

in, stagnating or falling, real meeting income rose 48.8% from 1980-2009, including a small rise 13.9% between the high of 2000, and the peak of 2007. as for the poverty rate we will get back to that in just a minute. the second major errors in the use of these numbers all relate to forgetting to the point brian may, these are pretax numbers. they are also pre-transfer numbers but they don't include any transfer payment. they don't include social security or income tax credit, food stamps, unemployment benefits. et cetera, et cetera. well, you know, if social security isn't income, i have a beef with the irs because they try to tax mind. but he lived out and they laid out benefits. they only talk about cash compensation, not health

insurance paid by employers. pretty serious mistake. that in spite of the fact that pre-transfer pretax income, people use these numbers. stiglitz did, piketty and saez been so stupid as an argument for raising taxes on the rich and increasing transfer payments to the other 99%. that's just ridiculous. it would make any difference. the numbers exclude transfers and they exclude taxes. so if you're somehow able to increase taxes on the ridge it wouldn't show up in the numbers. they don't count taxes. if you are somehow able to double transfer payments or triple them that wouldn't show up either. they don't count of transfer payments. yet these numbers are used that way all the time. this graph shows that problem number one with the data set is it's not a credible measure of income. and what i'm showing here is the total income, remember the top

1% s. 1% of what? it's a racial of 1% of incomes to everyone else's income. but even not counting much of everybody else's income, then that ration was going to be increasingly false. what i'm showing here is what they call total income as a% of personal income. and as you see they are missing a large and growing share of personal income. why? because health benefits are becoming more important and because transfer payments are getting bigger and bigger and they are leaving that out. and so this factor alone makes the top 1% rise in quite evolutionary manner simply because the denominator, total income, a shrinking and increasingly understated. they also, incidentally they use a measure of personal income, 80% of personal income for prewar data in the user for european data, but here they just use whatever is reported individual tax returns minus transfer payments, et cetera. bad measure.

the second big problem is it's not a credible measure of inequality. this gets back to the poverty rate that stiglitz was talking about. what you see in this graph is that when the top 1% share prices, notably in the '90s, the poverty rate goes down. when the top 1% falls, notably in the last few years, the poverty rate goes up. so we have all learned to say when the rich get richer, the poor get poorer, according to this data is absolutely backwards. if you're going to use this as the top 1% as a measure of inequality you were put in a paradoxical position of saying that spirit in which the poverty rates goes up is a good thing because its reduction of inequality. recessions are a good thing. they always produce inequality, by that measure, top 1% always fall. every recession but one since 1913 the top 1% has fallen so

these folks should be cherry-picked and 99% particularly should be cheering because in the last come into two years between 2000, 2009 their share of income rose by five percentage points. wow. this is a bigger share of a shrinking pie. welcome to a. it's not much fun, but that's the number that use. there are better measures, measures that include everybody. a common what is called the gini coefficient, e.g. coefficient of one would be perfect inequality. ag meaning one person owns everything. the gini coefficient of zero, everybody has the same amount. so they're usually in between like point for. the cbo's gini coefficient even though it includes big numbers for top 1% income was unchanged between the 2008, between 1998 and 2009. in other words, for 20 years it's gone up and down but it ended up about the same. some academics, put out a paper

in 2010 where they took the gini coefficient from census data and in a just a couple of adjustment period included cash transfers, not food stamps, cash transfers and they included the insurance benefit, health insurance. that includes medicare, medicaid but also an employee based interest. they use just a cyclical peace. so a cyclical peak of 1989, that the gini west point 372. in the peak of 2000 it was lower, and the peak of 2000 it was lower still, .360. so that's a fairly broad measure of inequality, and it is cyclically adjusted and it's not rising. for what it's worth. and the last thing i want to talk about is the method, behavior response, the changes in tax rates, and i'm going to do this in the simplest way i know how, which is to say let's look at the real dollars at the

top 1% received, derived is simply enough, they do it as percentages. i do it in real dollars. and the blue line is salary, stock options, all income of labor. the green line is other, mostly business income that is tax at the individual level, s. corporation, partnerships. and the red line is capital gains which is of course the thing that drives it most of the time, particularly in the cbo numbers. now, what's moving these things? will, you see this big spike in capital gains in 86, that's people rushing to sell assets to businesses, stocks, he for the tax rate goes up in the following years. it went from 20, to 20. it spikes up in bed safe very, very low. while the capital gains rate was high, 28%, that part of the top 1% income was low, understating making it look like there wasn't

much of a rise. then in 1997, we cut the capital games back down to 20% again and capital gains spiked leather dramatically with the help of the internet at a technological revolution going on at that time. piketty and saez always say most of the train in the top 1% of income has been in labor. that's not a bad thing to say when you're talking about a period up until 2000, but it does represent the blue line. there's a big spike right after the 86 tax reform which plays havoc with all of these numbers, and it is exactly what you would expect from eti when you cut the top tax rate from 50% to 20%. you could almost in half. the eti the teacher tells as you should expect the amount of income reported to practically double. and it practically double. then a kind of levels off. it goes up again. i will tell you later. the green, the other, spikes about the time of the 86 tax reform.

that is simply shifting of income from corporate to noncorporate forms. the corporate tax is higher than individual tax at which had dropped to 20% so it made sense to convert existing corporations to partnerships or subchapter s. or llc, and it also made sense for new corporations to be created in that form. because you get a big spike which adds to top 1% income, but it's totally illusory. moving money from the corporate form from individual form is not an increase in income. it's just a different way of reporting it. so that's wrong. the increases from 97 to 2000 are largely driven by the capital gains spiked which is a mixture of lower tax rates and technology booms. but there's also something going on, and that is stock options. by the end of 2001, the survey of consumer finances reports stock options were 11% of

americans had stock options. i missed that boat somehow. and it was a proliferation of nonqualified stock options which when realized after three or four year waiting period were taxed as ordinary income. but since then there's been no gain in labor income. not even 2007. you get another spike in capital gains and then we have the 2003 cut in capital gains to 15%. what is the theory? aei tells us we should expect a big spike in capital gains. we got it. we see a big spike in other income. that's partly business income but the big thing is we have a tripling in real terms of dividend income on the top 1%. i never held a dividend paying stocks when attacks on him was 40 or 50%, but i'm thinking dividends look pretty good to me. and apparently a lot of people agree with me. you have a big increasing amount of income. and by the way, and it's arguable that this is an amazing

device. it's not a reported dividend, enough to probably offset the lower rate. then, of course, we have the recession which is the grand nastiness of it all. so this is just a simple way of describing eti, and you can see the result of people were behaving when tax rates changed. this is a quote from piketty and saez with a young woman from mit, i forget her name. stephanie i think. and it says there's a clear negative correlation between top 1% income share and the marginal tax rates come at this graph which is from another publication size was involved in, i couldn't get the axes but i still look as best i can. copyright violation. but basically you can see for yourself when the top marginal rate climbed which is basically from 1932 on, top 1% are smart enough not to report much

income. then comes down in the '80s and the top 1% rises. and what piketty and saez and stiglitz say if we actually the entire rise of top income sure to click the top tax it, this translates into an elasticity of top 10, with respect to the net of tasks rate of around one. this statement can be turned around to it is reversible. if elasticity is around one, that means we can't explain all of the rise in the top 1% share as a behavioral response to lower tax rate, which is exactly what i think is true, and that doesn't even include capital gains which is a big missing part of that story. the response of capital gains was important in the chart i just showed you. tony atkinson and andrew lee studied five anglo-saxon countries from 1970-2000 the tony atkinson by the way, a co-author with piketty and saez.

and what they found, atkinson and lee that we estimate that reductions in tax rates explained between one-third and one half of the rise in the income of the richest percentile grew. now, even if it was only, say have, i'm saying it's more than that, this makes these numbers really not appropriate for the uses in which they are being put. it's really does make them appropriate as an excuse for raising tax rates are increasing transfer payments because tax rates in transfer payments are not counted in the data. that's all i say. thanks. [applause] >> over to you. >> i can do this. >> all you have to do is minimize. >> there is. and any speakers have cell phones on by the way, turn them off because it causes a little

bit of feedback. >> i am a senior and, therefore, i am entitled to -- [inaudible] >> let me thank the cato institute for inviting me to be on this panel today. i'm pretty excited. lately i don't be a lefty on the panel. actually i consider myself to be one of, one of about half a dozen libertarians running wild in the world today. but i greatly appreciate all the cato does come emphasized the importance of markets for widely, and also benefit greatly with in the last 24 hours i should say from grappling with alan's work specifically, and really glad to have a chance to respond to brian's paper.

so let me start, i want to disagree, or i want to agree rather that the question that brian raises about taxes and inequality in living standards generally, and the question he raises about the research of piketty and saez specifically our important. to a point i even sympathize with his answers. at some point high marginal tax rates almost surely do hurt growth by reducing investments and work among those who make the most money. diminish inequality resulting from high taxes can actually translate into harm done to the middle class and to the poor, at the very least they can be benign so i've argued elsewhere that the fact that inequality dropped quite a bit from 2007 2007-2009 presumably did not help anybody in the middle class, and, therefore, the idea that it necessarily rising inequality before then harm's middle-class and the four, have

to really fiercely consider the idea that that is just not true. finally the post-1980 increased inequality found by piketty and saez may very well be exaggerated. i have spent quite a bit of time over the last two years analyzing their data from a skeptical perspective. all this said i want to argue that brian's case for each of the empirical claims is far too weak to make them convincing. so consider first whether i tax rates hurt economic growth. brines discussions of growth in federal income tax is informative. it reminds us of just how much the new deal and world war ii changed the federal income tax. as he describes a 1913-1931, income tax rates were low with a top rate no higher than 25%, except for eight years during and after world war i. starting in 1932, however, the top rate was above 50%, just as

important from 1940-1943, personal exemptions were lower to the point where for the first time most americans were actually exempted the federal income tax. the rate hikes are driven by the new deal. the exemption cuts were driven by the fiscal demands of world war ii. the contrary, after world war i, after world war ii ended, top rates remain high. they remained above 50% for half a century after the 1932 height. and personal exemptions remained low taxation of income continued to be much more universal than it had been in the past. now you can argue since 1980 we've gone through a third airport tax rates have come down across the board, and more and more people in the bottom half have been removed from the tax rolls entirely so the debate about half of households actually pay no federal income tax at all. so it's almost certainly true these changes in marginal tax rates have had some impact on

economic growth, but brian was argued that they've been determinative growth. for example, he writes quote perhaps the most telling statistic illustrates high taxation is that before the introduction of the federal income tax annual growth was 4% while in the years since, it's been only 3.2%. this would've comparison would tell us next to nothing about relationship between growth and taxes. even if it was valid. many other things in the presence or absence of a federal income tax change between those two periods. but that aside, his numbers are misleading because they don't take population growth into account. higher population growth rates in the pre-1930 era grew the economy but those spread of our people of course so on a per person basis, gdp from 1790-1913, the pre-income tax era, grew by 1.5%. from 1913-2011, it grew by 2%. so per person growth has been

higher since the income tax was introduced, not lower. the income from the same source that brian used, and they really show that there's no basis for arguing that quote that conditions not changed in 1913, the poor and middle class would be better off today, the very mechanism for reducing inequality, the present income tax contribute to a precipitous decline in the trend of living standards is not at the top of the income. so to be clear, i'm not arguing that the introduction of the income tax increase growth. i'm only pointing out to properly analyze the evidence that brian presents actually contradicts his claim, and by the way, the piketty and saez data shows that for the bottom 90%, there are about three times richer today than they were in 1917. okay, so brian also intimates the low tax rates about low 1920s and the high tax rate of

the 1930s were responsible for respectively a strong and weak growth of those two decades. similarly he argues postwar boom was confined to a small period in the 1960s and attributes the timing to kennedy's tax cuts. but in neither case does he present evidence that would allow us to do something again these changes in tax rates from other changes affecting the economy. and easy way to make this point is to take a look at this chart. so i put together several business cycles. i combined a few small ones between 1937-57 i think to try to get these roughly to be 10 years. and i applauded gdp per capita against the average top marginal tax rate of the business cycle. and what you shouldn't see in the shaded area, there are actually two of these transitions between business cycles. that support brian. [inaudible] >> i'm not using this rhetoric

basically, the two periods that you see from 1937-48, and then from 1948-57, you can see the tax rate increase in annual growth declined pretty precipitously. and divisive an expert from 48-57 to 1957-69, tax rates declined an growth increased. but in all of the other periods, evidence mostly goes against brian's view. so when tax rates decline, growth rate -- i'm sorry, when average top marginal tax rates declined, you saw declines in growth, not increases in growth. so again i'm not arguing. i'm just sort of making a point that the evidence in the paper really doesn't help brian make the case that he wants to make. okay, so when i compared marginal tax rates to gdp per worker rather than per capita, the picture gets a little bit

better for three out of the seven transitions. they go the direction that brian hypothesizes. but interestingly, from 1940-57, 1957-69, what happens is that taxes declined, the growth per worker actually slowed. so again this is noteworthy because brian wants to argued the 1960s was really the only part of this era that experienced any growth and it was largely because of tax cuts. but that's a function of choosing, the golden era is starting in 1944 when we were in the middle of world war ii, and a lot of our prime age workers were actually fighting overseas. and in picking 1960 arbitrarily as being kind of the point where things got better. if you measure things from business cycle the business cycle, what this chart shows is that actually the 1948-57 period looks pretty good, 2% annual growth over those nine years.

if you look at gdp per worker, it looks better than the 1957-1969 era. and then you can also see from 44-48 there was a precipitous decline in growth. we know why that is the. it was the mobilization from world war ii. that occurred in one year between 1945-1946. when gdp per capita dropped by 12%. but didn't have anything to do with high tax rates. the economy boomed despite them. so to repeat, i strongly believe that high taxes of that era action did have a negative impact on growth. but the analyses that brian's paper, just don't support the case. okay, the second part of brian's paper involves a subtle shift. the first part he is arguing that increases, or the declines in inequality have trade-offs in

the form of slower growth that actually hurt the middle and about the second part of the paper he is now arguing that actually there hasn't been an increase in inequality, or previous decline in inequality but it's all kind of an artifact of tax day. so those both can't be right, but let me sort of tackle this secondary as well. so brian argues the estimates are misleading because the obscure the possible at a high marginal tax rates in earlier decades require that which today compensation in forms that don't show up in the data, or to shift their incomes around otherwise in ways that obscure it from the data that's showing first declines in increases in the quality. so this is almost ready to do sense. the question, how much? and so, i think where i disagree, so i agree with brian and certainly with alan, a book everybody should read, "income and wealth," but this is an understudy question, an important question any potential

because of piketty and saez data. but i disagree with brian, and probably allen, about how much tax avoidance is likely to affect piketty and saez figures. so brian notes that in his early work, saez shows the amount of taxable income reported is sensitive to marginal tax rates, the elasticity of taxable income that alan and others were talking about. then he asserts despite the evidence in his later quote in his later famous work with piketty on income in the cold, no reference to taxable income. that's not true. so if anyone has access to the courtly journal of economics they can take a look at either page four or page 31 to see for themselves. and one doesn't have to agree with piketty and saez's conclusion that tax avoidance doesn't affect the results, but piketty and saez to acknowledge the issue here for that matter saez any 2004 paper empirically tested or tried to test to the extent to which this sort of income shifting could affect his

results. now, he concluded that two points out of a nine-point increase from 1960-2000 could potentially be explained by marginal tax rate change. again that you don't have to agree with that conclusion but he has tried to take a look at this and to take this particularly somewhat seriously. furthermore there's an issue about elasticity of taxable income that makes all this complicated. so the fact that the report of taxable incomes could be sensitive to top marginal tax rates could derive from several different causes. so what brian is talking about and what allen has been talking about is that the rich can sort of move their income, avoid income taxes or capital gains taxes, dipping on how rates change. ..

whoever is right is making a huge difference in terms of how these -- how accurate their numbers are, so i don't find

that tax avoidance does not threaten estimates vary possible, but then again, i can't agree that it is actually a legitimate option to dismiss the case outright. the research is highly ambiguous. the evidence, i think, is really persuasive that changes in the tax code can have a short-term -- certainly short-term impact on the type and amount of income that shows up on tax returns. the big question is whether it would affect the long run increase or whether it would affect the sort of flat and equality that we saw before the late 1970's. and i think that is a tougher case to make. so a lot of people switch their incomes. a lot of businesses switch from reporting and come as a corporate income and corporate tax returns to reporting it on individual tax returns allen has done more than anybody to point out. and that as clearly shown up in

the data after 1980 as increases in business income received. if that chains hadn't happened as was pointed out, folks still would have received that and come in the form of capital gains. there would have realize their gains. that income is then reported on corporate tax returns for years. eventually the shareholders realized gains, and that's as of an individual income-tax returns and because these are games that are accumulating over time in the background was there realized and show up on tax returns is going to show up as an even bigger concentration having, at the top than if they had reported them all the way through which is what happens when they actually have to report their s corporation income. so, again, the fact that you see these, i think, really supports

gallons case. less clear that it negates the increases we have seen in inequality over time. at think we will just up there and say that this is an area where i wish kind of the conventional view which is that there is nothing wrong with the estimates. a little more gray and that people were more skeptical for all the reasons that allen has given in the past. but i think provisionally, at least, the best guess as to what has happened to inequality over time is that it has increased quite a bit at the top. that conclusion may be overturned at some point, but for now the evidence against it is not strong enough to ditch it entirely. all stop there. [applause] >> okay. were going to get to q&a.

everyone has to follow the rules. please wait to be called on. with a microphone. announcer name and affiliation. we don't need to know if you're capricorn. you like long walks on the beach, but who you are and who you're with. of course, if the people on the panel want to take the opportunity and respond to questions also respond to each other and what has been said. that is welcome to, although we want to make sure we get as many questions as possible. i'm going to abuse my position to ask for, you were making the point about pretax income to oppose tax income. does it change your analysis here at the libertarian cato institute. you want to go back to the world with much less government to my fewer transfers. does that change anything that you have to say?

>> no. i mean, to tell you the truth, i think kayten needs to keep going further. look. increase inequality if we went to that state of world? >> well, we don't have data on income inequality. we just don't have it. it's fatally flawed. that means we don't have the data. i don't have the answer to that question. >> the pre-tax data, you are suggesting the behavior would be different. >> well, i think some people on your side would say that in the quality is not a problem because we have some of redistribution. you're at an institution that doesn't like redistribution, so how does that change argument? >> it doesn't affect the inside numbers. they don't account for redistribution.

they don't count any transfer payments. no. they don't count -- you know, my annuity check, the other annuity which comes from social security, they don't count it. that's much more relevant remark than the congressional budget office which tries to meld some data that includes those transfer payments and all that sort of stuff. but even with transfer payments, there are behavioral issues their keep. the difficulty which transfer payments is, the transfer money from people who are due to people who didn't turn it, and that discourages the person who is paying the taxes and it discourages the person who is getting a chance for payment. you have a disincentive, particularly at the margin. if you work too hard or you take another job you're going to lose not only their unemployment check but also food stamps,

medicaid, and some other stuff. you don't do it. we still have some poverty jobs built into the system. the fundamental points, since they don't account for transfer payments and that accounts for taxation there are fundamentally irrelevant to questions of what we should do with taxes and transfer patients. >> one real quick one. you mentioned -- he talked but the difference between what might be real changes in income versus just an artifact. and he said that there might actually be a reduction in inequality because the returning less. is that a good thing? does that help support to help? >> this is where i end up not making friends on the left. i have argued in several places that if there is not actually very strong evidence of rising inequality, the increase there we have seen at the top since

1980 has actually hurt anybody. i don't think a reduction in inequality, for its own sake, makes much sense. if it could be shown that it actually did help people in the middle and the bottom then i think people are going to have different use where they stand. but it is pretty remarkable, the extent to which the debate proceeds as if it is obvious that reducing inequality helps folks elsewhere. >> okay. let's go to questions. up there. we actually know his name already. you can see where you work, scott. >> scott hodge with the tax foundation. this seems to me we are also overlooking a lot of demographic trends that are driving perceptions of inequality. in addition to the changes in business and come which is reported on tax returns there have been a lot of other demographic changes that i think are driving some appearances of

inequality. one is age. we have the pick of the baby bell restored to the python of 70 million people nearing retirement. they're at their peak earnings potential. doula earner couples which we have never seen before, about two-thirds of all couples and then education, as we all know, the return to higher education > ever 04. those are among some of the biggest changes that we are seeing in america today. and yet, none of that is being accounted for any of this data. can you speak to that at any point? how that might affect, if we were to account for some of that in these measures of inequality? >> so, in some ways the question of inequality turns at the very

top. the question of inequality within that 99 percent, if you will, very different kennel's a fish. so within the 99% it is certainly true that increasingly if you have more schooling there is more of a payoff to that drive and a lot of the inequality within the 99%, similarly things like family structure changes over time have become a lot more important. when you look at the changes at the very top in so far as we can tell, most of the research shows that it is not so much these demographic changes were changes in education. it is more about global markets. so it is that there is a bigger finance sector and that, you know, investing your money well as increasingly important. so the people who manage funds

for large customers do a lot better than they used to. the importance of having the best person as your ceo in your industry, that has risen quite a bit overtime as global markets have increased. so from what i have read people tend to look at these two phenomenon as being pretty different. that said, but did take a look. i have another slide that i didn't present but which actually shows you can use survey date it's a look at the share of income received by the top 1 percent over time. rather than the irs data, you find it remarkably similar trend since the mid-1980s. ollie's far back as you can go. i did that again whopping off anyone who was over 60 years old and i think. it wasn't really all that different.

>> will we talk about rich and poor we are often talking about the same people at different stages of life. i was telling scott that when i went to ucla i lived an animal hospital. i was poor. but i was acquiring human capital and the education pays off over time. when you look at the composition of income groups at any moment in time the top income group has at least two workers on average, sometimes more like to one-half of the top 10 percent, for example. whereas the bottom 20 percent has less than a half worker per household, and that is usually part time. very few full-time workers in the bottom 20%. i'm not saying they're lazy. many of them are retired. very young, very old, unemployed

that can put you down there for a while. and many of them may be students living in an animal hospital. i don't know. but it certainly is true that working people make more the people who don't work in terms of labour income and that 2-earner families make more than 0-earner families. if that were not the case he would not have much incentive to work. >> would you describe would be hard work. education and the life cycle feeds in. that's tough. what we do what we can't? apply the consensus estimate. that is something we can do. you know what happens? you get a flat line of top 1 percent income over 20 century which can be our new basis for discussion. >> next question.

set. >> independence dollar. other of the book lies my teacher told me among other things. two conclusions that draw and i want to hear comments on. first conclusion, it seems to me that the rich cannot be taxed. they cannot be taxed much. so maybe this will kind of debate not only in your. measuring the amount of inequality in society. other states have the highest index of any industrialized nation and it has increased over the last 20 years, especially if you look at the first speakers.

the higher indices are not the kind of societies that most of those i think want to live in. comments. >> as the u.s. turning into an oligarchy. >> can't be taxed. tax rates as high as 91% during the eisenhower years. individual income tax brought in seven percentage gdp. and then along came jack kennedy. cut rates across the board by 22% taking the top rate from 91 to 70. individual income-tax brought in about 8% of gdp. eventually they get around to taking the top rate down to 28%. that still brought in over a percentage gdp. so on i face of it to millions of tax rates to work. that's why every country has abandoned them. the cut the top rate from 60 to 30, brazil for 55 to 27 and a

half. from 60 to 13 and so on. those of the brick countries. it's happened many times in history. now, the international genies, be careful with those. the account income differently. what we know from the publication, which i don't have my finger tips, is that the u.s. has the most progressive income and payroll tax system. partly because of the refundable income tax credits. those don't often appear. not after tax data. most other countries distribute welfare payments in cash. the u.s. has always been habituated to doing things like food stamps and medicaid. subsidies and stuff like that. it does is show up in the data.

so i don't think that the international comparison exists of valid and is a good area to explore, to do some better international comparisons to define income the same way. do it after tax and count in kind cancer patients. >> and just my dad, more severe under rigid -- regime of high taxes. then the rich make their money privately. number two, they don't allocate the resources for broad purposes but for as to protect themselves. more severe under regimes with high taxes. >> i just add that -- two points. i think it is not dangerous. it's misleading to worry too much about comparing countries. there may be tempered -- issues,

but the u.s. and india don't have the similar indices. the poorest households in the u.s. are essentially richard dent the richest household in india. that is actually true. actually crunching numbers. so inequality is not the only thing that matters. the other thing i want to point out, you're absolutely right. increasing over time which points out there are other evidence that is not subject to all of these interpretation problems, the figures are subject to. the increases are not as dramatic as what they show the very top. rising inequality of something that has been going on in the u.s., we can come back to it. where it is increases pretty interesting in some ways. >> one more piece of that. it will be quick.

if we use that ginnie coefficient for disposable income, after-tax real income, census bureau definition number 14, it has not increased at all. looks like it increases 93 because they start counting income differently. captured more high income. basically it's almost a .5 as i mentioned, the cbo, which actually uses the tax base data for top 1 percent, their genie is no higher than it was in the late 80's. of course we're babbling in a recession. it may go up in the future by their measure. >> the gentleman in the green shirt. >> in response to the statement we don't have the data in the u.s., what other nations are doing a better job at providing data? what role does the u.s. census

bureau play in gathering the state? >> in gathering the inequality did it? how so the trick is that to capture what's going on at the very top, and even within the top 1 percent, where the real action is is the higher up you go. really the top half of the top 1 percent. within that it is even more dramatic if you look at the top 1 percent of the top 1 percent. the problem is, to actually capture these folks in the household survey that you might conduct, it just has to be a huge survey because, you know, the top 1 percent of the top 1 percent is a small group. that is why for the most part if you want to look at the very top you are stuck with the irs data. a small survey the federal reserve board does make a special effort to interview a lot of people at the very top.

they do that by actually getting a tax return information from the irs. there are things you could do. i think it would be tough for this and sparrow which is the main agency in the u.s. to collect income to do more. >> does any country to figure out ways of getting this city? >> a lot of countries that were the state is much bigger than in the u.s. they do things that would not fly in the u.s. scandinavian countries have this incredibly detailed data on everybody going back decades. they can do ridiculous things with their income data. i think there are privacy concerns and things like that on the u.s. at prevent that sort of thing. >> they put you're -- the amount of tax you pay online. mitt romney might have some issues with. over there.

>> edward broder, sunshine press. conservatives are fond of saying it, if you touch something you will get less of that. if you cut taxes on it you will give more of it. why then is it good policy to tax work at such a high rate than we tax rich people for being idle? >> anybody. >> we are referring. >> here are working. it is a practical issue. would it be fair to tax capital gains at the 35%? >> i don't know. maybe it would. i would not realize in the capital gains. nobody has to realize a capital gain. the idea that even this session

that -- well, never mind. the point is, nobody has told dividend paying stocks. you don't have to hold -- you can put this stuff in an ira. you don't have to sell. an unrealized gain is would just as much as a realized gain. the richer you are the less likely you are to sell. so elasticity issues a practical and important. you just, there are some things you can't tax. what you can tax heavily in get away with is liquor and tobacco. all around the world people tax liquor and tobacco heavily. it pays a lot of money. >> let me add, something of a myth of the decades. taxes have been lower than the income tax rates. you know, the real capital gains rates of the 1970's was over 100 percent because inflation was running 10%. this baptistery was 35%. so capital gains taxation areas

of high of place in which we have seen that 20th-century. the rich are bearing the burden. >> i have some data on this. when the top tax rate briefly hit 40% just before and it would be 1977, capital gains was one-and-a-half percent of gdp. very small. we cut it to 28% from 87-96 and went up to two and a half% of gdp. we cut to 20%. when it was 15 percent it was five percentage gdp. so we are now taxing twice as many games at a lower rate. and at shows up. because there is lower, more gains are showing upon tax returns, they show up as increased in come when, in fact, it's just you can see the in, because someone has decided to sell something. if they had sold the you would not see it. they just have the income. >> let's go up there.

>> my name is steve rankin, no affiliation. this is a fairly broad question, but what i thought originally were going to talk about. that is, what do you mean by fairness when it comes to us and come inequality? and because looking to me that income inequality, it almost presumes that the income pie for now we have a fixed income pie and therefore the rich are getting in come at the expense of the poor. i would say for the most part that is not true. therefore i don't really understand how the fact that average person makes billions of dollars is unfair to the poor

person. if there is an expanding pie and it has nothing to do with how much the rich person makes in terms of the fairness of how much the poor person pays in taxes. >> a nice, brought to a philosophical question. >> a lot of the literature setup by saying the top 1% to 20 percent of our income. that is the way i naturally view it. amid talk about some of these obvious cases where there have been high and come hedge fund managers. now, some of those are pretty astronomical, in the billions. they cantor your average numbers that's why i don't favor doing it that way. i use media members. what does that hurt? the only person who is hurt by a

hedge fund manager getting richer are your clients, and they are neglected poor. in the case of the stock auctions that we were talking about which proliferate not just the top 1 percent, but people like my daughter, the stock option turns out to do well. the company does well. the person gets the cash shut them becomes a microsoft millionaires. here is that hurt? it hurts stockholders. they are not necessarily a poor bunch either. and the whole concept of zero some concepts, the income gains at the top when the founders of apple or google or facebook make a lot of money, that must come from somebody. short. comes from the users of those services, which i rather liked.

without approval i would be a much dimmer person. >> the shadow of the national gallery here. let me talk about andrew mellon. you want the rich to pick out? i have a plan to do that. they compare everything. keep taxes on the rich slow and the government small. the rich well manifest their income to the taxman, pay the amount command be able to fund the government in its entirety. the problem i if government gets paid in taxes go up the rich had their income and when you get their taxes is not enough and yet to start taxing the lower class is. you want to solve an economy he found a way to do that. >> retired consultants, washington consultants. to cite notes. it seems to me that if you don't

normalize it for age distribution that you're automatically get a distortion. the other thing is on capital gains taxes, it's my understanding that a reason that it was done as a lower rate is because it's derived from a corporation profits and it's already been taxed once. so getting to the original question to my area don't quite understand this chart correctly, but dr. reynolds, big blue charge here, they show a decline of some sort. he has made it very strong that this is pretax, not after. i agree. this represents any argument in terms of