and both joint committee on the president's budget as a basis for those negotiations, so our position is that the president has on multiple occasions admitted very specific plans ann how to say $14 trillion over a 10 year period. .. >> i will be visiting nih on thursday morning. you, of course, would be welcome to join me if you are in town.

i offer a gesture of hasty bialty. i will assure that your question is asked. it's exactly one of the questions i have of dr. collins of the impact of sequester on nih, and your staff is more than welcome to accompany me on that visit so that they can receive the firsthand briefing that i will receive. >> [inaudible] >> as will, of course, senator hard kip's saf. -- harkin's staff. as you know, in his new role, senator pryor? >> thank you, madam chairwoman. let me just follow up on one of senator blunt's points he made about the department of agriculture, if i may. you know, the law on meat inspectors says that the inspectors -- that the plants can't operate unless the inspectors are there. so closing these plants for 15

days could result in reduction of sol volume of 200 pounds of meat, 2.3 billion pounds of poultry and more than 200 billion pounds of egg products. so this is going to adversely effect every consumer in america, it's going to be very disruptive to our food supply and the chain that we have here in this country, and it's basically the bottom line is it's just bad for the economy. also something i think senator blunt did not cover but i would like to, there's going to be over 100,000 very low income residents in rural america that will lose their rental assistance that enables them to stay in safe and affordable housing. these families are generally female-headed households, or they're households welledderly or disabled -- welledderly or disabled.

so my first question is for you, mr. werfel, if possible. and that would be as these furloughs, etc., take effect, do you anticipate it'll happen on day one, and it just happens in every agency and every department across the board, or will out be phased in -- will it be phased in over time? >> well, there's legal requirements for notice that i think deputy secretary carter mentioned. we have, what we'll see is agencies will start doing a couple of key things. first, furloughing is something that is subject to bargaining. so work is ongoing and will intensify as we approach sequester with union representation to make sure that the manner in which the furloughs are implemented are fair and equitable and etc., so that's a very important process

that will happen. next there will be a notice period, and as a general matter those notice periods are different dependent on collective bargaining agreement, but i think it can use 30 days as a general matter. so what we'll start seeing is the intensification and bargaining of that with unions where appropriate, and then notices will start to be issued. i think the defense department mentioned early april as to when that's going to be triggered. so the furloughs themselves will probably happen along a continuum not exactly on march 1st, but there will be impacts on march 1st including employee uncertainty, but also spending reductions as well. >> let me ask also, if i may, with omb just very quickly, and that is, um, have you all -- has omb done a study or an analysis of the overall adverse impact to the u.s. economy? i mean, we know how many federal dollars, we get that. that's pretty easy to get. but as omb dun a study -- done a

study on the adverse impact to the economy? >> i will point out that a range of third party estimates is now coming, i think some of them have been raised during this hearing. they show a negative impact of .5 to .7% in real gdp growth in 2013 alone. and that's, you know, that's a macroeconomic statistic, but what it translates into and i think the president has been clear, that's going to translate into hundreds of thousands if not more job losses. and we've talked about how these are difficult economic impacts to measure because they have ripple effects. there's the, there's the pulling the $85 billion out of state and local governments out of federal contractors very abruptly and suddenly, you've got impacts down our supply chains, uncertainty impacting decisions to make investment. so for me, i don't know the

.5-.7% in real gdp growth is an important macroeconomic measure. what does that translate into? we think it's very harmful effects to the economy and in particular to the middle class and jobs. >> yeah, i agree with you. let me also ask secretary carter, if i may, and i only have about 30 seconds here, but, secretary carter, i know ha you've talked about when it comes to the industrial base, i know we have contracts, and these contracts often times have provisions in them for if the government breaks the contract, you know, there's penalties, etc. so when you think about those penalties in the contract, and you said that the unit cost goes up. has dod done a calculation of how much this will actually cost in terms of efficiency and how many dollars will, in effect, be wasted as part of this? >> yes, we have, and you can do that program by program, and it's pretty dispiriting to see the waste associated with it. a good measure of the impact on

the industrial base is this: even if we furloughed everybody, every dod civilian, all 800,000 of them for the maximum we're allowed to do it legally, we'd get five billion out of the 46 billion we need. where's that other 41 billion going to come from? it comes from people who are not federal employees but who work for us indirectly doing the things we need whether they're maintaining our ships or building our weapons system. so it's a huge impact on that. >> thank you, madam chair. >> we know that senator johanns was here and left, his statement is on the record. senator alexandersome. >> thanks, madam chairman, i look forward to working with you on the appropriations committee. i thank you for the hearing, i thank the witnesses for coming this morning. mr. werfel, you mentioned the president's $4 billion plan to reduce the --

>> yeah, four trillion over ten years,. >> and and i assume you're familiar wit? >> i am. >> could you detail for me exactly the plans for reducing entitlement spending over ten years? >> i can -- yes, i can provide you some additional detail there. so the president's 2013 budget which contains his plan has within it with respect to the deficit reduction -- >> i'm talking about the specific proposal to reduce spending on programs over ten years. >> okay. there's $362 billion in health mandatory savings. they include such provisions as reducing medicare bed debt coverage, aligning payments better to patient care costs for both medical education and rural providers, increasing income-related premiums for part b and part d of medicare, aligning medicare drug payments -- >> that's 363 -- >> $362 billion over ten years.

>> all right. and how much more is -- how much -- >> and there's an additional $270 billion in the president's budget in savings in other mandatory programs such as eliminating direct payments to usda subsidies, changes to military and civilian retirement, increases in air passenger security fees and reforms to the u.s. postal service. >> is there more than that? >> that covers the, what i have here for mandatory programs in the president's overall plan for $4 trillion. >> so that's $5-$600 billion over ten years? >> that's correct. >> in reductions in mandatory spending out of the $4 trillion goal? >> well, that builds on a trillion dollars that was priestly achieved in the bca -- >> mandatory spending? no, i'm talking just about mandatory spending. >> yes, that is the component of

mandatory spending that's in the president's budget. >> but the problem with that is that entitlement spending is most of the problem we have, is it not, with spending and deficit? that the budget control act actually addressed discretionary spending which is what this committee deals with, 38 or 39% of the budget, and if we were to follow the caps that we put on discretionary spending over the next ten years, that part of the budget would grow at about the rate of inflation. is that not right? >> yes, that's my understanding. >> right. but so if the whole budget grew at just the rate of inflation, we really wouldn't have a problem, would we? >> i want to go back, senator, i think, to the fundamental question of the component of the president's plan. >> no, i don't want to talk about that. i want to talk about entitlement p spending. >> yeah. >> and you said there's five or six trillion out of a $4 trillion goal.

what i said you have got 55% that's out of control that's growing at the rate of 3 or 4% a year. and we've raised taxes, we've put caps on discretionary spending, and what's happening is entitlement spending is going to soak up all the money that all of you are worrying about over the next five years, and there's no plan from the president to deal with it. and this goes -- in this isn't just the president's problem. i go back 30 years as governor when i was sitting there trying to put more money into education, and federally-mandated medicaid was soaking up money that i'd like to put in higher education. so what i would like to see, respectfully, from the prime minister is a plan to do what his own debt commission said we needed to do which is to restructure or medicare and meld caid if a way that -- medicaid in a way that saves them so people can count on them and so that they don't squeeze out of the budget everything else we need to do. according to the president's own

debt commission, federal revenues will be enough in 2025 -- which is only 12 years away -- just to pay for entitlements and the debt. so there won't be any money for any of the things that any of you say are very important to the country and which i agree with. so states have to balance their budgets. i mean, why is it that in the federal government we don't get together during these next couple of months and do what everybody knows we have to do which is get control of entitlement spending so we don't have the problem that you're talking about? and it will not happen unless the president leads the way with specific proposals which he has not yet done. >> very quick response. first, i'm not in any way disputing that the growth of entitlement costs is a major, major driver in our deficit reduction challengings. what i'm pointing to is the fact that both members of both parties and independent experts have pointed to a $4 trillion benchmark of overall deficit

reduction savings as a smart, sensible next move that we can stabilize -- >> my time is up. senator corker and i have put on the table a trillion dollar plan to reduce entitlement spending over the next year. why hasn't the president done that? >> the president's ready, i think, to negotiate -- >> well, he's the president of the united states. supposed to lead. >> and he has put forward a plan. the notion that he hasn't is untrue. >> he has not put forward a plan to deal with entitlement spending because the plan which you related is five or six hundred billion dollars out of the $4 trillion, and immaterial does not address restructuring the programs that are causing the government to go out of control in spending and causing the devastation that's been described here this morning. thank you, madam chairman. i've used my time. >> this is a preview of things to come. thank you, senator alexander. senator merkley? >> thank you very much, madam

chair, and it's a pleasure to be here at my first appropriations committee, and i certainly look forward to engaging in these types of discussions as we wrestle as representatives of our respective states on both sides of the aisle on how to take our nation forward and restore a thriving economy, a growing economy that will bring us back on track. and that's what the discussion is all about. and i wanted to ask comptroller werfel if we take the budget control act, combine it with sequestration and the impact on interest and we total all that up, how much is the savings? ballpark. >> senator, the budget control act had roughly $1 trillion in deficit reduction, the sequester is, would impact the deficit by an additional $1.2 trillion. >> so about 2.2, and i had if

you threw in the interest on the -- well, from the center of budget and policy priorities they had 600 billion on the control act, 900 billion on nondefense and an additional 250 in interest savings. so it's a large number, i'm not sure why the discrepancy, but is that more or less than the 600 billion in revenue that is coming out of the december 31st deal? >> it's obviously more. >> by a small amount? >> by a significant amount. exactly. >> so when i hear folks on both sides of the aisle talking about a 50/50 plan for revenue and expenditure reductions, is that anywhere close to what's being pursued now with is te questionsation? -- sequestration? >> no. and how would that balanced plan be replaced by revenue? >> to achieve more balance, yes. >> let me ask you another question. is there any real difference between a $5,000 tax credit and a $5,000 expenditure on a

similar program? >> from the perspective of the budget deficit? >> either the -- [inaudible] or the cost on budget? >> i i can't to speak to the budget program, but the impact should be the same. >> well, if i spend $5,000 on an affordable tax credit and that i appropriate, isn't it basically the same $5,000? >> yes. >> so when we're talking about spending, why aren't we talking about across-the-board spending on tax loopholes, credits and deductions? >> i think the president believes we should be talking about that. >> well, so there are a series of things that i'd like to see. we're spending $85 billion on a sequestration as it now stands this coming year. there's a lot more spending than that on tax loopholes. >> yes. >> and if we were -- wouldn't we be closer to that balance we're talking about if we closed some tax loopholes, get back to the regular order and stop going from crisis to crisis and putting our entire economy at risk in the process?

>> that's ooh the fundamental, guiding principles that the president wants for a solution. >> secretary duncan, there is the edwards-gingrich payroll tax loophole proposal. that goes back a ways, but it had to do with the gaming of corporate status, saved about $9 billion. would it make more sense to end the spending on that tax loophole or cut head start, special education and title i? >> the best investment we can make in, for the future is to get our children off to a great start. we know it's 7 to 1 pang for the buck to not -- bang for the buck. it makes no sense whatsoever. we have to invest in education. we have to invest smartly and wisely. we cannot cut that investigation. >> and secretary donovan, there is the stock option loophole and offshoring of u.s. profits.

there's -- well, just the offshoring of u.s. profits about $24 billion cost. i'm not talking about the numbers being exactly even here, but just in concept does it make sense to close this tax loophole or to cut a vast number of the affordable housing programs that your department oversees? >> our entire budget for our section 8 voucher program which is the single largest helped over 50% of the people we serve; elderly, people with disabilities. that entire budget is less than the $24 billion that you talked about. and i absolutely believe it's a central investment that we need to make and continue to make. the costs of cutting it are devastating to families. they raise health care costs, they raise other costs for local p commitments. because when families are not housed, they actually cost us more. >> well, there's -- i have looked at just a small number of these tax loopholes including

the oil tax loopholes, the one that offshores basically subsidizes the offshoring of our jobs, our manufacturing. just four of them total up to about $90 billion or roughly the same amount as sequestration for the coming year. does it make seasons for us to shut down -- sense for us to shut down some of these room holes and basically protect programs that support core services to the middle class and get our act together on having both the budget process and the appropriations process in regular order? anyone's welcome to -- >> yeah, absolutely. >> okay. i'm out of time. thank you very much, madam chair. >> i'd like to now turn to senator cochran. senator cochran, you weren't here when i thank youd you -- thanked you during the time of senator inouye's passing where you were the ranking member. i know under the republican rules there was a change because

of time limits, but i really thank you, and i want to reiterate it with you here. your big help during that time was very much appreciatedded, and all of the courtesy you extended to me, the way our staffs worked together, and then the way we worked together to move hurricane sandy. and as i said, your steady hand, your wise and seasoned advice and experience and even direct guidance to me was really very much appreciated. and your service to the nation, and i think it helped during a really awkward time and even a sad time of transition. you were just terrific, and i just wanted to say that, say that publicly. so i'd like to turn to you thousand for your questions. >> well, i deeply appreciate your generous comments and your friendship over the years. we appreciate your leadership on this committee too. i think this has been an example

of a hearing that has really gotten into the details and probably more depth than any of us should approach. because it is such a big undertaking. and these are, these are real challenges that we face; too little money trying to solve too many problems. and there's never enough to go around. but somebody's got to decide. and we have to identify the priorities, and we have to work together whether we like it or not. the administration can't just send out edicts, and this is how much money each department's going to get or whatever agency it is or program it is. and so this hearing is very important. and i think it's been an excellent hearing due in large part to the even-handed and common sense leadership of our chairwoman, senator mikulski. and to all the members of the committee who have been here and put their best efforts into

carrying out our responsibilities, we thank you especially. it's been a long day, and i'm going to shut up and not prolong it any further unnecessarily. i did want to ask a question or two about sequestration. i'm just learning how to pronounce it. [laughter] to be honest. but the whole point is that we are operating under some new restraints and guidelines, if you will. but in general the sequester as written cuts off all appropriated accounts at a level that's the same percentage across the board. and so unless there are priorities identified by the this committee or by the congress in consultation with the executive, we're not going to be able to carry out the will of the people as expressed through the congress and our appropriations committee.

it would with a misguided effort if we turned it all over to the administration though to come in and rewrite an appropriations bill. so i think we're going to learn by doing, and we look forward to working with you in a cooperative way recognizing that any changes or modifications are going to have to have the collective involvement of both branches of government. and not just one telling the other what needs to be done. i don't have any other specific questions except to express our appreciation for your cooperation and to thank the chair for her leadership. thank you. >> senator reed, the chairman of the subcommittee on interior. >> yes, i am, madam chairwoman, thank you. and i want to add not only my best wishes for your service, but also thank senator cochran

for his service as a ranking member. so thank you both. and thank you, panel. let me ask secretary donovan a question. we worked together on a bipartisan basis to pass the hearth act which was directed as helping homeless veterans particularly, but homelessness in general. and it's disturbing to learn that about 100,000 formerly homeless people may be removed from current housing or emergency shelters if the sequestration goes through. is that the reality? >> [inaudible] senator, that is the reality. and as you know, the hearth act was bipartisan because we recognized both that we need to do more on homelessness, it's not only the right thing to do morally, it's also the right thing to do from a fiscal perspective. and senator boozman earlier made the point that veterans' programs were protected. in fact, our vast program would be protected from sequestration,

but the fact is 10% of all the people we served in our homeless programs, our regular homeless programs, are veterans. veterans are 50% more likely to be homeless than the average american. it's a tragedy. and for us to cut funding and to lose what would probably be 10,000 veterans from our housing and be back on the streets would be, would be tragic. the other thing i would just point out, um, the consistents in funding -- the cuts in funding for the public housing program and the voucher programs more broadly mean that the fees go down. last year we had six housing authorities turn back vouchers for homeless veterans. unthinkable. because there wasn't adequate funding. these cuts, i'm afraid, even if vast is protected would lead to more housing authorities turning those vouchers back. and as i said earlier, it's perverse because the truth is we'd be, quote-unquote, housing

those folks in shelters, in prisons, in emergency rooms, in places that are much more expensive than the housing that we provide. so not only would we have terrible human costs, we would also be raising the fiscal costs to the taxpayer by making these cuts in this ip discriminate way. >> well, you've raised a theme that i heard secretary carter echo before the defense committee, the armed services committee is that one of the great ironies here is this sequestration could end up costing us more money than saving it. and, secretary carter, can you elaborate on that? in terms of bringing work forces back, lost time? >> all of our programs that are required to be stretched out will increase hair unit costs -- their unit costs, in many cases dramatically. we're at a forcing our -- we're forcing our industry to make rapid adjustments from which

they will find it hard to recover, and it'll be expensive to recover. all those costs gets passed on to us. so what you'll see is us paying more in the long run for everything we do which is a great, tragic irony because we're all trying to save the taxpayers money or do the most we can on the taxpayers' money, and this makes it impossible. >> just one further quick point, secretary carter. at some point do you anticipate you'll have to just break contracts and pay penalty fees because you just don't have the funds to do it? >> i don't think that we would like to take that particular path in most cases. we may have to do that in some cases. what really will happen is that we won't be able to enter into contracts in the future, particularly ones that both we and our industry partners have anticipated -- a ship-building contract or something -- they're tooled up, they're staffed up to do it, and is we can't enter

into the new contract. and finally, we are -- these aren't contract terminations, but we are failing to exercise options as the year goes on. for maintenance and base operations and so forth. so those aren't contract terminations. we wouldn't have to pay a fee for that, but they're a big deal for the people that do the work. we're going to stop paying them. >> i have just a few seconds left, but, secretary knoll low, some of -- napolitano, we're all searching for ways to offset the cost of the sequestration. some of the suggestions are not filling positions as a way to pay for this. particularly with respect to the border patrol and some of your other key national security components, what would that do if you literally couldn't fill positions as people retire or leave or positions become available? >> well, i think the result, senator, will be that we will be less able to secure the border

between the ports, we will end up staffing fewer lanes at the actual ports. there will be disruptions in coast guard activities, disruptions in airport activities, biggies resumption in cargo and cargo inspections which delays the whole supply chain coming into the country. so there will be many, many deleterious effects. >> thank you, thank you, madam chairwoman. >> senator green, with foreign ops. >> thank you, madam chairwoman. i think the committee's functioning very well in a dysfunctional time. this is one of the oasis i like coming to. about sequestration, i think we've used every adjective known to man to say this is dumb. can we just all agree this is a dumb thing? >> yes. >> okay, well, all right.

good. now, the question is how dumb? now, are the iranians watching us in terms of our national security? >> they absolutely are. >> what signal would it be sending to the iranians to begin to dismantle your force as they try to ramp up their nuclear program? >> i think, i think it very directly shows a failure of resolve, that we're not serious about implementing our new defense strategy. that's the kind of signal whether it's iran or north korea or anybody else that i'm very concerned about. they're watching us right now and seeing whether we have the resolve to carry out our -- >> do you think we're still at war outside of iran with radical islamic groups? >> we are. >> now, secretary napolitano, what signal will it be sending to people who are trying to come

here illegally if we stop securing our border? >> well, we've done so much over the past -- >> you have. >> -- five years, four years to really get that border more secure, we would just go backwards at a critical time, at a time when the congress also wants to look at the whole immigration system. so sequestration just runs counter or to everything else we're trying to do. >> so sequestration undercuts all the gains we've made in terms of securing our border, and it certainly sends the wrong signal to radical islamists and the iranian threat, do you agree with that, mr. carter? >> i do. i do. >> now, you've suggested that you would reduce your pay by one-fifth? >> yes, i will. >> how did you arrive at that number? >> because that's the -- if we sequester someone in our work force to the maximum extent possible under the law, which we don't want to do, they'll lose

one day a week, one-fifth of their paycheck, and i don't think it's right that they lose one-fifth of their paycheck and i don't even though i can't be sequestered -- >> well, we can't be sequestered either, but i think it would be very wise for us to follow your lead as members of the united states senate. that if we can't figure this out with the president, that all of us ought to follow your model, and for every day that the sequestration's in effect, the president should have his pay docked, and we should have our pay docked just to show that, you know, we don't live completely on a different planet which some people think we do. so thank you for the suggestion. secretary duncan, how do you compete in the 21st century without investing in education? [laughter] >> makes it difficult, senator. and, again, if you look at other countries that are already doing a great job educating, like south korea, whereby lots of benchmarks they're ahead of us the past eight, nine years,

they're up over 30% in terms of their investment. >> have you been to any graduations lately for people receiving a master's and ph.d. in the hard sciences? >> it's a very diverse group graduating from those classes. >> okay. well, i went to clemson university and university of south carolina, and when it came to the ph.d. and master's graduates in the hard sciences, there's one guy named bob smith that everybody clapped for because everybody else was coming from india and china. which is a great thing. i wish we had more native-born americans get into the hard sciences, but we need to welcome people from throughout the world to come here and get an education. do you agree with that, secretary duncan? >> absolutely. >> and, secretary napolitano, we should make it easy for them to stay and be part of our country, do you agree with that? >> absolutely. >> i just don't see how we fix our immigration and education system if we're going to cut the budget like this. one final question. if we found ourselves in sort of

budgetary triage where we keep doing this dumb thing and this dumb thing a momentum of -- has a momentum of its own and begins to take a life of its own and i'm up here having to decide where the money goes, would you agree with me, secretary duncan -- and i know you don't like this position you would find yourself in -- that if i had to pick between the secretary, the d., the d. of education and the department of defense, i should pick the department of defense over your department? >> again, i think these are false choices. >> but if i had to make that dumb decision, do all of you agree that the number one priority of the federal government should be national security? >> i think we have to be able to walk and chew gum at the same time. >> i know. but apparently we can't. >> i have more hope. you've got a great chairwoman here, you've got some leadership, i think you guys have a chance. >> would anybody give a direct answer to that question? many would you, secretary

napolitano? if i had to pick between the department of homeland security and department of defense? who should i pick? >> well, i'm joining with my colleague. it's a false choice. it presents a -- >> what if it -- >> secretary carter already said in his testimony, i don't know whether you were here or not, but he said, look, you have to have well educated -- >> no, i -- [inaudible conversations] i'll just wrap it up by saying i want to tell the country it is a dumb choice, but if i have to make that choice, i'm going to pick the department of defense. and i hope i don't ever have to make that choice. >> i don't either. >> thank you. >> was that entrapment? was that question entrapment? [laughter] >> thank you for indulging me. >> be first of all, we're about to wrap up, as you can see. this has been an excellent hearing in terms of the members participating. we had a 98% participation rate,

and that was excellent. i have one final question that i will exercise that will be directed only to omb. here we are, picture march 1st. it is now midnight. the clock has moved, and there it is. can you paint for me the picture of how sequester is triggered? in other words, do all the lights go out in federal buildings? do furloughs trigger so we tell the nih researcher, the welder at the shipyard, the person managing the weather satellite, the border patrol guard don't show up every monday i now until congress acts? could you paint for me literally what happens when the phrase "sequester" is triggered on march 1st? what will that look like? >> what it'll look like, it'd be, you know, multidimensional in its negative impacts.

first, as you'll see, intense bargaining going on with unions ready to issue furlough notices for hundreds of thousands of employees across the federal government. >> so that's not going on now? >> that is going on now, but as we cross into -- this takes time, and that's what the world -- and once we get into an issue where a sequestration order is issued, now it's real and serious. i'm not saying it's not real and serious now, but then it becomes law. and that's an important, symbolic moment. contractors will, federal contractors will receive word of how their contracts will be impacted whether terminated, whether modified. they'll start getting an understanding of where our agencies won't be investing in contracts. states and locals, governors will be digesting information about how their footprint will be um pacted, how it's going to impact their ability to sustain their governments in areas like education and health and other areas.

the list goes on and on. the reality is that agencies are going -- because we're in a seven month time frame, agencies are going to have to move quickly to meet this budget cut. and we are doing the preparatory steps right now to get ready. but once march 1st hits and those funds are canceled, everything that we're doing in preparation right now becomes even more real and creates that much more uncertainty, that much much more -- >> i thawns. >> yeah. >> but is it then the issuing of notices to people? >> you'll see a combination -- >> or do the lights go out, people are told you're furloughed? what, you know, the word "trigger sequester" -- >> it's complicated. there are some elements of government operations that will feel the more immediate impact. so, for example, because of furloughs we talked about the meat packing element. now, the -- do the furloughs

occur on mar 1st -- march 1st? no. it's very intense prestaging actions that are sending out notices and warnings and all kinds of different elements of huh the sequester's going to play out. some of that's going to occur before march 1st. but it's different from a government shutdown. government shutdown means that effective at midnight you can no longer incur more obligations, and things do actually shut down. >> and that's scheduled to happen march 27th. [laughter] >> if there's not an appropriations bill, yes. i think with the final moments let me just emphasize this point. i do not think it would be prudent at all to assume that because the lights don't shut out across the government on march 1st that we can go across that precipice and, you know, and then pull back later. because even as, you know, we've had analogies here of the wolf being outside the door, the wolf being in the room. the reality is i think it becomes extraordinarily

problematic and serious, some of these economic consequence, once we hit march 1st. because then it's real, and then a lot of these things come to fruition in a much more exponential way. >> well. and i think it could turn into a firestorm. so -- well, first of all, let me thank the witnesses. you really presented excellent testimony. you answered things in a very forthright, candid, crisp way and very much appreciate it. i want to also note that some other agencies were invited like hhs. they had to be in chicago with rahm emanuel. you make your choices. other agencies have submitted letters, and or -- for those that we wanted to ask questions like va, agriculture, that's why we really appreciated omb here to do that. i wallet to tell the members -- i want to tell the members and for the record we have letters from every agency thanks to the

cooperation of omb. they will now be entered into the record, a public record, and also staff on both side of the aisle will be able to scrutinize them while we now work on this. for my members i would like to thank the active participation. the fact that really everyone stayed pretty much within the five-minute rule, i mean, it is now just a little past 12:30. and i think this is really the tone and the tempo that i'd hoped we'd move briskly, people would exercise their due diligence. i thought the questions were excellent, very content-rich, and also -- and i think, senator cochran, you would agree -- the decorum of the committee was such we would hope would be the tenor of this committee and hopefully even spread within the congress. so, yes, we fear outside foreign predators, we fear at times

foreign competitors, but this is a self-inflicted wound. and i think we need to deal with it, and we need to deal with it expeditiously. so thank you, and this committee, um, if there are no further questions, senators may submit additional questions. the committee stands in recess subject to the call of the chair. thank you very much. [inaudible conversations]

>> in a few moments, yahoo! ceo marissa mayer on the future of technology. and in a half hour, an inquiry on the security on the korean peninsula. secretary of state john kerry will be at the university of virginia for what's being described as his first major speech since being confirmed. that's at 11 a.m. eastern. and then at 12:30, the assistant secretary of state for conflict resolution and stabilization speaks at the council on foreign relations about iraq and afghanistan. >> the communism of china basically is communism in name only these days, and it preserved the power of the members of the communist party. but they basically threw most ideology aside when saw ping opened the country up, and it's now become a capitalist haven. they talk at great length at

these party congresses, but it's all about preserving the party's power economically as the country continues to grow because they threw aside most vestiges of communism a long time ago. in north korea it's all about preserving the power of the military and the kim dynasty, as you have there. and, again, it's, out really has nothing to do with, i think, what karl marx envisioned as communism way back. you know, someone could do a fascinating book somehow on how communism when it moved into asia diverged into something different in vietnam, cambodia, china, north korea, than the communism that appeared in eastern european countries. >> or harvard fellow keith richburg on 34 years of reporting and insights from around the world. sunday at 8 on c-span's "q&a." >> yahoo! ceo marissa mayer, the youngest ceo of a fortune 500

company, spoke recently at the world economic forum in davos, switzerland, on the future of technology. this is a half hour. >> good morning here in davos, switzerland, and around the world. my name is eric schatzker, i'm an anchor and editor at large at bloomberg television. welcome to an insight and idea with marissa mayer, the ceo of yahoo!. good morning to you. >> good morning. >> this is the first such conversation you've had since becoming ceo in july, is that right? >> that's right. >> i must thank you. it's an honor both for me and for the world economic forum. we're here to talk about the future of technology. so let's begin with the one nut that nobody seems to have been able to crack, the platform shift from desktop to mobile. how do you crack that nut? >> well, i think that, one, it's really important. if you look at what's happening in terms of the shift to mobile, the number of mobile phones and smartphones in the world has

tripled in five years, tablet sales will outsell laptops this coming year if predictions hold true. so it's really incredibly important. and there's a lot of consumers overall making the shift. so one is understanding how these work, what they really provide for and how we can best meet users' expectations. and then, of course, the other piece is modernization. there's all kinds of really interesting applications that exist on the phone. the real question is making money from it. and i have a lot of faith and confidence that whenever you see a consumer shift of this type that there will be a very interesting value-added way for, to create a modernization around it. >> where does that confidence come from? >> um, well, it was sort of the bane of my existence from about 1999 to 2004 -- [laughter] was that at the time i was at google, and for about five years every every time i interacted with anyone externally, the one question they would ask me is,

you know, search is wonderful, it's so great to be able to find everything that we can find, it's wonderfully academic, how is anyone ever going to make any money from it. and now that seems almost absurd because search is one of the giant moneymakers, if not the giant moneymaker online. but that said, whenever you see consumers adopting a technology, a platform, you know, a particular application like search with this much volume, you know that advertisers will want to participate in that. and there's usually a way where you can introduce advertising such that it's not intrusive, that it actually adds value to the end user and that it actually enhances the experience, and that's what we need to work on. >> well, we can look backward now and see how that was done with search. everybody gets to play monday morning quarterback and feel smart about it. >> sure. >> can you tell yet what some of the shifts will be in mobile that will allow mobile to

duplicate the success of search as a moneymaker? because it has to make money or else at some point innovation will grind to a halt. >> well, i think people already are. for example, the application store, there's a lot of people who sell applications. so there's some modernization there. i think the big thing is search is a daily habit. and what people do on their phones often becomes daily habits. it was interesting for me when i thought about the strategy for yahoo!, i pulled the list of what people do on their phones in rank order of frequency. and if you ignore a few exceptions of things that are going to be done by the carriers like voice and text and maps because i know from my former life it's really expensive and hard to do right, the list looks like e-mail, check the weather, check news, get financial quotes, check sports scores, play games, share photos. you get the idea. and it was funny, because i would go, and i would recite that list in the context of being the new ceo at yahoo!, and

i would say what am i doing? and my friends and family would say, well, you're describing yahoo!'s business. i said, no, actually, what i'm doing is i'm listing in frequency order what people do on their phones. so the nice thing at yahoo! is we have all of the content that people want on their phones. we have these daily habits. and i think whenever you're dealing with a daily habit and really providing a lot of value around it, there's opportunity not only to provide that value to the end user, but also to create great business. >> to your point, search remains one of the defining experiences for most internet users, whether we call it search, whether we call it content discovery, seems to me it will remain the way you describe, fundamental to what we do. how do you see it evolving? >> well, i think all the innovations you'll see at search will be in a user interface. so there's been universal search, the notion that search won't always be text-based. you can get videos and images, instant search so when you're

typing the fact that it's very speedy and responsive, voice search, the fact that now something like a quarter to a third of searches are done by voice on the phone. so all of those types of things are what we're going to see involve in the future. -- evolve in the future. i also think there's a huge opportunity in search around personalization, understanding what do i know already, what are my preferences and how to present the information. and i think that that expends beyond just search, but broadly to discovery. if we can think about how to we take the internet and order it for you, there's all these news feeds all over the web, that, you know, people will check; twitter, facebook. and, you know, the question is really what order should people read things in the morning, what should they look at, how should they do that? and to really do a great job, you need a terrific sense of personalization. >> well, personalization then in some respects, will it replace search? that once the computer, so to speak, figures out what it is we

like to look for, it'll just look for it op our behalf, and we won't have to go and do it any longer? >> i think the right way to look at it is not that it replaces search, but it becomes a critical part of surgery. one provocative way of thinking about it is in terms of, well, when you type into the search box, that's your become the query. it's what you typed, it's your background, it's where youe, it's your preferences, it's what you looked at yesterday. and the search box can take all of that as the input and come up with a set of results that are customized for you. and the nice thing is if you're the query, one, you could actually explicitly type in the search the terms, or you could just be the query passively. you know, this is the notion that if we can pick up on your context, who you're talking to, where you are, can we actually provide useful information or a series of lunges, picture -- links, pictures, videos that are

actually more useful in your current context because of that context? >> that sounds exciting, but right now the web is a managed experience. what are the capability technologies going to be? >> sure. i think it's probably going to happen in the next three to five years. i think a lot of what we've seen happen -- image recognition, voice recognition, translation -- these were all backbone technologies to really being able to understand context. now it's a matter of being able to take the personalized notions that people have already been expressing online, things like likes on facebook, what do you tweet, what do you pin on pip test, taking all of those -- pin test taking all those signals and saying, for example, i like clean energy on facebook, and i tweet out something about green energy. that's, in fact, the same interest of mine. >> are different companies going to do it differently, or is this the kind of thing that everybody's going to have to

move in the same direction on? >> i think that different companies will do it differently. i think that one of the key pieces here is you have to understand and decide what the oncology of entities is. >> explain that. >> meaning, you know, how are things named, how are they organized into hierarchies. so, for example, you need to know that wisconsin is a state and that there are cities inside of it. i'm from it, so if i say that i like wisconsin, there's a whole bunch of interests that cascade off of that. and so you need to understand that hierarchy of objects. but you also need to be able to understand how they relate to each other and synonyms, duplication, things like that. >> does this personalization then become, you know, the way that you described it as some complementary to search, does that create a new paradigm? at least the most recent thing that any of the large internet companies has come out with is

this social searching that facebook has introduced. is that a end steppingstone along the way -- is that a steppingstone along the way to what you see? >> i think so. there's the social graph which is really important and very fundamental. what i'm talking about in terms of personalization, it will give way to the interest graph. >> what is that? >> the interest graph is the set of things that i'm interested in. and if you know the set of things i'm interested in, you know the set of things other people are interested in, you can do, you can create connections on other people that aren't just based on whether or not they went to the same school, but actually are they interested in the same things. so we can create personalization technologies because we can see what other people who like the same things are doing and provide you the same information through things like collaborative filtering. we can show you interests you may have in common with people you didn't realize, you know? for example, i recently found out that reed hoffman, the

founder of linked inn and i, both have the major at stanford, symbolic systems, so you can see these kinds of things in the interest graph. but you also could find people maybe you've never met. >> it would seem a pretty high bar, or at least the warier to entry, you've got to have a fairly broad and deep level of user engagement, don't you? >> that's right. and we're, i mean, we're really very lucky at yahoo! because we have the home page. of we also have finance and sports and games and news and, you know, things like omg, you know, which is celebrity news. so there's a lot of different verticals that we put in and then also very broad applications like surgery and mail. >> does the interest graph have the potential to disrupt sort of the paradigm for tech power that was in some respects if not set coined by your old boss, eric schmidt, the four horseman?

google, of course, apple, facebook and amazon? could the interest graph or perhaps even something else change that order of the universe? >> well, i mean, i think all four of those players do a really terrific job providing a lot of great experiences for end users. so i think that all four of those will become major players in the future. i think the four horsemen analogy misses other players in the space. i think, for example, twitter is very exciting and very interesting. and i do think that technology isn't stagnant. it's amazing to think about the different waves of the internet and technology. right? you know, the first wave really was yahoo! itself, the directory. there's these pages out there, how do you organize them. and then the web got so large that the directory model broke down and gave way to search. and then the next wave came with social. and now i really think we're on the mobile wave. and so, you know, you think about that, that's all happened in about, you know, 15 years, right? we've gone through four major

technology shifts in terms of who the main players really are. and so i think that there's always opportunity for new disruption, and i think that a lot of this will be around interests. but that's just my prediction. >> so we shouldn't as consumers or in any other owl that we may -- role that we may occupy about the control that certain companies may exercise over the internet itself and the information that it contains? >> well, i mean, i think that privacy will always be something that users should consider. but i also think that privacy is always a trade-off. because when you give up some of your personal information, you get some functionality in return. and so it's really about making those trade-offs in a very informed way which really comes around, you know, for me the core principles of privacy online are transparency, choice and control. tell the users what information you have and how you use it, allow them to control what information you have and choice, do they want to use the

service -- [inaudible] or not? and so i think those are really the big three components of privacy online. and i also fundamentally believe that user data belongs to the end user. >> you do? >> yes. >> because clearly, you know, the question of control is the one that guess people most exorcised. how do you ensure or how does any company that participates in the space, this industry, whatever you want to call it a guarantee that that remains the case and provides users with enough confidence that the information that they share isn't being abused? >> well, the second part is all about transparency. you know, what -- >> you have to believe it though. >> you know, what searches do you have and exactly how are they being used. and so, and i do think that that is something that is really important. i think that there will be industry standards that arise in terms of providing users almost an account statement. you know, if you look at some of the various dashboards around data that exist on some of these

primary platforms, they really -- what they really show you is what data you have stored there and how is it used. and i really think that one of the key pieces here that also provides for a lot of user choice is making sure the data's portable, there are standardized formats which really allow your barrier to switching. providers are switching carriers to be lower. one of the analogies i'll use is papers you wrote in college. are they yours? absolutely. >> i feel like they are. >> what if, you know -- [laughter] >> even if nobody else is interested. >> so nothing about the searches that you've done over the past ten years. not nearly as coherent, not nearly as structured, you know, in eloquent prose. but just as insightful in terms of they were your thoughts, your words expressed your way. and they told a lot about what you know, what you've learned. and be i do believe that fundamentally they're yours, and if you can take that history, pick it up and move to a different search provider or take that as an interest graph

in and of itself and then apply it and use it in a different application, that's something that should fundamentally belong to you. you're allowing the service to access it in order to get better information and better results, and they need to deliver on that promise old else you'll talk your data and go elsewhere. >> well, that raises an interesting question. should you be able to take all of that data -- and it sounds to me like depending on how deep your level of engagement, it could be a great deal -- and move it from one platform to another? >> generally -- >> i can see one platform being resistant to the idea of moving it to somebody else. >> a lot of the players are providing for things like that. it's not something that's generally, you know, something that people think about doing every day, but it is an option, and i think it's an important one. i can give you a lot of confidence in terms of how things are handled. >> you described a couple of months ago how one of your employees asked how yahoo!'s going to compete if it doesn't

have one of these four key distribution technologies. there's the mobile operating system, mobile hardware, the browser and social. i don't know that we got an answer. >> yeah. well, it's funny, because one of my employees asked that, and they said, you know, given that we don't have mobile hardware, a browser or a social network how are we going to compete? >> and it's not just a question for yahoo!, clearly, it's a question for every company that seeks to compete with those others that have those key enabling technologies. >> sure. and, you know, of the four horsemen of the internet, that analogy, republican all of them are -- almost all of them are playing in one, if not several, of those medium. but i think the big piece here is it allows us to partner. yahoo!'s always been a friendly company, it's always been because of our focus on technology and media, it ultimately means there's really an opportunity for strong partnerships, and that's what we'll be focused on. so we work with, for example, apple and google in terms of the

operating system. in terms of social network, we have a strong partnership with facebook. and so we're able to work with some of these players and have a lot of strength in order to really bolster our user experiences that we offer on the screw -- yahoo! site. >> is that die cast? you talked about this new graph, the interest graph. is that the kind of technology that will become key to distribution? >> well, i definitely think with the web becoming so vast, there's so much content, and there's so much social context, and now with mobile there's so much location context and activity context. how do you pull all of that together? and the interesting way to take it is to say, okay, we're going to use some of that information, your personalization, your context, what you've done, all that, to actually make sense of the content. it's really the internet ordered for you. which is interesting because it actually brings yahoo! back to its roots. used to be that's who yahoo!

was, it took the internet and ordered it up. now it's so vast that you can't just categorize anymore, but could we provide a list, a feed, if you will, of information that is ordered, the web to -- the web ordered for you and also available on your phone? >> there's competition in the browser world, there's certainly credible competition in the mobile hardware world and in the operating system world. what about social? is the war for social over? >> um, i think that, you know, facebook provides an amazing pratt form, and so i -- platform, so i feel it will be one of the predominant platforms if not the predominant platform. but now it's about what you do with it. it's actually about taking that and finding useful content and telling me, hey, you know, you're in davos right now. do you know who else is? right? and being able to offer me the opportunity b to meet up with someone who i didn't know would be here. >> there's a natural conflict,

isn't t there, in the world of technology between innovation and execution. we see many companies struggling with it. can both be done well at the same time? >> it's funny, because it was pointed out to me a few years ago that, you know, one hypothesis is that innovation, if you think about what's the opposite of innovation, a lot of people think, well, it's status quo. it's stagnancy. and there's another school of thought that thinks the opposite of innovation is execution. if you have to be in heads-down execution mode, it's very hard to find the space to innovate, to have those new ideas and to pull things in. and i know for us at yahoo! there is, this is going to be a great period of execution. can we take these products that we have and revitalize them for the web and also make some transition to mobile? and while we're doing that execution, will there be room to innovate, to say, hey, this is how yahoo! groups worked on the web, but now there's all these new opportunities in terms of how group communication should

work on the phone. can we actually spot some of those innovative ideas, and i think there is, but it's hard. because i do think that they are natural opposites. >> is size a barrier to innovation? >> um, i don't think so because i think you can innovate at scale and with large size. you have to be very principled about it. you know, if you have, say, ten engineers and you're going to grow that to be 20 or 30, do you want to be doing the same set of things two or three times better, or do you want to be doing who or three times more things? and in terms of really, interestingly, in terms of execution, this is a great example of why there's so much opposites, but if you really wanted to execute perfectly, get the design exactly right, really work through all the details, you'd invest two to three times as many people per project. if you want to find those new ideas, those far-flung ideas, you want to take those same people and put them on something

that you've never thought about. and so it really is that there is this tension. so i think that you can innovate at scale, but you need to save room to have small teams working on those far-flung ideas. >> so share with us a little of your experience over the past few months. you arrived to an innovative company, but perhaps there was too much going on, wasn't disciplined enough to the point that you were just making. what have you focused on, what are you most excited about when it comes to innovative technologies, particularly the ones you have some control over? >> um, well, i was really overall just genuinely pleased and surprised. i knew that there had to be great people at yahoo! the same way that when you sometimes look at art you can tell if it was created by a nice person or not or a depressed person or not. you know, like, when you feel yahoo!'s products, you can tell that there's really nice, very smart, competent people there that have a great time, you know? and it's true. it's a great company overall that has a very fun culture. and, you know, for my first few

months my focus really was on people because i believe fundamentally that technology companies live and die by talent. and, you know, that's why i want to be able to talk about the talent wars. it's not that some of the companies are that competitive with each other. it's just when you start to see the best people migrating from one company to the next, it means that the next wave is starting. so i got very focused on people, building the right team, particularly the executive layer but all through the business. and also the overall environment. and part of that was because i wanted to make sure that yahoo! was absolutely the best place to work and that people really wanted to come and work there because that will help with the talent piece. but also because i believe that really strong companies all have very strong cultures. and yahoo!'s no exception. it's been a very strong company for a very long time. it's got a strong culture. different from every other corporate culture. each has their own unique and individual flavor. and i really wanted to find a

way to amplify it, because in amplifying it that's how you find the energy, and the energy's what you can harness into that innovation and say, okay, if we have people and they are really excited about what they're working on every day and they realize that, you know, the next big hurdle is mobile, you can take that energy around the culture and find fun ways to apply it that can be really impactful for end users. >> what are some of the things that you've found that we're going to see over the next few months? >> oh. well, i don't like to talk about things before we do them. but i do think a lot of the keys are what i've already talked about. i think that there is a real opportunity to help guide people's daily habits in terms of what content they read. that's something that we're really working on. i think that all of these daily habits -- news, sports, games, finance, search, mail, answers, groups -- these are the types of things where, you know, we have really been underinvested in them. and a little love will go a long

way. turns out i learned the other way that yahoo! groups -- which i remember using really pervasively back in 2001 because i was friends with the founders -- hasn't been refreshed in, like, 11 years. so it will go a lock way if we actually -- long way if we actually start to modernize some of these products. identifying what are some of these key technologies. i do think that the user-generated content component is something that yahoo! very much pioneered with things like yahoo! answers and yahoo! groups. and flicker, for example, was one of the first social photo services. now a lot of people think a lot more about user-generated content and video which is also really important. but going back to some of those roots and saying, okay, now that social really allows everyone to be a publisher and for you to find interesting questions to answer or find topics where you're a domain expert and write about them and for your friends and others who know that you're an expert in that field or know you to come and find your answer, i really do think

there's something very powerful that we can unleash there in terms of the content that we can surface for end users and this utility. >> how about elsewhere in the world of technology whether it's at big companies or little start-ups, what other innovations excite you? >> oh. i don't know, i think that there's so many things, this is a question i like to ask people. and the one question you never want -- the one answer you never want to give is, oh, i'm very discerning, there's nothing that good out there. i think there's, like, amazing things that you get to see all the time. you know, there's, you know, all kinds of amazing technologies on mobile. when you think about, for example, just what it means to be location sensitive, location is something i've spent a fair amount of time in the past few years thinking about. there's all kinds of really terrific technologies there. some of these are very basic in terms of things like being able to check in. so there's four square, but if you actually know where people are and where they check in, there's all kinds of interesting, sophisticated things you can go with on to do. so i think there's amazing

technologies like that. but even branching out from, say, the mobile technologies and desktop technologies there's just terrific things happening. overall in, like, the world of biotech in terms of being able to do dna analysis, analyze, you know, and help infertile couples actually do a better job selecting people and embryos to implant. there's a great company i know of there. there's an amazing company that's working on wireless power. you know, this is the thing of like atlas shrugged, can you have an automated energy machine? but it actually can happen. they actually think that you can send energy using waves. you have to be pretty close, but just think about what what that might mean in terms of all of us running around and plugging things in. you might just need to get close enough to the router that you could pick up on the power, and that that could do for the world of advertising if you know, for example, the sign at the bus stop actually had wireless power

behind it, you could sit there at the bus stop and charge while using your device. it would be pretty amazing. so there's all kinds of really exciting, new things that people work on every day. >> when people get excited about technology, they often forget about the role of design. apple taught us -- apple changed the way that many of us interact with technology, interact with the internet itself, and that maybe form can be as important or perhaps more so than function. how much do you think about that? how important is it to what you're doing? >> i think about design a lot. i think that apple is, obviously, the gold standard. i think in that apple's philosophy is that the design and the technology itself should fall away. and i think that's really true. a lot of these interaction technologies become really powerful when they do just fall away. i think the amazing thing about tablets, you know, the fact that you can just flick and get rid of things and switch from page to page, you know, the pinch, the zoom, these are things that are so intuitive that you

actually can see small children begin to use a tablet. there's terrific videos that parents, proud apartments will up-- parents will upload showing children before they can even learn to talk, they know how to turn the page and flick things on ipads, and they can navigate within videos to their favorite parts. they can't even ebbs press how they like -- express how they like that part, but they know how to get there. what's really powerful about that is it uses the natural paradigms that people already have embedded in their minds that are somewhat innate to us. and they allow it to be the way that we use this technology. and i think that's incredibly powerful. and so that a's overall what you really want to have happen, is being able to whittle away the technology such that all of the complication lies underneath, right? just like an iceberg. there's just that thin little layer that you interact with. i think that's one of the reasons, for example, why voice interaction has taken off to the

degree that it has and why siri is something that is so interesting for people, is because this notion that you can just talk, right? you can just say what you're thinking and transcribe an e-mail or transcribe a text or transcribe a search. that is just the way that you navigate and have every day of your life, and now there's this whole set of technology and supercomputers that just with your voice you can actually have them do what you want them to do. >> where is that to say that a level of cure ration is something akin to a walled garden isn't such a bad idea, may actually be necessary? >> well, i think that there's a clear tension there of, you know, open systems versus closed. i do think that, you know, the application system that exists in ios and in apple is, you know, very curated but absolutely beautiful, and you can tell that -- the reason i don't think that's such a bad thing is because it's really raised users' expectations of design. where people didn't, i think, used to think about design or

appreciate it that much. the fact that when you see something that's really beautiful, it does create a lot of respect for it. and i think that one of the reasons why apple has garnered so much praise for its design is that it's made sure, for example, the entire ecosystem is on that platform. >> several live events to tell you about today on our companion network, c-span. secretary of state john kerry will be at the university of virginia for what's being described as his first major speech since being confirmed. that's at 11 a.m. eastern. and then at 12:30, the assistant secretary of state for conflict resolution and stabilization speaks at the could council on n relations about iraq and afghanistan. in b -- >> from the very start, we told the board the approach we were going to take which was pretty straightforward. and, remember, we were sent there to sort of fix gm, the board and i. that was the mission is go make

in this thing p a viable company again. so we were all focused, and i brought the message we're going to design, build and sell the world's best vehicles, we're going to move quickly, we need your support, and we need your input, and so we changed a few things about the board meeting, we shortened them considerably. ..

>> everybody fumbles on a, but the key point is that for the last six years the center was founded by michele flournoy and kurt campbell has provided a centrist pragmatic, strong security posture that is had a lot of impact i think on and policies, and hopefully we will

continue in the future. my comments today are personal and very much nothing more than a humble contribution to identify what are challenges. i've been asked to focus on north korea's nuclear missile programs and the proliferation problem, but let me suggest to you right away that there's always a larger framework for thinking about issues. united states has an inherent interest in ensuring that it plays not just the continuing role as a major security guarantor of peace in the asia-pacific, but also the region recognizes that we bring much more to the table than that. as economic trade and investment, the rule of law, local dialogue and diplomacy, technology and vision for -- people to people, human rights and many other issues that are subsumed under the larger will that america place in this important dynamic region. now, on this topic, let me start off with a headline that the

successful long-range rocket launch in december, coupled with a successful nuclear test this month, have essentially committed three dangerous actions. first, north korea has jeopardized east from northeast asia, hiding both the risk of the outbreak of conflict, but also the risk of a nuclear arms race. at the same time, secondly, north korea has created a thicker trail of rocket fuel and nuclear know-how between pyongyang and the middle east and especially iran. it kills nonproliferation but it certainly advanced nuclearization in the middle east as well as issue. and then find a with korea, as chairman suggested is closing and on perhaps the ability to target u.s. territory with

nuclear-tipped missiles. we don't know exactly how far away they are from that capacity, but they're getting much closer with these threats. now, i frame my comments in five points. so let me begin with my first point, which transcends again this question of weapons of mass destruction which is pivotal, but it's never the whole story as. i've long advocated a more conference's approach to thinking north korea not just the transcendent issue, nonetheless, the wmd issue will be the focus of my talk today, but my first point is that we have to see a north korea is trying to shape the rhythm of diplomacy and security in northeast asia. that's my first point which is north korea is trying to upset everybody else's diplomacy and security and put everybody on the defense through its own offensive action, as in asymmetrical tactic. so this is part of a pattern of

practice that is well-worn and well-known, a provocation is met with an international sanctions, is met with new north korean threats about war breaking out, and eventually the cycle repeats itself started with another north korean provocation. so recently, in 2009, we saw this cycle the gun with a rocket launched and then the subsequent nuclear tests that was followed by a u.n. security council resolution, second major u.n. security council sanctions. that was followed by new threats. it's important to remember that north korea back them into thousand nine was saying we will go to war if you sanction us. they are saying the same thing again. this is not the first time. and that was fold eventually bite new provocations, especially thinking of yongbyon, island shelling and 2010, which seemed to ratchet up the provocation a level from weapons system illegal use of force.

is a slight variant of the cycle of course. we take a diplomatic detour. and the sanctions are met with some kind of engagement where you can read about the extent of back channel dialogue the twin both myung-bak government as well as kim jong-il. there's been pressing japan this week about what the obama could ministers also did in terms of playing from guam to deal with the north korean kim jong-il and the continuing under kim jong-un. this cycle was repeated obviously recently with the december 12, 2012, rocket launch that was successful, and it showed come in 10 straight for the first time critical technology for a long range missile. so why put a satellite into but

the important of a builder is it demonstrate long range missile capacity. only eight months earlier, of course a similar rocket shattered over the oc so this was a significant stride forward for north korea military perspective. that was met with a unanimous resolution, 27 and the u.n. security council, which undertook a fair proportion response of targeted sanctions on the space agency and scientists, but it was met with disproportionate asymmetric threats out of north korea, and even though u.n. security council talk about a roadmap to get back to the six-party talks, they were obviously ignored a north korea now has gone ahead with a third nuclear test this month. this new provocations begins a new cycle, so we are once again back in the same vicious circle. it does seem evident that the february 12 nuclear test of a

six to seven-kiloton nuclear device was intended to commit diplomatic preemption as i suggested. that is, to catch the incoming president of south korea, park geun-hye, the iron lady of south korea, if you will, wanted to pursue a new policy of inter-korean relations. or policy has now been significantly narrowed and how far and when she can do as she enters the blue house later this month. similarly xi jinping as he tried to consolidate his leadership authority in china and try to think about a host of interval challenges, including the putting off of major economic and political reform questions now has to deal with a much more provocative ally than he had hoped to sort of game. and i visited president obama as he begins a second administration, and you see lacked the second, the new

secretary defense has not yet arrived, it is suggested still trying to build his team and the administrators trying to get their interagency review undertaken. all of this in the midst of a readiness crisis, sort of budget induced. this is a very tenuous time. so kim jong-un has chosen his timing very well. he knows exactly what he is doing in terms of looking to work the scene. the scenes of south korean politics, chinese politics, u.s. politics, and setting the chessboard so that he now thinks he is on the offensive. so this leads me to my second point which is jong-un is unfortunately miscalculating about the dangers that will be perceived outside of korea. that is, he's not just increasing the chances of proliferation in the region and out of the region, but he is crucially increasing the chances of conflict. the security risk, in other words, is not stable, but rather

into this concept of the author of black swans that risk is not in the past. risk is in the future. so if we only look back, and it's important to look back, and larry knows history so well, we have to look at history, but it's not enough because he can't predict for the future. at some point we are reaching a tipping point here on security that is fraught with growing danger, i would today. the world is getting more dangerous because of these north korean actions. chairman chabot says we need a new strategy. absolute. what that new strategy is, what will work, i think we're all bedeviled try to answer the tough question. i will try to offer by vice on it but i offer with very great humility. because north korea has been a one continuous long march to achieving a nuclear intercontinental ballistic missile. really looking back retrospectively it's hard to see this otherwise. there's been a very steady course and you can go back to the '70s and see this steady

path. they've also got an equally long, not equally long but it are long track record of a whopper in with outsiders, especially only with tehran. the difference now in this stage of their provocation and their wmd program is that north korea, can see the finishing line at some of these long sought goals. a nuclearized cdm is now within reach of john young. that has to be -- john young. that's a very tantalizing objective within the inner circle of north korea. they demonstrate the technology so that they can build an icm that will reach los angeles. which is just under 10,000 kilometers. they have mastered reentry technology already. of those who say that this is a satellite launch, i'm sorry. they know how to to reentry. for those who say this was a

space launch, they should look at the use of storable oxidizer, this red fuming nitric acid which is free stable meaning they are trying to build an icbm. the kind of a missile ready to go at anytime, all the time. they are not just doing the one off space launch carefully planned for certain date. they may well have in this nuclear test blown up a highly enriched uranium device. we still know, they will undoubtedly do everything they can to ensure -- obscure the facts. we hope the chinese will be very successful made in helping us to pin down, but we should be working together internationally to figure out whether they have gone beyond their limited plutonium stockpile. because of that stockpile was produced with the reactive close, no longer producing plutonium. if they want to keep shooting off all of those test with plutonium, that's fine. run it out to zero. the problem is we have a suspect

is highly enriched uranium bernardine with which is why they prepared to chefs for test. and if that's the case it's just a potentially geometric increase in the nuclear arsenal that they could produce in theory in the coming years. and i would invite you to look at the open analysis of david albright and of analyze the talk about potential for quadrupling the nuclear arsenal for maybe 11 or 12 weapons to as many as 48, even by the end of 2015. it's all based on limited information, but it's a scientifically-based argument. so denuclearization may not be dead but nuclearization in the middle east and asia is gaining dangerous momentum. which leads me to my third point, which is that the concern is not just proliferation but also the fact that this could be emboldening north korea. this could be emboldening, especially a very inexperienced statesman, if i can call him back, kim jong-un. this is a man you may not be 30 years of age but thanks o