>> it will be a challenge to capture this target but again i think it will drive technology, it will drive capabilities. it will be critical for us if we're really going to go beyond loberthal road with humans and continued to explore space we have intended. >> as i've been educated by our chairman, my understanding is

that the mission contemplates bringing an asteroid back into orbit of the earth in what would not be a more typical elliptical pattern that rather a more irregular orbit. is that, do i understand that correctly? and if so could you explain that a little bit? >> actually the idea is return the object to it deep retrograde orbit, which in the reference frame of rotating with the moon it looks like it orbits the moon and at 75,000 kilometers off of them in but if you look at it more of an inertial frame, you see the object kind of wander between the moon and the earth, and it looks like kind of a loop that thing probably use all. what that is is that the interaction of the gravity of the moon with the gravity of the earth that keeps this object trapped in that orbit around the moon. i think the simplest way is to think of it as a stable orbit

around the moon but if you change reference frames it looks like a curly cue around the earth and the moon in that direction. but the orbit is unique in the fact that a stable and it's also exciting because we can get there with the early versions of the orion so don't have to alter any of the plans we have for either to go to this region. >> one of the important roles i think that the subcommittee can play is helping nasa articulate the benefits of the space program. to our nation. and i would be curious how you would articulate to the man on the street, why he or she should care about going and getting an asteroid. >> one obvious thing to think about is we've recently had the 50-meter asteroid attack the

earth over russia. for us to gain experience in understanding asteroids and surveying even the smallest i think can bring real benefit to folks here on the earth. also, the techniques we will use a flying around and catching a spacecraft to this object, those activities will have again direct application to helping protect the planet. they are not 100% compatible but what you do for 100,000 kilometers size object compared to this little seven-meter object, many of the experience we gained can be important as we try to protect our planet from these objects that are clearly in an orbit that could come back and impact of the earth. the benefit is you get a chance for us to understand better what objects are in the environment, not just the big ones but also the smaller ones. you developed some techniques that can help protect the planet from these objects if they were to approach the earth. >> and if i could ask a final question to general stafford.

you have spoken about the benefits, in your opinion, of another man's flight to the moon. i would welcome if you could share with the committee what you would see of the benefits of another manned flight to the moon. and the relative benefit of that mission compared to the asteroid rendezvous and retrieval to the extent one or the other is seen as mutually exclusive. >> [inaudible] >> thank you, senator cruz. to me it's not either or. when you develop the sls and orion, you in the support structure for this in the control center at houston, you developed a capability. and asteroid mission is a mission. it is not -- most of the studies

that i participated in in what we now have learned from the russians, what they're looking at a long-term plan, their final goal is at least an expedition to mars. but from that you learn on the moon. i headed this group for nearly a year to study that. there's a whole book on it, and what we learned from that, the operational procedures and the hardware it takes to do this. there's a reason, you know, a lot of reasons. as i started out the charge ahead for vice president quayle and president bush senior was to give them the technology and the architectures of how we do it. approximately four months into the studies it became obvious to us that we should say not only how do you do this, but why do you do this. why do you go back to the moon? back then we had a steering group. we have been to the moon, why

don't we just go to mars into the? so we dug into this, and it's very detailed, and the okis still regarded as the bible as far as space exploration and it tells what you can do and also it prepares you to go further out. but in providing this infrastructure you have this. and again, when we talk about commercial i can say this, that nasa itself is never built any hardware. just like in the air force, while i was at the chief of staff, the air force has never built a piece of hardware. we have been re- church in, but it's all been a commercial sectors that built. but to me there are many reasons that the moon is the next goal to prepare and operations, and also it will do a lot of things inspiring generations. and on that on our recent visit to russia last year, in the

advisory task force to the iss that i'd share pro bono work, about six or eight of the people, we have a russian counterpart. they laid out to us. i think we are the first americans to see a proposed start of the next 20-30 years of human spaceflight. it is working its way up through the russian government for approval and modification. and in that i thought he was very important that they said they would propose the same framework that the inttional space station is managed by, with the partners. we have it, it is working good as a shining light to the world how people can work internationally and this is what the russians have proposed. and that they showed us they would use the sls, orion, use their hardware. so it's a unifying portion but there's a lot of reasons as to why, but the main reason finally

i think every administration has said yes, someday we should have an expedition to mars. thank you. >> thank you, general. thank you, mr. chairman. >> thank you, senator cruz. mr. cook, pick up on that. we've got this plan with sls and orion. prior to that robotic mission to capture and bring into this retrograde orbit. we learned from that. perhaps we go back to the moon surface. we learn from that. as we are getting prepared for the 20 '30s to take humans all the way to mars, to take cargo to mars that could precede the humans. and tell about how this is going

to be a new opportunity for commercial involvement. >> senator, that's an outstanding question. if you look at the opportunities in space, i think we have too often thought of space as a very niche place. where only very few people can go at this point in the game. i think we have to change again and look at a marketplace, much as the way thomas jefferson looked across the united states and what the potential economically would be for the nation some 250 years ago. so if we look at in that context and you look at something such as an outpost, such as outpost on the moon, following up on the what general stafford mention. not only when an outpost like a good opportunity for new wealth creation, mining of minerals have been placed on the moon, and then even on asteroids later on for thousands of years it could be mined for various uses, helium three for example, for energy production which i know you're familiar with, is one

option. but as well it is an opportunity for routine resupply of crew and cargo, much of what's going on with international space station at where it becomes a marketplace. you in a tense and eventually hundreds of tons of cargo initially and then grew. later it would have to support outpost of these types. that is a perfect market for place for the commercial sector to get involved and make investment. but i think the key there is there has to be a long-term plan. there have to be dates associate with a long-term plan, and when there are and what our commitments, and the private sector will be plaintive layout business cases, to be able to go in move forward. i think that a key piece of this in terms of how we move forward with exploration, i think there is again new wealth creation, logistic support. really almost endless. they key is that long-term plan with those dates that allows and the commercial sector to leverage that and look for ways

to be profitable. >> and general stafford, you were talking about international cooperation in the commercial development of these capabilities. do you want to expand on that? >> well, the experience i had besides my first international effort was apollo-soyuz, but then as the airport deputy chief of staff, i was the manager configuration manager probably one of the largest international cooperation for defense, that was production of the f-16. and that was well over $100 billion program in which we had the norway, denmark, belgium, the netherlands, coproducing the airplane that was built in texas by general dynamics to start with. we continued on from that, but it was commercial entities in those countries. so that was some of the dod site. and then from the russian side,

what they proposed and what we are doing today in fact, again, it is commercial in that all the manufacturing is done by the commercial enties. now then, the market as for supplying is what has been described here by both mr. gerstenmaier and cook, supplying to the station. but the marketplace is today is the united states government and the partners that are on board. but i have had experience both in the department of defense and also now in working there with the russians on this. >> mr. gerstenmaier, recently nasa has said that the sls is ahead of schedule. what has nasa done to make the sls so different? >> i'm not sure the sls is ahead of schedule. i would say we are on schedule,

but we are moving up pretty well with all our contract activiti activities. you know, we picked the rocket designed to be consistent with the budget environment we were in. for example, we use the shuttle main engines as the primary propulsion system on that rockets we didn't have to go through development initiative for the solid rocket -- for those liquid rocket engine but also the solid rocket motor on the side, those came again from the previous programs and have basis back in the shuttle heritage we don't have to do anymore qualification firings of those, or any more development of fiery for those. those. we needed to do more qualification test. we are able to leverage off a lot of our experience we've had before with hardware design and rocket designed to keep us looking forward. so i believe the sls is on track. it's still not easy, the equipment, the welding equipment is starting to shut down in new orleans now, get assembled. we are starting to begin kind of the first series of welds to make all that happens, the

design work is getting to and. all that is completed, been completed. there's not any problems or showstoppers with all that but there's still a lot of work in front of the team. they're very motivated, moving forward and we're making solid progress towards the 2017 timeline. >> with the authorization bill, it was to utilize a lot of the technology that we had already developed. what are some of the gaps that technology gaps that nasa and its partners have to overcome to operate in space? >> there's a variety of kind of things we need to look at. as i described in the operate in this vicinity around the moon, we are now days away from returned from safe return. to our vehicle needs to be fully redundant, fully capable of

taking pills and so keeping the crusade. we need to make sure we have the right medical provisions for the crew, decade can be in that condition for nine days without any ability to back to the earth or to get to any kind of medical care. those are different ways of operating. we typically always have been able to an abort mode or an easy way to get back. it's going to be a different way for us to operate in that region. we also need to do with the radiation environment of space. again, we can deal with it for the shor short durations arounde holidays 20 today missions are so. but then as we start venturing out into space will be to get some more shielding, look at some water to potential to shield some spacecraft designed to shield. so there's some work that needs to be done there. and also the humans, we are learning a lot of space station had human body thrives or lives or survived in space, and the extended microgravity conditions. this one year intimate with the crews we plan in 2015 will be a

really important demonstration to see how well the human body really performs. the russians have flown in space for over a year before so it's not brand-new territory for us but they have not flown with all the detailed instrumentation and all the detailed medical exams that we will get in that instrument and that which was if the human audie really is ridiculous for these extended durations. so we have lots of things to learn both spacecraft was, cuban vehicle was, et cetera as we move forward. >> thank you, mr. chairman. mr. cook, you have talked some about the potential for additional commercial involvement in human exploration beyond low earth orbit. could you elaborate on what you see as the potential opportunities for both andy near-term and in the longer-term? >> senator, thank you very much for the question. that's a good question.

and again from the standpoint i think you look at into categories. one is in new wealth creation. this is probably more of the longer-term. you have efforts out there today that are looking at mining asteroids, planetary resources for example, has plans to do that. also there is a venture other called b612 is looking at astroid detection, things of that nature. recently nasa scientist based act agreement with bigelow aerospace to look at the broader set of implication applicationst does the commercial workplace look at the on low earth orbit? i think that is a two-phase approach. the results of that i think will be very interesting in terms of what comes. i think for new wealth creation in particular, whether it be new space stations in low earth orbit, which is probably near-term and our plans that are in place for that now, as well as longer-term, again, an outpost on the lunar surface for example, could be used for

mining purposes. you're going to have to have logistics servicing of that outpost. and so those go hand in hand. the key to that again is having a consistent long-term plan in terms of how you want to put it all together. >> one thing you have referred to several times is the potential opportunities for mining. i think it would be helpful if you could share our best knowledge and prediction as to what the mining opportunities might be either on astroid or on the moon itself. >> yet, there is, and i would certainly be willing to take some more, senator, some wartime and respond to the more fully for the record. there are quite a few studies out there, but in particular to minerals that have been talked about the most, helium three that is in abundance on the moon that has potential application to fusion power here back on

earth, very clean car. the key there is there has to be a low-cost infrastructure. you've got to have the interstate highway system if you will between your abdomen to be able to get back and forth. that's where things like sls comes into play, that's the government private sector involvement to be able to bring those coming to the resources there to mind and bring them home. and there's been a lot of work done on that by the university of wisconsin as a matter-of-fact. and then platinum has come up, which is obvious and very valuable mineral that could be used to back it on earth. those are just two examples. >> thank you. mr. gerstenmaier, if congress were to enact legislation that specified a specific major long range goal for human exploration, say a lunar base on the moon or human landing on mars, how long would it take for nasa to develop the specific description of the proponent elements that would be needed to

be such objective? >> you know, when we look at both of those objectives you just described, i would say the sls, putting together the heavy lift launch vehicle, it is designed to meet both of those objectives. it comes initially and 70 metric ton come eventually grossed 130 metric ton capability to low earth orbit. that's the kind of heavy lift capability we believe to get to mars kind of destinations. the orion capsule is also again sized for that mission. it's more than a capsule but it also provides a life-support capability or kind of an emergency backup. it will have to be teamed with a habitation module. if you're going to go extended durations in space. but if there's a problem with the habitation module, all right has enough space inside that it could be a safe haven for the crew prepared of time. so that's what is bigger than a typical capsule. so i think those two pieces are part of the infrastructure.

we could lay of the other pieces of infrastructure we need. we need some of these operational techniques i described to you that would come from astroid mission. you can lay those in, put those in place. you know, mars is a huge step for us in terms of distance, radiation exposure, exposure to the crews of microgravity, just the sheer magnitude of that activity is going to take some time for us to prepare. we conceptually said 2030s sometimes is the appropriate time for mars, but we don' can y do that with sufficient money and moving forward. but we got those first pieces of that activity already in place with sls and all right, so i believe we're starting to put together that capability. we will continue to add to it. the astroid mission fits in the same senate, it also adds and eventually achieved those goals that you described. >> thank you, mr. gerstenmaier. my final question i would like to address to general stafford. you are someone who has spent a

lifetime in public service, serving your nation, and you've been involved with space since really the dawn of space age. i would like to give you an opportunity to respond to the same question that asked mr. gerstenmaier in the first round, which is if you are talking to a man on the street, a young man, a young woman today, and that individual asked why should i care, what difference does any of this make to my life? how would you answer that question to the man or woman on the street? >> right, center. let me start from macro and work down to the micro. you know, recently in the last few days, unfortunately we lost one of the great journalist of america, mr. al newhart to the chairman new very well, and he started, against all odds he

started a national newspaper which you can now read internationally. and newhart travel throughout the united states consistently come nearly 90, write a weekly column. and he had a pulse on the american people. and he stated, was in a special edition they made for him. to be number one on the earth, you also have to be number one in the space. so from that unique leadership. from leadership will take them with partnerships. to get done more in specific terms, it talks about the inspiration that he gives to the younger people. that is i think one of the great things that came out of apollo besides the infrastructure. you can see it with the pads and the knowledge of how we do this. the main thing is what does this inspire you to go forward. to me it's an inspiration. and education sure you say you

can do education with other things. but to me, the inspiration, the education and leadership, and working with other people is the main thing. i wish i time, sir, to go into what we worked on for the year, why we should go back there besides how we should do that. but one thing i would like to point out, with the infrastructure that is there now, and the heavy lift that the 2010 act put forward, and that type of vehicle, the sls, will put in, and again they said 130 metric tons. they said that was a minimum, floor, not the ceiling. and when the booster i committed to the moon shot off in low earth orbit before we kicked off to the moon we have

300,000 pounds. today, the heaviest lift launch vehicle available is a delta format that has 50,000 pounds. some people say let's take it witwith a bunch of smaller to pt them together. i'm sure you or your staff that people come by and say that. but it's just not possible because you'd have to build, completely assembled, launch, check out. then way before that, go back nearly 50 years, and that senior people at nasa after president kennedy said will go to the moon and return, i like the word return, sir, it was decided that all the upper stages will have this fuel liquid hydrogen. because of the great impulse that gives us. and that was what was achieved to the saturn five. and today the air force expendable launch vehicles. the upper stages are all liquid hydrogen. it gives a specific impulse in the measure of about 450 seconds versus hydrocarbons which is good for the first stage, maybe

300, now solid rocket motors are getting up new that 300 seconds. but you need a hydrogen to go out. there's also a problem, and that is because of the temperature minus 428 degrees for oxygen, 297 minus, it boils, and it tends to boil off like, i think the best protection we have we might get 1%, have a percent a day of boil off. so you see where that leads. so there's a lot of challenges for mr. gerstenmaier and the team to work on. but that was early days of apollo is how do we get the propellants, facilities and everything to go the. and how we should do. there's also another thing, center nelson and minority leader hutchinson puts forth this bill. when you have this large sls, you have a large diameter volume

in there that you can carry a payload. when you have the small diameter rockets that people say they could put together, you do not have the volume for the payload. you just can't go ann mulligan together, and you're also working against the boil off all the time. so i'm sure you've had people come by and talk to you or your staff as on that. i just wanted to put that out there. back about the main thing is the inspiration to young people, and i'll be glad to provide you step with one of those books. thank you, senator. >> very good. thank you, general. thank you, gentlemen. thank you, mr. chairman. >> thank you, senator cruz. general stafford, on that point, share with us since you were a part of the apollo program the generation of scientists and technicians and mathematicians, that the early space program

spawned. >> mr. chairman, it's amazing today, in talking to people i get recognized, people get introduced to, so many people said, the reason that i studied to be an engineer, i studied to be a doctor or something was because i so we did in gemini, which aided in apollo. and that inspired me. yes, i wanted to be an astronaut. i realized the chances were very small but that still inspires me. that's why i wanted to be there. so i think there's been such a tremendous fallout from that to help make our country -- you see where we stand, we still of the best research develop and in the world in this country, and this technology is what makes this country great. when we lose that inspiration to go forward and have this technology, then we have lost a lot. >> now, let's go from the

heights of inspiration to the depths of reality. mr. gerstenmaier, what happens if sequestration, across the board, in venues and affects the nasa budget in 2014 and beyond? >> simply, we can't deliver the programs that we have committed to you we would deliver. we can tolerate the 13 sequester activity that occurred to us because we were prepared, but if it continues into 14, the programs i describe, the tie and tails i described to you, i do believe we can continue to support at the levels we did. so this is really going to be tough for us moving forward. >> and argue any position -- are you in a position from your platform of the 2013 budget and what you project in the future?

are you in a position to really encourage the private sector to get involved and develop these space exploration technologies that are advanced? >> yes, i think, again, the president's budget that was just submitted or just released that you've seen for 14, and now that keeps these programs moving forward and includes some technology development. it also involves us working with the private sector, to continue to move forward. we've done a lot in the cargo and crew world, but i think there's even more we can do in other areas. so we'll continue to look to the private sector to partner with them to move forward, i think is, mr. cook said it's really, the partnership between the government and the private sector needs to be the. we need to use each other, use the best of both activities to figure out a way to work jointly together and move forward. and i think that is key to us moving forward. so as we talked in this hearing

i think international is important to us and then private public partnership is also tremendously important to us. >> general stafford, when we were in the great space race to beat the soviets, to the moon, they tried. they had this big rocket and that big rocket blew up. ..

>> and with large thrust engines which we'd never done before, and also the first stage in building a large rocket engine is a very difficult task. the bigger you get, the more they tend to go unstable and explode. in fact, when i was flying in the gemini missions, the f1 engines we had on the giant sat turn was still exploding on the test stance, which is not too much of a comforting feeling. but over a period of time, they worked out the right form of the injectors and worked that out. that's one thing the soviets never could work out, was to build a large, single-chamber engine. and you even see it back into the soyuz rockets they're flying. they're really one engine but four barrels x. then on their rd-170 which had as much power as our f1, they could not get a stable combustion, so they went

to four different barrels. now, on the large n1 which is bigger than our saturn v, they had 30 engines on the first stage. i would term it a plumbing nightmare. and i talked to my dear friend john, and he watched the first one start up and blew up and blue pieces about 10 kilometers away. and they did not have the technology. so they were going to change attitude by throttling the engines which was not a bright thing to do. and they were going to use kerosene and liquid oxygen in all their stages which had the far lower impulse. so even though the booster had nearly ten million pounds of thrust and weighed more than the saturn v or they did not have near the payload to get out there, and they had too much complexity in that. now, the engines, those 30

engines they had on the first stage was called the nk33. they move been taken by aerojet and called the aerojet 26. and they've put gimbles on 'em, rechecked them, and they just recently flew perfectly on this fright by orbital sciences which they've developed on their booster which will go to supply cargo to the space station. so those are 45-year-old engines, but they've been modernized and evidently work perfectly, sir. >> mr. gerstenmaier, space station, it's doing well. with a crew up there working on science, how about telling us is, do y'all have any feeling about since we extended in law its life to 2020, what about

extending it beyond 2020? >> you know, our discussions with some of the commercial groups, and you could probably talk to the center for advancement of science in space, the casis organization, their feeling was if they knew station was going to be around beyond 2020, there might be a different market on the commercial side that would be interested in using station. so i think we're starting to hear kind of the groundswell from outside users and other folks that station is proving to be a very vital asset. it's things that -- they like to do research there. we're starting to see a lot of earth observation payholds go to station in the next couping years -- couple years, and i think if the market was extended, the market might get larger. if they saw a bigger market if station got extended and moved forward, but i'm starting to hear general indications from the user committee that extending the life of space

station would be a very good thing. >> can you speak as to some of the vaccines that are being developed now and being tested? >> yeah. there's not actual vaccine work being done, but it's more kind of genetic -- or generic research being done on station. the two big areas of interest are immune system degradation which occurs in our crews onboard station. their immune systems are not dysfunctional in spas for some reason. that -- in space for some reason. that proves an interesting way to test drugs that affect the immune system. we're going of to have the ability to take rodents to space next year on space station, and they can be used as a test medium for potentially new drugs that are being developed on the ground. before a pharmaceutical wants to take those into final fda trials, they could do a simple experiment to see if this

candidate drug is effective in the immune system, in preventing the immune system from becoming less effective. so there's some work going on in that area. we also see gene expression in space as very different. that allows some innovative ways to go look at things such as we've talked before like the salmonella vaccine based on variations in genes from examples flown to station. so there's quite a bit of interest in the pharmaceutical area along these lines in both potentially dealing with bacteria and the change in the genes that occur in space and then also on the immune side. so both of those are very promising areas that have real application to folks here on the earth. this is another way of getting insight into potential new drugs, and we can do it in a fairly quick manner by doing space to do that. >> did you say that the human immune system works better in space or less better?

>> less better. it doesn't work as well. >> and how about the vaccine for mrsa? >> again, it can also potentially benefit from this same gene expression. we can get a chance to go look at different ways genes are expressed, and that could potentially lead to potentially some type of drug that can help with mrsa. so, again, it's giving us -- what happens in microgravity is it gives us a unique insight into the way the bacteria and genes express differently in space than they do here on the ground. and that unique change can let the researcher develop new techniques or new, i guess, new ways to protect against a particular disease that is there. and there's a whole variety of them. mrsa is one. any bacteria in space, a new, novel way of trying to protect against it can be developed from research in space. [inaudible conversations]

>> i want to ask you what are the other missions and destinations that are necessary as we get ready for a long distance mission to mars? >> again, i think space station can be kind of that first step. we can gain a lot about how the human performances for long duration exposure to microgravity, so that's an important thing. station is also a good test bed to go look at lotter systems -- life support systems, the systems that remove carbon dioxide, process water. those can be run for extended generations, and we can develop a system that doesn't require a lot of maintenance or hard work to keep it operating on station, and we can prove that essentially on station. so that long duration life support system that'll be necessary to keep our crews alive, that can be tested

onboard space station. our next generation of life support on station, we intend it to be the exploration that will be flying in the future. station gives us the chance to test technologies that we're going to need to go distances such as mars. >> and describe how the station will serve as a platform to develop the propulsion technologies to go to mars. >> again, station is a good platform to check things out. we've been looking at potentially installing some small thrusters on station. we're not sure we're going to do this or not. they could look at drag makeup. but, again, it could be, essentially, a test facility for those small thrusters. we're also seeing, in the same vein we're seeing a lot of instruments that people would like to add to that spacecraft. they can take those again to space station, they can check those instruments out and add

them later to their space california so station -- spacecraft. so you'll see in the next coming years some things flying that are flying on dedicated satellites. for example, the carbon observatory that's going to fly as a dedicated spacecraft. there will be a companion set of instruments that are, essentially, the spare instruments for that spacecraft. those will fry to space station, and they will also give us insight into carbon general race on the earth. -- generation on the earth. it looks at carbon generation at essentially the same solar time every day. so you see carbon generation at one point of the day. that's a very good standard that's you would. but then station because it flies in a different orbit, it looks at those same locations but at different times of day, so that's going to give researchers insight into carbon generation throughout the day. it gives them a look at the same

phenomenon, so there's a nice sinner general between the dedicated spacecraft that takes science in a more pristine, more orged man -- organize toed manner. then it actually builds a better combined day a set than individually. so you'll see that fly. there's an aerosol experiment that will also fly and a rapid -- [inaudible] which looks at winds in front of hurricanes also. so there's a whole variety of uses of station that are starting to come about. >> well, you've just made the case if we're going to mars in the 2030s of why the space station ought to have the life beyond 2020. its legal life now in law. and, mr. cook, we'll let you be the clean-up hitter. tell us if you've got an extended life of the station, what does the private sector think of in the development ask

and use of the property -- and use of the properties of the station in order to benefit the private sector? >> thank you, senator. i think mr. gerstenmaier has laid out, for example, vaccines, new things that can be manufactured in space, new vaccines, new materials, thinks of that nature. but i want to flip it around the other way, and there are some technologies that expand the marketplace of terrestrial companies today. for example, one of the experiments that's being ready to be flown on international space station is an additive manufacturing experiment where you can literally grow parts in space. you can grow items in space. and there are printing technologies that allow you to do that today that are commercially available now, and this allows for a whole new market for them to be able to take it to the space station and test it out and demonstrate it out. build prototypes of parts, build even some parts in terms of -- and how does that work in space? does it work as well as it does on the ground?

it's another market. there's technologies that we're involved with in terms of taking commercial now technology, being able to grow tools and other systems from pretty much any metal or any combination of metal and ceramics in space. and so you use the space station as the ability -- it's, compared to mars getting logistics up and back to the space station is fairly straightforward. once we go to mars or anywhere else beyond low earth orbit, we've got to be able to live off the land. so using the space station as a platform for companies that have technologies that work here on earth to expand into space, i think added manufacturing is one very exciting area that alonger-term space station would allow that to be flushed out other time. >> and, mr. gerstenmaier, i keep saying the final question, but we've been joined by the esteemed senator from connecticut.

explain either the space station or the retrograde orbit of if you can park things there or have things on the station as you develop the technologies to go to mars that you don't have to go back down onto the surface of earth to resupply. give us some of your thoughts there. >> yeah. this asteroid retrieval mission that we described in this deep retrograde orbit, you know, that's an interesting region of space. some of the things we could do there potentially are mars sample return we've talked about we could use a similar technique to return a sample from mars to this region. once it's in this region, it's stable for an extended period of time, probably multiple decades. so, therefore, we could pick up mars samples from this region. some of the points are interesting gravity locations around the moon, potentially

maneuvering from those to deep space destinations is interesting and intriguing to us. we need to learn more about this, these regions and how we can use, essentially, the gravity of planets and also the moon to assist us in going to these various destinations throughout the universe. >> so you could bring a mars sample back, park it in the retrograde orbit and go sample it whenever you want to, because it would be stable, we'd have access to get to it, and you wouldn't have to work on it way, by taking it all the way back to earth and then coming out of earth back into orbit? >> that's correct. especially the asteroid. if it was there, you know, one visit probably doesn't biyou enough information -- give you enough information as you'd want. steve talked about some of the

potential minerals and things on the asteroid, you could actually spend several visits to go look at it, characterize it, understand are asteroids really a viable source of material for missions into space. so, again with, it gives you the advantage of having this object in a location where it will remain for an extended period of time, and you can visit it with, essentially, the capabilities we have today. >> um, since the amount of gold on the planet would fill two large swim withing pools -- swimming pools, mr. cook, if you find an an asteroid that's got gold in it, i'd say our space program would be off and running. >> yes. i think that's a fact. and i think, again, that's where space, viewing space is not just a novelty and not just a niche place, but is a marketplace that can be utilized for the benefit of mankind here and growing our

economic sphere. that's the approach we need to take. that's the approach that was taken in almost every other exploration effort i can think of over history, and we ought to be considering that collaborative effort from day one. >> it's just like the spanish explorers that found florida. they were looking for gold, but look what they found. all right. senator from connecticut, senator blumenthal. >> thank you, mr. chairman. on that note, you know, i was thinking the last gold rush was by horse drawn wagon, so we've come a long way, although our ultimate aspirations may be very similar. and i want to thank all of you for your excellent testimony which i've been following even while i've been absent here through the wonders of our modern communication system and, also, thank you to our chairman, senator nelson, for his leadership here and on this committee. i have a somewhat more mundane area of inquiry, and i won't

belabor it because i know we're near the end here. but i am the interested in -- i am interested in how nasa as its mission changes, as new programs are developed, constellation folded into orion, for example, changes its contract so as to maintain competitive bidding. in other words, i'm very interested in the openness and competitiveness of the contract awards so that when, in effect, the mission changes if there is a need for new services or goods, is there also a move to maintain or open new rounds of competitive bidding? i don't know who would want to answer that. >> i guess i can answer that. i would say that, you know, we have requirements for justification for other than full and open procure canment,

right? so -- procurement. so in the federal acquisition requirements, there's a pretty strict set of criteria we need to meet to not go compete. so our clear preference is we would go out and compete unless there's demonstrate bl advantage that shows it's of overwhelming advantage for the government for us to not compete. and things would be is there substantial investment already made in a previous program that is directly applicable to the next program, those kind of considerations. is there not really another competitor in this field? that's another consideration. so we logically have to go through all those various constraints, understand those and then when we d then if we show that there really is no advantage to competition, then we could potentially award flu the justification -- through the justification to one of the existing companies. and we did that went constellation went away. we went through each one of the major components.

we looked at what was justifiable, where was the significant advantage for us to continue the existing contract, or we went out and competed some of those contracts. and, you know, our experience shows we've made tremendous progress in sos, and some of that is because we realized exactly what we said in the procurement time frame. for example, on the core booster we argued that the upper stage for the constellation program was almost identical to the core stage in moring. so we -- manufacturing. so we did not compete that particular contract. and we were able to make tremendous advantage in that activity as evidenced where we are. you know, we're a little bit over two years away from when we did that initial transition, and we're already in the process of being able to manufacture hardware next year. so that shows how fast we were able to turn around and that was justifiable in evidence with the actual performance. but our preference is to clearly do competition and open it up. i'm continually surprised by what the market can provide.

i think competition is extremely healthy for us, and we need to look for competition wherever we can. >> what would be some examples or an example of what you decided to compete as compared to the instance you just mentioned where you decided not to compete it? >> i'm trying to think through some of the -- i would say for the, like for the cargo systems that we're using on space station, when we decided to pick a cargo resupply services contract, we actually put that out for full and open competition. we had an extremely good competition for that activity. we ended up selecting the two companies that are starting to deliver cargo to space now, spacex and the orbital sciences corporation. again, that was a pretty intense competition between all those providers. i believe we've lowered the cost of cargo to space station because of that competition, so that's probably an example of where competition was good and helped get us a better value for

what we're trying to do. it was also interesting the way we did that procurement. typically, we would build a spacecraft or contract out for the spacecraft itself. in this case all we did was acquire a service. so that's another thing that's good for us. when we see there's a market and they could potentially use that market to lift scientific payloads and other things, a market beyond what our need is, in that case just asking for the or service is much better than us actually asking to have the rocket built and then us, the government, owning that rocket. so that's another thing you'll see a lot of us doing more on, is actually just looking for the service. and even the expedition flight test that's going to occur next year where we're going to look at the heat shield of the orion capsule, typically we would have integrated the capsule on top. again, we kind of showed that as a service contract.

we didn't specify what rocket would be used for that. we left it up to the contractor to determine what rocket they will do the integration of the orion on top of that rocketer with us just watching. so, again, we're looking at an innovative way of getting a standard ownership, but that's another extremely effective way we've been able to get better value for the government. >> and just one last question. are there areas where you haven't made that decision about whether to compete it or noncompete it? >> yeah. for some of our future work sitting out in the front of us, we go through an acquisition strategy meeting, and through that meeting we describe these factors i just described to you, and we figure out what the best approach is to try to acquire a service or a capability we need and what that approach ought to be. we review that with the senior leadership of the agency, and we go through a formal process to do that. >> great. >> there's quite a bit of work out in front of us.

>> and my understanding is that, if i can put it in lawyer terms, not scientific terms, forgive me, that the burden of proof, in effect, is on the argument that there should be no competition. you're willing to go that route if there are clear advantages in cost or time or whatever to the united states, but otherwise you would go the compete route. >> yes. and that's, and that's what the federal acquisition require, rules and regulations require us to do. >> can thank you. thank you very much, mr. chairman. >> thank you, senator. it's been a very good discussion. thank you all for participating. the meeting is adjourned. [inaudible conversations]

[inaudible conversations] [inaudible conversations] >> today bloomberg news hosts a summit looking at global economy and the national debt. we'll hear from 2006 economics nobel prize winner edwin phelps and pennsylvania governor tom

corbett. live coverage begins at #u 30 eastern -- 8:30 eastern here on c-span2. and later in the morning on c-span, bill clinton delivers a lecture on his career in public service. mr. clinton graduated from georgetown's school of foreign service. we'll have live coverage at 10:30 eastern. >> former secretary of state condoleezza rice is in washington, d.c. this week to talk about the importance of global development. she was part of the millennium challenge corporation's annual summit on international aid. this portion of the conference is about 35 minutes. [applause] >> thank you. thank you very much. thank you. thank you very much.

it's a delight to join you here for the forum on global development sponsored by the millennium challenge corporation. i want to thank you, daniel, for your terrific leadership of in this organization. from paul applegarth, the first ceo of the ncc through john and now to you, we have had superb leadership. and i want to just say one other thing. we've had superb people working in the tricep. s here -- trenches here in washington and across the world to make this dream a reality. and so thank you also to all of you who have worked for and with mcc. i've always thought that american foreign policy, indeed america, is at its best in the world when our interests and our values come together. and i can think of no better example of of our interest and

our values coming together than mcc. we know that we have an interest in a world that is peaceful. we know that we have an interest in a world that can, indeed, provide for its people. the poorest of it people we know that those two are lunged, that -- linked, that very often conflict and disease are the harbingers of much, much worse to come. here in the united states perhaps we had to be reminded again of what the void of hopelessness can do when we experienced the terrible attacks of september 11th. we know that a more peaceful world is in our interest. but it is our values that tell us that that more peaceful world will come from the better angels

of our values. that, in fact, development and democracy, good governance, a place for every citizen, children who are educated, women who are cared for, people who are healthy and well served will be people who contribute to that peaceful, developed world. and so mcc brings together our interest in a more peaceful world of stable, responsible sovereigns and of values that no man, woman or child should have to live in tyranny, poverty and fear. that was the reason for the creation of mcc. but with when we thought about how to express that connection between our interests and our values, we frankly faced a bit

of a dilemma. there was a kind of urban legend about foreign assistance, that it was often wasted. in places that were corrupt, if places where you would never see the benefits, where you would never get a return on the investment of the american people. where did all of that foreign assistance go over the many years that we provided it? well, of course, urban legends are just that. american foreign assistance has lifted people up from all over the world for many, many decades. but in order to reenergize the american people, the american congress in the cause of foreign assistance, we thought that a new model was, indeed, a welcome addition to what we had been doing in foreign assistance. and, therefore, the mcc was

born. it was born, as president bush put it, as an effort to help people help themselves. the united states would not play a role patronizing those who were trying to develop, but it would be a full partner with those who wished to develop and to put in the hard work that it takes to develop. and so, as frank has said and as daniel has said, mcc became about a keyword: partnership. partnership, first and foremost, within the countries that were mcc recipients. it was awfully important that the country take the lead. the people of these countries know better than those of us in washington or even those of us

in the field. but, indeed, their dreams and their aspirations are and what the impediments are to reaching those dreams and aspirations. and so the compacts are, indeed, first and foremost a partnership within countries. with governments, with grassroots organizations, nongovernmental organizations and with citizens. and the compact process in and of itself allows a building of trust between governments and their people. that's awfully important because when there is no longer foreign assistance, there must be an infrastructure of trust between a government and its people. and that infrastructure of trust can then help those governments in building open economies that can attract foreign direct

investment. mcc was never meant to be a permanent condition. it was meant to be a bridge in cups that needed to find -- in countries that needed to find a way to build trust between their governments and their people. secondly, of course, a partnership between the people of the united states and the people of developing countries. the compact encouraged these countries to negotiate within their societies an idea, a plan, benchmarks and metrics, and then for the united states to say, that's good. we can support that. and to make, frankly, fairly large bets on countries that were trying to govern wisely, fight corruption, invest in their people, invest in their people both men and women, educate their children and make

their populations healthy. that encouragement for good governance was our side of the partnership and remains our part of the partnership. and it has, by the way, engendered partnership within the u.s. government through the work of usaid, the state department and especially multiple nongovernmental organizations, civil society within the united states that makes all of this work. this was about accountability as well; accountability of governments to their people, accountability of governments to the united states of america. finally, it's been a partnership between developing countries. we talk about the mcc effect. the fact that when other countries see the progress that is being made by mcc compact countries, they want to do that too. i can tell you that in many,

many meetings that i had as secretary of state people would actually come -- heads of state, foreign ministers -- with their gloss si about why they, too, would be a good mcc country. there is an mcc effect. it is carried out and institutionalized through mcc university where best practices are shared on all aspects of development. and so the key board for mcc -- the keyword for mcc has been partnership. partnership within these countries between governments and their people, partnership with these governments between the united states and the developing country, and partnerships between developing countries as they share best practices. and as we move toward the ten-year anniversary of mcc, it is, therefore, a story of shared success. it's a story of shared success

that i think fancies the model of what happens when people work together toward a common goal when interests and values come together. i want to thank, too, the united states government and in particular the congress, because this program has had bipartisan support. and heaven knows, we could use more of that. [laughter] i want to thank president obama, secretary clinton and now secretary kerry for continuing mcc, embracing it. we in the united states of america have a great success story. it was for more than 45 years that it took before freedom could come to that part of europe which had been dominated by the soviet union. this is one characteristic that got us to that marvelous day when europe was whole, free and at peace. it was the sustainment of a

policy from administration to administration across the aisle. that sustainment allowed us to ultimately triumph over communism in europe. sustainment will also, ultimately help us to triumph over poverty, decide and despair. and so i'm most proud to be here to represent the administration that tarted mcc -- that started mcc, but i am really proud to be here to see that it has been continued, embraced and continues to show tremendous success. i want to thank you very much for all that each and every one of you have done to make this dream come true. i look forward to celebrating ten years when we will once again celebrate what it means when democracy and development triumph, when there are responsibility sovereigns to help commit to peace and

prosperity and when, once again, we affirm that america is at its best when the world knows not that we pursue just our interests, but that we pursue our values. universal values of human dignity and well being. thank you very much. [applause] >> thank you very much. >> thank you. >> it's awfully nice of you, great of you, supportive of you to be here today. let me follow up on the return on investment that you mentioned, because that is what so many people look to when they think about development and their tax dollars at work. and when they hear that word. so in the case of millennium challenge corporation and this kind of work, define return on

investment. >> well, first of all, let me just emphasize what people in this room know, which is that mcc has a very specific indicator that it follows. and it enforces them rigorously. it means that sometimes countries when they fall back have to be taken off the path for a while, and perhaps they can get back on the path. and so this was a system built on accountability, on metrics, on the ability to measure what you're doing. but return on investment, we have to think of it in two parts. we can think of the numbers that you saw, the amount -- the number of miles of road that we've installed, the land titling work that we've done, the farmers that we've trained. and, obviously, you're getting a return on investment because those people are going to be contributors to the economic well being of their countries, and their countries are eventually then going to be contributors to prosperity worldwide. but return on investment also has to have a longer-term look.

history has a long arc, not a short one. and i would guess if we were sitting here 30 years from now, should we be so fortunate, that you will see that mcc has lifted many, many countries from what seemed to be oppressive circumstances. today seem to have no chance, and they're now contributing members of the international community. for the united states that means less need for emergency humanitarian assistance. for the united states, that means heads effort to help go in and break up comfort. that means people who are contributing to the world by development. so i would like us to think of the short term. we're seeing that return. but in the long run, it's going to be increasing the number of responsible sovereigns who can deliver for their people democratically and in -- >> that's accountability and pressure from the bottom and the top? >> yes. when people elect their

governments, they expect more of them. and so accountability comes both from what the united states insists on and the fact that these governments have made a pledge to their people. >> i do have some questions that we've gotten via twitter, so they are, therefore, short questions. which i will ask you -- [laughter] in a few minutes. they may not have short answers, but they are short questions. we also are fortunate enough today to have c-span here, so we have a national audience. let me ask you a question that i know you are asked a lot. i am from someplace in the midwest of this country. my family has had a great deal of economic hardship. maybe i've been out of a job, maybe i'm having trouble paying my mortgage, and i hear all these stories about sequester in washington and tight budget and foreign assistance. in the short term, why should i support more of that when e am having -- when i am having so much difficulty myself? >> as i said, it is in our interest because the world would

be less con flick call and more prosperous if there are more cups on this path. -- countries on this path. but we as americans have always been a generous people. we've always believed to those to whom much is given, much is expected. and i know that there are people in this country who are suffering. but i'll tell you, when you go to some of the countries around the world and you realize that there's a child who is going to die of dysentery pause there's not clean -- because there's not clean water, when you realize that there is a woman who's going to die in childbirth because she received no neonatal care, when you go to a place and you see that a mosquito net would have prevented the death of hundreds of children, with all of our problems we still have so much. and i've always believed that when you ask not why don't i

have, but why don't -- why do i have so much, you are a better person, and you're rewarded for it. and that's true for countries too. and so i would say to the american people, yes, we need to deal with our problems here at home. but just look at what's going on around the world. just look at all of the preventable disease. just look at all of the children who could be safed. you'll want to have american systems be a part of that story. >> key role of millennial challenge corporation in that story? >> the key role in that story is that our assistance is not just a handout. in fact, it's not a handout at all. it is a government that has said we're going to govern wisely, we're going to fight corruption, we're going to invest in our people, we're going to govern democratically, and we need your help. and here's how we need your help. and very often i was very surprised when i was the secretary and chaired the board

that very often it's something as simple as land titling so that these small agricultural plots for which there's no title can be amassed into something that's actually more than subsistence farming. so sometimes it's really grassroots technical. so the mcc is an on-the-ground, let's go after this problem together, you identify the problem, you work with your people. this isn't going to the government, to finance ministry. it's going to -- you're going to be held accountable because this compact has been developed with your ngos, with your farmers, with your labor unions. all stakeholders have been at the table. so that's mcc's role in this. >> tell us a place you've been, a person you've met, a project you've seen that just stays with you wherever you go. >> i will never forget, i was in tanzania, and it was just at the time that the compact had been agreed, and so we got to meet

some of the people who were involved in putting together the compact. and what sticks in my mind, because i've seen actual highways that we've built, i've seen actual land titling centers that we have. but what sticks in your mind is the commitment of these people to the joint with venture of putting this project together. it's seeing that the governments are having to actually deal with hair citizens in a way -- with their citizens in a way that we very often take for granted in democracy. so that's my fondest memory, is meeting, actually, with the compact stakeholders who had helped put this together for a more than $800 million project for tanzania. >> before i go to the twitter questions, biggest challenge in on taping -- in getting to this objective, values plus interests equals roi? >> well, obviously, this is not a perfect science. even though we've tried to have

metrics and to make it as scientific as possible. you're going to have some setbacks. and occasionally countries aren't able to stay on the path. and i just hope that when they are not that two things will happen. first of all, that they can get back on the path, and that sometimes happens. but also that people won't give up, because there's so many success stories. and -- >> that's the problem, isn't it? >> it is. >> the stories become the setback. >> the stories become the setback. that's what people -- those become the headlines. >> right. >> that's why i've been so gratified to see the support in congress, the support across administrations. because people recognize that it's not always going to go smoothly. this is a human institution. development is a very tough business. when you consider how long some of these countries have been underwater, when you look at the conflict that some of them have gone through, when you look at just the basic difficulty of raising the level of education or health, it's going to take some time, and we have to be

patient. >> okay. i've always wanted to say this to a former secretary of state. let's go to the lightning round. [laughter] and let's do it with some of the questions that have come in from around the country and around the world andro u.s. government via twitter. i don't know if that's my mic that's making my noise. >> i think so, frankly. [laughter] >> i'm not moving. [laughter] what do you consider to be the most pressing challenges facing international development efforts in the coming decade in. >> governance. if you can solve the governance problem, you will begin to solve a lot of the development issues. >> how does your perspective on foreign policy changed since your time in washington? >> well -- >> hard question, we can go with a longer answer. >> well, i get up and read the newspaper, and i think isn't that interesting because i no longer have responsibility for what's in the newspaper. that's the main thing. [laughter] >> are you still reading the newspaper? >> i do still read the newspaper from time to time. look, i think the biggest

challenge for the united states is that the world's been through a lot of big shocks out there, and figuring out how democratic development or people seizing freedom which we're seeing in so many places, how that's going to become institutionalized into democratic institutions because that's a very hard transition from the seizure of freedom to democracy. it's very tough. if i can just say one thing here, you know, we very quickly lose patience with people who are trying to build democratic institutions. i always remind people that when the founding fathers said we the people, my an's to haves were three-fifths of a man in the constitution, and it was 1952 before my father would vote in birmingham, alabama. so let's be a little bit more patient with these people who are making the very difficult transition from freedom to democracy. >> i think that's a very important point, and i think with all due respect to twitter and the cable universe and all of that, our attention span has

been reduced to a nanosecond. >> yes. >> and human development takes years and decades and sometimes longer. and we are seeing remarkable things around the world. it's easy to lose sight of that. what's the importance of private sector development for poverty reduction, curt? how should it fit in wider development policy? >> private sector development is the key to development. the mcc is premised on the idea that we will help to remove impediments to countries being economies that can attract private investment. there's not enough foreign assistance in the world to help countries develop. you really have to become a part of the international economy. you have to find your place in the international economy. together with microloans which has been another major, i think, innovation of giving even small villages the way to make a product that can be sold. governments like ours, foreign assistance providers should be thinking of ways that we propel countries from recipient of aid

to contributor in the international economy. foreign assistance should not be a permanent station in life. the it's a little bit like the welfare state. you don't want people to stay on welfare forever. you want to give them a chance to create infrastructure so that they can be -- >> but that does presume good governance. it's not going to happen by itself or out of good intentions. >> the reason i think mcc has put such an emphasis on governance, i can remember some of our discussions, and the one thing that would always get people's eye is if a country had big problems with corruption. because it's been said by the world bank, it's been said by usaid corruption is a tax on the poor. and if you can't trust a government to govern wisely, honestly and transparently, no amount of development assistance is going to propel that country forward. >> let me come back to a couple of my questions, then i'll come

back to the twitter questions again. you've talked about partnerships, you've talked about countries that are having success and partnerships between countries. how do those partnerships as we see new countries, excuse me, expanding their influence throughout the developing world offer an opportunity for the united states or for businesses to expand their partnerships and radiate out? >> right. well, let me just say a word about the private sector in this regard because one of the most important lead elements of the u.s. role in the world is how global american companies represent themselves around the world. remember that very often the only american that somebody will meet may be with a corporation. and i have seen some parve louse work by -- marvelous work by corporations in helping with the development process. yes, good business to do these things, but it also shows the heart of america. so we shouldn't forget that the

corporate sector is, in many ways, doing its part as well. but my favorite stories are the ones where countries other than the united states take some of the responsibility, other than developed countries take some of the responsibility for development. it's maybe not understood, but when -- not well known, when the united nations produced, developed a democracy fund, the first contributor to it was india. a great, multiethnic, multireligious democracy with a billion people that somehow manages to have successful elections every few years. i don't know how they do it, it's a miracle. [laughter] but they were one of the, they were the first contributor to the democracy fund. hungary has had a very effective transitions to democracy center that they bring others through because hungary has made that transition to democracy. and mcc, through mcc university, has brought countries like jordan to the fore to help others to understand how to make these compacts, how to make the

trust grow between governments and their people. and so i, i think the best is when it's not really the united states government that's doing this. we've somehow incentivized -- >> it's leverage. >> it's leverage, it's leverage. >> twitter question, how does sustainable development enhance security, security of developing countries? well, we know that environmental stewardship is an extremely important part of stability, the management of resources whether it is water resources and clean water, whether it is clean air. in some of the places that one goes, you worry about health because people are breathing dirty air. and so the ability to make development rapid but with environmental stewardship so that you have sustainable development is a part of, a very important part of the picture. and, look, we've learned some

tough lessons in some parts of the world. i think the chi news would tell -- chinese would tell you today that they have been very rapidly developing, but they've paid a price in environmental degradation. and they are now trying to come to terms with this. so helping countries not to go down the road of development at all costs is money well spent. >> and that retrofit if china is going to be phenomenally expensive. >> phenomenally expensive. >> if you can avoid that at the front end -- >> at the front end. >> there is no way this is a twitter question, but it's so good, i'm asking it anyway. in many developing countries rapid urbanization is a prominent phenomenon leading to new economic opportunities but also to the new hazards to sustainable, broad-based growth. in the what ways can urban development become a distinctive focus of u.s. foreign assistance? >> well, urban development is -- will be a focus because people are as they become more prosperous and they very often leave the land, they come into the city for different kinds of

opportunities. and so we have to be, we have to be attentive to that. and most developing countries are, frankly, having a very hard time managing urban development whether it's infrastructurebe, you go to any developing country in the world and get stuck in a traffic jam, and you know that they're having trouble with urban development. it's also very often that you create a class of people, urban poor. and this is something that we really need to pay attention to. you look at some of the countries around the world, and the urban poor be need to be more of a focus. these are people who come into the cities and don't even get -- >> what is the role of the millennium challenge corporation? >> well, the millennium challenge corporation, when a country presents this as a problem, remember, the identification of problems comes from the cup. but i think in conversation with these countries much has been about rural development because that is the key to unlocking so much economic potential. but i think you will see

countries beginning to concern themselves more and more with the urban poor, and there's much that mcc can do in that regard in terms of education and the like. >> another twitter question, if development is supposed to advance security and counter the spread of extremist tendencies, how do you explain molly? >> well, molly stepped back. i have to say, it was one of, for me, one of the real disappointments. we held the community of democracies in mali just the last year i was secretary. it seemed to be on a good path. but it's a reminder that these are fragile societies as well. and mali, of course, was affected by the neighborhood. and very often we have to recognize that countries that are trying to build security forces that can protect tear borders -- their borders, you know, terrorism, gun running, human trafficking, these tend to take place in places which have weak controls over worlders --

borders, that really their borders are porous and perhaps paying more attention to the security piece of the equation is going to be necessary, too, because mali is really an object lesson and a warning that these are very fragile countries even when they look like they're on the right course. >> it's not a straight line. dr. rice, i'm a, i'm an investor. i'm a taxpayer, i'm a business. i'm working with the millennium challenge corporation, and i'm watching this guy, daniel, really closely. what parts of the world should i be watching? where should i expect success? where will the surprise come in the next ten years? >> i think many of the surprises are coming in africa. we always have this view that africa was a place that was always trying to reach its potential. africa's beginning to reach its potential as a continent, and it's becoming -- it's doing that because there are really well-governed states in many

parts of africa now. tanzania, ghana, botswana, i can go on and name them. and they are countries that are governing democratically, investing in their people and givenning to attract foreign direct investment because people are saying, well, you know, that looks like a rule of law, stable place to invest. and so my guess is that a lot of the surprises are going to come in africa because we so long thought it wasn't possible in africa. now, there are some very good stories in latin america as well. and i would hope that as the middle east goes through the very difficult circumstances that it's going through, we'll have more jordans, we'll have more places where the basic governance infrastructure is there, but they need a lot of help in reaching out from the capital into the east bank, into places where people feel

disaffected. so the middle east is another place that i would watch very carefully and hope that mcc will have a role. >> we only have a couple of minutes. let me ask you a couple of more personal questions. i first met you when you were a krillnologist working in the reagan administration. you have seen the fall of the wall, you have seen the war in iraq, you've seen the conversation -- issues of development, conversations we're now having. what's been the most surprising thing in human experience and global issues you've encountered? >> what's most surprising to me is how quickly something that you thought was immutable changes. um, i was, indeed, a soviet specialist. you're dating me, frank, thank you very much. [laughter] >> i don't want to alarm you, but my students are now born after bill clinton was elected. >> yeah, yeah, yeah, i know. i asked some of my students the other day how old were you when the soviet union collapsed.

>> they said what soviet -- >> they were 1 or 2 years old, so i understand this. [laughter] if you had told me in 1989 or 1990, maybe even the first part of 1991 here's what's going to happen, soviet union, a country with 30,000 nuclear weapons, 12 stinter time zones is -- different time zones, they're going to take the hammer and suckle down from the kremlin, 75 years of communism, never mind, a shot won't be fired, soviet union will collapse, i would have told you you were crazy. ..

spring. so for those of us who want to see development, i would say the following. efficient. pay attention to the infrastructure. pay attention to what's going on underneath. take the time to lay a good foundation. and you might be surprised how quickly we begin to make the turn for some of these countries from recipient of aid and permanent basket case to fully functioning responsible sovereign an international system. history has a way of making what seems impossible, seem and medal in retrospect. it was never inevitable. it took good policy. it took leadership, it took courage. and it took innovation. one reason that i am so proud to be here today is industry is one of those industries that i think is going to matter. >> i think we're going to end on that note. i want to thank you for taking

time to be here today. let us have a round of applause, please, for our special guest. >> about 100 days into president obama's second term. bloomberg is hosting a summit look at the global economy and debt. a number of high level officials including nobel prize winners in economics, as well as the outgoing sec chair julius genachowski. we will hear from pennsylvania's governor. live coverage just getting underway here on c-span2. >> we will talk about the economy, government spending, taxes and job creation. so without further ado let me bring a peter cook who will be our mc for the day. peter is bloomberg's tv chief washington correspondent and host of bloomberg government sunday show on capital gains. thank you so much, peter.

>> hello, everyone. welcome. glad you all could be here for this bloomberg washington summit, another in our annual gathering here in washington. this is about the third one i've participated in. good to see so many people here. and also welcome to those of you watching on c-span, also watching and bloomberg.com. we welcome your participation as well. everyone will have a chance to the questions in during the course of the day. we did a great line up for you today, looking at whole range of issues, washington policy issues and state issues as well. we have two republican governors joining us during the course of the day. we have members of the congress joining us during the break, two members of congress democrats from maryland, powerful members of congress. we also have regulators here joining us. i will -- i'm looking for that.

i'm looking for to that personally. i hope you all are as well. we've got my colleague from bloomberg surveillance coming to you from new york, venturing then into the nation's capital. to get a sense of what the white house is think about the us economy right now from a critical policy issues right now facing the country. and again, that gets us through lunchtime right there. a long list of other policymakers, business leaders, thought leaders here in and an area and beyond, comity, giving their views on what's happening right now, not only in the u.s. economy, the federal government but again state level, local and beyond. before we get started i do have a few housekeeping notes. my main job is to keep the trains running on time, make sure it stays on schedule. and we've got a couple things you might notice that we don't have any breaks scheduled in the course of our agenda. that is done on purpose so if you want to take a break encouraged to go out to the area right outside here and get something to drink, something to

eat, maybe network with some of the other participants in the audience. we will keep the agenda going and take a break, come right back. you don't want to miss too much but there is an ample opportunity to do networking, gather outside and take a quick break. of course, we will be stopping for lunch. this event is not only being broadcast on c-span but we are also of course having a bloomberg television but it will be viewed live on bloomberg.com and also is viewable right now on the bloomberg professional service, the people using their terminals. if you have a question, not only those people who are not in the right now but even those of you in the room, i will tell you how you can submit a question that will be posted to the panel during the course of the day. it's very important. q. when they have bloomberg.net. they will have every opportunity to get you as many questions during the course of the day. you can tweak your questions to me at your secret or at bbg length on twitter.

if you tweak and general about the event your tweets should have the hashtag bb. quality and affordable i hope you have all those key hashtags down. we will try to get as the questions asked we can through twitter as well. we have also for those of you know this bloomberg link conferences, having been the one before, not just in washington but all over the world. we have another one coming up, bloomberg canada may 21. that sounds like fun. i hope to get to moderate that went to check out bloomberg link.com for full details. if you're attending any of those conferences, great conferences, a lot more plan over the course of the next few months and hope you take a look at the. we also really want to thank our partners and those supporting this conference, would not be happening if it wasn't for these and those allen hamilton as loan sharks harder, foreign affairs.

so with that we want to get things started with a bang. will take a look at the crucial question of what's going on with the us economy and the global economy. i'm going to call up to the stage my colleague daniel moss. we'll talk about the future of the assembled economy with an all-star panel. larry meyer is cofounder and macroeconomic partner, former federal reserve governor. nobel prize winner of columbia university and ahead of the peterson institute for international economics, adam posen was a form of the bank of england monetary policy committee, three brilliant minds on the subject of economics here to talk with dan moss. >> gentlemen, let's start with -- after relatively robust march numbers of payroll, retail sales and durable goods all showed some softness but all we're

really facing a slow down similar to that that we've seen in the last few years, or is it something different this time? or is it just a coincidence? >> well, i think pretty much long-term it seems to me that america was incredibly unfortunate terri sustained streak of innovation from the 1830s right up until the early 1960s. and when the rate of innovation fell sharply in the late '60s and early '70s, that sent the new normal unemployment rate up, succession of administrations, fired a lot of ammunition. nixon, welfare state, expansion, reagan, the tax cuts come and george w. bush both additional

entitlement expansion and massive tax cuts. but really you can't replace, those are no substitute for innovation. and so we are suffering from a continuing slow down of innovation. i would guess that the new normal, unemployment rate is in the neighborhood of 6.5, maybe even 7%. there is not an lot of room for recovery remaining, i don't believe. >> adam, you recently have been living in london as a member of the bank of england monetary policy committee. when you came back to the united states did you have a somewhat different perspective? >> well, only on one key issue. i think in the u.s. economy actually does have more room to run than ed argued. i believe there's a demand back. i think monetary policy is making a difference, and private sectors demand is quite strong,

except for what government is taking out with sequester and such. that the thing were i would agree with ned and why think people outside the u.s. have a different perspective is that we do believe, leaside and many others do, the natural rate of unemployment has risen. i sit less about a short-term innovation of them although i worry about that, and more as a result of us having had so much long-term unemployment for so long that that creates its own problem. it makes it harder to get back in the workforce. so i agree with ned at a agree with a lot of foreign observers that the labor market is more permanently damaged than some of the people of the fed thing. but otherwise i'm much more bullish on the u.s. line of consensus. >> larry, bullish as will? >> yes, more bullish than some but when you look at the data, you have to look behind it. so if you look behind the data for the fourth quarter and the first quarter, well, the fourth quarter wasn't as bad as it. the first chord wasn't as good as a look.

it didn't look that great. so across those corridors, we didn't really see a lot of faction building if we look at those headline numbers. not lobelookg them what we have to do is we have to distinguish the private demand which is ultimate driver of the momentum of the economy, and fiscal drag. right now we are seeing some improvements in private demand. it's improving to the point where the economy is poised to move to a both a trend growth. because there's a lot of fiscal drag. that was true in the fourth quarter and the first quarter, but is really especially great in the second quarter as sequestration its. it. so i think will have a slow down in the second and the third quarters, but in this case i think we can identify rather than some mysterious thing we don't understand if there are forces at work that we can

identify that i think will be responsive. >> ned, you were telling me yesterday that in the general narrative, not enough attention is being paid to what's going on with consumption. >> i picked up the paper and am constantly reading that the consumers are scared, they are loaded up with household debt. what about the assets they bought with that money deparle? anyway, and i just don't see that would. it seems to me households would be more accurate to say that households are bloated with entitlements and they been doing a decent rate of private savings, to, in part because of undertaxation. congress refuses to pay the bills. so i think that the households are in good shape just been. and, in fact, it strikes me that i think from 2000 until 2012,

consumption has been a very good performer. consumption demand has risen at a pretty good rate over that entire period with the exception may be of a sag, a drop in 2008, and a distance into 2009. i think so far the sequestration that hasn't seemed to lay a glove on consumption expenditures. now, i guess more the sequestration isn't going to become effective later on. but i just want to make one point. okay, suppose in some should demand is hit -- consumption demand is hit by the remaining sequestration coming in the next few months. what about investment demand?

that's a huge thing that is been weighing on the economy is the dearth of business investment demand. and it seems to me possible to hope that as business people see the federal finances are in better shape, business confidence will pick up. and maybe will gain an investment demand then we lose and consumption demand. >> larry, as you travel around to talk to clients what's the question they are most asking? >> well, recently i think what's on their mind is uncertainty. we have a growing literature in economics of the macro effects of uncertainty. i want to sort of overdue this. but with respect to fiscal policy and uncertainty that has been very important. maybe a little us today. and i think this question about the economy come is a building

traction, is it not building traction? i think that's the uncertainty today. some people think it is building such traction, the economy is just going to go sailing along. we don't think the. that's critical to monetary policy. so obviously a lot of uncertainty about monetary policy and rate. i don't think there should be that much uncertainty. >> adam, can the u.s. economy expect any help from the rest of the world this year? >> daniel, i think our assessment is you're going to get a small amount of help, but not a huge amount of help. so if you look at our major trading partners, canada isn't a bit of a slower mode because of the commodity cycle. mexico, to everyone's pleasant surprise, is doing quite well and i think the reform is underway from new government could lose growth there. japan i'm a very big bowl. i think the new policy changes, particularly of the bank of japan but also the ivy

government, -- aid government. europe remains a very negative, is taken out a lot of detail risk. so and larry are you speak about uncertainty, to me one big chunk of the uncertainty has gone away. it's not good news. so on that i think the u.s. has at least as good department as it did last you but it's not going to be a major engine growth is going to be domestic consumption, residential construction and maybe it's like some of larry's clients say, we get a bit of investment pick up. >> we are facing a legacy in most western economies of comparatively high unemployment. adam, your experience is the most recent. how is this reshaping the way central banks approach policy? >> i think this is a really interesting question and i know that ned and larry will have their views or kimmy, i think we had a shift in central bank thinking that started to take place while i was -- [inaudible]

which is politically and economically central banks decided they could talk more explicitly about at least growth if not unemployment in the near term. and for a long time central banks of the growth seriously, basically have a dual mandate like the fed whether not said so. but there was a political fear that if you talk explicitly about unemployment you would end up back in the '70s and be forced into targeting unsustainable rates of unemployment. and i think a lot of central banks in my mind rightly have made the call that in this kind of situation you can't just pretend unemployment is only a means to an inflation and. and you have to address it directly. but the second thing is i think there's growing concern that there is as there used to be in europe what is called -- meaning once you have written about this, once things start to go bad, particularly a labor market becomes self-reinforcing but i think that's another reason, particularly we talk about that

with the bank if enough other people at the fed who have spoken about this but i think that's another reason that central banks are talking worked closely about growth than they did in the previous time. >> letter, the fed's statement that comes up every six weeks now explicitly refers to the employment mandate, even though it's been wrong for some decades but could you describe a ship that took place? >> the fed has a dual mandate. so the fact that they focus on full employment as well as price stability is very ingrained that they have changed the they have become much more sensitive to the unemployment rate. they have gotten to the point where inflation -- prepared his inflation move about the medium-term objective so they can continue to focus on the unemployment rate. i think the way they see it is if you think about the reaction function, that the weight on unemployment inflation as they say depends upon the circumstances. today with the unemployment rate hike, they believe, a lot of

slack, inflation rose or close to the objective actually most today, they are focus intensely on that and this is a differen difference, that they're operating in a way that is different from normal times. the conditions are exceptional, monetary policy is exceptional at the same time. >> how worried are they or should they be about a persistent swelling of inflation? >> well, you know, i think that inflation today is remarkably low, the measures that the fed uses them 1.1% historical low, lower than it's been since 1960. there are some forces here that are artificial, that are lowering it. so i say we are at about one and have. but it is an inflation problem here. inflation problem is there

hasn't been 2% since 2008. the question is how low will inflation be when they get to a 2%, 6.5 is an unemployment rate? and the question is will they delay raising rates at that point because inflation is so low? so lower inflation is a very important part of the economic landscape today. >> ned? >> i'm not terribly worried about a recrudescence of inflation right now. i think i would get worried if after a year or so the ends are still growing at a good rate, and if the recovery had managed to proceed at a recent rate over the those, over that period. but right now i think i'm more

worried about the low inflation rate that i am about the high inflation rate. >> is the labor market in dire shape as some would have us believe? >> my gut feeling is the labor market is okay. i did write about history in a 1972 book. the labor force came out of the depression and scarred it seems to me -- unscarred. young men and women who went to war. lots of people got jobs, and i don't think, i don't think the economic historians have found any evidence of serious hysteresis as a result of the massive unemployment with 25%

unemployment rate in the 1930s. and just anecdotally, i meet a lot of young people because i do some hiring for my said on capitalism and society, and it's interesting to see how young people are coping. they are taking jobs that are far below their expectation, but they are not unhappy. they are not being scarred. and there will come a time when they flower. >> at them, the bank of england is about to get a new governor for the first one in its history. and non-uk citizen. what sort of innovation will they bring to the bank of england and how important is his selection in the context of, say, postwar central banking? >> i think on pure merit competence is someone most central banks would want to have. so that is this bit of unprecedented to have a former

actually running the central bank. they did of foreigners on the committee like me and to a number of others central b have done that. but it is a little different to have your governor or your chairman do that. but i don't think unfortunately perhaps for some of people sitting here, myself included, it's going to be a global free agent market and central bankers. i was not considered for governor of bank of japan, for example. more seriously and specifically to the bank of england, i think mark carney said pretty safely in his last appearance before the select committee, which is uk's house of commons robin oversight, that his main emphasis is going to be on the huge managerial challenge of getting bank supervision back into the bank of england, integrated function and a better way that it functioned in the mid-2000. combined with the intellectual challenge to thank all central banks are facing a which is we have this feeling we need

something called macroprudential instrument, something to do with credit and asset crisis that it isn't just all embodied in the monetary interest rate. but we don't know what it is yet. to me those are the two things. and i hope he and his colleagues there, my former colleagues are able to come up with great innovations in macroprudential side because god knows we needed it but i have needed it but i've the feeling notes needed it but i have a feeling thousand needed it but i have a feeling thousand of the glove will have answered until we experiment quite a bit. >> the bank of canada under carney did some innovative work on forward guidance, publishing, anchoring expectations to a specific year. and the fed has subsequently done that. is that something you see him bring it with them to the d.o.e.? >> he may but i don't think it matters very much. >> why? >> i'm not much of an outlier but i'm a skeptic. there is a combination of an academic -- based on people --

and desperation on the part of central bankers, what we seem to be doing doesn't seem to working, we need another tool. so somehow the statements are being treated and talked about as though they were independent extra instruments along with quantitative easing or interest rates. meanwhile, we spent the last 30 pleasure talk about central bank as though what they said is not money but it's not clear to me why central bankers making a verbal statement is anything more than any other kind of market segment they do. it's not a policy instrument. this is not just my assertion. this was borne out by the bank of canada to get to go back to the discussion we had a jackson hole last summer, we both go to the fact that in canada they announced forward guidance and oftentimes the policy and then the market impact would be the opposite of what was intended. same was true with sweden where under the then governor, they get a lot afford guidance

announcing future interest rates, didn't seem to make any difference. markets would often go in the wrong direction from what they would announce. so to me this is much fuss about nothing. so carney may bring with them. he may not. but i think in general it's more of what central banks do than what they say. >> larry, doesn't -- objects. first of all, i disagree with adam. i can't talk to the various countries that he has talked about. it has been a lot of work. we've done a lot of work on the impact forward guidance. we believe it's been very effective, and unicom as effective as a fairly sizable balance sheet policy. back when i was at the board, a long time ago it was always emphasize documentation was important because what matters is not the current rate but the expected path of short-term rates over time. so we affect long-term rates. now the fed has become much more

specific and much more explicit in its forward rate guidance to anything that is a very important tool. with respect to coming governor carney, this is not a regime change. he is a great supporter in my view about the monetary policy committee has operated flexibility of the flexible inflation regime, much better communicator i think about that. and while i think he would like to bring some forward rate guidance, i'm not sure how it could work. i can't figure it out but because the fed and a late entrance of the unemployed that rate, flexible inflation targeting central bank really i don't think has that option. so can't do something as aggressive as outcome-based policy, and i think a lot of people are disenchanted with the experience of calendar-based kinds of commitments like carnage is at the bank of canada. i think this'll be one of the

more interesting but i agree with adat big story with carney is really financial stability. he's the head of the financial group, forum, chairman of that. he comes in with a background. and we are at a really important time in central banker, where central bankers are trying to evolve with a roll is, what the role of bank supervision of radiation indeed with financial imbalances and asset bubbles. so i expect him to focus a lot on that and i think we'll all learn from that spin any additional thoughts, adam? >> just quickly, i think as larry said, there has been an overturning in timebase forward guidance. so that already says that it's very nuanced what kind of communication matters are and so again i think it's better to do both, to talk clearly about what they are doing but actually do

something. i think in terms of bank of england the issue for them as they've already done the review of the remit and the government is basically said no change except the flexible that larry already mentioned. so there's not as much room for carney to change things. spent i noticed that both adam and larry touched on financial stability, but i think it deserves maybe a few more seconds than we gave it. my sense is that the financial sectors performing very, very poorly, that would be startups are starved for financing and that's part of the low innovation story. and the same time governments are going ahead willy-nilly with all sorts of measures that will make the banks seek, or force

the banks to seek even greater security. and i don't think economy can function well if, in the financial sector there isn't that decent amount of risk taking. i'd be interested in what my colleagues think. >> i just want to second the main point of ned. because to be one of the biggest reasons why the uk's recovery has been so much weaker than the u.s., but also one of the reasons why the bcb talks about the monetary policy being ineffective in the euro area is because of this breakdown in small business and new business lending in countries where there's fewer alternative channels come in terms of diversity banks of diversity of instance than india's. i agree with the mission in years but i think it's a major story for why western europe including the uk are behind. >> so, a couple of comments on the. with respect to small business and credit availability, bother is an s