>> well, we have had this paradigm shift that the market is now coming under transparency. as you said, swap dealers are registered. you all can actually see the transactions for the first time in january this year, it is free, and you can see those transactions. we've been focused on completing these rules and implementing these rules. we're going to start shortly to aggregate that information so that you can see it as well. that's reay t benefit, br public, that aggregated information and that streaming information of transparency. and it lowers costs to end users of the products.

>> these are financial weapons of mass destruction in the words of -- >> warren buffett. >> and others who have questioned, again, the role of derivative in thes economy, the finish in the economy, the role in the final crisis. you believe swaps are a good thing for the u.s. economy, right? >> i think that derivatives, both the former and the original product called futures and swaps which were invented just 30 years ago help the real economy lock in a price and hedge a risk. basically, the same thing a farmer did years ago to say i want to lock in the price of corn or wheat at harvest time and focus on what i do well. in the modern day a company, even a bloomberg, can lock in the interest rate, lock in a currency risk and focus on what they do well; innovating, hiring employees, providing a service to the economy. so that's what's critical. >> this is a $600 trillion market. >> it is. it's big.

it's big. >> it's a huge -- >> do you know there's $12 of derivatives around the globe for every dollar of goods and services in the economy. in the u.s., because we do it a little bit more, there are $20 of swaps and futures for every dollar in our economy. so it's a vast market. it needs to benefit from common sense transparency and reform. >> and there are going to be some who look at the rules that have been put in place by dodd-frank and say, a, these are not adequate to that challenge or, b, that there's no way these rules can somehow affect the natural flow of of business in that market. where do you fall right now on that scale? >> well, i fall that in a great democracy, people have to debate these things. is it too much, is it too little? you know, in the nursery school rhymes that was debated, too, about porridge. but in this case all we're trying to do is bring the reforms of the 1930s into this marketplace. transparency so people can see the pricing before the trade and after the trade.

something called central clearing that lowers the risk to the market and making sure that there's a cop on the beat. we're an underfunded agency. we need funding to make sure that there's an effective of cop on the beat -- effective cop on the beat to insure there's not fraud and manipulation in the market. >> i'm going to talk about the budget in a little bit, but in terms of -- >> i had to get that in. >> we'll talk about it because what you're asking for is a pretty tall order in a time of shrinking budget dollars right now. >> but i'd say, peter, with all due respect, it's not a tall order. we're an agency that is only funded about $200 million, and we think we need to move to about 315 million. why? because we've been given a market that's eight times the size of what we had already regulated. and think about sports. the national football league. if you had eight times the number of games but you didn't have any more referees, what would happen? i mean, for a while it'd be kind of interesting, there'd be

mayhem on the field. but not too long, the fans would lose confidence in the game. and so the franchise of the american financial markets does dictate that agencies like ourselves and the sec are well funded. and if we're not, over time degrade the confidence in the marketplace. >> you've got about 700 employees right now, you're looking to adjust over, or you'd like to get to over a thousand employees. >> that's right. >> what would those additional bodies do? how is it you're going to apply those resources if you get them to -- >> well, i mean, at 700 we're only about 8% larger than we were 20 years ago. so to get it framed up. and we're only about one-sixth the size of our big sister agency, the sec. just a frame and scale in size. what do we do with the extra 340 people and the extra budget on technology? we try to start to look over the swaps market. we finished rules, but now we need people to deal withhe75rep.

we need to be able to look over the exchanges and clearinghouses and actually examine for compliance with these new common sense rules. >> all right. let me ask you about one of them, and that is you've got about 80% done, is that right? >> you can scorecard it, but 80, 85% done. >> 80-85% done. what is on your to do list still that hasn't yet been done? there are a lot of issues out there where you've got a lot of people still lobbying, some of your former colleagues on wall street saying, gary gensler, listen, you've got to make modifications here. >> there's two large, important areas. pretrade transparency, making sure buyers and sellers of the products come together and compete in a marketplace. congress adopted something called swap execution facilities. made-up words by congress, but important words, and they gave us a direction that they should be where mipleparties transact with multiple parties.

we have to finish those rules and related block rules. why do they matter? it lowers cost to the economy. it fundamentally lowers costs when people have to have competition and the access to marketplaces rather than a dealer-dominated market. and then secondlys th cross-border application. we put out guidance last summer, we've been working with our european and asian colleagues and canadian colleagues making good progress, but it's insuring that the risk that's booked offshore doesn't come back and crash into our marketplace. we know in aig where we each -- everybody in the room who's a u.s. citizen had $600 in aig, and if you had a family of four, it was $2400. you don't want to put $180 billion into that again, and guess where that was operated out o mayfair, a neighborhood in london. that was aig. we don't want risk that's booked offshore but guaranteed back here to be outside of our regulatory rules. >> well, let me ask you about

that because we've heard in our reporting that there are some of your europ colleagues wre frustrated with gary gensler. >> no. i think, i think they say it a little differently. >> they do say it a little bit differently, but they do express a frustration that the united states is trying to drive this train here and that the rules, what you all are pursuing at the cftc may not be the perfe for what's going on in europe, and they feel there may be an uneven playing field here and even swaps dealers suggesting the rules here might penalize u.s. institutions at the expense of -- ions around the globe, gee ner, and europe, u.s. and japan have all passed laws that have central clearing that's mandated, that has data reporting that's mandated and various risk management. we are ahead on timing. r law passedn 2010, and congress gave us one year, just one year to finish it, and this is three years since then. and i think we need to lower the uncertainty that the chief

executive officer of ups talked about earlier. lower some regulatory uncertainty and finish these rules. in europe they've made great progress, but they don't have the same rules in all circumstances. so that's what we're sorting through. and if a transaction is booked in new york, we think dodd-frank applies. but we have said if it's booked in an affiliate in london or an affiliate in tokyo or toronto, we could look to what's called substituted compliance. basically, are there comparable rules in that home country. but if it's between a u.s. person, somebody sitting here in washington, d.c. or my home state of maryland, we don't really see how that wouldn't be what congress thought has to be covered. >> are you okay if the is seen as having tougher rules here and bringing everyone else along? >> i'll tell you what i'm not okay with is eight million people lost their jobs in 2008 because of an unregulated swaps marketplace.

i think that's the job that congress has given us to do, and that's what we are committed to and passionate about at the cftc, is bringing transparency to this marketplace and not allowing some clever legalese to move it outside of regulation. you know, most of these financial institutions have two, three, four thousand entities. lehman brothers when i failed has 3,300 legal entities. and that's modern finance. and i was at a firm that did this as well. and so you drop a legal entity somewhere, could be in the cayman islands, and you'd say, aha, we're out of u.s. taxes, we're out of u.s. dodd-frank because we drop it in the cayman islands. long-term capital management failed in 1998, and i was the guy who had to pick up the phone and call the secretary of the treasury and say, bob, i don't know what's going to happen when it fails. it's going to fail, but they booked their $1.2 trillion derivatives book in the cayman islands, and we have no idea

what's going to happen there. so that would be wrong, to leave the american public exposed to that. >> swap execution facilities, you mentioned this is another area where you still need to finalize things. this is also a related area to the lawsuit, so i'll let you answer as you see fit. >> i'm sorry, are you guys suing us? >> that's my understanding. [laughter] >> are you part of t lega team? >> i am not -- >> you're not part of that legal team, all right. [laughter] >> there is a question here about -- >> did they send you here to ask this question? [laughter] >> they did not. i wish i could have framed it better. >> you probably would have gotten paid more too. >> as i read this question, the question about collateral requirements for swaps versus collateral requirements for futures. and the concern expressed out there that we are driving more swaps into the futures market. is that a legitimate -- >> so i'm not going to comment on the lawsuit other than giving you good-natured, you know, fun. >> fair enough. >> but in terms of cleared

derivative products, we've had clearing since the 1890s, and clearinghouses stand between buyers and sellers of these products in case one of them goes belly up. kaput. and the clearinghouses had been clearing something called swaps for the last 11 or 12 years. london clearinghouse clears interest rate swaps and has for that period of years said you have to put up what's called margin, a performance bond, a minimum in case they need fife days to liquidate the position. that's not the cftc, that's the london clearinghouse. and, in fact, i.c.e., the intercontinental exchange, did the same on credit derivatives. that's not the cftc, that's i.c.e.. and in lehman brothers it took about five days to sort through that issue. that's why they did that. so swaps has had a minimum margin by industry of about five days. that's what we adopted in the

rules at the time we finished the rules. >> another international issue where you've been very visible and vocal on, that's the issue of the london interbank -- libor. >> you've read some of my speeches. >> i've read -- >> have you seen the chart show? >> i haven't. this is a big deal, and there are real questions raised about this key benchmark rate which determines everything from mortgages to car loans here in the united states. again, questions about whether it was an authentic rate. and what should be done in the future? you've talked about this, you've spoken with some of your international colleagues. are we going to see a libor replacement sooner rather than later? >> i think we need to. i think this is a growing international recognition around market integrity. i mean, how do markets work best? it's when buyers and sellers meet and compete and set a price in a marketplace. and yet this london interbank offer rate is no longer that. buyers and sellers are not meeting in london at 11 a.m.

offering to lend to each other on an unsecured basis. unsecured like a credit card loan where you don't put up llateral. eyved've moo something else called a secured lending model, more like a mortgage, more like a car lope when you have something -- car loan when you have something put up. so banks aren't lending that way anymore, peter. and what we found in these three lawsuits, barclays, ubs and royal bank of scotland, is that it was progressively rigged. numerous years, numerous traders, senior management, collusion -- collusion means getting others to assist in the falsehoods. basically, the rigging of a marketplace. and i think those three lawsuits really should be looked at more as a symptom than the actual issue. the issue, the diagnosis of this problem is not having an underlying market. so the financial stability oversight council, the fsoc spoke to this.

this is where u.s. regulators come together in an annual report and last thursday said we need to identify alternatives and also plan for a transition to a future where, yes, libor would be replaced and similar rates, but only working with international regulators. so that's international central banks, international market regulators and most likely through the financial stability board. >> what's your message to people out there right now who have contracts, agreements that are based on libor? >> my message is that we all need to get to a better place, that this london interbank rate and other rates like it undermine market integrity. and by that is you can't really trust that if it's been rigged in the past, that it won't be rigged in the future. and that's from the guy who runs a federal regulatory agency that oversees it. and that's was it's not

tether -- because it's not tethered to something underneath that's actually happening. in terms of the process to engage with the market regulators and central bankers on what's the best alternatives, what's an alternative for the collective use of the marketplace that is tethered to underlying transactions, we know of some. they're tied to secured markets like the general collateral financing rate, something called gcf. in other countries it's called something else. their market's call it overnight index swaps, even transaction-based indices tied to treasuries and southern yield curves. but where does the market want to move, and then the question is how do we get there. >> i want to end before we turn it over to questions from the audience on a new topic, if you will, to some extent. >> great. >> and you had it raised at an advisory committee today at the cftc. two issues, really, related or unrelated. the idea of high frequency

traders, those algorithms and what they do to the markets you oversee and this separate concern raised about the fake ap tweet ask -- and how that -- >> were you glad it wasn't on bloomberg? >> let's just say, yes, i am. i am. but ap, to its credit, tried to clear it up as quickly as it could. as a regulator, can you talk to us about those issues? you are about to offer some guidance? >> we're trying to put together a concept release that is fancy washington words for getting public input on what rules and regulations we should do. i think we always have to evolve to new technology. there was a time that you couldn't have a telephone or even any electronics on the floor of the new york stock exchange. that long ago went away. and so technology will constantly change and shift, but there have been people trying to put false information into markets for hundreds of years.

that's what happened in this one event last week. and it will be true a hundred years from now. what we as regulators have to do is insure that we're staying abreast of that technological change and making sure the system's resilient to these shocks, the shocks of false information, the shocks of even cyber attacks. and one issue is that as you centralize information technology, you have to make sure that it's even more resill cent, because we've seen -- resilient, because we've seen a lot of operating risk as well. you saw this last week with the cboe, and we saw it last year in three or four cases. so a lot to do. we'll put some ideas on the table, hopefully, in the next six or eight weeks and get pluck input. >> for people who say high frequency trading should be banned altogether, what's your response to that? >> well, i think they're a significant part of our market, some days more than 50% of the markets. and they actually provide competition to many others in

the marketplace. i think what we need to focus on is insuring that their presence in the marketplace is based upon transparency, fair access and, again, making sure there's not fraud and manipulation. and lastly, that the market's resilient. because when they have an operating outage, when they have a fat-fingered issue or something else, you have to make sure the market's resilient and can survive those outages. >> my colleague, neil richardson, has a question from the audience. >> sure. the first question, peter, has to do with the reauthorization of the cftc that congress is gearing up to do later this year. do you think congress should keep the current law in place, or do you think that there are places that need updating? >> um, i look forward to working with congress on reauthorization. but i think that the commodities exchange act as amended with dodd-frank is very strong and gives us the flexibility we need to get these rules in place. >> okay.

if we have time, there's another question. will the u.s. government stand behind a derivatives clearinghouse if it fails? >> well, i think that the answer to that is clear that thest not supposed to. [laughter] and so i think i'd leave it at that. i think, also, there's got to be a freedom to fail. my dad who ran a small business -- and that's where i first met senator cardin. senator card p's dad and my dad were friends back in the 1950s. they were in the food wholesale business, the cardins. if my dad's business failed, nobody was going to bail them out. the city of baltimore wasn't going to come -- just shut down. and that's what's harsh and great about the american economic model. and i think that's got to be true about largebacks and also in clear -- banks and also in clearinghouses. and then the clearinghouses and the regulators gotta make sure we do everything that they don't fail, but if they do, that there's unwind.

>> let me wrap it up with a final question to you, and i ask you this on bloomberg television a -- >> so it must have been a good question. >> it was a good question. i still haven't got a straight answer, and that is -- >> oh, come on, peter. [laughter] can i just give you the same answer? >> you can try. it's up to you. >> right. >> four years at the cftc -- >> terrific. >> i just spoke to the fcc chairman who is moving on to new challenges in life. >> julius genachowski. >> that's right. best i can tell, he's not going to the cftc. but my question is, how much longer will you be at the cftc? >> i love the job, we've got lots to do, and i don't have a new answer more you. >> do you feel personal responsibility to see these rules put in place before you leave? >> i think we've got 85% of them done, and we continue to put them in place. but beyond the rules there's so much to do about the implementation and the phasing of that implementation, working internationally on the harmonization and on moving on from this libor that are so

challenged right now and undermine market integrity. we've got to move on, and that's going to take considerable work and time. >> you dodged it well again. >> all right! [laughter] thank you, peter. >> as always, appreciate it. chairman gary gensler, the cftc. [applause] we're going to head this way, and i'm going to give you my emcee responsibilities. nila, thank you as well, appreciate it. and, again, appreciate the questions as well. please remember to send them q&a@bloomberg.net. i'm going to call up our next panel. i'm not sure if they're here, but we're moving on to foreign affairs. important issues involving the united states. the u.s. versus china is the next topic for discussion here at the bloomberg washington summit. and, of course, this has been a big issue for some time. mike tackett is going the lead the conversation, a very talented guy who's going to get

a lot out of our next series of panelists. they include carly fiorina, she is the chairman of good 360. steve henke is co-director of the institute for applied economics, global health and the study of business enterprise at johns hopkins, and ambisa, author of "winner take all: how the west was lost," and "dead aid." with that, we're going to talk about the u.s./china relationship and, mike, it's all yours. >> okay, thank you, peter. we're thrilled to be here. although we are aware of one thing, we're aware that we need to stay on time because this panel is the only between you and a free lunch. and we would hate to interrupt that. so we won't do that. peter sort of helped out on the introductions of our panel, a really heavyweight panel in terms of knowledge and expertise about the u.s. and china. in addition you should know

about dambisa that she was also named one of time magazine's 100 most influential people in the world of science and thinking, and carly fiorina, of course, almost needs no introduction. the first woman to head a fortune 20 company ever, which is quite good, and her charitable works that peter mentioned at good 360 in alexandria is doing extraordinary things using technology to leverage the kind of donations that really impact people's lives. just as one example, 1.8 million books, 500,000 articles of clothing, 11,000 mattresses. i mean, these are things that really matter to people. and to steve hank key who not only has a perch at the cato institute and johns hopkins, he was named one of the 25 most influential people in the world

in 1998 by world trade magazine. but if you really want to know why you should think he has credibility, it's important to note that he grew up in atlantic, iowa, which is a very trustworthy place. iowa is a place where things grow, and so we, we're really happy to have everyone here. dambisa, let's start with you. your book, "winner take all," really looks at how china has embarked on this incredible resource rush, if you will, of commodities. talk about sort of both the political and the financial implications of them doing that. is it a good thing, is it a bad thing? >> so thank you very much. i'm glad to be here. in order to answer the questionfectively, i think it's really important to set the global context of where china's operating, and very quickly, if i may, just remind people in the room and elsewhere that there are two key drives of commodities which are obvious on the one side we've got demand pressures and effectively what are supply constraints. on the demand side, of course,

basically the size of the world's population has grown incredibly rapidly since the 1950s where we had about three billion people, rapidly now increased to seven billion. expectations of that it will plateau out in 2100 at about ten billion people. china's a large piece of that certainly in absolute numbers. then, of course, pressures from the increasing wealth of the emerging markets and urbanization. but these demand pressures are being effectively, um, hampered or concerned -- constrainted by constraints on the supply side. so whether it's land, water, energy and minerals, we are seeing constraints which we can detail in a moment. china's approach has been to effectively adopt three key aspects in a systematic and deliberate approach to securing natural resources. the first aspect is to what i consider to be, um, the reliance on symbiosis. so going out into the world not just in developing countries, but also in developed countries to secure natural resources by

effectively giving these countries what they want. so in 90% of the world's population lives in the emerging world. in those places you have populations sort of 70% and higher under the age of 24. they need job, they need infrastructure and the trade and the chinese are delivering that. similarly, you see that canada where the largest transaction is underway from the chinese, largest foreign direct investment, $15.1 billion for an energy company, we know that the canadians have been a natural resource producer for many years now but, obviously, in terms of the attractiveness from china, putting money into the country, it's quite attractive. number two is the idea of overpaying. when we use discounted tax flows in the west, we think china's overpaying. actually, it makes sense when you understand why they need to access those resources. and very finally in terms of the three-pronged approach is that

china is very heavily focused on being the key buyer of natural resources. already for copper and iron china is the key determiner of these prices even in the public markets. to your specific question if i may really quickly, in terms of the political and economic implications, economic i've just addressed. they are, obviously, so sizable, so large in terms of impact that they are influencing market prices. but in terms of the political implications, clearly china has become the go to country for negotiating trade contracts for investment, foreign direct investment for many countries around the world. and that is actually a big piece of the political dynamics that are occurring along the way. >> steve, is this a plundering by china, or is this just prudent free market exploitation of the resource? >> well, i would say it's just free market exploitation of the resources. i mean, they're growing at

almost double-digit rates and have been doing so for 30 years. so they're in the market for things. they want to buy. and, of course, this has raised a little bit of a firestorm. a lot of people don't want them buying for whatever reasons. but that's on the buying side. now, on the selling side they face the same kind of firestorm. i mean, they've replaced japan as a whipping boy for the united states, and the united states has a variety of completely wrong-headed policies in my view vis-a-vis china, and the big one is the currency. and the currency is one in which you hadden ever of depreciating wand from if 19 -- until, really, 1994 from '81 through 1994. the yuan was was declining in

value. and, of course, what was happening? you had lots of instability in china. not only a variance in gdp growth, but the inflation rate was, went from 7% below the inflation rate in the united states to 20% above the inflation rate in 1994. then they fixed the exchange rate. and from 1994 until 2005, the exchange rate was fixed to the u.s. dollar, and they had stability. and stability might not be everything, but everything is nothing without stability particularly when you're talking about a big place like china. so they had stability. then we continued beating up on 'em, beating up on 'em, and now they've let the yuan in various stages appreciate again, and in my view, this has just been completely wrong-headed. the chinese should have a fixed exchange rate with the u.s. dollar, an absolutely fixed

exchange rate pretty much like they did in '94, 2005 and that would give them a lot of stability. the u.s. has done this destabilization before because of bad economic thinking. and, of course, it was japan. japan in 1971 the yen was 360 to the dollar. and by 1985, april of 1985 the appreciation, it had been an ever-appreciating yen until finally robert reuben realized the japanese economy was going to implode if this continued. so this idea of manipulating exchange rates to favor the united states isn't wrong-headed, it's dangerous, it's destabilizing for not only the international scene particularly with china which is contributing about 35% to all

incremental growth in the world now. i mean, they are the engine that's driving the world. so this idea of u.s. policies that destabilize things because probably they're just wrong-headed and never been thought out, i think, is a key thing vis-a-vis china. so they're getting pushback because they want to buy a lot of natural resources. they're getting pushed back because they are expanding and contribute, for example, about 40% of the bilateral trade deficit with the u.s. as contributed by the chinese now. not as bad as the japanese. they were contributing about 60% at the peak in 1990 with the united states. but still chinese is facing -- china is facing a lot of problems from the united states

with regard to trade and other countries, not just the u.s. >> when you look at the resource question and you think about it in the context of winners and losers, if china is the big winner, who are the losers? >> well, first, i certainly agree that china is getting pushback more all these reasons. for all these reasons. i agree as well that some of our policies are wrong-headed and ineffective. i think our railing about human rights is totally irrelevant, frankly, to the chinese. they have a different value set than we do on the balance between individual freedoms and collective progress. i say that not in a pejorative way, but it is a factual statement. but i also think the chinese get pushback because they are not a benign actor in all cases. and i think they think about it from the point of view of their victory in both economic,

cultural and, i believe ultimately, military terms. i am not suggesting that they are our enemy, but i am suggesting that the chinese think about winners and losers. and i am suggesting that they behave in less than benign ways. i think, for example, there is no question that the massive amount of hacking that is going on in this country is state sponsored. i say that as someone with clearances, i say that as someone who served on advisory boards for both the defense department and the intelligence agency. i think they are concerned as they look out that while they have had great challenges up to the point in time and they have managed those challenges in a superbly effective way, that in many ways their challenges going forward are even more difficult. difficult because of what is going on in the world around them with regard to freedom of information, difficult because their own population has grown

frustrated with both huge income disparity and massive amounts of corruption. difficult because people in their own country are no longer as content to be, for example, forcibly relocated so that something new can be built or have their private property taken away from them. so i think they face some very difficult challenges, and i think they think about their place in the world as wanting to achieve leadership across multiple dimensions. >> let me ask you to stay with that theme for a minute. in what ways then do you think the u.s. is really fighting the wrong battle? well, in the following sense. first, i agree that our policies with regard to currency have been wrong-headed, but i would add beyond that that i think they don't have much asuasion with the chinese.

and that is in part because the chinese believe -- and i happen to agree with them -- that we have spent a lot of time and energy manipulating our own currency, manipulating our own stock market. so they look at us and say, you know, why are you talking to me about this? likewise, i think -- so when we send treasury secretaries from multiple administrations over to talk to them about this, i don't think it has much impact. although it may irritate them, as you suggest. [laughter] i also think that when we send secretaries of state over to talk about their human rights record, it's not relevant to them. what i believe is relevant to the chinese is their perception of their own economic self-interest. period. no more, no less. i also believe the chinese, as we all know, are extremely strategic and long-term thinkers. and so i think they have come to realize that they can wait out a lot of policy maneuverings that go on in this country, because we tend to in some cases change

our minds, change administrations. i think the battle we need to be fighting with chinese is how is it that we can continue in a productive, interdependent, economic relationship which will require them to play differently with regard to a couple key things? they need to play differently with regard to the protection of intellectual property. they need to play differently with regard to the cyber intrusion. they need to play differently with regard to certain global challenges that cannot be solved without their participation such as global warming. and i believe we need to press on those issues with consistency over time and exact consequences to their economic self-interest if we are not making the kind of progress that we both need to

make. >> one of the things carly said that's on the top of mind of most americans, most international corporations is this notion of hacking coming from the chinese. from your perspective, is it state sponsored, and what are the implications of that? >> so i would say that's out of my area. i mean, i can offer an opinion, um, and i think the sort of general story as you read the papers, if you listen to the media, it sounds like it is state sponsored. do i have any evidence beyond that? no, i don't. now, i think it's interesting listening to the commentary here, i do agree that -- well, actually, i fundamentally believe that the united states' approach with china is inaccurate. the reality is china is going to be the largest economy in gdp terms. yesterday somebody said it might already be. we expect that is going to occur by 2016 which is just three years away. i think all these issues, i actually agree with what carly said. i think all these issues will fall by the wayside, human rights, cyber talking and so

on -- stalking will become irrelevant. can they continue to crifer economic growth and meaningfully put a department in their population growth in the country? and there are many countries around the world that are now heavily dependent on the chinese succeeding. but more than that, when i hear comments about the income inequality being ab issue, one of the things that's particularly interesting is that china's income inequality today is exactly the same as the united states at .47. and more than that, the trend has been positive for the chinese and, as you know, the united states' trend towards income ip equality had has beenn the decline. we should care about intellectual property, we should care about human rights, but the ideological both political and economic model under which the united states and western countries operate -- private capitalism, the idea of liberal democracy -- >> are, basically, the antithesis of the way the

chinese operate. so i think to focus on cyber is incredibly important because it is sort of costing our very nature of what we believe to be honorable and correct. but i think it would be to miss the broader issues and motivations of the chinese political class. >> steve, if all is going well with china one thing that would always be a cloud for them is inflation. what's your outlook for inflation in china? >> as long as they keep the currency tied to the u.s. dollar fairly rigidly, it's not going to b a problem unless it's a problem in the united states. because the inflation rates in both places will be about the same. the real problem though is that right now you have the quantitative easing type programs in the big western central banks where the interest rates have been manipulated down to unreasonably low levels, either negative real rates or very close to zero.

and what this has done, the central banks don't realize the implications of this in the sense that hot money then goes out of these quantitative easing countries, and where does it go? it goes to the emerging markets. it's a yield-chasing kind of phenomenon. think yield chasing at a hedge fund, and this is going on on a massive scale. and so the asian story, the reason that held up, by the withdraw, so well in the postcrisis period was it's all about the money supply. economic activity is about the money supply. forget all in this fiscal stimulus and austerity and so forth. it's where is the money supply. now, where is the pun supply in china -- the money supply in china? if you look at the trend rate of growth since 2003, right now the money supply is about 12% over the trend rate. in other words, the hot money is coming in. same thing in end tease ya.

it's about 10% -- indonesia. it's about 10% over the trend rate. all of these emerging market countries are suffering from -- they put it in the context of currency war. there's no currency war. that's a ridiculous idea. but that's what they've labeled it. it's just massive flows of hot money coming out of europe, the united states and now japan into the emerging market countries. and this creates a big headache for them. so we're back to inflation. their problem is going to be fighting too much loose credit and inflation in china, specifically because of the hot money flows. now, where's that coming from? that's not an indigenous chinese thing. it's we're doing it to them. they're just the victims, basically. >> -- so when we get into the money thing and the currency thing, again, this is just another aspect of doing

everything wrong from their point of view and giving them a big headache. the trade thing, just one little thing i forgot about as we started, the u.s. is involved with the -- now just started negotiating with europe or is going to be negotiating with europe on trade. well, this annoys the hell out of the chinese and makes them very anxious. you say, well, what's the business of the chinese what the u.s. and europe are doing. and it comes down to the u.s. and the western countries, western europe, they have a habit of regulatory protectionism. under wto we can't have old-fashioned tariffs and things like that like in the good old days. but there are all kinds of consumer and environmental regulations that can be put on products and, essentially, raising the bar. and by raising the bar, impose kind of a protectionist barrier and protect the market. so the chinese, as paranoid as

they are -- maybe rightfully so -- think that the u.s. and europe are going to get together to cut a deal and raise the standards and keep chinese products out. >> and that's an example, we may differ on this, that's an example, i believe, of the u.s. acting in its own economic self-interest and perhaps having an impact on china's economic self-interest. i think it's fantastic that the is negotiating. i hope they can conclude a negotiation with the european union. but i think that's precisely what the u.s. should be doing, and i think it is an attempt to raise the bar, and it will have a consequence. >> yeah, well, just to follow up, carly, the chinese, you know, i was on some program on chinese television debating this, and the chinese were wringing our hands about it and everything. and my view is whatever the standard is, the chinese will meet it and compete. i mean, that's -- if they change the rules of the game, they will

play by the rules, and they will meet the standard. but in the meantime, though, diplomatically, you see, this is another realm where you're basically, you know, throwing sand in somebody's face. they don't know why they were really never consulted about all of this and why they don't have some seat on the sidelines anyway. and why they're not involved in some way. so that's what -- >> we may be staying on it too long, but i think part, i think, of a productive policy that the u.s. would apply to china and vice versa is i think it's fair to say that china is at a point in their maturity where playing the victim doesn't work very well. they are not a victim. they are a major actor. and so for china to say, oh, woe is me, we need a deal on the side, please. i don't recall the u.s. getting

a seat on the side while they're cutting deals for resources in their own self-interest, i africa. think, is laughable. >> well, first of all, to that you know, the united states not point, i mean, the notion that just in terms of this recent the chinese would expect the announcement with the europeans united states not to act in which i have absolutely no faith is going to happen, i mean, i hope i'm around to see it if it does. [laughter] but you know, a catalog of trade manipulation through subsidy programs. yooff alluded to a few of those -- you've alluded to a few of those interventions not just in trade, but, obviously, a whole list of tools that the europeans and the united states are using today to, in effect, impact asset prices in these emerging economies. the notion that anybody would think that, sit back and think that the united states is going to actually do the right hinge in the interest of, you know, some external entity, i think, is misplaced. i have very little faith in that, and i think everybody understands that. >> peter? >> we have a couple questions. economists have long said that

global rebalancing requires a significant increase in chinese domestic demand. is there much progress on that front? >> yeah. again, this point of the chinese realizing that perhaps the american export story will not last, part of that is that they are focusing very heavily on policies that will increase the domestic demand from around 30, 35% to somewhere closer to the equilibrium of around 50% which i think would be considered ideal. it's very difficult to do that, but they are -- if you look at their 10-year -- excuse me, their 12th five-year program which came out a couple of years ago, they're expolice sutley encouraging subsidy programs to local populations and encourage them to buy refrigerators and encourage domestic demand that way. is it going to be an easy thing? no. it's incredibly difficult. and also i think some of the risks of inflationary pressures could come from that, and i'm not sure they're ready to manage that aspect. >> yeah, i think the story on the imbalance, it comes back to the united states. the united states has had a

tread deficit every year since 1975. there's only one reason for this, savings is less than investment. and, therefore, if you -- the only way you can get rid of that imbalance if you think it's worth getting rid of, you can cut down on private consumption, you can cut down on private investment. we're not talking about china, this is the u.s. now. or you can cut down on government consumption. those are the only ways that you can bring the thing back to balance. forget about exchange rates and so forth. it's totally irrelevant. it's the savings and investment equation that drives these trade imbalances or global imbalances. my own view is i think you should just let the market take care of it. and the imbalance story wastes a lot of the chattering class' time because they don't understand it, and they invariably take the wrong policy course to supposedly correct the

thing because the a problem -- it's a problem. >> i'm going to sneak in the master of ceremonies prerogative. one more question here from our audience. china has enough credit problems to slow their economy dramatically. they've overinvested in industries that are in oversupply. why should we be concerned about china when they are in the same position as japan in 198ed? >> well, i think we should be -- just the obvious headline thing is their population. and not only their population, but the network that they've created across the world. many countries around the emerging world are now heavily dependent on the china story working. and by the way, it's not just emerging markets. you'll be familiar, i'm sure, with the recent transaction that the chinese have embarked upon with the australians to, basically, do a currency swap directly with them. so there are many countries around the world that are heavily reliant now on the chinese economy functioning and functioning effectively. there are huge inefficiencies in

the economy. obviously, as an artifact of the state capitalist model and aspects of them trying to move away from investment towards consumption. but i do worry about commodity constraints. i think that's a big thing for them. but also i do worry that a lot of the pressures domestically to satiate demand and to minimize poverty on the ground will, basically, incite the political class to do things that are perhaps not market sensible, but much more politically expedient. >> with that, want to thank our panelists. want to thank mike for leading our discussion here. and now it's very important for me to tell you where lunch is. it's upstairs on the eighth floor. hope you all can join us for that. and then a reminder, we're going to come back here at 1:45 sharp. tom ryan is right now barreling down the east coast, host of bloomberg surveillance, he's going to be speaking with alan

krueger, going to be hearing about the white house view on what's going on in the u.s. economy right now, some of the policy issues confronting the country. so you want to be here for that conversation at 1:45. once again, we'd like to thank our sponsors, visa, also our partner, foreign affairs, for helping make all of this happen. we have a lot more in store for you this afternoon. sort of remind you, we have a reception at the end of the day. that's at, robin, remind me what time? >> [inaudible] >> 4:30 or so. there's plenty of reasons to stay here this afternoon. and this other reminder, we do this all over the world. we've got the bloomberg canada economic summit june 21st, june 4th in new york, i expect to see all of you there june 17th and 18th. check out bloomberg link.com for full details if you're interested in attending any of these conferences. thank you all very much for coming, for your questions. look forward to seeing you at 1:45 sharp for our next panel.

thank you. [applause] [inaudible conversations] [inaudible conversations] [inaudible conversations]

>> if you missed any of the morning sessions of this daylong bloomberg summit, they'll be available for you shortly at c-span.org. our coverage of the summit continues later on our companion network, c-span. this afternoon's panels include discussions on jobs, health care and the automatic spending cuts known as the sequester. that gets underway live at 1:40 eastern on c-span. and join us tonight when booktv will examine the effect of technology. we'll hear from authors including naomi barron and douglas rushkoff. that gets underway at 8 eastern here on c-span2. president obama answered reporters' questions earlier today. we'll have his news conference on a wide range of issues tonight at 8 eastern on c-span. and after that a conversation with supreme court justice clarence thomas. justice thomas recently discussed his life and career

before an audience of about 1200 students and faculty members at due cane law school in pittsburgh. he talked about race in america and the inner workings of the supreme court, and he also gave advice to law school students. here's a look at some of his comments. >> well, i never called myself conservative. that was another putdown in the 1980s when they started naming us black conservatives to show that we were sort of like, you know, some vile thing that occurred. laugh but we didn't call ourselves anything. we were just people trying to think about very different things and offer a point of view. suddenly, there was a prescribed point of view. i always found it fascinating that if people were told they could only go to one naked, that's wrong. -- to one neighborhood, that's wrong. but then it's okay to tell people they only think certain things. that's bizarre. but at any rate, i was never

politically involved. i don't like politics. that's another thing. i'm interested -- i think about things. i think about ideology or things that happen in society. i don't like politics. i don't know how you can tell something that is obviously wrong, and you make them believe it. [laughter] [applause] so the -- and i certainly was not republican when i came to d.c. i became a republican to vote for ronald reagan. i was a registered independent. and the, but that was about it. i voted for in law school, in college i voted at 18 because i was from georgia, i voted for hump free in 1968 and mcgovern in 1972. so, and i taught they were too conservative. [laughter] it was, again, trying to think

things through. i was more of a libertarian. i was trying to figure things out. but people were telling me that you're black, we already have the views you're supposed to have. you're not supposed to read ayn rand, you're not supposed to think about things. that's bizarre. well, why do we go to school? just give us our list of what we're supposed to think. that saves a lot of time. [laughter] then we just read, oh, what am i supposed to think today? you know? [laughter] >> that's just part of supreme court justice chairns thomas' remarks. you can see the entire event tonight at 9 eastern on c-span. >> the intelligentsia is driven by this certainty that religion and reason are many different boxes -- in different boxes, that science and religion are in different boxes, and the two actually are at war with each other, they are inimical to each other. someone who is rational is not religious, someone who is religious is not rational. science is the antidote to

religion. science is rational, it is the antidote to religious irrationality. now, this itself is the ultimate irrational idea. because the belief that religion is inimical to science and reason in the west is completely untrue. religion underpinned science and reason. >> author, columnist and winner of the orwell prize for journalism, pelny phillips, takes your calls, e-mails, facebook comments and tweets "in depth," three hours live sunday at noon eastern on booktv on c-span2. >> there are two infamous prisons in the western u.s. one is the human territorial prison, and the other one isal alcatraz. there's something in our culture, in our consciousness of what would it have been like to be in a prison like this. the yuma territorial prison was

considered to be a model and humane institution in its day. and this was the solitary confinement cell. any major infraction, talking back to a guard, not giving your respect to, you know, the authorities, it was really -- if they couldn't deal with you, the dark cell could deal with you. of all the treatment, this was the place you didn't want to come, because you did not have a latrine, you got bread and water once a day. occasionally there'd be more than one person in here. and one great big prison breakout there were 12 people in here. now, folklore, we have no proof of this, that said a mean guard would in the pitch black you'd feel something coming down the air shaft, and it could have been a scorpion or a snake.

now, that is just something that's not documented. >> from 1876 to 909, the yuma territorial prison was home to more than 3,000 prisoners including 29 women. this weekend discover the history and literary life of yuma, arizona, saturday at noon eastern on booktv on c-span2. and sunday at 5 p.m. on american history tv on c-span3. >> rex tillerson started working at exxon soon after graduating from the university of texas. he's now the chairman and ceo of exxonmobil. he recently addressed the world affairs council of dallas and fort worth about energy, innovation and the economy. this is about 45 minutes. [applause] >> thank you, ray. you know, one of the great attributes of dallas are its

remarkable citizens. and i think you would search high and low, far and wide to find an individual -- and i would be remiss if i didn't want include -- i didn't include his wife, nancy ann -- in terms of a person who cares so deeply about dallas' future success, both of them, nancy ann has been a great partner of mine in supporting boy scouts here locally in dallas. and it is a, it's a real privilege to call someone like ray hunt not just a colleague, but a good friend. and, ray, thank you for that kind introduction. well, it's certainly a pleasure for me to be here with the world affairs council. dallas and fort worth. exxonmobil's had a long history of our support, longstanding relationship with the world affairs council wherever we operate. so not just here in dallas, but in other chapters and cities

across america. and world. world affairs council, in our view, does a great service in enriching public dialogue and providing a place for in-depth discussion of public policy and a respectful exploration of solutions. .. >> this afternoon, i'll discuss

risk management techniques enabling us to unlock new supplies of energy across the continent and bringing environmental benefits, and why, as we look to the challenges in the decades ahead, we will need public policies that allow us to build on our successes and promote innovations for decades to come. to do this, challenge old ways of thinking rooted in the notion we have to ration scarcity and embrace new ideas that respect the roles of industry, government, and society, all of whom must play their respective role in an era of abundance in energy. from the outset, this is the north american energy markets, and more than 30 years ago our

good friend, declared, and i quote, the energy future's bleak and will grow bleaker in the decade ahead, and, indeed, it did. we have to rapidly adjust economies to chronic stringency and additional energy supplies. now, that mind set of the time of scarcity influenced our nation's outlook of energy security, foreign policy imperatives, and our optimism about our shared future. in the three decades since, the nations of canada, mexico, and the united states have been an example to the world of how trade, cooperation, and innovation can expand energy supplies and lead to mutual benefit and progress, and in recent years, in particular, the energy industry's long term investments, new technologies, and risk management have combined to put north america at

the vanguard of energy transformation reshaping global markets. sources of oil and natural gas once dismissed is not economic and inaccessible are now reliable, affordable, and environmentally responsible cricketers to our global energy portfolio, all a result of industry innovations. in canada, for instance, we're deploying new technologies and techniques enabling the development of nation's vast oil sands. this resource space now has the potential to provide approximately 170 billion recoverable barrels, enough energy to fuel the days north america's personal vehicle fleet for almost 45 years. in the gulf of mexico, we've taken the concept of deepwater drilling from the drawing board to execution in little less than a generation.

more recently, our industry has come together as never before and made strides in emergency response and risk management offshore. with these ongoing discoveries and advances, we anticipate more than doweling both north american and worldwide deepwater production over the next 25 years. finally across the united states and canada, we are unlocked so-called new unconventional sources of energy, energy located in the formations referred to as shales or type oil formations. advances in drilling and fracking bring new supplies of oil and natural gas to america's economy safely and responsibly. these technologies and techniques are not knew to the

industry. we have used them for decades. its their integration that's game changing. put this in perspective, i ask you to consider the following. since only 2008, u.s. natural gas production up 19%. this additional increase in supply's enough to meet 90% of natural gas consumed in all of u.s. homes in 2012. technologies puts within reach enough natural gas to power the u.s. economy at current demand for a century. these boosted more of the natural gas supplies, domestic oil production is up sharply. since 2008, full year domestic oil production rose by close to

30%. in fact, by the end of last year production was up, the increamed, by the equivalent of the output of nigeria, the 7th largest producing company in opec. thanks to the new technologies, the united states has not just declinedded, but the world's fastest growing hydrocarbon region. new supplies carry strong economic benefits, and increasing investment, job creation, and growth at a time when our economy needs it most. in 2011 aown, the oil and gas industry generated more than a half trillion dollars of investment in the form of capital, wages, and diff depp. in texas, the multiplier effect had a particularly strong influence on job creation. recent economic studies find that new oil and natural gas

oduction created 576,000 jobs with about a million direct and indirect jobs predicted by the year 2020. the entire oil and natural gas sector currently supports 9.2 million american jobs or 7% of the u.s. economy. it delivers 85 million every day in revenue to the government. our industry's innovations in oil and natural gas production brought ru newed hope to areas once written off. for the more than 50 million people in the small cities, towns, and rural areas of america's heartland, inflated adjustment income per capita rose between 2007 and 20 # 11. at the same time, incomes were falling in u.s. cities.

industry innovation felt beyond borders in the state where energy production takes place. energy related benefits extend to the 32 states without uncon sensual energy production. new york state for instance has more than 44,000 industry supported jobs with many of those the direct result of the shale development next door in pennsylvania. timely, a new era of abundance in energy increases competitiveness and sectors once believed to be in permanent decline. they revitalize the steal industry, which will contribute rebuilding to the nation's infrastructure and automobile manufacturing. these new gas supplies reenvying rate america's chemical injury, including oil competitiveness,

and boosting american exports of bulldozers, farm equipment, and other heavy vehicles. our industry's contributions go beyond economics, though. the new supplies of natural gas help our nation meet shared environmental priorities. the u.s. energy information administration estimated that in 2012, energy related u.s. carbon dioxide emissions fell to the lowest level in more than a decade and a half. what makes this extraordinary is that the united states, if you go back to 1995, the united states today has 50 million more energy consumers than we did in 1995, and we have an economy that is 50% larger than it was in 1995. yet, our c02 # emissions are close to what they were in 1995. in america's energy industry, we

believe this is just the beginning. we believe our nation can do more to bring energy to the world. in this historic moment, as we transition from an era of scarcity to an era of abundance, it's important from us to learn from and build on our successes. we must recognize the fundmental importance of investment, innovation, and trade in helping us achieve nation's economic and environmental needs. to do that, we must understand that industry, government, and society all have roles to play in pressing forward the frontiers of innovation. our industry, the first and foremost priority is always to operate in a safe, secure, and environmentally responsible manner. we must uphold the high standards of operational integrity from planning an investment to construction and project completion. this builds trust in the private

sector and in industry's ability to deploy new technologies in new ways. in communities across the nation, we have safely and successfully implemented hydraulic fracturing, horizontal drilling, and other innovative technologies. this has allowed the energy industry to create jobs and spur growth and encourage the industry to engauge with the public at a local level communicating the wide array of risk management techniques, working with state and local officials to ensure industry accountability and how we minimize the environmental foot print. in town halls and public forums, we have to work with local leaders to study land and environmental impacts where we drill, how we design and build wells with safeguards in place to protect around world, and how we have rigorous standards in place to monitor and maintain wells after the drilling is

complete. as we identify new questions from the public, we support sound science to inform and construct reasonable regulatory frame works. government has a role to play in innovation beginning with understanding the role of the private sector. energy projects are ultimate long term investments. the spending patterns are long, even before the first dollar of the revenue is realized, and the completion cycles are long. sometimes the depletion more than 75 years along the way requiring reinvestment and reinvestment and reinvest. they estimate the energy industry needs to invest $37 trillion in energy supply infrastructure through the year 2035. coming to about 1.6 trillion a

year. think about executing a drill, and they are positioned to establish the investment by establishing sound legal and tax policies. too often, officials focus on the near term ups and downs of commodity prices. the cycles reflected at the pump or pick winner anticipate losers through subsidies, mandates, and tax provisions. we have to make investments over the long term hoer rye soss. in addition, the pathway needs certainty, transparency, and promote understanding between government officials and business leaders. policymakers must understand how legal and policy uncertainty can negatively affect business.

we have to reck nice innovation and consider the costs the policies to the economy and consumers against the benefits delivered to society. public policies must be governed by sound science and economic assessments of cost and benefits. the regulatory process should provide a clear and efficient pathway to meet the public's expectations for safety, efficiency, and environmental protections. the proposed keystone xl pipeline is an objected lesson in what can go wrong when decisions veer from the path. this is a project that requires sustained investment and carries the promise of significant benefits to our economy, yes despite following the process, as set out by our government, the project sponsors have yet to obtain the approval to proceed.

in 2008, going op five years now, government and industries held more than 100 open houses and public meetings, gathered thousands of pages of supplemental information submitted by states and federal agencies, and throughout the process, the state department studied 14 different routes, issued a draft environmental impact statement, a supplemental draft impact statement, and a time environmental impact statement that told them more than 10,000 pangs, -- pages, and after all this work and public congressmen, the state department's own findings indicated the pipeline would pose no up do risk to people or the environment. they found this twice. yet, as you know, the decision was made to further delay the project preventing the cession of more than 20,000 construction jobs and more than 118,000 other

new jobs for local businesses that would be located along the route of the pipeline. it's easy to forget they have support from both sides of the aisle, union workers, leaders, business industry, and as well as certainly the canadian government. the decision to delay construction was a matter of putting politics ahead of an already rigorous regulatory permitting process. most of the policymakers i talked to over the years understand pipelines is the only way to transport natch wall gas, and there's hundreds of thousands of miles of pipeline with wap extraordinary decade's long record of being safe and sound. now, government can support innovation in other ways by

providing access to resources and opening avenues of trade. with increased access, discipline investment, and innovative applications of technology, our industry can further expand supplies, create jobs, and fuel growth in north america. in the united states, many prospective areas for oil and natural gas lie under federal lands. lands opened by the american people, you and me. yet these lands have been kept off limits to drilling for decades, denying the american people the economic benefit of the development of the resources. meanwhile, technology has advanced. across this time, call -- calculators no longer cost a hundred dollars, computers no longer fill entire room, and our industry's ability to drill in the arctic offshore or multiple wells from the others, all that

ignored by our government. today, federal areas on and out of show remain off limits or are severely restricted, but many of the resources certainly can be safely and responsibly developed using these technological advances. 3-d cease mic imaging, extended reach in horizontal drilling, all technologies allow us in our industry to see these underground resources as never before, to plan how we max miss recovery for success, and minimize the foot print. one study by energy researcher wood mckinsey estimates that forward looking policies that increase access and expand opportunities for oil and natural gas production would create more than a million additional jobs and generate hundreds of millions more in revenue at all levels of government, federal, state,

local. in this newer era of abundance, we need thinking in a new area to meet not just our domestic energy needs, but the potential to be an energy exporter. who would have thought this possible in a nation where rationing and gasoline lines are not a too distant memory for many, and ever-rising levels of foreign imports were considered to be our energy destiny? economic studies and economic analysis indicate that by allowing exports, we can attract new investments that expand our own supply, create jobs, and help with our u.s. balance of payments. of course, a few companies have come out to limit energy exports, in particular in the form of liquid gas, lng, a

supercooled natural gas allowing for transport by ship. opponents of free trade are appealing to political leaders who still see the world in terms of rationing scarcity, but there's reason for optimism. this debate prompted a strong and bred coalition made of hundreds of voices from governors, trade associations, economists, to manufacturing companies who reaffirmed the value of free they in energy. after all, energy, itself, responds to the same basic economics that govern other exports from american wheat and beef to computers and automobiles. as we've shown in north america, canada, mexico, and the united states all stronger because of energy bridges and trade that increased security and investment.

in the decadessed ahead, consumers need to be involved in the strength of innovation. public debates need to be framed by factses in science, fundamental physics, and basic economics. we must build a renewed appreciation for the time lines required to advance technology. the scale of the challenge is confronting us. the important role of engineers and scientists in driving improvements as well as inventing revolutionary breakthroughs. one of the most important priorities in the effort must be to improve our nation's educational standards and achievement, especially in science, technology, engineering, and math. even as america's energy industry led the world for the past few decades, there are reasons to be concerned about america's long term competitiveness. three decades ago, the united states ranked third among

developed nations for college students earning science and engineering degrees. today, about 20 other countries rank ahead of the united states in these vital subjects. science, technology, engineering, and math are not just important to the nation, but gateways to opportunities for millions of students. that's why in 2007, exxon-mobi led l founding of the initiative, and that's why we continue to press forward with the commitment today. this initiative is built on the conviction that improving stem education means supporting teacher training and challenging students with effective curricula. our goal is simple. find the proven programs that work with measurable outcomes and scale them up in schools and universities all across the nation. we don't need to invent anything new.

think are out there. first program we identified was you teach, originated at the university of texas. it facilitates undergraduate students working towards degrees in math or science to also earn alongside their math and science degree a teaching certificate by providing them an integrated degree plan, financial assistance, and early teaching experience. since its inception, more than nine out of ten you teach graduates have become teachers. eight in ten are still in the classroom five years later. that's compared with fewer than 65% of teachers nationally. importantly, 45% of the teachers went to work in high need schools. the second program is the advanced placement pioneer program, engineered here in dallas by peter o'donald

encouraging schools to expand college level ap courses in high school and encourages teacher training in ap courses. the national center confirmed that when students take a task, an advanced course, they are more likely to graduate from college. the result. over the past four years, participating schools have increased their qualifying ap test scores in math and science by 160%. five times the national average. these two successful programs give us confidence that we can increase the ranks of the next generation of innovators. what we need to do as citizens and society is recognize the role of education in developing future scientists and engineering. we must have the courage to identify an uphold education standards that boost

achievements, even when there may be pressure to abandon them. in the decades ahead, the needs continue to grow shaping our first of challenges in energy and no invasion. with nearly 1.3 billion people on the planet, still without electricity for needs like clean water, cooking, sanitation, life, safe storage of food and medicine, we must realize the need to expand energy supplies has a humanitarian dimension often not part of the domestic discussion. as the industry proved over the past three decades, we can meet the challenges of the future. resource access and a positive climate for investment, we can find new technology, spread them to new parts of the world, and unlock new sources of energy in increasingly safe, efficient, and a responsible way. with government, industries, and

society united, we can all contribute to the national culture of education and innovation. we can ensure extraordinary advancing of the past are nothing more than building blocks to an even broughter future. i thank you for your kind attention. [applause] >> thank you very much. >> my pleasure. >> a few questions to squeeze in. by tradition, the first is a student's question. quote, now that hydraulic fracturing, or fracking, seems to established itself of the energy technology of today and perhaps the next 50 years, what, in your opinion, could be the next technological breakthrough in the energy industry? >> well, that's a great question. what i tell you is ten years

ago, i did not see this one coming. [laughter] that is what is so exciting about this industry, and it's why, in my comments, we are absolutely committed to continuing the bright minds and innovators for the future. this is not the things you know how to do, but things you don't even know you want to do. those are the break throughs. now, there's a lot of opportunities for incremental breakthroughs, expand abilities to work in ever harsher climates, certainly in deeper waters as we have done, in the arctic, and there's a lot of technology development to allow us to open the window of opportunity for resources that i mentioned in the talk and due to economic, what happened is technology and innovation opened that window. it made those resources not only accessible, but also economic, so it's where are the resources?

there are a lot of resources around the world yet to be developed. it crosses a broad range of technologies in the deepwater and arctic and what we call unconventional, which i told others we have to stop calling it unconventional because we produced it for 16 years now. it's conventional now. shale-type formations, and a lot of breakthrough, i suspect, will continue to come nor ability -- in our ability to image the sub surface. exxon mobil had the mathematical modeling capabilities to process information and continued breakthroughs in the ability to image the sub surface lowers risk, and exposes more of the resource to the economic window.

if i were a young person, and i wish i was, starting out because when i went to work, i was working on slide rule. got the first four calculator, and my call -- calculator had a square root key. i thought i died and gone to heaven. [laughter] how could i have imagined anybody in my generation, how could anybody imagine the way our engineers and scientists worked today? it's extraordinary. they are extruer their. i stand in awe of our scientists and engineers working for us and whey that do. it's an exciting future, and the excitement is i don't know what the next thing will be. i'm counting on you to go find it. they referred to success in russia, one of the members they'd like to comment on the future of the russian oil and gas industry. >> well, russia continues, you

know, the nation to evolve its own economic structures, certainly, its own legal structures. we've been there a very long time. we've been there for a lot of the evolution, and we have participated in it. i would be less than honest if i didn't tell you i've been disappointed with the pace in which things evolved, but it's a big country with a lot of complexities. they had huge enormous oil and natural gas resources, many of which are not even known to us yet, but we will find them, so they will always be a very significant and important supplier of energy to the world. today, they are the largest oil producer, larger than saudi arabia, they have e enormous gas resources and potential to do more, and they are limited, only, by their fiscal and regulatory structures. their rule of law. structures. now, our experience in russia has been quite good. it has not been easy.

i -- we entered in a time and put in place contracts before their laws were even written, emerging from soviet era laws and regulations to the modern day. they have always respected that contract. they could have changed it. they could have tore it up. they could have said not fair, but they stuck with it. i have admiration for the leadership for having done that, and as a result, we've been successful together. moving forward, i think the only limitation a their ability to put the right legal regulatory structures in place to attract significant investments required. nothing is done inexpensively there. the resources are huge. the investments required are enormous. you have to have the stability frame works in place. their leadership is committed to that. it's how they travel the road to get there. it's sometimes hard for them. i would observe we have the same

problem here in this country. we know where we need to go. sometimes politically we just have a hard time getting there. many many ways, they are not different than us. they are going to be significant in the future, and i think their prospects are very good, and like a lot of countries, they'll be some highs and lows, but the tray trajectory, i think, will be up. >> given aggressive china, a state owned corporation and recent establishment as a global oil player, how does exxon-mobil plan to compete with other companies or companies owned by foreign governments? >> well, it's their role and participation globally as we see

entities created to manage the national resource, today known as national law companies who created largely to work domestically now leaving their borders, equipped with funding from the government, and certain directives to go out and participate in resource acquisitions and developments globally, and so i think what you see happen in the first decade, and it's not just the chinese because the same is said for national economies is that we should what they seem to have figured out is the best way to go out there is to find good partners. most from the stand point, but learning how you manage the complexity of operating in a country where your government's not calling the shots and

somebody else is, so we have never seen that as particularly as a threat, whether we see it -- whether it's an opportunity. where are their places we might partner together? oftentimes, we want to mitigate risk too. i think that's, generally, what you see across the industry. they will continue to be agtive because china is a huge consumer of energy. they do not have sufficient resources in our view domestically to meet that need, and i think it's entirely to be expected and reasonable they would fan out across the globe and participate broadly. that's good risk management. get yourself involved in a diversity of offshore resources, offshore outside the country so you are not overly dependent on any one country. something goes wrong here, we're involved elsewhere. i think their approach and strategy is one that's predictable, extensionble, and they operate at a different

level of economic expectation than those of us who have to perform for theticty markets do. that's okay. it puts pressure on us to be even better. >> we have a number of questions about countries to the south. in particular, a question about mexico. we recently saw an election of a government which appears pob a reform administration p. how do you assess the opportunities in mexico in the government's likelihood to open industry to exxon-mobil and other countries? >> well, i think the current leadership, and certainly the prior leadership was fairly open about their view that mexico had to move to a different place and development of the own resource.

if you know history of mexico, this is a highly emotional issue with the mexican people, the nationalization of the oil industry, down there, everybody kicked out of the country, still one of the most celebrated national holidays in the country, 1938 exprop -- exappropriation. there is recommendation throughout the leadership, growing recognition among the broader political body, and now you even are beginning to see recognition among the public. i think what i see leadership doing is the slow process of bringing people along to understand why it is in their interest to allow others to come to the country and participate in the development of the resources. there have been some start-stops on small experiments as they continue to, i think, test, well, you know, what does it take? what does it take to get people

interested? my take is that continues out of necessity because they are not realizing the full potential of the own resources. they are in a position of not having to import energy which s pretty extraordinary if you look at their consumption versus what the resource capacity should be, so i think there is a clear commitment by leadership to move this along to the point where there with ultimately be participation, whether it's something we'll do or no depends on the terms and conditions and what's on offer, but i think there's a continued effort to move the country in that direction. >> i'm told we have time for one more. let me shift gears just a little bit to ask you this question, would you please elaborate on exxon's view of itself as an energy company rather than an oil and gas company, and how that view affects decision making. >> well, we're an energy company

because 80% of the world's energy con suggestion is in the products we deal with, but make no mistake, we're a petroleum and petrol company. we take a great deal of interest in understanding and from time to time participating at a certain level in the development of other sources of enrg we've been in the solar cell business. didn't work out. we've not been in the wind business, but we watch it. you know, we've been involved. we've participated in a number of technology develops, and a lot of the technologists have collaborations with others who are investigating ways to meet this enormous challenge which confronts the world of supplying the energy that these economies need. if any of you visit our website or read the annual publication,

we have a energy outlook dealing with what's happening on various economies throughout the world, the demand sectors, and the fuel mix, and what we know from that work, and it hasn't changed, we pay colossian attention to all the other alternatives. obviously, there's a business opportunity, we'd look at it. we've looked at all of those alternative, and we continue to carry out research investigation on some of those, but we're an oil and gas petrol company because projections, looking at the most recent, while we see enormous rates of growth in some of the alternatives, that we know a lot of people have great aspirations for the contribution, but solar, which we think east going to grow by 20-fold over the next 0 years, even when it grows by 20-fold, that accounts for 2% of global energy supply.

wind is going to grow 7-fold over the next 20-25 years, and even so, it accounts for 7%. the challenge is that all the other energy options face is the sheer enormity of energy consumption to take care of the planet and to meet the aspirations that so many people around the world have to raise their standard of living, provide for their children, and give them a life that we have that they only dream of. they deserve that right. the only way they're going to get there is with petroleum, oil, natural gas, coal, and then a handful of the others, so that's the business we're in. we're in the energy business. that's largely oil and natural gas. thank you. [applause] >> thank you very much. appreciate you coming.

[applause] >> i've never called myself conservative. that was another putdown in the 1980s when they started naming

us conservatives to show we were soft of like, you know, some vile thing that occurs. the -- we didn't call ourselves anything, just people trying to think about very difficult things and over a point of view, but there was a prescribed point of view. that just -- i found that faze enating if people were told they could only go to one neighborhood, that's wrong. if you're told you can only go to these schools, that's wrong, but it's okay to tell people to think only certain things. that's bizarre. at any rate, i was never politically involved. i don't like politics. that's another thing. i'm interested. i think about things. i think about philosophies, ideologies, and things that happen in society. i don't like politics. i don't know how you tell somebody something that was obviously wrong and you make them believe it, and i also don't like --

[laughter] so -- and i certainly was not republican when i came to dc. i became a republican to vote for ronald reagan. i was a registered independent. the -- that was about it. i voted for in law school and in college, voted at 18 because i was from georgia. i voted for humphries and i thought they were too conservative. the, again, trying to think things through. i was a libertarian. i was trying to figure things out. that's bizarre. why go to school? give us a list of what we are supposed to think. that saves a lot of time, oh,

what am i supposed to think today, you know? >> the supreme court justice clarence thomas had to say. you can see that entire event tonight at 9 eastern on c-span. >> the intelligence is driven by this certainty that religion and reason are in different boxes, that science and religion are in different boxes, and the two actually are at war with each other. they are someone who is rational is not religious, someone who is religious is not rational. it's the antedote to science, and science is rational, the antidepressant dote to religious irrationality. it is the idea because the belief that religion is fun and reason in the west is completely up true. religion underpins science and reason. >> author, columnist, and prize

for journalism takes your calls, e-mails, comments, and tweets "in-depth" three hours sunday live at noon eastern on c-span2. >> recently, a senate subcommittee held a hearing focusing on opportunities and challenges of human space exploration. senator bill nelson of florida chairs this 90-minute hearing. >> good afternoon. welcome to the second hearing of the subcommittee. , and, today, we're going to focus on the challenges and the opportunities for human space exploration.

we want to get back in that business. it's vital to our space program. it's vital to the ions community. it pushes america's best and brightest to the limits of their creativity and all of us on earth benefit from it. the allure of exploration keeps our students in science, technology, engineers, mathematics, just look what the apolo program did creating a whole generation of young scientists and engineers and mat ma tigses. it generates basic research in other high technology areas, so in the authorization bill, we

required nasas, quote, to expand human presence below lower earth orbit, end of quote, calling on the agency to explore beyond leo for the first time since the 1972 apollo 17 mission. under the guidance of that authorization bill, nasa has been working with the nation's space industry to sustain a human presence on board the international space station. it is designated as a national laboratory, one component of it, and with nasa's guidance, one

u.s. commercial company has already delivered cargo to the station, and just this past sunday, another commercial company successfully tested its new rocket, and that rocket delivers cargo to the station later on. efforts to enable commercial crew commercial capabilities are also well underway, and we look forward to those successes, and so nasa sits at the an nexus ofe public and private space sectors, and these partnerships enhance what we can accomplish in space. for exploration beyond low earth orbit, leo, nasa is currently building and testing hardware for the new space launch system

and the crew capsule to carry astronauts further into space than ever before. in 2014, a test are fly the capsule 15 times higher than the iss before returning it to earth at speeds near those that general staff ford, one of the participants today, reachedded in his reentry in the apollo 10 mission, and that capsule is now undergoing final construction in the onc billing at the kennedy space center. it's heat shield, the largest ever build, and they will fly together for the first time since 2017 and carry the first

crew in 2021. nasa is also preparing its people and infrastructure to support this space exploration to ensure future missions have adequate ground support, of course, what they are going through is the upgrades of all grant support equipment and launch infrastructure, and those will enable us in nasa, the military, and also the operations space sector. where do we go with the capabilities? mars is the goal. with the right technology, sls and o'ryan will be able to enable a wide range of human missions and destinations which

describe going back to the authorization bill include, quote, the surface of the moon and near earth asteroids, end of quote. two weeks ago, nasa announced the plan to capture a small asteroid and redirect it to a stable orbit around the moon, and the concept is still studied, but if nasa can find a suitable asteroid and redirect it, we can sustain a 2021sls o'ryan flight. we'll hear about that today. research is also underway to better prepare astronauts for the dangers of the lower earth

orbit. the hometown of this subcommittee's ranking member, senator cruz, houses nasa's human research program. there's a national physical in the johnson space center. nasa is going to continue to learn about the effects of microgravity on the body when an american and a russian start to have a one-year stay on the international space station. we learn about the effects of 0g and bone loss as a result of 0g. we're going to learn at the johnson space center and learn

about effects of radiation on the human body and how to protect us when we are going all the way to mars, and what are the kinds of shields that we have to have in case there is a solar explosion on the way, to those planets, are, in fact, if we're on a moon base, what do we have to protect human life. nasa's efforts are strong and well underway. with the leadership seen and the creativity, with the dedicated contractor force and the civil service work force, then we would have reason to believe nasa can achieve goals. i want to welcome the witnesses

here, i want to thank them. this will be an exciting topic to discuss. our first witness is nasa's associate add min straiter for human exploration and operations, to update us on sls and o'ryan and technology needed for human exploration, and on this gee whiz asteroid mission; thefer, of course, we're very fortunate to have someone who is not a stranger to this subcommittee, and he is our air force retired lieutenant general, tom stafford, went down, orbited the moon on apollo150, and, of course, one of the great cause in the cold war occurred high above the

earth in 1975 when a soviet crew joined up with an american crew and lived together in space for nine days in the midst of the cold war. general stafford was the commander of that mission, and who better to discuss value of international partnerships, especially in human space exploration and the man who has been there and seen it since its inception. of course, in his position, when they left the astronaut office, went back into the air force, he was the deputy chief of staff for research, development, and acquisition, and was involved in the initiation of a stealth

fighter. he wrote the initial specifications for the be-2 stealth -- b-2 stealth bomber. he knows technology. we have steve cook. he's going to address nasa's partnerships with industry, the roles of government and private sector together in human exploration as well as the policy needs. thank you, all, for being here. senator cruz. >> thank you, mr. chairman, for calling the hearing today on the path of human space exploration, thank you to each of the distinguished panel members for joining us this morning. i appreciate the opportunity to stand side by side and the

opportunity to hear from the distinguished panel on your wisdom and insight and years of experience on space policy. in particular, addressing nasa's long term mission any challenges presented to the mission by the path we're on today. i also look forward to hearing further about how the commercial sector is making an important contribution to achieving these goals, and how we can further expand that partnership including, perhaps, learning lessons about how government can be more efficient, and how our space program can continue to generate opportunities for commercialization that generate economic growth and jobs throughout the private sector. it's critical that the united states ensure its continued leadership in space, and that will require broad support from

a range of stake holders from the general public to the u.s. government to the scientific community. i look forward to the opportunity to learn from each of our distinguished panel members here today. thank you. >> we want to welcome in the add yensz a number of people attending the suppliers conference of the sls, o ryan suppliers, and so let's start with you, go right down the table, and then we'll get into the questions after you testified. your formal remarks are inserted into the record, and if you share with us, verbally, a shortened version. thank you. >> thank you very much for asking me to represent the nasa team for the hearing on challenges and opportunity for human space flight. this is a very good time for

human space flight. international space station makes tremendous progress in space based research. the isf is beginning to show potential as a world class research facility, many of the early findings have direct application for people on the earth. expedition 24's patch had the statement off the earth for the earth. this statement captures well one of the reasons for iss. there are several earth science payloads scheduled to fly in the next year as direct application of the expedition's statement. the recent results are also providing unique data on dark matter in the universe. they are providing unique data on a radiation environment of space. ..

this was a tremendous accomplishment both for the vehicle and the launchpad. orbiter one x. flight demonstration mission to the iss in june or early july. u.s. companies are stepping up to the task of keeping the international space station resupply. commercial crews making tremendous progress in implementing the acquisition strategy in vehicle designs, for the certification and demonstration flight should be out in the next two months. all of these efforts complement the use of iss and demonstrating the commercial value of space. the heavy lift launch vehicle

and orion are also making tremendous progress. the sls design is in sharing welding equipment is being assembled in new orleans, and by the end of this year all major weld schedules will be completed for the core stage. the goal just to manufacturing w orleans. the orion capsule is in florida being outfitted and tested for its test flight next year. the heat shield was in boston having thermal protection material installed. this test flight willprovide critical performance data for the heat shield. it's exciting to see a flight vehicle being assembled and outfitted in florida again. finally, work is beginning on the test stand. this will test the propulsion system and late 2016th ior to shipping for flight in 2017. the work on the service module with the european space agency for ryan is contending with significant progress being made. it is clear international cooperation will be part of any

nasa has aounc atrvor that unites scientific observation, technology development and human spaceflight activities into a unified approach. first step in this strategy is an astroid retrieval mission with crew aided sample returns on orion. the mission would use therk donenthe mis directorate for astroid detection, worked on an solar-electric propulsion by the space technology mission directorate, and worked on on the orion and sls a human exploration and operations directorate. the experiences learned from this mission will provide a critical framework for human exploration beyond low earth orbit. this is an exciting time in human spaceflight. we've made tremendous progress in the last year and was all planned for the future. i look forward to your questions. thank you. >> general stafford. >> chairman nelson, ranking member cruz, staff members. i'm once again honor to appear before you today to discuss our nation's space program.

before we begin i would like to take a moment to note we probably would not be here today on the specific subject but for the crucial work done back in 1910 by you, mr. chairman, as was former ranking member senator kay bailey hutchison of texas, and by the key committee staff members. and then the house science committee that was headed by congressman ralph hall otexas, and his staff. it was sure work in crafting the nasa authorization act of that year, which mandated the development of the heavy lift a staunch system and the orion multipurpose crew vehicle that has allowed us to envision a robust future for nasa and the american space program. at a time when bipartisan cooperation in congress can be hard to find, your work stands out as a shimple of what

can be done when men andwomen of goodwill are working side-by-side, put aside their differences and work together for the larger service of our country's interest. as a retired air force general officer, former astronaut, and citizen of this country, i thank you, sir. now, three years later, that 2010 act still bears directly on the issues to be directed at this hearing topics, which are of critical importance to our spacprogramto thchoice of resources, destinations, sensible mission planning and funding to reach them, the role of the new heavy lift sls and the orion vehicle in carrying out these missions. thank you -- the new technologies a systems which mr. gerstenmaier has described will be needed beyond sls and orion. in a manner which nasa can most effectively collaborate with international and with its

commercial partnersn setting and reaching national goals is certainly a broad and challenging range of issues. i will try to address them the best i can in the time i have for the opening statement and then be pleased to respond to your question. to put my remarks in context, i would like to go back for a moment back to 1991 and the publication of america at the threshold, america's space exploration initiative. this report was prepared by the synthesis group, a year-long study that was chartered by president george h. w. bush, and i had the honor to be. our charge was examines in detail exactly the questions we are here to address. destinations, missions, sysms, technologies, and collaboration. this was not the first presidential chartered assessment and it certainly wasn't the last. the vast majority have reached the fundamental same conclusions, the core of nasa

and - pardon me, the court national and international goals are critically thought out in space policy has been consistent over several decades, and among all groups studied, possibly the best service is to remind us of the fact and to arizu ese important conclusions. they can serve as a useful guide for us today and in the future if we would only keep them. leadership in space for any society that can aspire to attain it is a key to leadership here on earth and in human society for all generations to come. national leadership comes with the obligations to partners, allies. it is nevertheless the only proper goal to which america should aspire. strategies and policies based on this understanding of leadership have placed our nation in the role of the world's most influential country.

failure to take his influence into space, failure to lead in the development of the next human frontier, will consign our nation to a backwater in which others, but not ourselves, will shape the destiny of human society for the generations to come. america's leadership, its power and its influence in the world of today were not as some once thought a matter of manifest destiny. it was earned usy by eors. we must earn it a new for our descendents, and we must earn it in many ways and places. one of those certainly is in space. thank you and i would be honored to answer any questions. >> thank you jenna. mr. cook. >> chairman nelson and senator cruz, i want to thank you for your continued support for the nasa space launch system and many exploration programs. and for conducting this hearing and the challenges and opportunities of human space exploration. particularly your focus on the

synergy between government and the commercial sector, focusing on how a stable, long-term national exploration strategy can provide and final for commercial ts forth surviving. the time he could not be more critical. the ramifications of the decision you make impact space exploration for the rest of the century. since 2009 i've had the pleasure and honor serving as the director space technology at dynetics incorporated, a 38 year-old employment or business in huntsville, alabama, with a 1400 employees. part to my private sector career i spent almost 20 years at nasa, from 2005 until 2009 i served as manager of the aries projects, the predecessor to the sls at nasa's marshall space flight center. present as the server years in the 1990s with the d.c. xa an x-33 flight demonstrators which te move toar commercial bk space transportation. unfortunately, the fish is that

develop within the space committed over the past or years have to off into the commercial and government space actors against each other and an us versus them debate. this is very unfortunate and counterproductive. historically successful government backed exploration efforts have been linked inextricably with commerce. government private sector partnerships have literally expanded the human footprint. at i core, commercial means that the private sector bears the burden of the investment, the result and risk as was the subsequensubsequent reward. is based in a just economic growth since our founding. private companies can be itle b providing products and services and by creating new wealth. however, commercial success need not be limited to the commercial sector. partnerships between government and industry can produce valuable products that can benefit the space sector as well. the current landscape is ripe with recent success stories.

some that i have some personal examples with, our dynetics first commercial satellite, a culmination of a public-private partnership between dynetics and nasa marshall but dynetics veed its own money, flying the passenger at the capitol for the program, while nasa's for the project on a cost reimbursement basis in terms of the conceptual idea come in jenin capability and facilities. the result, spacecraft ready in 16 months that met rigorous government flights to and. fasts that opera for 24 months, 100%. additionally private industry can take systemsner contract to nasa and the cheese for other purposes. this has been done successfully in aerospace projects are decades. recently in april and open competitive process, nasa selected several sls advanced booster risk reduction projects. dynetics has partnered in developing a liquid booster concept based on the apollo saturn five f1 main engine.

our team is taking a flight proven design originally developed by nasa and is merging it with the best of modern commercial manufacturing techniques. in addition we have an agreement with nasa marshall which allows us to engage experts in propulsion, test and manufacturing and utilize to it on a cost reimbursable basis. it is a win-win. dynetics is pleased to sp tohe e of the competitive process slated for 2015. the bottom line is this. when we keep things simple using models proven and other markets over time, the commercial sector and the u.s. government can work tothharmony, not against one another. for this public-private partnership to succeed, a stable space policy is necessary. a space policy to transcend election cycles.a olprogm shift now away from the core principles of the 2010 nasa authorization act will be ry damaging to u.s. leadership in space. a consistent long-term policy

will allow both government and commercial and government efforts to thrive. laying out clear goals, destinations, and dates will provide an environment in which the market can and will rond. in closing, you must recognize the need to work together as a command and realize that as in many other exploration efforts, commerce and exploration go hand in hand. let's focus on the power of the and versus the tyranny of the or. in doing so we must recognize that the u.s. government play a vital role in undertaking projects they have no business, high-risk, high capital and a long payoff endeavor. we must recognize the commercial means of the private sector bears the brden of the investment and the risk. thank you for the opportunity to testify today. i am excited and optimistic about the future, and i look forward to enabling it for generations to come. i will be happy to answer any questions you hae. >>enator cruz?

>> thank you, mr. chairman, and thank you again to each of the witnesses today for appearing. mr. gerstenmaier, i would like to start with you. there has been much discussion recently about the asteroid rendezvous and retrieval mission. and i would like to ask you to share what nasa sees as the specific benefits of successfully accomplishing that mission. and also, what you see as the most significant obsta succesly a plishing that mission. >> -- a publishing that mission. >> i think in terms of the benefit of the nation like a described in my oral remarks and said in my written test money, this mission bring tother some activities we are already doing. a science fiction director was off visibly looking for potentially hazardous objects that could impact the earth. we will expand that cannot look

for smaller objects that could be part of this nation we described. described. we're also offloading a demonstration flights and about solar electric propulsion. that is needed if we're going to go the distance is to mars with cargo and crew eventually and that kind of timeframe. so again that brings in a sar electric propulsion activity wng to occur. it also gives us a very good destination for the orion capsule and sl -- sos vehicle where we replace this object to be examined. it also gives us tremendous amount of experience in poverty in deep space. it will e vity of men roughly nine days away from return back to the earth and that's very different from or what are today on space station several hours with. going to operate with cruise in those regions and those distant regions, burning havetemechicant amos, all those things really bring together all these aspects, the science mission directorate activities, the space technology director activities and my director

activities, all together and unified nation that really build us a capability a pretty critical for u f so that's really the ata see of this mission. i think the challenges of the nation will be finding a suitable target to return. sometimes talked about him its talk loosely the target is a drawback to this or would. it's not really drug back. it's actually returning naturally to them and system. we will reflect using the gravity of the moon and the gravity of the earth for examination. so it's not going to be easy to find his target equitably there are many targets of this size but we are not really look at this smaller diameter target, or smallergets. et.i think will be challengea a it would be a challenge to capture this target or attach a spacecraft to the. but again i take will try technology. it will drive capabilities. it will be critical for us if we're really going to go beyond low earth orbit with humans and contind to elore spacehe way we have intended. >> now, as i have been educated

by our chairman, my understanding is that the nation contemplates bringing and astroid back into the orbit of the earth, and what would not be a more ypical is the pickl pattern, but rather a more irregular orbit. do i understand that correctly? and if so, could you explain that a little bit? >> actually, the idea is to return the object to a eper retro great orbit, which and reference frame rotating with the ground. it looks like it orbits the moon. 75,000 kilometers off of the ofe moon but if you look at and more of an inertial frame you see the object wanted between the moon and the earth, and it looks like a kind of a little loop that they probably use all. what that is is that's the interaction of the gravity of the men with the gravity of the earth that effectively keeps

this object trapd in that orbit around the moon pics i think the simplest way is to ink of it in a stable orbit around them but if you change reference friends it looks like a curly cue around the earth and the moon in that direction. >> i can buy the orbit is unique in the fact it is stable and it so ebecausweanget ere with theey versions of the sls and with the orion. so we don't have to alter any of the plans went for either orion or fls to go to this region. >> you know, what are the important rolei thinatubcommcans helping nasa articulate the benefits of the space program. to our nation. and i would be curious how you woul articulate to the man on the street why he or she should care about going and getting and astroid. >> i think one obvious thing to

thint isyou know, we have recently had the 50-meter asteroid that attacked the earth over russia. for us to gain experience and understanding asteroids and surveying even the smaller ones, i think it brings real benefits of folks here on the earth. also, the techniques we would a spacecraft to thisand object, those activities will have again direct application to helping to protect the planet. they are not 100% compatible for what you would do for a 100,000 columbus has object compared to this little 70-meter object and many of the experience we gained could be very important as we try to protect our planet from these objects that are clearly in an orbit that could come back and impact the earth. so i think the benefit is, you get a chance for us to be understand what objects are in in private, not just big was also the smaller ones. ultimately, you develop some techniques that can help protect the planet from these objects, if they were to approach the

earth. >> and if i could ask a question to eneral stafford. you have spoken about the benefits come in your opinion, of another manned 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 astroid 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 the orion, you in the support structure for this in the control center at houston, he developed a capability.

and the astroid nation is a nation. it is not the total. and most of the studies that i participated in and what we now have learned from the russians, what they are looking at their long-term plan, that the fia , east an expedition to mars. but from that you learn, i headed this group nearly a year to study that. there's a whole book on it, and what we learned from that, the opional 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 priorities and 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, sir, but why

do you ts? why do you go back to the moon? we had a steering group. we went to the moon, why don't we just go to mars into that? so we dug into this, and it's very detailed, and the book is to regard as a bible as far as space exploration beyond e.o. and tells us what we 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, nasa itself has built any hardware. just like in the air force when i was deputy chief of staff when i had researched if of an acquisition. the air force has never built a piece of hardware. we've done research in cooperation, but it's all been the commercial sectors that built it. but to me there are many reasons that the moon is the next goal to prepare an operation and also it will do a lot of things inspire in gnerns

d onour reent visit to russia last year, in the advisory task force to the iss that i chair, pro bono work, about six or eight other people, we have a russian counterpart. re ther americans to seehink we their proposed start of the next 20-30 years of human spaceflight. it's working its way up through the russian government for approvals and modification. and in that i thought it was very important that they said they w p the same framework that the international space station is managed by. we have it. it is working good. it is a shining light of the internionally, and this iork what the russians have proposed it and that they've showed us that they would use the sls, orion, use their hardware, and that. so it's a unifying portion but

there's a lot of reasons as to why, but the main rea finally, and i think every administration has said yes, someday we should have an expedition to mars. thank you, sir. >> thank you, general. thank you, mr. chairman. >> well, thank you, senator cruz. mr. cook, pick upn that.e got td orion. prior to that robotic mission to capture and bring into this from that.orbit. perhaps we go back to the moon surface. we learn from that. as we are getting prepared for the 2030s to take humans all the way toto take cargo to ma. that could precede the humans.

and tell about how, this is going to be a new opportunity for commercial. >> senator, that's an outstanding question. if you look at the opportunities in space, i think we have two often thought of space as a very niche place. we're only very few people can go at this point in again. i think we have to change themet place, much as the way thomas jefferson looked across the united states and what the potential economic would be for the nation some 250 years ago. so if we look at in that context and you look at somethi such anoutpost, such as an outpost on the moon followed up with what general stafford mentioned, and not only would an outpost like that be an opportunity for new wealth creation, mining of minerals that have been placed on the moon, and then eonstid later on. for thousands of years it could

be mined for various uses, hee hee and 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 a cargo much as was going on with the international space station now where it becomes the market place. you in the tens an adventure hundreds of tons of cargo and initially and then crew, later would have to split outpost of these types. that is a perfect market for a place where the commercial sector to be involved to make investments. so i think the key there is there has to be a long-term plan. there have to be paid to associate with a long-term plan and when the r&r commitments, the private sector will be willing to lay out business plans and business cases to be able to go and move forward. i think a key piece of this in terms of how we go forward with the expiration but i think there is again new wealth creation, logistic support.

really, they key is a long-term plan with those dates that allow in 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, a the experience i had was apollo-soyuz, but as the airport deputy chief of staff i was the manager of, configuration manager of probably one of the largest international cooperation is for defense, and 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, and we contin from at. but it was commercial entities in those countries.

so that was on the dod site. and then from the russian side, what they proposed and what we are doing today in that, again, it is commercial in that all the manufacturing is done by the commercial entities. now then, the market as far as supplying is what has been described here by both mr. gerstenmaier and cook, supplying to the station. but the marketplace today is the united states government, and the partners that are on board. i have had experience both in the department of defense and also now in working there with the russians. >> 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 pretty well with all our contract activiti activities. you know, we picked the rocket designed to be consistent with the budget if i but we are in. for example, we use the shuttle main engines as a primary propulsion system on that rockets we didn't have to go to develop and initially for the solid rockets, excuse me, for those liquid rocket engines but also the solid rocket motors on the side, those came again from the previous programs and have based back in the -- we have to do any more qualification firings of those or any more development of firings of those. we need to do two more qualifying 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 moving forward. i believe the sls is on track. it's still not easy. equipment, the welding equipment have started to shout down in new ons now and get a simple

but we are starting to begin kind of the first series of welds to make sure all that happens, the design work is getting done, the wind tunnel work is getting done. all that has been completed. is not any problems are show stoppers with that but there still a lot of work in front of the teams. but they're very motivated, moving forward and making solid progress towards the 2017 timeframe. >> as 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? ..

those are different ways of operating. we have typically always been able to have an abort motor or easy way to get back. there will be a different way for us to operate in that region. we also need to deal with the radiation environment and space. again, we can deal with it for the short durations around the moon on these 22-day mission is ourself, but as we start venturing out into space it will need to give more shielding, look at some spacecraft design is to shield, so there is some work that is to be done there. also, the humans, we're learning a lot of the space station, how the human body fires or lives or survives in space in extended

microgravity conditions. one year increment, it will be an important demonstration to see how well the human body really performs. the russians of floating space for for your four, so it is not brand new territory, but there not fun with all the detail intimate @booktv instrumentation and detailed medical exams we will get which will really show us if the human body is really ready to go for these extended duration spirit lots of things to learn, both spacecraft was commissioned in vehicle wise to make such as we move forward. >> thank you, mr. chairman. he talked some about the potential for additional commercial involvements in human exploration beyond the lower earth orbit. could you elaborate on what you see as the potential opportunities for both in the near term and in the longer term?

>> senator, thank you very much for the question. it is a good question. from the standpoint, i think you look at in two categories. one is in new wealth creation. this is growing more of a longer-term. you have efforts out there today that i looking at mining asteroids, a planetary resources has plans to do that. also, there is a venture out there called the sixth of looking at asteroid detection taught things of that nature. recently nasa signed the space agreement to look at the broader set of the obligations for the commercial marketplace. and the thing that is a two phase approach. the results of that to my income will be very interesting in terms of what comes. but for new wealth creation in particular, whether it be new space stations and lowered or but college is probably near term, and there are plans in place now and, as well as longer

term and how pose some a little service could be used for mining purposes. you will have to have a logistics' servicing of the 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 together. >> one thing you have referred to several times is potential opportunities for mining. i think it would be helpful if yocould share our best knowledge and predictions as to what the lighting up to these might be, either on asteroids are on the moon itself. >> i would be willing to take more time and response that 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, there is an abundance on the

moon. potential application to fusion power here back gareth. very clean power. the key is to invest in the look us infrastructure. yet can be adjusted valley system, if you will, between here in the mud to get it back and forth with things like sls comes into play, the government and private-sector involvement, bring those -- with the resources there to mina and then bring them home. and there has been a lot of work done on that money usg of wisconsin, as a matter of fact. in platinum has come up, which is obviously a very valuable mineral the could be used back here on earth. those are just two examples. >> thank you. mr. bill gerstenmaier, if congress were to enact legislation that specified a specific, major, long-range goal for human exploration, a salem airbase on the moon or human lattimore's, how long would it

take for nasa to develop these specific description of the component elements that would be needed to be such an objective? >> you know, when we look dead those objectives you just described to my lucidity for with the heavy lift launch vehicle, it is designed to meet both of those objectives. it comes initially 70 metric tons a low earth orbit and grows to 130-ton metric ability to lower reported. that is the kind of heavy lift capability, we believe, to get to mars destination. the zero ryan capsule is also size for that mission. it is more than a capsule. proviso of support capability or kind of an emergency backup. left the team with a habitation module. there's a problem with the habitation module, ryan has enough redundancy in space inside a qb is safe haven for the crew. that is why it is bigger than a

typical capsule. those two pieces of part of the infrastructure. we cattleya the other piece of official action needed. many so these operational techniques described it would come from the extradition to decollate is in a pleasant place mars is a huge step for us in terms of distance, radiation exposure, exposure further crude to micro gravity, just the sheer magnitude of that activity is going to take some time for us to prepare. we have conceptually said to the thirties is inappropriate time, but we can only do that with sufficient funding in moving forward. we have the first pieces already in place with sls and o'brien, soliciting to put the capability together. we will continue to add as we go forward. the extra emission fits in the same scenario. it eventually will achieve those kind of goals. >> thank you, mr. bill

gerstenmaier. my final question i would like to address to general stafford. you are someone who has spent a lifetime of public service serving your nation, and yet been involved in space since the dawn of the space age. other tv and opportunity to respond to the same question that asked mr. bill gerstenmaier and the first-round which is coming if you were talking to a man on the street to million men, young woman today and their individual last, should i care? would differences in the this make to my life? how would you answer the question? >> senator, let me start from the macro and work down to the microbe. recently we lost one of the great journalists in america, mr. allen is the chairman

knew very well. he started-a newspaper which you can now read internationally. travel consistently and still would write a weekly column at the age of 90. he had a pulse of the american people and the stated in this special edition of them made, to be number one of the earth you also have to be number one in space. so for that you need leaders. leaders and partners. to get down to more specific terms, it talks about the inspiration they give still under people. one of the great things that came out of apollo besides the infrastructure, the viejo be -- envy ab and the knowledge of how we do this. the main thing, inspiring you to

go forward. to me it is an inspiration and education. you can do with other things, but to me the inspiration and education and leaders and the work with other people is a man to. i wish i had time, sir, to go into what we have worked on this limb by we should go back the size sell. what the hell would like to a point of, the empress structure now for some of the facility's and bet heavy lift that that act puts forward, that type of vehicle, that sls, would put in @booktv again, 130 metric tons, they said that was a minimum, the floor, not the ceiling. and when the booster shot of

that low earth orbit before kicked out we had 300,000 pounds today the heaviest lift launch vehicle available is a delta for that has 50,000 pounds. at that time some people say, well the stick a bunch of small ones and put it together. but but this is not possible because you have to the build complete reassemble, launched. and then before that, go back nearly 50 years. after president kennedy said we will go to the moon, like the word return. it was decided that all of the upper stages will have liquid hydrogen because of the great impulse to give this. that was the key to the saturn five. today you're forced to spend a lot vehicles to be the of procedures were all excited. it gives a specific impulse in

the measure of of water in 50 seconds verses hydrocarbons which image for the first age 300 solid rocket motors are getting a beer that. you need that hydrogen. there is also a problem. that is, because of the temperature,-4 ordered to degrees, oxygen, to under 90 something, it boils. it tends to boil off. we might get 1 percent, half a percentage a day boyle off. you see where that leaves you. a lot of challenges for bill gerstenmaier and his team to work for. that was the heritage of apollo that we left, how do we get the propellants, facilities command everything to go there. also another thing that center nelson and minority leader hudson put forth in 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 these small diameter rockets that people say they can put together, you cannot have the volume for the payload. you just can't go in and bolted together. you are also working against that all the time. i'm sure you've had people come by and talk to you and your staff. that just wants to put that out there. the inspiration to the and the people. all be happy to provide your staff with one of those books. thank you, sir. >> thank you. >> thank you, senator. ♪ coming back to that point, share with us says you were a part of the apollo program the generation of sciences said and technicians and mathematicians

that the early space programs bond. >> mr. chairman's, amazing to they. in talking to people i get recognized. many people upset the reason that i studied to be an engineer or study to be a doctor or something was because i saw what you did in gemini and apollo. that inspired me. yes dalai wanted to be an astronaut. realize the chances are small, but that still inspired me. that's why i want to be there. so i think such a tremendous fallout still make our country forward. you see where we stand. we still have the best resource development in the world in this country. this technology is what makes this country great. forward and he th lost aion to lot.

>> let's go from the height of inspiration to the depth of reality. mr. bill gerstenmaier, what happens if sequestration across the board continues and affects the nasa budget in 2014 and beyond? brought -- i don't believe we could begin to support the levels. so this is really going to be tough for us moving forward. >> and are you in a position van from your platform of the 2013

budget and what you project into the future, are you in a position to really encourage the private sector to get involved and develop these space exploration technologies and will that are advanced? >> yes. i think again, the budget that was just submitted a release to you have seen, that keeps these programs moving forward. moving forward. we have done a lot and crew world, but there is more that we can do in other areas. we will continue to look to the private sector to partner with them to move forward. i think as mr. cook said, it is really the partnership between the government and the private sector and that needs to be there. we need to use eh other, use the best about the activities to figure out a way to work charlie

together. international is important, and private public partnership is also a tremendously important. >> general stafford, when we were in the great space race to beat the soviets to the moon, they tried, they had this big rocket. that big rocket blew up. tell about that, and tell what happened there and tell about the derivatives of that rocket and how they're actually using it in the commercial sector today. >> mr. chairman, i would be gutted to the best of my knowledge. when we made the commitment to go to the moon the soviet union at the same time made the commitment to go.

again, one of the keys we made, as i mentioned, was a decision to go to liquid hydrogen and upper stages with large thrust engines which we had never done before. also, the first page, building a large rocket engine, a very difficult task. the bigger you get the more they tend to go on stable and explode. and, in fact, w was flying in the gym by missions, the f-1 engines that we had on saturn were still exploding on the test thames, which is not too much of a comforting feeling. but over time they worked out the right injectors. that's one thing that the soviets never could work out, to build a large single chamber engine. and you even said back into the rockets that are being flown, all those muscles. there was really one engine with 4 barrels. already 170 whi hs much

power. they could not get a stable combustion, so they went to four different girls. now, on the large in the one which is bigger than our saturn five he made had nearly 10 million pounds of thrust, but instead, they had 30 engines on the first page. i talked to my dear friend, and he wants the first startup and then explode and blue pieces of tonight kilometers away. and if they did not have the technology as far as the gamble. and so they're going to change attitudes by throwing the engines, which was not aboard thing to do. there were going to use kerosene and liquid oxygen in all their stages, which had impulse, so even though the booster had nearly 10 million pounds of thrust it did not have new the payload to get out there, and

they had too much complexity. now, the engines, those 30 engines they have on the first age was called the m bill gerstenmaier three. taken by aero jet and modernized and called the era of jet 26. they put gambles on them, reject them, and they just recently flew perfectly on the flight by orbital sciences which developed on the booster which will go to supply cargo to the space station. so those are 45 year-old engines , but they have been modernized and evidently worked perfectly, sir. >> mr. bill gerstenmaier, space station, is doing well. the crew up there working on science. hello -- do you have any feeling about sense we extended an law

its life to 2020, what about extending it beyond 2020? >> in our discussions with some of the commercial groups, and you could probably talk to the center for advancement of science and space, their feeling is that if they knew the station would be around beyond 2020 there might be a different market on the commercial side would be interested in using station, so i think we're starting to a hear the kind of groundswell from outside users and other folks that station is proving to be a very vital asset. things that they like to do, research, we are starting to see a lot of work observation bellows go to space station. if the horizon was extended the market might get a little larger, but i think it would be worth a good discussion with the private sector or what they think about that in the face of a bigger market.

i am starting to hear general indications from the community that extending the life of the space station would be a good thing. >> can you speak as to some of the vaccines that are being developed now? >> not actual vaccine work being done. it is more kind of map generic research being done. the two big areas of interest are immune systems, degradation which occurs -- workers and our crews on workstation. the immune systems are not as large one space for some reason. that proves an interesting way how to test potential new drugs that affect the immune system. right to have the ability to take a row here next year bonds space station, and they can be used as a test medium for potentially new drugs are being developed on the ground and

before our pharmaceutical company was taken isn't a final trials, they could do a simple experiment to see if this candidate drug is effective and the indian system -- preventing the immune system from becoming less effective. so there is work going on in that area. we also see gene expression in space that is very different that allows some innovative ways to go look at things such as we have talked for, the salmonella vaccine. can be developed based on indications of the variations to genes from samples of responses patience. quite a bit of interest in both potentially dealing with bacteria and a change in the genes that occur in space and then also in the indian side. both of those are promising areas that have real application . potential new drugs. we could do it in a fairly quick

manner. >> cities say that the human immune system works better in space or less better? >> less better. it does not work as well. >> how about the vaccine? >> again, it can also benefit potentially from the same gene expression. we can get a chance to go look at different ways that the genes are expressed and that could potentially lead to some type of drug that could help. so, again, it is giving us -- what happens in microgravity is it gives us a unique insight into the weight that the bacteria n. jeans expressed differently in space than they do on the ground. the unique change can then let there research and develop new techniques or new ways to protect against a particular disease. there are a variety of them. any bacteria and space, newcomen

novel way of trying to protect against it can be developed. >> i want to ask you, what of 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 that first the. we can gain a lot about how the human performs for a long duration exposure to microgravity. that is an important thing. the station is also a good test bed tillich a life-support systems that generate oxygen, remove carbon blacks i to reprocess water. the systems can be run for extended there rations, and we can develop below maintenance system that does not require a lot of maintenance and does not require a lot of hard work to keep it operating and station. we could prove that on station.

so that long duration life-support system that will be necessary to keep our crews a live can be tested on board space station. in fact our next generation life support systems, we intended to be the expiration systems that will fly in the future. so they're giving us the unique chance to experiment with technologies, we're going to need to go then to the long duration flights. >> and describe how the station will serve as a platform to develop a proposal technology to go to mars? >> again, station is a good platform to check things out. we have been looking at potentially installing small thrusters on station. rihanna assured right to do this are not. they could look at make it, but again, it could be essentially a test facility for those small thrusters. you will also see it in the same vein, seeing a lot of instruments that people would like to add to the spacecraft.

the contenders to the space station, check those instruments out. then they can add them letter to the spacecraft resuscitation is proving to be an interesting proving ground. you will see in the next coming years, some things fly that are flying on dedicated satellites. for example, the carbon observatory that will fly as a dedicated space craft, there will be a companion set of instruments that are essentially the specimens from the spacecraft of full-fledged space station, be a test to space station, and there will also give us insight into carbon generation of the earth. the satellite flies in orbit, looking at carmen generation at essentially the same solar time every day. use the car regeneration at one point in the day. that is a good standard that is understood. you can look good car regeneration from that, but then because it flies in the different or become a looks at the same locations but at different times a day. that would give the researchers some insight into carbon

generation throughout the day. it gives them a different look at the same phenomenon that they are done with their dedicated spacecraft. and as synergy between the dedicated spacecraft that takes science in a more pristine, organized manner and then there is the space station because of its orbit the picks of data in a little more random fashion that adds to that data and builds a better mine data set. you will see that is why there is an aerosol experiment and a rapid step that would set wins in front of hurricanes. so there is a whole variety of uses of station and started to come about. >> well, you just made the case, if we're going to mars and 2030, why the space station on to have the live beyond the 2020. its legal life now. in law. and mr. cook, we will let you be the cleanup hitter. tell us if you have got an

extended life of the station, whatoe pvate sector think of the development and use of the properties of the station in order to benefit the private sector? >> thank you, senator. i think mr. bill gerstenmaier has laid out, for example, vaccines and the things that can be manufactured in space, new vaccines, materials, things of that nature, but i want to flip it around the other way. there are technologies that expand terrestrial companies today. for example, one of the experiment's been ready to be flawed and international space station is an added to manufacturing experiment where you can literally grow parts and space. there are printing technologies that allow you to do that today that are commercially available now. this allows for a whole new market to be able to take it to the space station and tested out and demonstrated, build prototypes and some parts.

how does that work in space? as well as a dozen the ground? there are technologies that we are involved with in terms of taking commercial nanotechnology property much in the metal or a combination of metal and ceramics. and so you use the space station compared to mars hitting logistics' up and back is fairly straightforward. once we go to mars or anywhere else beyond lower-court we have to be able to live off the land. so using the space station as a platform for companies that have technology to expand the space, i think added manufacturing is one very exciting area the longer term space station would allow overtime. >> and mr. bill gerstenmaier, i keep saying the final question,

but we have been joined by the state senator from connecticut. explain here in this space station or retrograde orbit. .. interesting region of space. some of the things we could do there potentially our mars sample return. we could use a similar technique to return a sample from mars to this region. once it's in this region its table for an extended period of time, probably multiple decades. so, therefore, we could pick up more samples from this region.

some of the points are interesting gravity locations around the moon, potentially removing the ring from coast to deep space destination 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 of the moment to assist us and going to the series of destinations throughout the universe. >> so you could bring more simple back, park it in retrograde orbit, and go sample it whenever you want to. because it would be stable. we would have access to get to it and you wouldn't have to work on it by taking it all the way back to earth, and then coming out of the earth, back into orbit. >> that's correct. especially the asteroid. if it was there, one visit

probably doesn't give you enough information. you would want, you know, talked about some of the potential minerals and things on the asteroid. asteroid. you can actually spend several visits there to go look at it, characterize it, understand our asteroid really a viable source of material for missions into space. so again, 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. >> since the amount of gold on the planet would fill two large swimming pools, mr. kirk, if you find an asteroid that's got gold in it, i would say our space program would be off and running. >> yes, i think that is a fact. and i think again, that's where space, me doing space, is not just a novelty and not just the

niche place, it is a marketplace that can be utilized for the benefit of mankind year, growing our economic sphere. that's the approach we need to take. that's the approach that was taken, and almost every other exploration effort i can think of over history and we got 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, the senator from connecticut, senator blumenthal. >> thank you, mr. chairman. on that note, i was thinking the last gold rush was by horse-drawn wagons a week, 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 was absent here through the wonders of our modern communications system. and also, thank you to our

chairman, senator nelson, for his leadership year and on this committee. i have a somewhat more mundane area inquiry, and i won't belabor it because of we are near the end. but i am interested in how nasa as its mission changes, new programs are developed, constellations unfolded into a o'briant, 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 award 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 more 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 procurement. so there's pretty, and the federal acquisition requirement there's a birdie strict set of crotchety we need to meet cannot go compete. so our clear preference is we would go out and compete in less there is demonstratable advantage shows overwhelming advantage to the government for us not to can be. and things would become 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 a competitor in this field? that's another consideration. so would logically have to go through all those various constraints, understand those, and then if we show that there really is no advantage to competition, then we could potentially award justification for other than full and open

procuremen to one of the existing companies. and we did that when constellation went away. we went through each one of the major components. we looked at what was justifiable, where was a significant advantage for us to continue the existing contract, or if we went out and competed some of those contracts. our experience shows would make tremendous progress in sls, and someone that is because we realize exactly what we said in the procurement timeframe. on the core booster, we argued that the upper stage for the constellation program was almost identical to the core stage in manufacturing. so we did not compete that particular contract. and we were able to make tremendous advantage in that activity as evidence where we are, a little over two years away from when we did that initial transition and we are already in the process of being up to manufacture hardware next year. turn around, and that was justifiable and evidenced by the actual performance.

but our preference is clearly to do competition and open it up. i am continually surprised by what the market can provide. i think competition is extremely healthy force and we need to look for competition wherever we can. >> what would be some example or an example of what you decided to compete compared to the to to you just mentioned where you decided not to compete it? >> i'm trying to think through some of -- i would say for like the cargo systems that we're using a space station, when we decided to take a cargo, cargo resupply services contract we actually put that out for full and open come addition. 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 have lowered the cost of cargo to space station

because of the competitions is probably an example of where convocation was good and help get us a better value for what we're trying to do. it was also interesting the way we did that procurement. typically, we build a spacecraft or contract up for the spacecraft itself but in this case we didn't. all we did was acquire the service. so that's another thing that is good for us is when we, there's a market and they could potentially use that rocket to lift scientific payload and other things, there's a market beyond what our neediest, in that case just asking for the service is much better than us actually asking to have the rocket built and then us, the government owning that rocket. that's another thing you will see a lot of us doing more on is actually just looking for the service. and even the expedition flight test that will occur next year when we look at the heat shield of the all right in capsule, we did that in a unique way. typically we would have procured the launch vehicle. we would've integrated the orion

capsule on top. what we did there again is we chose that as a service contract. we want the entry he cheat -- entry heat data. we left it up to the contractor to determine what rocket they would do the integration of the all right and on top of that rocket with us watching. so nasa is not directly involved. so again we're looking at i would say an innovative way of getting a standard service that doesn't involve government ownership, but lets the market could do that. that's another extremely effective when i think we been able to lower some of our costs to get better value for the government. >> one last question to other areas we we haven't made that decision about whether to compete it or not compete it? >> for some of our future work thomas sitting out in 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 service or capability we need and want that approach ought to be.

we review that with the senior leadership or the agency would go through a formal process to do that. there's quite a bit of work out in front of us. >> my understanding is that, if i can put it in lawyer terms, not scientific terms, that the burden of proof in effect is on the argument that there should be no competition, you are willing to that, there are clear advantages in cost, time or whatever to the united states. but otherwise, you would go to compete root? >> yes. and that's what the federal acquisition rules and regulations require. >> 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] >> join us tonight on booktv. we will hear from authors.

their books aren't you online and other technologies are influencing how we communicate. that gets underway at 8 p.m. eastern here on c-span2. president obama briefed reporters earlier today to discuss syria among other issues. will have his news conference for you tonight at 8 p.m. eastern on c-span. than a conversation with supreme court justice clarence thomas. justice thomas recently discussed his life and career. that is tonight at 9 p.m. eastern on c-span. >> former president bill clinton was at his alma mater georgetown university early today given the first images of speeches on his life. we will show the entire event later in a program schedule. but here's a brief look at some of his comments. >> one of the great good news stories of the turn-of-the-century in the early

21st century is the explosion of the nongovernmental movement. the united states has about 1 million foundations of various sizes, down to community foundations, and up to the gates foundation. which is not only the wealthiest but arguably the best. they do wonderful work. and that doesn't count the 365,000 religious institutions all across our country of all different faiths that tried to do public good as a part of their mission. half of those foundations have been established since 1995. and you see it in india, half a million active ngos based in india, and there are a lot more registered that may or may not

be activated. i think depending on the financial means of the people who registered them. china has about a quarter of a million registered, and probably at least that many more not registered for fear of political reprisal of one kind or another. russia used to have 150,000 but mr. putin seems to think they are a threat. and in some ways they are. ways that by and large are quite positive. i remember thinking about the freedom component of the ngo movement when there was a hilarious cartoon that appeared in many newspapers in america at the end of my comment middle of my second term when i was in a long running battle with the republican special counsel, kenneth starr.

so in this cartoon i'm talking to the president of china, and i said, you ought to allow more political liberty. and in our country these people going to keep putting in jail. they would be out there speaking on the street corner. he said yeah, and in our country kenneth starr would be -- would be in jail making tennis shoes. [laughter] that was the cartoon. so it was really fun in. [laughter] made me reconsider my whole position on liberty, but anyway -- [laughter] no the point i make is this ngo movement has also been a thorn in the side of governments, and they're like anybody else, they are not always right but they basically pushed the envelope of liberty and political responsiveness in a way that i think is very positive. >> there are two infamous

prisons in the western u.s. one is the human territorial prison, and the other one is alcatraz. there's something in our culture, in our consciousness of what would have been like to be in a prison like this? the human territorial prison was considered to be a model and humane institution in its day. and this was a solitary confinement cell, any major infraction, talking back to a guard, not giving your respect to, you know, the authorities. it was really, if they couldn't deal with you, a dark cell could deal with you. of all the treatment, this was the place you didn't want to come because you did not have a latrine. you got bread and water once a day. occasionally there would be more than one person in your, and one

great big prison breakout, there were 12 people in here. now, folklore, we have no proof of this, that said amine card in the pitch black you feel something coming down the air shaft and it could've been a scorpion or a snake. now, that is just something that's not documented. documented. >> from 1876-1909, the yuma human territorial prison was home to more than 3000 prisoners including 29 women. this week and discovered history and literary life of yuma, arizona, saturday on booktv on c-span2 end sunday at 5 p.m. on american history tv on c-span3. >> iowa senator tom harkin recently criticized the government for using funds from fitness prevention broke rams to help set up insurance exchanges under the 2010 health care law.

the chairman of the appropriations subcommittee on health express his concerns with health and human services secretary kathleen sebelius health and human services secretary kathleen sebelius who use either at a budget hearing. the secretary said many of the services provided by those programs would be required and house plans offered on the exchanges. which is scheduled to begin enrollment in october. the president's 2014 budget request includes $80 billion for hhs, of nearly 4 billion over 2013 funding. this hearing is just over two hours. >> [inaudible conversations]

>> [inaudible conversations] >> the subcommittee on labor, health and human services, education and labor will please come to order. madam secretary, welcome back to the subcommittee. i want to start by commending you for the outstanding work you're doing to implement the affordable care act. president obama signed into law three years ago. since 2010 some 6.3 million seniors have received more than

six put $1 billion in discounts on the prescription drugs. lash almost 40,000 seniors in my state of iowa said an average of $660 a year. more than 3.1 million young adults are staying on the parents insurance until age 26. most important of all 105 million americans have received a free preventive screening our service because of the affordable care act. your department is carrying out these reforms with great skill, and i thank you for your leadership. more work remains of course. president's budget request for fiscal year 2014 includes additional funding. at semester operating the department that will allow consumers and small businesses to compare private health plans. as chairman of both this subcommittee and the health committee, the authorizing to me, i'm determined to do everything i can to help this effort succeed. however, madam secretary, i am beyond, i am beyond upset, beyond upset that the

administration helped pay for the affordable care act in to your 2013 by raiding the public health and prevention fund. and maybe you just don't know how angry i am about this. this is a 20 year effort, 20 to effort to get more focus on prevention and wellness, and the aca provided the opportunities to change. i have been saying for over 20 years we don't have a health care system in america. we have a sick care system. if you get sick you get care. and we are good at it. we have great surgeons and great doctors. once you are sick you get great care in america. but where we have failed, where we have failed miserably is keeping people healthy, preventing disease and illness in the first place. every study, all the studies all these years show the payback on

prevention. it's incredibly high. and yet we cut it and we cut it like dodos. we wonder why health care is going through the roof. so when the affordable care act was being developed here, some of us, i included, thought of not just th just a way to pay bw do we pay the bills, how do we do it more efficiently and more effectively? but how do we reduce chronic disease through prevention and wellness programs? in other words, a change, to begin this change, to think about having a true health care system in america where we support people from the earliest times, every aspect, not just in a clinical setting, that's important, but in our workplaces, and our schools, in

our communities so that we have a regime of wellness and prevention in this country. the prevention fund is working their children are being immunized, people are quitting smoking, communities are fighting chronic diseases, more people are being screened for hepatitis c. rotting prevention we know these efforts can improve people's health and lower health care costs goes against the very mission of health care reform. rating the prevention fund to just figure out how we pay the bills that would set up a structure just perpetuates, perpetuates our unique costly american sick care system. i'm sorry to say that this administration just doesn't seem to get it. i just don't seem to get it. first of all it was a $5 billion

raid last year on prevention, this year is another $332 million raid on the prevention fund. and madam secretary, i read your statement last night. a great statement as far as it goes. doesn't even mention prevention. doesn't even mention it. only in mental health, mental health and the infectious disease surveillance program which cdc has been doing for over 50 years. it's sort of like the prevention fund and but we did is sort of an afterthought maybe. it's not in your statement. is that indicative of the administration's approach? that is just an afterthought, it can be rated, can be done away with. well, we are going to do another bill this year. i'm hopeful we can get it throuh and i hope that we can allocate

the money as we have done in the past. but this strikes right at the heart of trying to change this system. another matter of the president's budget does some good things to get increases keep arteries like child care and head start, nih. especially interested in how hhs and the department of education plan to work together on the president's early childhood education initiative because both hhs and indication that parts of that. and we need to know more how that is going to work in terms of how we allocate funds on this committee. so madam secretary, i look forward to hearing your testament. first i yield to senator moran for any opening remarks he wishes to make. >> mr. chairman thank you very much. madam secretary, welcome to the subcommittee. i was reminiscing and my own mind the first time that i served in public office together

was 1970 but which i as a freshman member of the kansas senate assigned to be on the indian gaming committee come and you and i spent a number of years with a federal judge negotiating. at least i would've never envision a circumstance in which we find ourselves this morning. it's a pleasure to see you again come and welcome back to the subcommittee. obviously a difficult economic environment. congress struggling with difficult budget decisions. concern that i have with department of health and human services budget is a 10.5%, 6.9 billion above current spending levels. specifically the budget includes significant 1.5 billion request to set up health exchanges, insurance exchange is. i'm concerned that we still don't yet know the full cost of the affordable care act.

last week the department announced it would transfer fiscal year 2013 funding from the prevention fund that senator harkin described to fill some accounts in the health insurance exchange implementation. this decision takes public health dollars and workforce development funding supported by the prevention fund and diverts it towards what i believe to be the administration's political priority, implementing the exchanges. in fiscal year 2014, the taxpayer is handed another unexpected bill from 33 states including our own -- our own home state which have declined to set of exchanges. it turns out the blank check that was available for states to set their own state-based exchanges was not extend to the federal implement the changes in the 33 states that did not implement the state exchange. the administration struggles to find funding to implement the affordable care act. is critical that we don't continue the haphazard rob peter

to pay paul strategy. we did need to set thunderbird to assure balances in increase, certainly across all aspects of our nation's health care system. one of my priorities in congress has always been to ensure that americans have access to quality, affordable health care in whatever setting, whatever place in the country they live. therefore, a significant emphasis on rural, and i'm concerned with other proposals within the department's budget that we were disproportionate affect kansas and other rural states, jeopardizing health care access and threatening the survival of small towns. in particular the issues when you train -- transfer money from the prevention fund to fund the exchanges, rural health care it is affected in a number of ways, including rural access to emergency, flexible the grants. section 317 immunization program, the critical hospital

program that i also want to mention another part of the budget, the continued attack on critical access hospitals, reduction in the percentage of cost-based reimbursement. the mileage issue, and so i raise genuine concerns with an issue that i know you're very familiar with. the real aspect of certainty transferring funds from the prevention fund to set up exchange is. i'm also interested hearing, and i'll ask the question about the legality of transferring money from the prevention fund by what authority is that possible. again the president's 14 budget cuts medicare reimbursement a critical access hospital programs, eliminate the destination for hospitals that a few than 10 miles from another hospital. and if that's an appropriate decision i don't know how it's appropriate retroactively.

it cuts in proposals, programs i just outlined, in large part because the transfer from pension for the other 40 working with you to ensure that these proposals are not adversely affect health care access for any american. finally, as we continue to work with unlimited budgetary environment, funding should be targeted to programs that we know she'll proven results and, therefore, i'm pleased to see the department has requested additional 471 million increased to the national institute of health. focal point of our nation's medical research capacity. while medical research has yielded significant scientific discoveries that extend life, reduce illness, lord health care cost but i'm sure economic growth and nih to me is one of those great aspects in which in my view whether you come from the perspective of a caring person wants to make certain everyone has access to the

latest technologies and life-saving advances or you want to make sure that we save every penny that we can't, medical research does both. and i'm pleased to see the administration budget request increases the funding for nih. i believe we need to continue the federal commitment to advancing that research. i worry that if there's any break in that pattern that we will lose those who are committed to scientific research on our path and we want to remain a global leader. we don't want people were considering, to pursue a career in medical research to decide that the funding is on again off again. so thank you, madam secretary, for your presence here today. i look forward to our conversation. mr. chairman, i am committed to working with you to find fiscally responsible ways to address are issues. >> thank you very much, senator moran. kathleen sebelius became the 22nd of the department of health and human services on april 29, 2009. in 2003 she was elected as

governor of kansas, served until her appointment by president obama as secretary. prior to her election as governor she served as the kansas state insurance commissioner. i believe this will make the second or sixth appearance before the committee and we welcome you again. madam secretary, your statement in its entirety will be made a part of the record, and please proceed as you so desire. >> [inaudible] >> chairman harkin, ranking member moran, it has been a while since 1989, and the indian gaming debate, and good to see governors, senator, secretary alexander. and i really appreciate the opportunity to discuss the president's 2014 budget for the department of health and human services. this budget supports the overall goals of the president's budget

by strengthening our economy and promoting middle-class job growth. it injures that the american people will continue to benefit from the affordable care act, provides much-needed support for mental health services, and take steps to address the ongoing tragedy of gun violence. it strengthens education of our children during the critical early years, and to help ensure they can succeed in the 21st century economy. it secures america's leadership in health innovation so that we remain a magnet for jobs in the future, and we helped to reduce the deficit and a balanced, sustainable way. i look forward to answering your questions about the budget, but first i would like to briefly cover a few of the highlights. the affordable care act is, chairman harkin recognizes, is already benefiting millions of americans and our budget made sure we can continue to implement the law. by supporting the creation of new health insurance marketplaces the budget will

ensure that starting next january americans in every state will be able to get quality health insurance at an affordable price. our budget also addresses another issue that's been on the wall of our minds recently, mental health services, and the ongoing epidemic of gun violence. while we know that the vast majority of americans who struggle with mental elvis are not violent, recent tragedies have reminded us the staggering toll that untreated mental illness can take on our society. that's why our budget proposes a major new investment to help ensure that students and young adults get the mental health care they need, including training 5000 additional mental health professionals to join our behavioral health workforce. our budget also supports the president's call to provide every child in america with access to high quality learning services. it proposes additional investment in a new early head start childcare partnership and

it provides additional support to raise the quality of child care programs and to promote evidence-based home visits for new parents. together, these investments will create long lasting positive outcomes for family and provide huge returns for children and society at large. our budget also ensures that america remains a world leader in health innovation. it makes significant new investments in the nih that will lead to new cares and treatment come and help create good jobs throughout the country. provides further support for the development and use of compatible electronic health records systems that improve care coordination, and it includes funding to ensure that our nation can respond effectively to chemical, biological and nuclear threats. i also want to especially thank the committee members for your support of our efforts to provide a safe environment for our unaccompanied children who enter our country.

as you know, we've seen a growing number of children coming into the country without any parents or guardians, and our budget includes additional funds to help ensure an estimated 26,000 unaccompanied children are safe and healthy. even as her budget invests in these critical areas that also helps reduce the long-term deficit i'm making sure that programs like medicare are put on a stable fiscal trajectory. medicare spending for beneficiary group last year at just four-tenths of 1%, thanks in part to the $800 billion in savings already incorporated into the affordable care act. in the president's 2014 budget would achieve any -- achieve even more savings. the budget will allow low-income medicare beneficiaries to get their prescription drugs at the lower medicaid rate, resulting in savings of more than $120 billion over the next 10 years. in total this budget would generate an additional

$371 billion in medicare savings over the next decade on top of the savings already in the affordable care act. to that same end, a budget also aggressively reduces waste across our department. it includes an increase in mandatory funding for our health care fraud and abuse control program. and initiative that save taxpayers nearly $8 for every dollar we spent last year. and it supports additional efforts to reduce improper payments to medicare, medicaid and chip coming to strengthen our office of inspector general. this all adds up to the budget guided by this administrations north star of a thriving middle class. it will promote job growth and keep our economy strong in years to come while also helping to reduce the long-term deficit. i'm sure many of you have questions and i'm happy to take those now. thank you very much again, mr. chairman.

>> thank you, dam chairtry. we will start round two of questions. since you didn't mention this in your statement and in a written statement nor in your verbal statement, i hope you don't mind if i start talking about prevention. i'm deeply concerned by the presence plan to eliminate the regional program, the racial and ethnic approach. african-americans and latinos are nearly twice as like a dove diabetes and our non-hispanic whites in this country. shocking 18 points 7% of all african-americans aged 20 or older have diabetes. according to the american diabetes association. these as there is a desperate important as we think about how to improve the health of this country and bend the cost curve. clearly we have to work with the leaders of these committees if we are to have an impact. in 2001-2000 physical activity rate among minority population in reach communities increase

from 7% to 12%. that may not sound a lot but compare that to reduce average in the general population of two to 5%. from the places where reach is working, physical activity grew to three times the rate grew elsewhere in the country. this is staggering success. so i have to ask, if the administration is really concerned about been in the cost of health curve why would you eliminate a program doing such important and successful work? >> mr. chairman, i first of all want to applaud your incredible leadership and tenacity on prevention. you have been trying to change the focus of the health system as you say for well over two decades, and have been uniquely focused on this initiative and successful in creating for the first time ever an ongoing stream of funding in the prevention fund, and that's a

huge step forward. i think there's no question that this budget represents a very difficult decision, but in the case of the health disparities initiative, but we feel very strongly and i think has been proven by data throughout the country is that connecting minority communities with the health home and ongoing insurance benefits may be the single most successful way to make sure that preventive benefits are available to every family, to every person day in and day out. and so we are, as you suggested, focusing some of the prevention fund dollars on not building the exchange is, but on the outreach and education effort to make sure particularly in the most vulnerable minority communities and the most underserved communities that have access to the prevention benefits which are now, by law, part of insurance coverage. and we feel that those efforts

combined with our ongoing work in obesity and initiatives led by the first lady and a number of the presidents physical fitness and nutrition council and areas that we are really aiming at, changing school eating patterns, changing food deserts, driving down obesity rates in focusing on tobacco, that those will be enormously successful. >> reached was funded at $84 million in 2012. 13 million, 54 million. 54 million just for year 2012. there were 139 in our bill, 49 from the prevention bill. i don't know what fiscal year '13 theaters yet will get the latest week. but in the fiscal year '14 budget request the total is zero. nothing from us, nothing from the prevention fund for a

uniquely targeted prevention program over the last several years that's proven to work. i ask again, why are we zooming out this program? >> again, mr. chairman, i think this budget reflects difficult choices. and we are focusing an enormous amount of effort on reaching people and connecting them, not just with a one time program our one time effort, but with ongoing health care and preventive benefits which has been proven to be enormously important in maintaining and continuing good health. >> well, let's see. your budget is how much was at last, this last year? how much was your budget total hhs budget last year? this year, fiscal year '13.

>> discretion and medicare are just the discretionary? total outlays are $967 million. mandatory -- >> got it. 967 billion, and yet we can't, we've got to take $54 million from the reach out of $967 billion. well, i'm sorry but what i look at that i look at the other invasions of the prevention fund again i get back to where i started. this administration doesn't get it. you know, we just keep trying to think of how we pay today's bills can how to get people covered if they are sick today. that's important. but that's all we're going to do, we are looking at the next 30, 40 years, going after the

same chronic diseases we've had in the last 40 years or i just, i'm sorry, i just can't buy, out of $967 billion, 54 million has to come -- i'm just like that one program, the reach program. i'm not talking all the other prevention funds that are being invaded. but again, i don't know what the will of this can be will be but i can tell you that as force this chairman is concerned, this is not good to take that money from the reach program out of that. so we will have to think about that when we move ahead. >> well, mr. chairman, again, i know another priority of yours is the community transformation grants. grants. >> exactly right. >> there is a lot of duplication between reach efforts and

community transformation efforts, which are focus on many of the same disease prevention initiatives. and the fund does continued the community transportation grant program, not only in 2013 but in 2014, tries to maintain the level of funding. and continue those efforts focus on prevention of chronic diseases for the communities of color and minority communities that the reach program did focus on spend i'm more than willing to take a look at that, if there's some duplication, that's fine. we will straighten that out. just one prevention program that has been pretty successful. >> mr. chairman, thank you. i want to for start with the question that indicated i would raise, which is the authority by which you can transfer the funds to pay for the federally created exchanges. under the affordable care act the prevention fund can be used

for quote programs authorized by the public health service act for prevention, wellness and public health activities, including prevention research and health screenings such as commuter transmission grant program, for preventive benefits and immunization programs. health insurance exchanges are not authorized under the public service act nor do they fit into the listed criteria. what authority does the department use to move prevention fund dollars health insurance exchanges? >> well again, senator, i think i would disagree with the characterization of your interpretation of section 4002 of the act. we are not using prevention dollars for building the marketplaces, for the hub, for the i.t., for the call center. what we are doing is focusing some resources from the prevention fund on education and outreach to make sure that eligible individuals understand

what benefits they are entitled to receive, and how to actually in role so that they can get ongoing prevention coverage. so we think it fits very well in the education and regarding preventive benefits. every insurance policy sold on the exchange marketplace and every state in the country will have preventive benefits available with no co-pays and no insurance. that's a huge step forward, and that is what these funds will be designed to do. the education and outreach based around the country for, as you suggested, the marketplaces that the federal government will be operating. >> so the president's budget request does not take money from the prevention fund to create the exchange, only to provide money necessary to educate people about -- >> it will be for education. >> housing does the president's budget address the issue of the

33 states that have come at least at this point, do not create a state exchange? >> that math is a little wrong. we have 31 states and the district of columbia who are either engaged in some kind of partnership or fully running their own exchanges. said the characterization that there are 33 states who have given us over to the federal government is not quite accurate. having said that -- >> twentysomething? >> there are 32 entities, 31 states and the district. so in the states where we are operating the marketplace and for the federal hub, which is a connector that every state would use, we have used the previously allocated administrative budget to actually build that infrastructure. and that is paid for. we had $1 billion in original

administrative costs dedicated to the exchange moving forward. states have additional funding sources. if they're operating their own exchange, that they can draw down. but our administrative costs have gotten on the department of labor and the department o depae treasury, but for hhs to build infrastructure that we need for the federal hub, for the i.t. center, for the call center. >> i assumed expectation was that most, if not all, states would create a state exchange and that hasn't happened. up nearly 18 is the number of states that have not. your ability fun and create a fund to create a federally created exchange exists within $15 within your appropriate budget to? >> as you know and the chairman knows, we did ask for additional resources for 2013. there was an anomaly as for by the administration did most of that funding would've been for

education and outreach, the call center. we did not receive any additional funding from the continuing resolution. so we are still operating at the 2012 level with the original $1 million which was allocated for administrative overhead. spent what is the expected cost to create the federal exchanges, instead of the state exchange? >> the budget before you request an additional $1.5 billion. i think a good news is that wendy affordable care act was passed on the congressional budget office suggested that the administrative overhead should be in the 10 billion-dollar range, as they projected the cost out. we received $1 billion with the funding that came along with that law, and we are requesting at this point an additional $1.5 billion. spent my times expired. i assume we'll have additional rounds. >> thank you, senator.

senator alexander. >> madam secretary, welcome. good to see you. >> thank you. >> where did the definition of a full-time worker, where did the definition that a full-time worker is someone who works more than 30 hours come from? i can't find andy act. it sounds more like friends than the united states. >> -- like friends. i assume it was the discussion as you know, the regulations were written by hhs, the department of labor and treasury it was a tried department initiative, and if you're asking exactly what the nexus of the 30 our -- >> i just wonder why, you know, typically basically the law -- >> it's in the statute. in the affordable care act. that is what osha's told.

>> that's where senator harkin god or whoever wrote it in the united states. normally we think of full-time work week at the 40 hour work week. i was wondering about the rationale for that because don't you think with a 30, the rule that says that if you work 30 hours, you could be considered a part-time worker is in some cases becoming a disincentive for full-time employment if some companies look at the health care law and say one way we can avoid it is a more part-time workers, and so we've workers across the country who are going from full-time at 40 hours to part-time and 30 hours. so they're not only no insurance but no full-time job. >> well, i am hoping that that will not be a decision employers may. iink that when the law was

written there wit was great care taken to try and capture what is a snapshot of the small employer marketplace. any employer with less than 50 full-time equivalent employees is totally exempt from any aspect of the law, except for the fact that he or she may have the opportunity for the first time ever to buy affordable coverage in a larger pool without having to join an association or be a member. i think that as people get more familiar with what the rules are and are not, we're likely to see the kind of input data lease i had for the couple of years before this law was passed. but certainly as governor heard each and every day from farm families and small business owners was that they had no access to affordable health coverage. they felt themselves to be disadvantaged -- >> let me --

>> competition with larger competitors because they couldn't offer the benefits. >> i was would use asking where the 30 hours came from. >> it's in the law. >> it seems to me to be providing a disincentive for full-time employment. but i've a different sort of question. i would like to ask you to comment on. under the new health care law one of the things that can happen is a problem for those on medicaid, which some people call churning. it usually affects those who make between 138% of poverty level and 150%, and through basically no fault of their own, they might be going back and forth from the exchanges to the medicaid program based upon their change in income. and it has been suggested that one way to provide more certainty for those lower income working people would be a plan that would help them own their

own insurance so that as they went back and forth from different income levels they wo be less, their lives would be simpler which will be good for them. arkansas has made it -- made an interesting proposal which you seem to have a pregame concert. it incorporates different ideas, and governor of tennessee has watched the very close to. i know he is talked with you about what he calls his tennessee plan for using the money that would be otherwise available for many of those medicaid recipients. i tried to follow the rule, the can on the one governor in tennessee at the time and i am not it right now. but i would be interested, i do wonder into fear with your discussions with governor hazlett but i hope to continue and i hope they're successful. but i wonder if there's anything you might say about the general idea of the arkansas plan and the tennessee proposal that

governor hazlett has made any report you might have on its status. >> well, center, i figure out the correct that i have been in close touch with governor haslam. we had a couple of meetings in person and several phone conversations and less couple of months. i think he is evaluating whether or not expansion of medicaid is beneficial for tennessee looking at all the cost estimates and looking at the health benefits for individuals and his a lot of information that we been providing them. we are waiting to receive a specific proposal from our -- we're serving in close touch with governor pbs was governor kasich in ohio and governor scott in florida and some others around the notion that medicaid dollars could be potentially used to purchase coverage from a

company offering coverage on the exchange. and as you say kind of eliminating people going back and forth. as you know, i'm sure that tennessee has a similar situation in kansas but most of the medicaid program is offered right now by managed care company bigger contracts already there. those companies will be providing benefits on the exchange. so we are working around sort of premium assistance plans. there is more flexibility in the original medicaid law for sharing, for different kind of benefit packages for those up of 100% of poverty. and think governors are very intrigued by creating a format where particularly for the higher income, low-income workers, there would be a package that looked very similar to what's in the private market. and have the ability if someone's wages continue to rise, that they would stay with that plan. so we are waiting to receive

this big proposal from arkansas. we have made it clear that we would be open to some waivers from states looking at this, this kind of interpretation. and our interest in and have told governor haslam that precluded pics i think his weight is exactly what our -- but as i should with you, the arkansas bill did pass both the house and the senate by a three-fourths vote, and they will now submit a proposal to medicaid. >> thanks, madam secretary. thanks, mr. chairman. >> my friend asked me why got this i had to check with my staff. and the secretary was right, refresh my memory on this. we checked with the department of labor to find who is a full-time employee, and the secretary said, quite correctly, that the snapshot was taken at the time want to employers, writ

large, what do they use as the cutoff for employee benefits, it was a full-time employee and who is not. and it came in at basically 30 hours. that's what was written in. so that's where came from. that's what employers were using at that time. to decide whether someone was a full-time employee or not. that's all i can figure out. senator pryor. >> thank you, mr. chairman. and thank you, secretary sebelius for being here. we appreciate you very for much but i want to follow up on senator alexander's question in a different way. i want to say thank you, thank you for working with governor beebe. i know that you all have a good working relationship, and he signed that bill into law yesterday, and i'm sure there's a lot more work to be done but i just want to say thank you on that. because you are innovative and we're trying -- we appreciate that very much. it will make a huge difference in my state.

the second thing want to ask about or talk fact that we have p pediatrician graduate education. i think what a lot of people don't completely understand is that a very large training funding for training of physicians across the country comes through medicare. not much of that is for pediatrics though but percentage of doctors whod ke th yo just about your graduate we are looking for primary care physicians, as we're looking for ways to train more doctors and get more doctors in the field. and the fact that states are under tremendous budget restraints and restraints. i would just like to know how you think we couldt

pediatric care physicians for the needs we have in this country? >> senator, i think first of all, i want to say that i was pleased to work with my old colleague, mike beebe, and not only has he been very innovative about medicaid expansion ideas, but we are doing some really excie whe .. health care system. to shift additional spots into

primary care and geriatric care and pediatric care from specialty areas, but the budget as i say those reflect the direct cost and we are hopeful the same number of residents slots will be available going into the future. >> thank you. i think that many of my colleagues here would share that same general educational slot to make sure that we train and equip the best physicians we can and hopefully a lot of them will end up in rural america, depending how you count it about 20% of the populations but only about 9% of the doctors in the process it's a big expansion of private health care in our state. it's a program that for years

has worked and our consultants work very well, and i am just concerned that with the president's budget we may be jeopardized in or at least stunting some of the progress that we are seeing in my state. are we going to continue the funding? i would love to come back to you and respond. also with the rural hospitals, critical access care hospitals. when i talk to the rural hospitals in my state they tell me the budgets are tight, with some of the changes for medicare bills are making them even tighter and then you throw the sequestered on top of that and now we are talking about a 1% cut in the budget so critical access care to hospitals really

impact rural america and i would like to get your thoughts on how we can help these hospitals to i know they are working on the efficiencies, they are trying to do all they can but how we help hospitals keep their doors open? >> welcome senator, as the ranking member already suggested, coming from kansas we like to refer to your state as our kansas as much as possible. i am fully aware of how critical hospitals or if you close a school or hospital or talon nobody wants to live without a health care facility, so it's something that i take very seriously. this budget submission is the same as it was in 2013 which reflects the critical access hospitals would be paid at 100% of cost, not paid more than 100% but it reflects the would have

their cost fully reimbursed and we felt that that was an inappropriate way to deal with making sure they did keep their doors open and had the ability to serve the patient in their communities. >> thank you mr. chair. thank you, senator pryor. now senator cochran and senator boozman. >> mr. chairman, madam secretary, thank you. because arkansas and mississippi have a lot in hand except football and that kind of goes back and forth. we have a large number of poor people living in our states and many of them have benefited from the department of health and human services sensitivity to the challenges that many of our small-town hospitals face in our two states. they are worried malabo about

how the new regulations or programs might affect them in an adverse way. so i refer to a letter delegation sent to your office wondering if you could let us know what your plans are for critical access hospitals and whether or not certain payments of reimbursement costs will reflect the fact somebody in the mississippi river delta region may not be able to keep their emergency rooms open its open and available to people who need medical attention. what concerns can you address today.

it's not going to have as bad a consequence as many down their fear. >> a couple things. hopefully will give some assurances. first of all as i suggested to the senator, the budget request before this committee has 100% of cost for critical access hospitals recognizing keeping the doors open in the small communities is really essentials, so it does reduce from 101% to 100% but it is a full reimbursement for cost. in many states around the country it's caught the attention of hospitals, and the anticipation of full implementation of the affordable care act whether it is people who will be enrolled in private health plans and marketplace is

in a state like mississippi or if indeed the mississippi governor chose to expand medicaid hospitals will be looking at a dramatic reduction in the uncompensated care that right now is threatening certainly the lowest margin hospital. they deliver care if somebody comes through the door but if that person does not have their health insurance or in the devotee to pay the bill that adds to the hospitals that. the hospital executives and leaders have been so engaged in discussions and state legislators and also in the communities. that will be the change starting in 2014. as the mekouar estate advisers meet partnership grants from the

office of minority health are going to be done away with with the new budget request submitted by the department. is that true or not? >> we have eliminated some of the grants that come directly through the minority health office but have increased funding through some of our other programs in the area of health disparities of there's an overall increase in the budget in those programs and grants that will go into communities that not one that directly through the office of minority health. >> thank you. >> thank you mr. chairman. we really do appreciate your hard work. i hear a lot from arkansas businesses that have perhaps 75

employees. one of the mandates increased cost. the letter is does it have those costs that makes for a difficult situation. america, arkansas, kansas. isn't that an incentive for those that are a little over the 49 to downsize, and then again the question i would ask is what are we telling those employers that are losing hours or jobs as a result of th >> well senator i know that i have heard those same concerns expressed by folks and heard over and over again the snapshot of what is the current market

prior to the affordable care act being implemented, which is that small business owners are paying about 20% more than their large competitors for exactly the same benefit package. what we know is about 94% of employers who have 50 or more employees are offering health coverage much because it is the best recruitment. they still lose employees to the big guys that have more leverage in the marketplace. so i think that the law is attempting to capture with a snapshot of the market was calm and to put together a larger negotiated a pool of benefits so they can have the leverage that some of the large competitors have enjoyed for years. what we saw in massachusetts, which is the only state with a fully functional marketplace that's been in place before they

got up and running the had a similar employer responses of a provision from a similar penalty, and the fear that was expressed is lots of employers would drop coverage and drop out of the market. what has happened is just the opposite. more employers right now offer coverage than before the small market has actually increased. and so we are hopeful that with affordable comparative rates with competitive choice is any plan that those small employers who told jokes for years was a critical bottom-line issue would now have some choices to make for their employees. >> again i would like to seek kind of the white paper coming you know, the research to back that up, that is thinking about shifting a lot of employees into the exchange.

is that something that you intended? >> in washington state? >> yes. it's been considering moving some into the health care exchanges this will shift health care costs to the state and federal government. if others follow suit this could cost the federal government billions. that is what they are reporting. so that's something that you need to look into if you are not aware. >> that is something we will look into. i've had many communications with the the new governor of washington state, and i am unaware of any conversation or any decision -- >> let me read the first. this is an article the would capitalize on provisions of president obama's health care law that could cost the federal government millions of dollars washington state lawmakers found a creative way to pass a large chunk of their health care expenditures along to

washington, d.c. that is something that is being considered. evidently as they do, the white papers and their analysis, they're finding to their advantage as the employers with a little bit higher than 51 as opposed to 49. my last question is the president said the health care law would bring down premiums by 2500 for the typical family. but your can the arkansas families expect to see that savings? >> well, senator, what we are seeing prior to the full implementation is actually one of the slowest growth trends over the last three years in private benefits and i think that is due to a couple things. it's due to more rigorous insurance commissioner oversight and a lot of commissioners both

asked for and got new authorities from their legislature, heitor actuaries and are doing much more intensive rate reviews at the commissioner level. we have in place thanks to bill wall the so-called 8020 rule where companies for the first time have to make sure that 80% of their dollars collected are for health-related costs and not for overhead costs and we saw last year about $2 billion sent back to consumers around the country so they got checks for last year to lower their benefit cost because their companies didn't meet that ratio. the third step will be in the new marketplaces for the first time ever having competitive choices available to families and if you are below 400% of poverty, the ability to get an ex of the rated tax credits as

an assistant to purchase that without the overhead and administrative cost that a lot of companies added on the so all told, and will send president obama come it was the congressional budget office and looked at that implementation and that both what competition can do, what transparency can do, what the rules can do, and with the subsidy would do for families and made the 2500 a dollar estimate that as you know the markets are not up and running. that will be next year and we will report back to the committee. >> thank you mr. chairman. >> mr. chairman, thank you. good to see you again. do you prefer to be called governor or secretary? [laughter] >> either works. you missed senator alexander. he has three titles but you only have to, senator. he has three? that's right, your secretary.

i'm so sorry, you were a secretary, senator, too. let me -- >> probably a diplomat. i don't know. >> never a diplomat. [laughter] i've never been accused of being a diplomat. cbo in a recent report actually in february estimated that 7 million people are expected to lose their employer provided coverage due to the health care law. this estimate as you know continues to grow. cbo estimated 4 million its august report. cbo goes on to do an analysis, and the estimates that the worst case is that as many as 20 million americans could lose their employer provided coverage under the health care law.

i think cbo is simply recognizing the reality of one of the features of the health care law that reality very simply is this employer looks at the cost of the health care plan, looks at the cost of the penalty and makes a decision. you and i can recognize there's been a competitive advantage in terms of getting employees to provide them health care plans verses paying the penalty and sending them to the exchange. but i think the reality of what is the senator saying and what the cbo is saying is that the promise if you like your health care coverage your green to get to keep it we can quote that word for word isn't fulfilled

and people who did like their health care coverage who wanted to keep their health care coverage they might have argued that it was costly and they wish it was less costly but having said that, they like the coverage and one to keep their coverage and are not going to be given that option. what can you do cbo recognizes it is incurring and could get a lot worse, 20 million would be rather breathtaking. how do you stem that tide? >> well, senator, a couple things. first, i feel that is correct that cbo did adjust the baseline is the assumption that people would lose their employer

coverage and they are suggesting that some of the people who were in states where a governor chose not to expand medicaid may be coming into the exchange of of 100% of poverty that have a baseline adjustment would have people in the exchange based on the governor's decision not to expand. i think that also if you look at the 155 million people or so who are currently provided employer coverage or dependents of someone who is provided employer coverage as you know that market was totally voluntary coming into the part of the market that

works the least well for both employers and of the employees was the small group market and certainly they entrepreneurs and self-employed or family business they have over a ten year trend prior to the affordable care racked got more and more expensive and fewer people were covered. so, so that is the incentive of the market will be most affected to the two affected by the marketplace and most employer plans are grandfathered in. most medium plans are grandfathered. new market benchmarks the most popular employer plan in the marketplace and allows the state to set benchmarks and flexibility to the and so we have tried to actually as the senator said in authority hours capture the snapshot of what was going on the market and allow the states to make a lot of choices that fits. but it's nebraska may not be the

same as what works and i know the word california. so it's a very state based choice and we are hopeful but at that price will be reflected in more affordable coverage the snapshot is what is going on in the business community right now in those states. >> i'm out of time which is always one of the challenges in a hearing like this. but there has been a tremendous amount of disagreement about this all from day one, and i cannot emphasize enough, madam secretary, how much i disagree with what you just said. i don't think that accurately reflect. people aren't going to lose their insurance, they already are. the other thing i can tell you define a plan and forcing everybody to offer that plan, the fault that you are somehow going to impact the price of that plan really doesn't make

one bit of economic sense to me. the problem the small businesses are having is that they are trying to ensure very small pool but with the small businesses are now doing if they are at 48 people or 49 they tell me what i'm not the way to go over 50. i don't want to deal with this health care mess. they take the people of the health care plan are huge. its huge. once it breaks it is going to be a mess and there isn't anything that you will be able to do about that, and i just am convinced it is going to happen to the. the economics are too big for that not to happen at some

point. >> i think i heard the senator. >> again, madam secretary, we know there's more than 75% of the health care costs from chronic diseases many of which are preventable cause part of the prevention title. that's why we have it there. a lot of people focus on prevention as just being in the doctor's office. that is one part of it, the clinical setting. it must be done in a broad setting in our society. communities, workplaces, schools. if we are really going to get ahead of the curve. we have to make it easier for americans to make all the traces. i've always said in america it is easier to be on healthy and harder to be healthy. why shouldn't change? why shouldn't it be easier to be healthy and harder to be on healthy? so anyway, we put in all the things like smoking cessation,

diabetes prevention, wellness programs and the work and the trust for america's health has had a lot of reports on the return on investment to be five to six. so again i back to where i started. the prevention fund in 2014. here is what is interesting. in the budget, there is money in the fund for things like the board screenings, cancer screenings, birth defects, things i think we can all agree on today that the same time the budget proposes to cut these programs on the base of the hhs bill. for example, the budget includes 28.5 million in the fund for newborns cleanings. everyone says that's great. the budget cuts 28.5 million for the newborn screening on the base will so there is no increase. we are swapping it from one account to another.

they allow the money to be swapped out. it was to increase over and above what we have been doing it, funding for prevention. we have the same for teen pregnancy prevention and control centers and other programs, so again, what is the fault behind just this idea of swapping it out rather than having an increase to be in the prevention fund. >> senator, i think that we are in the process of trying to evaluate as we move into calendar year 2014 the full implementation of the affordable care act with the assets will be that will be now part of the individuals health insurance that won't need to be duplicated by special programs and the base budget or special programs in the prevention fund. so, screenings will become more

routinely part of a family's opportunity to move forward. prevention activities that deal with cancer detection and colon cancer screening. even some of the smoking cessation efforts will be funded through private health insurance and for the medicaid program in ways that currently are not available to a lot of people. so, i think what we are trying to reflect in 2014 is yes, these initiatives are important moving forward, focusing prevention fund on activities to known to have proven success. but also recognizing what is and in that budget and not reflected in the budget for millions of americans they will actually have access to prevention benefits as a part of their insurance package that they do not have now so don't need to

draw down those federal funds for program dollars of the state level. again, i agree with you that trying to get to the underlying causes of chronic disease are the best way to save dollars in the long run, so we have tried to make sure that the smoking programs are not only included about our ramped up through the various efforts and that the kind of community transformation efforts with focusing on chronic disease management and prevention in the first place actually continue forward. >> again i would say that i would like to see that happen before you start cutting the money. i'm not certain that it's going to happen just like that overnight in 2014, maybe 2015, 2016, 2017. when that happens, well i'm not going to be here. but it seems when that happens then we can talk about shifting it over but that isn't going to

happen in 2014. so we will take another look at that. let me just also say that the budget is a first for the administration for community lending. they created this bringing together riggins to provide services with people of this a devotees. i think it is a great idea and i think that what you have done is commendable. but i'm not certain exactly how it is going to carry out the mission to promote the independence of a person with disabilities as well as older americans. so i just, again i want to know briefly i guess i've gone over my time, too, how you are going to get this agency believe moving to fill in all those gaps. >> first i want to recognize

your incredible leadership on behalf of americans with disabilities. that has been part of your career achievement and certainly a voice that will be terribly missed when you leave the united states senate. we were pleased to work with you to the established what we think is incredibly effective moving forward, and it was to take our various disability programs and the agency on aging and put them in one on the lot, and actually what is very exciting as it kind of models the best practices that are going on in the states around the country. so, the heady first anniversary. it's now been an entity for a year and a visiting the

leadership with only the administrator. the disability community, they are very enthusiastic about the opportunity to build a network of services and support at the community level because whether you are thinking about someone aging in place or someone from the disability community being fully productive and the community, a lot of the individual needs are fairly similar. transportation needs some support and housing, access to the medical now service, the medical home model, so the combination of these two important communities doesn't mean we are going to have a one-size-fits-all package of services but it does mean the leverage services and supports the operating in the silos and we have some real administrative efficiencies and we actually are

encouraging and creating a the state level and at work of community services that can much more effectively not only people from the disability community that we take advantage of the money follows the person and we continue with our olmsted efforts to get people out of restrictive setting into the community. but that doesn't work very well unless you have the support services in the community and i think that is the exciting thing and that is really what is happening on the ground. >> i think it was a good idea and i commend your leadership in pulling this together and starting to look forward to you to reinvigorate and keep it strong. >> thank you. madam secretary, just a few follow ups and i will try to ask them briefly in hopes i can get through. your response the department took to my question requested

1.5 billion for exchanges was not answering the question i was asking. what is the dollar necessary for the federal government to pay for the federally created exchanges in the states that did not create an exchange. i did what you're telling me it is 1.5 billion for the exchanges generally, but what are you estimating the cost to be to solve the problem with the states have decided not to create a state exchange? >> will again, senator, it is some of the same. part of what those dollars are for is for the set up in the original location of the federal pub which is the data system that will verify income levels and provide the tax credit and enrollment information coming and that will be for every state in the country with a hour operating verdone exchange one of for the states where we are operating at least from the one

part or all of the exchange, some of those dollars are used for that and the dollars that come from the federal government will be also replaced by user fees so that interested of the country whether it is the federally operated market or state operated market ensures you are providing paying a fee and they will make the market self supporting. but i can get you a more detailed breakdown. >> when asking is what is the unexpected cost as a result of states bought operating in the state exchanges? >> we always assume we would operate some exchanges. what we can tell you and try to get those numbers nailed down is what additional costs there are but we always have to rebuild. we are always going to really portion of the infrastructure, and what the cost estimates have differed, we were not sure as

the deadlines passed hell many would be in or out and now we finally know. >> in response to senator alexander's question, you indicated you will then pull years don't do what senator alexander was suggesting. i would indicate and it seems to me it is a "washington post" article this morning the state of washington is looking for ways to have more part-time employees and get their employees out of -- get the state out of the requirement providing insurance for them but that is happening in the private sector as well and the interesting thing is to me it is happening in the state of washington, but those kind of conversations occur all the time and the anecdotes and kansas of people who are either chongging to get below 50 full-time equivalent employees or to have more of their employees be part time is really prevalent and

again, anecdotes of small businesses closing a couple of their businesses so they fit that criteria i think it's out there. i want to ask about the rural health care again. you are supportive of the president's budget request in reducing the 101% to 100 percent of cost based reimbursement for critical access hospitals to estimate that is the budget proposal coming yes, sir. >> you are supportive of the change and mileage limitation from, well the hospitals that have been granted a waiver and are less than 10 miles apart you believe they should not receive the reimbursement as a critical access hospital? >> yes that is the proposal within the was made last year and this year. >> if you're a hospital but we have a number of examples many of which you are aware of life and i guess i won't put anybody on the list but there are a number of critical access hospitals that would meet the criteria that you are creating

and as i said in my opening remarks i can see that began respective. how do you take away the critical access possible designation for both hospitals, which in my view means meter succeed, and one of your -- i can't remember who you were responding to that you indicated in response to this issue, and maybe was the senator boozman they are already getting 100% of cost but the reality is not all of the costs are included in the calculation of costs. there is a definition of what they are and to get presumably 100% the in person at of the costs but they are not all costs of the hospital. at least according to the national health care association come 40 present fall critical access hospitals are in the red now. there is less access to capital for small hospitals. they treat older, poorer and sicker patients, and in addition to the specific and unique needs, they represent such a very small portion of any money spent on health care.

so when you reduce the payment to critical access hospitals it doesn't have a significant corresponding impact on the overall budget. so i was interested in -- i guess my question on that is any response you want to make to that. but how do you explain the hospitals who would now no longer be eligible to be critical access hospitals that neither one of them are going to be designated as a critical access hospital losing the status and closing of hospitals? >> senator, i will share with you i had a similar conversation in a budget briefing the of the day, and frankly i would love to work with you on that aspect of this proposal to drill down a little bit in terms of how it impacts people if they got a designation being 10 miles apart how far away are they in the next critical access hospital which is the typical is

55 miles. how did this 10-mile structure occurred but i would love to continue that. estimate i would guess as the governor you granted in the days gone by the court to grant exemptions to the 35 m.p.h.. >> that could be. >> i didn't know if you had the opportunity to respond and the train wreck, and anything you would respond to what was reported by the senator's decision of the implementation. >> i think the senator was describing a situation where he felt too few people were aware of the benefits that they were going to be entitled to receive and there wasn't enough outreach and education going on, which i would agree is a challenge and

is on of the reasons that again we made what is a very difficult decision to use some of the prevention funding when we were not given additional resources for education. you use some of the prevention funding so that there will be now navigators on the ground and states around the country to begin to educate folks, community groups and others. we know that worked when medicare expanded the program. there was a series of steps that we were watching very closely one was on the ground helping assistance. we didn't have the funding in our budget. we didn't get a 2013 budget, so we made a very tough choice but i think that is what the senator was expressing his to few people know what's happening and it's not sure anybody would be able to enroll and that is what we are trying to get out ahead of. >> i look forward to working with you on the critical access

hospitals. >> i have to go over to the floor so i'm going to turn the gavel over. in order will be center boozman at senator shaheen. thank you very much for your testimony. >> members are showing up. [laughter] >> thank you madame secretary for your forthrightness and the answers to questions and your knowledge and the health care system we appreciate that. thank you for your leadership on these vital issues. i have some more questions i will submit for the record. senator. >> thank you. >> i would like to get your comment on a few things that are not confirmed to the concern of the affordable care at but one

of the concerns made about the concern about the slots for, you know, people in the specialties right now we are in a situation in the programs where we have a lot of the foreign medical students to be it makes no sense if we are going to try to find medical students, we should have the ability to allow them to stay once we subsidize their education. that is a problem. we all agree maybe we can argue about the extent of the problem, the residency problems are a real problem since we have more students going to medical school and now we haven't increased their residency programs. we do have a lot of foreign students. what makes sense to make it such that there were an easy way if

they chose to stay in the united states and practice. can you comment on that? >> senator, that is one of the components of the president's proposal and the senate bipartisan proposal on innovation reform. it is an immigration issue to increase the number of visas for highly skilled highly trained workers particularly those workers in critical areas who were as you say educated in the united states. sometimes it is called a component of the program of the steeple green card to your diploma, and that is one of the components of the bill but will come before the senate. >> i don't mean to interrupt, but in this case we have a critical situation. we are adding all of these patients into the system and it makes sense if that can be done in the context of the matter if the other doesn't get done it is something we simply have to

address as a stand-alone or whatever. but i think where you can help as i illustrating the extent of the problem. i don't think most members of congress understand that. i know our providers to and our hospitals to. the other thing is i believe very much we need to have accountability and things. when you have a situation where 70% of the audit is overturned, that is not a good situation nobody is on waste and fraud and we all agree there is a tremendous amount of waste and fraud in the system. but i do think and i would appreciate if you would look at it and make sure that we are not spending an inordinate amount of time of people trying to get their right as opposed to the bad actors. i was visiting with a lady had a medical center recently commission said it was her analogy was like one of the kids

in the family acting out and spend all of them and i feel we have some of that going on. the last thing that i would like for you to comment on is sg our pitkin and former optometrist and i know we are not going to cut providers by 20, 30%, what ever we are up to now, but they don't know that. health care is 17, 18% of the economy. we have essentially froze in those offices that some of them are doing well. but they cannot plan, they cannot do that with that hanging over. it's going to take leadership all of us to come up with a plan. but we talk a lot about the economy and the importance of, you know, growing the economy, providing economic opportunity. but that is one of the things that is a wet blanket that is hanging over us to risk and a glut me tell you why would be happy to follow up on the issue

that you raise and any specific example, your case of a 70% over turn that is always helpful so we can drill down on a case and use that as an example. so i would appreciate getting that. in terms i would say the residency program again, we are focusing on a whole a ray of workforce issues because with or without the for the becerra act, the aging of the population and the demand on the providers is different. >> the aging of providers? >> you bet. so we have a whole series of work force and chefs -- work force initiatives under way to the weekend at the the part of health and human services change the visa situation. but finally, i don't think there is any bigger single threat to medicare them the constant

threat that medicare providers will be cut year in and year out. far too much time and energy. the budget every year since i've been appointed secretary has included a long-term fix and this budget does the same. we think a transition period for a couple of years which gets rid of the threat and working with congress on a more pay for performance strategy is the best transition under way and that is what is incorporated but i can't agree more we would love to work with you and other members in congress to get rid of this year we dance that takes providers time, scares' the patient and is not beneficial to the notion that health care needs to be planned for in the future and particularly for the small provider offices we hear people are taking out loans and they don't have any idea if they are

going to have a payment the following week or the following month and last year we had to implement pay cuts so we have seen this up close and personal. and i have gone over the edge of few times so i would love to work with you on that. >> thank you mr. chairman. i am a new member of the committee and it's very nice for my first hearing to be here with you. i very much appreciate the work that you are doing and that he wore at the helm of the department of health and human services at this critical time as we change our health care system in this country to read thank you very much for all of the work that you are doing. i want to follow a little bit on the issues senator more m. raised about how we educate people in this country about what is available to them through the new health care law

particularly small businesses i am hearing a lot from a myth in hampshire as they are trying to figure out just how to comply with all of the new requirements i wonder if you can talk about to what extent you are cooperating with the small business administration, the department of labor come all of the other agencies within the government that are involved in trying to implement the law. >> senator, we have had extensive collaboration, particularly with the small business administration in terms of outreach. they have a very effective and active network. their number one issue from their employer base for years has been affordable health care as the biggest challenge the small business owners face.

so our regional offices around the country as well as a whole army of folks from the hhs are doing a lot of joint presentations. we have done trainings for the small business administration employees at their request so they can actually give information and hold business meetings using their networks of newsletters and outreach and i think those efforts will ramp up as we get closer to open enrollment in october of this year. >> i would urge you to do what ever you can to make sure that we are aware of those efforts because we can also help in our home states to educate people. >> yes. >> one of the other issues raised with me recently by some folks who were involved in implementing the massachusetts health care law was the extent to which those people who had been uninsured had never been

part of the health care system had no idea how to navigate the system and the challenges of trying to provide assistance to them as they were being brought into health insurance coverage. so are you anticipating that, and is there funding in the budget to do things like help lines and all of the assistance that will need to provide to people who have no idea how to operate in the health care system that gives them health insurance? >> i think you've just given a snapshot of some of the challenges that we know are real and that we will face. everything from language barriers, cultural competency, lack of familiarity with terminology. you can't make choices unless you actually understand the system. so we will have a variety of assistance available on the

ground, help from trained individuals who come from community groups and advocacy groups and neighborhood groups, and those grant applications were out in the stations around the country, the so-called navigators. we will use our federal employees at a variety of points of contact and health centers and hospitals and in housing units and programs where they have contact with individuals, and again the training and materials we are trying to create the easiest most consumer friendly web site to use in multiple languages with the kind of health plan that pops up when you are shopping online that can indicate if somebody wants to pick up the phone and call them along the way to get questions answered that that is available. we have got to 150 languages that people are anticipating questions. we ask what comes in through the

medicare line of as well as recognizing that a lot of people are going to need help actually filling out forms and answering questions. many states will have agents of brokers and falls, and that really is a kind of marketplace by marketplace decision to get so, i think we are anticipating a lot challenges. we have an education summertime and hopefully a motivation to enroll period. but if you've never dealt with how the germans before, if you don't know what it is that you are looking for, it is pretty difficult to make a decision. >> thank you. >> my time is expired. but hopefully i can do another round in a few minutes. >> senator trent -- thank you mr. chair and madame secretary. it is wonderful to have you here. there are so many programs you

have responsibility for that touch the lives of folks in so many different ways. so i will pick out of you to ask about. one is what is the community service block grant? i do a lot of town halls, one in each county each year so i've done more than 160, and before and i hold a meeting with the city and county leaders and inevitably they raised the flexibility of the block grants to be used in so many different ways in different parts of the state. i believe the president's request is 350 million of the numbers i have our rights and the fy 13 enacted amount was 680 to roughly 50% decrease in the block grants and if those numbers are right, i just want to get your thinking about because i see the communities advocating all the time for the

huge amount of flexibility to address vital needs and the value of that. >> senator, i did there is no question that those programs play a critical role in delivering services at the local level. i think the budget reflects difficult choices in a budget time that we are trying to balance the needs across a wide array of services as you say so in a different budget year we certainly wouldn't suggest or recommend a community service grant, but there was a choice made for this year's budget. >> i appreciate those that you are resting with as you compare your budget. it doesn't sound like there was any particular critique of the program dealing it didn't work well or anything of that nature. >> unfortunately, most of our service areas were cut back.

we are looking at 2012 baseline, and i would say the only plus up areas or areas where we actually have new authorities and challenges and are trying to begin allocate resources as strategically as possible. i want to turn to the issue of the reasonable break time for nursing mothers. this was a provision baseball law that we adopted in oregon when i was the speaker that worked incredibly well because essentially it asked businesses to provide both privacy and flexibility break time for the mothers to continue to express breast milk for their small children and the result was happier mothers and less sick time, help your children and good health the fact. the senator has emphasized more

positive health for the women as well. it's one of those things that doesn't cost much and businesses are very happy because they have high your morale so the department has the ability to enforce it but there is also the role for hhs, and i believe that the administration is putting up signs of a web site on breast feeding and also there is a role for the centers of disease control and the hospitals promoting the proposal. this is a case where a little bit of education and working with hospitals changed habits like giving mothers a kind of implied encouragement to not breast feed by free samples and so on and so forth and making sure the staff can help mothers through the first couple of days to get them going.

is there enough money in the program to kind of do the work that is necessary given the great value that stems from it? >> first of all, i share your strong commitment that not only does this have tremendous health value, but it is proven to be effective in terms of bonding mothers and children together and as they -- the duo grandmother of and 8-year-old who was the beneficiary of breast feeding i can tell you it's been great to have this opportunity for my daughter in law to go back to work and have a place set aside. one of two things have happened in addition to what you are saying. we have a lot of agencies who feel that it has an enormous benefit. we've also had a surgeon general

kind of call to action around breast feeding in the very high profile rollout of all of the health impact and working closely with hospitals, for instance, to discourage the gift of formula, that is sort of a cease-and-desist and working as you say with new mothers. the affordable care act as you know also has a recommended set of preventive benefits specifically for women's health that the institute of medicine recommended to us, and one of them as lactation help and support for new mothers that that will now be part of every new health plan available with no copayments, no coinsurance, and i think again it reflects the fact that we are trying to address this issue at the public education level, through our agency for children and families at the cdc through private insurance now covering support

and health and certainly working with hospital leaders on what they can do to make sure that new mothers get off to the best possible start and know how beneficial this can be. ..