government incentive to be used with the adoption of the cybersecurity. . . now we supplied instructions on producing unclassified cyberthreat reports to the ability of critical infrastructure partners to prevent and disbond the significant threats.

let me pause a moment here. unclassify. i think one of our challenges, quite frankly, is increase the capacity of those who are owners and operators who are critical infrastructure to supply material, and receive classified material on a real time basis. so the information sharing challenge goes goes from private companies to us and also at the -- [inaudible] particularly the classified to you. we have produced procedure for expansion of the cybersecurity services of the program to all critical infrastructure sectors, to provide for greater cyberthreat information sharing, and we have provided recommendations on incorporating security standards and to acquisition planning, and contract administration.

to see what steps can be taken now to make existing procurement requirement more consistent with the cybersecurity goals. what does it mean? it means we have to incorporate thinking about cybersecurity when we are purchasing i.t. and like wise -- [inaudible] what are the security needs and how do you maintain and sustain them? n.i.c.e which is department of commerce and the standards and technology continues to develop a cybersecurity framework that is due in october. there is a lot of work going on ongoing throughout the summer on a significant entbaijment by the private sector. next up is the deliverables on the public-private partnership evaluation and cyber dependent infrastructure. what does it mean?

it means that under the ppd it is the responsibility of homeland security to identify what is the nation's core critical infrastructure? what are we talking about? who is included there? we do that from a risk-management perspective. what kind of infrastructure should be taken down? should be rendered inopen -- inoperateble similar to so what we see when the utility goes down for a period of time. we need to -- in this case, develop situations awareness we need to update the existing national infrastructure plan and develop critical infrastructure performance goals that link to the n.i.c.e framework. the goal for basically how --

[inaudible] what is the trademark that we all together need to achieve? it's an active process right now. it's -- this is a very aggressive. think about when the the definition of core critical infrastructure set, and the public/private partnership moving. so within dhs, we have been busy not only maintaining the sustaining capacity we have, but building on those. and, by the way, i must say that somewhat of an interests challenge when you don't have a budget and there's sequester. all i will say about that is if you look at the president's budget request for dhs over the last four years, you look what congress has appropriated

included in the most recent fy '14 budget. you can see in the cyber arena we had dramatic increase in funding. why? i think there's a general recognition that we have to build civilian -- capacity where cybersecurity is involved. and to do that, if you look around the government, where is the natural home for this? it will be within the department of homeland security. that's with the core information sharing should come. core critical infrastructure is concerned, that is where threat information should be shared, that is where we should be talking about how to do the most we can, the best we can, to prevent successful attacks while also dealing with resilience should an attack succeed. i don't think we should let

congress off the hook, by the way. i think we need legislation. we need legislation, i believe, that sets forth the privacy and civil liberty safe gourds we have adopted as policy. we need legislation to make sure real time information sharing occurs. we need some additional law enforcement tools in the digital age, and we need, and this is peculiar to dhs, but very important. we need the same kind of hiring authorities that are held within the department of defense where cyber is concerned. that allow us not to civil service hiring and scales. we are even more competitive than we are right now. we are competitive for cyber experts. why? we are competitive because of the mission we are performing, and the fact if people want to

be involved on what really is the foundational work with the nation's cybersecurity is involved from that security aspect, and that experiment that i talked about, the work is that of dhs. the mission itself, is a huge recruitment advantage for us. but let me not say that we all understand that there are other issues that people need to take in to account. including, how much they can get paid. so we want some relief there. that has to be done by statute. let me close by saying you're meeting at the critical time. you have seen our people in and out all day. they are inin and out all day. they are busy working on the deliverables i discussed. we are moving quickly on the timeline. we cannot succeed, and the experiment will not succeed unless there is total buy in by the nation's operators and owners of critical

infrastructure. this is the ground experiment. we intend to succeed. i hope you do as well. thank you very much. [applause] [inaudible conversations] >> hello everyone. i'm from npr, and i'm assuming that congresswoman will be back after she says goodbye to sec

their that pal ton -- we have a chance to respond to. let me, first of all, say on behalf of npr how appreciative we are to jane hair month and the wilson center for sponsoring this series of programs, which we call a national conversation, and it's a great honor for me in particular, personally, to be able to moderate these discussions. now, television interesting to me that secretary janet napolitano talked about what she called there in the end a grand experiment. he said this is the first time talking about the cybersecurity challenge. this is the first time that the united has really, in a sense, dependent on the private sector for such an important partnership role. you know, i noticed that one word we didn't hear at all in

secretary janet napolitano's comments was word "mandate" or "mandatory "what a difference that was from last year when the mandatory approach was part of the discussion. the word she used instead is "incentive" but i also noticed she didn't seem 100% convinced that this approach was going to work. she referred to it an experiment, he said she wasn't completely convinced that the private sector is ready to fulfill its mission. i would like to begin with that point, i mean, i think this is a really a provocative idea that a security problem of the scope and scale that we are facing in the cyber domain, the government is really dependent -- depending on private sector to play a huge role. it seem like the verdict is on on whether this experiment is going to be successful or not. i would like to go down the line

here and get your own thoughts on that and whatever else caught your attention. first secretary. >> i think it's an anomaly. we are used to the security, the law enforcement is largely a public responsibility. i mean, we may have private guards, but we don't really expect the private secretary to defend itself against attacks, for the most part. obviously what is different here, you are dealing with asset and people that are largely distributed throughout the united states in networks and private hands. so for the u.s. government own the major responsibility for defending these networks, we put the government in to everybody's computers, and in to everybody's networks, i think we don't want to do as a people. so that means that private sector has to shoulder the major responsibility. but here is where i think the secretary is right in saying it's a two-way street. you have to step up and take the responsibility. if people in the private sector

say, you know, i operate critical infrastructure, but i don't want to invest in security. because i don't really care whether i go out of business or offline for a couple of dais. it's not an acceptable answer. as we saw with hurricane sandy and private prior hurricanes. a lot of people depend on the critical infrastructure. there has to be an acceptance on the part of the private sector. their obligation to protect those assets and employees. and there's got to be collaborative effort. i think the private sector indicated it wants to do that. assuming we can put mechanism in place, which we can talk about, you know, in a little while,ic it can be done. but i i do think their message at the end of the day, if it's not done and the private sector doesn't step up and particularly a major event that causes significant loss of life or candle, -- damage, the public will demand mandate and the mandate that are the most intelligent or the most

sensitive in term of the private sector. >> ambassador, you have worn both hats and security hats in the government and now in the private sector. >> you know, i find the private sector really does understand its responsibilities here, and the difference may be in scale, you know, the amount of money that is required to be invested in, i think it's always a discussion. but the idea that the private sector does not understand from a either a reputational risk from a customer value perspective, the porn of this. importance of this. we have got tonight point where clearly the question for partnership is how does the partnership work? there are many definitions in partnership. i believe the partnership has to be a partnership of mutual responsibility and respect. for what we each bring to the

table. >> i i guess i would say there's an element of this that is novel and probably we use the cold war stepping off point. i think a lot of this is back to the future. if you really look at the nation's response to the second world war, it wasn't saying basically public sector. i think with me as a stepping off point about the threat the particular issue is so sobering, and back to the issue of looking at -- late 'out there was some debate in the national security circle whether it was the serious threat. while i fell down pretty hard on that it was, i could, you know, accept that there was some agreement for this particular threat. i know, no other -- whether such consensus amongst

the top officials who look at it as well as everybody is an expert on the private public side or academic side. it's a problem. we are getting our act together to how to deal with it. i think the threat warrants the kind of mobilization effort that is required that we have not seen in the past. beyond saying government can you slip it out -- we want to dot happiness on the side here. thank you very much. there's a huge choreography challenge. i would add one more wrinkle. part of the reason why you need private sector engagement, the networking are global. if we take infrastructure, a lot of the juice, the power we get up in the northern new england area comes from quebec. if you have a purely domestic conversation for networkings that scrawl across borders. private players are already in the market because the system work that way. that's another idea where the

partnership is critical. >> steve, you mentioned world war or two ii and the private sector. i heard the national counter intelligence executive make the point in the world world war ii, the private sector played a support role. if there were to be an major cyber confrontation conflict. the private sector wouldn't be on the rear. it would be on the frontlines. and that's a very different situation, isn't it? >> i think that's exactly the difference. it's not just the question of providing the material and the support, but in this case, the actual conflict, so to speak would be in the private networking. the secretary mentioned that case which is public in which there was a destructive attack on the computer infrastructure of it. so there you have the tip of the sphere or the people who were actually operating in the networking. this requires actually we think very carefully how we plan for a

response. if there were a cyber 9/11, obviously you would want to have the private sector and the government working together. to do that, so you to have a lot of planning in advance, so you to a mutual understanding of what is operating on the networking, both what is coming in and within the networking, and again, that's a little bit new for us. it's going make some people uncomfortable. i used to say to people when i was secretary, accept the fact that the state government going to be involvedded in the nerving. which government the u.s. or chinese government? you have a government. so there's no way to say we're going to somehow take cyberspace and remove it from the domain of conflict and threat. >> you know, i promised jane i wouldn't quote anyone from lunch. i think i can say generally there was a lot of concern about the economic of cybersecurity. because in order to protect the networks, to the degree we have

-- i think we agree is necessary is going to require some real expenditure. a big investment. i think it's a question the government can come up with the funding -- can require private industry to spend that money is a big question. does this mean that the risk is just something that we have to accept? what the strategy in mitigating the risk? are you going to fire -- or take very specific steps to deal with the risk at the right level to ensure you mitigated appropriately. so -- and this is expensive. but it's not, you know, so expensive you can't do it.

there was a discussion we had earlier that said 80 percent of the thrart many of the risk we face are patching and vulnerability as we know about. it's not that it's so expensive it's getting people to do it. and do it in a consistent way. >> but those and i think that the reference there is not to the threat of a massive attack on infrastructure, but rather smaller scale attack. what about how do you protect against the cyber 9/11? that's a threat of a whole different order. >> we are moving from the cyberthreat being essentially stealing data or disrupting networks to basically comom deering the nerving. therefore with a risk of sabotage as a result. you don't need to mobilize a

team and get on an airplane to craws direction of the system. you can potentially do it as laid out. a generator or substation or pipeline or hydroelectricity dam. we can go on. they are increasingly on the net. not all of them. someone so old and -- you you have we are going to move them to the realm. stepping on the economics, i mean, a element of the challenge here is coming late to the game and kind of often security safe guards or system not built to be made safe. essentially for the threat. it's like taking ranch home and trying to make it handicap assessable. it's going to be expensive, ugly, and not work well. everybody is looking at the legacy infrastructure we have now and saying it looks like try do that. we need talk about designing to the system the safe guards. that's not a conversation we have really started.

and that's part where i am. silicon valley works and -- [inaudible] private sector is handing with the folks developing the idea and application. that security conversation is happening affiliate they are developed. we have to figure out how we design it. the economic case is clearly simple. overall, if you want -- if a business wants to continue, to provide the service it probably doesn't want to be descruchted. it's going to be disrupted. in a cost-effective way you ensure the continuity of the business. that's what we need to have as a conversation. >> secretary they have been working on the effort were disappointed that the huge effort ended in failure. how do you see the political environment now different from that? are there lessons learned from

that? >> i don't know if i would say it failed as much as rain out of time. i kind of helped out pro bono with the member of the senate. i think they were my grate, it was a broad comprise. there are challenges on the information sharing side and the standard setting side. and, you know, there are legitimate criticism or concern that raised. on the other hand we live in a world which the enemy of the good is the -- you're not going to get a perfect. i think there's a opportunity here what is important is urging the urgency. there's not a real appreciation, there's not a theoretical discussion. we are dealing with threat not only happening in the area of theft threat and intellectual property. beginning to see destructive behavior. i can tell you having lived through 9/11 and been in a

position of responsibility and since then, if god forbid we had something like that in cyber, you would see legislation. and people didn't like what was coming, it would be unhappy with what you see. time to think about this and plan is it an advance. not in the immediate aftermath of a big event. >> frirm covering the debate last year. there were a number of comments made by people on one side. owners of critical infrastructure, particularly in the utilities area, too often down played the threat. now secretary mentioned there's more sensitivity perhapses to the urgency. would you agree with that? >> i think we have come to understand the nature of this. e how it impacts our mobility and research and protect our intellectual property and those sorts of things. i wouldn't say people down play it. but it's the --

level risk going to be held accountable for managing to is maybe a question that somebody would ask. understanding the risk and threat to our operations and our people, i think it's very clear in the private sector. >>. >> i want to say one thing, one challenge for the private sector, the process it was mystified. there's a lot of jar gone and engineering discussion. being on boards and dealing with boards there are a lot of -- [inaudible] you invest in and focus on it. there are a lot of civilian who hear the jargon and feel it's complicated either way. we can't deal with it or we're going make a technical problem. it's not too complicated. frank is right. you want to manage the risk. if you can understand it and translate it to plain english. there are things you can do -- you have to make decisions.

do you allow everybody to bring their own device to work and move it back and forth freely. do they get to take their own thumb drive and stick to the networking and bring god know what the networking. they are not technical issues. they are policy and govern mans issue. >> is it true that private entity that cut cornerrer may benefit in the short run by not taking the measures. >> i guess i would don't news that this is where we're going misdirect. we need standards. if you a large company and doing the right thing, and some of these involve cost, a smaller player can basically say i'm not going to do that. people can have confidence they are enforced basically have a level playing field. the real issue is a lack of trust between many private players and the public whether the standards will make sense. they don't actually dress the problem.

the real conversation should be about that. what is it and competently get the two-way street in developing the standards? versus stranders are somehow something we can live out. they do it with third party and insurance and other things. we get it pretending it's happiness and best practices. we have been doing it for how many years? the threat is only growing and facing with the reality of not making much progress. it was the best practice is a lousy practice. >> frank. you are up with the representing private sector. steve use the s words, "standards." >> hi. i'm frank taylor. [laughter] standard, i think, are important. they have to be realistic. as mike said, the conversation is threatmy grate people get turned off.

the world is going to come the end tomorrow if you don't do this. it's not that dire or drastic. and so i think a racial conversation about realistic standards that address the vulnerable is what needs to be had. a lot of times the conversations around you should do business in so and so. well, yeah. companies go where revenues are generated. they are customers. they are going to sell things. having a racial discussion about what those standards should be to address the risk, i think most companies would come to the table and have that discussion. but it can't be out of -- [inaudible] as i call it. have you been guilty of threat monitoring. >> i don't think i'm monitoring the threat here. i think it's developing a newspaper.

i think it's publicly reported. they are obviously also important knowledge here. that's one of the reasons making classified information either available because you declassify or allow people to be clear. these are important party. i think in term of standards what is interested about the process proposed now with voluntary standards it would be collaborative. involve the private and public sector. setting general performance-base standards. that requires the private sector as well as to recognize they are hurt, if there outliers that don't ring up the capability to a reasonable amount of risk-management. that's what the experiment is. it they recognize that, we may get good standards going forward. i think that it's got to be dynamic. it's not a status threat. it's got to be a recognition as we said earlier. there's no risk elimination.

there's risk-management. the one tool that the government has, which i think is important, is looking at the liability system and i think the insurance industry can play a role here. and using that as an incentive so enterprises they understand if they make an investment to a reasonable degree and meet the standards, they will get some measure of protection which is exactly what you need to spare investment. >> if i can add, i think it's important in the backdrop the conversation we can't have the at the end of the day. it's something at the student level and at the household level is an act of leadership to get it out of purely talking even after that's the backdrop for the public to say i'm willing to pay or support one way or another.

and if we don't get there, we have a problem. in instance of this the utility. most utilities can set the rate. those are trying to keep the cost for the users down. if you are a utility you worry about trees collided with lines, as we know in the neighborhood and my area. you are worried about aging equipment and backup subbization. they have risk to disruptive service. the government said you need to take on a new set of problem with the new costs, by the way, there's no relief on your price. because the public doesn't get the rates go up. we may have a problem. the main user is public but the companies that defend on that have to be part of the conversation to say it's an acceptable cost. i'm willing to bear it because it will provide me a service i need. anybody who lived up in the northeast it wasn't just new jersey, new york, i was in connecticut, three quarter was state was out of power.

we have towns -- i think we probably have microphones on both sides. if you are willing, i think it would be helpful for you to identify yourself and your affiliation or company first. let's open the floor to questions from the audience. in the back there. >> i have two questions, if i may. be patient. i read in this report where they were talking about a lack of cyber protocols, and then they went on to say that the problem

is that nobody wants to take accountability for governing cybersecurity. who will be accountable? everyone said we need these laws. we need these accountability and protocols, but who is going to step up and take responsibility? they are helping cyber terrorist and no longer need a stationary terminal to commit the cyber crimes. it's mobile in computing is growing rapidly. it's out of control. who will take responsibility for that? who is responsible for governing cloud computing and governing the mobile devices and controlling the number of people who can use them to commit the

crimes? it's going to address some of the issues. some of them. i think you put the finger on it an important issue. first of all, nobody controls who every enterprise can set the own requirement and standards. but in the were world at large. it's been close to an -- maybe you want to say libertarian and, by the way, there are people who are absolutely committed to the idea that any regulation off of the internet or this kind of communication is problematic. there's good reason to be leery of doing that. so i think it's going to be much more enterprise specific, and it's going to be about standards. on the issue of who will bear the responsibility if there's a catastrophic problem, that's kind of a feature of american life. there will be a round of finger

pointing, another 9/11 commission, and go back over the things we should have done and the report written before will be brought out and people say we warned you. i think we are trying to avoid they putting in to place a set of standard and practice and capabilities in advance that will reduce dramatically the kind of catastrophic event. it reenforces for me there's not an easy answer. there's sensitivity that have to be in place. it's not begun. we're dealing with this almost after the fact trying to develop safe guards, being aware of vulnerabilities. government has a role to play in

supporting accountability. we learned this over a long time with loss of systems. standards, again i think the key we talk about are i did dynamically forged that. they are helping to design the standards. the enforcement ideally should be third parties, user base and party here. there's almost a need for the government to make sure that in fact outliers are not outliers or isolated from the system. and i think we have to talk about a robust dynamic and recognize that some of the issues that are feed the ability of policing and it may not be -- it has to move forward. >> larry? thank you. larry with the internet security lines. i want to associate myself with

whoever made the comment before we're in the beginning of this discussion. because i think we get some back and forth thinking about when we talk about the threat and how combating this. it's my understanding and i appreciate the panel they tell me differently. the standards we're talking about, which do exist to solve 89% of the problem, a., currently already exist. and b., those are going to combat the low level threat. nobody anybody who thinks that the standards or the framework that comes out is going to be effective that can take down the electric grid and et. cetera, et. cetera. that's the area i'm interested in. secretary -- [no audio] said and i agree with him that

the private sector is going to have to step up. i think the private sector said is willing to step up. but i'm curious as to what the government does to assist the private sector. because if we're going deal with this massive threat, we're not talking about a little bit more money. we're talking about a lot more money. studies say 5, 8 times as much money. we are going to need big incentive for that. what can the government do to assist the private sector in taking on this unique and fairly substantial role? you have to separate the majority of comprises and small businesses that probably need to make a relatively modest investment to take care of the 80%. much of the discussion with we had here about the top critical infrastructure which the department is identify.

those are comprise if they fail there's a huge effect. if god forbid the air traffic system fail and planes fall out of the sky. i'm not saying it's going to happy. -- happen. there you need to have a focus on the advanced persistent threat. there will be different standards there. what is it going to take? some will be incentive to get the enterprise in the critical field raise the degree of investment recognizing as a benefit for that, they should get liability protection and caps so they don't have what happened in the world tried center after 9/11 where everybody sues the owner and believe me, that's a road to bankruptcy. that's one set of incentive. second, i think the government has to be tightly bound in term of information sharing and share of technique and capabilities. that's going to require maybe looking at the law again. it is going to be addressing people who don't like the

government of being involved in this. if something happens fast, you want to have the government working side by side with the private sector to stop it. i think throats a couple of areas with i have to look at. >> if i could add on the critical infrastructure, component. i think one of our problems is there's a little bit of -- i think causing a -- cyber is now all what everybody is focusing on. that's where the resource is going. we thought about cyber. i think we need to talk about the state of our infrastructure and the risk of risk confronted with infrastructure cyber is one of those. as ab advanced -- if you don't maintain it, if you don't upgrade it for the kinds of weather events and stresses of use, so i think part of the element of being more successful about how do we assure that mobility, communications,

finance, water, all of this happens one of the disruptive risk the one clear and present now is cyber. it's not the only risk. until then probably not going to be willing to talk about investing in infrastructure safe guards to ensure the continuity. i think we need to broaden the conversation away from it. that's the element of cyber physical that is an opportunity we haven't harvested yet. i would like to get his response to the liability protection might be a significant incentive. how significant an incentive do you think it would be to companies? would that be a sufficient incentive on the own to justify them making much bigger investment than willing to make now? >> i'm not a lawyer, therefore, i company speak for our legal department. the incentive that limit

liability and that sort of thing would be probably be very attractive. it takes legislation. it takes an understanding how it fits to the overall protection of the infrastructure of the company. and so i think that would be attractive going forward. >> another question? >> back here. >> thank you. [inaudible] >> thank you. my name is jake, from the center of the study of presidency in congress. i want to ask what role, if any, should reform to the federal energy regulatory commission play in creating required standards for energy companies? i'm thinking about, for example, the grid act? >> thinking about the what? >> grid act. in congress a couple of years ago and failed. >> any of you particular? >> i can take a bit of a swipe here. again, part of the challenge is

dissing a are a gaiting the you till fry take the port authority of new york and new jersey. it moves open any given day actually at rush hour which is the way it is in new york. it is about 1.8 million people that are in a port authority tunnel, bus terminal, airport, all of it requires energy as if it's going to work. as we saw with sandy. it's not part of the conversation with the utility to say what are you doing make sure that the power stays on? because our mission is critically dependent on our mission? one of the challenges here is to broaden the focus of not just beating up one sector to do more. finding in a way which the sector is working with able to make the case and therefore

ideally getting the funding extreme that goes with this and the other critical public sector . >> i would say we do a lot of work with them. they are focused on the, and i think our looking continuing continually to upgrade. remember, if we go a smart grid, every note of the networking grid will become a potential for which malware can come in to something. that's what, i mean, being dynamic. you have to stay head of what is happening. i know, from talking to private sector people. there's a lot of concern about the compliance mentality being the product of the standards we're talking about. we certainly regulation is helpful and hurtful. if it's done poorly. the compliance regimen in this

area, in my view, is a product of danger if not done properly. it doesn't mean you can't have compliance. it has to be done in partnership with the public and private sector. otherwise if it's mandated. we are a discussion about that and how it rolled out of dhs, and the challenges. >> and the chemical facility. >> with not a lot of private sector input to that. adjusted over time. but it doesn't just coming out with a compliance regimen without real collaboration, cooperation on this. i would, you know, the notion that the private sector doesn't understand the risk, we operate globally we operate with the internet and cyber systems being critical to our business moalgtdz. we attacked every day. we have an understanding of the impact of this.

how do we work with government here and government around the world to protect what is on that networking and criminal acts against that networking that are occurring around the world that impact as well as impact national security and certain regimen regions around the world? >> i think like to invite any of the folks who are at launch today, if you have any comment to make or question. i know, you have a lot of concerns that, i think deserve the -- yes. dan; right? with caterpillar. this is a tactical question. but one of the things we have seen there's a major vulnerability cause zed by poorly written code. that underlies our application, operating system, telecommunication devices. we talk about designing security in. having code that is stable,

secure, that is u just not happening. you talked about silicon valley, you talk about the route 128, the same problems are inherit in all of those companies. and all of those locations. they write bad code. this is something that can't be done purely on the private sector. it can't be done purely on the government sector. has anyone really given that a thought? how can we change the whole vulnerability landscape we exist? first yet, some of the code is not being the problems are deliberate rather than accidental. there's a real push to get code out quickly and update and for a long time in this domain, the pressure was getting new things out more quickly. the security element was not a major feature.

the customer has a lot of say here. if the customer starts to look at this and wants validation. not just for the software but horde ware too. it becomes supply chain and security. it's a whole another chapter. >> acquisition resumes are key. the gaming industry and the gaming industry ten years ago were like everybody in a garage. the gaming industry is three very large players that push out products. that mean there's more leverage before you give me x product i want to have some due diligence here with regard to the code. i think not enough has been done about that conversation clearly, and we have to look for the leverage points. again, there also is a sense of cultural change that is going to be challenging in this information there's risk that we as citizen of the cyber a posed

to -- to tie the discussions to current event and news. and secretary janet napolitano pointed out that the solutions that we're talking about, the approaches that we're talking about in this area are going to require a level of intimacy is the word she used between the public and the private sector. i'm curious if any of you have any thought about whether these recent revelations, about collaboration between the tech companies have jeopardized or made more difficult or tainted the whole notion of collaboration between the private sector and the government? >> as she said quite rightly has to be emphasized. what we are talking about is completely different on another program. the experience shows in the

public discussion a lot of stuff gets conflated. there's a risk that for some people particularly when there hasn't been a bad event, they can get themselves worked up by speculating or imagining or hypothesizing how it's going wind up with some big brother type of thing. there are structure changes in our society with the ability of big data in the private sector that are not going to be rolled back. we are largely dependent on networks for not only moving information but making things happen. anybody who thinks that it's better to let things develop so criminals and terrorists and adverse actors can exfloit is going to be very a rude awakening. i think we need to be honest and clear about it. frankly, since you're a journalist, i can say. who is the media to spend time actually explaining with clarity what is being proposed as opposed to simply taking what

one drinks grunt l person may someone and putting out there it's it's the gospel. >> i agree completely. i think it colors the dialogue or the discussion. i think there has been a public discussion a about the finish for people to understand and many cases complicated issues that people haven't thought about in term of their cyber presence and how that is potentially exploited. we hear about identity theft, but the more sinister aspect of this are not very clear to the public. so the revelation in the last couple of weeks have made it difficult. there was one telecom that said the government asked for the 5,000 request in the last month. you read between the line, you know, you don't do law enforcement investigation in this company without going to get the cell phone records. it's all a part of how law enforcement gets to the facts. but that was all kind of in this

big push about government involvement in the private sector. explaining that a bit more efficiently in term of what it really means, and how this part of it infrastructure protection is quite different from intelligence collection and those sorts of things, i think will go a long way toward the american public understanding how to must work. >> i think it reflects in part transition that the government is going through that this conversation, the secretary heart attack help to highlight. we took the position right after 9/11 that the security of dealing with the terrorism threat was of the governmental. job of all of us were the citizens of shop and travel. and we put it on steroids and make it go away. we realize that the threat hand gone away. the only way we get out of the threat it's targeting our -- yet our cold war apparatus is

ticking away it's inherently governmental and patriot closed system. there are some things that have to be closed. i think what the government is starting to realize is that it probably needs to ear on the side of -- 're on the side of push out a little bit more what the system are. the days we with work behind closed door and take care of problem are gone. and if this messy situation we have now helps us may be the cultural shift quicker i think it will be a positive instead of a negative out outcome. >> before we close i want give you an opportunity if there's some point you left unmade or a comment you want to throw out as the final comment parting thought? >> i want to thank jane hair month and the center for highlighting this. i think we're at the time people are focused on this. i think it's a little bit of novelty to talk about the

private sector actually having -- we need to continue the discussion. let's not continue indefinitelily. the action has to follow we are going to be in an unhappy place. >> i would echo the comments and the private sector really does understand this risk. it's a risk to our reputation. we're not sitting with the heads in the hand thinking the government is going to tell us what to do. it's day-to-day work we are doing. the integration of that within the critical infrastructure structure of the country and other countries asking the same questions will be the challenge. that's where the partnership has to be. that's where the dialogue has to be i'm reminded.

i spent thirty years in the air force and twenty years ago the military was having the very discussion who is in charge and who is accountable we saw that in todd some years ago. i see us at the same juncture in public private discussions in term of what the shared responsibility, who is going to lead the way? and whether the process is that we are going use to do that? from. >> from a political point of view. it's fascinating. [laughter] representing sectors and, you know, and sectors on diverse. but i'm delighted to have the chance to be part of the conversation. private public i would argue academia needs to be. there's a need to believe and design in to. that means the manhattan project, which i mentioned earlier was taking a bunch of people who were smart, woo knew nothing about national security

and harvesting that expertise to deal with the threat. we have that as a greatest strength of the country. we left ak dame ya on the sideline from the conversation. >> okay. all right. jane harmon, thank you so much. it's been a useful and interesting discussion. and i would like to thank the woodrow wilson center and my organization, npr for sponsoring this. [applause] [inaudible conversations] [inaudible conversations] upnext on c-span two a report on medicare finances. then the head of the associated press talks about the subpoena

of ap phone records by the justice department. later hearing on the national security agency data collection program. senate minority leader will talk about free speech and the irs targeting of conservative april groups tomorrow morning. the american enterprise substitute host the event at 10:00 a.m. eastern. we'll have live coverage on c-span. that's live at noon eastern also on c-span. >> as lee would march north he would write to davis, and they sensed at the time had come. it look like we have a chance because vix berg had not been

settled yet. it was may. in fact, june, and -- there this is our chance to maybe hit them again, win a victory that will bring the lincoln administration to the table. davis was so taken by the idea in a sense and probably too strong. he a formed a three-man commission that would negotiate with the lincoln government upon a victory in pennsylvania. so when lee went north, he went north to settle it. 150th anniversary of the battle of getties berg live all day coverage from the national military park sunday june 30*9 starting at 9:30 eastern on american history tv on c-span 3. a hearing exam the fiscal health

of the medicare prpl. two social security and medicare public trustee testify at the house health subcommittee. the congressman chairs one-hour hearing. [inaudible conversations] >> subcommittee will come to order. we are meeting today to hear from the two public member of board of trustee, the federal hospital insurance and supplemental insurance trust fund on the 2013 report annalist reporting the current dire status of the medicare program. it's important to understand that financial health and viability of the medicare program to ensure that the program is solvent and available to the immediate senior as well as future generations of americans. the author wrote most men would

rather deny a hard truth than face it. i worry that when it comes to medicare that is true for too many in washington today. if medicare is just fine, as some claim, then why the medicare trustee issue a medicare funding warning for the seventh straight year? it's there no problem that needs action now, why are the assets in trust fund slunk by 15% from the projections made just five years ago? in a sincere concern about medicare financial condition are dismissed as alarmist rhetoric by some member of congress, why can't medicare pay the million bills for seniors in thirteen short years? today no member of congress can hon -- honestly look a 52-year-old american and assure them medicare will be there for when

they retire because they confirmed it. .. a couple of years of reduced health care spending within a recession solves the problem, do the math. the number of people medicare doubled over the last 35 years and it's going to double in size again. no one has proven reduced health

care spending will last. even the medicare trustees didn't attempt to make that claim. they are not alone. the independent actuaries at the centers for medicare and medicaid services again published what they call an alternative scenario. in their full scenario they assume that congress will prevent scheduled cuts in physician provider payments and repeal the heavy-handed independent payment advisory board causing medicare spending as a percentage of our economy to skyrocket. the trustees report and the alternative scenario reinforced for prompt attention to medicare severe financial problems. as we will hear from our witnesses today we will continue to push but now's the time to act as the sooner we make changes the better the program structure, the less drastic these changes will have to be. it's my hope that this hearing will help my colleagues on both sides of the aisle continue to understand the extent of financial problem that pushes us to work toward a bipartisan common sense solution.

we can't wish this problem away. medicare is going broke to quickly and no amount of position political game is going to change that fact. the medicare board of trustees urged us as congress to take prompt legislative action and recognize the projections in this year's report continued to demonstrate the need for timely and effective action to address medicare's remaining financial challenges. so if the trustees don't view the two added years of solvency is a significant -- then why should congress or the white house? our witnesses here today will further explain this extent of medicare's financial difficulties as we work to deliver on this promise. medicare is important. it's in trouble. common sense takes that we have now. before recognized thinking membership dermott for the purposes of an opening statement i ask unanimous consent that all members written statements be included in the record. without objects and so ordered.

i now recognize ranking member mcdermott for his opening statement. >> thank you very much mr. chairman. i want to welcome dr. reischauer. it seems like you have been a permanent fixture around here doing something. ever since i came 25 years ago so it's good to see you here today. one of the public witnesses and doctors blahous thank you for your service and being willing to sit on a commission like this. i believe it's been a couple of years since we have seen you before the committee and i look forward to hearing your thoughts today about what's going on. as in the past as my colleague mr. brady, this hearing as he has usually been a hearing where there has been continual harping on medicare's supposed entire finances and scaring the public into believing that medicare is going bankrupt and it won't be there for you when you get to a certain age. every generation has been

subjected to that since i've been in congress. it's not going to be here by the year x. when i looked outside this morning as i got up, i can assure you the sky is not falling. the latest trustees report projects two additional years of solvency in 2026 but that is healthy by historical standards. additionally the affordable care act as improving conditions across the medicare program. projected medicare spending is down from where it was headed for the passage of aca. before aca we were projected spending would reach 11.4% of gdp in 2082. i don't know who can believe we know anything about 2082 but people said around and make those kinds of projections. this year that numbers down to 6.5% in 2087 so that's almost a 50% cut. the long-term 75 year deficit

has also dropped from 2.88% in 2099 to 1.11% in 2013. that's a 72% decline so you are saying that things and factor in the long term seemed to be getting better. if you believe those predictions the guys who want them believe them i guess. i'm one of those a little dubious about who will know what will happen and 75 in 75 years but the aca is also resulting in historically low health care spending rates. per-capita medicare spending rate was only .4% in 2012. that's less than 1/2 of 1% and national expenditures grew only 3.9% in 2011. the third straight year of slower growth but these rates are expected to remain low through the decade. that's not just a one time occurrence. these are a result of the initiatives within the aca and

the initiatives in this catalyze throughout the country. providers and insurers have gotten the message loud and clear they need to transform into high value efficient providers if they want to compete in the health care system of tomorrow. while all of this good news won't keep my republican colleagues from playing chicken little i would like to remind them that repeatedly the aca have tried it 37 times. their goal for the last three years would actually put the program on a worse financial footing. the latest estimates of the actuaries say that repeal would shorten solvency by eight years. it would also increase beneficiary costs and eliminate benefit improvements such as free preventive care and closure of the part d doughnut hole. so rather than using this year's trustees report to invoke panic

and fear rather let's use it to justify shifting costs or justifying costs on to beneficiaries and undermining the program in the name of solvency. i challenge my colleagues to think bigger. let's figure out how to ensure medicare is an efficient program that provides a quality benefit to those who rely on it. while i support improvements to the medicare program no program designed in 1964 could possibly be adequate for today. there is just no way you can do that. and i reject calls to slash the program to save it. it wasn't made two big of a -- but let's give the aca and system reforms a chance to work. after all this guy is and going fall tomorrow either and i think the committee has to look at what you present to us and decide how we actually implement the efficiency that is in the aca because it will affect

medicare as it affects everything. the delivery of health care in the way we pay for it is going to change over the next few years. it's changing in part by the fact that we have actually put aca in motion. that made people start to think think about it. i yield back the balance of my time. >> you will hear from two witnesses, charles blahous and robert reischauer boat public trustees on the social security board of trustees. thank you both for being a today here today and i look for you true testimony. five minutes for the purposes of providing oral remarks and mr. blahous we will begin with you. >> thank you mr. chairman, ranking member and all the members of the subcommittee. it's always a great honor to appear before you to discuss findings of the medicare trustees report. by mutual agreement with my fellow public trustee dr. reischauer i'm going to present my oral remarks in the primary financial projections of of the medicare reportedly the

two is testimony tune is testimony to discuss some of the recent evolution of the longer-term outlook. the first i would make in my oral remarks is simply that medicare finances a very complex. the program has to trust funds and the they are financing different ways. each year there is a high degree of public tension in our projections for the data from the hospital insurance trust fund and that is very important to the data and it's appropriate that there be such a tension but there are is just one piece of a larger mosaic of medicare program finances. medicare also has a supplemental medical, supplementary medical insurance trust fund which acts as large expenditures so it could never go insolvent by design. it's given whatever general revenues it needs in order to maintain benefit payments so when we have financing strains on outside of medicare than not manifested in the trust but manifested in the form of rising premiums and rising pressure on the general budget. in fact we are showing pressure.

under current projectioprojectio ns in 2013 we are expecting $594 billion total medicare expenditures. that's about 3.6% of our gross domestic product. we are projectinprojectin g going forward that medicare costs will rise substantially faster than our economic output to the point where in the 2030s by mid-2035 we are expecting the total program cost to be about 5.6% of gdp. thereafter we are expecting continued increases relative to our economic output to hit about 6.5% of gdp by 2087. the primary driver of this cost wave of courses the demographics. we have a lot of baby boomers and then if it rolls. health care cost inflation plays an important role and is the relatively more important factor although many are turned demographics of a larger one. under current projections as has been noted we are projecting the hospital insurance trust fund

will be -- in 2026, two years later than what we projected in last year's report. my colleague will explain some of the reasons for recent changes in the outlook. here in my remarks i will note that medicare finances are really very much on the -- we are starting with less than one year's worth of benefit payments in the hospital insurance trust fund and so our 2026 projection depends to a great degree on whether annual tax income and outgoing benefit expenditures would be allen stover the next several years. if our projections are off a little bit and our long-term projections are subject to great uncertainty that 2026 could move a few years in either direction through the last one i will make mr. chairman is simply that for various reasons total costs are likely to be higher than what we are showing and most obvious of these is the sustainable growth rate formula for physician payments. we are obliged to project what

happens under literal current law with a 5% reduction in physician payments at the beginning of next year. historically congress has tended to override these and we assume that pattern will continue and cost will be higher and projecting more than 10% higher over the long term. there are some who argue that costs are higher than our current projections for other reasons and those are rooted in some of the technicals of how we make our projections. i will try to explain these without getting too far into the weeds. but basically our projections for medicare cost growth are very highly dependent on our projections for health care costs relative to the broader economy which determines the input costs that providers report to medicare. what we do in our long-term projections is we assume a certain level of deceleration in the national health care cost growth. the reason we assume that has to do with the historical elasticity of medical cost growth as a function of price

growth. i think the lamest way of understanding it is as health care takes a larger and larger share of our economy and absorbs more of each of our pocketbooks the pressure and the direction further increases is lessened and if that weren't the case we would ultimately get to the point where are economy -- so we assume a certain level of deceleration in national health care to venture so when you overlay on top of that the ambitious cost constraints of current law in some areas we actually have projections that have per-capita expenditures in medicare more rapid than gdp growth in the near term but less than gdp growth in the long term. so there are some people look at our projections and say we don't think that's possible and we don't think lawmakers would permit expenditures in medicare to be less than the per-capita aces. we have to be agnostic about that. we can't predict the future actions of lawmakers but what we do say is we show the main projections in the current law and we also find alternative

scenarios and assume some of these provisions are overwritten. in conclusion mr. chairman medicare is a conference -- my complex program which has consequences including the chess fund and rising pressure the general budget. we are showing cost rising markets over the next couple decades due to demographics. costs are likely to be at least as high as we currently project in the pattern of sgr. in in our report we say under current projections legislation will be needed to prevent financing shortfall in the hospital trust fund would address rising budgetary pressures arising from smi. the sooner legislation is not for the more likely it will reap what produce long-term savings with less disruption for beneficiaries. thank you. >> thank you. mr. reischauer. >> chairman brady ranking member mcdermott and other members of the subcommittee i appreciate the opportunity to appear before you today. my colleague dr. blahous has

covered the prestige latest operations of medicare and i'm going to stray a bit in part in response to the op-ed that was in last weeks "washington post" about the credibility of medicare's long-term projections. what i was going to talk about is the implications to the slowdown in overall health care spending will have or could have on the medicare programs future financial situation. as you know both medicare for beneficiaries spending and private-sector per-capita spending has slowed considerably over the last few years. the latest trustees report projects that the year and which they trust fund will be depleted has been pushed out two years from 2024 to 2026. this is good news because it suggests the cost curve has been met and in a sustainable way and

we can relax. even though i count myself among those who think much of the spending slowdown is structural in nature i believe the fundamental financial challenge facing medicare's the need for further cost restraint and reform remains largely unchanged from where they were a year or two ago. the slowdown in per-capita national spending has been going on in fits and starts for the better part of the decade. probably the biggest single factor in explaining the slowdown is the economic week is of the past five years. this weakness has ridges the ability of many workers and their families to afford health care. what is less recognized is is also had an effect on medicare. and the fisheries who experion sharp declines in the value of their iras and 401(k)s and reduced interest income from their cds and bonds. in addition they went through years without social security cola. the fact that relatively few

technologies are introduced in the past few years is the second factor that is can she be due to the slowdown. policy changes both at the federal and state level also take credit for the spending slowdown and a final factor is the sea change sea change that is taking place in the attitudes and the focus of leaders in the health care center to contrast the past which is now widespread appreciation among these leaders that health care cannot be provided without concern for its cost and efficiency. as a result of this attitude no shift hospitals physician groups insures and employers have initiated innumerable projects designed to moderate cost growth and some have helped demand in overall spending. whether the spending slowdown will continue as an open question. while there are reasons to be cautiously optimistic there are also reasons for concern. prime among these reasons of course is the possibility that breakthroughs in genomics

science and technology, stem cell research and other cutting-edge technologtechnolog ies could lead to an explosion of new and expensive interventions. the increased market power that providers may gain when they consolidate to provide a greater high-quality care as envisioned on their health reform is also a threat, potential threat to the continuation of the spending slowdown. some might ask whether future pace of growth of four while health care spending as much relevance for medicare because medicare has administered not market-based prices and does not negotiate with providers when they sense other costs related program parameters. notwithstanding these differences in medicare cannot set is its own course with respect to future growth, independent of what is happening in the rest of the health care marketplace. this has been illustrated clearly by the appropriate reluctance lawmakers have shown towards a hearing for sustainable growth rate formula.

as you know the projections in our report assume the physician fee schedule will with the reduced by 24.7% in the start of 2014. the report notes however that it is a virtual certainty that this reduction will be overwritten. this judgment is based on experience since 2003 and an appreciation of the disruptive consequences that a sudden sharp reduction would have on medicare payment rates leaving at far below those of other payers. in short what happens in the private marketplace does constrain what medicare can do to slow spending. for several years the trustees reports have expressed caution with respect to the long-run sustainability of the major cost reduction measures required by the affordable care act. the most important of these are the productivity related reductions in annual payment rate updates for medicare providers. while the trustees believe that

these measures were alternative ones have similar impacts can be sustained over the long run. they judge that this will occur only if the overall health care sector transitions to significantly more efficient models of care delivery. such a transition will not happen unless private payers as well as medicare continue to pursue cost savings innovations aggressively and pride of providers respond to the incentives to moderate growth. in short medicare's ability to moderate growth over the long run depends critically on the private-sector success in its efforts to slow spending and vice versa. thank you. >> thank you mr. reischauer. mr. blahous u. you and six other trustees predicted in 13 years medicare will only be able to pay 87% of its benefits going forward.

how will cuts that severe or a shortfall that severe, what impact does it have on medicare and its ability to provide medical assistance to seniors? >> that shortfall is the hospital insurance trust fund and if it were allowed to simply play out without action, the amount of benefits we would pay would be 87% of what is currently scheduled. under the law that side of medicare cannot make payments in excess of the balance of his trust fund so basically under most interpretations of the law medicare would simply have to wait until income and revenues in many instances a denial of -- be your project slightly higher cost growth rates going forward so when effects we ought not count on the low growth rates of the last two years and you make

the point that our finances are on highest edge. the seven trustees you said -- have said that congress needs to take prompt legislative action. so is that prompt and timely meaning sometime in the next 10 years, sometime in the next five years? do we need to act sooner? >> certainly the sooner there is action i think the more prudent it would be for a number of reasons. one is the sooner you act the more people you can involve in the solution. you can involve cohorts of taxpayers and you can have a gentler impact. if there is going to be an impact on the fisheries you can spend -- spread it out. the other point i would make is yet remember the main factors that are driving the cost growth one of them is demographics. it's hard to change on a dime. if you've change anything about eligibility criteria. >> a lot more people coming into

the program, higher costs over the long term continuing to drive financial problems. what is your recommendation for this? you have been there and you know the issues and the challenges. how much longer do we delay taking some meaningful steps? the difficulty is lawmakers have to make a judgment as to what is the right environment and the best time to act from a number of perspectives. i can tell you strictly from a numerical aspect the more immediate action the better. >> preferably from a purely technical substantive purse -- perspective, yes. >> thank you. mr. reischauer your testimony sounds like everything is just fine in medicare. is your thinking, don't worry, be happy? it will all work out? >> well, i think i said early on

in my oral remarks as well as my written remarks that although i'm optimistic about the spending slowdown, i think that we still face a very significant problem and like my colleague i think the sooner we adopt measures to address the long-term situation the better. i'm not one to spend sleepless nights worrying about 2087 but you know looking out at the next two decades, there is cause for concern and the like.org blahous i believe the sooner decisions are made the more gradually they can be implemented and the more political viability they will have. >> is your thinking too rather than waiting five years or 10

years would your recommendations as far as taking meaningful steps to congress be to do this session, to start those solutions or at least the steps of them now rather than continuing to delay? >> we have adopted a lot of changes. we are going to learn a lot from the demonstration and pilot programs and from the implementation of various cost reducing measures in the affordable care act. and they think in a few years we will be in a much better position to adopt and they sense the next generation of changes. informed by what we learn about how well some of these demonstrations are doing. >> you spent a lot of time with her testimony talking about the benefits of the affordable care

act. i didn't see that. what section of the trustees report was that in? >> it wasn't. i said i was going to stray a bit from the trustees report. >> what is your personal view just looking ahead on these issues? >> yes, and it comes from the belief that the success of the efforts to hold down medicare costs depends critically on what is happening in the rest of our health economy, that medicare can't go off -- >> i heard your testimony loud and clear. final point, is it accurate that the trust fund this year started out only having enough to cover 81% of liability is? is that accurate? in your trustees report?

>> the trust fund assets amounted to 81% of 2013's expected expenditures so if there were no money coming into the trust fund -- >> is that expected to get better or to decline? >> it is expected to decline gradually over the next 13 years. >> thank you. mr. mcdermott. >> these hearings are basically educational for the public. let me try and get clear in people's minds what you are talking about the deficit, you are talking about the deficit in part a. that is what you're talking about in part e, that his doctors and other incidental laboratories and so forth, it will be paid in full and part d would be paid in full so those two programs are not what we are worried about here. we are worried about the hospital at 87% and there is

going to be 87% of the value in whatever is out there. >> if we do nothing you are saying, if we do nothing but in fact we have done. we put in place the aca so we now are putting in cost control mechanisms in the aca that are affecting us or assumed to be affecting it. i looked at the medical advantage program and saw that it's dropping. it's really encouraging news that the bids are coming in lower on medicare advantage which suggests to me that aca is already having an effect. is that a fair estimate? either one of you, dr. reischauer or dr. blahous? >> the trustees report says that the initial estimate of the

impact of the affordable care act on medicare advantage plans were probably a bit high, a bit low in terms of reductions and that behavior of these plants and the changes in the benchmarks that have occurred over the last three years have led the actuaries to believe that the savings will be larger in medicare advantage than they thought in 2010, and we have also seen an increase in the numbers of folks signing up for medicare advantage, higher than was predicted at the time the affordable care act was enacted. >> the initial medicare advantage introduction was a little bit rocky as i remember. >> well i mean let's start with recalling that medicare advantage and a sense cost the

government more money than fee-for-service. we were overpaying these plans relative to the cost that the individuals who participated in the plants would have cost had they been in fee-for-service medicine so the affordable care acts took a number of steps to try and reduce that situation and those have been quite successful. >> so, to sum that up what you have just said is the congress took actions that have reduced costs already, and it looks like there's there is no reason to believe that won't continue out into the future as more people get into managed care and daycare advantage and the bids keep coming down. we will save money in the future. >> well, but to take this to the

next step bids have to come down well below what the cost would be in fee-for-service which means that these plans have to be, ever more efficient which i think they are on the way to doing but to go back to my original testimony these are plans that i and large are run by companies that also ran managed care plans in the commercial market so this is all one big ball of wax here and we want to keep pushing on all aspects. >> it seems to me that what you are really saying is that some of the things that are being put in place have put been put in place in the aca and medicare advantage in the past. you can expect them to go in and instantly have a major change. that's like trying to take a the

supertanker and turn it on a dime. it takes 20 miles to bend it for degrees in that direction and that is what we are doing with the program. his that your view that we are getting the benefit? >> we are think and i hope we will get more and i think you are right on the money when you say this is a vague sector of our economy and it needs time to evolve, to change and move in that right direction and that is why the chairman's suggestion that making decisions sooner rather than later and giving instructions on what direction to go is very timely. >> i would be glad to help. thank you. i yield back the balance. >> and want to recognize mr. -- because we have a vote and i know members want to take a look at those before they began. we begin. we will recess at five minutes after and get a vote series and

we will reconvene at that point. mr. johnson. >> mr. blahous the trustees report estimates that medicare hospital insurance trust fund is projected to spend more money paying claims this year than it will -- collect from the payroll taxes. is that correct? >> that is correct. >> how long has this been the case? >> 2008 was when the expenditures began to exceed tax income. >> okay, are you aware of any program that is financially sustainable and spends more money than it has or is this a recipe for bankruptcy? >> obviously we can't continue on that path forever. our current projections over the next decade we are projecting almost an exact symmetry between income and go and there actually is a brief -- when we are

projecting tax incomes for one year exceed expenditures but then after that the lines go apart in expenditures exceed on a permanent basis and that is what leads to -- >> i don't know how you came up with that decision. mr. blahous in her testimony say the current edit care cost growth projections show there will be increased pressure on the general federal budget highlighting the increase in general revenues needed to prop up the smi trust fund. what does this mean for federal finances as a whole and won't this further pressure the budget? >> the answer is yes. it does mean increased pressure on the general budget and on three and outcomes. you have to have higher taxes, hugh have to have higher david nesser reduced expenditures elsewhere in the federal budget. >> okay and which of those do you favor or?

>> well this is my personal view. i'm not excited about the idea of steadily rising taxes are steadily rising debt but i'm also not excited about seeing the rest of the budget squeezed either so we have to do something about the rising cost of medicare. >> maybe you could make the whole cost -- >> i would not want to do that. >> mr. reischauer in your testimony say policies included in the affordable care act and obama careful reduce costs and pay more efficiencies than the system. you specifically mentioned cost-conscious insurance policy products that will be offered within the exchanges but many states have also released numbers showing that premiums will be increasing 10%, some 20 to 50%, some as much as 150%. your assumption doesn't sound right to me. how does this help us control costs in medicare and facing the problem right now? >> first of all the numbers you

suggested i don't think account for the differences and generosity between the plans that are being offered now and the plans that will be offered in exchange because there are benefit requirements for plans offered in exchange. but what i really am referring to is the situation that we will have once the exchange starts which is the individual consumer having a choice of which plan he or she decides to sign up or -- you know there will be plans at different levels of generosity. we might find very significant fractions of the american public are quite comfortable with plans that are not as generous as those that we see offered in the usual employer employee situation and that will change and start a competition that

heretofore really hasn't existed both because few employers offer a range of plants and those that do usually make their contributions to those different flavors of plans such that true market responses by their employees are not exhibited. >> well my impression is people don't want to spend more health care than they are to ern at that is what what i'm afraid it's quite happen. >> i think you are right. i agree with that. >> we used to series of votes. each of them are two minutes long so we will, the subcommittee will reconvene five minutes after and we will be back here ready to work. [inaudible conversations]

>> thank you for being patient during the vote series feed we have another one coming up and i would like to recognize mr. pascrell for five minutes. >> thank you chairman brady. dr. reischauer, reischauer i'm sorry. do you think that medicare can hit the spending projections in the trustees report under current law? do you think that we will hit those spending projections that you mentioned?

>> well, one aspect of current law is the assumption that the sgr will be implemented and that physician payment rights will go down by almost 25% and in that respect i don't think we will hit the projections and i think the impact that has on medicare's overall spending is about 2% but extracting from that you know i think it is perfectly plausible that over the course of the next 10 to 20 years that we will hit the

project did numbers better in the report but as i said in my testimony, this presumes that there will be a significant transformation of our delivery system, not just the delivery system for medicare's prospective but from the private sector as well. but i think that we are on our way to that in large measure because of the pressure that congress has been exerting on health care providers. health care providers. >> correct me if i am wrong on this, the alternative scenario projects spending at 9.8% of gdp. compared to a projections of

11.4% prior to health care reform. is that accurate? >> yes, that is. >> that's pretty important is that? >> if you look at the 2009 report the 75 year projections were considerably more pessimistic than either the current law projections in the 2013 report or the alternative scenario contained in that report. some of that is of course the affordable care act but that is taken out by the alternative scenario and some of its is the different projections of the economy and inflation and you know some of it is the slowdown in spending that we have experienced. a lot of factors going on but

the basic observation is correct. >> you would agree? >> yes. >> now we have slowed down the rising cost of drugs, yes or no? prescription drugs. smulian have slowed down prescription drug costs in large measure because there has been a very substantial shift from branded drugs to generic drugs, much more than the experts had predicted a few years ago. in part because of the pressures that pbm's have exerted through the medicare part d. program. >> now, the projects that we are into right now in terms of medicare and health care for that matter are designed to moderate costs because if we don't touch that we cannot, we cannot raise enough money so we

continue to go on the past process, we are out of business but let me ask you this. i don't want to be morbid about it but there is really as i see it and correct me please, there is no real hope of a real reduction of the cost of health care and indeed medicare unless folks take control of their health choices and learn to read their bills. i have looked at the reports, both sides of the aisle. neither of the size of the aisle are stressing those choices and i would say both sides of the aisle are going in the wrong direction and the major emphasis if i had a chance to finish the question mr. chairman and maybe a short answer if it's possible.

>> i will give you time mr. pascrell. i will ask the witness to respond. >> the point according to the question is this, we can't raise enough money to do the things that we want to do then we need to deal with the person who seeks care whether he is in control of his health. this bill says you are in control of your health and this is what you will do but that is beside we are not discussing. we are not emphasizing this and i fear mr. chairman with all your good intentions and great intentions of the ranking member that we are not going to deal with this and deal with the lowering of that cost unless we deal with those two things. a bill and can taking control of your own health. that is not in the books here. i don't know why we are not discussing it is.

>> thank you mr. pascrell. dr. price. >> i appreciate dr. pascrell's -- a bill the response to that i would be glad to sit down and chat with you about them. i want i want to thank our witnesses and expertise to bring the expertise to bring in the contributions that you have made to trying to move us in the right direction. dr. blahous i am struck by your testimony and much of the graphics within your testimony. we hear some of her friends at their side sound relatively sanguine about the situation and that is not a big deal only don't have to worry about it too much but you said the democrats are driving the challenge. we have 10,000 books reaching retirement age every day and we will continue to do that until we get to 78 million folks of my generation the boomers to this process. that is a huge economic challenge and my sense is that

things aren't as rosy as some would like them, like us to believe they are an impact they may not be as rosy as the trustees report. would you care to comment on that? >> sure. with respect to the observation that cost may be higher than what we are projecting into.your reischauer's we are assuming a 25% reduction in physician payments next year. historical there is little basis for summing that's going to happen so if you assume those payment reductions continued to be overwritten costs will be at least to that extent higher than what we are currently projecting. beyond that i think an important part of the message i would offer is that we still have work to do to sustain medicare. there has been an awful lot written and said about the recent slowdown in health care cost growth and obviously we are very hopeful that will continue and we are hopeful that it will

render the aggressive cost containment mechanisms in current law over the long run but i think it would go too far to assume that things are going to turn out significantly better than what we are currently projecting. >> and likely not as good trade. >> likely not the likely not as good because we are basically assuming that is going to work. >> let me turn to the issue of cost control that has been stipulated by the aca for medicare through the independent advisory board, something that many of us opposed vehemently because we believe it removes those choices for patients and families and doctors for the care that they desire. the projections right now are that the independent payment advisory board will come into play when they have to make a decision about reducing services for reducing compensation reimbursement to physicians in four or five years but what is the interplay between that and

the projection that the trustees that made already? >> is a little tricky. basically be ipab comes into play whenever total medicare expenditures exceed basically gdp plus 1%. that renders it a little difficult to run out the lester to alternative scenarios because for example if you assume that the cost containment provisions in the affordable good air care act are overwritten then unless they ipab is overwritten ipab would have to fill in the gap. he would have to provide the savings of those costs mechanisms do not provide so there's a strong interplay between the two. that is why in our scenario we show the consequences of those cost containment provisions being overwritten and the assumption that ipab's assumptions are overwritten. you can't show the effect of one

unless you assume the others turned off because ipab will come in and fill the gap with those cost containment's are overlaid. >> the cost containment does not occur which we all believe should not in congress will act, does the ipab, does the ipab come into play from decreasing reimbursement to physicians sooner or later? >> the short answer is i am not certain. i will tell you what i think the answer is. i think the answer is that the main interplay is with the so-called productivity adjustment to the affordable care act and the reason i believe that is the sgr override that we are assuming that basically most of that effect is in early 2014 and we are summing 25% higher physician payments in 2014 whereas the years that we are projecting ipab coming into play based on the targets those are more in the out-years subsequent to 2018 but it could

be much sooner. it could be much sooner but a bigger factor is whether the cost containment are overwritten and i'm looking to mike côte trustee in case i have that wrong. >> thank you very much. mr. smith for a final question. >> thank you mr. chairman and thank you for our witnesses for being here today and sharing your insight and expertise. dr. reischauer in your testimony suggested spending on health care may decrease in the future in part because of the creation of ipab and what part of ipab is it that you think can lead to that? i know many folks are concerned that is a form of rationing care. >> first of all, i don't believe that spending will decline. i think the weight of spending will continue with relatively slow rate increase so i am not here predicting nirvana so to

speak. you know the ipab effect is a relatively modest one in our projections as blahous mentioned. the significant impact comes from the productivity adjustment and the payment updates for most types of providers. you know, the ipab, if it is created and if it is put into effect as you know will be charged with bringing up suggestions that don't necessarily have to be a cut in physician payments or other payments. it could be some other things as well. to bring spending down below a

threshold and if congress disagrees with those measures, it can enact a substantive way of dampening down the growth of costs but some of the materials we have suggest that looking out over the next 20 or 30 years the ipab is really a relatively minor part of the story of holding down costs growth. >> would you say it's minor but important? a little bit of context -- >> it's important -- its -- its importance if i could make a prediction it would not come from its actions so much as its threat of actions and focuses in

the mind of policymakers at hey we have to do some more. we have done a modest amount so far but we have to do some more or else this could be viewed in a play something like sequestration. it's nobody's first or tenth you know idea of what a good solution to the problem is so let's as legislators come up with an alternative. >> okay so just to follow up dr. blahous of creating the ipab is considered by many to be good policy i have my concerns why is it's elimination assumed in the basic report? >> basically it pertains to what we are trying to show in the illustrious alternative scenarios trying to equate lawmakers with the potential expenditures that could arise if certain mechanisms of current

law are turned off and ipab is very important in that demonstration because if you left ipab to contain to operate in congress came in over road those cost containment mechanisms in current law then under other aspects of current law ipab would come and have more savings to facilitate so in order to show the magnitude of the additional expenditures you assume certain elements of current law overwritten and you also have to assume ipab is overwritten as well because otherwise ipab will fill in the gap for that savings. is that clear or somewhat? >> my fear is perhaps the sgr will be replaced by ipab under a little different acronym. is that conceivable? >> well i would say i think there are different levels of skepticism within the trustees process as to which elements of current law are likely to be

sustained. i think the trustees as a body are based on history very very skeptical that anything approaching ftr is going to happen because historically we have overwritten that. with respect to ipab and other cost containment and current love you have greater agnosticism. you certainly have some players in the process you think it's possible that they could be sustained. you have others who are more skeptical. we have the technical panel look at this over the last couple of years and they basically came back with a recommendation that are illustrative alternative scenario we assume that these cost containment mechanisms operate in full up to 2020 and are partially phased out from 20222034. again it's not a prediction and not a policy recommendation but basically that reflects an alternative assumption that basically these cost containment mechanisms would be overwritten

to the extent that would be necessary under our methodology. but there is great diversity of views on that especially since we haven't seen whether these will be affected yet. >> thank you mr. chairman. >> i want to thank witnesses for your testimony and clearly i hope we heed your warning to take meaningful steps to extend the life of medicare. as a reminder and a member may submit questions 14 days after the wreck and i would ask witnesses to respond in a timely manner which i know you will. without the subcommittee is adjourned. [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] up next on c-span2 the head of the "associated press" talks about the subpoena a peep on

records by the justice department. in about one are the head of the national security agency testifies about nsa surveillance programs. when you talk about transparency with the american public you are going to give up something. you're going to be giving signals to our adversaries as to what our capabilities are and the more specific you get about

the program and the more specific you get about the oversight the more specific you get about the capabilities and the successes to that extent you have people sitting around saying okay now i understand what can be done with our numbers and in the united states and yemen and consequently i will find another way to communicate. there's a price to be paid for that transparency. where that line is drawn in terms of identifying what our capabilities are is out of our hands. you tell us to do it one way and we will do it that way but there is a price to be paid for that transparency. ..

it. >> to donate to programs offered to the public, please visit to our

web site. on behalf of the members worldwide up with like to welcome our speaker and those of the audience. our head table includes guest of the speaker as well as working journalist if you hear applause i would note that members of the general public are also attending so it is not evidence of journalistic object of the. [laughter] also we would also like to welcome our c-span audience. you can follow on twitter. after we conclude we will have a question and answer period uno as his many as time permits. it is time to introduce our head table guest. please stand as your announce. from reporters about borders and vice chairman of the freedom of the press committee. breaking news reporter for

"usa today." senior producer for all of his era english. senior writer for congressional a quarterly will call. bureau chief for reuters washington bureau. a reporter with "usa today" and vice-chairman of the speaker's committee here at the press club and former president. executive vice president of the speaker committee member who organize today's event. and the founding director of the center and a guest scholar at the brookings institution. and a host of on the record with greta van sister and on

fox. sr. business editor npr as a member of the press club board of governors who is a liaison to our committee. and managing editor with the sunlight foundation. [applause] in may 2012 the associated press reported of the cia operation in yemen that stop the al qaeda plot to detonate a bomb in airplane bound for the u.s. and one year later it made the justice department to notify the ap it had secretly obtained the phone records of numbers of individual reporters as well as bureau in new york, washington and hartford connecticut and the house of representatives press gallery. 20 phone lines in april and may were tracked the justice department did not explain

why the phone records were received. our speaker today, the president and ceo of the ap responded immediately. he wrote to attorney general eric holder of a massive and unprecedented intrusion into the news gathering activities of the ap. he said interfered with a constitutional right to gather and report the news. he speaks not only as the head of one of the largest news gathering organizations but also a lawyer. his career as freedom of speech lawyer led him to a position as general counsel for the third largest newspaper company in the u.s.. said shares later he took a leadership position in sacramento and by and 1994 in part on at the series of corporate leadership positions at mcclatchy serving as a ceo from 1996 through the head of the ap last year.

it is a not-for-profit cooperative owned by member newspapers with 3700 employees in more than 300 locations worldwide. more than half of the population sees the news reported on any given day. when he took the helm he probably thought his biggest challenge would be the transformation of international markets but today his concern is far more fundamental and he says the seizure is having a chilling effect on news gathering itself and of journalists are restricted to report the news, then people will know only what the government wants them to no. please join me to give a warm press club welcome to mr. gary pruitt. [applause] >> thank you. also to the national press club for inviting me today

and also for the really cool cupcakes that they put together. [laughter] of all of the logo of the ap through the years i think it was artfully done and deliciously done. and for those of you who don't want your cupcake bring it over to the ap table, we will take it back to the washington bureau i'd like any good news from they will devour those. [laughter] and m. sorry for those of you watching on line on c-span that you will not get those cupcakes. before coming here today to speak, i thought it would be a good idea to get a sense how the seizure of the ap phone records by the u.s. department of justice was affecting our reporting and what i found should alarm everyone in this room and in the country. the actions of the doj are

already having an impact beyond the specifics of the particular case. someone time trusted sources have become nervous and anxious about talking to us. even on stories that are not about national security. and in some cases government employees that we once were checking with regularly will no longer speak with us by phone and some are reluctant to meet in person. in one instance, our journalists could not get a law enforcement officials to confirm a detail that was reported by another media. i can tell you this is not just that ap but other news organizations as well. journalists from other organizations say it has intimidated sources from speaking to them. the government i love this suspect they do.

but be where the government that love secrecy too much. today i want to provide you with the latest news from the front on the seizure of the ap phone records from the department of justice and what we're doing about it and the implications. let me recap how this started. angela touched on it briefly. may 7th of last year, 2012 ap published a story on a foiled plot by a the al qaeda affiliate in yemen. it was planning to use a new and more sophisticated bombs to destroy an airliner headed for the united states. our story revealed the cia forwarded this attack and was intended to coincide with the first anniversary of the killing of osama bin on an. now that is a real scoop and it was broken instantly by two longtime ap national security reporters who

shared the pulitzer prize for investigative reporting. it was not a story that was a surprise to the u.s. government has the story itself pointed out ap held the story five days of the government's request because that sensitive operation was still ongoing and then only reassured us that the national security risk had passed but the ap acted responsibly. so the story was important on its own merits americans have a right to know that it was being plotted and the government could prevent dip. in a statement made by a jay carney just two weeks earlier he had said we have

no credible organization including al qaeda to plot attacks and u.s. to coincide with the anniversary of the been lauded as. yes finding that right in the middle of living such a plot and it turns out the person who was to carry the bomb was a double agent working with the cia the, the saudis and the british. some have argued for a peek at the context from in this was never the al qaeda plot but this scheme from the outset. beaches that interpretation strains credulity. al qaeda constructed the bomb and its agents were working to activate the plan. so the story received wide attention and soon after the department of justice announced it would launch a

leak investigation and it appointed u.s. attorney to take on. fast for. one year. last month friday may 10th we received a letter from the department of justice and forming as it had secretly seized the records for 2180 phone lines which we now learn or now we know was over a 40 day period around the same time that our story was released. so this was the unprecedented intrusion into the news gathering records and have never seen anything like this before. it was an intrusion from government officials so broad and overreaching and secretive that it violated the protected zone that the first amendment provides journalist in the united states. we do not dispute the u.s. government has the right to pursue those who leaked classified information.

disinformation has prosecuted those like no other in history. but the justice department has ruled the bauhaus to subpoena the press and how it works and they date back to the watergate era because any demand is to be as narrowly drawn as a

switchboard number of locations let me stop. while they got the switchboard numbers they also got a sweep just be on the active members. they got the switchboard number for the d.c. bureau from more than six years ago

that we had vacated the was no longer being used. vesa p ned of mind of a reporter that work to her efforts seven years ago. it is not focused in any way or nearly taylor the sweep of the records of course, you think today that sounds minor compared to what we have learned the nsa has collected they have the entire country's phone records. but the dlj was collecting ap records, not just to load them into a database, but it was a specific criminal investigation with the dedicated team of prosecutors poring over the records to locate the source of the reporting and in doing so there accessing a broad swath of other news gathering information protected by the first amendment against precisely this type of intrusion.

now the sec and weighed the department of justice by they did its own rules was to execute without notice to the '80s we cannot seek judicial review. he claims the exception applies if they notified us it would have compared their investigation. but how could that be? ap could not tamper with these records we can even have them in our possession they are maintained by a phone carriers the doj claims that by notifying us it would have tipped off the leaker but he already knew of this investigation and was publicly announced. the fbi director of publicly announced nine days after the story ran and furthermore that kind of reasoning from justice about tipping off the leaker would apply for every single case

the press would therefore never be given notice never be able to go to court to be involved than the exception would swallow the rule had doj come to us in advance we could help them narrow the scope of the subpoena and if they did not agree then a court could decide. there was never that opportunity but the deal jay acted as judge jury and executioner in secret. they may well have been acting in good faith and i give them the benefit of the doubt but i suspect they got so single-minded they focused on the leak investigation that they overlooked the first amendment implications of their actions. the doj has our records sam probably have for use them as part of their investigation so we cannot

undo that but i am pleased to tell you that the justice department has given us assurances that our phone records have been and will continue to be walled off and protected and use for no other purpose than the leak investigation and we appreciate those assurances it does not excuse what they did and we want to make sure it does not happen again. president obama has asked to tear it -- attorney general holder for recommendations on the justice department regulation in this area in an end to that and justice has been consulting with a number of news organizations and public-interest groups and meanwhile there has been renewed support for a federal shield law to protect reporters to protect sources to extending to the federal realm of laws that have it already existed in

more than 30 states. dap believes the following friday's measures are imperative of the first amendment. we want the justice department to recognize the rights of the press to a band's notice and a chance to be heard before the records are taken by the government. this would give 80 the chance 2.0 the failings of the subpoena. we believe notice was required under the existing regulations. doj sees it differently and the regulations should be strengthened to remove any doubt. we one judicial oversight. we need to ensure proper checks and balances are maintained and the ap phone records case the justice department determined on its own that advance notice could be skipped with no

checks from any other branch of government that is not how this government should work. third, we won the guideline updated to bring them into the 21st century. they were created before the internet area on negative era it did not have the mails or text messages. the guidelines need to ensure the protections afforded journalist encompass all forms of communication. for, a federal shield law enacted that will protect reporters from such unilateral and secret government action. we want the department to institutionalize formally what president obama and attorney general holder have said publicly that the justice department will not prosecute any reporter for doing his or her job the department should not criminalize or threaten to

rise of journalists returning to do their job such as calling them co-conspirator under the espionage act as they did to james rosen this phase to be part of the established directive not limited to the current administration no one in this country should ever be prosecuted for committing journalism. the ap has no political dog in this fight is not about democrats or republicans but the issue is freedom of the press and the right and still the the first amendment designed to hold government accountable. if reporters phone records are open territory for the government to secretly monitor, then new sources will be intimidated to talk to reporters. the ap will not be intimidated but our sources will be. and 98 essentials new sources are critical to a free press and holding government accountable

otherwise he'll just year from the official source than the public will only know what the government wants them to no. that is hardly what the framers had in mind when they wrote the first amendment. this month had fines if they show is facing just how much power and information the government has and why a robust free press is more important than ever. this issue resonates far beyond america's borders. the freedom of press enshrined in the constitution has been a model for nations and people are brown toe world. did you ejections could not have been more taylor made to suppress their own. it should not be this way. a free and independent press is fundamental to the oxygen

-- it separates the free society from tyranny. the first amendment is the collective covenant that freedom will flourish on the shores. we should all be concerned by the apparent failure of the justice department to recognize how its actions threatened the fundamental freedom. thank you very much. [applause] >> thank you. not surprisingly we have a lot of questions. he said in your remarks the deal jay violated its own rules and talking about the effort to update those. do you believe there revisions will make a difference how they carry

out there practices? >> i hope they do. i can tell you over the past four decades the greatest protection afforded reporters in this area is through these guidelines that is why it is a focus going forward of ap and other news organizations that they be updated and improved. it is appropriate the president ask the attorney general to look to these regulations to come forward with improvements and recommendations. so all of us in the media and everyone in the countries should the pinterest what happens on july 12th and what improvements and updates and how they are updated and we are extremely hopeful they can provide clear guidance to the justice department and increase protection to the media especially given the strained interpretation

is justice department applies to those rules. >> what in the role can guarantee this will not happen again? >> we believe the rules were violated in this case. the department thinks they were not. they went ahead in secret and got their way facebook of the records and told us about them up to 90 days later. if they can do that then their perspective will always prevail. we need to check on that which is another branch of government. that is why we need the notice so we can negotiate with them. that is what the rules contemplate and only under exceptional cases can they go in secret. but under their reasoning

every case is that case not to tick them off give me a break. we want to the rules clarified so they are clear the press will get noticed. and we think that will provide much greater protection. we could have helped them to clean up sestina over -- subpoena or the defunct phone-number in that regard none of that was able to happen because of their interpretation i think they can be approved go -- improved going forward. >> you consider this administration's response to the news media any different from other administrations?

>> no. [laughter] >> then why is it getting more attention now with more highly publicized instances? to make this civilization has been more aggressive to go after leaker ban other administration so it has more active investigations going on. but this administration came in on a platform of transparency and unfortunately, like passive ministrations commit has not fully lived up to that promise. >> did any time did the government threatened retaliation for advancing

the terrorism story directly or indirectly? >> the government? no. nothing like that happened. ap alone got this group it is a very significant news story and obviously sensitive. the ap went to the administration to talk to them about it. of the administration asked us to hold the story out of national security concerns. we did. and 80 does not want to endanger anyone's life or national security so we always strive to act responsibly and we did in this case only after we heard from two parts of the government that the national security risk past, did we run the story. now, the white house asked

us to hold it one more day but not for its national security reasons. favor going to announce this war to plot the next day and we did not feel we should hold the story for that reason. so we released the story but we did not hear from in any way that national security was compromised, nor did we get pushed back for running the story. we didn't hear anything until one year later when we found out that the records were swept up in the investigation but we did not get any push back from them at that time. >> of the government did not say in detail why did once the story published what it to the ap think was the story at the time? >> i was not involved in those conversations.

i can tell you that it could jeopardize safety and national security if we went with the story at that time. and that seemed right now we did not want to you jeopardize that or create those problems so we waited until we got reuse assurances that security had passed and it was no longer under way and there was no security risk to run the story. i don't know the details details, but that was the judgment that was made and it was not criticized by the government or the administration at that time. they preferred we hold it one more day. because they were going to announce it. i guess it would have preferred that we did but it had nothing to do with

national security. >> with the ap ran the story did have an inkling the bomber was a double agent? >> now we get into details that are sensitive. that h-p had a sense there was a double agent involved but did not report that. in part, out of concern this could be a safety issues. >> after release the story the warehouse was very aggressive to talk about this story. john brennan and he was head of the counterterrorism unit at the time. and he disclosed that they had internal control of the

situation. that implication allowed others to draw the conclusion there was a spy or a double agent then it was widely reported by others including follow-ups from the ap that there was indeed a double agent but we did not disclose the fact a double agent was but then misreported why the fact that he were other news organizations. >> if this is about when it was published but wide you think now that this is considered to be one of the most important ever. >> that is a really good question.

[laughter] item have the answer. maybe they will come here and answer the question for you. [laughter] >> the invitation is pending [laughter] has 80 change the news gathering methods as a result of the situation with the doj? >> the short answer is no but we are looking at our contracts very carefully with aerophone service providers to make sure we get as much notice as possible of with the subpoena to have as much knowledge as we can protect our records. of course, we're looking at as much encryption and security issues and doing sad generally because of factors. -- hackers we looked at secrecy and protecting our

news gathering efforts and to anonymity of sources and protection of our records and they're probably doing that more than we ever have before. that is an arms race going on forever. i think we are having to deal with sources a little differently who were anxious about having their phone numbers associated with the associated press and that kid go on in your news organization right now and you don't know if you will find out 90 days later potentially you'll get a nice surprise in the mail and and there is more reluctance thank could require more personal meetings. pro we also known to fall of reporters and what they're doing on foot as well.

but we will make sure we protect the sources and get the stories by any means possible. >> to talk about the integrity of your service providers have you thought about asking them to push back on the government when they have reason to leave it may violate the law? >> yes. the phone service providers they comply and they are required to. and the government also notifies them not to notify us. so they're not put in a comfortable position. the answer to this is not in an but the idea is to get a

better contract with bryson but the answer is to get better guidelines from the department of justice. >> what about the public's reaction? do people outside the media community know what this means? >> the action has been incredibly gratifying. i will tell you i did not expect it to be this big of a story. i knew would be a new story but i didn't know it would be this big. it could be because it was the third scandal with the benghazi and ira circuit have been reasons but it got more attention than i thought because i thought maybe it would be regarded as a peer press issue but i was pleased the american public saw as a broader issue of is the government harassing the media and can

this affects just as it violates the first amendment? that is a good debate to have been a good issue to surface and i was very pleased that it did. i think the justice department was surprised by the reaction and that may be the biggest protection we have against this happening again because i don't think they want that backlash against. i sure hope not and it prevents them from doing it again but we were pleased to see the reaction and i do think it has gotten traction worldwide. not only for the benefit of the united states as a said in my speech i think some countries around the world were surprised this could go on in the united states and the ap is known around the world. this was not a local newspaper god love local newspapers but the associated press is worldwide and wing countries

around the world and press agencies heard the u.s. government was doing this to the ap they were shocked, surprised we received an enormous amount of support and surprised that the u.s. government could do this. we have been pleased and i was surprised fetid became such a major story but we are very pleased that it was. and we're hopeful for future actions. >> how do better engage and mobilize the public light calls for a rest of "washington post" journalist, members of congress, how do you keep story at the forefront of public attention? >> i know some of the of

polls show it does not resonate like the irs does that is not surprising. come on. the irs will resonate with everyone in a different way. but i think it is important for the media 2.0 how this affects the people. not just the media. and it is not just about the media but holding the government accountable it has never been more powerful and technology gives the government power it could never dream of the four but that is all the more reason the press needs to be stronger as well because we are the circuit of the people that is the only way the public can be informed and we have to catch our argument and approach imposition in terms of the people and why it is important for them and yes

yes, the stories come and go but when people sense the government is overreaching and affects their sensibility they rise up and speak up and that have been here. i was wrong because i thought this will not be a story i was wrong and it was great and it is resonating in they think this will have an impact and if it happens again it will resonate further so let's hope this silver lining is that we will get better updated and improved guidelines from the justice department that will give recognition at that reporters activities are not criminalize and therefore we will have a freer society. >> should reporters be objective van new shuttle -- neutral? as organizations should redo

data pushed back against the surveillance? >> ap is a nonprofit news organization and does not endorse candidates or have editorial positions or express opinions but it covers the news as objectively as possible date in and day out and we should do that on every topic including press freedom issues and if we don't we will lose credibility so our stake is clear now on the op-ed page that is different. and i think that is the place for opinions and a marketplace of ideas to argue every which way. the justice department deserves their say. great. that is okay. we think they are wrong and we will state it clearly. so it needs to push for the

shield law and to push for changes in the regulations and needs to be active in that regard but it should cover it street and objectively. and not lose that because i think that is a road to our credibility and the looks of self-interest. >> a follow-up to a train of thought from the floor if the department of justice has violated some of the old rules why didn't bother to tell the ap it had done this in the first place? >> it had to. the law requires them to notify us that after they do this so they can sweep of secretly but they can wait up to 90 days before they tell us about it. so we don't know when they captured these records. we are not sure but we do know that it should have

been within mainsheet -- 90 days to make up the notice so three months prior to that. they had to do it if they knew would be public eventually but it was public because they already obtained the record and we lost all opportunity to note -- narrow the focus of the subpoena to get the court involved to sort out how it should be and what the proper scope should be some losses opportunities we cannot and rings the bell. >> in "the washington post" column it was argued because the story was national security risk it should not have been published. what it you think of his take on this story? >> i respect him as a reporter gravy but i do think he is wrong on this one.

i think we were very concerned about national security and we handled them responsibly and we were not criticized by did ministration in releasing or running the story. work to think they're happy we got it? no. did they criticize us to jeopardize national security? no. and i think if that was over one year later that is more suspicious to me. but we did not hear that at the time. i think the ap did act responsibly and the white house announced it the next day i don't know if it was going to announce that absent the ap story, i don't know. >> if repealing classified

information is a crime for those to a sworn to uphold the why isn't it a crime for the reporter to publish? >> to have an elusive grasp of the first amendment, government employees is a specific crime to the classified information. it is a complicated issue and the government is over classified there is way too much that is classified. a lot of it should not be classified some of it is because it is embarrassing or they don't want it out. there is over classification. we do know it is the government and post 9/11 when one of the criticisms was our intelligence

information was site load and we needed to connect the dots to have a more integrated intelligence network to prevent terrorism , so we did. maybe that helped. it could well be but it meant millions of people and almost end low level people have confidential access even privates in the military can upload bodes of information to reach you leaks. government contractors the drop of high-school can release massive amounts of information. that's going to happen when you have 3 million people having classified clearance you will have leaks. it is inevitable and would keep happening.

so they have that right. it is a complicated but the justice department source that out to make their own determination for what they will pursue. and how they conducted the investigation. that is what we want to keep to focus on. it is free pressure and when a journalist but when we find out the information and doing our job, that should not be a crime. we agree with president obama when he said that and we agreed the attorney general when he said that and we think it should be clear in these guidelines

and in their rules that it should be something that we don't have to ask every question there. we think that is embedded in the first amendment that if journalists doing their job to find other reformation should not be a crime and in fact, that is what we rely on to hold government accountable to have a free press to be the informed public so that we could have the robust debate about the marketplace of ideas united states is not afraid of that. we should not become afraid of that we should welcome those debates the president said he welcomes this debate. we do to. okay. let's have the debate and as a society lets decide you cannot have the debates if you don't have information many journalists to do their job without fear of being prosecuted because then not only will the sources be

intimidated but the journalist and i don't want to live in that country. >> do you know, if any of this sources have been punished by the government. >> that and know who the source or sources were and i have no idea of their status but the investigation is ongoing so i do know there any punishment or formal charges brought or anything like that. i eat insurer we will know if and when they are. >> and other follow-up was there any harm to the double agent and you care if it did? >> of course.

we don't want reporting to jeopardize people security safety or national security and we were very careful to make sure we didn't. again we did not publish the story and tell the administration, to parts told us that the national security issues had passed and only then did we run the story and we did not reveal that the double agent was involved and we did not hear from the administration or the intelligence community that there is any risk to the double agent because of our story and if there had been i am sure we wo been i am sure we would have heard about it and they would have told us sam probably that is the reason .hy they wanted us to holdd >> you mentioned the similar situation arise mr. rosen of fox news had you compare that with what had been that a p? >> i think they are similar

but in some ways ours is worse and in some ways that situation is worse. of ours was a broader sweep of material as far as i know and it was a broad overreaching gathering sweeping information in secret i think with the justice department did was more offensive in the sense that they put in a subpoena for a search warrant that he was a co-conspirator and in other words, he may have been violating the espionage act which were acting as a journalist we don't think people should be prosecuted for committing journalism so

i think given and the degree of what they went after and how they tracked him and the meetings he had come i think there was more searching for a deeper investigation into his particular activity so i do think it was more troubling for their two different cases both raised substantial issues. >> pointing to the importance of a free press yet the economics of today are going in the other direction with less money to spend on investigative projects. what is ahead? >> it has become more difficult because the economics of the news gathering have become more strained than traditional media has less resources to devote too important news

gathering and that is the reality. but i can tell you that the work remains excellent and there are thousands of journalists doing high quality work throughout the united states, and many here in washington. so while i think it is a concern i think it is a greater concern locally where local newspapers and tv stations and radio stations might have fewer resources available to cover those issues and that is the bigger issue than nationally but there is still a strong robust reporting going on in the nation's capital but it is a concern. and i am hopeful as traditional media builds the digital revenues that it can

sustain the news gathering and investigative reporting that is so essentials to the country and i am hopeful about that and we will have to see how it goes but it is something that is a concern as greasy resources for news gathering declined. >> allotted people like to know your take on edward snowden? >> i will not speak to that because if i do then that sort of become this what gets reported about what i said here today. my opinion of snowden frankly is not that important add-on regarded as relevant to the topic that i

am speaking today. as i said our quibble is how the investigation was conducted to avoid it from happening again. and my particular view of one particular person or another is not terribly relevant but i would say that i would agree with president obama in that i welcome that debate. i think it could be a healthy debate for the country. but our issue today even though we used to covering the news we're not used to being the news story. it is not entirely comfortable for us but we're doing our best to cover it objectively and it is up to me to speak to articulate our position and i will do

that but we also understand that it is not our position to go out and a mouth off about every issue. >> you think major a let's have the scrutinize sufficiently if there is in a corollary between reporting or the lack thereof and what we see now with the media? >> i am not sure. i think because of the ap issue and the fox news issue there has been greater awareness and more focus on the obama administration aggressive stance to the teachers and i think that is more well known and it has gotten more scrutiny since then.

it may not have gotten much attention before but it will get more now as a result of these cases especially if they continue to impinge on the first amanda rights. >> we're almost out of time before i ask the last question i have housekeeping matters. first of all, i would like to remind you of the upcoming luncheon speakers we have the former ceo hewlett-packard currently chairman of could 360 and on august day we have jim rogers president and ceo of duke energy. second only to present our guest with the traditional coffee mug. [applause] >> great. >> and we have had a serious hour we will end on a more lighthearted note to amir told, our sources tell us you like to use rock lyrics the year speeches you did

not do that today but could you find some lyrics over the last month and a half? [laughter] >> let me think. do you have another last question? give me shelter. and another "rolling stone" -- rolling stones song, this could be the last time. thank you very much. [applause] >> the key for coming today. oscillate to think the national press club staff including the broadcast center for helping to organize today's event in here is a reminder to find more information about the press club on our web site.

if you like to get a copy of today's program you can find it there at www.press.org. we are adjourned.

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the public identify with the house they call the white house under her term will pay off because it will give a surge of nationalism around the war. . .