basically looking at the global financial crisis and the challenge of american wealth accumulation. the fed has been put in a very difficult position. if i look at this broadly, i kind of see an oscillation, which american households that are trying to preserve and store wealth are running to the stock market, to the housing market and back to the equity market. ..

>> the fed was very accommodative, and we started to build a housing bubble which we burst in 2008, and now i think arguably in 2013 we may have created or at least started to create another equity bubble that in some areas, perhaps many some real estate markets, is also turning into a bubble. new york city, toronto, we were talking about this at lunch, other urban centers, especially those attractive to foreign buyers are seeing very rapid increases whereas in more rural areas that's not happening. so how do we, how do we respond to this, and what does this tell us about the future? one of the things that's emerged here is that the financial and

real estate markets have in the united states and perhaps elsewhere have developed a kind of uncomfortable codependence with the central bank. that is, if markets, especially let's say equity markets in the last several years, are very resilient in the face of threats. we saw this in recent weeks where all the arm-wringing, hand-wringing and talk about we're going to default, we're going to default, the markets were pretty calm about it, in fact, downright calm. and the minute there was a settlement, stock prices rallied to levels above where they had been a month ago and nobody thought -- a month and a half ago, nobody thought we were going to either shut the government down or have a debt ceiling crisis. and i think part of the reason

is, again, this codependence, that the prospect of a problem that might cause problems for vehicles of wealth accumulation like the equity market and/or real estate markets just doesn't bother most investors now because they continue to be pretty convinced that there is a fed put out there, that is that the fed won't let anything bad happen. and it's really hard to gauge, but what part of the level of equity markets and recovery in some of the real estate markets that have been chronicled here are dependent in a sense on the fed put, on the notion that there's not a lot of risk in terms of accumulating assets and

that the fed will be there to rescue. that theme of a fed put experienced a bit of a wrinkle over the past quarter. you all recall that prior to the fiscal crisis in the u.s. analysts could talk about nothing but the fed's decision to taper that chairman bernanke hinted at in may, that was a virtual certainty just before the fed's, i think, september 17th meeting. and then the fed decided not to taper. and they, you know, they observed a couple of things. they observed in the written statement that you can easily look up on the fed's web site and/or chairman bernanke's press conference one of the concerns was that interest rates had gone up over 100 basis points, and so that the affordability of housing had been sharply

reduced. you know, some people were rather calm about it, but, you know, a move in interest rates from 3% to 4%, i think, on a typical mortgage i think i did the math, let's say a $250,000 mortgage, you're looking at a couple hundred dollars a month. for many households that's a problem. so here was the fed thinking about i think ending some of the codependence in a pre/post bernanke world to use the title here -- [laughter] and i think wishing they could get out of this qe circle they're in and wishing they could get away from it. there's a lot of dissension on the fomc about it. people just, you know, and probably they're taking a lot of heat, and it's probably not doing a lot of good. it's very controversial,

difficult to do simulation experiments on the effect of qe because there isn't a lot of -- we only have a few years of data. but it's clear that, you know, if we look at average growth rates for the past four or five years, we're, what, about 1.9% in the u.s. with inflation drifting lower. so to whatever extent printing money to buy government bonds and mortgage-backed securities has been undertaken, it hasn't really lit the economy on fire. partly because the demand for cash remains quite high in a world of a lot of policy uncertainty and event risk. and companies hold a lot of cash, individuals hold a lot of cash. partly, probably two basic

reasons. one is the optionality that cash gives you, and so companies like that if things go badly and opportunities arise. if you've got cash, that's good. and then in a sense you're self-insuring if you're a large corporation and you can afford to do that, then that's an attractive idea. so against this background and just to put things in perspective, i went back and looked at the net worth of households and nonprofit organizations which is, what, the real net worth which is what the theory of the fed maintains just to try to scale the housing collapse, housing bubble collapse. and it turns out that in the year before, essentially, leading up to the trough which would have been around the end of 2008, households lost 20% of

their net worth. which is substantial. needless to say. and efforts to recover have been reasonably successful. i think now if we look at real wealth per capita in the u.s. as measured by the fed which is probably as good a measure as any, the recovery has been to about 92% of pre-2007 levels which is good, but i think most american households have developed the notion that they ought to be getting a little bit better off every year, and to have gone seven years without reattaining the old level of net worth is, obviously, problematic. the result, the observable result -- there are two observable results. one, in terms of consumption if you look at a

cyclically-adjusted consumption pattern, and the chart is in one of the papers here on the wealth accumulation, consumption in recovery's very weak. and this is a macro number. obviously, some people are doing very well, others not. but if you look at it on a macro basis, consumption is running way behind a typical postwar expansion on the order of over a standard deviation below the typical point at which we find consumption this far into a recovery. remember, the recovery began in this june of 2009 according to the nber, and it's probably a reasonable enough date. things got so bad that they started to look a lot better by the middle of 2009. and now i think so that puts us

into the -- and here i'm just giving you a little bit of macro background -- we are in month 54 of this recovery. so another thing that's happening here as we move further and further past the crisis is that the lock -- the clock is running. we are having a recovery. it's a tepid recovery, and it's actually starting to reach the average length of recovery in postwar u.s. a typical postwar recovery in the u.s -- and this is with a somewhat proactive central bank -- lasts 58 months. so one of the problems that we face here as we're raising questions about how the central bank, how aggressive the central bank can be in supporting real estate values and equity values,

we have, you know, experts in the field suggesting that there may be some signs of overly stretched valuations, and the role played by investors and cash buyers in the market, the dominant role played by investors and cash buyers in the market probably the data suggests is getting less pronounced partly because the investors have pretty much driven up the prices of the units they want to rent out, financing costs are a little higher, and so, you know, that seems to be -- that portion of the real estate recovery which is really not a matter of everybody's feeling better and willing to spend more on a house, it's really a matter of investors saying, gee, if i bought, well, you know, what, i think blackstone bought huge portfolios of existing real estate and rented it out,

securitized it. you know, they're already gone from the game. meanwhile, the flow demand that that creates is gone from the market. so the pattern will be fairly familiar, that if the bounce in the housing sector needs more support, the fed's in a somewhat difficult position because they have pretty much offered as much support as they can, they have indicated this year in the second quarter that they were a little bit easy about the major instrument they're using which is quantitative easing and which entails, i guess, who had the picture of the fed's balance sheet? important to look at. you know, the fed owns a lot of treasuries, and they own a tremendous portion of the

mortgage market. and they have to, they have to hold it at least. and, of course, the problem i think that alex pointed out is, yes, they may not sell any of it, but when they stop buying it -- and that's what tapering is all about -- that may be a problem. and so we're kind of, you know, i think i go back to the theme that a number of the panelists have suggested, that is we may be sort of in the as good as it gets stage of this modest bounce in the real estate sector. and the equity market i, you know, i'll leave it to, i'll leave it to the equity experts. certainly, the valuations based on bob shiller's yardstick are adequate to slightly high. so it's not as if the stock market is a screaming bargain. so again, five years plus into

the postbubble period we've thrown a great deal at at least getting wealth back to where it was, and we're almost there. the vehicles have been the equity market, the asset markets, the equity market and the real estate market. and the implied can codependence has become more and more obvious, underlined, of course, by the fed's recent experiment with abandoning tapering and, of course, when they meet, let's see, a couple weeks, they'll have to revisit that issue. but i'm expecting they won't want to go anywhere near a discussion of changing their tapering policy at this point because it's just so sensitive. so going forward into the post-bernanke fed what should -- >> and you have one to two minutes. >> i can't believe -- i never

run out of time. [laughter] all right, quick, two things of janet yellen. janet yellen, i think, does need to give a big speech after she's installed as fed chairman, and she needs to -- this is not a forecast, i'm just saying under current circumstances she needs to establish at least two points. one and very basic, i don't think anybody would disagree, fed can't do everything. and certainly, they've been asked to do a great deal. and they can't do everything. and so she's going to have to somewhat lower expectations about what the fed can do. and then secondly, i'm very up comfortable and -- uncomfortable and i guess janet reinforced this, with the fed's commitment to keep interest rates low until the unemployment rate goes could be to 6.5% or lower. the problem i have with that is that there's really not a,

there's no empirical relationship between interest rates and the unemployment rate. and it's not clear that the fed can produce a long-run effect on the rate of unemployment. so they're in this awkward position of having made a commitment that may not be fulfilled, and yet they'll be politically held to continue to try to reach the goal without being able to do so. lastly, disinflation continues both in europe, we're seeing actually more disinflation. there's an interesting piece in the ft today. u.s. and japan is struggling to overcome it. hasn't got there yet. so have monetary policy fading and then, of course, fiscal policy is being consolidated in most places and most aggressively in the united states, notwithstanding the fiasco we've seen for the past

several weeks. so five years on i think this post bubble recovery is getting a little long in the tooth, and the role that central banks are playing in it is becoming problematic, and so janet yellen has a lot of challenges. i'll leave it there. >> thank you, john. all right, i want to give each member of the panel one to two minutes, two minutes max, to either respond to anything anybody else said or add something or clarify something. jay? >> just wanted to make a couple points to emphasize what john finished saying and what chris said is that when you look at the efficacy of the fed's actions, what is the actual benefit in terms of unemployment rate of tapering. as opposed to what are the problems with withdrawing the taper. so in other words, we can't see that it's necessarily doing that much good in place, but we know what the pain is of withdrawing

it. it's sort of reminding me of that old joke of coming upon somebody hitting themself in the head with a hammer and saying why are you doing that and the answer is, well, because it hurts too much when i stop. i guess i think back to some of these sports things and in workouts they say no pain, no gain, are we really supposed to be in a painless society, or should we accept the fact that breaking circle of codependency with the fed is going to cause some pain in terms of either a reversal of some of the personal wealth gains, some of that we've seen. so i think that is really the policy issue at the moment as opposed to, as john said, do we really expect a further decrease in unemployment rates because of continuing tapering. >> mark? >> thank you. jay, i just wanted to ask you a question. you're the numbers guy. do you remember when the last time we had a market where both re-fies and purchases were

gaining in the same year? >> not off the top of my head. >> certainly before the bubble, right? sometime in the '90s, do you think? early 2000s? i don't know myself, i'm just spitballing here, that sounds about right. and, chris, i just wanted to ask you a question, this might be too obvious, but you talked about the factors that discourage lending, you didn't mention the cfpb, are they going to discourage lending as well? >> well, i would say the cfpb is probably the single biggest obstacle to americans getting loans today. if the intent of dodd-frank was to protect consumers, it's protecting them from getting a loan. that's really the bottom line. [laughter] >> mark? that's all? >> yeah. >> okay. thank you. good questions. >> desmond? >> i guess i'd take a somewhat different view on quantitative easing in that i think one can't

say that quantitative easing hasn't been effective because it hasn't got the economy to grow very rapidly. i think one's really got to look at what the counterfactual would have been, that without quantitative easing, we could very well held back into recession. and i would have thought that if quantitative easing brought down interest rates particularly at the long end to the kind of levels that we saw and it boosted asset prices, i would have thought that quantitative easing would have had some effect at maybe the problem was that there wasn't enough quantitative easing. >> chris? >> yeah. i wanted to pick up on a very important point john made that's already been mentioned which is that there's no empirical connection between interest rates and jobs. you know, one of the central fallacies of the fed's policy mandate going back many, many years is this notion that they can manage both employment and stable pricing.

up until really the bernanke year at the fed the what was called the taylor rule which, essentially, posited a trade-off between inflation and jobs was the operative model. but that's now been thrown out the window. so today, again to repeat, if you talk to people at the fed about why they are doing what they are doing, they cannot offer you a rational, intellectual construct. there is none. and, indeed, if you look at what's happened in every one of the asset classes that have been discussed today, you do see bubbles. you even see institutional investors running around buying family homes to, essentially, run them as rental properties for mid to low single-digit yields if you do everything right. my firm is one of the biggest managers of rental properties in the country, and we're very good at it, but it's a very tough business. it's a business that you really don't quantity to see a lot of leverage -- don't want to see a lot of leverage underneath.

so it's not to say you can't make money running rental properties, but the fed that is managed to convince wall street that this is something they should put a lot of money into. and i think when you look at the third world and other asset classes that have been affected, even the bond market, by quantitative e easing, you have to ask yourself is this a good thing. and my answer would be, no. i think we're living in an anomaly, and when policy does change, it's going to be an extremely painful process for consumers and others. last point, inflation. does anyone in this room think the cost of living is going down? i think the fed's already hit the inflation target, and today need to admit it. thank you. >> thank you all. during chris' comments we should have put your last slide up again. mark? >> john. >> quick response to two points. quantitative easing, i should have distinguished between marginal and average impact. certainly, quantitative easing

has had a support i impact on the -- supportive impact on the economy and had it not even been attempted, i expect we would have been having slower growth. i'm really thinking about if janet yellen -- let's suppose the economy slows down for whatever reason. is qe4 going to do as much as qe3 and qe2? i'm concerned it's not, so i'm really concerned about the diminishing marginal impact. the bubbles question, i guess i should add to her speech i think janet needs to be very clear that the fed will be watching asset prices on both sides; that is, if there appears to be a bubble, they will take that into account. that is a very delicate discussion. it's sort of the inverse of chairman greenspan's 1999 testimony where he said we can't identify a bubble, and we're not

going to try, and everybody said that's great. here we go. but i think given the presence of bubbles, alternating bubbles in the stock market and the real estate markets, the fed really does have to pay attention to that. and very, they have to be explace sit that they're -- explicit that they're watching it, and they have to be sure that in reacting to a market response like some of the problems we've had in the past that they're not really just inflating a bubble further. so that becomes a big channel. a big challenge. i think a bigger challenge, janet yellen takes over at a time when the fed's mutuals have probably been pretty much used up, and in some cases are gunning to be -- beginning to be counterproductive. >> thank you.

before we open the floor to your questions, i see the first question is back there, but before we get there i wanted to say that inspired by john's focus on the aggregate inflation-adjusted wealth of american households, we just looked at the series of numbers again, a nice 60-year history. and it turns out that a the trend line through this history is unsurprising. it's approximately the average growth rate of gdp. just what you'd expect. so 3.1 or 3.2% a year on average is the growth in aggregate household wealth. and that's the same as the growth rate in real gdp. but when you look at the chart, of course, there are two huge diversions from the trend. first, the equity, the tech

stock bubble as john said and then the housing bubble. and the danger is that in both those cases the wealth people thought they had was, in fact, completely ill illusory. those bubbles introduce a kind of mass psychological illusion on us about what wealth we have that really isn't there. and if you look at it over the longer term, you see it right back into its mean reverting trend line, and that's what you can expect, not the bubble behavior. but bubbles are extremely -- or asset price inflations are extremely insidious in that way. all right, let me come to the questions. let me just remind you aei rules, please tell us your name and your affiliation and state your question. if you -- i'll get you second. if you give too long a preface to your question, the chair will remind you to get to your question. and first question back here, please.

>> bert elie, banking consultant, and, again, as one who has attended these conferences, this is an excellent one, as have been the prior ones. i have a two-part question for desmond, and it's related. i keep reading a lot of articles, particularly in bloomberg in recent months, about the fact that we still have a lot of banks that need restructuring in europe and a suggestion that there's, you know, potentially some more bank ip solvencies coming along there even though we seem to be past that here in this country. and that there's going to have to be some substantial amount of taxpayer money funded by government debt that goes into these restructurings. so i was wondering if you could, first of all, comment about the magnitude of the bank restructuring that europe still faces, and then related to that you talked about public debt restructuring. can you just give us a little sense of what that might be in

terms of where it's going to occur and how it might occur? >> i think the two are related. if they've got to spend more money to straighten out the banks, this is going to further aggravate the problem. >> you just described what the president of deutsche bank called last week. that gave you an extra ten seconds to think, dez monday. >> right. there's absolutely no question there's going to have to be quite a lot of money put into the banks, particularly in the periphery. basically, what you've seen is you've seen very large loan rosters. we know that these banks are undercapitalized, and i'm thinking about places like italy, portugal, spain, greece where money is going to have to be put there. but something that is really very important that i don't know that -- [inaudible] are paying that much attention

on is that the germans have made rather clear that as part of the restructuring of the banks, bondholders are going to be bailed in. you know, so that they're not going to be capping taxpayers, and we've got a model for that, you know, from the cypriot case where they really went after uninsured depositors above 100,000 euros. so i think that's what you'll see, is money might be thrown at this by the various governments. but it'll also involve private money. i think that the german position seems to be that this should be done by the national governments which, as you say, would add to the debt burdens. just in terms of debt structure ing, it would seem that with debt ratios 125, 130% and

rising, that is not attainable in a low -- sustainable in a low-growth, disinflation kind of environment. so you're going to get restructurings of that debt. i think it's just a matter of time. the countries that you're most likely to see it in, i would think, would be portugal would be a very high on the list. but, you know, you could also get places like italy doing it just in terms of greece, that is, there's somewhat of a dispute between the international monetary fund and the european governments, and i think the european governments on the right side of this one -- you know, the imf would like to see debt write-downs, but that would mean that the taxpayer but to recognize that there were losses. the proposition that would probablily work in the end is -- probably work in the end is that they'll term out these official loans. so in other words, the greek

loans will be made into 50, 100-year loans at ridiculously low interest rates so even though you might have a debt ratio that hasn't changed, might be at 175% from a effective point of view, it's the same thing as writing down the debt. >> an economic write-down by which you try to avoid an explicit write-down. >> well, i think it's referred to in the trade as extend and pretend. [laughter] >> thank you. i have the me question here, and then i'll come to you. right here, please. >> thank you. judd -- [inaudible] documentary film maker. i was fascinated by chris whalen's comment about the relationship between interest rates and employment growth. in economic theory there is such a relationship with the investment function, but my question is, what does this mean? does it mean the fed is rethinking a lot of these neoclassical models they've been going through?

what does this really mean if, in fact, doubt is being cast on this relationship? >> well, i guess classical in a neo-keynesian sense. look, i wrote about this in my book back in 2010. since the 1990s when we -- 1980s when we first really confronted a dropoff in demand, the fed has used interest rate policy to goose consumption. and be this is how we've driven gdp in nominal terms. but if you look at the interest rate charts -- and it's gone down and down and down, we've loosened credit criteria for housing particularly because housing was the great driver for employment and demand -- and so i would say it's a distortion of neoclassical rules because there is a price stability rule in there somewhere too. and that was thrown out the window. i would argue that we've always had a modest to relatively high rate of inflation hitting consumers despite what the statistics say. because that's why you see flat

to down real income for consumers, and that's why you see a weak job market, because the same cost pressure that's hitting families when they go to the grocery store also makes it very difficult for employers to add new employees. it's the same environment. and then going back to the earlier comment, what are we doing now to make up for the excesses caused by these policy decisions over the last 10, 20, 30 years, we're now going to penalize savers. and we're going to take all of their income and force them to, essentially, take below real rates of return to subsidize the remediation of this bust. i think that pretty much discredits what i would call neo-keynesian socialism, and that's how i would characterize fed policy going back half a century. you know, it's like we lost the cold war. i wrote a monograph about this years ago for a very right-wing group in new york, and i think it's the case.

we adopted statist, really socialist policies as the core element of, essentially, keeping people out of the street. you give them nominal growth, but you're killing them in real terms. that's how i would put it. >> thanks, chris. john, you had another -- >> just a quick comment. that's a very stimulating point about the relationship between interest rates and employment. i think, you know, in normal times if you can get interest rates down, people invest more, and if they invest more, the demand for labor may go up, and that's good. but we're in a situation where real interest rates are zero to negative, and we still have substandard or net investment. and so that's sort of this classic textbook case where for some reason or other we're out of investment projects, and even if we keep real interest rates

negative, we can't get companies to want to add to their capital stock. and so they're also not eager to add to their labor stock. so that's why i'm concerned about saying we're going to hold interest rates at these levels until the unemployment rate goes down to 6.5%. that's going to be difficult. leaving aside the measurement issues. >> one more comment. >> if you could look -- >> two is the most you get in answering a question. >> if you look at a couple of the charts in my presentation, the thing that's missing in housing today is -- and this goes back to irving fisher. if you want to talk about classical economists. credit growth. despite the uptick in home prices for the last few years, you've seen, essentially, a dim in addition of credit in housing. once supply normalizes so that many markets where you still have tight supply, you have adequate supply for home buyers, i think we're going to see flat

home prices going out over the horizon simply because you have so many constraints on new families, etc. , and you also have constraints on credit creation to your point, right? so if you lower interest rates and you don't get credit, obviously, that relationship is broken. >> mark has a comment, then we're going to go on to the next question. >> yeah. just that i think probably the relationship that the fed sees between prime and, you know -- employment and, you know, lower rates is that if you lower rates on the mortgage market, you know, the mortgage -- housing is a great driver of employment, you know? if you start building houses, you've got construction jobs, you've got closing attorneys, you've got retail jobs at costco, and i think that may be the relationship that they see. >> thank you. and a question up front here, please. we have the microphone? right up front here, please.

[laughter] thank you. >> i'm diane katz with heritage. considering where interest rates are and the regulatory constraints that some of you have alluded to, is there any connection between the credit tightness and the payment of interest on the excess reserves? is that a further reason to hold back on credit? >> okay. the fed, let me just give a little background on that. we have a, i guess, $3.8 trillion fed balance sheet, something like that now, of which almost $2 trillion are excess reserves held by banks which in previous times would have been non-interest bearing, presumably giving the banks a reason to try to employ them into investments or loans. but now they swear interest at -- bear interest at rates of a quarter of a percent which isn't much, but the same as

you'd get in a short-term money market investment. so how about this relationship? john, you want to mention? >> yeah. the, part of the problem is that even though there are excess reserve -- quote, excess reserves in the system, you know, it's difficult for the implied, the high level of liquidity for the banks to turn into loans, because the banks are sort of supposed to be lowering leverage, and i think that makes it difficult for them to undertake an expansion of their loans. and so you get a big drop in the so-called money multiplier because you get a big increase in excess reserves and not a big increase in overall loans. the regulators, at the same time the banks are supposed to be recapitalizing, the regulators are telling them they're supposed to be holding back.

and i think the banks -- and chris knows this very well -- i think the banks are largely traumatized or not wanting to get back into mortgage lending, and it's difficult for them to compete in other lending because companies can borrow so much in the open market. so you're correct that the banks really aren't serving as financial intermediaries for some reasons that are related to the overall weakness of the economy and the reluctance of the fed to allow them to expand, the fed and the regulators to expand their lending activities. >> thanks, john. i want to insert a question here because we just had a bold forecast of house prices from chris which was after a few or some intermediate term flat, is that flat nominal or flat real? >> ooh, maybe flat to down real. >> okay, so flat nominal down in inflation-adjusted terms. okay.

so that's one house price forecast. now i want to ask both jay and mark who are experts in that for their matching house price forecast. >> um, i see things that we're not going to continue with the jumps that we had because there are certain factors that were special in terms of the recovery in some of the worst-hit markets as we get to more of a normal increase. but i think we're probably looking at the range of 2.5-4 percentage point increase on sort of an ongoing basis and foreseeable for me doesn't extend more than a few years at the moment. but that we are going to see some -- i have a somewhat different view of household formation and demand. sure, we see the big increase in rentals from married couples with children who have been going into rentals, but they've been going into single family rentals. at some point i think once they

get their credit up, once they deal with down payment issue that they will, in fact, be converting to buyers. and i see that demand then picking up. >> mark? okay, other questions. right here, please. >> barry wood, columnist on economics and rthk in hong kong. why is the economy growing so slowly? and i'm thinking here when you've mentioned trend growth rate of 3% in consumption, we're not there, we have record low interest rates, and we've had qe for five years, and we're five years into this recovery and yet we're growing so slow. why? >> excellent question. chris? >> well, you know, going back to what we said before, in the last 30 years housing has been one of the biggest drivers of

employment and income growth in the country. if you think about what the fed is saying with today's policies given that consumer income is flat to down, what they're really saying is go to the home depot, get a credit card and spend money. because if you don't have growth in income and jobs, where else is the demand going to come from? so it's a long-term issue. i think it's an issue that all countries around the world are facing, excess capacity. it's almost like 100 years ago prior to world war ii where you had a lot of innovation, the electrification of the united states, for example, before world war i, and it made us more productive and put a lot of people out of work. so we're in that same mace today for different -- place today for different reasons. >> desmond? >> i don't think that's surprising and, in fact, it was anticipated by many people like roqueoff and reinhart that after

the financial surprises we had of 2008 and 2009 with a lot of people highly incutted, wealth affected, the expectation was that one would grow very slowly. i think when you look at the united states in 2013, part of the reason why we've grown so slowly is this massive amount of fiscal tightening around about two percentage points of qdp that -- gdp that had to do with the fiscal cliff, sequestration and so on so that there's really a strong headwind that is slowing what would otherwise be a recovery. once one goes into 2014 the hope is that with less fiscal restraint you could get swa more of a pick -- somewhat more of a pick up. >> john? >> yeah. quickly just to add, there's no single reason that keeps -- it, you know, depends on the year. right now i would just list four

things. we're in a liquidity trap, so monetary policy doesn't do a lot of good. as desmond suggests, we have a lot of fiscal drag in the united states. thirdly, we have a lot of policy uncertainty which some recent research has suggested can slow growth. and finally, the global economy is slowing as the imf has acknowledged. so just not a lot of good things happening. >> mark? and then we'll go to the next question. >> i think that -- [laughter] sorry. i think one of the reasons, you know, is quantitative easing was supposed to produce the kind of results the gentleman is referring to, and it just hasn't. >> jay talked me into, jay talked me into adding a comment. >> 30 seconds. just to echo the excellent points john made. i go around, talk to bankers. i ask them, okay, what's holding your customers back? the big issue is uncertainty, whether it's economic uncertainty, policy uncertainty,

tax uncertainty, regulatory uncertainty. when they look at all that, do they then want to have a big new investment at what might turn out to be the peak of a cycle going into a recess, and that's what's holding them back. >> thank you. okay, yes, please. >> janine garcia with the imf. i'd like to hear the panelists' views on the issue of whether high income inequality stems growth? >> anybody want to take that? john? >> that's, obviously, an interesting question in this current situation, and i don't know of any good empirical work in the area. there may be some and, obviously, somebody can jump in there is. if anybody's done it, the world bank and imf ought to have done it. but i don't know there's any reliable empirical relationship between the two if you did a

carefully-controlled experiment. and then secondly, i can't think of a theoretical reason why rising income inequality would slow growth. .. the financial times has this by weekly section on how to spend it. you know, the new million and billionaires in emerging markets

are big spenders. and so, you know, to some extent they're buying a lot of stuff that's employing a lot of people. so it's a question that's interesting, but on an empirical and theoretical basis i can't come up with a good, quick answer. >> chris? thanks, john. >> that is part of the narrative. you do that a lot from me, income disparity. but i was come back to our tendency to understate inflation with the official statistics. so if almost half of don't income in the country comes from transfer payments and if there coal is less than should be to read reflect inflation, obviously we're not getting any growth, right? if anything it's a drag. same thing with the private sector. they have had to adjust the competition from outside the country to all sorts of other factors, and they also see the cost of living going up much faster than wages.

this is what income growth is flat. so i think we have to accept the fact that we have an invisible tax. we don't want to pay for all of the services provided by our government. we funded through debt and to accommodate of monetary policy. and the cost is we slowly erode real purchasing power here and as i said before we also make it much harder for employers to add new employees the guts of the cost. >> as you said before we expropriate savors. >> i think the causation is in the opposite direction. i think in fact where we have low growth, that causes greater income inequality. i think we have faster growth we would see incomes come up across the board. >> thank you. other questions? all right. seeing none, i want to thank you all for coming, and let's all express our appreciation for this excellent panel. [applause]

[inaudible conversations] >> as all get no speakers we are live now at america's health plans and health care coverage conference. much of today's conference focusing on the health care law. this is just getting under way. just being introduced right now is bill mcinturff, partner and cofounder of quick opinion strategies. and again this is just getting underway here on c-span2. >> one of the most important things that we found on his bio is that since founding the firm in 1991, the firm has completed more than 6 million interviews. can you imagine that? that just says a lot about a guy who has completed that and still has the reputation that he did

20 years ago, 10 years ago, and two years ago. so says a lot for the firm, for bill, and for their insight into national political trends. he has been called by "the new york times" the leading republican pollster, and certainly the company has been the leading republican polling pollster company. at the same time he has appeared on "meet the press," cnn, and every news show you want to imagine. he has been a trusted advisor for most of the key national politicians that we can name and that we are familiar with. and even those that are in a more face that we're not money with but will be. so please join me this morning in welcoming bill mcinturff. [applause] >> thank you, that was especially gracious. as my partners like reminded, i didn't do all 6 million interviews myself.

we started with three people. i now have 11 partners, so we have added eight, half of whom are women, which is terrific and is a needed perspective but someone has to match the firm you manage people differently, a little bit so that when one of my women partners move to a bigger office in denver, i center a huge bouquet of cut flowers. and that afternoon around 4:00 and i get this call, lori is on the phone. and i pick it up and i'm expecting my gracious think but she said, what about that did you think was funny? let me do my first pole today to start the day. how many men and women have been married more than 10 years? so those men should be able to predict my next two words. i'm sorry. [laughter] i didn't know what i done wrong but after a long and successful marriage i knew the words were i'm sorry. i said i'm sorry, i thought you would love applause. she goes, the flowers are beautiful by the card said rest in peace.

[laughter] so i called my florist, i love flowers. i love them a lot. they said bill, you've got this all wrong. your think about this the wrong way. i said how should i be thinking about it? somewhere in america there's a funeral and someone's -- somewhere it says best of luck in your new location. [laughter] what that tells you is that when you live in washington, even if the florist on that quick on their feet, you can spin anything. karen asked me to give you the real stuff. if you're a god i want to just confirm for you, in eighth grade when they put you in a different sex and class they said we had to do a one sports metaphor, a man like quote. so i want to sports but i found a manly quote. we spent two chapters of the book talking about your needing to find the right to rain for the battle.

so what he basically says is that all the battles success is based on your capacity to fight the battle in your terrain. and he says if you don't, you lose. this is the context of want to put him in terms of what just happened. let's just talk about what was fundamentally flawed about what just happened, which is one horrible terrain. because there's a massive difference between when you ask people do you favor, oppose, have a positive, negative opinion of obamacare versus a different question, which is do you want to see a totally eliminated defunded? when you ask that question, which we did at cnbc, 38% said yes, 44% said no. you can't shut down a government with 38% yes, and then there's the question that should've been asked which we did. witches of those 30% we said okay, but if you believe it should be totally unlimited and defunded, should have a

government shutdown until it is removed? 19% of americans said yes. they supported a government shutdown to totally eliminate funding for obamacare. 19%. that's pretty awful terrain. you're not going to win a public battle where one out of five people believe that what you are doing makes sense in what they want. then it got worse. care me to talk about impact of our nbc wall street poll which was released late last week because that number changed during the debate. as people heard about what was happening people start shifting their opinion. their opinion shifted to, do i favor, oppose, totally eliminating and defunding obamacare? 50% said no. let me come talk all the bits about the roots of like that happen. we in the old days, this is a 20 year chart and it telling you

from 20 years ago the most liberal republican to the most conservative democrat and how much overlap there was in the house of representatives. so in other words, a generation ago there were 344 members that were positioned between the most liberal republicans and the most conservative democrat. you can see how that changes. and so in the last session according to "national journal" there was 11 people who crossed party boundaries. in other words, we have become a functional parliamentary system where the parties have become, both parties, this is a republican, both parties had become much more ideological and there is no overlap anymore in terms of any kind of shared kind of common ground in washington. why? because of the way we drew the congressional seats. when i started my current after the 1980 campaign in national politics there were 134 house

seats that were different than how they voted for president. in other words, i could be a democrat member who voted for reagan. i could be a republican member and deceit that may have voted for carter. there were 134 of those seats. today we are down to 26. that means we'll have 26 people who wake up in a district where have a vote for president is how they voted different than how they voted for congress. what does that do? instantly what it means is we have about 350 members who don't respond to about losing a general election but they worry about losing a primary. if you're concerned that losing a primary, your instincts are radically different in terms of your behavior. the other thing that's happened is i was there in the 1995-96 shutdown but only about, it looks like a 15% of the members of the house and senate were. we have a stunningly new house and senate. so again, the job of your

association and karen's job and budget is so important. there is zero institutional memory. so the stuff that i take for granted having been -- then there's this, which is when people say, how can they be so tone deaf? you to understand they are not -- republicans were not being toned down. they are representing their constituents. because in republican districts around the country in october, this is the worst data i've seen on republicans in a very long time come in their districts, the districts they represent, barack obama's approval, 37%. people in their districts last week said i want a republican house, 46-38. in other words, their 230 plus seats are a bastion of people to agree and think and have very high disapproval ratings for the

president. let me kind of put this in context. my former wife, we have an international republican and democrat institute. we send people all of the world to do democracy training. she helped write the cost of tuition for remaining three weeks after it started. she and her other folks think all the new candidates to run for office for the first time ever in romanian history. and then they set up these teams were you go back and help monitor the people you helped elect and kind of help kind of get democracy off the ground. so it works. he goes over the two or three times. they elected parliamentary system. they have a prime minister. she goes over with the american delegation, remains are here, and the american delegation says how is it going now that you're in office and your voting the parliament? they said, it's going pretty well. we only have one question for the american delegation. well, okay, what is a?

are we supposed to vote for what our constituents want court what we think is right? and the american delegation breaks up laughing is is okay, that will be chapter 22 in the federalist papers and you figure that out. so the point i want to powerfully make that people don't understand is look at, republicans, they were just out of the blue, they're doing what their constituents wanted. their constituents don't are just carbon in a very special -- that a republican. i always do this as well do i want you to remind can guess what from that story? people have the right to do what they think is right. i get these calls from "the new york times" and npr and other, msnbc and the sort of liberal institutions. they always talk about, ask me about well, how crazy republicans are. why would you do this? this is crazy. what i tend to do and for

example, the new york times did his glowing editorial in 2010 after the democrats won 63 seats with a list of like a 37 he rose who voted for health care who just lost their seat and all these heroes who, when quoted say look, i believe in universal health care. it's been 75 years. is this costing my seat, fine, i want to do the right thing. i said you editorialize and said these were american hero's. so that was not -- they lost 63 seats. they voted in a partisan bill that had no bipartisan support to kind of change when six of our economy. so you can't say those people are he rose and then when you elect a different generation say okay, i'm only 19% of the country agrees with me and i know no one wants a totally eliminate. i think it's a double bill and i think it should be stopped and i don't care. if i lose my seat, okay because i'm doing what i think is right. that's a very good way to legislate by the way and it

leads to what you've just seen. people have to understand that these are sincerely held beliefs and you can't pick one or the other. if it was add multiple for the you would knew would be an piper and cost you see, it's no more crazy to then try to stop it and be willing to lose your seat. so what are the consequences of what we've just seen? first, this has and it was impact on the competence of the direction of the country. gallup has been doing this forever would ask you were you satisfied with the way you're being governed. there are these the three lowest marks in american history. when you slip the watergate levels you know things are bad. we are at an all time kind to a three generation record for lack of confidence about how we're being governed in washington. the most damaging thing is the significant drop of consumer confidence. the debt ceiling five f. two years ago was one of the single most significant events that killed consumer confidence since

1952. we will have to wait until the end of october but we are watching the same instant kind of draw. gallup has their own daily tracking with a look at kind of perceived confidence about the economy. we've been under water for years, and starting in june if you can see it we were minus three. we had come to the highest level we have for six years and then between september and october almost daily we dropped 17 points in one month because they were dropping a point a day, day after day after day during the shutdown. you cannot take a fragile economy, renew $24 billion of economic activity, demolish consumer confidence and not know that it's going to be an enduring consequence. number three, it led to enormous anger about people in washington and our elected system. with a very cool question that my democratic partner peter hart made up where we've been asking people, because he said let's

just ask people, if you could and you could vote out every single member of congress, including your own representative, would you vote yes to every single person in congress? we don't vote like that but it was a way for pollsters to measure a level of discontent and anger. the high water mark was october 2010, 45% said yes. that 45% produce a 63 seats shift. after the debt ceiling negotiation we popped the question, 54% last week it was 60. in other words, six out of 10 people said i would start totally from scratch. that level of anger is debilitating and kind of leads to a lack of confidence in our institution. from a republican perspective this is an ideological boomerang. we've been asking people about the role of government based on government more, less. we spent years where we had the

country 48-40. i know use the 48-48 to say of courseware paralysis. if you ask what the role of government and your equally divide in the country whether it should be more or less, of courseware having a massive public fight. but what this shutdown did was it painted older women, women swing voters and others and attempted them slightly to say no, we need government to do more. that's the opposite of what you want as a republican. the second thing the republicans did was what has been remarkable about obamacare is the level intensity from republicans have something extraordinary. there's been no real intensity support from the democrats. there are court people who ought to be facing this bill, favorite kind of without much strength, with weak tea. and then guess what happened? if you shut down the government over this issue, then the hard democrat partisans say if they will be that against it, i'm for it. so what happened in these

entertaining two weeks is the democratic simply shifted and moved and it actually support for the bill is at its high water mark since the 2012 election when it got this close. gallup has been recording the republican party image for a very long time. the republicans have the lowest favorable image of any major political party in gallup history. again, these charge are difficult to read but i'm just kind of starting with way over in the left from the early '90s, both parties are relatively the same, 54%. impeachment is the other issue that looks like this. the impeachment vote by republicans with exact same data, republican party favorable 31. today, democrats and 43. republicans and 28. 20%, and that means the unfavorable rating for republicans is in the high '60s. that's a huge number. you all work and have, a lot of

you have consumer brands to imagine a consumer brand that dropped don't 20% favorable. that by the way, again, evil don't talk about it but the other point of this is the democratic brand is not in great shape. both of them have dropped. you can see a little drop in the dark green line but we are not talking about that because watauga is in the drop for republicans. the nbc walter jones doesn't ask how they voted it uses the want the republican house, democrat house. so in september people wanted a democrat house by three points. and by october, two and half weeks later by a point. here's the probable point. to actually win the house, the democrats to win house they probably need to win the actual vote cast by four, 6%.

so 8% is by not going to stay in place i don't think this is what they will look like by nature but if it were that big in the you, and the house is in peril because given the congressional district lines, it would take a massive democrat to vote to try to replace the republican house. so what's coming next? let me tell you what happens in washington, which is there's sort of like a trendline, and then washington presumes and the press presumes that trendline will continue unchanged. that's not how public policy works and how public opinion gets stream. there are no straight lines but in early september we had a two-week meltdown over syria. this is a country that changes its focus incredibly quickly. you cannot keep people focused on one topic. again, my favorite quote, democracy in america -- this is

like 1828. he is writing about what are americans like. you read this book and you say, wow, it's a lot like us. what he said is americans are the only people in the world who would build a greenhouse and move before the roof is finished. -- a greenhouse. my point is you because you're seeing all this data it does mean it's going to stay this way. we'll get to some other issue very quickly. things will go back to normal and that leads to number two. this is, in a, you were kind enough to mention the 6 million into district what i trie was tg to convey about this last week was okay, it means i've got a lot of surveys. and my friend, peter hart, dates back to mid '60s. when peter hart said this is one of the five or six most consequent opals i've done in my career in terms of how quickly attitudes have changed, then he

talks about what has been like? the tet offensive in 1968. the release, the nixon tapes in 1973. when peter starts comparing, like this is the sixth survey in micro since the mid '60s what we've seen data changes quickly, you've dropped the center of public opinion bomb that has blown up kind of a normal world where we see modest changes. when you do something like that you don't get to understand it. it takes months to settle down. when you blow everything up it doesn't reassemble in the same place but it shifts subtly. that's going to take three to six months. so when i going to renew the enduring consequence of this because everyone has to write and to be sunday talks, who won, lost. this is nonsense. this will take months to figure out its happen and the consequence. the third thing is, despite every data using a dozen republicans necessary have a bad election cycle in 2014. one, as i said, the house has

been found that 190 -- you need 218. there are very few seats in play, and also most of the senate campaigns are in republican terrain. so despite everything you're seeing you can't look at this and say oh, my gosh, this means bad things republicans. because typically in america when we're sitting around next october, this episode will be in the long rearview mirror and will not have that much consequence on what will happen. the other thing i wish i could tell he is is mitch mcconnell has quoted, i love the quote that there's not much learning in the second kick of a mule. he said the first pick was 95, which he was there. this is the second kick. we didn't learn much and he promised -- he said hopefully all these new people learned a lesson. we will not do this again. having said all that, don't expect much change.

when i told you, and i showed you the why, the reasons why this happened, none of those things changed. so it's a real simple kind of equation. if that bill is five reasons why this happened, did any of those five things changed in the last three weeks? no. if those things haven't changed i don't think you'll see much fun to know changed and now the congress works or discontinued level of paralysis. now, number five. there's the other kind of court ruled a teacher in politics, which is if your opponent is imploding, please stand back and let them do it without you anywhere close. so here's of course the other thing that happened, which is obamacare and the sign up website had all these quote glitches. assignments are going very slowly. i mean, in any of the world, republican to step back and let their opponents be the center of attention, we would be talking

about oh, my gosh, this is all not working well. but guess what? the shutdown story will go in the rearview mirror and people will start focusing, where are we now? what is this with obamacare? how is it working? it will not go for the supporters. -- opponents care support. that's what i'm saying, should you from a policy debate and come a fundamental debate without about the role of government for three or four years. does this work or not work? that's my other point. americans are not really an ideological country. this is a country that is based on doesn't work or not work. they are our attitudes about this law are very simple. they will be based on doesn't work or not work here so between nbc, "wall street journal" and cnbc where we also devolving, we created a series of tracks in september so we would have a baseline to measure what's the real impact of this law are

perceived impact. we asked how likely are you to sign up for an exchange. all 14% everybody set up be likely at least very or somewhat likely to do. 32% of the people not insured. i don't see that, there's not evidence of any polling i've seen this is they will get the 7 million people, much less the original estimate of nine. i will be very surprised. it does mean they will not do it. there's enormous money out there. there's an infrastructure in place. there's a need. it could happen. you just don't see it in terms of polling yet. the other thing we did it in d.c. is we asked people this question, have your premiums increased? have your work hours been reduced? have you lost your job? have you lost private coverage? are you being injured for the first time? we said come and do you think it's because of an health care law or for some other factor. i'm showing you the baseline numbers in september among all the americans saying that 18% of

americans said i think my premiums went up because of the law. 3%, hours reduced, 1% i've been insured for the first time. what struck me, a democrat pollster did some work about obamacare, and he tried as always, find, try to present positive stuff why this is all getting better. what struck me when you look at the data, do you think this new health care law is better, worse or about the same for you. people start of networks and then he gives them all the positive, fairly, conservative he gave some of the negatives. he repeats the question but at the end it's still a net worse. my point is this is really simple. the president's core promise has been and this is what you're so instrument in this, his core promise has been if you like a good private coverage, you can keep it. and if that happens, this will be fine. if, in fact, if, in fact, tables

are having the good private coverage replaced and it makes them unhappy and it does that in large numbers, it doesn't matter, you know, it doesn't matter what people say now. they are going to be kicked. if they're going to be kicked they will look and say what i going to do to fix this because i'm going to lose my good, private coverage. so in my mind you have always been the core, center of this story. because that entire hinge -- is the last thing to remember. the elements of obamacare there really aren't popular are all health insurance from items, pre-existing condition, guarantee of coverage, 26 years old, and the entire language in every survey about what people want are all the things that were health insurance reforms. so if, in fact, as i said they don't work and you lose good coverage and that's what happens, this whole thing will be very, very just stable.

so just to compare notes and try to put this in perspective, i travel a lot but i was in new york, reading the little daily news, a little tabloid but i was looking through. there's a story in the corner that was set in queens, new york. there was a judge's critics thought he was too liberal and he wasn't tough enough on crime. he got mugged on the way to his car after work. he came back to the days later he was black and blue, and he said today, he said today's are injured but i haven't opening statement. he said, i know there's a cynical joke that a liberal is just a conservative who is not yet been mugged i want you to i have a mug and i'm not changing my views. i still believe in social justice. this little old lady in the back said beat them up again, he didn't get the message. [laughter] so that the sort of what they do with polling. we are trying, and what i would say about american public opinion is it works like a little old lady where it keeps beating people up until he gets

the message. so that's why at the end of the day i become less cynical cycle after cycle because american public opinion really does in some way referee the worst of her kind of instinct and behavior. so with that as an overview, happy to take any questions. and i forgot to ask, is there any press in the room? >> i see one. >> okay. thank you been. good to know. so far i've been saying the stuff in public. when i get the questions sometimes i get too carried away. >> let's gather our questions. i'll turn to you in a second. bill, how do the republicans handle the next phase of budget negotiations ?-que?-que x and every time limited offer in terms of government being back for a certain amount of months, and then we will do this again. so what do you think people take from this? >> well again, i think, i think

that the speaker of the house held his caucus together. he didn't carry a majority of the house in the final vote but he did in a way that kept the caucus functioning and his leadership functioning. and mitch mcconnell said publicly i won't shut down the government. this should be the object lesson. i'm not entirely convinced that that's how their members to. i don't think it will change much. when i talk about unintended consequences and thinks that being in a straight line, i think that the republican position, which is if we're going to increase the debt and went to increase other federal spending in equal proportion. can only be strengthened from this. that's what i'm saying. like unintended consequences, if you have the perception that republicans get very little out of the deal, then why would you presume that they will not look

for more in the next round? they're looking for more would be an additional federal spending cuts and some sort of entitlement or other changes. but the point is that the pressure inside the caucus and with the constituencies will be to deliver more so to get something out of what they did. and another kind of real-world quote that i love, if you've already done this time, do the crime. so i would just say if you look at these numbers, they have done the time. so you know, so that's what instinct that when i say it's not going to change, blah, blah, blah, i think it would be pushing for more. but they will do more, by the way, much, much, much better terrain. which i peoples concerned about our level of spending and the need for structural change. they will be and much more, much stronger terrain on that topic than they were on trying to shut the government down about obamacare.

>> questions? there's one right there. >> good morning. i'm interested to know, is there enough support yet in the public to make these dramatic changes to entitlement? and which ones, i mean is a social study, medicare? >> no. no, no. no. no. [laughter] >> you can leave it there. [laughter] that happen because i started to say snotty things and i squelched them all. we do, can i come again can we do these what washington said to be the kind of reforms when you for medicare and medicaid and the other programs and set it and the point is almost all of them are opposed. these are very, very hard changes, even with the president

changed, changed and can we jusy we get cost-of-living. all of these are hard. to do then it would require a long debate with the american public. you have the kind of convinced a bunch of them why this was needed and it would have to be broad bipartisan support. so the police noted you would go into a conference session with a handful of people and make those level of changes and announce them, that's actually not, it's not very popular. and so, now, if you actually had the president of the trend and republicans explaining it, may maybe. but it would take weeks and months to help make and build that case. but it's not something could happen in the deadlines we are talking about. so this is where, again, congress is kind of way ahead of public opinion in terms of, if

they believe their support for this. so it's not something i think would be easy to change at the time once did not exist. >> my name is ray becker with combined insurance. could you go back, one or two slides. you had one -- that one. i'm sorry. >> this one? i think you want the next one. >> that one, that one. those are some of the core arguments that republicans were making against obamacare. it looks as though they weren't gaining much traction with the general public. and i miss reading those results? >> well again, this is little bit unfair because i'm giving these as a percent of all interviews. but your hours reduced can only happen if you are working.

that's about 50% of the country. so again, most people who are working, that's eight or 9% who think their hours or the job has been lost because of this, because of the new health care law. the same with a loss coverage. you're talking about eight or 9% of american workers. that's not insubstantial. these are september numbers. and so yes, you know there's been elements that have been put into place and you've lived those elements. but for most people this october rollout is the beginning of obamacare. and so what happens between now and next year is going to be pivotal in terms of how attitudes are shaped. and so if the hours reduced goes up to 15, 18% of american workers are, yeah, i believe about 10, 12%. they might sound like small numbers but as i said you got to remember, 10%, that's like

20 million people. 20 million people -- i made that up. i'll do the math an imminent. 20 million people, those people ripple across the neighbors, their friends come to complain. they call members of congress. that's a lot of people. we will track them in december and march. i also believe the of think i would just, public opinion, if lines and if bad lines go up, that's bad. and so it is no risk of up and they go up sharply and the public perception is people are losing their jobs, the workout, the coverage, and that number is sharply up, even if they are not fundamentally that high, if the delta is out, it still creates an enormous problem in terms of support for this bill. because again, here's the other thing about public opinion. when stan greenberg, democrats and was trying to make a case, this is in a lot better shape, his a lot better shape is

opposed in his data was dead even, 45-45. his victory lap memo is because public opinion was stacked to even. that's not really happy. and also in his own data the people strongly oppose us to all of our strong oppose and strongly favored. so the way our brains work, if you are starting in a very weak base, its easyshare negative information that reinforces what you believe in ways that pushes it off a cliff than it is is there so much positive information that you can change your opinion. so the folks who support obama to have this problem, which is it wil would be easy for peopleo believe the negatives and the positive and about to deliver the positive in large enough numbers to restructure opinion. and so, and lastly, are just a long that point, given what i showed you about those republican, the men and women who live in the seats and votes, could still be voting come and

that's what i'm saying, about the republican electoral prospects, that did more, that's becca i want to put the people back in charge to keep fighting. and so that's why i still think i do think the role giunta and anything will work well enough about obamacare for 2014 to get it off the kind of political life support is been on for these last three plus years. that's my own personal view. >> another question? >> have you done any polling on medicaid expansion of the states? >> i've done a lot -- i've done a lot of polling on medicaid expansion because we've had -- our client base includes some of the republican governors who supported medicaid expansion. i've done a lot of work on trying to explain and build support for medicaid expansion. and again, good-humored leak, i

was after the forthcoming we said no, there's an argument that would convince the majority of republicans to support medicaid expansion. because if i can do it in the first or polls, i'm not going to do in this one. so i think medicaid expansion is systemic in terms of public opinion. i am very supportive and again, i don't mean from policy perspective, just somewhat from a political perspective. you do policy. i do politics big i said that i believe that from a governor perspective, he or she, to expand medicaid for the purposes we're talking about, i as republicans have if i were you as republican governor of would put in a kicker that says this is all based on the government keeping his word of money but if the government doesn't keep its word went out. i was you don't expand medicaid, let's put in a new private plans as instead. i would all those things. but i thought it was basically sustainable politically before

medicaid expansion. however, it didn't mean that you could produce a majority republican in terms of voters who supported or believe in that position. you could get the support of like 30, 40% of republicans but support with democrats and independents were high. also i think there's a difference between incumbent governor and somebody running and the republican primary. looking at the state if i had to win the republican primary for governor, it would be very difficult being a man or woman who supports medicaid expansion under obamacare. so what that means is guess what, you had income and governors and did the ioc a lot of challengers running in primary -- republican primaries for governor who champion the cause. as i said i just told you i think were going from health care policy to help the reality. the health the reality is we will see if it works or not. if it works in america, the

other states will be pressured quickly to take their chunk of the money because again, what worked best republican's was the robot and the reforms that would cut abuse in the medicaid program, but we are paid attacks me, forget, money is going to california and europe and the states that took. and so if those states, if it does work in those states, or more likely it works in the states where republicans can did it and works on republican governor of going to the beatings saying you guys are crazy, this is, it's working here. i workin working here. i mean, this could certain change begin quickly over time. >> can you take one more quick one? >> sure spent this will be the last one. >> idaho association of state lives. two related questions. we are going to start this process all over again, headed toward february led normally at least by ryan anne-marie.

you expect to see any material differences and round two in general? in a particular do expect to see any backs on the sequestration rules? >> republicans keep trying to offer that we could change the sequestration so you could have more flexibility inside you agency. which is i think rational or and when i said unintended consequences, sequestration is actually from a republican perspective worked pretty well. there was this whole big thing, federal spending is still what it was two years ago. know, my god, that's a victory. that's a massive victory but it didn't go up by combined 12% or 80% over two years. it a victory if we're at the same level. but the democrats are trying to use every leverage they can to change it. so i don't -- as i said i think for a lot of republicans, the

sequestration has been in the caucus or sustainable, is like the one thing you kind of got out of this so far, and i don't see them kind of like relenting unless there's something else, some other structural change in terms of spending. then three, the democrats have been so opposed to it they haven't been willing to vote for get agencies more flexibility. and so if they won't do that, you are still stuck in terms of why you do not have levels of agreement. so i will tell you again, my friend, karen, keeps neat images very short leash when i'm behind a microphone. so she told me, but everybody is like a. she said you got to the story about my favorite college professor. here's my philosophy, professor but he always told the story about the freshman essay about who was socrates. the freshmen into food socrates

was go socrates was a great philosopher. socrates talked and talked and talked. socrates was killed. [laughter] he said i would like to remember that. start of our meeting for the day about keeping on time. so i will tell you at the stroke of 930 tonight and i've remembered my socrates learning very well. >> what you left out, he was killed willing play. i may have some import for where we are today. please join me in thanking no and turf -- in thanking bill nye concert intend country and -- bill mcinturff. [applause] [inaudible conversations]

>> we're going to go ahead and continue this morning. so if you go ahead and take your seats. i am privileged again to talk with you all this morning, and introduce another great panel is going to talk about our early experiences with the exchanges and give you some insight from their perspectives of how things are going, and where we're going and where we have come from. i'm going to go ahead and abuse our panel.

our first speaker is greg cromer, chief executive officer of the louisiana health cooperative. as louisiana's first nonprofit health insurance co-op, louisiana health cooperative plans to provide a variety of health insurance options for individuals and employers statewide for cover starting january 1, 2014. and greg is not just busy enough with that, he also ran unopposed to the louisiana state representative, the house of the '90s house this should be also serves as an louisiana legislature as the chairman of the insurance committee which has oversight of legislation pertaining to public and private pension systems including employment and automobile insurance. he sits on the house executive committee, house and joint committee on homeland security and the special committee on military and veterans affairs.

so he is a very busy guy. our second speaker is going to be julie bruner. she is executive director of the minnesota council of health plans and was previously the county administered for st. louis county in minnesota and also worked in the ramsey county attorney's office. if anybody knows julie, you know she brings a candid spirit of the she does and shoot on what of the most quoted health plan executives in the nation and a safe and tested job for her health plan members in minnesota. our third speaker is the lovely leslie moran, senior vice president at the newark health plan association who was please with the deputy press secretary for the nuke state a similar and was the news producer for the 6:00 news in new york. leslie is a valuable advocate on behalf of our member companies enters in new york state. as you know from your agenda, it looks different out there than what you all expected. so we had a little last minute change.

jennifer koehler could not be with us. she's actually in the premises that her luggage is not. and so she sent her apologies and would have provided a stood up and was going on illinois so we wish her well and we hope her luggage arise. with that i'm going to go ahead and turn over to greg cromer who will kick us off. >> thank you, leanne. it's good to be with you folks this morning. greetings from the state of louisiana, home of the new orleans saints. osha time and now the louisiana health cooperative. that's a cheap plug but i had to do it. a little history about me. i was in the space business for 31 years building external tanks for the space shuttle system, and then working with the boeing corporation on this page wants system, the next generation of heavy lift vehicles. big, big rockets. been elected to the legislature for stitches, chairman of the

house and injured commend for the last two years and i was brought an opportunity to change career paths at age 55, and take on the task of cl of the louisiana health cooperative. we are a nonprofit member owned a member governed insurance company, the newest insurance health insurance company in the state of louisiana. some of you may question the wisdom of that choice, or decision to go for a very profitable, successful aerospace career into the insurance industry. don't feel like you're alone because sometimes i feel the same way. but with my background i can say that our industry is not rocket science, and i can say that with a little bit of authority because i've been in rocket science for a long time. the only exception to that may be the actuarial is that we use. are there any actuarial agency or? i don't see any.

good. good, because when i compared iraq a second look at the projections for me and our enrollees to date, i think and maybe more like science fiction instead of rocket science. we have gone to market but we have not set the world on fire with what we've established so far, but that's coming towards the end of this year we hope. a question yesterday, how can we partner with state officials? whenever i was appointed to this position as ceo, louisiana health cooperative came to me. jeff and company are in the front row. immediately before i was even active in the position and started talking to me about joining as chairman of the house and should committee, i know what a fine job they do in addressing key, and education to

my members of my committee. and it was an easy choice to engage with our association. further as a whole. what have we face as a startup? the first hurdle that we have faced as a co-op, which is as most of you know, it's spun out of funding through the aca, it's an education process. most folks look at us and they think we are the exchange. we are a mechanism that people enroll into insurance plans. we run it, which is absolutely incorrect. we are in the exchange but where in the private marketplace. we are health insurance company. that's one hurdle we've had to overcome. the next one is some of our competitors have felt that we

could mandate costs and mandate rates with our providers. that's absolutely incorrect also. we have to go in and negotiate contracts with providers just like everybody else. and believe me, the folks who sponsored us, which is a very big health care system in louisiana, were the hardest people to negotiate rates with of anybody that i had to do with. i just signed the last contract with them about a week before we went to market on october 1. believe me, i didn't get any favorable consideration from them. we were finally operational on 10-one on the federal marketplace. we opened our internal exchange was ready, the federal marketplace was supposedly ready. we spun up, we spun down very quickly. there were some glitches in the internal software. we have that fixed before the end of the week. the federal government as we all

know continues to have glitches in the system. we are not sure, depending upon who you talk to when all of those cases will get tired out. there was a piece that we talked to folks in washington about three weeks ago, and were told that it absolutely would not be working this year. and our customer service representative within office the very next week and we after the same question. she made a call to washington and she came back and said they would absent to be up and running on october 1. so coming from the same agency, two different answers didn't give us a lot of confidence that we would be up and running. and, therefore, whenever 10-one back rolls around, it was not up and running and still not up and running yet. one of the good things about the first week that we were open though, a friend of mine, ceo of

the biggest competitive ahead in the state of louisiana, there's a group of us to group of us to play golf together, sitting around the table after round of golf talking about our numbers. whenever started talking, mike, but his number and my number, lo and behold i found out i should be optimistic because i was ahead of him to do one. -- two to one. that's the average. that's actual enrollees. two to one. [laughter] but he was the big guy, 800-pound gorilla and i was taking to sneeze at that point. -- taking him to sneeze at that point. one of the encouraging things that we are getting is that several of our early enrollees have been young people under 30. which was a concern for all of us that we're going to get all of the high-risk business and not get young folks to offset the high-risk.

but we've had a fair amount of volume in the younger folks, which gives me a reason to be optimistic that maybe there will be some chance for success. most of the interest in our plans have been coming from folks that are calling us directly instead of going to the federal marketplace. and there seems to be two reasons for that. one is that there's a significant amount of frustration with the ability to get into the federal marketplace, the folks i talked a bit of been able to get on and do transactions have all occurred between the hours of about 11 p.m. and 4 a.m. some of that now without long waits of an hour and half to two hours to be able to make a single transaction. there's a lot of frustration. but we are also finding that many folks are looking at the marketplace that if the that limited coverage or even no coverage at all don't have any real ideas about what they need

or what is available to them. so they're calling us directly and looking essentially for education, number one, of what they can get, what they may need, and what type of subsidies are available to them. and we will, therefore, walked into the process to enroll if they are subsidy eligible to. if not we walked into the process with the company. they are calling us directly to get into the programs. due to the problems with the ffm, we are taking info manually and customers that colin as we educate in taking information manually and actually calling them back, hopefully within a week in most instances as were able to access the system. ..

seemed to come down to one key issue and that is with all of the planning that has gone into this over the past two years or more of the inadequacy of the amount of time that was scheduled for testing of the systems in the federal marketplace and resulting in our testing of our systems as we were able to integrate with the federal marketplace has been just sorely inadequate. we are putting things -- putting

them life on the web without good knowledge that they are actually going to work and you see that in the federal marketplace. and therefore they are doing upgrades just about every evening, taking systems down on weekends to do upgrades. one of the big things in developing software is the testing and implementation. that piece of the puzzle seems to have been really i'm not going to see overlooked but with the july of to get the market in a timely fashion was not fairly allocated time. i see one big problem with our company coming in the near future. maybe some of you will see the same. with the slowness of the enrollees and folks getting enabling -- being able to get into the system i've got a small team that works for us but i see that there will be frustration

sitting in with those folks. and my biggest problem is going to be not getting the members enrolled. it's going to be keeping my team motivated and upbeat and engaged. they have to have a positive attitude when they talk to a consumer. it can't be any frustration. there can't be any frustration in their voice or any concern. they've got to be positive, and that's where i see one of my bigger problems. i look at my team as a football team if you will. i am projecting out how we are going to be prepared to win in the next three to five years. this year we have a won game this season. we are in the first quarter right now. the referee has blown some calls and that is a kind way of putting it. it has prevented my offense from being able to move the ball down the field. so we are looking for a strong

second quarter, if you will, between mid november and the end of the year when we expect to see a big push and we hope the systems are up and running a little bit more smoothly. we are seeing a little bit more access that we are hoping for a very strong second quarter so we can score a couple times and get points on the board. then make a year, halftime of course everybody is going to make some adjustments coming into the last two quarters which will be the enrollment period between january and march. if we can score some points in the second quarter i think we can maintain and hold our own in the third and fourth quarters therefore we will have a successful season and be able to compete again next year and that's the goal to get past this year and next year, two or three years downstream we are hoping to the super bowl winners. so that's the plan i'm going to use to motivate my team and try to keep them on track and on point. so that's about all i have to offer you. i will take questions treacly in

a minute when the time allows. thank you. >> thank you so much. that was fantastic. we are going to keep moving along. we will to q&a when we are done. surely, we will turn it over to you. >> good morning. i'm not into sports but i am from where all the women are strong, the men are good-looking, the children are above average and now paul bunyan and the blue ox are leading the charge on the state based exchange. my story is going to be pretty similar. but from a little bit different perspective. i want to set the stage a little bit from minnesota where we all get along and spinal and tried really hard -- smile and try really hard. [laughter] it's been a tough couple of years. minnesota we have 5 million

people, 5.5 million people. we have an uninsured rate at about 8%, and that is up some. we have the largest high risk pool in the country about 26-years-old, so we have a pretty good idea as we phase that out of the risk is going we don't know where it's going. everybody is watching of course. we have seven health plans and minnesota in order to hold an hmo license you must be nonprofit. so those are the companies that sell in minnesota. now, we have a very large for-profit company that is how was it in minnetaka but they don't do business in minnesota because it is for profit. we have a little bit different environment that we operate in. five of the plans chose to go on the minnesota exchange.

and two of the health plans are not on the minnesota exchange. however, stanford health out of sioux falls that does hmo business in minnesota is on -- is in the exchange in three other states but not in minnesota. so that sort of is where we are starting out. the projections for the numbers of individuals that what we call mnsure, isn't that cute, i thought was like ensure. we are going to be drinking that stuff. it's awful. at any case it's about 1.3 million as the sort of optimum number that they were going to be shooting for. so to give you a little bit of a history of how we got to our state based exchange, it really was launched by the governor with an executive order in 2011.

and that was because for the first two years of the current democratic governor's term, the legislature was not interested in passing exchange legislation. we worked very hard. a coalition of business providers here is very hard to try to convince in the legislature would move toward the state based exchange in minnesota to try to get that attraction. but when thought the election happened in 2012 both houses of legislature went democrat. so the first thing that on the first day from the 2012 session the governor signed the medicaid expansion and the senate final

one was the exchange legislation that move through 20 some committee hearings and by the end of march we had our legislation passed this year it's an active purchaser starting in 2014 to meet the requirements to get the product approved and the rate that proved to be on the exchange. we have had in minnesota for long time in a very -- when you're a very highly regulated markets and we have had a real treat you forever. so some of those pills that folks have to swallow for the first time where it was a bigger hole they had to swallow in the past we were able to rolph through some of that in.

some of the companies are leaving individual business and then three of them are doing individual and small group. we have a very strict interest that constitutes who can be on and off the board exchange board in minnesota so there are no brokers, no insurers, no providers on the board. it's a frustrating thing for the stake holders who have been so active in trying to move this forward. fortunately the board that was appointed appears to understand that working with stakeholders who are involved in this is going to be successful hedging in exchange we've done a lot of work with them. some numbers out of the gate that were announced wednesday this week and we will talk just a little bit about the sort of

communication strategies that we adopted in my organization. so as of wednesday and about 12,000 accounts have been created. i think that is a small number when you think that we are moving towards it's almost november. we have a long way to go before march but the exchange officials are pleased. this is meeting our expectations which is a theme that they have struck. messages are positive and i will talk a little bit about that. of the 12,000, only 5500 completed applications to sort of determine whether or not an individual is eligible for credits and so forth have been completed. so now we are going from 12 to 5500. it's going to get better. of that, about 3900 have started

to the enrollment process. about 406 commercial applications have been completed. so, i will talk a little bit about them and medicaid. the balance of all of those will be the medicaid enrollees and then we had a state subsidized program of minnesota care. so about 3500 of those. that system is not yet automated. that would be the coral let people go in but it's not working behind the curtain yet and we know that is what the status of this is going to be. at this point there hasn't been one successful a 44 filed to a health plan. and that is the point that we are at right now on a daily

basis talking with the exchange officials so that the plans at this point we know there are 406 names someplace, but not one of the companies at this point knows who they are. the plans did receive a call a couple days ago telling them of the 406 you have 10% and 30%, but the numbers are pretty small i can be in a 7:40 a.m. exchange call with all of my members to just keep information flowing. it's been very useful because we are able then to turnaround and communicate back to the officials on exactly what's going on and with the plans or during the operations calls in the days before.

we expect in the production ready 8:34 in the day. we thought it was going to be yesterday. i had my call today at 7:30 and now we expect it today. wade is eminent and we think it is coming. br seeing very positive messages with the exchange so far. we also haven't gotten the navigator in the sister function not on all fours in minnesota. after we get the 834 and the 820 solved, the next is getting the navigators and the systems physicians to start working so that people start to enroll. because what i will tell you is we want -- am i companies want the exchange to work in minnesota. we think this is important.

$110 million has been spent to date on this and that is something we wanted to work and want it to be easy for folks to find, compare, make choices and get coverage. the biggest challenge i will talk a minute or so if i can add and delete the about communication strategy. we started talking on the communication strategy exchange about two years ago because from my perspective, the biggest challenge that the health plans have is managing the expectations people have that once i go on the web site and i enter my information, and i am in a health plan and that isn't true. people are actually calling the health plans in minnesota saying i enrolled in you yesterday. i need to schedule surgery in january. can you tell me if my position is in a network?

this is happening. so we have been doing a lot of communication with the media. a lot of education in the media trying to help the media understand how those promises that were made as the passage of the affordable care act to keep your coverage etc., etc. how that is basically true, but everything is going to be individual. it's all individual. hell you are impacted by the affordable care act is really going to be how this fits you personally or your family. one of the things we did early in the year is we developed a web site called myhealthcarefuture.org. it was a five or six minute play -- quiz you c