diversity. >> in accord with the conditions of our judicial system that appearance and deception has to be served because of the immense and many respects undemocratic powers that courts exert undemocratic because we believe in elections generally and here we have unelected fisa court members, operating secret, other members of the judiciary operating in the open. but they too are unelected. i think that your point is very, very important. i again thank you all for your service to our nation. thank you. >> thank you very much, senator blumenthal.

>> it's rare that a freshman from the minority party gets to chair a committee proceeding like this. but, you know, who says the race go earth not to the swift? first of all, i really appreciate all of you coming here, and i appreciate your willingness to serve on the president's review group. the work that you've done has been very helpful, and i'm confident that it will do a lot to frame this important discussion as we move forward. the importance of these issues can't be overstated. one of the things that i liked

that you pointed out in your report appears on page 15. wherein you pointed out an interesting coincidence you might call it. my word, not yours. the concept of security has dual meaning. on the one hand, it refers to the fact that one of the most important, fundamental, sacred obligations of government is to keep the people safe, to protect us from each other and to protect us from those outside of our country who would harm us. security is one of the most important functions that the federal government has. and at the very same time, it refers to something different. it refers to something else that might appear to be this conflict with or create tension with that first concept, and that is the concept of security referred to in the fourth amendment, that we have the right under the fourth amendment to be secure, to be

secure in our persons, houses, papers and effects against unreasonable searches and seizures. now, this concept of that means, to be sure, in that second respect has changed over time. it has necessarily changed as our technology has changed. but the fundamental principles underlying that concept of security must necessarily remain the same. "news of the world" for us to remain a free society and in order -- "news of the world" for us to -- in order for us to remain a free society. one of the things we have struggled as a congress and that we struggle with really as a country as a whole relates to the fact that where we keep our papers and what our papers are has changed especially in the last few years. no longer do our papers consist

exclusively of actual paper. what the founding generation would have thought of as papers often exist only in the either, exist -- ether, exist only in the electronic equivalent of 1s and 0s. and those are not any longer stored exclusively on hard drives with a finite location that might be in our home. be a lot of the time they exist only in a cloud somewhere. and yet these pieces of information, these papers or effects or whatever you want to cull -- call them are a in instances in which we have or reasonably should have an expectation of privacy that is reasonable, to say the very least. and so we have to figure out how best to balance these two sometimes conflicting interests associated with security. there are several ways in which

this arises, but we've talked a little bit today about the collection of metadata and the fact that we've got an enormous amount of metadata that's been collected on, you know, potentially 300 million americans. the government notes that it has in place a rigorous review process that must be followed before anyone accesses this database containing metadata on basically every american. be what concerns me about that is the fact that these are basically internal operating procedures. so what is a policy today which may well be followed religiously today could change tomorrow. and i'm willing to assume for purposes of constitution that the men and women who work at the nsa have nothing but our best interests at heart. i'm willing to assume that at least for purposes of this

discussion. that might not be the case a year from now or four years from now or ten years from now or forty years from now. we know how the this movie ends. we know eventually if that much information remains in the hands of government for that long, it will be abused for partisan and otherwise nefarious purposes, and we can't let that happen. so start with professor stone. when we look at this, would this be something you would describe as one of the most compelling arguments in favor of putting more row to bust restriction -- robust restrictions in law so that they're not simply in the hands of people however well intentioned they might be within the nsa? >> yes. this is our primary concern with respect to the collection of metadata is not the actual use of the metadata in the ways in which it's authorized, but the risk that somewhere down the road someone will figure out how

to and want to misuse that data. so we think safeguards are critical. i think the safeguards that are now in place internally are actually quite good. they're rigorous, they're multifaceted. there's checks and balances. there's the senate and house oversight committees, the fisa court all looking over this. but even so our judgement is that it should be taken out of the hands of the government in terms of holding the data. that reduces -- doesn't eliminate entirely, but reduces, we think, the potential for the day a to be misused the way you're talking about. and it's still a question of trade-offs. even there it's always a risk, but in our judgment, it's an important step toward reducing the risk from one point.

>> some have suggested it would be infeasible, categorically infeasible ever to require a court order as a condition precedent performing a query of the government database. and let's assume for purposes of this discussion that the data set will remain, at least does remain for the time being in the possession of the government in that we're not going to move to a different system in which the government doesn't have possession. the argument frequently arises you can't possibly require any kind of court order as a condition precedent for querying that database even where you've got u.s. citizens involved in the query, because it would just take too much time. do you know of any reason why that should necessarily be the case or why that would unavoidably be the case, why we couldn't get around that by perhaps creating additional fisa court positions?

>> we find that wholly unconvincing. our view is that there are practical realities. if your going to add the burdens to the fisa court, you've got to adjudges in necessary -- if necessary, but there's no reason why the argument for getting a court order for a query of the metadata is any more impossible than to get a search warrant to search a home. there are great protections in having judges oversee this, and there's no good reason why this should not be adopt inside this context as well. >> thank you. thank you, professor. thank you, mr. chairman. >> senator franken. >> thank you, mr. chairman, and thank you, gentlemen, for this report. i think it'll be a real help as we work to improve our privacy and surveillance laws. on page 124 of your report you wrote, quote: a free people can govern themselves only if they have access to the information that they need to make wise judgments about public policy. i couldn't agree with you more, and right now the american

people don't have the information that they need to make up their own minds about these programs. i have a bipartisan bill that would fix this, surveillance transparency act of 2013 that has the support of 14 of my colleagues and the strong support of the business community which has broadly endorsed the principle of transparency and has endorsed my bill specifically. when we met last year, late last year, and when i submitted written comments to your group, i urge you to support the reforms in my bill, and i'm pleased that your report endorses the same measures that are at the core of my bill. i'm going to focus my questions on the transparency reforms that we agree on. first, my question is on government transparency. seven months after the snowden leaks, the government has yet to public my disclose even a rough estimate of how many people have

had their information collected in the telephone metadata or prism programs. this is an accident under current law, the american government doesn't have to do this. my bill would force the government to annually disclose an estimate of the number of people who have had their information collected by nsa under each key surveillance authority. your report supports this. you say that for each, for key surveillance authorities, quote: the government should, to the greatest extent possible, report publicly on the total number of requests made and the number of individuals whose records have been requested. why did you support this particular transparency reform? mr. sunstein, why don't you begin, and whoever else wants to -- >> well, a theme of our report consistent with your bill is that sunlight is the best of disip februarying about thes as justice brandeis said and that

it's very important for the american people unless there's a very strong national security justification on the other side to get a sense of what their government is doing. so the first and foremost goal is about democratic self-government in a free society. that's one of the things that distinguishes our nation from some others. and another idea to which you also referred has to do with economic interests which shouldn't be trivialized. there are american companies who are at economic risk because it's thought that the american government is forcing them to turnover all sorts of stuff. it's just not i true. sunlight shows that the program is much narrower and targeted than some people fear. >> and my bill does that. i want to talk about that next. but any, any other comments on that? i'm going to just continue to drill down on this first recommendation, because it's different from what the administration has been saying

and is saying. it calls for the government to say how many people have had their information collected. my bill calls for the government to say how many people have had their information collected. yet last november representatives from the office of the director of national intelligence and the nsa came before the subcommittee on privacy, technology and the law which i chair and testified that it would be, quote, difficult if not impossible for the government to say how many people have had their information collected under these authorities. mr. swire, did the administration communicate this concern to you? if so, why did you find it unpersuasive? enter thank you, senator. >> thank you, senator. we talked in some detail about transparency provisions. they certainly expressed concern about, when there's a provider that has a small number of customers, for instance, that we

not tip off people who are being surveilled in those cases. there's a national security problem there. i think when it comes to the number of people who have been touched by the orders, they did not focus in their discussions with us on that risk in transparency. and my own sense of having talked, among others, with the companies on this is that if there's cooperative efforts to have the companies, the proid viewers work -- providers work with the government, we're likely to be able to come up with practices that allow estimates. you might not have exact numbers in all cases because sometimes you don't know if the same e-mail applies to one perp or three people, but i think you can have good trend numbers and a good overall sense of what's happening. >> okay. so, well, i'm out of my time, and as you can see, we have another vote. so we will recess for five minutes for another vote. before we do, i just want to, mr. sunstein, just reiterate

this thing about the companies, their ability to disclose. because it is hurting them. and we had an analytics firm forester, so the american cloud computing industry stands to lose up to $180 billion by 2016 as a result of increased distrust of their services, particularly abroad. so thank you for that being part of your recommendations. so we will recess for five minutes, because identify got to go -- i've got to go vote, and i better go right now. so we're recessed. [laughter] oh, senator cruz? good. i'm sorry. the -- i guess i'm the chair. i call on senator -- [laughter] cruz. >> thank you, senator franken. and i want to begin by just

thanking each of the members of the panel, thank thanking you fr service in the intelligence community and thank you for your service looking at the difficult and important legal issues and privacy issues that surround this critical area. i think great many americans have concerns about the current state of nsa surveillance. i, for one, have concerns on two different fronts. i am concerned on the one hand that the federal government has not been effective enough monitoring and surveilling bad guys. that we have not succeeded in preventing what should have been preventable terrorist attacks. and at the same time, i'm concerned that the sweep of the surveillance has been far too

broad with respect to law-abiding citizens. and i think a great many americans would prefer to see that reversed. far greater scrutiny on bad guys, people that we have reason to suspect may be planning a terrorist attack, and far more protection for law-abiding citizens who have committed no transgressions. and so i want to begin on the first piece on targeting bad guys, and i want to follow up with the question senator graham asked earlier concerning major hassan and his communications with al-awlaki, a known terrorist leader. despite all of our surveillance capabilities, despite having significant indications that major hasan was engaged in these

communications, the federal government failed to prevent the horrific terrorist attack that claimed the life of 14 innocents at fort hood. and so the fist question i'd like -- first question i'd like to ask the panel is in your judgment, why is that? what was lacking that prevented us from acquiring the information and acting on it to prevent that act of terror? >> well, i guess i'd say that it is a very important question, and your general thought that the target through surveillance known bad guys, that is something that we did devote a great deal of attention to, and recommendation 15 is of, i'd say, great importance. it's gotten essentially no attention so far as i can tell, not even on twitter has it gotten attention. and that recommendation is we need to expand our authority to track known targets of

counterterrorism when they first enter the united states. so that's a gap in our statutory or structure that when they come to the united states, they get protections immediately, so we can't track them. whether that would apply in any way to the case you're describing, i just, i don't think so, but it is an important gap. that one, i think, probably is a group we'd need to get more into the details than we did. >> mr. burrell, i would welcome your thoughts also on how we could have done better preventing that terrorist attack. >> um, senator, it's not something that we as a group looked at. that wasn't our mandate. i am familiar with the case, obviously. i'm a little constrained here, because i don't know what's in the unclassified world and what's in the classified world, so maybe we could have a conversation afterward in closed session.

>> okay. a follow-up question for the panel anyone would care to comment. the same is true with respect to this tsarnaev brothers, the boston bombers, where in that instance we had intelligence from russia that they were having communications with radical islamic groups. and yet for whatever reason, their radicalization continued, the government dropped the ball, and they carried out yet another horrific terrorist attack. do members of the panel have any views as to why our surveillance capability did not provide sufficient information to act upon to prevent that terrorist attack before it occurred? >> so, senator, i'll tell you in that case there weren't any communications between the united states and overseas.

so there was no surveillance of those communications that would have provided any information that have have prevented the boston bombings. and this is largely a case of domestic radicalization. and i think that's the best way to think about it. >> well, but as i understand it, the elder tsarnaev brother after traveling to chechnya, after meeting with radical islamic groups came back and posted on a public youtube page admonitions to jihad. and that certainly doesn't take extraordinary surveillance capability. it simply takes the government looking to what he's saying publicly and loudly before that terrorist attack is carried out. finish. >> yeah. and i was making a different point, senator. you're absolutely right, but i was making a different point about actual communications and the collection of those communications. >> well, and i think that underscores that my concern that the focus of the programs has

been far too much on law-abiding citizens and far too little on people for whom we have significant reason to believe there may be a real danger of terror im. and with respect -- terrorism. with respect to major hassan, with respect to the tsarnaev brothers, i'm not sure there could have been too much surveillance based on the information we had to protect national security. now, flipping to citizens at large, am i understanding correctly the conclusions that the commission received that, in your judgment, the bulk metadata program has not to date prevented any specific terrorist attack? is that an accurate understanding? >> yes. that's a fair understanding. we think that it's contributed some useful information, but could not say that any particular terrorist attack has

been prevented because of information learned from the metadata program. >> now, an additional recommendation, as i understand it, from the commission is that the government itself stop collecting metadata. but that private companies, the phone companies that already have that data preserve that data and that searches be conducted only when there are specific cause to search rather than in a blanket sense the government sweep anything be every law-abiding citizen. >> precisely. >> and is it the judgment of the commission that if the data were kept in private hands of the phone companies that already possess the data legally, that that would do nothing to undermine the efficacy of the program preventing potentially future attacks? >> we believe that that way of handling the data can be done in a way that would not in any way

undermine the efficacy of the program. on the other hand, we recognize in our report that that's speculative. we don't know that for a fact. and if, in fact, it turns out that there are inefficiencies that make it more difficult to use the data in an appropriate way, that the alternatives to have it held by a single private holder. and that would basically eliminate most of the inefficiencies. >> focusing also on the question of potentially overbroad surveillance, a couple of weeks ago senator sanders wrote a letter to the nsa asking if the nsa, quote, has spied or is the nsa currently spying on members of congress or other american elected officials. and the nsa's response to that was members of congress have the same privacy protections as all u.s. persons, which certainly suggests the answer to that question is in the affirmative. now, as i understand it, each of

you were granted security clearances and the ability to seek classified information in court opinions, and so the question i would ask this panel is are you aware, has the nsa ever done surveillance on members of congress or other elected american officials? >> we are not aware of any such, and one of the things we learned in our review is that there's no targeting by the nsa of people because of their political views or their religious convictions or their political party. so in terms of concretely some details we may not have precise questions that every one of which we have off the top of mind answers to, but politics, religion, political views, that's not what they're interested in. >> just one small thing. we're talking about in recent years. we're not talking about back in

the '60s and '70s when there was a different history about intelligence agencies doing things that got exposed. >> i mean in current years. although i do want to clarify, professor sunstein, one thing you said about religious views. i assume you would agree that a commitment to jihad would not qualify as a religious view and, indeed, would be a political position, an embrace of violence that merits very close scrutiny to prevent that violence from being carried out. >> yeah. the there's a reason to believe the person is threatening to the united states, that would not fall within protected religious belief. >> um, a follow-up question related to the question about members of congress. is any member of panel aware whether the nsa has spied or is

spying on the judiciary or in particular members of the supreme court? >> we have no information to that effect and would not anticipate that. >> very good. well, i want to thank each of you for being here. the remainder of the committee is off voting, and so with that, we'll take a five minute recess, and then i expect my colleagues will return, and the hearing will commence again then. thank you. [inaudible conversations]

[inaudible conversations] >> today governor rick snyder of michigan delivers his fourth state of the state address. we'll be live from the michigan state capitol at 7 p.m. eastern on c-span. >> as the president first stated in march and reemphasized tuesday night, the goal of the united states and afghanistan -- the goal of the united states in afghanistan and pakistan is to disrupt, defeat al-qaeda and to prevent its return to both countries. the international military effort to stabilize afghanistan is necessary to achieve this overarching goal. >> robert gates served two pratts as defense secretary from 2006 through 2011, and cia director in the early '90s.

friday at 6:to 30 p.m. eastern on c-span2, a live booktv event. secretary gates talks about his management of the or wars in iraq and afghanistan and his relationship with the white house and congress. and in a few weeks, look for women's history for beginners author bonnie morris. she'll take your questions and comments live on "in depth" february 2nd at noon eastern. and online through january, join our discussion on mark levin's "the liberty amendments." go to booktv online and click on book club to enter the chat. >> and looking at the events of a person's life, the normal approach is to do it chronologically starting with the subject's youth and progressing on through adulthood and old aim. we do this with james monroe, we immediately run into the limitations of the visual documentary record. the figure here holding the flag is supposed to represent james

monroe. you want legacy, here you've got it in spades. general, you know, a great iconic painting of the american revolution, this and probably trumbull's signing of the declaration of independence are the two most known paintings of the era. you look at monroe, washington, it's exactly the same pose. it's almost a mere reflection. so not only is monroe right there with general washington, but he's in pretty much the same pose. and he's holding the flag. >> portraits of the fifth president, sunday at 7:30 p.m. eastern. part of three days of american history tv this hold day weekend -- holiday weekend on c-span3. >> and we're live now at council on foreign relations for remarks from treasury secretary jack

lew. he'll be speaking about the economy, the next steps for financial reform and his department's international agenda. john bussey of "the wall street journal" will moderate the discussion. we expect this event to get under way in just a moment. live coverage here on c-span2. [inaudible conversations] [inaudible conversations] >> again, awaiting remarks from

treasury secretary jack lou this morning -- jack lee this morning -- jack lew this morning. he'll be talking about the next steps for financial reform. he'll be introduced by john bussey of "the wall street journal." coming up on capitol hill today, the u.s. senate will gavel in at 10 eastern taking up consideration of a $1.1 trillion omnibus spending bill. the house passed the measure with bipartisan support yesterday, 359-67. live coverage, as always, of the u.s. senate and the house on the c-span networks. [inaudible conversations]

[inaudible conversations] >> while we wait for remarks from treasury secretary jacob lew this morning, yesterday the head of the international monetary fund, christine lagarde, said the world economy looks like it's headed in a positive direction in 2014, but risks do remain. she cited the u.s. budget deal, commonly referred to as the ryan-murray agreement as one step toward stabilizing the economy because itty marijuanad uncertainty. we'll show you some of her remarks as we wait for treasury

secretary lew. >> growth in the united states is certainly picking up driven, essentially, by private demand. and that recovery that we have observed in 2013 that, unfortunately, was dragged by the fiscal consolidation of 2013 will be helped by the loosening of the fiscal corset as a result of the recent budget deal. still, it will be critical to avoid premature withdrawal of monetary support and to return to an orderly budget process including removing the threat of the debt ceiling. if we look now at the euro area, the euro area is clearly turning the corner from recession to recover.

but when you drill down can, growth is -- down, growth is still unbalanced with some countries growing will be my well and some economies doing quite well and others still lagging behind. and some of those are actually suffering from significant high debt and credit constraints as well. so here monetary policy can continue to help. clearly, the ecb has done quite a bit to facilitate the financing of the economy. but it can do more, and we believe that it can do so in a very targeted way by facilitating targeted lending in particular in order to avoid the financial fragmentation that is still there despite the unconventional policy that has been applied including forward guidance. we believe that the forthcoming asset quality and stress tests that will take place in the course of 2014 is going to help if it is done even handedly and

in a credible manner. and, obviously, well communicated as well. in the euro area, we also believe that there is a need to accelerate reforms to boost labor market participation and enhance competitiveness, and that applies pretty much across most euro area countries. let's now turn to japan. in japan the initial boost from abenomics and the three arrows has been effective, but it is weakening a bit. hopefully, temporary fiscal stimulus that have been announced by prime minister abe will actually offset or at least partially offset the negative effect t of the necessary consumption tax increase which is one step this the process of increasing consumption tax. now, the challenge for japan is

to agree on medium term fiscal adjustments, medium term, and to the economic and social reforms that we believe are needed to strengthen growth in japan. what do i mean by that? well -- >> well, welcome, everybody. we're going to go a few minutes later than planned, to about 9:20, and we'll have a good opportunity for a robust question and answer session. so, please, be thinking of some robust questions as we go along in our conversation this morning. just a reminder that this is on the record. when you ask your questions later on, i'll just be asking you to identify yourself. if you can put your ringers off on your cell phone, just put it on stun, you know, whatever setting you have, that would be very helpful to us. and since we have a lot to talk about, let's jump right into it. secretary lew, thank you very much for joining us.

this feels like an historic week. it's not quite like a moon landing, but we appear to be very close to having a budget which is -- [laughter] seems an up usual thing for the united states of america. it's not without a sop gap or so -- stopgap or so, but it looks like this is going to move fairly quickly now. i wonder if you can talk about how this might affect business confidence, consumer confidence going into the 2014 calendar economic year, how it affects your outlook on growth in the u.s.? but also do so in the context, if you would, of this strange number we got on jobs in he's which seemed like it was out of the ordinary from the trend line which had been quite positive before, a weak jobs number in december. if that was an anomaly or be there was something that worries you in it. >> john, it's good to be here, and thanks so much for doing this. i think we're starting the year off strong. we're starting the year off with

economic tailwinds not headwinds, and i'll get back to the specific number you asked about. and i think we're starting out with congress following through on the end of last year which was trying to get back to some kind of normalcy in and away from the kind of brinksmanship and uncertainty that was causing a great deal of impact to confidence in the united states and internationally. obviously, we're, you know, not out of the woods completely. we still have a lot more to do to keep our economy growing. but if you look at the arc of the last half year, the trend of economic statistics -- job statistics, confidence -- have been strong. it's been strong across sectors, and there's potential for more growth in a number of key areas. um, i do think that the mood in washington makes a difference. in two different ways.

one, the policy actually matters. the fact is that the budget agreement which is now being implemented through these appropriation bills takes away some of the fiscal drag from the economy. that actually matters. macroeconomics matter, and going from policies that push back on economic growth to creating a little bit more economic energy help. but the question of business as usual versus dysfunction is extremely significant. just a few months ago we had a goth shutdown, we were -- government shutdown, we were in the midst of a crisis over the borrowing authority of the united states, and it was very undermining of confidence. now, the reason i say we're not out of the woods completely is that as long as we still have so many americans looking for work, our job is to focus on more growth and more jobs. and we still have some deadlines ahead of us here in washington. we have a deadline looming in february, february 7th, our borrowing authority runs out again. at that point congress has to

act -- >> we'll get to, we'll come around to that. tell us a little bit about december, though, about what happened with the jobs number. >> so it, you know, i've spent be most of the the last three and a half decades advising policymakers not to react to each month-to-month number too strongly, to look at the overall pattern. we will only know in several months exactly what that number means. i've read enormous range of views as to what the number means. i think you have to look at the kind of trend that has been clear for several months, and i don't think that one ought to look at a number that deviates from that as being many and of itself -- being in and of itself proof that there's been a fundamental change. economies don't turn on a dime. so all of the evidence that there was strength in the economy is still there. and, you know, our job is to make sure we promote more growth. our job is to make sure we promote more investment. there are things we can do. you know, there's a debate in

washington now about whether or not to extend unemployment benefits. you can look at that in two different ways, and both are right. one, it's a question of just simple fairness, people looking for work, you know, out of work because of the deep recession that we took a long time to come out of. they need the help. you can also look at it as a macroeconomic question. all those people who are looking for work are also putting food on the table and taking care of the necessities of life, and every penny they get, they spend. and that's economic activity. so i hope that we get back to the discussion of how to extend unemployment benefits. we can get in the discussion to other questions of things that we can do, but, you know, the more we do consistent with the spirit of the budget agreement that takes step after step to make progress, the better the economy's going to be. you look at the budget agreement, there are actually some things in there that as people focus on them, you know,

there's funding for manufacturing centers, there's funding for early childhood education. there are things in there that are going to be good for today and for the future of the american economy, and we can continue to take steps along that path. what the infrastructure needs in this country, it would help in the short term, it would help in the long term. >> so there have been a lot of good numbers in the last several months, a pretty healthy trajectory. manufacturing growth, export growth, november numbers were really good. one number in december that was consistent with previous months is the erosion of the denominator in the unemployment calculation. that is, people leaving the work force, giving up looking for work. how does that affect your growth forecast for 2014? are you still on the, still expect it to be in the 2% range? >> well, we'll obviously come out with our new economic projections in a few week when the budget comes out. i'm not going to kind of lift the curtain early on it except

to say that -- >> just between us. [laughter] >> we ended the year with confidence that the economy was doing better, and we start the year with confidence that it's continuing to do better. um, you know, the long-term unemployment numbers, the labor force participation rate numbers, they're very serious issues that we spend a lot of time poring over and asking what's causing it, what are the policy responses. there are a lot of, again, competing explanations, some of them demographic, some of them cyclical, some of them -- >> people getting older. >> people are getting older, and there's some normal transitions going on. it's been a long, slow recovery from a very deep financially-led recession, so there's a delay in some of the employment growth. but it's that structural piece that we have to worry about. we really have to ask ourselves if somebody graduated from high school or college and didn't go to work and didn't get right into the labor force, what can

we do to make it easier for them to get started? what can we do to take away the skill gap that may be preventing them from getting started? and, frankly, what can we do to work with employers to take away some of stigma that is associated with not having worked for a period of time? you know, if you graduated college or high school when unemployment was, you know, close to 10%, it was really hard to get that first job. and the fact that you're now delayed in getting started is something we have to worry about, how do you catch up. you know, frankly, that's something that's a question of public policy, but it's also a question of working with the private sector to make sure that employers are thinking about how do we give those kids a chance. >> so you mentioned february 7th. that's yet another potential stumbling block for the economy. another point of uncertainty. it's the debt ceiling deadline. having been through this drama a couple of times now in the last

couple of years and seeing the effect on confidence, the economy, the markets, wouldn't it be in the treasure eye's interest -- treasury's interests to say,ing looks here's our battle plan. if this thing goes to the wire again, these are our priorities or spending, this is how we're going to martial our funds, we'll buy enough time past the end of february not just for a couple of weeks to see the economy through. don't worry, market, don't worry, businesses, don't worry, consumer. ..

and i'm asking them what, why would anyone want to hurt the u.s. economy that hurts the recipients of payments that they're entitled to? because of a self-inflicted wound. something that everyone knows, the obligations are not made when the borrowing authority -- the obligations are being made when you vote on appropriation bills, when you vote on tax bills. in the end, the borrowing authority merely allows you to operate under the policy decisions you've made. spending, the combination of policies. congress has unique responsibility. congress is going to have to act. it is not i think something that anyone should want to repeat a kind of hairy to brinksmanship

that causes real uncertainty and anxiety in market participants and normal consumers. if you went outside of washington in october, it didn't take very much to get people to be worried about what was happening and what was going to happen. people worry about what happens if payments are to me. what happens if there's an economic fallout that undermines their stability, their employment. these are not things that congress should play games with. it has to be done, the sooner the better. we get into kind of a washington -- time to figure out the precise moments when is the last minute? it's a mistake to go to the last minute. the buildup of the last minute causes damage. it's a mistake to wait until the 11th hour. congress should do this as

quickly as possible, and with the least drama as possible. and i will say in terms of how long congress has, you know, i've communicated with congress saying we thought the ability to manage through the debt limit being hit on every seventh would get us to the end of the end of march. it's a very unpredictable time of year in terms of cash flow. because people are filing for tax returns. when you start paying tax refunds, it's a time of year when money goes out. a month later when people are paying their taxes, money comes in. you cannot get from here to there without extending the debt limit. and i think if congress is looking at the numbers the way we are, we have the best data, they would see that they would look at the end of february towards the end of march. >> a tighter timeframe.

let's talk about the global economy. you have just been recently in europe. you did a trip to china and japan and asia a couple months ago, europe before the. you've been counseling the europeans, particularly the germans, to spin for the mystical as opposed to buying exports. that sounds like john snow saying the same thing to china a few years ago that you need to build up your domestic economy. the germans kind of sick leave us alone, mind your own business when you said that. can you walk through for us what's happening, starting with europe? is the crisis now admitting to the point where you can see growth? organically? >> i think if you look at europe now compared to europe in 2012, there's been a huge amount of progress. we don't have to worry from day-to-day about half a dozen

countries. but they are not completely out of the woods. they are looking at having turned the corner from minus to either neutral or small positive. there is inconsistency as fragmentation in the financial markets. there's very different rates of potential growth in different countries. our message in europe has been that you need to do what you can do to get overall growth in europe to a higher level. understanding that not every country has an equal capacity, that there are surplus countries that have the capacity to invest more and to create more domestic demand, and that would be good for europe's economy, good for the global economy. take a step back and put the pieces into perspective, because here's how i think about it, since the global economic recovery. we are now in a growth place that many in the world envy, and

we're in, people are talking can we get three? they are trying to get to one. there's a decimal point behind numbers they're looking at. you know, in our most optimistic projections we can't make up for europe falling have a point or a point behind where it should be. we can't make up for china falling a half a point or a point behind where it should be. so as i talk to my colleagues around the world i say we are going to do our part. we're going to keep our economy growing. we're going to shoot to get growth targets that outperform people's expectations, but you have to do the same. so in europe that means country that have surplus doing some more to stimulate investment in demand. frankly, i think if you look at the german coalition agreement and the policies they're putting in place, they are doing more. they have made a commitment to invest in infrastructure this year. i wish we could make a commitment like that here. it would be good for the united states as well.

you look over the arc of the last year, february, march, april, the discussion was should countries in europe that have to meet fiscal consolidation targets give it more quickly or over a longer time horizon? they had eased the time horizon. so i think we've made progress and i think if you look at the questions of banking reform, they've made progress. biting each of these cases there's more to do. so our conversations, we do have friendly differences of views on occasion, but i think they have impact and we are pushing for more because more is good for them and it's good for us. you talk to china, it's pretty much the same story. when i meet with my chinese counterparts, i am pretty confident that they are intent on the path of economic reform that they described. at the same time, i am not confident about the timeframe or

which targets of opportunity will be sequenced early in the queue. and we continue to bring an awful lot of focus on the need for market determined exchange rates, on competitive market determination of allocation of prizes per capita. and i think that they're going to move in that direction, and our interventions will be designed to speed that process up. again, it's good for china's economy. i don't think we're asking either europe or china to do things that aren't in their own interest. >> come back to china in the second and stay on europe for a minute longer. one of the areas that still needs to be resolved is financial regulatory reform. we are five years now after the crisis. and still there's fundamental disagreement within europe, between europe and the united states, for banking requirements, the levels of

reserves, even executive pay, the difference between britain and the rest of europe, with the u.s. why can't this be resolved? we are five years into, you know, after the crisis. europe needs to have that confidence in its banking system for its economic well being. is this financial protectionism, financial regulatory protectionism in a way playing out, we don't want to restrict our banks if you're not going to do the same thing? >> this is a very difficult stuff and i think we in the united states have made enormous progress, even the last year we've made enormous progress implementing finance reform. i think international we have made and are continuing to make progress. i know my objective energy 20 this year's going to bring some additional focus to the international -- >> meaning next month. >> the first meeting is in february in australia.

g20 and the financial stabilization board are the places where the international community comes together. to have conversations about harmonizing standards. just this last weekend some significant progress was made in terms of international standards, on capital and leverage. for the last year there's been an argument about whether or not our differences were as big as people said or not as big, because of differences in the way we calculate it. i must say as somebody who likes to be able to compare apples to apples, when you have conversations when people are talking past each other because, you know, one is looking at a set of numbers on the net basis and the others looking at them on a gross basis, and trying to do the conversion in your head is almost impossible. there is an agreement to do it on a standardized basement that our regulars put in place, draft

rules earlier in the year. i think it opens the path for the united states to finalize rules in a way that's consistent with international standards. and i made clear that as we engage in conversation internationally, we cannot we can standards to get to international harmonization. we cannot we can standards. this has to be a race to the top, not to the bottom. we should try to harmonize them to eliminate confusion, special where the confusion is related to technical differences as opposed to policy differences. when i look at the challenges ahead, i also look at what was accomplished. that's much more capital in the united states banks and and global banks. we've put in place a revolution program that is something that the world is now seen as a model where we do stress tests. we have living wills. we have a single point of entry in the event of a failure. and we are seeing those become

things that the world, of the regulars around the world are trying to put in place. -- regulators. we pass rules, we have multiple regulators and sometimes it's a challenge to get our regulators to the same place but we've been doing a lot of work to get our regulators to consistently put forth standards in these as. go to europe and you have, you know, multiple countries and multiple legislators have to take action after there's an agreement from the larger group. so we are very sympathetic to the challenges of coming up with policies. at the end of the year, the progress that was made in europe on banking reform put in place a mechanism that is new and important. it is the path towards over a period of years having a fund that banks contribute to that are loosely modeled on our fdic. we don't think it's big enough. we don't think it's fast enough. as a look to the future, the

challenges of 2014 and beyond have to deal not with what were the risks in 2008, but what are the risks in 2014 and beyond. and we are focusing heavily on issues like shadow banking, issues the global -- >> outside? >> outside the regular did banking. spend money sloshing around. >> there's a natural shift of money from the more controlled environment to the less controlled environment, and the risks are not always as visible because of a lighter regulatory process and because of a lower set of requirements. so that's an area that we are focusing on. i think my international colleagues also are focusing on a. and i think we can make -- we have made progress. we could make more progress. cross-border revolution from this gets to your question about the differences in standard. i think we learned from the collapse of lehman that the

problems with a major financial institution tales are not, don't respect international boundaries. the transactions don't live within one country, the implications don't live within one country. it's very important there be confidence that when an institution fails, if an institution failed, that the revolution internationally works. because that's the way you can avoid the domino effect that is an accelerate to a financial and economic crisis. i think we have more work to do there. we have made progress. we need to make more progress. >> just on china for a moment before we get to trade and want to get the questions in just a second. you mentioned china's economic reform program. so far we've heard a fair amount of discussion of this, and it's going to focus heavily on developing on the private sector of china, xi jinping has said as much. is that good or bad for american business? is that something that will be

more inclusive of just business, or are we seeing the cultivation of national champions in china to the continued exclusion, not entirely but to the continued exclusion of a lot of involvement from the u.s., anti-monopoly law, to hammer foreign businesses, reminiscent of the indigenous problems that american businesses have. so does if you like the situation is changing much. >> well, the goal has to be open markets, and to have market forces determine the answer to the question that you're asking. if there are artificial barriers in place, then it's not really letting market forces work. i think we will get some tests pretty soon. when we had our strategic economic dialogue last summer,

we had a set of important agreements come out of it. i was very pleased that china moved on opening shanghai free trade zone. they moved altering a decades long policy of presuming industries were closed to foreign activity to presume that they're open, and less individually closed. we've yet to see with the obligation of those policies look like. said at the shanghai free trade zone opens up to real competition, for example, u.s. financial firms, that would be a meaningful signal. as they go through the designations of what's open and what's closed, you designate everything is closed, it doesn't amount to real change. it's still early. the direction of the policies that they announced in the third plenum was consistent with what they agree to in our bilateral discussions. i think that they know that it's critical to the chinese economy to let market forces drive much

more, if not all, major economic policies. they look at -- vasey build up inventory that has nowhere to go. -- vasey build up inventory that has nowhere to go. they know that is not a way to maintain the growth that they need for china to be where it needs to see in 2014 because -- at the same time transition is difficult in any economy. difficult in our economy, difficult in their economy. they are obviously concerned about the pace at which change happens and managing it. they are trying to stop it, would be very damaging to china's economy. and i think they know that. i can't tell you that at the end of this year we will be able to say they made the move we hoped they would make. i can tell you we're going to engage them on a consistent basis to keep pressing forward, making the case, and i believe

that's welcome. when i was in china just a few weeks ago, it was important for the president to meet with us, to meet with me. we had an exchange that, our second exchange in the time i've been secretary, and when i meet with my counterparts, the vice premier, we talk about the tough issues. they don't tell is to stay out of their business. they want to learn from our economic experience. i think our continued to bring focus to these issues is something that helps them to make progress. but i approach it with a very clearheaded way. intentions are critical and they are important, that its results in the end that matter. >> one of the pressures that might be brought to bear on china and the your part, these two trade agreements that are being negotiated now, the trans-pacific partnership in asia and ttip in europe, can you

get those trade agreements without fast-track from congress? these countries don't want to be negotiated with congress people. they want to be negotiating with an administration that can promise them that the deal their striking is actually the deal that will be enforced. >> i think we've made it clear that fast-track authority is important and it's something we're going to work with congress on a. as far as negotiations go, i remember when we started working on the trans-pacific partnership, tpp, back in 2009, there were skeptics who said you can't start a conversation setting high standards with some of the smaller countries in the region and think that the big countries are going to join. look at where we are now. the big countries are at the table, and even bigger countries are contemplating coming to the table. japan is at the table, and japan has you mused out loud about sure they come to the table. that is an enormous change from

2009. citing the principle of setting high quality standards as being the terms of the future of trade relations in the pacific and the atlantic has already moved very far. there are still tough issues to be negotiated. you know, i've never been a trade negotiator. i defer to people have been successful trade negotiators in the past. a tough issues are always resolved at the end. it's not as if any party, before the final round of negotiations make the things that are really difficult for them at home. so we've got to keep driving forward, ma getting to those final tough issues. and we have to lock in both trade agreements and fast-track authority. we need to do both. >> let's get to some questions. i would just ask you to identify yourself and who you are with. yes, please. >> hi. nelson cunningham your mr.

secretary, good to see. thanks to do this. last year in the president's budget for the first time that i can recall a democratic president began to proposed changes in the growth of entitlement programs designed to rein in that growth. did it disappoint you that that conversation was not picked up by the other side? and would you expect the president's budget this year to repurposing and try to start the conversation once again? >> look, i think we ended the year and begin this year in a place where we have made some small progress, but important progress, getting back to more normal way of congress doing fiscal policy, making budget. and i think is very important are obviously we started the year in a place where people are talking about a grand bargain. the president put out a budget that did have very tough policies in it, that a hard in terms of making changes to

entitlement programs. he also had a tax or for proposal that would've raise revenues in a balanced way. we would've been able to put in place -- what was at the core of earlier negotiations that he was having with republican leaders. i haven't worked on these issues for most of the last 30 years, would have hoped that we could have reached an agreement because i had thought then and i continue to think that would be in the best interest of our long-term fiscal path and long-term economic path. i think that the president's budget will speak for itself. i'm not going to get ahead of him announcing any of his specific policies, but i think it demonstrated last year in his budget that he was remain committed to a fair and balanced approach to having long-term fiscal policies that keep us on the right path. and i think that last year's

budget reflected a deep set of convictions. >> yes, please in the back. >> i'm from the new your times. good to see. wanted to ask you about china and cybercom a big issues, the sunny land summit came up and a continuing issue with your economic and strategic dialogue. i get a since the snowden revelation that sort taken the pressure off the chinese comic given way to argue with you believe the argument or not that we are doing something akin to what they are doing and there's very little evidence that you see much of an abatement of the kind of behavior that you were so concerned about about this time last you. i was wondering if you could give us a sense of where that is going? >> david, i have to push back on the premise a bit. i don't think there's any way you can compare the kinds of

intelligence activities that almost every country engages in financial security purposes with the deliberate theft of trade secrets for commercial advantage. there's no comparison. i don't think that anyone credibly believes that there is a comparison, and they don't think that the issue has in any way been taken off the table in terms of our conversation with the chinese. [inaudible] >> we've been very clear. i can't tell you that they have done an about-face, but i also think they understand that for them to play the role that they want to play in the world as one of the great powers, as one of the rulemakers for the world, you can't be a rule maker engaged in those kind of practices. >> yes, in the back.

>> mr. secretary, what about the imf? money for the imf, overdue payments that all of the other countries talk about. and what about boosting the representation of developing countries, emerging markets within the imf? it's moved at a snail snail's p. what is your view on that? >> i think that the united states commitment to the imf remains solid. we are the biggest contributor and participant in the imf. it's critically important to u.s. economic well being that the imf be strong and that we have the kind of role in it that we've had since its inception after world war ii. in 2010, there was a negotiation which i think made a very important progress in terms of rebalancing some of the shares, interest in the imf, while maintaining the u.s. position

with a significant enough share to have the controlling voice on important questions. i have made no secret of the fact i think it's critical for us to finalize the ratification of those. we made a full-court press to get it done, i got close but didn't get it done this past week. we are continuing to stand by our commitment and we will get it done. >> yes, please, right here. >> thanks, with human rights first. my question is about the role of money in the supply chains that enable mass atrocities like those that are going on in syria. some people have argued, including some former treasury officials that the treasure on to take stronger action against russian banks that involved directly in financing arms shipment to assad. i wonder what you think about that?

i know to be awkward since we are now partners with russia in trying to resolve the situation, but do you think treasury on to be taking stronger action in investigating and even designating russian banks that are correctly involved in supporting assad? >> we, you know, through our responsibilities in overseeing the flows of financial funds and whether or not there is compliance with u.s. and international laws with regards to them, we have been very aggressive following the flow of funds. when things violate the law we take action without regard to the home country, financial institution. it doesn't always make us popular the sometimes it's friends who are very close, sometimes it's countries with whom we have more tension. but our policy, whether it's sanctions regarding syria or iran or other designated countries, the designations are not always the same but our policy is to be vigilant and

using these financial tools. i would just say that we implement these laws and we don't look at the country of origin. >> father andrew from the st. paul's foundation. thank you so much for your government service, mr. secretary, particularly for tip o'neill. i grew up in the district. st. paul's to strip its often to the poor all over the world in 30 different countries in areas of serious conflict. i want to touch back on ofac. there seems to be an extreme level, extreme level of accountability among the federal officers at ofac. we can get an income we can get a number. we are trying to provide food, shelter, clothing to people in effigy cans outside of syria. we're trying to make financial transfers. our banks have a question for ofac the conversation with ofac. we can't seem to get anybody at the table. how would you propose building and accountability so we can provide the needed resources to

people who have the opportunity to be fanatics and fundamentals but are not precisely because of the aid we are giving them? >> i think ofac does an outstanding job in very difficult circumstances. there are often cases that are just heart wrenching in terms of flows of funds that are inconsistent with our laws, but that have the effect of providing relief at the same time. not just in syria, it comes up in many troubled parts of the world. i'm happy to look into the question of access and communicate and. obviously, we strive to a high level of clarity and communication, but sometimes these issues relate to specific matters that are not public matters. and i would have to go look at the specific matter in order to respond. >> there is a general -- [inaudible] >> yes, please.

yes. >> good morning. paula stearns, stearns group. my question is about the trade promotion authority and the headline yesterday in one of the papers about the pushback from the democrats. we will need bipartisan approval of authority for fast-track. and given the fact that we started the year with this new budget, and deal in congress which suggests that maybe we're not going to be as toxic this year as the past, i'm wondering what your plans are really for whipping into place a bipartisan authority for the president, given the pushback from some of the democrats? >> i don't think there's anything new or unusual about the current need for there to be

a partisan support for trade promotion authority in order for it to pass. it touches always required a bipartisan effort. there's always been challenges on both sides for different reasons. we have worked on a bipartisan basis with the leaders of the committees, and we will continue to work on a bipartisan basis with the congress to get done. the president has made clear its important. it's one of those issues where there is the ability for there to be a bipartisan conversation, and it's never easy or so it's going to require effort. >> you care to venture an effort, about a time frame? add-on resolution of tpp and then a ttip? >> i obviously am very hopeful that the next round of discussions on tpp really accelerate the pace of progress, and that will have implications in terms of other schedules.

so we'll have to see how the pace goes. >> six months, 12 months because i'm not going to put a number on. ambassador solomon is pushing. he's going to continue pressing so those issues, those are issues that require countries to kind of move across the finish line get queued up and i believe it will have spent ambassador from coming u.s. trade representative. yes, please, right here. >> twenty years ago, jim baker, with the devaluation of the dollar is stabilized our current accounts for almost 10 years. recently the japanese have engineered a 20% devaluation of the currency. would you expected of a similar impact in japan? out with the south koreans and others react to this new change in their competitiveness? >> i think the challenges facing japan and the economy have been

profound for almost two decades. i think, you know, it has been a recurring argument made by the united states and international community that japan needs to take action to reverse almost two decades of deflation and economic decline. they have put in place policies. we still have to see what the so-called third arrow of their policies are. those are the real reforms that will determine whether or not the future is one where they will growth or domestic economy, growth domestic demand and be able to continue to have the kind of growth that they are now seeing because of the shorter term policies they put into effect. i think it was very important that last year, roughly this time, february, there was an agreement at the g-7 and the g20 that has stuck, which is that countries will hold themselves to the agreed upon rule that

they will use domestic tools for domestic purposes to grow their economy. that is a critical important frame and is something japan has to fix. they need to get their domestic economy growing. their long-term growth can be rooted in a strategy that ultimately turns in any way towards the reliance on unfair advantage of the exchange rate. we have kept an eye on that our current report, analyzed a very closely. we continue to analyze very closely. we set house long as they stick to those rules, domestic total for domestic purposes, it's in japan's interest and the world interest for japan's economy to grow. the three big -- for big economies of the world, china, europe, china and japan but if anyone of them is performing particularly subpar and it

creates problems that flow will be on the borders. the balance, we've got to keep an eye on it. we can't let it turn from the kinds of policies that are domestic, policies for domestic purposes, but it's is important for japan also to grow. >> we have time for one more question. right here in the back of the room. >> thank you. i'm with voice of vietnamese americans. thank you, secretary. i come back to your focus on spending and a limitation. i would like to hear from you the lessons learned from our wto and the coming tpp and ttip and all the free trade agreements. because i think there's a lot of doubt and uncertainty in our american. we get the unemployment that we didn't experience for the last fighters, actually for the last

10 years. you see things wto, we've suffered -- [inaudible] with rising power china, and the recent situation with the wto that happened -- [inaudible] so our question to you is as secretary of treasury, where do you see we need to do to ensure the implementation phase of all of our agreements? thank you. for the u.s., the americans. >> i think we've been very clear in all our conversations in the multilateral negotiations and our bilateral conversations that we need a level playing field with clear rules. and those rules need to be enforced. so taking enforcement actions to make sure that agreement are adhered to, is a critical part

of having effective rules of the road. rules that are not followed are really rules. so that's why wto actions are brought from time to time, and the goal is to have countries observe the rules, not to be in place where one has to be taking action, whether it's from one industry or another to enforce the rules. i think if you go back to what i was saying a few minutes ago in terms of the spirit of negotiation of tpp, it's very encouraging. i was just recently in asia, went to a range of countries with extremely different economies. i was in japan, china, malaysia, vietnam and singapore. in each of the countries come at a very different point of into economic development, there was a desire to participate in a high standard trade agreement. there was also anxiety about

what does that mean in terms of the domestic economy, what would be the transition rules? what would be the reflection of the fact that countries don't come in exactly the same position? those are the kind of issues that are being negotiated in the tpp. sensitivity to the fact if we get all of the countries to credible an enforceable high level roles and it's good for each of us individual and it's good for us globally. but it's not good if the rules are broken and we need to be vigilant as we are to make sure that when we make agreements, the agreements are kept. >> secretary lew, you've got to get to work before the stock market opens at 9:30 imacs i want to thank you for joining us today and also thank the council on foreign relations for holding this event. >> thank you very much. [applause] >> [inaudible conversations]

on capitol hill the u.s. senate gavels in at 10 eastern and will take up consideration of a $1.1 trillion on the spending bill that funds the government through the end of the fiscal year, september 30. the house passed the measure yesterday with bipartisan support. live coverage as always of the u.s. senate here on c-span2. yesterday ahead of the international monetary fund, christine lagarde, said the world economy looks like it's headed in a positive direction this year but risks do remain. she said the u.s. budget deal,

referred to as the ryan burton agreement as one step towards stabilizing the economy. -- bryan murray agreement. we will show you some of her remarks leading up to the senate this morning. >> good afternoon and thank you very much for having me with you. i would like to thank the national press club and especially president team for not only inviting me to this assiduous venue but presenting the outline of what i want to talk to you about now. it's as if we have prepared the together, which we have not. let me first of all begin by wishing you all a happy new year to i guess it's still time to do that, even that which is exactly halfway through between our western new year and the lunar new year, which will be in a few weeks time. i think it's also appropriate to wish ourselves a happy new year given what i would like to talk to you about, which has to do

with the global economy and what we should expect for 2014. i'm going to test you, numerology skills by asking you to think about the magic seven, okay? most of you will know that seven is quite a number. and all sorts of themes, religions, and i'm sure that you can compress numbers as well. so if we think about 2014, all right, i'm just giving you 2014, you drop to zero, 14, two times seven. that's just part of the example. we're going to carry on. so 2014 will be a milestone and hopefully a magic year in many respects. it will mark the 100th anniversary of the first world war back in 1914. it will mark the 70th

anniversary, drop the zero -- [laughter] of the bretton woods conference that actually gave birth to the imf. and it will be the 25th anniversary of the fall of the berlin wall. 25th. it will also mark the seventh anniversary of the financial market jitters that quickly turned into the greatest global economy -- economic calamity since the great depression. the crisis still lingers. yes, optimism is in the air. we have left the deep freeze the highness, and the horizon looks just a bit brighter. so my hope and my wish for 2014 is that -- [inaudible] we have seven strong years.

i doubt whether the g7 will have anything to do with it, or whether it would be that you 20. i certainly hope that the imf will have something to do with it. now, is this wishful thinking? no. but it will not happen randomly without us together and policy makers in particular making the right decisions. having the right policy mix, organizing themselves in a coordinated way. let me talk about, first of all, the global outlook as we see it and then i would like to touch on the policies that i believe will help us transform those seven measurable years india seven strong years. ..

hall and leave how do to improvements in the economy. yet despite the directionally positive movement, growth is still stuck in fairly low gear. remains the potential which we believe is around 4% which means that if it worked at full potential could create a lot more jobs than before and we do have at the moment. we could do that without having to worry about the inflation

genie coming out of the bottle. without positive initial statements i would also like to add that it will not be without downside risk and significant ones. with inflation running weight below central bank targets in most quarters, clearly we are seeing risk of deflation which could prove disastrous for the recovery. if inflation is the jeannie then certainly deflation is the odor that must be fought decisively. during the years of crisis we have relied heavily on the emerging market economies and the low income economies to be the drivers of growth and if you combine those two categories they produce actually about 3-quarters of global growth. however, a growing number of

those emerging market economies are slowing down as the economy cycles terms. that is also one of the risks that we see going forward. we also see risks arising out of the financial market turbulence and volatility of capital flows. the reaction to the fed capering has been calm so far and that is partly due to what we had, a dry run in may and june. it is good news that this reaction was calm but there could still be some rough waters ahead. overall as i said the direction is important. global growth is still too low, too fragile land too uneven. moreover even as it is or as we forecast that it will be, it is not enough to create the 200 million jobs needed by people looking for jobs everywhere in

the world. additionally, in too many countries, most countries, the benefits of growth are being enjoyed by far too few people. just to give an example in the united states, 95% of income gains since 2009 when to the top 1%. 95% of the income growth gains went to the top 1%. this is not a recipe for stability and not a recipe for sustainability. let's now turn to the policy recommendations. all of that points to the fact that policymakers all need to stay focused. focused on the policies needed for sustainable growth as well

as rewarding jobs. we so far have avoided the wealth gate scenario and all policymakers have made part of the necessary efforts that went clear the way beyond the call of duty were the central bankers. kept interest rates low, and the financial system functioning while governments in most places deployed fiscal stimulus, and apply adequate, sometimes a bit too much, fiscal consolidation where they should. the road has certainly been difficult and continues to be so but as edward merrill once said difficulty is the excuse that history never accepts. once the global economy looks

more stable the big priority for policymakers from our point of view in 2014 is going to fortified the stable global recovery and make it sustainable. great. what does it mean in practice? i am going to run you through the advanced economy is that i take by groups, then the emerging markets, then follow income countries as to what we see as a good, coordinated policy mix that could be applied to secure and strengthen that growth and create those jobs. if you look at the events economy what it means is you remember what i said about monetary policy applied by central banks, central banks are going to have to slightly since, gradually over time and properly communicate, and do what they had done but they should not do

that until growth is robust enough and firmly rooted so that the way in which he purring is complied, the way in which conventional returns will have to be very well timed. at the same time countries will need to use of the room created by an conventional policies to put in place the reforms needed to jump-start growth and jobs so it is not just central bankers to do policy works but also for other places in terms of budgetary policy in particular. let me go deeper and touch on different regions and look first at largest economy player in the world, the united states. growth in the united states is certainly picking up, driven essentially by private demand and recovery that we have

observed in 2013, that unfortunately was dragged by the fiscal consolidation of 2013 will be helped by a loosening of the fiscal course it as a result of the recent budget deal. still it will be critical to avoid premature withdrawal of monetary support and return to and orderly budget process, and the threat of the debt ceiling. if we look at your area, that area is clearly turning the corner from recession to recovery. but when you drill down, growth is still unbalanced with some countries growing reasonably well and some economy is doing quite well and others lagging behind. some of those are actually

suffering from significant credit constraints as well. monetary policy can continue to help. the ecb has done quite a bit to facilitate financing of the economy. it can do more and we can do so in a targeted way by facilitating targeted lending in order to avoid the financial fragmentation, and conventional policies including forward guidance. we believe that the forthcoming asset quality and stress tests that will take place in the course of 2014 is going to help if it is done evenhandedly and did a credible manner, and obviously well communicated as well. in the euro area we believe there is a need to accelerate reforms to boost labour market

participation and enhance competitiveness and that applies across most countries. let's turn to japan, in japan the initial boost from economics as of three arrows has been effective but is weakening of bit. hopefully temporary fiscal stimulus announced by prime minister and the will actually upset or partially offset the negative affects of the necessary consumption tax increase which is one step in the process of increasing consumption tax. the challenge for japan is to agree on medium-term fiscal adjustments, and to the economic and social reforms that we believe are needed to strengthen growth in japan.

what do i mean by that? deregulating the service and product market that is heavily regulated and highly protected and that is what i mean by social reform, making sure women in the japanese economy can access the job market. i am pleased prime minister abby has listened to that recommendation and is including in his budgets of 2014 significant spending in daycare centers for japanese centers. moving away from the advanced economies in the emerging markets. the trouble is going to be to navigate and stay strong. policymakers may be wary of any signs of financial success especially in the form of asset bubbles or rising debts including through backdoor

channels or balance sheet instruments. financial regulation needs to be strengthened and implemented in order to be able to better manage credit cycles. many countries also could do more on the structural front by investing on the trust structure in a well-managed and with a good strategy to remove the bottlenecks that those emerging market economies face, over the last five years. and the news is generally good. these countries have really been the bright spot of the global economy. now is the time to look in those gains and make sure what they have used in the financial crisis aiken said. and the direct by way of

committee markets, and the consequential external shocks that could result from movement of capital flows that would weaken growth in emerging market economies, typically trading and investment partners of low-income countries. in addition, countries should keep those countries, low-income countries in addition to build the buffers, including buy rating revenues, they had the benefit of strong growth but we haven't seen in those economies and he equivalent and proportional increase of their revenue so they have to focus on that but they also should keep on spending effectively and selectively on important social programs and infrastructure projects. just coming back from two regions in the world that was just before christmas in asia visiting cambodia, me and bar and korea which is not in the

category of low-income countries and just got back from south africa and kenya and those two regions have grown at the rate of 6.5% and 6.5% respectively. when we are here in d.c. often we tend to forget the massive movements that have taken place in those markets and how those economies are on the go, the middle class is building and the economic power is strengthening in those areas. everything is relative but anyone who has been to molly will stay in the middle class is rising and everything is rosy. there are massive changes underway and the speed at which they are taking place is phenomenal. i will not investigate the global economy without mentioning the arab countries in transition and you are right the we have to spend a bit of time

on europe and thus euro area we also spent a lot of time on the arab country in transition to try to help them strengthen the economy to restore political stability going forward. three years ago the arabs spring started back in tunisia and spread out to the rest of the region. as these countries crumble with the reform of the dynamism of the private sector. they need support, they need international support and in insignificant way, not just from next-door neighbors. i have tried to take you through the various regions of the world in terms of where we see those economies, where we see them going forward and try to describe the policies and coordination of policies they apply which doesn't mean to say

there are no issues that will cut across those different groups that require common resolve, common solutions to common problems. think about the legacy of public and private debt instance. think about the fiscal and current account consolidation, think about reforms to the financial system that the not only apply by the dodd-frank act but apply across the board because just like environmental threats, just like contagious disease, those issues know no borders. the same is true with rising inequality. as i mentioned to you rise in income has gone to 1% of the population. of course it is the result of the improvement of the security market, not only because of that. those are problems that cut across all groups of countries

and it is only by addressing them that we can ensure future prosperity, that we can meet the rising aspiration of young people in those countries and global citizens more generally jobs, security, opportunity and dignity. so i will conclude. at the outset i made reference to the news conference in this country 70 years ago and behind the funding of the imf among others but to move forward and for the imf to continue to be supportive and ally and partner of financial stability needed for all economies to prosper we need the same spirit of cooperation and global solidarity today. some people sometimes wary and wonder and say why is it that

the imf is supporting europe at the moment? and i remind them, 70 years ago the first country that had the benefit of imf support work european countries like my country. the first program with the imf and it moved around the planet. we had to help latin american countries and asian countries, we are helping african countries under the basis throughout different lines of business and helping europe at the moment and will be another group of countries next time around. i believe the imf can play a valuable role here as a forum not just to blend and then collect back as we always do but also to operate in full coordination.

we certainly played our part in the collective response to the crisis. we made no less than 154 lending commitment and provided technical assistance to 90% of our membership since the onset of the crisis in 2008 and we provided the best possible policy advice to all 118 members. one of the strength of the imf is we see the bigger picture and it is not me being arrogant about it but to look under the skin of the economy of 188 members and we have to compare best practices and we have to offer advice, take into account what spillover effect will be as a result of domestic policy decided by one country or the other. no other institution can do that at that scale, at that level.

and the rules will become more important with time. we need to continue to adopt and reflect the changing dynamic of the global economy and our membership. that is why we need to continue support of our entire membership. i will end with one thing. i would like to pay credit to your organization and through you to the journalists who very often have this commitment to truth and honesty and do that sometimes in very difficult circumstances in very far away places where they take risks much more so than we often think of. i will end with another icon of american journalism here. i don't mean ron burgundy. i mean walter cronkite. you all know what he says. he says something which i have heard president shock chirac's a many times in french version of

course during cabinet meetings. he used to say, renders happening in the world, waiting to see what we could do. he would say -- [speaking french] walter cronkite used to say that is the way it is. thank you very much. [applause] >> thank you. lots of questions on lots of topics from all-around world. start here in the u.s.. what is your reaction to the u.s. congress leading the increase in the budget and did the spending bill and have you met with our lawmakers in recent weeks and do you plan more meetings now that that decision looks to have been made?

>> is that the only question on the u.s.? >> no. >> i did say so right after the announcement of the deal which in and of itself is great. to have a deal on the budget, no matter what the deal is i was going to say, is a good indication that there is willingness to actually work in not more orderly fashion and it is one step of many and i hope in many steps to come the imf reform will have been included and i think it is a question of timing and not a question of the termination to exclude the imf. i would find it extraordinary and disconcerting given that the international monetary fund was actually created in the united

states largely at the joint initiative of treasury secretary white from this country and ward canes from the united kingdom, and the main mission is to work, help with and in short the best possible financial stability in the world which is clearly in the interest of all economy is, first among all the u.s. economy which is clearly the largest player, my largest shareholder and one that is a vested interest in financial stability so alive very much hope this is the imf working with all its members, essentials as far as this country is concerned, the united states of america. as i work with lots of people -- >> yes i have. what is your strategy for twisting the arms to get a

different result when the u.s. works on its next budget bill? >> i have never been in the business of twisting arms which is probably the reason i will never be a very good politician. i on the other hand believe that time is on our side, and number 2, that the merits of the case to convince those in charge that it is actually a force for good and for economic development and financial stability which is not only in the interest of the entire planet but in the interest of the economic players including the united states of america. and given the role that it can play in the institution, what i will hope is by continuing to explain what we do, why we do

it, what principles we do its in the name of, i hope sensible and common sense judgment will prevail. >> does the imf have a timetable for the 2010 governance reform? >> this is coded language. not everybody knows about this. the 2010 reform was decision made by all members of the imf particularly the g 20 countries because that is where it was essentially pushed, but it was decided for the imf to actually strengthen the institution, to give it more permanence, financial strength, to intervene where it was needed and that was called the doubling of the quota. is a quota institution and the second part of the reform was to changed the board composition of

the imf so there would be less european representation on the board and more voice, votes, quota available for emerging and dynamic countries that were underrepresented. that was the genes of the 2010 reform. the commitment was to complete the reform by the end of 2012. we are now at the end of 2013 beginning of 2014 and still short of one of the three thresholds to actually complete that reform and the united states support is vital for that. >> what are the repercussions of the u.s. congress's action on your european programs and their support among developing countries? >> i am not sure about the intention of the question but

for all the programs we have put together both for the european countries and the euro area countries and lots of other programs that we have, to give you an example, programs with jordan, tunisia, morocco, program with pakistan, lots of other countries, not as if the imf was working for the euro area. those programs are negotiated and published with the governments on the ground and then taken back to the board of the imf and approved by members of the board and wants the program is approved it becomes a program of the country and it is important the country takes ownership of that program but it is fully supported by the board. >> do you see the u.s.'s failure to increase funding as a

turning.for the future of the imf? >> not at all. i really think that as a lead economy come as the key partner at the table united states of america are bound to support the institution and we work for stability, we work for the economic developments and it is clearly in the interest of the united states that they be stability. let's assume we had not been able to help the euro area countries and they have been difficult in those parts of the world, it is a key partner for the united states and a key economic region in the world. if it had been in disarray everyone would have suffered as a result so i think everyone is interested including the u.s.. >> looking to the fed what is

your assessment of the impact of fed capering on the global economy? >> a bit difficult to say because they are beginning now. it is more than a dress rehearsal. it helps everybody anticipate what the tapering could be. does it help countries particularly emerging market economies prepare for the potential tapering? this is what has taken place in the last six months. was the consequences will be, difficult to predict, but the announcement that was made in december did not produce the outcome that we saw in may and june. we can hopefully expect that most of the anticipation has now taken place and tapering is

conducted gradually, well communicated as was the case in the summer, should not produce massive effect, there will be consequences clearly because you don't move as significantly yet gradually as announced without consequences but we don't anticipate massive, heavy and serious consequences of it. >> what would premature fed ex that time table like? >> premature? >> exit time table. >> why should we speculate on that? it was clearly announced that it would be gradual, that it would be anchored in various economic criteria that have some flexibility about -- >> we will leave the last few minutes of this discussion and go live to capitol hill as the u.s. senate is about to gavel in.

lawmakers will take up consideration of a $1 trillion omnibus spending bill that funds the federal government through the end of the fiscal year on september '32. the house passed the measure with bipartisan support yesterday 359-67. now to live coverage of the u.s. senate on c-span2. the presiding officer: the senate will come to order. the chaplain, retired admiral barry black, will lead the senate in prayer. the chaplain: let us pray. o god our shield, as we approach the martin luther king jr. holidays, we thank you for raising up leaders who appeal to the better angels within