and that's, actually, that's actually what has helped grow the internet that we have today. and same with, you know, wireless broadband. wireless broadband has proliferated precisely because it has not been burdened by these old sort of command and control style regulations. >> host: last word. >> guest: well, you know, obviously to, i disagree. have to save some of that for a longer time, but i think it's very clear that what we're talking about is a telecommunications or transmission service. and if we're going to protect internet users, if we're going to make sure they can't be abused, can't be discriminated, web sites can't be blocked, the only viable way is through broadband reclassification, and that's what the pcc should do. >> host: -- fcc should do. >> host: very quickly, do you agree with robert mcdowell that it's time to rewrite the telecommunications laws in this country wholesale? >> guest: i think the explorations make sense, but i think we should go back and look at that 996 act. what it actually says and start not trying to whittle it away, but actually enforce that.

i think there's a lot of good law there that could solve a loot of these problems. i think that should be the starting point for a larger conversation about bringing our laws up-to-date for the new realities. >> guest: it says that the internet should be unfettered by state or federal regulation. >> host: and that's the last word. robert mcdowell, former fcc commissioner now with the hudson institute, and craig aaron, president and ceo of free press. >> c-span, created by america's cable companies 35 years ago and brought to you today as a public service by your television provider. >> and we're live at the kaiser family foundation this morning for remarks from arkansas governor mike bee by here in washington for the national governors' association winter meeting, and this morning he's talking about the impact of the health care law's implementation in his state. this is just getting underway, live coverage on c-span2.

>> we determined through various means that by utilizing the private option to which was the ability to take private, to take public medicaid money and buy private insurance with it for exactly same population, requiring exactly the same at least minimum requirements that medicaid expansion would have required, that we were able to save roughly, excuse me, $86, $88, $89 million in general revenue that otherwise would have been spent had we not accepted medicaid expansion in the form of a private option. the legislature wanted to and decided to give that money back to the taxpayers. so they passed and i supported tax decreases comparable to the amount of savings generated by the private option. they're not going to repeal the tax decreases. i mean, politically, that's not going to happen. so the ramifications of not continuing the private option

would be that you'd have an $86 million hole in the budget. what's the strategy? tell them the truth. what's going to happen to the budget? in arkansas k-12 is sacrosanct. so you're not going to touch k-12 funding. that's roughly 50% of the general revenue budget. which means 100% of those cuts to make up that $89 million will come from just 50% of the budget. ramifications are significant. i'm sure there'll be, if there's 135 legislators, there may be 135 different approaches to how you would make up through cuts in the budget that loss of that $86, $88 million in revenue. and once they, once they a look at that it seems to me, the choices are going to be very difficult. we just keep telling them the advantages. there's no difference this year in terms of any negative reason

why they would vote against it. in fact, there's more positive reasons in this year than there were last year. we got the questions answered. last year when we passed it, we were still unsure as to whether the federal government was going to grant the waivers, the specific waivers. a lot of what was done was contingent upon the federal government to granting that. that's happened. so the uncertainty that existed at the time service service of originally approved by 75%, all those questions have been answered positively. and as i indicated, we've passed tax savings on to the voters subsequent to that. so that's another reason. and now you've got 100,000 or more people that are on health insurance that didn't have it before. that would now be talkin' off of health insurance. -- taken off of health insurance. so all of factors, it seems to me, that would indicate that a positive vote, a continuation would be warranted are there and then some over and above what it

was last time. so the good news is that the speaker is willing to keep voting. you know, at some point i guess you have to pirg out if you're not -- figure out if you're not going to get that last one vote or the last two votes. you have to figure, okay, let's throw out another budget. let's start talking about budget cuts in areas. we've got some other significant budgetary problems, and my proposed budget addresses those. but it goes away, the proposed budget goes away. so that's where we are. >> all right. well, let's open it up to the audience. reporters, i'd like you to, please, state your name once you get the microphone, your outlet and your question for the governor. who would like to ask a question? >> got one right here. >> right here in front, all right. >> [inaudible] >> hold on. why don't you get the mic and restate. >> phil -- nice to see you again. >> good to see you. >> how much do you think this will affect other states that

are looking at this? do you think this will sort of put the brakes on it in other states that are considering this? >> it depends on whether or not, it seems to me it depends on whether or not they analyze why it wouldn't go forward. if it doesn't go forward, it won't be because the overwhelming majority of republicans and democrats don't think it should go forward, as i've already indicated. in the senate we've got 23 republicans, 12 democrats. and yet they voted 27-8 in favor of this. that's total bipartisan support. in the house we've got 51 republicans, 49 democrats. actually, technically 48 democrats and a green party, but the green party caucuses with the democrats. so count it as a 51-48. and it's 73-whatever depending on where those two end up. so again, a majority of -- it's

bipartisan overwhelming majority. is if other states recognize that if it doesn't go forward it's because a small minority stopped it, i don't think it'll have a negative effect on what other states want to do. the substance of what's going on is going to be appealing. it's not going to be changed whether this passes or whether it doesn't pass. and probably there are very few states and very few governors and very few legislatures hard pausing in this kind of -- facing this kind of enormous hurdle, you know? i joke all the time that 75%'s's hard to get for motherhood and apple pie, much less something that can be controversial. so i think other states are pursuing it and following along. you know, there are a lot of things happening in states that are -- how should i put this? -- that are interesting. [laughter] one of the, one of the cornerstones by which what the

federal government did to help pay for this -- and, incidentalally, one of our arguments have been all along we're going to pay for it whether we take it or not, everybody's going to pay for it whether you take it or not, but one aspect of how you afor the federal health care and the proposed medicaid expansion as well as other aspects of the health care act is that medicare reimbursements to hospitals have been reduced. those reductions in medicare reimbursements to hospitals are going to occur. with or without medicaid expansion. and so what happens is those hospitals take the hit without any corresponding offset. and even with the offset in most instances, they're still actually projected to lose more money than what the offset with the medicaid expansion covering the uncompensated care. well, the other day we had a couple of our colleagues on the other side have an epiphany, i

suppose, about the potential harm to their hospitals in their states. and decried, i guess, the ramifications of the federal health care act on the reductions to the hospitals for medicare reimbursement as though, i mean, everybody's known this, i suppose, or should have known it for some period of time. i've been talking about it for over a year in arkansas. and so their solution, apparently, in a couple of instances was not to take medicaid expansion. but to give more state tax dollars to those hospitals. seems to me like their taxpayers then are paying twice. and that's one of our -- there are a lot of arguments that we utilize. we utilize the potential penalties on small businesses that would be reduced significantly depending upon what the business was, how many the employees qualified, etc. in arkansas it was about a $38 million estimate for small

businesses that would be otherwise have a penalty imposed that would be relieved. now, that was an estimate, and it could vary, and, you know, it's hard to put a precise number on. but it was -- it's a significant number. certainly, the effect on hospitals just on our medical teaching hospital alone it was $28 million a year difference to take medicaid expansion versus not to take medicaid expansion. so, i mean, that was an argument. i used the oversimplified analogy of the federal gas tax all the time. that, you know, we're paying 18.5 cents a gallon or something this that a area for federal gas tax everybody in the country pays. your states get federal highway monies back, but we all get some degree of money back from the federal government, and it'd be like paying your federal gas tax and telling the federal government don't send us any of our money back. our taxpayers want to help pay for the roads in california because our roads are fine.

we don't need any help. all of those arguments and then some certainly, i think obviate for the fact that it's arivet me tuck as clinton called it. it's not even math. [laughter] and as a result of that, different folks more different reasons. and, of course, the basic altruistic reason, you're going to have people with health care coverage that never did before. i also point out i chaired a hospital board for about ten years when i had a real job and a real life and making real income -- [laughter] and we saw what uncompensated care does to the rest of us. there's cost shifting. hospitals can't stay open if they continue to give 10, 12, 15, 18, 25% of their goods and services away free, not be compensated for it. so you shift costs on the rest of us so those of us that are carrying health insurance or

paying health insurance premiums are paying for these medical bills, end up paying more to offset the losses and then the taxpayers end up doing that to some extent too in varying ways in varying states as was part t of our savings. we were able ore deuce the tax dollars we were providing for uncompensated care. all those reasons and then some, probably more than we got time to talk about. >> phil brought up other states which is interesting, but i'm wondering if you have any tips for governors negotiating waivers with hhs. how difficult was it for you to do it, what advice would you give other governors? >> this is one thing all the governors are united on, it shouldn't be hard to negotiate a waiver with the federal government. it's already been afforded somebody else. i mean, they shouldn't treat anybody any differently, any worse. if you're asking for more or something significantly different, then you might have

to go huh the process. when the,tive committee -- executive committee met with the president last month, which many of you all i think may have even covered, one of the things we talked about was the fact that waivers need to be streamlined particularly where they are waivers that are virtually identical to waivers that have already been afforded somebody else. so instead of starting from scratch, if arkansas has a waiver that covers abc and utah wants a waiver comparable to abc, don't start over, streamline. and i think they're receptive to that. so i think other states will -- i think it's the attitude of this administration, i know kathleen sebelius has been very easy to work with on this issue. i think what they will do is try to accommodate unless it just totally violates the basic principles of what the statute calls for in terms of who's covered under what suckers. >> okay. -- circumstances. >> okay.

next question. okay, did i see julie's hand up? >> there's all kinds of hands up. >> julie rovner from npr, i know medicaid expansion wasn't technically on agenda this weekend for the governors, but is this something that came up privately and formally -- >> that's where it did come up, it came up privately. the nga is notorious for trying to stay away from controversy. we're sitting there, republican and democrats, but there are so many issues on which we can agree -- it's usually anti-congress stuff. [laughter] but so there's enough business to do without getting into things that you have such a huge division on. but privately i was approached, and don't ask me the names because be i've already told a couple of reporters that have asked this, i'm happy for you to ask them. if you can figure out who they are, and i'll confirm if they confirm. but if they come to me talking

privately about what we did and what they might want to do and what they're thinking about doing, then i'll honor that sidebar. >> but can you just share with us generally the kinds of things the governors are talking about? >> yeah. how did you do it, what are the advantages. there are a couple of substantive advantages that immediately pop out. first of all, the churning issue that occurs with those folks that are close to the upper limits on the poverty level create a problem back and forth between what do you get off of medicaid or get onto subsidized insurance. and so that issue is significantly resolved with the way we did it because we're doing private insurance anyway, okay? so that's one issue. secondly, and this is a big thing for some governors, we have an insurance premium tax in our state. some states do, some states don't. bun of the big concerns -- but one of the big concerns by

everybody is, well, we can't afford this when the feds start making us pay a share of it. notwithstanding that it maxes out to 10% in 2020, we can't afford it. so that's an argument against it. well, what we have is an insurance premium tax so without raising any taxes at all, we've now got an influx by the way we did it of buying private insurance of new revenue that can be set aside to help offset the state's share of the obligation going forward. that's certainly appealing to some of those folks, particularly if they already have some form of tax in that regard so hay don't have to, quote, raise taxes. but then you've got the added benefit of increasing competition because you, what we saw was we had more insurance companies with a greater pool of folks that presidentially would be involved -- potentially would be involved, we had more insurance companies come into the state for competition than we had before. so it's not just cosmetic, it's

truly, there's truly a substantive difference between what we did. but the basics are is the same in terms of the population that gets covered, how they get covered, what they get covered by or for and what those income guidelines are. but that's the kind of questions that i get from other governors, and virtually every one of them -- i don't know anybody that's got a three-fourths hurdle yetment i think they ought to give me a medal. [laughter] >> maybe they will, who knows? let's go to this side of the room. right here in front. i'm sorry, beg your pardon. i'll get back to you -- >> governor, kyle cheney of politico. just a quick arkansas-focused question. speaker carter has said, you know, he's 100% certain he's going to get the private option passed again, but you don't seem to be as optimistic or willing to say you're confident it'll get done. is there a reason you're not as hopeful? >> no, no, no. it's just my style. to be a little more guarded.

you know, it's -- speaker carter's got t a good handle on his body, he's a good man, and he's a good judge of what's going on. it's just more my style to be a little bit more guarded about what i say about stuff like that. for a lot of reasons. first of all, i don't want to antagonize anybody over there, okay? i don't want anyone to think i'm taking it for granted. i served 20 years in the senate. i know how governors can irritate legislators, and i promise you as governor, i know how legislatures can irritate a governor. but those individual legislators have all sorts of different things going through their mind. oftentimes the less said by the executive branch of an controversial issue where some of them are still making up their mind or at least they haven't declared themselves yet the better. and so part of that strategy and tactic to not try and throw any gasoline on a fire. so don't take my reticence to

come out and beat my chest about predicting as anything other than me trying to just hold my powder. >> terrific. carter, right there in the back. >> morning. ricardo alonzo zaldovar with ap. governor, this is connected to the rest of your budget, and what happens if you can't resolve this impasse? what happens to the rest of your budget? in virginia they're talking about a possible government shutdown over medicaid. is that something that would happen in your state also? >> i certainly would hope not. it depends on -- i mean, there's no telling what kind of hardball somebody could play. you know, i think i that kind of hardball inevitably backfires on even. on everybody. and so i would hope we wouldn't do that.

i've got democratic colleagues in the house that are ready -- or at least they talk like they like that a. i think last year the republicans in congress figured out they didn't want to do that anymore. i think the voting public, the voting public would be very irritated at everybody. it'd be hard to figure out who they're going to blame for a shutdown. i think the more realistic possibility is severe and draconian budget cuts in some essential services is likely to be the result if it did pass. but by its very nature, i think that potential harsh remedy may be one of the reasons why speaker carter and perhaps others have more on the to mitt romney about it passing -- optimism about it passing, including me. once you see how you get, who you hurt and how you hurt 'em because you have to balance that budget, then sometimes that could have an effect on

somebody's vote. particularly if you just need one vote. or two. >> okay. in the back and then we'll get to -- >> hey, governor. i'm sarah wire with the arkansas democratic -- >> i've heard of you. [laughter] >> i'm just wondering if you think there's anything you could have done differently last year or to convince the minority now who's not many support of the private option again and maybe what suggestions you would have for other governors. >> no. i don't think there's anything we could have done different. and as i indicated a minute ago, sarah, i think to the contrary. i think all the objections before have been positively answered. you've got to look at what's going on here. you've got, you've had a couple votes switch, right? a couple of those folks are running for other offices including congressional offices where this is an issue. where the anti-obamacare at tuesday is an issue in a primary.

attitude is an issue in a primary. and some have announced they're opposed to the private options that don't have thinking to do with understanding what the private option is. i mean, these aren't people that have been involved in the debate, they're just running for congress that have never been in the legislature. i'm talking about the others. so they come out against the private option to really without understanding what the private option is. they're just against obamacare. and it's caused some people to change their vote. i would argue that that's because of a political race. i mean, i don't know any other reason for that. and, you know, that's just enough to tilt the spectrum. but everything that was promised, it happened. the wawfer was obtained. the waiver was obtained. everything that was outlined as to what it would be ended up being that way. so -- and then you've got some people that are against it and that were always against it, and they're just philosophically

opposed to additional taxpayer-subsidized government programs period. period. so some of those folks philosophically that were against it before and still are against it, you're never going to change. look at it this way and realize this: we had 77 votes in the house before. by our last count we've got 73 now. so, i mean, you had four people change for whatever reason if the count's correct. and those reasons could be political, they could be finish i don't know. i know at least a couple. i know one in the senate was fairly political that changed, but then the other one flipped, so it offset it. >> okay. question over here? here in the middle. okay. go ahead. sorry, who had their hand up here? >> i think he -- there you go. >> it was robert? okay, robert, beg your pardon.

>> governor, has the -- >> robert, please identify yourself. >> robert pare, new york times. has the state legislature passed legislation authorizing creation of a state-based insurance exchange, and do you think arkansas will have a state-based exchange by 2016? >> well, that's a great question. yeah, they're leading, they're headed now in the direction of a state-based exchange. i tried to get 'em to do that to given with when all this stuff first came out, and they didn't want to do it. the legislature did not want to do it. i guess i could tell this story, matt. >> sure you can. sure. [laughter] >> i mean, after all, this is just between us, right? >> you got it. [laughter] >> last year we were riding over to the white house on a monday morning, as we'll do here in a minute, as we always do to have a couple hour really intense session with the president, whoever the president is, -- i

sat down on little mini bus that we go over in, and rich otter, the republican governor of idaho was with me. we came in together eight years ago. nice fella, philosophically there are some differences -- >> [inaudible] >> yeah. former member of congress. and he said what are y'all doing on the exchange? y'all doing a state exchange? i said, no, we did a federal exchange, but we actually did the hybrid partnership kind of thing. i tried to -- oh, you can't do that, he said. you've got to do a state exchange. obama, he just wants everybody to do a federal exchange, that's how thai going to take it all over to. i said, you need to come to arkansas and tell them what i've been telling them about wanting to do a state exchange. so irony of all this is the very republican, anti-washington health care contingent when all this came out that didn't want a state exchange now has come to the conclusion that they want to

reverse their position to, do a state exchange. so, yeah, we're headed in that direction, to answer your question. >> okay. over here. >> john like art with cq roll call. if the vote doesn't go your way on tuesday, what other opportunities do you see for a vote? >> they'll vote again wednesday. [laughter] >> wednesday? >> and then they'll vote again thursday. [laughter] >> but doesn't every time you have a vote, doesn't that open the door for a lawmaker to say, you know, to keep my vote you need to do x? >> well, you about run out of xs, you know? i mean, it's -- can you can't, you just can't go -- first of all, it's not father to the 73 -- fair to the 73 or 71 or 68 or 52 that have always been there. it's not fair to start making deals with somebody at the 11th hour unless it is something that benefits the entire state that's not specific to a specific legislator. because if you start that stuff, then the folks that have always

been with you that didn't ask for anything and were just trying to do what they thought was good public policy will, you'll lose some of that support. so, i mean, that's a fine line to walk. you can't just start trading things away. besides, we don't have anything to trade. >> all right. in the back right there. >> -- [inaudible] chapman from bloomberg radio. governor, what are the insurance companies standing to lose if you lose? what are they doing to help grow? how about other companies in the astronaut like walmart, tyson, which have low-wage workers who qualify for -- >> yeah. >> what are they doing to help you, and could i ask one other thing? >> sure. >> medicare advantage costs the government more money than straight-out medicare. how did your insurers manage to cost you less money than straight-out medicaid? >> well, let me go back and take the first part of that question. the private sector is doing a lot, and it depends on who in the private sector's ox is

getting gored the most as to who's doing more. for example, all the hospitals are working their -- and the board members and the private sector that support hospitals and the local chambers of commerce and the folks that acknowledge and recognize the ramifications of not continuing this for their individual hospitals, particularly some rural hospitals, are working very hard. the chamber of commerce statewide is working very hard. i mean, they get the arithmetic too. so, i mean, what we're seeing is what i call the traditional republican business community is aligned with the democratic -- with the democrats. how do you all like that? and that's how you got a three-fourths. and so traditional republican business interests are totally supportive of continuation of the private option. now, when you're talking about medicare advantage, you're talking about something else i'm not even messing with, so i'll

have to ask somebody else about that. i can tell you that part of what we did with regard to the waiver was to keep the costs pursuant to the insurance rates for medicaid expansion, in our case with the private option to, had to be with the parameters of what was anticipated by expenditures by federal government. and that's where we are. we've been able to do that. and we've been able to do that to some extent with some additional competition. >> [inaudible] be fair to everybody. i'm sorry. go ahead right here. >> paul stark with the philadelphia inquire. so in pennsylvania we have a governor who's trying to out-beebe you, sir. [laughter] he tried to require work search, he's trying to do changes to all the existing medicaid recipients -- >> we haven't done all that. >> pardon me? >> we haven't done all that in the private option.

>> right, right. and -- >> we haven't required the work stuff, and we haven't, we haven't changed the existing medicaid requirements. >> from right. and so what do you think the prospects for success are -- >> you'll have to ask -- you're a better judge of that than i. i love philadelphia. i'm mad at you, you closed he beck finn which was one of my favorite restaurants in all of north america. [laughter] >> we could send you takeout. >> you know, i can't answer that question. i think what, i think corbett has, as a lot of other governors have, have just looked at the pure math. their people are going the pay for this whether they take it or not. their taxpayers, their hospitals are going to pay there for this whether they take it or not. they are not going to impact the federal deficit or change what's going on with our national debt whether they take it or not. and they, a lot of 'em have

awakened to that. i mean, i hate to be repetitive and give clinton too many too much credit, but it is arithmetic. really, people. and the logic of it permeates most of these people. now, there's -- i'm not calling out names, so you'll have the judge who it doesn't permeate to. but, i mean, i don't know any n n -- look, most of our people in the legislature do not want and do not like obamacare as they call it. this is not ap enforcement of obamacare in arkansas. -- enforcement of obamacare. if you took a vote, it'd be 68, 70% of the folk would be opposed to the federal health care act, and if you took a vote in the obamacare as to whether this continues nationally, they'd vote against it. they have been able to separate the fact that they can't control in little rock or you're not going to control in harrisburg what they do in congress.

the it is a -- if you don't like it, go to congress, vote. run for congress, win. in the meantime, you have an obligation to your people in your own state to do what's best for the people many -- in your state with the cards that are dealt you. and so these cards have been dealt the entire country, and the entire country is dealing with it in different ways, but most of these governors now have recognized that there are major advantages to their state and to their people to take it if they're paying for it anyway. and so that's what the fight is right now. how do you get there. and a lot of them are constrained by the pure politics of their own situation. and, you know, my argument is -- i mean, we're all supposed to do what our people want. we're representatives, okay? i get all that. but a governor has a responsibility to lead, too, and to educate too.

and sometimes, it seems to me -- and it's easier for me to say, i'm not running for anything else, okay? but i would like to think i've been this way all my life. and part of my responsibility and i think part of anybody's responsibility is to help educate your own people about what you believe is appropriate, good public policy. and i think a lot of them are now starting to do that and trying to do that including a lot of republican governors. a lot of republican governors who -- did anybody see jan brewer pointing her finger in obama's chest a number of months ago? anybody think she's a big fan of the president or what's going on? she took it. and then she said if hay don't keep it -- if they don't keep it, it wrecks her budget. it's arithmetic. >> so you think it's just a matter of time before the governors that haven't accepted the medicaid expansion do so. >> no, i -- there are some i don't think will ever do it. and i'm not going to go there. but i think more and more are

trying to find a way to do it. you all have reported on some of it. you've asked questions about specific names on some of it. i certainly have been asked by many of them about ways to do it. so, yeah, i think it's incremental that there'll be more and more. >> okay. >> i know this is what y'all want to talk about, but let me just throw something else at you that's related to all of this because i think it's important, maybe a bigger deal than what you're talking about in the long run if y'all are health care reporters, and maybe something that i've been asked about by members, by other governors as much or more than medicaid expansion/private option in our case, and that is payment reform. we are actually leading the country in a methodical, logical and reasonable way to reform the way we pay for health care in this country, and i think that's

going to be, ultimately, the huge story before it's all said and done. and it's -- we've got to get away from fee for service, and we're doing that. i don't want make public policy in arkansas in a back room with a bunch of staff members. i think you involve the actual front line people that have of to implement whatever that policy is as you're formulating the policy, not after you've done it and said here it is. so we've had the medical community, the hospital community, other providers, the insurance community, patient advocates and all sorts of folks from the beginning over a couple-year timeline and incrementally and slowly shift away with various episodes of care away from the old fee-for-service model into something that -- and this is hard to do, it's a balance -- how do do you reward quality and

efficiency, cut costs? almost you would think that would be mutually exclusive. it's not. let me give you one quick anecdotal story that i keep telling over and over about this because i love it. one of the first episodes and the way this works, and i've got a surgeon general here and our medicaid director here if y'all have got real questions that i can't answer, is you've got a baseline of say what it's normally going to cost for a certain procedure. now, there have got to be a safety net for unforeseen consequences, etc. but one of them was pregnancy and labor. and a normal delivery. and here's the baseline. when we were establishing all this stuff, we had to really find -- a really fine ob/gyn who just raised cane, can't do that. all of my deliveries are way over this line. i'll lose money on every delivery. can't do that. well, unbeknownst to him and with a little bit of self-examination as all this was

occurring, in every pregnancy, in every delivery his office was sending every placenta to the pathologist. whether it was called for or not. whether there was any reason to be doing that or or not. and so, i mean, the pathologist was making a little money, but he didn't know that. the office was doing that as a matter of routine. of when they stopped that and decided to only send placentas that required it for pathological examination, his baseline dropped below. he was going to make more money. and what's going to happen? the taxpayers, everybody in general are going to be paying less. so, i mean, that's where country's got to go. and everything we talk about, i mean, we had bernanke there, ben bernanke there yesterday for a governors-only thing. and people kept talking about, you know, the gdp and where the country's going and what the economy's going to be like. and consistently health care costs, both public and private health care costs, continue to

be the unknown factor including with the entitlement programs that pose the greatest threat to the stability of the economy going forward. and if everybody's going to talk about our health care costs being unpredictably bad and that we don't have any better outcomes than a lot of other western industrialized nations that are doing it differently, then we'd better do something different. and we started it in arkansas. and more and more folks are starting to do that. i'm sorry that wasn't what you all wanted to talk about, but you need that in your radar because that's the next big story. and ultimately, maybe the bigger story overall. >> okay. i saw two hands up here. >> see, i wasn't making -- >> start back there, and then we'll get you next time. >> hi, i'm jeffrey -- [inaudible] with mississippi public broadcasting. >> oh, or boy. [laughter] >> you've graced a lot of -- addressed a lot of the questions, and i've heard

democrats in my state making all the same arguments that you've made. if you think the branding of it being the around plan will make it any easier to bring republicans to table. [laughter] >> somebody asked me that question the other say day, said did you do this just because you changed the fame of it? that's -- the name of it? it's more than that. what we did was substantive as well. and you've got -- i give a lot of our republicans credit. what i call traditional business republicans. news bay helped formulate this -- because they helped formulate this, and they deserve a lot of credit. this was truly a bipartisan approach. yeah, it had a different name, and that had some effect, you bet. but it's more than that. it was honest to goodness substantive differences that lent themselves to private sector support, and it's certainly provided a pathway for folks in our state even with a

75% requirement. if i were talking strategy, yeah, i would talk about that in mississippi or alabama or any -- south carolina. i think that there are principles that we utilized that would be appealing to some folks on the other side of the aisle. and i think democrats embraced it pretty wholeheartedliment at least our dem -- wholeheartedly. at least our democrats did. so if you're asking me would an approach like this help in your state? i think it would. i think the starting point, though, you've got to get, you've got to get a bell cow whether it's a legislative leader or a governor or whoever that has to embrace it first and then start trying to sell it. does that answer your question? >> [inaudible] >> what else? what else do you want? >> i mean, the democrats might -- and it didn't go anywhere. so, i mean, it just seems to me

it's not quite the answer that people in my state are looking for. >> well, you're probably right. [laughter] >> all right. right here. [inaudible conversations] >> i can't -- >> okay. whoever has mic, go ahead. >> hi, governor. martha, i work for public radio in boston. thanks more your time. >> how are you? >> doing great. >> mad at the red sox. they beat my tigers. >> you know, you'll have next year. you'll come back. >> okay. >> so my question is who, meaning government or someone in the private sector, makes sure that savings -- if there are any in payment reform -- come back to me, the consumer? >> that's a really, really good question. theoretically, competition will generate some degree of those savings. if, indeed, health care costs are going down, then theoretically insurance, health

insurance company a is going to have to lower some degree of rates to be competitive with health insurance company b. what we also have is the ability to take the data and present the cay that in our case to -- the data in our case to our insurance commissioner and transparently let the world know what the data is actually showing. i, frankly, don't think this is going to cause a lot of reductions in what we're spending. i think what it's going to do is stop the growth which is just about as important. the upward spiral of health care costs outpacing inflation is, and outpacing growth in general has been the huge problem in terms of eating into our gdp. so i wouldn't be overly optimistic that all of a sudden when we do all this and implement all these episodes

that we're going to see significant reductions. i hope we see some. we've seen a huge leveling off, but the whole country has, with regard to health care costs. our medicaid projections are much better than they were a year and a half, two years ago, but so are everybody else's for that matter. so we've seen some stagnation in that inflationary spiral. but do y'all have any thoughts on any specific ways that the savings are going to actually show up and be realized in somebody's pocket in terms of their health care costs? >> let's get you a microphone before you answer. >> gotta give him a mic. >> he needs a mic. >> i just asked him to talk. >> yeah. >> he's the surgeon general of arkansas. >> just introduce -- >> he doesn't know squat about insurance, so he's not going ab able to -- >> joe thompson, surgeon general for the governor. i think two parts. one is increased competition. our marketplace has not been

very competitive, so with payment improvement combined with expanded coverage, we will, hopefully, have increased competition. the second is the savings actually are equally dispersed between, as the governor with said, between the payors and the providers. so the payors in turn will transmit those savings back to their customers whether the customer is a business paying for insurance or an individual buying insurance. >> and i don't mind you being skeptical about this. and i think it's worth watching very, very closely to insure that it works. but i can tell you what we're doing is not working. where you reward through payments every test, that's not conducive to pisht city. and it doesn't -- efficiency. and it doesn't necessarily help for quality of care. and you know what with the technology we've got now, if somebody does an mri in hospital x if a rural area -- in a rural

area, they can immediately transmit now, and the doctor this hospital y in a metropolitan area can in realtime have that information and doesn't have to do another mri seven hour, ten hours, twelve hours later unless it's called for because of some particular thing that's going on with that patient that's different. and so in the past you get paid for the extra mri whether you needed it or not. now you're not going to. not unless there's a justified reason for it. and that's the way across the board with tests and everything else. it also rewards and puts almost in a patient-centered medical home burden and the responsibility and the coordinated care effort on part of the primary care physician, puts that primary care physician in control. and we've got so much in the way of health care costs, and i don't mean to get off into this because it's different than what you're talking about, but you asked a good question. a lot of this stuff is manageable to keep health care costs down. a lot of these conditions whether it's diabetes or high

blood pressure, whatever it maybe, properly managed with a proper primary care physician making sure people do what they're supposed to do and have a reward for being able to follow up on it can prevent a lot of higher health care costs down the road in a more expensive setting. >> i think we had a question right back here. >> hi. diane weber with kaiser health. >> hi. >> i want today go back to something you said earlier about small business. you said you have something like $38 million savings for the private option. is that because people who are working for small businesses would be eligible for that private option so the small business wouldn't have to -- >> yes. yeah, that's the estimate. and, again, part of that's been delayed. they keep delaying the implementation of the penalties. but that is an estimate that was done based upon those folks that fit those categories.

and, you know, i mean, we've got a lot of small businesses, convenience stores and folks that might in the aggregate because of the way that it's imposed and the number of stores be over a 50-employee threshold or be in a threshold where they would otherwise have to pay a penalty, but they're not paying the kind of wages that would allow them to have subsidized health care, and they'd fall within that 138% of poverty level, and that's an estimate of what penalties would be, would not have to be paid by an amalgamation of those businesses across the state. is 38 right? nobody knows for sure. but that's as good an estimate as our folk could come up with. and it wasn't our folks, this was private sector estimates. i saw in one -- i don't remember whose publication it was, might have been politico, but i saw recently an estimate of something like 300 to $400

million a year is the hit on texas small business. did y'all -- anybody see that? am i the only one that saw that? matt, you saw it. where'd matt go? you saw it. yeah. y'all didn't see that? i thought y'all were in the news business. >> we're going to look it up as soon as this is over. [laughter] >> could i just ask another question? >> diane, sure, follow up. >> how long have you had that 75% -- >> long before i was born. long before -- back in the '20s or '30s, i think. >> really a? wow. >> trust me, it's not my idea. >> all right. we have one right here. >> jane trillion with ohio's wcbn public radio. in ohio we've had quite the battle over medicaid exing pangs as well. >> sure. >> one of the things i'd like to ask is cost analysis. you talk about 100,000 people being on will. how are you guys accounting for cost savings at this point? you mentioned several ways that

costs are being saved, so how do you tally that up and report it to the public? >> you're talking about the 80 some odd million dollars i mentioned that we saved as a result of it? >> [inaudible] >> you know, that's a great question, and i'm not doing a very good job of explaining that on front end, because really we had people running for governor right now in arkansas that asked that same question can shows i wasn't doing -- which shows i wasn't doing a very good job. that money's already been saved. we were -- it's primarily in two areas. we were giving state general revenue to various providers including but not limited to the med center and other folks, community health centers, etc., we were paying x amount of tax dollars in our annual budget in the form of general revenue to

offset uncompensated care. so we didn't take all that back because they're still going to have some uncompensated care. the various entities are still going to be treating folks for whatever reason that don't pay a dime. and so we didn't do 100% pullback on all the uncompensated care dollars that we were spending out of our budget to various entities, but we did a significant portion. then there's a small but important portion of existing medicaid people -- >> [inaudible] >> what? >> tuberculosis, etc., there's a certain population in everybody's existing medicaid program that can legitimate by go over -- legitimately go over to medicaid expansion, right? so they go from us paying 30% to

us paying 0. on a state share. and that varies from state to state. you understand what i'm saying there? so a combination of those things saved $89 million that we were spending in our regular budget already before any of this stuff calm up. now we don't have -- came up. now we don't have to spend that. so that savings was automatically created because those obligations were relieved by the private option. so it's not a question of who, how are we going to track the data, how many are signing up. we already know that data, it was in the budget. you follow what i'm saying? now, if we don't do the private option, then we've -- that $89 million theoretically would be paid somewhere, right? but we already gave it back to the taxpayers because we cut taxes. we cut our overall income in our overall tax policy by an amount of money equal to what we were

saving in not having to spend that money in the uncompensated care or in the traditional medicaid that folks that could legally and legitimately move over to medicaid expansion. that's the problem. and i have not done a very good job on the front end of explaining that because of your -- that's a great question. you asked a great question, and others have asked that question. i've got to do a better job of explaining how that $89 million savings exists. because it's not a savings based on like saving penalties from employers. it's an actual savings that's already been realized and quantified in a budget. that make seasons? okay. >> for our last few minutes, do we have -- you know, i've been curious about the, what happens to the prices in your exchange plans if you didn't get additional money for the private option because the overwhelming majority of people in the the exchange are the private option -- >> yeah. >> if that money goes away, it's

not continued, what happens to your risk pool many your exchanges? what happens to those premiums next year? how will that play out? >> it'll have a devastating effect, it seems to me. everybody knows perhaps because of rollout, who knows or problems with the federal rollout, etc., the subsidized portion of the population is, as you mentioned, significantly less at this point than the medicaid expansion portion of the population. and you pull that whole pool out, then the insurance companies and the pool that's paying for all in this theoretically has an upward cost spiral on it. and you may lose some of the insurance companies that are otherwise there and, certainly, the ones that are left undoubtedly you may have increased insurance premiums as a result of that. i mean, all of it -- it all needs to work together, and

that's a great point. it'll have a negative effect on the subsidized pool. >> sure. all right, folks. any more questions? yeah. go ahead. wait one second, phil, let's get you a mic. hold on. so everybody can hear you. >> so you're leaving here and going down the street to the white house, what are you going to talk to the president about, what health issues? >> probably not a lot of this, you know? i mean, again, you're going to sit there with a bunch of republican governors and a bunch of democratic governors, and we're going talk to be talking e president. to the extent we do talk about health care issues, one of the things i think we'll be talking about the ease and the streamlining, if you will, of the waiver process. i think there's pretty much unanimous agreement on that aspect. but we'll be talking about other stuff. i'll tell you one of the the things that hasn't got anything

to do with what your talking about that all 50 governors are fired up about right now is the national guard cuts. those are the kinds of issues where you're going to see so much unanimity on the part of the governors. that'll probably be the bulk of what's talked about. >> [inaudible] >> no. i don't think you're going to change anybody's mind in the course of a three-hour meeting with the president on where they stand on health care right now. >> all right. so i think we'll leave it there. i want to thank you so much, governor beebe, for being -- >> you bet. good to see you. >> want to thank health affair, and i'd like to thank everyone for coming to participate this morning, and wee hope so yee you back -- we hope to see you back here for future events. >> bye-bye. >> thank you so much. [applause] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations]

>> if you missed any of this conversation, you should know that it is available on our web site. go to c-span.org and look in the c-span video library. well, congress will return from their presidents day recess this week. the house is in tomorrow, but the senate will be back today at 2 p.m. eastern, and shortly after they gavel in, maine senator angus king will be recognized to deliver the annual reading of president george washington's farewell address. at 5:00 the chamber will debate and vote on the u.s. district court mom night, and as always, watch live coverage of the house on c-span, the senate live here on c-span2. the nation's governors this weekend gathered in washington for their annual national we were the meetings, and this morning at 11 ian both president obama and vice president joe biden will address the national governors' association from the white house state dining room. we'll have live coverage of their remarks here on c-span2 and, again, that'll start at 11

eastern. this afternoon beginning at 1 p.m. today there'll be a speech by secretary, defense secretary chuck hagel talking about military budget cuts. we'll have live coverage starting at 1 p.m. eastern here on c-span2. >> the new c-span.org web site makes it easier than ever for you to keep tabs on washington, d.c. and share your finds via facebook, twitter and other social networks. easy search functions let t you access our daily coverage of events. new tools make it simple to create short video clips and share them with your friends via facebook, twitter and other social networks. or you can send links via e-mail. just find the share tools on our video player or look for the green icon links throughout our site.

watch washington on the new c-span.org, and if you see something of interest, clip it and share it with your friends. >> well, last week the u.s. department of agriculture hosted its annual agricultural outlook forum in virginia. part of the event included remarks by the department's chief economist who provided a trade outlook for 2014. in addition, a panel moderated by secretary tom vilsack discussed the future of domestic and foreign agricultural systems. this is about an hour, 40 minutes. >> good morning. >> morning. >> i'm deputy secretary of agriculture or christa harden, and this is usda's 90th annual outlook forum. let me start with some housekeeping and ask you to the turn off your cell phones.

everybody take a minute, turn 'em off. i turned mine off before i got up here. so please do that. on behalf of secretary tom vilsack and usda's office of chief economist, welcome to each of you. thank you for being with us. especially our international guests, and a special greeting to everyone who'll be watching the forum later via webcast. several representatives from foreign embassies are in the audience including minister of agriculture from costa rica, and we're honored to have her with us. also joining us is a former colleague, secretary of agriculture from california karen ross. i'd like to open with a deeply-felt thanks to every individual on our organizing team. planning the forum demands great skill, knowledge and attention to detail for months and months. ..

highlighting the changing face of agriculture. and there's no question that american agriculture demands are more dynamic population. we face pressing issues by the aging of the american farmer. the increasing food demands of this century, and the next generation of american agriculture. at the same time we have seen a shift in agriculture with new farmers making their lives on

the land. there are women, immigrants, returning veterans, recent retirees and former ranch kids coming back to the farm. this morning secretary vilsack will moderate the panel exploring unlimited opportunities for young farmers. and i will moderate a panel for setting featuring successful women in agriculture. this forum about sal agricultural supports our veterans. a broad look and agriculture's changing demographics the secretary will give a first glimpse into the 2012 census of agriculture a little later this morning. and a session this afternoon will also explore the new census in greater detail. why we look at the future we are also celebrate the 100 year legacy of the cooperative extension service, a project it's changing role in this century. agriculture may depend on part on the 30 in people who are with us from the outlook forum students diversity program now

in its eighth year. these are high achieving students eager to learn all they can induce today's. many thanks to our program partner, the university of maryland, and their sponsors to make the student opportunity possible. c. h. x., farm credit, usda's economic research service, the natural resource conservation service and the agriculture research service. students, would you please stand? they are right back here. give them a hand. [applause] >> i had a chance to meet with the students this week, and i can tell you they are so bright and ask tough questions. good to see all of you. i also want to thank ffa leadership and the agribusiness study group from the national defense university who are joining us this morning. and the u.s. farmers and ranchers alliance for hosting a live stream dialogue discussion

to you're invited to attend this session on attrition, who is shaping america's eating habits. we are honored the u.s. trade rep mike foreman will be our dinner speaker this evening. as you can see we have a very ambitious to days of mind up that will delve into changing issues in this dynamic industry. at the same time we will remain true to the forum's central core, the outlook of agricultural economy and trade. chief economist joe glauber is our first speaker this morning with the economic outlook for agriculture for 2014. his remarks follow the strongest five year period in our nation's history for agricultural exports. doctor glauber was deputy chief economist for 15 years before heading up the office of chief economist. into thousands of news and special doha agriculture envoy at the office of just trade representative. he answered his economic adviser the blair house agreement leading to the completion of the

uruguay round negotiation and senior staff economist of the president's council of economic advisers. the secretary looks to dr. glauber for developments in agriculture commodity markets on issues from trade negotiations to energy policy and legislative proposals. his responsibility include global climate change and else's, and every highlighted by california's severe drought. dr. glauber chairs the board of directors, the federal corporation. i am very delighted to introduce joe. joe, come on a. the things i think about what to think about joe, not only how smart he is, how dynamic, much and does and how he can break down very, very complicated issues even for simple mind like mine, he is definitely tall. but he bites -- he bicycles to work. he is always there. thank you, joe. [applause]

>> well, thanks very much, deputy secretary. another good forum, and i think this is the 90th forum or so, so we've been around a long time. what i've like to do is do what i always do and d that is go ovr the outlook for u.s. agriculture, someone just reminded me, asking whether not my notes were from last year or the year before and, frankly, you will see some similarities just because the trends we've seen over the last so for years are still in place today. and, in fact, i'm going to start with the chart that i've used in the past. a few years ago i showed this chart, and it essentially shows the major agriculture price, crop prices over the last several years deflated. that is, taken out, inflation

affects taken out. you can see this long trend downward over from about just after world war ii down to about 2000 or so where prices, with exception of the spike prices we saw in the '70s because of the grain sales to the former soviet union. we've seen essentially this march of productivity growth that caused rises to fall in real terms. this is one of the huge success stories of agriculture in the competitiveness and the productiveness of u.s. agriculture in particular. you can see that very much cared through about 2000. what happened really over the last 10 years has been remarkable, just in the sense of one, we've seen prices for most of the major crops, field crops double, increase by 100% or more. we look at agricultural trade has doubled since the levels that we saw in the mid-2000.

farm income has doubled. just amazing. since 2006 we've added about $1 trillion to form equity. what we have seen of course after having record prices in 2012 with very large global record crop crops for most greed oilseeds we saw prices fall. and with some pretty dramatic falls in the case of corn, for example, down almost 35% or so from last year, and as we project out the economic research service, and world work when they're doing our 10 year projection, we look at instead returning to the longer-term downward trend, we see more of a flattening of prices. of course, these are highly dependent on assumptions on yields, highly dependent on assumptions about the weather. and we don't for one thing one way or the other the next 10 years those lines will look a lot more variable than they do in our projections. i think it's fair to say there's

a lot of still strengthen the underlying economy despite the drop in prices, and i want to go through some of those factors. one is we talk about all the global production record we saw this past year. global record corn crop, we crops, rice crop, feed grains in general, global record, soybeans record crop, sunflowers record crop. you can just go down the line. high prices will do that. it will bring in more production, and with better weather issue than we saw last year, we see these records. but the thing i think this chart shows is not only do we have global record production, we've also global record use. you can say you're over your records. in general, grains have been growing at about 2% per year. that's total grains. and certainly if you were to look at rice and wheat, they've been moving along about with population growth.

but look at corn. corn has been increasing almost 3% annually, close to almost 4% annually, in fact. some of that is biofuels, but a lot of it is increased demand for feeding, because of increased livestock production, and i think as we move forward that demand will continue to grow. if you look over on the other side of the chart, the oilseeds, the scales are a little misleading but with oilseeds you've been seeing greater than 4% growth. i could extend this chart backwards into the '90s. you would see this continue remarkable growth in demand for oil seed production. we project that to continue. i think this is evidenced very well by the fact that our revisions for the agricultural export come out today and will be available for release in more detail today. but we are now projecting fiscal

q2 -- 2014 exports at 142.6 billion, that's a record. that's up more than 5 billion from our august estimates for fiscal 2014. and i think the important thing to remember is this isn't a year where we've seen prices decline. so these are increased volumes, increased maulings across the board for grains and oilseeds. very strong demand particularly over the last increases over the last three or four months that we've seen the imports are up as well to $110 billion but still a very healthy trade balance of almost $33 billion. and so again this whole growth in agriculture, again by world demand for grains and oilseeds i think is very, very important. you can see also, and i have made this point shall times over the last two or three years, just what a big factor china is now. $25 billion estimated going to

china this year. again a record, and china remains our -- a record for china, and china remains our number one market. most of that is soybeans and cotton. but again i think as i went through last year, there's a whole host of other products that have become more and more important, things like sorghum and things like livestock products moving there. it is and will continue to be a favorite important market. looking forward, editors want to give a little -- we put out our baseline estimates just a few weeks ago, and here he shows what the projections are for global trade in soybeans and feed grains and wheat. and you can see there we are expecting that to increase as well. again reflecting the strong growth that we anticipate in these markets. if you were to factor into productivity gains, one way to think of this is this adds

about, by the out years, about 50 million acres for the growth in trade that we would see. that has to come from somewhere. i'm not saying that that's an additional 50 million acres that need to be planted. rather, that some of that may come out of other crops, other things, and it certainly isn't all the u.s. -- the u.s. won't see all this game. this is global. we will face fierce competition for soybeans from south america in particular. wheat from the former soviet union and other places, corn also from south america, and some, southern hemisphere countries. so again, this isn't, shouldn't be translated into just positive numbers for the u.s., but i think if u.s. dutchman competitive in these markets, and we will compete for a share of these markets as we move

forward. let me turn now to the domestic thing, and here is a chart also argues a lot over the years. i think it's received a lot more focus recently because of proposed regulations by environmental protection agency on rss, renewable fuel standard. and what that might mean for corn used for asthma. we know for a long time, that is, ever since under the energy act of 2007 that we would see this rapid buildup in corn used for ethanol up until about 2010. it was anticipated that would flatten. and, indeed, we seen that growth pretty much at all around 5 billion, that level out of 5 billion bushels used for ethanol per year. a third comes back in the form of distillery dried grains but the fact is ethanol use has been fairly flat over the last few years. i would say this has been long anticipated. the issue is in terms of moving forward, how much growth will we

see? i do think we will see growth. a lot will depend obviously on penetration of higher blends for ethanol, but the other very important thing, and we've seen this over time, is the importance of ethanol exports. i can 2011 we exported about one dozen gallons of ethanol, or more than a billion gallons of ethanol. you can see here with some of the markets. i think this will increase longer run and as i said in the past, a lot is going to depend on the price of petroleum and the underlying feed stock price of corn. i would contend that those two can't get too far out of bounds before you will see more ethanol, or corn being converted into ethanol. and competing in that market. the other big factor obviously that farmers are looking at this year is farm building. i think the good news is the uncertainty that was out there,

by the fact that farmers were trying to make planning decisions or thinkin thinking at planting decision and not know whether not they would be a continuation of the 2008 act or a new farm bill. we have that resolve now, and as the deputy probably can go into great length, and the secretary about how important it is to get that implemented and get that out, those rules out so farmers will be able to make those choices, but the fact is as farmers will be faced with some pretty significant choices. on now are the direct payment program, the countercyclical payment program and the old acre program, replaced by similar programs in the sense of having area revenue programs and price laws coverage programs. and then on top of that there's a whole number of augmented crop insurance programs that you may or may not qualify. all this is to say that there are some complicated choices for producers as they go forward but i think significantly here with congress agreeing that these

should be based on basic is rather than planted acres, that means that these programs of less direct impact, or influence on planting decisions. so planting decisions we believe will continue to be largely influenced by relative prices. i think that as an economist, i think that's a good thing. the other last thing i will get into before getting into the short of -- sort of short run outlook is a drought. again, another story that is carried on for a long time. this is the fourth consecutive year we seem drought conditions lingering in the southern plains. we know what impact that sat on crops over the last few years, and in particular the livestock sector where we've seen some big losses in cattle inventory in those regions. but the other big thing here, and i know the secretary of agriculture from california can attest the difficulties being faced with water and -- water

availability right now in california. and, obviously, california is our number one agricultural state. there's a lot of concern and the focus now looks at how, what availability there is in water and how would that be allocated among crops. producers there will have to make decisions on what crops to plant and, obviously, when you talk about a state that produces about one-third of the vegetables that week in this country and about two-thirds of the fruits and nuts, these things end up being very important. let me turn now to the short run outlook, and again to more is as you all know, we have extensive sessions on grains, oilseeds, livestock, dairy and other, the commodity thing so not going to great deal of detail here, but if you want to talk about two things. one is the fact that we can do this year, 2014, even after

these really large global record productions. we still into with a pretty tight stock situation and i think this is again an interesting back story to what's been going on in the world. that is, despite this big run up in production and response to high prices, because of the record global use that we've been seeing, the stock levels just aren't increasing all that much. all that is to say that prices and other things will remain sensitive to production shortfall. so if there are problems this year that emerge, we could see spikes in prices much like we did in 201011. i'm not saying necessarily those levels, and i think but generally again assuming normal weather in the world that he think we should see the larger production this year and a building, further building of stocks as we move forward. the numbers, i know a lot of people are interested in are

what we anticipate for plantings this year. you can see the total, if i just look at the major row crops that we are expecting total area to be down marginally, but actually fairly close to last year's levels. the big, i think one of the more interesting decisions, obviously, producers are going to be banking, midwest producers in particular making that choice between corn and soybeans but if you were to look at future prices for march planting, march delivery, that is, despite what south america would been facing they're making their planting decisions, you would've seen the soybean and corn racial about three to one. so it clearly favoring the planting of soybeans. that's down a lot. we've been looking at a ratio of closer to 2.5 to one. but that still is very favorable for soybeans. we expect soybean area to increase by about

3 million acres. and to see a decrease in corn acreage down to around 92 million acres. we come we know from the report, that's awful a little bit from last year. and again, you can see the changes there. the to crops that we will see i think some increase in production will be rice. rice we've had very strong prices world rice prices have been very strong. i think rice will look very attractive relative to other alternatives, other alternate crops. then the other thing, getting getting back to the california situation is i think we'l we wie most of this increase occurred in the delta and i think we will see more medium and short grains being groped -- wrote in the delta this you. because they're typically grown in california. i think there will be produces in california will be faced with decisions on whether not to sell their water rights and not plant

rice this year. we believe some of that will migrate to the delta, at least for this year. okay. well, i think from that we are with, again, strong plantings both for corn and soybeans, and again returned to more normal weather this year, we should see close to record crops, probably record crops are anticipating record crops it in soybeans and maybe even in corn. with better production. all that will bring prices down. and i think you're as we look at our expect patience for prices in 2014-15, you can save that for many crops these are the lowest levels we've seen since 29-2010 but were looking at corn price under $4. again, this is higher than what we're carrying in our baseline projection, largely because of the change in the 2008, our with the new farm programs we had

assumed under the continuation of the old law that morland would'vwould been planted to con because of the acre program. now with the new programs based on base acres we think there will be more flexibility. they will look at the soybean to corn ratio and plant a little but scorn than normal. but even so priced below $4. we are looking at wheat price of $5.30. again, soybeans $9.65, all these the lowest level since 2910. hot and awful a little bit. again lowest since 2009-10 but as i mentioned rice prices still quite strong at $15.9800 way. very similar to the 16 the are so we're seeing issue. as far as specialty crops, we been anticipating that to drop a little bit because we were looking at some changes in prices that would've brought down revenues for both fruits and nuts and vegetables. however, i think with the big

uncertainty there is california, as i mentioned. one-third of the vegetables grown in the country are produced in california, about two-thirds of the fruits and nuts and the fact you look at met in particular i think that's almost 80% or so. producers are going to have to make tough decisions in terms of how to allocate water in california and i think we are all looking at the very, very carefully. any sort of drop could have some impact on prices, et cetera. let me turn quickly to the livestock sector. i think here, clearly, if you look forward to 2014, the livestock, the animal sector in general is in far better shape than we've seen over the last several years. we know over the last four or five years that we've seen this extended period of low fee to price ratios. that is, the feed cost has been high.

product prices even though they have been high at times, property, probably measures at least measure by the sort of crude deep price ratios are all significantly improved this year. the other big thing product prices for most of these things were looking at record prices for beef. we've seen high prices for poultry, high prices for pork. all this, a lot of this being driven by just how the strength that we've seen in export markets. a lot of us can remember 20 years ago when exports contributed to only about a couple percentage points of overall production would go to exports. now you're looking at poultry over 20% of broilers grown in this country end up being exported. so very, very strong growth in exports that we've seen. this is likely to continue. we are down a little bit for

beef but that's for of constraints and supplies in the u.s. again, strong growth in these markets for livestock products. and, of course, that translates into, to the extent that that will translate over time to increase production. that will mean more increased feed grain production, increased oil seed production. we have seen some constraints. i think with these better margins there's been a lot of assumptions we would see an expansion. we know that the drought kind of cut that a lot, but this year with the second half of the 2013 with feed prices coming down considerably, it was thought they would see a little more expansion in beef and hogs. on the cattle thing, these are the lowest numbers in terms of numbers that were reported for january 1. lowest inventory since 1951. a lot of things they are i think

producers seem to appear to be reluctant to expand until they can be assured that there's sufficient forged conditions. this is another issue is the look at california, and the southern plains, so this will be a concern. it takes time to rebuild the biological factors are a little bit different, or take a little longer for beef cattle than they do talks and poultry, certainly. we know these numbers are down. we know that if you look at where the losses occur, they occurred in these red states. i know numbers are a little bit bored and i apologize, but we know that there's been significant reduction in inventory since 2011. significant reduction in where the southern plains. and if you look at total loss of around 122, 1.3 million head since 2011 in the u.s., almost 85% of that are still to be

accounted for in those four states. you can see the big losses in states like texas. so it will take a little while there i think to get that turned around, and we should start seeing some expansion in 2015. but again, with cattle at least it will take a little longer than some of the other species. the other big one, however, has been hogs. and their again they've also seen improved profitability. however, with the forcing epidemic diarrhea virus, that has affected later rates. that unfortunately has spread. it affects piglets and so we have seen mortality higher than what we might have seen. the pigs per litter rate some measure of productivity in the sector has been just a genetic increases over the last 10 years as we seem. year over year if we look at quarterly numbers, the increase year over year. just dramatic.

this year, however, at least we are seeing some signs at least by the pigs per litter rates we've seen over the last six months that those are little lower than -- you can see there is some cyclical behavior in here anyway but we are seeing a little lower than what we would have seen otherwise and i think that, unfortunately, would reduce the expansion. let me turn quickly to dairy, and here i think, if you look at the feed margins here, and i'm using the feed margin looking at the proposed, or the feed margin out of the farm bill, just looking at milk price miners a component of feed. here you can see that very margins have improved and to increase the difficulty over the last, since about mid summer or so. we started seeing this, and now with margins above $8 looking very profitable. again, we were seeing record prices from a lot of dairy products. and again they are being held by

lower feed costs. again, california is another wild card in this thing. california is a major dairy producer. we know that their supplies are going to be adversely affected by this drought. so margins in california may be for some lower producers may look very different than this particular chart shows. we anticipate marching to continue to be very, very strong as we look out over 2014. again, a lot of them driven. this is another picture of where trade has been very, very important for an interstate that really didn't think a lot about trade, frankly, 20 years ago what it was more surplus disposal 20 years ago, now we are seeing, we have recently seen very strong butter sales but you look at not that no, other categories, u.s. has been very, very competitive in these markets, and we anticipate this to grow over time as well.

so in looking at prices, i think in kind of contrast to what we saw on the grains side, here we have seen the result of what has been really reduced supply, and supplies that have an expanded as fast as we might have thought otherwise. that is, and w we're seeing that in the form of just record high prices, steer prices $100, $136 a hundredweight. unico hog prices down a little bit but still very close to the record in 2011. broilers just off march fleshes record and dairy prices at $21.20 a hundredweight. all very, very positive things for this sector. let me turn quickly to just food cpi. despite these high prices and high animal product prices, the cpi food inflation measured as percent of inflation rate -- excuse me, prices of this your relatives where they were 12

months ago has been very low. over 2011 the average glacial rate was about .9% for food consumed at home. it's a very low number relative to more of a historical level of two to 3%. surprising number in one sense. we thought we would see some food inflation with the drought a year ago, it really hasn't emerged. as we move forward we are forecasting an increase around 2.5-3.5%. this again, they will be talking about numbers later today, if i'm not mistaken, just right after lunch. but as we look forward, all food inflation and the at home insulation for food prices looking at 2.5-3.5% for 2014. okay, let me turn the last bit,

and that's looking at farming come. and now ers did release the net cash income numbers just last week i believe, at the beginning of the week at $101.9 billion. still about $5 billion-the average tenure average. no large surprise there. largely the decline was led, not surprising him in a decline in receipts, cash receipts for oil seeds and grains. total there down probably $18 billion or so. the other big change was the new farm bill. new farm bill a limited direct payments. direct payments would've been paid out in calendar year 2014. they won't be. that's a lot less than $5 billion. certainly, producers will be eligible for payments under these new programs if there are payments, but those won't be under the new programs like ark

and plc. they will be available until calendar year 2015, just by way the payouts are. i think the cash income situation here is certainly down from the record levels we've seen over the last couple of years, the number records we've seen but they are still high relative by historical standards. the farm equity situation as i mentioned, the overall equity increased by about $1 trillion since 2006. a lot of that driven by this enormous increase in land values that we've seen over the last 10 years. and to get a lot of this is an artifact of two things. low interest rates and then just a strong growth in farm income that we've seen. as we move forward i think one issue will be what net cash income, we know that come we are looking at a little bit of moderation there. and then on the interest rate side, we've seen very low interest rates.

we have begun to see increase in interest rates over the last several months. certainly if you look at things like congressional budget office and other institutions that make projections about interest rates, we are seeing at least forecasting an increase in interest rates. that will soften, i think will lead to a softening in land value short of any sort of price spikes we might see this year, or other unforeseen events. i think we could see some land, cash, fall if these lower prices or to continue. but again all this comes after a long period of build up in land values. if you look, and as i close, again if you look at the overall economy and look at the financial performance, again,

what is so striking here is, at least by an aggregate measure of looking at total debt held by the farm sector, it's at the lowest level that we reported, or that we have since we began reporting this number back in 1960. you can see certainly compared, you think back to the farm financial crisis when you had debt cash, that's for the nation as a whole, over 20%. that's now down to 10.5%. i think that's a dramatic, again, a result of just the phenomenal growth we've seen in the sector over the last several years. you would really need to even get up, to get up to 20% now, holding kept constant, you would need i think the drop in land valley of over 50%. it just goes to show how different things are than they were back in the mid 1980s. looking forward, we obviously

will want to look at debt levels. we want to look at what we anticipate for asset levels, but just to say we're at a very low level right now. that doesn't differ by commodities. debt to assets are little bit higher. typically for some of the livestock producers and dairy producers. they, after all, have gone through pretty tight margins. i think the common factor is not surprising, younger farmers are carrying more debt certainly are looking at slightly different things. so as i close, i think that, you know, i fully recognize these numbers are going to look, particularly for the crop prices, look, you know, we are down, back to levels that we haven't seen since 292010. i think a lot of people would look at that as boy, that's a very pessimistic outlook. i think, i'm not disputing the fact that lower prices and we

have cash have been ago shanda basis of some pretty high prices that that is certainly going to be a change and the challenge for the sector as we move forward. however, longer-term i still think we have very positive aspects in what's going on in the agricultural sector. and i expect that we should see some very favorable times as we move forward and look out at u.s. agriculture. and with that, let me thank everyone for attending, and enjoy the program. [applause] >> thank you, doctor glover. we will go right the way to our first panel, get the discussion going to the future of agriculture, building markets here and abroad.

secretary vilsack is going to moderate this, but i'm going to ask our panel is to join as a introduce you. i'm going to start with cathy burns who is the president of the produce marketing association, a 30 year veteran of supermarket industry, including senior level positions. welcome. kellee james is next, founder and ceo of my cars, a data service saving platform for organic and other preserve agricultural commodities. paul schickler, president of dupont pioneer, the advanced see genetics business of dupont. mr. schickler them with pioneer since 1974. and dr. raj shah come administrative u.s. agency of international development and the former chief scientist and undersecretary for research and education and economics at usda. i will our moderator is secretary vilsack. [applause]

>> i would like to add my welcome to all who are attending today, and my thanks as well to joe and jerry into the deputy, and the planning team for putting this great outlook for him together. want to just take a second to acknowledge the good work of the deputy in particular, focusing on young farmers and women farmers. i think later in the session when i talk about about the senses, you will see why that work is going to be extraordinarily important, and thank her for focusing attention on the issue. i also want to take this opportunity to thank joe glauber. i think sometimes we have a tendency to take joe for granted. he has been our chief economist for so long. but raj just commented to me, joe, as were walking up here, what a terrific job you do in explaining the outlook in a way

that folks can understand and appreciate it. and i think really joe deserves another round of applause for his work. [applause] >> i want to thank the panel for doing this. this is a great opportunity for us to have a conversation with all of you. so this is going to be divided into three parts. the first opportunity will give each panel is a chance to say a few words to you directly. then i will have a few questions, and then we will open it up to audience participation. so cathy, i think it will start with you and move right down the line, if that's okay. take a couple of minutes to visit with the folks and then we will ask a few questions. >> good morning. i come to you from root of the supermarket industry as the deputy mentioned. i spent 30 years in the industry. i started as a backer and worked my way through the system and ended up most recent as the

president of food alliance that is 1300 stores, 75,000 associates and 11 distribution centers. now i have transition. i know part of the produce marketing association, or for those who may not know what the produce marketing association is, we are a global organization. with members across 50 countries and recover the whole supply chain. so from the seed all the way through the farm, the grower, shippers, retailers, food service, and have some great partnerships with the government, specifically with the usda. and our intention is to convene those groups across the supply chain to move the industry forward. so as i think about things that are really important to us right now, it's about demand creation. and creating the demand for food, as opposed to demand fulfillment. we know we need to do both, but we believe there's a huge

opportunity for fruits and vegetables specifically to be more in the market around creating demand. the other thing that's important to us is taking away the barriers to produce the food. so the opportunity to be more efficient and to leverage a science and technology in a way that we can help the industry move -- remove some of those barriers to ultimately increase consumption. and the third thing that's on our mind is the war for industry town. and if there's an opportunity and we know we have an opportunity to continue to inspire young people to come into this industry, i know it's difficult, the supermarket industry was very difficult to attract talent, and the opportunity we had through the pma foundation to really build bridges across this great industry to make a real difference. so i can tell you from 30 years in the supermarket industry. look for to taking some of the expertise and sharing it. and honestly as a mother of two

girls i want to leave this world a better place than when they entered. i believe this industry has a soul and the drive to do that so i look forward to spending time with you. >> so, first of all, good morning. i want to thank the secretary and also the chief economist for the invitation to speak. i've attended this event in the past and the audience is always a great experience to i want to focus by remarks on a couple of points of the panels i'm sure we will all cover and that his new market opportunities and then sort of a call for our governorship towards the end. i cofounded a company called mercaris a little over a year ago and we provide market data and electronic trading for identity preserves as commodities, specifically organic and non-gmo. i think, you know, the ip markets are a niche but there are profitable niche and growing. so last year there were $35 billion in sales just in the

u.s. it's been growing since the usda's promulgate regulations almost 16 years ago through the national organic program. the key thing to know for me about organic is it's grown on the sheer strength of the consumer demand. so that hasn't been a lot of support in the way of what you think about subsidies or research dollars, very small, but consumers have been so positive in the respond to these, this type of food and fiber that the market has continued to grow. one of the things yo you'll see from a non-gmo has been around for a while, it's been export our midmarket but the numbers are harder to come by there because we don't have is fundamental data that tracks it year after year. so i want to talk about the opportunities for particularly for the american grower that has been somewhat masked by a little bit of low-paid market.

you can look at following on the chief economist remarks. you can look out, we started tracking the cash market for gannett, something like organic corn in the last three months, cash market price has been just over $12 a bushel. you compare that to $4.50 a bushel that you're seeing now for march delivery and you see a very healthy margin. on the non-gmo site, you can see 51 cents, up 50 cents a bushel basis so give that's much more than the organic premium, but if you're skating on the edge of profitability on your farm, 50 cents is maybe worth considering. so organic soybeans looking at 26 hours a bushel for non-gmo, general use soybean, $1.75 basis for food and some are in the range of 95 cents a bushel basis for feed. and then finally for hard red winter wheat, organic is looking at prices over again the last

three months is about $16.70 a bushel and you compare that to winter wheat price of $6.60 a bushel. so this is i think important information to communicate to our growers, that there is this opportunity here. the second thing is, there's room for organic for u.s. production to grow. again, because of consumer demand, because some of the barriers and into organic are fairly high can we start importing quite a lot of new crops overseas. we are right that importing about 10% of our organic wheat, about a quarter of our organic corn come from overseas and almost right in range of half of organic soybeans is actually growing outside of the u.s. a final note i'll say on these sort of large sort of macro statistics is a non-gmo, which has been to this point primarily an export market. japanese consumer buys a lot of our non-gmo soybeans. however, again with the consumer

demands we have seen a domestic growing market. so you see a lot of processes coming online with its new mills or elevators that are being built to handle the growing domestic demand for these crops. you see activity like at the state level with labeling initiatives, and even when we don't have the strength of a sort of a federal program for non-gmo standards, you have private sector entities that are moving into this space and creating their own standard. which by the way my into being a little bit of a difficulty if we end up with multiple different standards for non-gmo, but when you have everyone from full food markets to general mills to post now developing products that can carry a non-gmo label. so that's some of the little slice, little snap -- snapshot of the label for the landscape for identity preserved crops and i will just close out by saying, the company that i founded

didn't exist a year and a half ago. and i can't say strongly enough, especially to which everyone but to the young folks getting into this sector now, entrepreneurship as a way of tapping into innovation, it's no longer the case we have to have 30 years of experience and a huge capital, huge investors to be able to create something valuable in the ag sector. we've seen with the rise in big data from decision data to improve on farm productivity, farm manager software, all of these things require background in technology. but they don't require huge amounts of capital in many cases. i am excited by the chance, or by the emphasis on our governorship recently and i'm always happy to talk more about that. >> paul? >> good morning, secretary. thanks for convened the panel and also for the invitation for dupont pioneer to be part of it. pleased to be here. as we think about the future,

not only in the remarks that we've already enjoyed today, but just as a look at the future, certainly we've got challenges. and the challenges are numerous. we've got challenges to meet the demands of the world are we have demands to produce an adequate amount of food and to do so that has increasing nutritional value. that's clear demand that we have. secondly, we've got to get sustainably. and then thirdly, a tremendous demand already has been alluded to for information, information, whether it is by the farmer or information that the consumer wants. so when you look at the challenges that we have, clearly the demand, quantity and quality, sustainability and information all right there in front of us. what i am thrilled about is that we are, all of us in the room, part of meeting that challenge but and that is what dupont

pioneer is all about. what i might do is take a moment to talk about how we address each of those challenges around nutrition, around sustainability, and around information. so first of all, as it relates to nutrition, today in fact we announced tremendous achievement. we've been working on sorkin for a number of years. it started really with tremendous collaboration, first with the bill and melinda gates foundation, later with the howard buffett foundation. now a number of workstations in sub-saharan africa. what we announce today is not only the increased availability of vitamin a, also the stability of vitamin a. ensor. namely, about 100% increase in stability. so what that means for an african farm is that they can harvest that sorghum crop and

save it without losing the vitamin k content for up to about three months, tremendous improvement. also comes with increased levels of protein, iron and zinc, soy tremendous achievement. what we are doing there is basically delivering the opportunity for increased nutrition to children throughout sub-saharan africa. so i'm excited about that. secondly, improving rural livelihood. my example here is in indonesia. on the island off the coast of java, it's a less-developed part of indonesia and what we've got income in partnership again with the minister of agriculture of indonesia, is gone in, looked at the committee, offered improved seed varieties, education that allows growers to improve their

agronomic practices and to put together a whole system all the way from improved irrigation capabilities and improved shelling equipment, improved site which practices, all the to provide sustainability to the local community as they improve their agricultural productivity. just last month the president of indonesia came to our site and recognized the achievement that was brought to rome development in indonesia, and we are not in the process of extending that project across other areas of indonesia. again, in partnership with local community as well as with the minister of agriculture. and then my third example is back to the information subject that we've already talked about today, that's already been alluded to. whether it is growers or consumers, people are anxious for additional information. as part of dupont pioneer's business, we've always provided service, information in support

to our customers. so that they can use our product to the fullest benefit. but now as we move to the electronic age and bring all the young talent into these great opportunities, we are really trying to take advantage of all the information that is available both that we collect and that is publicly available. and again, trying to improve productivity for u.s. farmers as well as eventually growers throughout the world. so again it's all about partnership. we put this activity together in combination with john deere. we also have an agreement with the dpm organization to bring the weather and market information forward. inches this week announced a collaboration with usda and the university of missouri for soil mapping techniques. so again bringing an array of information together for the whole set a partnership, again to improve the productivity of u.s. growers and growers throughout the world.

so what we are focused on are those challenges, again, all of us in the room are after improving the quality and quantity of food, improving rural livelihood and then doing it all sustainably. so i'm excited about the future. i'm excited that all of us here are really after the same objectives, and i think sort of to where joe left his remarks this morning, even though we are going through challenging times, coming off some levels that were pretty favorable for agriculture, when you look to the future, the opportunity is pretty bright. >> thank you, secretary vilsack, and to the whole usda team for pulling this extraordinary event together. i guess i will just share one thought for everyone in this room, which is over the next 20 to 30 years, two to 3 billion people around the world will move from about $2 a day in income for $10 a day, or more,

in income. and as that transition happens, we know with certainty that people basically demand to things first. the first and most important is a better diet. and that means animal protein, higher value consumption, better nutrition across the board. the second is the smart phone. and so i tend to think about, i tend to think about it as the smart phones get all the attention but we are really serious about attacking issues like climate change, improving large-scale human malnutrition, especially amongst children, making big reductions in the 840 million people that will still go to bed hungry tonight, and protecting communities that live on the edge of vulnerability from more erratic climate events to poor rainfall. actually it's the dietary

diversity and the agricultural consequences of that that might very well be the much more important long-term trend. i think the future is very bright. i think american farmers, producers, disastrous, seed companies, have a tremendous amount of technology and know-how, and systems, development come experience to apply to the global challenge. and it's your thing that is exported to me is that it doesn't get more attention because it really is such a profound trend in such a unique opportunity for trading both american economic value and tackling some of the most profound challenges we face around the world. >> okay. so with his opening remarks, i hope that no one from my staff provided you with questions that might be asked so that you're prepared. because if they did, just forget them. [laughter] this is partially about trends.

and so what i would like paul and cathy to talk about for just a few minutes is, imagine this group five years from now. show has already given his presentation and, frankly, folks, it would be very similar to what you just heard. [laughter] you are back five years from now. what are we seeing in that five year period from today? and kellee and raj, your challenge is to go all the bit further down the road. i would like you to talk about what you see 10 to 20 years from now in terms of trends. >> so i'll start with demand creation. i think there's a huge opportunity for our industry, i'm speaking to the produce industry, to create, to actually steal some playbook from the consumer packaged goods company and how the market, and transfer

that to marketing, especially for small children and their millennial families. so on average, a child sees about 5500 advertisements a year for junk food. for healthy food is less than 100. and so we have an opportunity over the next five years, and i would love to make it even shorter, to be able to market to children in a way that that's the age group we need to target. we are almost a lost cause in terms of our eating habits. but if you think about the next generation, and hopefully the students, too, they have a choice, and marketing works. and so we've entered a pretty exciting partnership with the partnership for a healthy america, the white house, "sesame street" and pma to provide industry the tools and the framework to do just that. sesame has given the rights to the produce marketing association to sublicense their

assets, royalty-free, to farmers, growers, the retailers, to market products with yes, elmo and big bird and all of those favorites that we grew up with, on fruits and vegetables to inspire young kids if they're walking the produce department of the store saying hey, mom, i want apples. ..