enormous investigation that have been done, it does not look like that you have used the information that have been uncovered by russian and ukrainian bloggers. this is enormous information have been some kind of found even very first few days after the tragedy. and can think would be extremely useful to combine what you have done with what have been done by russians and ukraine bloggers. it gives me the suggestion to you, when you are saying -- i think probably you had in mind special kremlin just not confusion russians and kremlin. ... russians. that's a very important difference.

not all russians follow not the. another suggestion. it seems to me the conflict launch in april we suggest that you would exclude crimea fully occupation and taxation. what has been reported on extensively which is not essentially correct because moore has been studied according to the russian ministry of defense. look at the mental. >> okay. let's keep it to a question. >> exactly what you have in the announcement we know who pushed the button. >> the question is who shutdown -- >> no, no. let me formulate it. we know who pushed a button. my question, to make it more accurate, who gave the order to push the button? i would like to ask everybody.

>> i will give you the answer i give the journalists, that we will wake for the investigators to come up with their conclusion. >> i think they're circumstantial evidence that points to the fact this buk was provided by russia and a lot of circumstantial evidence that shows you can't operate a booklet she had a lot of training. >> current training. >> right okay. and so i think we can see there's a lot of evidence pointing towards russia. i think the question of who gave the order i don't know necessary if there would've been an order. i wasn't in the buk he sitting in are looking at a cell radar screen. he's got like two seconds to make a decision and then he pushes the button. i suppose it's sort of a general orders but i don't think he had

a specific order. then again i'm just pulling stuff out of the sky, so who knows? >> yes to follow up on that point i talked to david crawford description of what it takes to operate and your 40 seconds to make a decision. so my question is, and his comment that sooner or later this kind of incident would have probably happened, given the fact the equipment is there in the amount of time you have to make a decision. >> according to an interview i saw on russian tv yesterday with a russian aviation expert, if you bring a buk like that in isolation without the other part of the echelon which a radar that to you exactly what you looking at in the sky, essential you can know what you're shooting at. it was pretty much criminal just to bring it without the rest of the agreement on its own. he can fire on its own and hit things clearly, but it's not as

accurate. you don't see what's going on up in the sky as well without the other five or six or maybe seven -- >> that's what indications all right now, but it was not a complete buk system of all the systems that are supposed to be there. >> so my question is we are not looking to necessarily put malicious blame on someone because of all these circumstantial things, but we are looking for who is responsible. and most importantly it's just like you're in washington. whatever scandal that has come it's the cover-up that becomes the bigger issue. so this incident took place however you want to describe it but the issue come the big issue what happened subsequent in terms of access for the families and information and all of that. and is there a way to get the russians to understand that's

the issue. >> what you mean but access for families to speak with the cover-up. there was a successful recovery. in other words, the whole investigation and the subsequent dealing with the incident. >> i think the future rebel leaders a lot of time they will be saying from the beginning on that -- open to anyone who wants to go there. even armed dutch forces, like armed policemen. i'm not sure if they actually showed up they would have left them there but that is something they said for a long time. they didn't come directly. we have to do the dirty work. and away they are right in that because the dutch experts did not come directly after the crash because it was a war zone and maybe they were a little bit afraid of what was going to happen.

also they did not want to recognize the people's republic. was this whole discussion about signing agreements and over the bodies and stuff like that. michael knows more about if they are truthful in that or not but what i saw and what i heard from them was, welcome open to release of journalist and also for experts. >> initially there were difficulties i pointed out in my presentation. and then there was a period where things had to be -- that was when the large numbers of dutch and other experts flowed into donetsk. a cease-fire was agreed to. we got big numbers out of their infield. and it had a day or two of work and what do you know shelling happened nearby. we had to leave. we don't know broke the cease-fire. they know who they are but i can say that there was a lot of concern for many weeks about shelling nearby.

i think there was a lot of bravery demonstrated too i many of the experts. i remember i wrote this in my cnn.com these thursday that a large number of dutch and australian experts came on the crime site, i think was the australian commander said treat everyday indo pacific is your last one. because the point of hitting we do know how much time will be available to collect human remains, personal belongings. very difficult situation. >> one is there any come time to think through what these purpose of this misfire could have been. is there any use for a buk other than shooting down aircraft bucks isn't a general artillery weapon? i'm just surprised mother rush would bring a buk into the center of conflict if it's only

purpose as a weapons assistant is to take an aircraft spirit there was a lot of air activity. they shut down a to point previously. around that time, 10 ukrainian air force maybe even 14, i don't remember but have been shut down they were bombing the area. >> it was like a very necessary thing for the military to such a weapon. [inaudible] >> excuse me? [inaudible] >> yes, of course. the manpad -- [inaudible] >> actually there was a certain suspicion shot down --

[inaudible] >> even now the kiev government doesn't know what was the cause of the crash. >> could you wait for a mic, please? >> i just want to point out that going back to the original question social media local groups in the area, there was suspicion on the day and the hours preceding the attack, there was people suspecting there's going to be a plain incoming. there was chatter about people getting excited might be another ukrainian plane or might be more bombing. bellingcat explore that and look at that. there was a reason for them to transport a buk missile into that area that particular day.

>> i'm from the hudson institute. if you allow me i would actually like to take a step back from the mh17 episode and ask you about right now especially for those of you who travel to the zone regularly, which is a good implementation of the ground of minsk to the cease-fire agreements? >> well, as you know there've been two rounds since september and in february. february very clear roadmap was outlined for everyone to follow most crucially of course was maintaining a cease-fire. also the removal of heavy weaponry. this cease-fire as i indicated in my colleagues verified we recorded many, many violations almost everyday, pretty much every day. entrance of removal of heavy weaponry what, there were three

basic steps. one was to provide the osce, both sides with an inventory of what they have. in other words, a baseline that we could work off of. secondly was to advise us of the roots that were taken to move the heavy weaponry. and thirdly, is to identify where the storage sites are come where these weapons will be kept out of harm's way. the first point giving us inventory, we never as far as i know right now received full information from both sides. and that made it very difficult. and that also asked was he ever get reports, we go through these storage sites on daily bases and occupying the weapons have been moved, and some of the excuses we get, well, they are being used in a parade or been used on training. so that part is very difficult. the other we haven't gotten that far yet. the other worrisome thing is, we

are also beginning to see training or firing ranges pop up on the rebel side, and they are also using weaponry there that is prescribed by minsk. so it's a very difficult situation right now and you know, all the politics aside, again, we have to remind people that at the end of the day it's the civilians that are really something. -- something. i think then number i quoted, it's going up very quickly. i think in some which have 1000 2000, 3000 people leaving the conflict zone for safer ground in areas controlled by the ukrainian government. one last point on that is that after so many months of hosting these displaced people you can imagine the strain is put on post communities as far as western ukraine on ngos that

are looking after these folks on the social fabric of the country. and it does create tensions as well. for our part as we've done two things off the top of my head come with a report on the situation. and the second thing we do western ukraine is what i don't roundtables or dialogue with people to help prevent tension from this population, configuration. >> let me illustrate it. michael spoke of the numbers. the last trip i made was early june, and the very day that we went to enter was the day that there were fighting going on in donetsk and it appeared like is becoming -- although ukraine checkpoints were close i could that day and we were not able to enter at all.

we found a little hole and we did enter it but that data was fighting going on so can shift very much from day to day. that also in the factory i told you about we went up to the roof. the highest building over there in the night and you could actually see this case the ukrainian shelling donetsk airport from there. i'm not an expert on what type of artillery but it was like fireworks at night. it was just your average day. >> have you been back recently? >> no. it's been a couple of months. >> so if there's a sense, ask a follow-up question, if there's all these violations happening everyday, all day every day i can come is this come to connect this back to mh17, we don't say it's a cease-fire violation because of been it would apply this towards a certain cause of action or what is there a political decision there do not

say that? >> that are important -- [inaudible] there's the minsk meetings happening where we are involved in the security working group. again, talks are continuing. there's another meeting. it goes back to what we said earlier, it's very important the world not divert its case on the conflict. i can tell you that often at the permanent council meetings at the osh ukraine is very, very much a top the agenda. and in theory, i can say think in a very granule format with a lot of detail because we are there on the ground in such numbers, i'd like to add another quick but because we also have to look ahead. one of the things we have been reporting on which is very, very worrisome is the unexploded

ordnance. you can imagine at this limits the fighting that is how much concentrated. becoming a huge threat to civilians and two aid workers. and also a massive massive destruction of infrastructure bridges, roads, railways. i think the u.n. a few months ago, two or three months ago came up with a figure of the cost of a configuration -- reconstruction. 1 million plus. probably more. destruction of those bridges is also impeding the flow across the contact line so that they can go into ukraine proper and get their pensions, to get medical aid, things like that. very very complex. >> atlantic council. wanted to follow up on michael bociurkiw statement about 2.6 many people who have less --

spiff 1.3. >> you said 2.3. >> uprooted is the way the u.n. put it. >> but you have people come 1.3 in ukraine. then we have people in russia. you have normally two different numbers. half-million or 1 million. both very even and only have 100,000 people going to other places. how many people are left now? what is your assessment of that? thank you. >> very difficult number to come up with but let me answer it this way. you probably heard of the village to the east heavily, heavily shelled over the past weeks. we've been trying as much as possible to not observe what's going on there but also to arrange for the guns to go to for a cease-fire. so civilians can at least return. in our most recent report that the village is now empty and this could've been avoided.

we were also at the village closest to donetsk airport a few weeks back. i've was there as well. was virtually empty. and a lot of the settlements in eastern ukraine in rebel held areas, you have villages that almost deserted and those left behind are unfortunate the most vulnerable, the elderly, those with physical disabilities. at lcc some children there. i've worked a long time in unicef and we have to also mention the toll it's taking on children the number have been killed, the number that have been injured, displaced and the psychosocial distress this vote is also huge. even before the conflict i think it's fair to say that ukraine was very well set up to deal with the types of large numbers of distrust young people. so this is something the international community could

possibly help in dealing with that huge problem. do you know what you really want or a sense of normality. they want to play, go to school, roofs over their head heads and you don't want to hear shelling. i've worked a long time in gaza and west bank and to see the effect that this could have over a prolonged period of time. huge concern. >> so looking forward you mentioned these deserted villages. looking forward what do you do with this region? it's been splintered off from ukraine. russia doesn't seem to be looking to absorb it. they don't really have the money anymore to do so. this is a question to all of the panelists. how do you see this unfolding to afford and what do you do? >> first to illustrate my close numbers also again, in february i think cliff diving into the snow was in the village and i

think a village of thousand inhabitants at that time there were only five families left ear the rest of the village was totally, completely shot apart. the ukrainians have stayed on one side of the village for a few but the rebels on the other side. in the crossfire there was just not one house being unharmed. it's really, really terrible to see at i think it's very difficult of course to build a villages like that in the near future. talk about children. i also made a report about donetsk over house who is actually still running operas for children all during the war from which is like very strange to see of course to place a cinderella and warplanes flying -- flying over your city. asked about the future. so many people fled, economy is obviously not, the republic is

not able to stand for a long time because there's no money floating anymore from kiev, no pensions the whole kohl miner industries is just at a standstill. i'm very curious how long they will be able to survive being independent and not being -- [inaudible] >> i did a 23 minute long report specifically about russia's involvement in eastern ukraine so that i could say that russia is involved in eastern ukraine and not have the the cage that with anything. i know they are russian soldiers ordered by the russian government who have been sent to each and ukraine. i think the answer to what happens lies with russia. there needs to be pressure on russia if this conflict is going to end and you can't fix it into the conflict is over. it's up to russia to the end of the war. i think all measures should be

towards pushing russia towards ending the war because it has to come from them. >> we have spoken to many internally displaced people in housed, and the one thing, the one thing they always repeat to us when you ask what are you going to call him are when you want to go but they don't want to go until the shelling stops come until they're sure that kids will not be killed by live fire. the second thing i mentioned this a huge effort to divine bridges, roads, railways. the enormous threat right now it's very expensive to do you need a lot of experts on the ground. once again that would be something the international community could access as soon as possible. >> do we have time for more questions? i do know how we are doing on time. okay. we have five more minutes. go for it.

>> i am formerly with the radio liberty. my question is for we. i'm -- greedy. i'm still perplexed, puzzled by the dutch government's reaction to the downing of inmates 17. is there not a realization in the dutch government that bybiguous they are complicit in russia's denial cover-up, why of everything that that is happening? >> very difficult to answer because i can't look in to the source and the might of our government. so yes once definitely happened is that they tried to distance of them from planning the russians at this point. why they're doing that -- [inaudible] >> as a journalist i don't like to speculate too much to be

honest. there's a lot of criticism at the dutch government. at first there's been some surveys of the university, you know, judging how politics come if politicians are trusted over last year. just after inmates 17 when they brought the bodies back and there was respectful repatriation and stuff like that come it was increased a lot. first it was like 40% of the population trusted the government, and it was 60% something like that. after that when things like this started to happen, it went down again. during the last winter the trust in our government went down again on this issue also. why they are doing this i can't tell you. >> obviously quite difficult. if you want the government to pick sides for the

investigation that seems and it doesn't seem productive for the government to basically claim one thing is set and then have an ongoing criminal investigation. >> the one thing i did in my speech is there were investigators in the committee and if our government would say right now -- [inaudible] they would probably leave the investigation committee directly making, making to speculate a little bit, making let's say relations already a lot harder and also making investigation itself more difficult right now. because you want to block all parties aborted during the investigation to be able to access all the side you want to go and also yeah. >> you are very disappointed, i can see. >> thank you so much to all our

panelists. this was very interesting. thank you to the atlantic council. i think we are -- are we going to get another question? >> i like to thank everyone for coming. there's one thing i want to point out. there's going to be a memorial march for the victims of the shootdown today at 5:30 p.m. started in lafayette square and going to the residents of the russian ambassador, just so everyone knows. thank you. >> bring some flowers. >> all right. thanks everyone. [applause] [inaudible conversations] >> cuba's flag was raised today, the country comes in washington, d.c. in a summit of the new u.s.-cuba relationship. diplomatic relations were cut in

1961. full diplomatic relations with the u.s. will -- were restored last night at midnight. john kerry will travel to havana august 14 to present over a flag raising ceremony at the u.s. embassy there. the u.n. security council meanwhile, endorsed today the nuclear deal between iran and six world powers and authorized a series of measures leading to the end of u.n. sanctions if the measure let's u.n. sanctions to snap back in place if iran fails to meet its obligations under the deeper you can see that vote at c-span.org. coming up tonight, niger's president delivers a keynote speech on his nation's relationship with the united states during a dinner at the used chamber of commerce in washington. niger is seeking better trade relations. c-span live coverage beginning at 815 eastern. >> tonight on "the communicators" we'll we will speak with "the wall street journal"'s information age columnist gordon on what he thinks washington is

the danger zone for innovation. >> if you go back to earlier technology like railroads and the ma bell telephone monopoly osha regulated as common carriers regulators set prices. they set terms. they set rules. we all know what happened. it was very little innovation in railroads, then in trucking. and in telephones until they were all deregulated. all those common carriers were essentially undone by congress. when it was so clear that innovation was being suppressed by the u.s. was falling behind in its competitiveness. that was the backdrop for the bipartisan consensus of the 1990s that the internet was going to be different the this is during the clinton administration. a clear consensus, democrats and republicans that unlike the

earlier technologies the internet was going to be largely not regulated. >> tonight at eight issued on "the communicators" on c-span2. >> we are live at the museum in the nations capital with treasury secretary jack lew is going to talk about financial industry regulation. to be speaking before the better markets group which supports public interest in banking law. the event marks the fifth anniversary of the dodd-frank law being signed by president obama before secretary lew, the primary authors of that law former senator chris dodd of connecticut and representative barney frank of massachusetts. of democrats are also expected to speaker while we wait for it to get into what a look at what's ahead this week in congress. >> host: what are the key legislative items on tap this week just a few weeks ahead of

that august recess break? >> guest: that's right. good morning. thanks for having me. i think it's going to be all highways all the time. it's the last thing they have to do the last must pass piece of legislation to have to be before they leave for the long august recess. the trust fund, there is a timer is because of the trust fund dips below a certain level at the end of this month and that means it's going to cut off aid to states and other local governments, and very few lawmakers want to go back home and explain to people that are why they're not getting highway fund. there's a lot of pressure on congress to do this and they have done it a number of times over the past i think the statistic other today was since 2000 fit past 34 short-term funding bills. so the real trick is to do a short-term patch or do they give a longer-term fix? they will have the house has

passed its bill last week it passed an $8 billion patch to get this into december, about five and. the senate republicans want to do something much longer. mitch mcconnell has said he wants to do something that gives released to the 2016 election. there's another group, a bipartisan group that wants to do something much longer than that. evocative a six-year bill. a lot of sticking points and the number one concern will be paid for. everybody wants the highway bill to pass but a lot of disagreements, parts and discredit about how you pay for it. so you can expect all the sites to be taking place. >> host: isn't enough time for a long-term patch for the fight to happen in the senate and the house ask at what point does the senate abandoned those plans if it's not working for a short-term patch? >> guest: that's a good question. the question is the answer is it depends on who you ask. there are guys who think there isn't time. a lot of these safe words are

not new. people been working on them for many many years so the trick is just getting more and more people on board. as the wiki false we'll know pretty quickly i think people are getting on board and if there is a possibility for a longer-term plan. again the two ideas that we see float in the senate right now $80 billion bill that would get you through the 2016 elections. that's what senator mcconnell is looking at. than there's a group that wants to hundred $75 billion six-year deal. no one thinks that is possible am at least this month. good question. when did it go back to the house bill? and how long do can they keep fighting for the 80 billion we don't know the answer to that but we should know pretty soon because they do have a procedural vote tomorrow. to have a vote on something they don't know what it is. we will know very quickly with the going to do. >> host: before you go

community members are looking into the long august recess. can you give us a preview of some of the deadlines that hit in the fall pretty quickly right when members of congress get back into town and take up legislative and can? >> guest: sure. they will come back, it's going to be september and the government -- federal government should step on on october 1 to have a month to pass all the propecia pills or some kind of the package to prevent a government shutdown -- appropriation bills. >> now that they control both chambers they don't want that to happen again particularly year in year out from a presidential election. no one expecting a shutdown but we do expect a very tough fight over government spending. although the later you will hit the debt ceiling and enormously contentious issue, a lot of republicans don't want to raise the debt ceiling. they just want to cut deficits

and kept the data that we. we will have a fight later but the big one is going to be government funding with a two year old shutdown in mind and decided easy issue for the republicans to legislate with the conservative caucus is. >> host: mike lillis woodhill, reported that always appreciate help on the "washington journal." >> caller: thanks for having me, john. appreciate it. >> backlight to the newseum in washington. one day before the anniversary of the signing of the dodd-frank law. jack lew would be speaking shortly. to hear ahead of that from chris dodd, former senator of connecticut, and representative barney frank of massachusetts, former chair of the house financial services committee. the current chair is a jeb hensarling and didn't opt they did in the wall street to he writes that tuesday will mark five years since president obama sign at the dodd-frank law. the most sweeping rewrite of the

countries financial loss since the new deal. mr. obama told the coach of the legislation would quote lift our economy. the statute itself declared that he would quote into the ghetto and promote financial stability. jeb hensarling writes not of that has come to pass. too big to fail institutions have not disappeared. big banks are bigger small banks are few. some of the right to the chin of the house financial services committee. we will hear from barney frank and chris dodd and a bit. while we wait a look at some of the activities today. the state department, u.s. and cuba renewing a diplomatic relationship beginning at midnight last night. the flag was raised at the qm embassy. also raised over at the state department added to the collection of flags at the state. here's a look.

[silence] >> the qm flag going up at the state department it was also raised at the qm embassy in washington. it was announced secretary of state of john kerry would be in havana on august 14 with raising the u.s. flag at the embassy there. all of our coverage today of able at c-span.org. the secretary of state and the qm foreign minister speaking shortly on u.s.-cuba relations taking some questions over at the state department. that is yet to get underway and you can fold it over on c-span2. on c-span, rather.

>> i'm president and ceo of better markets and ottawa and when you're today and welcome the audience watching on c-span. thank you for joining us and thank you c-span for covering this event. i'd like to welcome antonio weiss, for joining us. ebony congressional and executive branch staffers, many of whom put in months of incredibly hard work of what we now call rather casually the dodd-frank law. including in particular the former staff directors for both the senate banking committee and the house financial services committee. i'd like to recognize someone who had the vision five years ago to see the financial reform is really about making markets work for everyone. it was really about building a stronger, safer financial system that protects and promotes america's businesses, jobs savings, homes retirement and so much more. he saw a need for an independent nonpartisan professional

organization dedicated to supporting, defending and fighting for the public interest and the financial markets and the d.c. policymaking process. that was mike masters was the founder of better markets who's also joining us here today. tomorrow as you all know is the fifth anniversary of president obama's signing the historic dodd-frank wall street reform and consumer protection act into law. the most significant financial reform legislation since the great depression. we have a terrific program today including both senator chris dodd and former congressman barney frank along with treasury secretary jack lew. i will begin with a discussion of report that better markets is releasing today on the cost of the crisis, and a copy is on every chair and it's available on our website, www.better markets.com. but before i begin let me start with a few quick housekeeping matters.

first the treasury secretary is delivering his address starting at four and to close our event. once he is finished we ask that you please stay in your seats until the secretary has departed. second, if you haven't already done so, please turn the ringer off on your cell phones. we know who you are when you forget to do that. finally, for those of you joining us in the i issue a notice to our index cards on your chairs. if you have a question you would like to ask you to chris dodd or barney frank please write it down and pass it to our staff on either side of the studio. we will see if we can get a few of them answered. let's review the crashed and the costs of the crisis. summit as by begin a figure anniversary event by talking about what happened actually more than five years ago. the answer is quite simple. to really understand where we are and where we need to go we first need to look back to understand how we got here. this is all the more important

because in the last five years that discussion has dramatically shifted from the financial collapse, the economic crisis the cost to the country and industries role in causing it all, to the financial reform law the rules necessary to implement it and the claimed cost for all that. the way some people talk in this doubt it would be news to them to learn that the world didn't actually start five years ago when the dodd-frank law was signed. you see it every day. almost all the discussion of the dodd-frank law the rules to limit it and financial reforms generally failed to even mention why the law was passed over the historic crash of the cost that made it so necessary. but without this critical context it is impossible to understand what the law was trying to prevent from happening again and why it's so important.

none of that is to suggest the law is perfect. people in this room know better than almost anybody that no one is perfect. it is the best law that our political system could produce at that time. and aciphex of the crash and economic crisis show it's a very, very important law. let's start with the basics. the financial crash was the worst crash since the great crash of 1929. because the worst economy since the great depression of the 1930s. that's why it's been named the great recession. that crashed and economic catastrophe it caused are ultimately going to cost the people of the united states more than $20 trillion in lost gross domestic product and massive human suffering. that's what is detailed in the report we are releasing today.

the topline number is $20 trillion counting and this report about one to 20 pages worth including too many footnotes than i care to count go through chapter and verse of what it cost this country. we hope to take the time to look at it. that's why five years ago president obama signed the dodd-frank law to try to make sure this never happens again to our country. so let me take a quick look back to review the crisis and the cause. almost seven years ago the financial crisis began a terrifying spiral downward. in limine collapsed on september 15 -- lehman -- 2008 come it ignited a series of almost unimaginable events captured in headlines that hope you had a chance to see and the site of the studio on the waiting. this being the newseum i thought it would be appropriate to review the story and the crisis these headlines that announced to the world as it developed.

this is monday september 15. the papers didn't know the lehman had filed for bankruptcy that night by the headlines blared crisis on wall street as lehman forest gump merrill six apart buyer, aig hunts for cash. the next day u.s. takes over aig and $85 billion bailout. central banks reject -- inject cash. mounting fears shake world markets as banking giants rush to raise capital three days after lehman collapse of the notice in the lower right in order already a world, worst crisis since the 1930s with no end yet in sight. and e-mail asacol became officials on friday february 19 to enter a federal reserve bank of new york e-mail, and i believe it to you quote --

>> that's nearly four days after the bankruptcy filing of lehman. it's easy to forget now how things were spiraling out of control and unimaginable events were happening to if anybody askedasked the week before if you don't a week later that night a morgan stanley or goldman sachs would open the doors, nobody would've believed you send it. the markets were in disarray. blending locks up, the dow was crashing every day. the new phase of financial crisis as investors run to safety. the u.s. drafts sweeping plans of the turmoil worsens. there's something interesting about this particular headline. i do know if you noticed the

picture but that is president george w. bush. is read much of report the crash and the crisis you wouldn't know that the crash happened when he was president. or that part by kevin when he was present for many of the bailouts happen when he was president. in fact, people are often surprised when the president obama has not been elected yet. this is september. that's what it means they need a little context and history which is so often missed in all the reporting on not just the dodd-frank law but just the crash. >> things of course kept getting worse. we had a money market mutual fund that broke about the result in the treasury effectively guaranteeing that $3.7 trillion money market industry. i think the country was run about 237 years at that time. it was the first time such action had been taken in the country. and then as the e-mail from the prior friday presage at a call from a morgan stanley conference

that president tim geithner suggested, goldman sachs and morgan stanley scrap the wall street mall and became banks in a bitchy right out of the crisis. if anybody said that was going to happen a week or two before nobody would've believed it. and did. that's what was happening on a daily basis. unimaginable actually catastrophic events were happening as the financial system was spiraling into a crash. wells fargo and its european banks, that's about it. the good news at least according to some it says treasury and congress signed off on a bailout package. citing great financial threats officials with two massive bailout package, and hopefully get the insights from chris dodd and barney frank about some of these events and some of these meetings in the next hour. the bailout plan as you all remember was rejected by the house. what happens of course is the markets crash. once again policymakers can

government officials and the markets are plunged to the abyss with no one really knowing what happens next. t.a.r.p. was passed, $700 million. another part of the discussion that happened since then and now was the talk about t.a.r.p. mean the only part of the bailout would of course we all know that's not true. i will return to that in a minute. then using the t.a.r.p. money the united states -- largest banks, who would've predicted that? no one. we must remember when we thinking about what dodd-frank was responded to end what it was trying to defend is not just the recurrence of what exactly happened but the conditions and circumstances under which the future financial crisis might happen went equally unimaginable events occur that today no one foresees and everyone would discount. the $700 billion t.a.r.p.

bailout is just a small part of the trillions in bailouts big the federal reserve board, the treasury and the fdic guaranteed let or otherwise used many trillions of dollars more in bailouts and rescue progress. is just one as you all know. zero interest rate policy that's been in effect since the crisis. the fed's balance sheet balloons to more than $4 trillion. the crash -- sorry. they get trashed continue deepen to 2009 fasted economic crisis. something else that is often forgotten. people often think the crisis essentially peaked when lehman collapse during the few days or months after that. well into 2009 the economic crisis continued as did the financial collapse. this is one indicator of the economic crisis. that's the dow. ultimate we now know in hindsight that march 9 2009 was the low. at the time nobody knew that was

the low and of course when you look at the trajectory you had good reason to wonder where the bottom was. one of the most important document i think the entire crisis and, indeed, maybe in the history of the country, and maybe the most overlooked is a joint statement of ever 23rd 2009, issued by treasury and fdic occ, and the federal reserve. let me quote. the government will ensure that banks have the capital and liquidity they need to provide a credit necessary to restore economic growth. moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they're able to meet their commitments, closed quote. this is tipper 23rd of 2009. pretty deep into 2009 and the financial crisis is still so bad that the statement was issued effectively putting the full faith and credit of the united states behind the financial system effectively putting the

wallets of all taxpayers in the united states behind the financial system. that's what happened and that's what was at stake at a time. then there were enormous human social and government costs. this chart is that u-6 rate month by month. u-6 rate is under and unemployed americans. unemployed is well known concept or underemployed major forced to work part-time because you can't find full-time work. what this chart shows is that it exceeded 17% in october 2009 and remained above 17% provide of the next seven months. even when it got below 17% you can see it's to remain incredibly high month after month. so what is 17.6 -- 17.5% quick to put it into perspective it equals the entire population of the state of texas and it is one out of every six workers in the

united states. and it compounds month after month. and that's only the people who are getting unemployment or unemployed. of course, many of those were heads of households. so the implication of just this part of the crisis, the employment part of affected many tens of millions of americans well into the 50 and 60 million. 27 million americans direct affected. many heads of households. the ripple effect into the 50 or 60 minute americans is what we're talking about just some employment. housing crisis collapsed back in 2001 levels relatively quickly. historic foreclosures were out of control. millions and millions of foreclosures. small businesses were crushed. s. economic activity plummeted one at the front line organizations in terms to feel that were small business and they started going bankrupt at historic rates due to the complete collapse of economic

activity. and underwater homes really beside crisis, went over 30% would she say the mortgages were much higher than the value of the homes could be sold for in the markets as crisis collapsed. you can see through today there's still way too many underwater homes. there's tens of names of americans and families behind those numbers. this is just one picture you can take in '08 '09 2010 2011 of lines at job fairs. this one in atlanta. this is children the elementary school in southern florida in october of the 2011. at the time every weekday more than 200,000 hungry students were getting free or reduced lunches. because they couldn't afford them often almost always because of unemployment and foreclosures and homelessness. at that time in that county in

the economy was so bad that seven out of 10 students, 71% were eligible for those lunches. this is i think one of the most telling photos. the ripple effect that state and local bubbles and the collapse of the economy in the financial crisis, this his fellow firefighters applaud a five year veteran at the camden fire department who's telling them to keep up their hopes as they prepare to turn in their gear after being laid off. camden laid off one-third of its firefighters. that act was repeated with firefighters, cops teachers and whole bunch of other state local municipal workers because of the collapse in tax revenue and the diversion of resources to mitigate the economic effects of the financial crisis.o is unemployed applying for food stamps in february of 2011. food stamp use in the country skyrocketed in 2011 to ultimately being used by 43.6 million americans. that should surprise no one when you look at the unemployment

numbers and a foreclosure numbers and the underwater home numbers. this woman in 2010 holds an unemployment check from burbank, california, pictures laid off from a quality assurance job which was making $100,000 a year. this is the quote from her. it really gets me when they say you lazy people. they have no idea how depressing that is when you have been beating your head against the wall trying to find work closed quote. that was the economy facing tens of millions of americans. with tax revenues plummeting and social needs of skyrocketing government deficits and debt ballooned. so as you can see, i hope you can see if you really good eyesight may be but it will then start in 2008 and really takes off in '09, 2010, 2011. that's as tax revenues evaporated and social needs of skyrocketed. this is a very telling chart.

this is the u.s. debt as a percentage of u.s. gross domestic product. in january of 2008, cbo projected the status of gdp in 2018 at 22.6%. just three years later cbo random projections again in january of 2011 and in 2018 u.s. status percentage of gdp skyrocketed to 75.3%. one thing and one thing only happened between those two projections of any magnitude, and that was a financial crash that economic crisis hit cost. and this is a chart that shows your real tax revenue is still lower in the second quarter of 2014 in 29 states since the recession. so not only did it go down at all 50 states at the time of the recession, at the time of the crash and the afterwards, deep

into last year and in fact continue to this year real revenue is still down. it's interesting the same thing as happened in the private charitable sector nobody talks about this. charitable contributions decline as the economic crisis continues. charities were asked to provide more services with less support to the exact same problems that squeeze the federal, state and local governments squeezed charitable sector, too. charitable giving declined the worst in 50 years. id and no surprise. this shot was the worst shock since the great crash of 29, and the great depression of the 1930s. so you would think he would have roughly similar declines in other activities including charitable giving. so public finances are tremendously stressed. deficits and debt drive decision-making. private charitable activities suffer. large endowment losses in contributions decline.

at virtually every issue anyone cares about have suffered due to the trillions of dollars both extended or used to stop the financial christ and mitigate the damage and economic crisis. this is just one example. federal financing for r&d which of course, underpins much of our economic growth and leverages the r&d and the private sector and 2009-2014 it dropped a calamitous 26 points 7%. but that's not the only area that saw a collapse. almost everything has suffered from cuts and underfunded from education, poverty, art science, housing the environment energy you name it. every one of those issues passing funding cuts since the 2008 financial crash on both the public and private funding side. many of those cuts have been very significant. even future funding increases it will never make up for the lost jobs, homes, funding for these programs the r&d that wasn't

done and, indeed, in many cases lost lives and lost dreams. let me conclude by mentioning just one of the cost which is never mentioned. that's the exploitation of financial reform for political and partisan gain. given the devastating cost of the crash and the crisis inflicted on tens of millions of americans families, workers and businesses, rethinking such a catastrophe from happening again should not be a political or partisan issue. after all, the economic wreckage and the cost knows no party, as this chart shows. the economic calamity caused by the financial crash hit everyone regardless of political affiliation. so this chart shows by state the average usage rate for roughly a year, from the fourth quarter of '09 to the third quarter of 2010. -- use x-ray.

it's broken down by great state and blue state. what it shows is the economic wreckage from the financial crash really doesn't care whether you're republican or democrat or an independent. with your east coast to west coast or the middle of the country. the economic wreckage after inflicted massive damage in every part of this country. that's why it shouldn't be a political issue or a partisan issue. because the wreckage wasn't political or partisan. the financial crash and economic catastrophe caused that would make financial reform and dodd-frank so essential. preventing that from happening again is what the financial reform is really all about. it's not about numbers and statistics. it's about protecting americans jobs, businesses, homes savings, retirement and standard of living. it's also about making sure that public funds are never again diverted from social priorities to bail out reckless financial activities.

and that's also why the dodd-frank financial reform law must be fully implemented and aggressively policed as soon as possible as strong as possible and as thoroughly as possible. with that is in summary the cost of the crisis and a review of the crash which is essential context one needs to understand the dodd-frank long to talk about the dodd-frank law i think on an informed recess. ..

>> joining me in welcoming senator chris dodd. [applause] >> former congressman barney frank. and our moderator. [applause] >> hi. >> you are over here with me. >> all right. >> just the two of us again. >> let me do quick introduction. senator chris dodd after serving six years in the house of representatives served 30 years from 1981-2011 in connecticut. during those decades he was fair

to say in every major national policy debate. he worked in the 111th congress in 2009-2010 and led the fight for two historic pieces of legislation. first the affordable care act which led in the senate after friend and colleague ted kennedy fell ill and passed away in august of 2009. and senator dodd picked up that legislation and carried it through to the end and it was a remarkable accomplishment. but that wasn't enough for senator dot. he led the fight for finance reform. senator franks from 1981-2014.

he has been at the center of every major national policy debate as well for those 32 years. from 2003 on he was the leading democratic on the house financial committee and served as the chairman was 2007-201 is where he too shepherd financial reform into law. i will say you have to read this book. and don't just read the book. read the two appendixes. if you care about the issues we will talk about and they will talk about there is that and more in his book and it is terrific. he didn't ask me to do that but i would not resist. our moderate spent more than a decade at the "washington post" and covers the federal reserve and the economy. she is a con tributer at cnbc and guest host c-span's

washington journal. she covered the financial crisis and crash for some time. she has done reporting on the long-term unemployment benefit cuts and what it did to so many american families as well as terrific reporting on the metastasizing devastation from the sub-prime mortgage closure. we are looking forward to having a good discussion. >> thank you for that kind introduction and thank you senator dodd and representative frobbing frank for being here. i would like to get your take five years after the law that bears your name has been passed. where do you think it has been most effective in insuring the financial system is safer and where do you feel it has fallen short of your expectations? >> we could spend the next -- >> in five minutes or less. >> i think first of all one of the things i appreciate is

reminding people i say as a nation we are blessed and burdens with no memory. that has been an asset in many cases but a burden in this particular case. so it is important to go back and remember where we were when we were loosing 750,000 jobs a month. over that period of time 10 million jobs lost five million homes and 13-20 trillion in national wealth evaporated. we are still seeing the effects of that to this day. institutions investment things credit unions insurance companies, commercial banks, many which have been around for decade decades are gone. all of that happened and today it is hard to remind ourselves what actually occurred and how

devastating this was. you ask me what changed a lot. the economy is doing better. 64 months of continued employment growth reduced the deficit which is huge banks are capitalized at $600 billion, leverage is better liquid assets exist many think too much but considering where we were that is tremendous transparency in the derivative market is a major achievement. going from 90 billion to 600 trillion in a decade or so. we made sure, to a large extent and time will tell that you cannot have taxpayers bail out institutions by having funeral plans, stress test and resolution authority. and for the first time in the country there ought to be something called the consumer

financial protection bureau. barney and i celebrated the incredible work that administration has done. 17 billion people have had $10 billion of their money returned. 650,000 consumer complaints have been handled by this agency in four years. in the past you had to pass separate pieces of legislation to deal with consumer issues and today it is one-stop shopping for all of that. people say what happened has been phenomenal. not all of this is because of our legislation but without it it would be difficult to talk about the economic recovery that occurred. >> a couple specifics. i do have to say i am older than chris but not senior in service because he had six years in the house so he has 36 years to my 32. >> it is 68 all together.

>> i am thinking how young he looked there. what we have accomplished i think, it is hard to look at the specifics because much of what we did was to avert trouble. but there were two things that were curiously problematic. worse than problematic. the number of bad loans being made today, i guess that is talked about your work with the closure crisis actually i am glad dennis mentioned the apendix of my book. in 2004, for example, mel watt co- co-sponsored legislation to fan the sub-prime loans.

we tried to pass the bill and it was written the republican leadership ordered it to die. but you do not have the kind of toxic loans which is good were the system and individuals. secondally aig was one of the participants in the crisis and i must say -- secondly -- yes he didn't give him money but it was an odd opinion. aig is suing the federal government and the best description is the arsonist suing the fire department for water damage. what happened with the aig is they were selling credit to false reps without the ability to pay off and any idea how much they sold first they told the feds $85 billion in the hole and then $170 billion and wound up being $185 billion.

that can not happen today. no one has the ability to pay for it. the second point is we have i think, seen a confounding of the negatives we got from the left and right. people on the left said this bill doesn't do anything. a lot of my friends and some of them are not happy and they are not hon complaining first the bill didn't have any teeth then they said the regulators pulled its teeth. they said without any force it was not being implemented and they were wrong in both counts in my judgment. the biggest mistake on the right with the advances and kept america from having the best economy in the western world and hasn't stopped the financial institutions from doing what they are doing.

and in the next to last point we didn't ban anything in the bill except banning people money for homes that could not possibly pay it back. it said they can take any risk a they want but they have to stand behind them if they go back. that is the essential fact. by biggest disappointment? you get the bill through and we had to add, what i thought risk retention in the business was the single most important thing we could do and to get the bill through we had to create a what i thought, was a small category where some very small loans could be exempt from this retention. and people talk did the banks weaken the bill and my liberal friends joining with the banks realtors and home builders to

take the loop hole so you have no risk retention for mortgages. you have it in other parts of the country. they didn't make it permanent and i hope we don't get there again. but the exemption of all -- and i know it was if we have risk pretension for mortgages we would not have mortgages which meant before 1980 there were no mortgages because we didn't have it then. that is my single weekakweakness. >> you mention the strength of the economy as a sign recovering. $25 billion is the number being thrown around. >> who is throwing it around?

>> $25 billion is what is being thrown around for the cost of complying for financeial inconstitutionin institutions. and representative dawn said has dodd-frank never left the system more secured. many of the things identified are primarily a result of the law itself. has dodd-frank made the system more unstable? >> of course not. this is ridiculous. does anyone want to go back to the fall of 2008 when we asked taxpayers for write a check for $700 billion. look at what is happening in europe? we have not hurt the lending institutions to the extent of the cost of the taxpayers writing this.

we prohibit if you try to do what we did in the tarp legislation, it is bad to go back and ask the american taxpayer to do what we did in the fall of 2008. and clearly, capital if nothing else and leverage and liquidity is in better shape. they dealt with a number of in institutions through mutual funds. looking over the horizon to make sure they are not product lines for institutions that can cause the damage in the past. doesn't mean we will stop the crisis from happening but we have to ability to stop them earlier enough with the coordination we didn't have in the past. and the shelby-dodd amendment that passed with establishing

the stress test the unwinding if you will that senator carr and the legislation think we will work. the fdic has the history and record to do that. on all of those major issues that didn't exist today we are clearly in far better shape and the reason as bonnie pointed is because of all of the economies around the world doing the best and stable is ours. it wasn't a miracle but it was because of hard work. >> are there unintended consequences like the issue of marked luiquidity? >> i was amazed to read -- i wish i had the ability to say ridiculous things and be unphased by the potential reaction. complaining nothing has been

done about fannie mae and fredi freddie mac. he is the chairman of the committee over those two. the republican control from 1995-2006 and did nothing about it. in 2007 when we had control we passed legislation that they asked us to do to put them into conserve ship. the republicans have been in control of the house for five years and done nothing about it. as far as the unintended consequences there is one case where they say there was a shortage of liquidity, i have seen no evidence this was caused by anything we did by requiring people to have capital. in the first place it was a bit

that clearly dealt with. it had no negative long term consequences. when you are in a transition there are things to work out and people are getting used to it. i do not believe the requirements for higher capital and standing behind the risk you take is a problem and you have to learn to live with it. i will say paul is the one who said by the way the notion that liquidity is the single most important thing to look for and everything should give way before greater liquidity is one reason you get in trouble. anything you do to safeguard the system and diminish liquidity. the biggest one they talk about is the supposed problem for the community banks. i ask people meeting them what

in the bill do they specifically have problems and i don't get answers. the bill is in favor of community banks. they pay less for fdic insurance, the increase in maximum was done at their request to diminish the competitiveness. and i think what the opponents of the bill have done is very clever. they have done a bait and switch. they talk about how the community banks have been hurt but when they get a chance to legislate they help the big banks. in the one case where they held the appropriations bill they e amended the law. i don't know many $3 billion banks that worried about this.

they talk about the community banks but work to help the big ones. >> let me come back to the fannie and fredie issue. the reason we had 75 votes in the senate is because we had a lot of cooperation. i remember on the floor of the senate it was not the lack of trying. we just couldn't up with an answer that was satisfactory which is a separate issue that needs to be dealt with. the tail wagging dog being the source of the problem is your point. unintended consequences is not a reason not to legislate. there is always going to be unintended consequences and think -- things you will want to

change down the road but you don't sit around and do nothing. you would never legislator if that was the case. >> the criticism we didn't end too big to fail i think we are done and the proof is this. some institutions are in that category. others are subject to the discretionary judgment of the f-stock as to whether or not they will be in that category. they are fighting against the idea of it being a benefit to be in that category. why is met life suing to get out? and mid-size banks trying to push up the $50 billion? the criticism comes from tim geithner and others in the community that we made it too hard for the fed do is bail out banks. i disagree with that. but they say there may come a time in america when it is

important for the public to come to the aid of a major institution and my answer is given what we have been through if in fact that is the case, you will have to persuade congress the notion you would give the executive branch unilateral right to do that misreads history. and there was one allegation that the bill contribute today a temporary problem with liquidity and it seemed they got the buy side/sell side mixed up in that. that is the one thing in five years they allege was damaging and it lasteded a couple hours. >> you mentioned the repeal you called a frightening precedent. there have been 139 bills to repeal dodd-frank all together or reform or change the law. i am curious to see where you

thing -- where do you think this law will be five years from now? >> a frightening precedent was using the appropations bill to get the cut. i don't believe the president vetoed it on that ground. they had this is about how to manipulate derivatives they would have backed down. but it wasn't the substance, that was a huge hole, but i think at this point they talked about repeal but compare obamacare to financial reform. they had 50-60 bills on repealing the health care law.

no votes on repealing the financial reform bill. the only bill i saw in 2011 to repeal the whole thing came from mitchell bachman who is not in the leadership -- michele -- of the republican delegation from minnesota. they are afraid of it. they know it is poplar. that is why they make the big arguments about the community banks. the danger is if republicans are elected president, and i think they will be very afraid of the appeal in terms of voting fraud but i think the danger is they will appoint the kind of regulators they appointed previously who will not have the powers they had. >> i think it is quaint to say this today but we happen to be friends and richard introduced legislation and banking but little to do with dodd-frank.

nothing on the consumer bureau or f-stock so the ideas he is proposing is different which is important to note. and there is this chatter about undermining it. you go back and question things. i regret we didn't have self-funding for the fcc because what killed the efforts in the past was to starve the federal trade commission is an example. starving the agency in its ability to do its job. we did the financing of the consumer protection bureau which was smart but is an area of contention. the one thing i do worry about to some extent is the health care bill has financial interests that care about the bill. the insurance and pharmaceutical insurance and they will releluctant to have changes to that. the financial reform bill

doesn't have big interest in the bill. the culture changed dramatically. i was speaking to a former staff member of mine talking about a bank he works with and he said i cannot tell you the number of risk committees i attend. they didn't exist previously. institutions sitting around thinking about product lines and if there are risk implications that didn't happen before. there is nothing in the bill requiring that but it shows how the culture is changing within financial institutions. and many into a stowstitutions are ahead of the regulators. i am optimistic about what is occurring in the market place. we don't have major financial interest to defend our product such as health care. >> i agree with that.

if hillary clinton is elected president in 2016 the bill will survive even if there are people -- there would be vetoes and i am not looking for head on conflict, it is still a poplar thing. by the end of the next presidential term, by 2020 these practices are going to be embedded. the president here is the new deal. you look at the rhetoric of the late '30s and '40s the fcc and security exchange act and investment act were predicted to be terrible. by the end of world war ii they got used to them. and i think by 2020 after ten years, they will have taken root and they might nibble at the edges but it is not in their interest to introduce all of this instability. so my major fear is that it will

get underadministered. i thought about it while we were talking. to some extent we have diminish diminished their ability to be kind of self-mobilizing in the sense where we have diminished the ability of the financial community to be a profit center on its own as opposed to be a financial inter financial immediate. it is clear with the the inventions in the '80s and '90s the major justification of the profit of the institutions than a service it served for the ro

production of the economy. >> historically financial institutions are 20% of the profitability of the community and rose to 40% at the end height before the crisis. >> we heard dennis talk about the importance of context and remembering how bad things got during the crisis in 2008. can you sort of take a trip down memory lane? when did you realize the depth of the crisis? >> let me say, dennis thank you for highlighting this at beginning of it. in the summer of 2006 jack read and jim bunny had hearing on the

house crisis. i took over chairmain january for the first time of '07. we had almost 90 hearings or gathering on the growing mortgage crisis. hank showed up to take about china. harry reid bear sterns over st. patrick's day week in 2008. but that was a one off. this thing was cratering as we were talking. the crisis began long before the announcement. the refusal to recognizing what was occurring and all of the evidence was out there. this is what was most disturbing. it was going to be a big deal anyway but it could have been a lot less of a big deal if we had operated early to stop the metastasizing if you will in the mortgage market. then it blows up six months late to the day with the window we

scurried around the meeting in nancy pelosi's office where it was said and i will quote them being i remember it being etched, unless you act within a matter of days the entire financial system of this country and a good part of the world will melt down. that is one of the most important central banker in the world telling the leadership and the president to do that. it took two weeks to write the carp legislation. we did it in the senate and house and barney said it was probably the single most unpopular thing we did but the most important. this process began earlier tan that know -- than the fall of 2008. >> yes it is true we saw the

mortgage crisis. mortgages given to people who should not have gotten them was at the core of this. then the mortgages were bundled up and they were bullets. it started with the mortgages and they are put into packages and sold against them. the key was the bad mortgages. there was a myth it was because nickels wanted to give housing to poor people. in 1994 i was not very active but the congress was the last year of the democratic congress a while pased the home owners equit equity protection act getting the federal government the about to regulate mortgages. a favorite quote of mine in 2007 before it was obvious what happened economics in the age of turbulence book said it is true

these mortgages carry a high risk of non-repayment but is a risk worth taking because you cannot have a capitalist society without support for property rights and this creates support for property rights. a group of state starts the act. georgia and new jersey and north carolina had activist to regulate mortgage practices. the bush administration responds in 2004 by a blanket preemption of any state regulation of national banks. the only things the state could do was enforce the fire code and say you could not discriminate on racial grounds. states couldn't do thing to interfere with the businesses. total blanket preemption.

part of the bill restored what the states could do. a significant amount of regulations. so that was the first thing to repair. second it was the states and the bush administration preempts it. brad miller and mel watt try to draft a bill. the chairman of the subcommittee is sympathetic to us and we start working on the legislation. tom delay says we are not in the business of regulating like that and he ordered him to tell him to stop trying to do it. things die until 2007 when we take over.

in november of 2007 we get a bill through under democratic control to regulate prime mortgages. "the wall street journal" as an editoral november 2007 you can look it up and attacks me for keeping low income people especially minorities from getting home and says why concern about the sub-prime loan when 80% are paying on time. like that was a good statistic. 80%. we got the bill through the house, run into opposition from the conservatives in the senate, but we finally took that legislation that we had worked on jointly and it is part of the financial reform bill. that is the history. what i didn't see was how badly

it affected others. they did come to us in 2008 and say here is the pump before leiman. and we have two choices if the big bank goes bad. let it go bankrupt and have problems or take it on and pay all of the debt and that is what played out with lehman and aig. >> the first act of that became the dodd-frank was more radical with three agencies overseeing the entire financial system. can you talk a little bit about your thinking at the time? why you decided to make such a bold statement with your draft legislation and some of the political realities that sort of

went into the crafting of what eventually became the dodd-frank bill? >> the discussion draft in 2009 and today a lot of institutions like to revive the idea that seemed radical at the time. but the idea of a single regulator would have a larger following than it did then. at the end of the process we wanted to get rid of the unnecessary given the fact the regulatory bodies this was never a sweeping set of architecture, there was some new regulatory body created with every crisis >> and this one as well. >> to a large extent yeah. the idea was originally if idea of one single financial regulator as a way of creating far more efficiency in the system. you had regulatory arb triage and people were out shopping to find a regulator of least resistance so they could do what

they wanted to do. that was the basic idea. we got three votes in the committee and people screaming bloody murder about it and we moved on. that is what you fry to do as the chairman of the committee; testing ideas and finding the tipping points of what people accept and reject. we incorporated the idea it isn't an illegit and we tried to create a system to allow that to occur. it is called radical but today i think you might have different thoughts about it. that was the genesis of the idea. >> you try to do a lot of tough things at once. we did very difficult, politically hard, complicated and my head hurt after. when i retired, announced by

retirement, i celebrated two things marking my retirement. first it was in november and i announced i was not going to march in the christmas parade in the cold. >> fair enough. >> and secondally i began to sing my version of ain't going to study derivatives no more. i was very happy to get rid of it. here is the deal. there are political resistances to substance and institutional change. trying to do them both in one bill -- we barely got 60 votes in the senate. we came very close to loosing a couple of the key provisions in the had yous -- in the house. the fed became very controversial. so people were furious if you

gave the fed more power and people furious if you gave them less power. and one problem i had never anticipated and didn't know enough about but the independent community bankers complained because chris made one credential regulators and the community banks said the state chartered bank don't want to share a regulator with the big banks. they were afraid if it was the same regulator they would be overwhelmed. that was the political factor why we could not do it. we did as chris showed get rid of the office of super vision because that was clear dup lie duplication. regulator for country wise and aig and anybody else who didn't want to be regulatored.

-- regulated. i had a fall back and i wanted to change the office name. but that was the basic problem. we had a very hard political job trying to make the substance changes and then multiplied with the other changes. we had the dual banking system and most countries don't. that is the cause of a great deal of the compplexity of our system and unless you are prepared to do away with it you have to live with it. >> financial reform shouldn't be a partisan issue it was mentioned but i believe in the senate only three republicans actually voted for the dodd-frank bill. can you talk about your efforts to garner republican support? >> listen if i could speak to the house side the bill in enclosed a lot of republican ideas. the actually vote at the end of

the day you end up with the numbers you cited. in the fall of one evening of 2009 i asked all of the members of the committee to gather in the senate foreign relation committee hearing in the first floor of the capital. after a vote around 7:00 at night. i didn't tell my staff or share with anyone else. what i did, it was a little risky, and i announced i was preparing to work on the legislation. and warner and corker worked too big to fail and schummer worked on corporate governance and i worked with dick shelby on consumer bureau and jack read and greg hardy worked on the

regulation. everyone liked the idea and went off in pairs with staff. this is too big of a project to take on with the chairman's job. they made worthwhile contributions to the product you can see. they contributed a lot in some cases. in the case of jack reed but they could not reach cloche closure on the derivative side. corker and warner had tremendous contributions. senator kennedy was a master at this on major complex pieces of legislation asked democrats and republicans to work together to put something together we can all support. so it was saddening in a way, and i did -- we took provisions of the bill. the provisions the in -- in the

deal deal deal -- in the bill dwiingealing with the congo. texas provisions incorporated. i am looking at amy. amy friend was general counsel during the consideration bill. we made the effort to bring people in as you normally do if you take major provisions and they end up being supported and may not like other parts of the bill. no lack of trying and in fact the bill reflects an awful lot of contribution i described earlier. >> i became ranking member in 2003 with mike oxly. i had a good relationship with him. he was in charge. i had power i didn't realize because dick cheney wrote in his book in 2000 he said in 2003

the administration tried to get reform of fannie mae and freddie mack. but said i killed the bill but i wasn't chairman until '07. i was distressed until realized i was paid an honor. having dick cheney lie about what i was doing in 2003 kind of put me in the same category as weapons of mass destruction in iraq which is an unusual distintctiodistint distinction. we passed a bill in 2005 that was bipartisan but the bush administration thought it didn't go far enough and it died in the senate because the senate republicans didn't like what the house republicans did. bite worked together on it --

but -- then i become care chairman and the republicans decided this. i mention the sub-prime loans. he tried to work with us and was overruled. in 2007 when he is the ranking member of the full committee, he works with us and did adopt in 2007 a subprime restriction which never passed the senate in 2008 but became part of the bill. that was the basic law. we were working with spencer on the bill and he voted for the bill when it went to the floor of the house. as a result of working with us and bringing republicans along the more conservative republicans who were dominate went to the house leadership and tried to get them dumped. this was reported in the hill. harry reid -- he had to fight

save. but they send people over from the republican leadership to control him. there would be times when a statement came out and i said how can you say that and he said i was told what i was going to say. he was penalized for working with us and from then on there was no cooperation. and when president obama came in, this is part of the problem, the republicans -- when bush was president there was instinct to help the administration. when obama is president there is no partisan reason to work with the administration and no ideaological so i never had a chance. john miller was interested in housing sub-prime but the word was out they would be in total

opposition. so you say it should not be partisan but i should not have to chose between being fat and hungry. >> i should have mentioned, susan collins was incredibly helpful by voting for the bill and adding substance to the legislation. snow from maine and scott brown from massachusetts was a helpful and jim siegel who is here. >> scott brown's staff helped a lot. we were getting the three in the senate. two in the house? joe cal from beating bill jefferson in his freezer. and then mike castle i think wrote the bill and lost to the lady who wasn't a witch.

>> those three republicans in the senate were very brave. >> people say did you have one extra vote? no, we didn't. those three agreed for their own protection they had to do it together. you get the three votes and you get a phone call that i hated to get. chris calls saying we have a problem. this is why there hasn't been enough attention. we paid for the bill by an assessment on financial institutions that are $50 billion more. they said it would cost $20 billion within ten years and make more money outside. we assessed their financial instuitution institutions. that became too much and chris gets word from them they cannot

vote for the bill on the floor. we got it out of conference because we didn't need the republican vote in the conference conference. but chris tells me they have been told we cannot do it. we finalized it conference signed the bill gaveled and two nice things about the conference there are no rules and no one had one in a long time secondly. you network experience. >> i saw the parliamentary -- >> let me explain what happened. tell you what he said. chris calls me and says they won't vote for the bill. i announced the conference was reconvening and we amended the bill and took out extra money and that was it.

>> it was about 4:00 in the morning. and i forget which member of the republican side of the house or senate made a suggestion and i told them if we can all live with that we can pass it with that idea. there was a strenuous objection to the paper described. we signed the conference report, this is where it gets delicate it was a major decision for the parliamentary and the senate when you sign a conference reports and there are rules -- >> in the senate which is crowley -- usually the opposite way around. >> you asked! i didn't ask. >> when you sign the conference report as long as it hasn't

been signed or voted on it is still a live conference. but it was more than a day for the parliamentary to come around and a years before a confery changed on a transportation bill and that was exceeding the authority. so they are delicate about when a conference report is a conference report. and we had to open it up go back and change things. >> turn to questions from the audience. we have time for a few. would holding individuals a accountable for violations at big banks improve the safety of the financial system? >> i believe it might. we have enough other factor in there. i am puzzled by no one was found guilty. i want to say to my liberal

friends we held to the im importance of due process and an element of that is you could not be prosecuted for which you didn't know the action was criminal. it is not ignorance of the law. there was things that were bad but not criminal. i still don't understand why they didn't prosecute a few more people. >> barney is right. what happened in a number of cases, what they were doing was actually legal. it was not illegal. it was highly irresponsible to put it mildly in a sense. we tried to do some things after the fact to create where this would be punishable. we were not drafting a criminal statute. we were dealing with a banking

bill. >> i didn't have jurisdiction over criminal. >> we had another committee involved because it was the same for me. we did things that i think don't get as much attention as people talk about it. the risk of information has experienced major changes allowing someone now to by pass going through the corporate structure and directly to governmental bodies where they believe wrongdoing occurred. so people are nervous that would be highly disruptive and disgruntled employees. i am told by the fcc to their great surprise this has turned into a tremendous source of information in terms of going after wrongdoers. everything three years, god forbid, shareholders the owner of the company have an opportunity to vote on things being well managed and even compensation which today is not done in the regulatory process.

it is short of criminality. >> a narrow win on say on pay we dread to the house ceo of citi corp. he won the pay in such a narrow margin and that is why he left. >> senator chris dodd and representative barney frank thank you so much for coming in. [applause] >> i will give one more plug in terms of what is illegal, withdrawn or right. it will take a few minutes to setup for the treasury secretary. we will be right with you.

>> jack lew was just speaking at the museum in just a few minutes. i will let you know the associated press is reporting the federal reserve is directing eight of the u.s. biggest banks to hold extra capital to push against unexpected processes and reduce the chances to taxpayers. the banks include jp morgan chase, citi group and bank of america. as we bring you back to the museum to here from treasury jack lew in a pew few minutes but first what we can expect on capitol hill capitol hill this week >> what are the key legislations on tap this week? a few weeks ahead of the august break. >> i think it is going to be all highways all of the time.

it is the last thing they have to do. the last must-pass piece of legislation they have to do before they leave for the long august recess. the trust fund, there is a time restrain here because the trust fund dips below a concern level at the end of the month meaning it will cut off aid to state and local governments and very law lawmakers want to go home and explain to people why they are not getting highway funds. there is a lot of pressure on congress to do this. and they have done it a number of times over the past the statistic i read was since 2009 they have passed 39 short-term funding bills. the real trick is do they do a short-term patch or a longer-term fix. and the house already passed its bill, $18 billion patch to get to december. about five months. the senate republicans don't want to do that. they want to do something longer. mitch mcconnell wants to do

something at least through the 2016 elections. and there is a bipartisan group of senators that want to do something much longer than that. they want to do a six-year bill. but a lot of sticking points here and the number one concern is going to be the pay. of course everyone wants the highway bill to pass but a lot of partisan disagreements about how you pay for it >> is there enough time for a long-term patch for that fight to happen in the senate and house? at what point does the senate abandon those plans for a short-term patch if they are not working? >> the answer is it depends on who you ask. a lot of guys think there is time. people have been working on them for many years so the trick is getting more people on board. as the week evolves we will know

if people are getting on board and there is a possibility of a plan. two ideas, one is an $80 million getting through the 2016 election, and there is a group that wants $275 billion six-year deal. no one thinks that is possible at least this month. good questions and when do they go back to the house and pass the $8 billion to get through december and how long do they keep fighting for the $80 billion we don't know but should soon. they have to vote procedures tomorrow and we will know quickly what they will do. >> before you go you mentioned members are already looking ahead to the long august recess can you give us a preview of the deadlines that hit in the fall quickly right when members of

congress get back into town and take up ledgegislateing again? >> the federal government is shutdowning down october 1st so so they have a month to prevent the government shutdown. two years ago the government did shutdown because they could not get that done and it bit the republicans politically. now they control both chambers they don't want that to happen particularly a year out from a presidential election. no one is expecting a shutdown. but we expect a tough fight over government spending. a little later in the fall you will hit the debt ceiling, another issue that causes issues with a lot of republicans not wanting to raise the debt ceiling. they just want to cut the debt that way. we will have that fight later. but the big one when they come back is government funding with

the two-year old shutdown in mind and not an easy issue for the republicans to legislate. >> always appreciate your help on the washington journal. >> and here at the museum in washington, d.c. expecting to hear from treasury secretary jack lew speaking in a moment. a bit more from that story reporting the federal reserves directing eight of the biggest u.s. banks to hold extra capital above and beyond the requirements. they would need to gather about $200 billion in additional capital together. they are aiming to shrink mega banks so they have less of a hold. chase, citi group and bank of america are a few of those

expected to hold more. jack lew is expected to speak on the financial state of the u.s. look earlier today at the flag going up at the cuban embassy after it has been shuttered for more than 50 years while we wait for that.

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[cheering]

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[cheering] [applause] >> shortly here at the museum we expect to hear from treasury

secretary jack lew and you can find the earlier conversations with the authors of the dodd-frank bill in the c-span library.

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>> we are live at the museum waiting for treasury secretary jack lew to be speaking at the museum. we will look at remarks by secretary of state john kerry and the foreign minister of cubea cuba. actually it looks like secretary lew is showing up in moments so we will stand by to see if he takes the podium.

♪ >> we are honored to have secretary lew here. he was confirmed by the united states senate as the 76th treasury secretary in 2013. before becoming treasury secretary he was president obama's white house chief of staff and before that director of the office of management and budget in the obama and clinton administration. at and before treasury i could mention accomplishments but i webbeded to mention one of the

things we fought for. none the less it is cfdc funding. it is one of the mow important regulators one of the most important jobs in protecting the american people from the dangers of the derivatives. it is a small agency under attack and underfunded. it is more than $2 million in the federal budget of trillions. and at the white house and treasury secretary, secretary lew has fought for cuts to the cfdc budget and fought for increased funding. that is telling you a lot about secretary lew's priorities and concerns when he is on the front line fighting for an agency as small but important as such. that is one thing the secretary has fought for that doesn't get headlines but are important. we are lucky to have him here

today and here is secretary lew. [applause] >> good afternoon. thank you for the introduction and organizing this event. it is a pleasure to be here to mark the reform of the act. the two architects of the law we are gathered to celebrate and their tireless efforts along with those of the president and members of both side of the aisle led to the biggest fiepgs financial reforms since the great depression. i want to thank them for their vision and unrelenting determination. today as we mark the

anniversary, i want to reflect on the progress we made over the last five years. i would like to put wall street in the form of the crisis. when president obama took office the country was n depth of the worst financial crisis of our life time. the economy was contracting at the fastest rate in years unemployment 10% and the american automobile industry almost collapsed and millions of americans lost their homes and live savings. it hurt families and businesses on main street and wall streetment so financial stability can at times seem like an abstract concept. the crisis demonstrated excess

risk in the financial system has an impact on all americans. when people discuss rollback wall street reform it is important to remember those that suffered through the worst recession of our life time. the borded up store front, the loss retirement savings and all of those americans who lost their jobs. make no mistake. an unstable financial system harms us all. stability is a critical ingredient of a functioning financial system. we need one that promotes economic growth and maintains capital market and extends credit to credit worthy businesses. the wall street reform set out to transform the way the financial system operates so it is more stable more transimportant and more focused on serving customers. five years later with the major

rules banks are growing and there is no doubt wall street reform is working. before this law was enacted many financial institutions oversight and investigations -- over capitalized. a significant portion of the risk was born by customers, creditors, and taxpayers. wall street reform required businesses to manage more sufficient and manager buffers to bear the cost of their burden. the burden was born through others by public losses and action. going forward, wall street reform made it clear that had to change. one requirement because banks hold more capital. and that serves as a shock observer allowing banks to

weather economic downturn. we hear it as more capital leads to less lending. but the opposite is true. a bank without capital can't lend. bank shareholders have added another $600 billion encapsulated encapsulatedin in capital. during the crisis the largest, most complex financial institutions held the least capital. to address the danger posed by these institution wall street reform created regulatory framework applying differently to the largest firms. while the regulation of all of the nations 7,000 banks was improved by wall street reform only the 31 largest firms, more than $50 billion an assets have

height ned requirements with liquidity rules and living wills and stress test tests design to insure our largest financial inconstitutions can weather storms and continue lending to support the economy. wall street reform recognizes this not confined to traditional beeping banks in. in 2008 no entity looks over the horizon. there was not adequate regulation of aig and lehman brothers and no ability to respond to the risky behaviors. when several of the banks experienced financial distress they damaged the economy more broadly and shook the system. to address the gaps in our

regulatory framework, wall street reform created f-stock to bring together federal and state regulators to monitor the entire financial system and identify threats. the f-stock's approach resulted in greater scrutiny posed by institutions in a range of activities across the system. since the creation the f-stock made recommendations to enhance financial stability and assigned eight market utilities and four non-bank companies for additional oversight to help address the risk they could pose. through the work of the f-stock and securities and exchange commission, reform is addressing risk in the money market funding industry. during the crisis some funds were susceptible to run. new protection was needed. the fcc worked to put in place additional reforms for the important processes.

to keep taxpayers from having to step in and save a financial firm again wall street reform ended too big to fail. regulator regulators also have modern common sense tools to protect taxpayers in the event of a crisis or failure. regulators can seize large financial institutions and wind them down. and since we know that financial chris crisis doesn't respect border we are working on t-lack for global banks at the g-20 this year and supported change do is prevent fire sales at home and broad in the event of future failures. insuring stability and preventing excessive risk taking is not much. functioning markets require transparency to insure safety and fairness and that is why wall street reform tackled the

vast derivative market that was valueed at more than $600 trillion in 2008. derivative derivatives were traded privately using market par advertise -- participants and during the crisis losses led to panic. many were leveraged and had to sell their position making the shock worse. many of the derivatives are traded on exchanges or transparent platforms. requirements are at work in other forms as well. for example, the law requires that hedge fund advisors register and report data. the law seeks to improve corporate governance by

increasing compensation. and it created the office of financial research informing the public with data. this office is leading the development of international data standards and the implementation of a global identity which makes data easier to understand. we must continue to look out for new risk and monitor dynamics and insure that markets are transparent and participants have access to clear information. a financial system that supports a growing economy through responsible lending to businesses and consumer is the job of wall street reform. before wall street reform many financial institutions lost sight of this. this encourages banks to take a long-term view in investing

procedures and halt procedures around unfair and hiden fees by mortgages borrowers. the bulk rule is the major component of the bill. the rule prohibits risky trading like the london well transaction while protecting the stability of the capital market and safeguarding taxpayers ultimately. it allows banks to provide core services to customers, protecting core financial activities like market make underwriting risk mitigating and hedging and trading in certain government security. wall street reform didn't set out to repair capital market. it sought to insure banks were invested in the success of the loans they originate. the requirement a lender before extending a mortgage loan making reasonable, good faith determination that the borrower

has the ability to repay the loan. this approach was too rare in the years leading up to the financial crisis. many leaders loaded people with points and fees to get their compensation up front before selling it to a third party. it encouraged lenders to be steered toward expensive products. the abuse and unclear writing standards resulted in risky mortgages that hurt consumers and threatened financial stability. wall street reform eliminated that and extended protection to home buyers and access to credit that borrowers can understand and afford. and insuring qualifying borrowers have access to mortgages we have been working to seek to address friction in the housing market and provide clarity to lenders on issues.

we must strengthen our resolve to restore reform of the system. reform has brought greater fairness to credit markets by improving information. consumers benefit from new mortgage disclosure forms that are shorter and less complex and make borrowing for a home simpler and more understandable. general reforms have been adopted or are being developed for student loans, auto loans and pay day loans. the effect of these reforms is lenders must focus on good faith and out compete lenders by offering better terms not by finding a way to sell consumers products they don't really need and can't really afford. the independent protection bureau, the first regulator solely dedicated to defending americans from fraud and deception, is focused on enforcing the rules of the road. through the roles, we have

established consumer protection that is preventing the contained of behavior that contributed the financial crisis. it is transforming mortgages so they are clear and safe for customers, putting a stop to discrimination in auto lending, and tackling abusive pay day loans that trap some of the poorest americans in debt. we have put debt collectors under federal supervision for the first time and reining in lenders who prey on the elderly. victims of financial fraud before the reform rarely saw their money returned but now money is flowing back including military families targed by predatory lending schemes. all told in the last five years alone, the bureau has secured

more than $10 billion in relief for more than 17 million consumers harmed by illegal practices in the financial marketplace. one of the greatest sprint strengths of the american financial system is one generation after another of financers. the goal is to make sure the oversight of the system keeps up with the pace of transformation. the work of reform is ongoing. it is constant and we must be unwielding in our pursuit of it. the progress must be renewed with each administration and congress and generation if we are to avoid another financial crisis like the one in 2008. we cannot afford to take a break from this pursuit. in the past policymakers have been tempedted to roll back regulations, weaken reform and

reduce oversight. we are seeing this movement on wall street and capitol hill. we are hearing calls to water down concern because they are adversingly affecting liquidity. we need to make certain that we do not return to the pre-crisis way of doing things. as we learned in 2008 broker dealers with too little capital cannot perform liquidity when provided the most.

to this law weaken consumer investor or taxpayer protection or impede the ability of regulators to carry out there mission. fund our regulators they can keep pace. wall street reform increase the scope of the cfp bees responsibilities command they need funding to conduct their work. bringing there budget new line allow the agency to fund its operation on the primary beneficiary. we also need to protect the ability and asked the hard questions and identify potential risk to the financial system wherever those risks reside. critical to understanding how to develop must change the landscape of the financial system. today our financial system has broadened more than

through the assets of large complex financial institutions. the revolution ofthe revolution of our financial system is that we must consider a different kind of risk and be open to different kinds of policy responses and always be looking ahead asking what are the risks of the future. to make sure our financial system is safe that is why we need to look. we must finalize the rules like the ones that raise standards and the ones with fixed compensation practices we have seen attempts to roll back the safeguards by slipping complex divisions. this tactic chips away and is unacceptable. let me be clear.

this a ministration strongly oppose these. threatening tothreatening to turn the clock back to 2,008 and leave the american people vulnerable to another crippling crisis i will recommend the president veto in closing, i want to.out that in the aftermath we saw proof of what we all no. the american people are resilient capable and created, fiercely independent and profoundly generous. rather than be disheartened they will take the actions needed to emerge. pay down the debt, get an education next and skills save up, sailor for knew homes to start new families command secure their retirement, create knew business and industry, rebuild our nation only foundation. around the world the ability of the us economy and american people and the political process to bounce

back is an ideal to which others aspire. the purpose of wall street reform is to make sure our financial system is worthy. that's why five years ago we work so hard to make wall street reform the law of the land. keep the law strong both in statute and in practice. thank youpractice. thank you very much. a pleasure to be with you today. [applause] >> thank you very much secretary. i thank you all for attending. making markets work better. don't forget if you are in

the audience take your copy of the report and if your watching on tv check out our website for all the information. thank you command this concludes our program. ♪ [inaudible conversations] [inaudible conversations]

[inaudible conversations] >> tonight on the communicators we will speak with the "wall street journal" information age columnist and why he thinks washington is a dangers of renovation. common carriers, regulators set terms, rules. we all no what happened.

and in telephones. all the regulated. so clear that innovation and the us is falling behind. the bipartisan consensus of the 1890s. the internet was going to be different. a clear consensus democrats and republicans that unlike those earlier technologies i was going to be largely unregulated. >> tonight at 8:00 o'clock eastern. >> the president of nigeria is in washington this week. today he met with president obama and the oval office, and tonight she speaks of

the chamber of commerce. his speech is at 8:15 p.m. eastern. you can watch it live on our companion network. two weeks from tonight a forum with republican presidential candidates. partnering for the voters 1st forum. is they're a 7:00 p.m. eastern. >> the best access to congress, live debate congress, live debate and votes for the senate floor, hearings and current public policy events in every weekend book tv with nonfiction books and authors.

>> today the heritage foundation hosted a discussion on proposals to change the us tax code. plans from presidential candidates hillary clinton and rand paul. whatever curb very was the was the basis for tax kind and lava some -- ronald reagan. >> those who are joining us on c-span. check the cell phones have been muted. comments can be sent to us at any time. hosting our opening discussion and the rest of our program for part-time today returning to heritage

this year after serving as director of income security policy at the u.s. senate committee on the budget. he served year as a senior policy analyst. he is additionally serving on the world economic forum commission to study alternative measures of economic performance. specializes in health economics and applied econometrics. >> the david and jones -- did i get that right? senior fellow at the hoover institute. a world-renowned expert in a number of areas having served on president reagan's task force.

the washington university st. louis. please join me in welcoming. [applause] thanks. we have -- going to engage in a little bit of a discussion and then open up for questions. first of all, i would like to welcome david tour tax reform talkshow. we don't have a live band but if you want to place games, i'm open. so let's get this thing kicked off. you wrote that economists and politicians of all persuasions agree on three main points. the federal income tax is not simple the federal income tax is not policy and the federal income tax is not fair. can you elaborate? >> sure.

for those of you who may be interested have not seen the versions we managed to convince the flat tax and the four pages largely self-explanatory. but 60 70 80,000 pages. i forget how many. anyone who thinks that simple is missing the. some of the stories over the years are complicated. seven different tax offices and get seven different results. that can be a problem. and then all the difficulties make for enormous complexity and all the various gray lines. every time there's another likely enough. among my favorite phrases was bill archer talking about the income tax.

so part of the problem is that it just gets worse and worse and worse. what does it cost us? all i was invited in 1984 to serve on the commission on taxpayer compliance. we have three former commissioners, some professors contacts experts command we produced a report it was about a hundred pages long singlespaced. the staffthe staff of experts helped us out command we look through every single thing to figure out why they are taxes that are open and not paid. it is really hard to prove in any way scientifically what the main causes. the higher the rate they greater than i compliance. the lower the rate the last noncompliance. no hesitations or reservations.

lower rates. and so that cost, we have found a how many hundred billion dollars in unreported income. underreporting income. wrote the 1st book in 1983 the number of people who practice law in new york city versus washington dc. we found in the early '80s the number had grown so rapidly it caught up with the number in new york city. except they did not practice law. they advised people on tax policy, expenditure policy. we created this massive industry. in silicon valley a member talking to 400 financial planners. all but about two or three

said you would have to look for other work. because we have high rates basically a dollars saved in tax purposes is $2 and producing income. way better to concentrate. so simplicity, complexity cost rates, the whole package. it is not fair. if you think about it we have a wonderful legal system that is gradually evolving. you're not supposed to discriminate on the basis of age, sex, gender, race religion, ethnicity. tax policy discriminates. different kinds of amounts in exemptions and deductions and rates. a passcode which seems to me to find the face of the 14th and amendment.

a good way. >> it seems like there is a tremendous opportunity cost my goes in to avoiding taxation. everyone else -- and just by sharing how many people work in the tax world? tax lawyers are tax accountants? not as many as i thought. >> i should also mention that we can't quantify forgone opportunity. under a simple flat tax i will give it a shot. going to pay a personal income tax rate. try to go into business on my own. we end up deferring

opportunity. a noble. we just try to estimate what they might be. there's a whole range of cost associated. >> talk about this issue of fairness. many on the left and right graduated marginal income tax rate that we have today. in reality it is not. rather it's a function of average rate, marginal. go into a little bit? >> i did have one and set of numbers that i wanted to bring with me. i did an assessment of something like 202 political jurisdictions around the world. here is what i found. sixteen have no personal income tax. forty-five have a flat rate

of which about 36 or 37 we can trace my book. it's a nice picture. twenty-three have to rates. not only that but these rates are the same. so if someone wants to tell me what is a fair tax i want to no how you pick out. they won't sit still long enough change anyway. so the notion that a particular system is fair and the others are not his matter what you can put we get away with. the way i like to think about fairness is you can have a progressive tax on a single uniform rate. i did the numbers. let's just take for an

example insane individual has a $20,000 exemption. if you go to 40,000 you are paying 10 percent and go all the way up until you make a million dollars. so you run your way up from zero all the way to 20 depending on your level of income. they can hire. that way you would have a greater degree of productivity. at the end of the day as long as there's a personal allowance of exemption. the question is what degree of progressivity do you want if you decide to have tax rates you can be sure. high income people get special treatment because

people don't pay 50 percent tax rates. what happens is is rates go up as you end up with the tax code that gives special the directions for startups and various kind of sectors and industries. when you talk about faster marginal rates yet to deal with the fact that you taxing different entities at different rates for business enterprises and the like. my view of this is it's impossible to consider a flat rate with no reduction. once you hit the threshold of flat rate allows you to have a fully integrated progressive consumption tax. i will repeat that again. fully integrated progressive consumption tax. having a consumption tax base plus an element of

progressivity plus the whole immigration without double taxation. that is the beauty. under that situation they treat people pretty much the same as everyone is tax the same and everyone depending on family circumstances received the same personal allowance. you may think you want to give preference to one group over another. fine. form of financial transfers. voting for spending money. if the height of the tax code and not on the record. it's way more complicated the equivalent of spending money. the flat tax or any flat rate system is about as fair

as you get. some people don't want to treat people equally. >> in your book you have this great quote on the theory of justice applied upon -- across a broad base. i think it's safe to say not necessarily a conservative. so i thought that was -- >> you don't no what your life going to be. why not everyone have exactly the same tax system rather than determine in advance. >> he spoke about the consumption base. the folks in the room who may be unfamiliar the consumption tax is a tax on

income spent on consumption. can you explain are going to detail why it's so important? >> basically the way i like to think about it is just use a simple formula gross domestic product is small. if unit out investment in the food investment. make your business activity more productive. first year right up the maximum incentive to make that investment in the 1st place which changes the tax base of gdp. economists generally across the board agree you get better performance by taxing consumption and not knew investment.

that is the basic core argument. there will always be differences among people. how much better the economy will perform. one 10th of 1 percent half a percent. i'm not sure i no of anybody who says is negative. pretty much agree it will be positive. we give more productivity worker wages rise and so forth. you do get a benefit over the longer run. imagine how much more rapidly. it becomes very useful to think in terms of long run rates of growth. higher growth rate over time >> can you talk a little bit about why marginal tax rates so important?

>> people work for themselves, not the government. which people sit down and say what can i do to reduce the national debt. today are going to write a check. >> nobody works there. >> paying down the national debt. most people work for themselves which is quite fascinating. think about this. you have billionaires in the way to make sure they are not paying ordinary income that varied interest on certain transactions. he gets a lot of money from those people. that continues to survive. basically as the tax rate rises ronald reagan figured out early and by this time

is paying 90 percent. there are a lot of situations where tax records up. is it really worth it? it may be worth it at $0.60 on the dollar. the other thing is the higher the rate the more likely you are to evade and avoid. the line between the two is often a very thin decision. one of the things we discovered in romania and bulgaria and those were high marginal rates in the drop them to ten or 15 and made some estimates and figured out so much is underground and so much will become legal. they estimated in the 1st year. they typically got that much revenue in the 1st nine months.

such a positive response to people coming on board. so high marginal rates really create all kinds of problems for all kinds of people. and so the lower the rate the higher the concern. >> there are a lot of congressional staff in the room. one of the issues being debated right now is the highway trust fund. one of the ways they propose to pay for the shortfall is they're additional measures which would almost by definition increase the complexity. what would you tell a member of congress who is looking at additional compliance measures relative to overhauling the code altogether question early speaking i would tell them low rate on a broad-based

reduce the incidence. and that complexities and at and you have less need of compliance. people paying taxes. do you really good response. not as good response. any measure that we will increase complexity is just going to make people more unhappy with every aspect. there's a story i like to tell. if your in a residential neighborhood 60 miles per hour. call the police tried it the person apprehended but if everyone is more or less honestly paying the taxes no because the irs. they go over and asked him how he does it. i think this is just some indication of how people respond to the irs. generally speaking we set up

around aa bunch of people and tax conference in irs conference after hours what are you doing? from some special thing. talk about more compliance. >> the white house website president obama laid out a series of principles for tax reform including lower marginal rates eliminating inefficient tax rates be part of the deficit reduction and increased job creation and remain progressive. >> as i said a fully integrated broad-based low rate consumption tax that over time to the extent it made economic growth and reduces noncompliance will generate additional revenue.

if we can stop the congress and president spending every dollar they would overtime reduce the deficit. a faster performing economy and the less rapidly growing government. they are all terrific. governments don't create jobs. they get in the way of job creation. the committee and individuals don't create jobs. i would not focus on the deficit reduction part of it i would try to freespending. if you try to focus on cutting savings you end up with people telling you why shouldn't. they don't do what they say. >> basically the presidents poison the well and tax reform. >> they don't but i have noticed secretary clinton today is proposing things to

do. i believe that. i would just put it this way could not be more wrong. in particular holding long-term investment. silicon valley, nine out of ten startups fail. >> interested in getting in getting out. getting a low rate. >> the really significant things inside the beltway accomplishments the tigers a sad dispute that higher rates repudiate the one genuine love economics which stimulates prices and quality.

how do you think what do you think the knew dynamic scoring 11 adopted by congress have health eventual passage or acceptance? >> there are 50 different factors. but it certainly they're is going to obviously be a huge debate on what the degree of response we will be small medium, or large. so we're pretty sure there we will be some response. this notion people get rich quick are. but i don't think there's any doubt more people we will be working in investing in doing things. >> not over exaggerating the benefits just as a political

measure that -- >> is going to have a long impact. even if you could only get a one half percentage.increase >> a few minutes for questions. >> okay. >> a few minutes for questions. there are a couple of microphones. state your name and affiliation. >> high. can you comment on the idea of having a pure consumption tax and whatever you want to call it off laptop replacing all the taxes, business corporate payroll taxesand

keeping the progress of the universe current system with a rebate individuals to replace all the various income transfers. do you think that concept would work well? >> what you have done, of course is described the fair tax. we had governor huckabee out a little bit in favor of the flat tax. i wrote the peace once friendly case against the fair tax. i just want to give you a couple features of that. in the 1960s there were 12 countries with12 countries with the national retail sales tax. but 19830. the value-added tax is more

about self enforcing. the retail sales tax is prone to cheating. i was having dinner at a restaurant in rome. on the way out because you serve in a charity value-added tax. if we see someone coming up to go ahead and show that there is is one of those over at the. sorry, we give you the receipt. after a while it turns out proprietors be good at doing this kind of thing. you will lose a lot of revenue. retail sales taxes are very hard to enforce across the whole country. the 2nd matter polio

retail sales tax. a number of other aspects. the joke. i hope all of you have seen the various series. i have this little book. if i remember is only retail. the 2nd thing is i don't know how many of you come from other families. family who settled it for you wholesale. there was no tax. set up small businesses. in any it is sales tax license from the state. in the worst economic situation you wonder, the

proliferation of restaurants the next thing for me is terrific. a little my tax growth. we consume such aa tiny portion of the budget that it would be better. as another level aspect of this the increase to a stable entity raising the consumer price index. you get a value-added tax. it looks like an income tax. this is just a bunch of these things that get in the way complicated. the afternoon was eligible. anyway what i think is if

you were to do that. one for the. mr. 3 percent. only 30 you rid of the personal income tax. no european country is done that not japan korea, taiwan. they haven't reduced in contact. it is no accident. this because there gone that route and you andend up not with the replacement but in addition. so many programs. congress would never agree to an overnight swap. transition. it became a big problem.

ice. five-year. five years. a lot of unused appreciation if you want to do it right away 80 percent of all enterprises to expensive. certainly for startups it's fantastic. we can drop down unprofitable. not persuaded are influenced about 80 page review. there are a lot of problems. only if we have a constitutional amendment which guarantee this replacement. otherwise would be nervous. >> if you want to follow up?

>> i can throw us out of business and apparently makes the money. >> 25 percent of the economy is estimated to the underground. 50 percent of the entire population is unemployed. >> i was wondering if you wouldn't mind going into detail contrasting flat tax with the proposed tax plan. >> i don't know what her tax plan is. it will be higher taxes on the wealthy. maybe 50 percent marginal rate. let me digress the through a little cold water on that. the best-selling economic book and 50 years, thomas picardy organize the letter

signed by 250 french economists say the supported françois because he wanted to put a 75 percent personal income tax on those earning over a million. lo and behold he did. then comes the end of 2014 commend the thing is scheduled to expire and he lets it. so he turns down the frenchman will honor. and then to make matters worse he resigned from the french school of economics in paris which he himself founded and moved to london where they have a center for inequality and are more open works in theory but not in practice. in the british labor party was running against cameron. the poll showed them even. back to that 50 percent tax and they got slaughtered, of course. a week or two ago the knew leader who you never heard of the prime minister's

questions, no more talk about a 60%a 60 percent marginal rate. happy with 45. let the corporate rate go to 18. so out they're in the real world people who have either tried it or who are advocating it give it up and don't want to talk about it anymore. there is not much stomach for actually doing this stuff. and i think it is important to remember what went down so i. whenwhen you like to talk about 91 percent under eisenhower, nobody paid it. 90 percent of the people were paying 20 percent. a tiny fraction not a 3rd of the middle class paying these high rates. starting about high rates of tax on capital gains. capitol gains is just a double tax.

and the form of dividends. the tax on after-tax profits that are distributed. capitol gains. it is an after-tax gain profit on the higher stock price. in any case, as we approach creating a tax base is gdp. you don't find capitol gains and gdp. the gdp consumption base tax and then you end up in the hybrid systems with an commendable taxes. we went out for the lowest rate. if you had a 9 percent rate and then another 9 percent on capital gains and the double tax rate would only be about 15 percent. it will be prohibitive. if your going to start talking about a 39.6450 percent tax on talk about a 50 percent tax on capital gains, 25 percent tax you are in a million dollars. your paying 75 or 80 percent marginal tax.

that is when companies start buying cars for everybody. then we go back to three and a half hour. ends up as distortion, inefficiency, complexity. it's just the wrong way to do it. >> a technical question. you mentioned that you figure that 80 percent of businesses would choose expensing given the option. where did you get that figure? >> this went back to the early 1980s just looking at the nature of investment for example we had drawn out depreciation schedule for construction to buildings.

but imagine you can put up a shopping mall. what your going to have is on there investment. it will certainly come under the knew tax code. then you look at the value of appreciation. for some companies they're might be some calculation where you have to think about if youryou going to make new investment for the benefit of writing out of maybe losing some of that appreciation of -year-old investment. the people who would benefit our those who are just absolutely stagnant, not planning much in a way of investment and slowly depreciate there own investment. based on our assessment as a small minority certainly in the tech world they're is no case where you prefer that appreciation to a first-year write-off. and since most are created with small business i don't remember the exact number 80 percent, you will get a better deal with small

business and job growth by having full investment spending. section 179 we managed to get up to 200,000 for basically what we are proposing for the entire tax code, across the board section 179 from knew investment. but interestingly enough if you look at investment in physical plan equipment for producing more. our economy is manufacturing. the output value is higher than it was when it was bigger. for getting into a situation where it is almost going to be obvious to anyone if you want to take the expensing route. after five yearsafter five years it's going to be pretty hard to find very many businesses, six, seven, eight, nine terms of writing off the rest of the appreciation. i think that's the principal benefit. not only that, and i should tell you a little bit about how the senator became the 1st important.

it turns out democrat, his family control property. forty-eight separate properties which were set up as 48 separate companies and they were all hundred 48 separate depreciation schedules. he looked at at me and said, i can time all of these together. i said yes. he said sign me up. that is how we get democrats in 1982 they're were more democrats than republicans supporting our plan. the wall street -- now. it was the new york times came out on april 1598 to a strong positive endorsement. economic student. anyway i had the actual quotations from 1982. to the story tanked. i want to make one other. which is not been brought up.

economists think more about efficiency. a think about equity but the think about efficiency and neutrality. and as i look back over 34 years of doing this stuff for marketing all over the world, what i would say is that in the united states we may have understated or underplayed the importance of the system. whereas when you look at the post-soviet countries started with estonia, lithuania, latvia central and eastern europe they regard simplicity and compliance an understanding and online reporting in the same way they regard high-growth strong revenue growth. i think your we cannot stop talking about efficiency and we don't talk about simplicity ease of understanding, is of compliance, is a selection a

selection is a promotion of the idea and that a low rate ourour very 1st purpose tax simple tax flat tax. we change the title. we discovered people could not see pre- concepts -- c 3 concepts in there mind at the same time. that is the old can't walk and chew gum. then we had to go on that it was a low rate possible tax and flat. simplicity is important, and i think many of you ii think it is important to stress that we have got to keep it simple because otherwise all we're going to have is increasing complexity. if folks want to no a little bit more how can they do that. >> okay. the good news is you can get the book free online. the easiest way is to google my name. my homepage comes up 1st. you will see in the brief

description about me though was the flat tax underlined. you we will go to the hoover press page where you will see the flat tax book. each chapter can be downloaded and printed free of charge as many as you would like. printed thousand. given to your friends. on my same homepage they're is a link to my flat tax blog. and what you will find is i tried to chronicle the history of the flat tax movement all over the world. forty-five jurisdictions and now have it. i've written about everyone and what the rates are in the latest update investment judges put out. and it goes back to 2008. 120 posts. if you really want to follow it go back and you can read all 120 and no the entire history of the flat tax movement. every time there is a change anywhere i put it up.

i usually put up an end of year update. on that same flat tax blog site you will see a picture if you could not find it click on the picture. of all look like that because it is the newark hardcover version with an introduction explaining. by the way, just a short note why is it that these baltic countries have a simple flat tax? under commanding control the states gave up the money and collected the revenue. when the wall came down and they needed to go quickly the easiest thing was a short, simple for me to do online. and they neededand they needed to collect revenue market economy literally anyone. and then some of the other countries wanted to follow western europe, russia czech republic all these others. after seven or eight years later in the towel. when russia went to 13 percent they literally

triple taxes and seven years that is when the bandwagon started all of the world. so i'm still trying to market this as big movement in italy which we don't have time to get into. it's my great hope that we will see something happening in western europe. that is how to get it. the best way to reach me if you media all want to talk is e-mail me with questions and i we will take the time to answer them. the back of our book, the last chapter has 66 questions and answers. the 66 most common questions we heard over 15 to 20 years of interviews. it was a paragraph designed for quick and easy understanding. ifif you don't want to read the plan, read the questions and answers. if you come up with a knew question you get bonus points. >> will save theall save the q&a section was absolutely fantastic, and i encourage everyone to go out and

download a copy for thousand and give them away. everyone please join me in thanking the dr.. [applause] >> thank you. that was great. >> and that this time we will have the next panel come on out. [inaudible conversations]

>> i would like to introduce my colleague senior fellow and economic policy at the institute for economic policy studies at the heritage foundation refocuses on tax matters security blog kind of regulatory administrative law issue. his career includes a partner and the argus group manager of the us chamber of commerce and tax policy and general counsel at the national small business association. received a ged and apparently the only lawyer here from the university of maryland law school. he also has a bachelor of arts degree from the university of chicago. pleaseplease join me in welcoming give it to the podium. [applause]

>> good morning. the purpose of this panel is to discuss the essentials of good tax policy. we have a very strong panel today with five of the country's leading experts and proponents of fundamental tax reform. each panelist will make presentations about ten minutes command them will have questions and answers from the audience. the entire session will last about an hour and 15 minutes the broad principles of tax reform are something that most informed conservatives and libertarians generally agree about. the economic principles of sound tax policy are driven by the findings of public finance literature the optimal tax literature and the theory of microeconomics and those principles can be summarized as the tax system should raise the amount of

money necessary to fund limited government and the least economically destructive way. and in more formal economics terms in the way that minimizes the deadly loss for the excess burden associated with raising a given amount of money. what this effectively means is the flat rate consumption tax. as you will here in some detail by the panel the four types of flat rate consumption tax that have been proposed by conservative politicians of the years. the flat tax is one version of that that we just heard about. there is also what is sometimes called the knew flat tax or a consumed income tax expenditure tax cash flow tax, and that also has been introduced in congress. although not in the current congress, i believe. there are two other methods. one is a business transfer tax and the other is, of

course, national retail sales tax. now, the magnitude of the economic gains to be had for moving toward any of these approaches is very, very large. steven in particular is going to address this subject to the fundamental tax reform is the ability to positively transform the american economic landscape. it is probably unique in that it has the most -- represents the greatest opportunity to improve the standard of living of the american people and create and re-create prosperity in the united states. our 2nd principle is the tax system should have the least negative impact on the core institutions of civil society that would include the family but also voluntary associations association such as religious charitable and educational and civic institutions. they have written eloquently

and persuasively about the importance of these types of institutions to the success of a free society. the 3rd is to help preserve our way to life, liberty, and property and further the cause of fairness and justice to be the tax system's are composed no unreasonable burdens on an individual and apply consistently to all americans with special privileges for non-. it should also respect taxpayer rights to due process. three papers have been made available to you today. and those of you who are watching either on c-span with a webcast the papers are for conservative tax plans weeks, equipment economic results and examining economic equivalence of the various consumption tax proposals. the 2nd is called a tax reform trevor for the 2016 presidential candidate and it walks through the various

design choices that anyone developing a tax reform plan must confront. the 3rd is how congress should reform business taxes and looks in detail at the issue of how we should tax businesses and proposes both intermediate and long-term recommendation. all three of these papers are available on our website now, let me quickly introduce our speakers. first, we have doctor dan mitchell senior fellow at the cato institute senior fellow here at the heritage foundation before he lost his way and went to work for that other think tank. he previously worked for senator bob packwood ability before he was chairman of the senate finance committee command he is one of the nations leading proponents of the flat tax and a tireless advocate for economic freedom. senior fellow at the tax foundation.

he and his colleagues at the tax foundation have created the best and most transparent tax model in the country. prior to enjoin a tactic for prior to joining the tax foundation whose with the institute for research on the economics of taxation. he was also deputy assistant secretary for economic policy at the treasury department during the reagan administration and worked for the jc and can commission. dr. jasondoctor jason fechner is senior research fellow at the market is center. also an adjunct professor of economics at georgetown johns hopkins school of advanced international studies and the virginia tech center for public administration policy. jason was explaining to me just before we came here that the students like his courses. so i am hoping we will have a similar erudite presentation today. [applause] jason served as deputy

commissioner of social security and as chief economist and associate commissioner for retirement policy and the social security administration and served as senior economist with the gec. chairmanchairman and president of americans for fair taxation and an attorney in private practice who sometimes calls himself a recovering tax attorney which means he brings to discussions a practical awareness of the real world problems with the current tax system. it is fair to say that no one has done more to improve the public's understanding of the fair tax and the need for fundamental tax reform generally than steve. curtis. curtis debate is research fellow and tax economic policy at the heritage foundation. previously senior associate of price waterhouse cooper were restructured international taxation's. he also served as senior economist at the tax foundation where he authored three widely recognized reports, tax freedom day state and local tax burdens and the state business tax

climate index. both curtis and jason are among the very best of a generation of free market tax policy experts who we will go in the order that people are seated at the days. please join me in welcoming dan mitchell. [applause] >> let's just do this sitting down. make -- that might make more sense. thank you for introducing the panel. it isit is good to be back here at heritage. i used to represent the conservative wing, but i'm glad that you are reporting that important role. i want to make one basic comment that i think underscores the importance of everything we will be talking about, and you sort of got this from alvin and you will here later on today as well. tax rates matter. and what really frustrates me is that politicians

understand this when they want to. a lot of times we see politicians federal federal, state, local level playing their 1st saying we need higher taxes on tobacco because we want people the smokeless. i am at a libertarian think tank. i don't think it's governments job but i give those politicians and a+ for economics. they're right. the higher the tax you put on something the less your going to get a bit. you also get cigarette smuggling, but the fundamental economic.is right. high tax rates discourage what is being taxed. many of those same politicians forget that listen when itless than when it comes to taxes on work, saving, investment risk-taking, entrepreneurship the things that help our economy grow and make us more prosperous, create jobs, make us competitive. that is what tax reform in my mind i try to make it as simple as possible.

that is what it's about. you heard alvin just say over and over again consumption base tax. my job on this panel is to try to explain why that's important. it is important because our current tax system treats income that you save and invest much, much worse than the income that you consume. think about it in aa very simple fashion. you make the money you pay tax on that money. what's left? disposable income or after-tax income. youyou have two choices on what to do with your after-tax income. consume it right away or in the future. what is consuming in the future? saving and investing. now, let's think about how the federal tax system treats those two choices. if you consume your after-tax income right away the federal government by and large leaves you alone.

yet, we have a federal accept accept -- excise tax on gasoline, bows and arrows , but other than a few obscure things they're is really no federal tax on consuming your income. what happens if you save and invest your income? in other words, consume your income in the future? between the capitol gains tax, corporate income tax, double tax on dividends it is possible for that single dollar of income to be taxed over and over and over again you don't have to be a wild eyed supply sider to think that if you have even low tax rates but those low tax rates impose multiple times that you are going to be doing something that is going to dramatically were significantly affect people's decisions on whether to consume the income today or in the future. why does it matter economically? so what? people want to consume they're income faster rather

than slower. what difference does that make? well, it makes a big difference. every single economic theory we could have a socialist from marxist. every single economic theory is based on the notion you have to defer consumption to finance growth have what economists call capitol formation. yet our tax system mistreats and abuses those who save and invest because rich people 10th to have saving and investing. it is simply why politicians double tax and triple tax and sometimes even quadruple taxed. let melet me try to sum this up with an analogy that makes it very clear.

getting into the fall. apples are right. it's time to harvest them. what is the best way? do you pick them from the tree or chop down the tree? apples are income. the trees are capitol. the reason we want a so-called consumption base tax is because we don't want to mystery capital. to understand why it is foolish you need to think about marxism or socialism. if you chop down a tree to be more accurate if you harvest apples for sawing off the branches what does that do for your long-run prosperity? will have fewer apples next year so does not make sense.

on this issue they are right the the the formation. that is why we need a tax system that treats all income equally which means no longer double taxing income. you want neutrality how you earn and spend. thank you. [applause] >> thank you for putting the panel together.together. it is refreshing to see the topic coming back to life. it is critical worry about

the tax base and not how much were trying to get. this is not strictly about government deficit. it's about what is good for the economy andcountry. i have a handout with some charts on it. the very thorough job listing for layers of tax. i want to make the.that these extra layers have an adverse effect on capitol formation, and the adverse effect please into employment and wages. talk about how economists focus on efficiency. we have been talking about efficiency, but the reason it is bad is that it leads

to horrible inequities in the fact that you are depressing wages don't have enough savings and need to rely on the sins of others. when youwhen you cut the capitol stock to reduce the demand for labor. so when people are thinking in terms of putting together the concept of income we now use today they were neglecting the adverse effect on the labor force. itit was not unknown. the godfather of the income tax admitted that it would damage the economy. his economy. his current disciples don't want you to remember that or have forgotten it. here is what simon said about income taxation. income taxation is an estimate of economic control a means of mitigating economic inequality.

moderation inequality is an important objective of policy and proceed to consider income taxes as devices for effect it. the case for drastic progression and taxation must be rested on the case against aninequality on the ethical or aesthetic judgment that the prevailing distribution of wealth and income reveals aa degree and/or kind of inequality which is distinctly evil or unlovely. not particularly scientific. it is reasonable to expect every game through taxation and better distribution we will be accompanied by some awesome production. thethe optimal degree of progression must involve a distinctly adverse effect upon the size of the national income. with respectwith respect to capitol accumulation the consequences are to be significantly diverse. well, he had a solution for the damage for putting these extra layers of tax on saving and investment. he was going to restore national savings having the

government run large perpetual budget surpluses. how often does that happen? furthermore, even if furthermore, even if it did and you are stuck in a 91 percent bracket the savings is going to go in the plan and equipment spending is still not going to occur. as you buy down the national debt people will use the free flow of there own savings as knew consumption or sell assets people abroad and let foreigners find a finance capitol, but all people want. simon said another idea or perhaps the government would have to start allocating things. this was going to be the road to the government taking over far too much of the economy. going down the path of argentina and chile and someone. this is not a good idea if he was explicit about that in this big book on income taxation.

well. well, david has asked me to give you estimations of magnitude. i just want to make sure you realize how bad things are under the current system so you can see why we're getting results we get. another chart i have come a discussion of what would happen if you start saving a thousand a year and added in the pension as opposed to ordinary taxation orfor you are immediately taxed on your earning and the interest as it builds up. you end up with 400,000 in the pension and 240 in ordinary savings account. lost two thirdslost two thirds of your potential retirement income because of the double tax on saving which was that initial double layer of tax. let's talk about the corporate layer. when you havewhen you have the corporate tax to the tax on dividends and capital gains you get tax rates prior to bush's 2,003 tax cuts that were about a

48 percent on the capitol gains retained earning and over 60 percent on the dividend payout between the corporate tax and the tax on the dividends at the upper end of the bracket. mr. bush reduced those tax rates to under 45 percent but we have now had an increase in the individual to operate, an increase in the top right on the capitol gains and dividends for 1515 after 20 and then 23.8 with this knew tax. and when you and the corporate tax to that we're at almost 50 and a half percent. we have taken back almost 200% of the tax code and capital gains of the bush and taken back a 3rd of the dividend tax cut under bush and apparently according to some of the people running the like to go higher. well, i will tell you that your not going to get money out of this. when the income tax increase on the affordable care act came in with some big

realization on capital gains in advance of the tax hike command now we are beginning to see data from the years after. we're going to be seeing a crashing capitol gains realizations. last time we tried this thing in the 1986 act capitol gains realizations collapsed for a decade until they were lured out of the clinton administration of all things at the insistence of the republican house and capital gains realizations came back. you get no revenue from taxing something is fleeting and mobile and time sensitive as capital gains. then, of course, they're are state taxes. 40 percent. the irs is a bunch of kindly people who at the objection of the congress were told not to let anyone feel left out. they impose to state taxes but a 40 percent and

40 percent of the 50 percent. if your saving money in your retirement and your state to pay income tax on it and if your a working person after you have begun your retirement and earning a little bit of money yet to pay the payroll tax on that as well and then they're are state taxes. the combined effect, 80, 81 percent, 84 percent. that is the federal level. 90 percent of the state level and basically tell the elderly don't bother working, weworking, we don't want you in the labor force in more. well, these are big effects on taxes. the other big effect is on the treatment of depreciation. when you spend a dollar on the machine today that is a costs today and part of your car structure. you think you would defined find income as revenue minus the cost of learning it.

we don'twe don't let you take the depreciation today. we make you write it off. thethe value of that goes down with inflation and the time value of money. the government is basically telling you your earning a profit before your really earning a profit and tax you on that extra inflated profit which raises the cost plan equipment a lot. the failure to allow expensing is the biggest hit on capital in the tax system , and that is where you get the most bang for the buck if you fix it. movements toward things like bonus expensing yield a high gain for the economy in my. let me give you an example. a seven-year asset has a right off. at the 5 percent inflation the building only has a right off for $0.30 on the dollar. you have to earn additional money before that building really has any hope of paying its own way which

results in a very big swing in the capitol stock. a big swing in the capitol stock means a big swing in ways is -- wages and job opportunity. what do we get if we eliminate these four -- these three extra layers of tax on saving and investment in severe tax on consumption or the equivalent of it over time in your saving behavior well, it is about 12 to 13 percent of gdp. we ran something where we went to fall expensing set a corporate rate at 25 that did not tax capitol gains and dividends, have individual rates of 15 and 25. the top rates down. no amt deep state income tax. a. gdp boost after all adjustments it takes a few years, five to ten for the capitol stock to build out. 12.7 percent. gdp is to try and higher.

private business equipment and structures are up by about 39 percent. the wage rate up about 10 percent. we have about 3 million additional jobs. this would cost money initially on a static basis of about 400 billion a year. by the time you get your growth is hundred 40. i think you could spend that amount. is not too much to ask. in addition there we will be some attempt by people to report more income in the united states and less income abroad if you have a multinational corporation and the joint tax committee seems to be guesstimating things on the order of 20 billion or so year. they don't quite explicitly state what there doing. you getyou get a virtual balance after the growth effect for these tax changes no net cost of the government. people's incomes are up about 10 percent.

additional jobs, more people working. now, that's as close as you can get which is the damage done by the current tax system. all the neutral taxes are a means of getting rid of these additional three layers of tax. some are collected at the business level some collected only at retail, some partly on the business level. my favorite, the personal expenditure tax is put on down your income, subtract the savings, and pay taxes on what's left. they took what? and you don't vote for them again. whereas the retail sales tax might be nickeled and i'm getting might not save your sales receipts and realize what happened. our compliance and enforcement conveniences. we willhe will have to take a look. these are really all efforts to get away from horrible effects of the income tax and moving to a more sensible neutral tax base

which is where the flat tax is really a five-part. one rate, to rates, but it is the base that is flat. not putting one way of tax on consumption in all these layers on investment. the flat matters, and i'll take any of them i can get me they're, although i although i have my preferences, but that is the focus we need to have. thank you. [applause] >> good morning. i want to thank david. if you have not already realized our current income tax system is kind of the take away message. it is an economic term. the united states tax code severely distorts market decisions and the allocation of resources, impeding economic growth and potential tax revenue. you are hearing a lot going on getting in the presidential election cycle and there is a lot of agreement on the need for

tax reform but there is no consensus between always been parties on specific elements of reform. even among republican parties. luckily policymakers need not. we've been talking about that this morning. keep in mind a few things as we walked through reform ideas. a tax reform plan should be simple. talking about this all morning. the complexity makethe complexity make it difficult and costly to comply with an easy to scam. congress should make the tax code is simple and transparent as possible. it should also be equitable. we talked about the idea of equity. policies intended to benefit of penalizing select individuals or groups and a result in a measurable unintended consequence. fairness is subjective but tax fairness at least reduces the number of. that group, we talked about this this morning. a plan should be efficient.

economists like efficiency. because the tax code alters market decision it impedes economic growth and reduces potential tax revenue. also should be predictable. the negative effects of the current tax code result not just from what it does today but also from what it may do in the future. such uncertainty deters economic growth in an environment conducive to growth and increases revenue requiring a tax code to provide both near and long-term flexibility. i often joke that we now have a permanent state of temporary tax policy. that is not efficient for economic growth. you have also heard about how economists prefer broad tax base with lower marginal rates because it's the tax rates the drive the decision of the margin of what to do next or at the margin do

more work, more saving, more in -- more investment or more leisure because marginal tax rates are too high. a broader base is more efficient in not treating some different than others. now, a caveat. i generally prefer a broader tax base but broadening should not be a trade-off for other provisions in a vaina vain attempt to achieve revenue neutrality that would raise the cost of capital for undo most or all of the benefit the lower marginal rates have on businesses. increasing the length of appreciation schedules is not a good trade-off. personally we should not focus so much on the neutrality and all. one of the points mentioned dynamic scoring debate but i, but i can tell you we should focus on the right policy provisions for economic growth, competitiveness, and job creation. the tax we have today does not do that. we need to get rid of it. the current unitedthe

current united states tax code severely distorts market decision for the allocation of resources hampering job creation impedes growth of revenue and throughout the discussion today -- also, please keep in mind only people pay taxes. take one thing away from tax policy corporations don't pay taxes, people do. ifif you tax a corporation you will have a lower rate of return for investors, higher taxes on the profits or higher prices on products or you will be taxing labor. labor price you pay we will be lower because that money is going to taxes. so it wasso it was also mentioned that many developed countries are reducing the corporate tax rate and the structure of corporate tax systems to make them simpler. thethe united states federal government appears to be taking the opposite approach some states throughout the united states and lowering corporate tax rates and offering competitive tax packages to attract businesses command you can see that going on. tax provisions increase

uncertainty and cost. this drives competitive profit-seeking corporations to minimize tax exposure and the for income overseas the lower tax countries and for some to reincorporate outside the us. even worse, some companies take out debt to pay dividend to shareholders. unless we reform our corporate tax rate by lowering the tax rate this country will fall further behind in global competitiveness. with the tax rate so much higher than other countries they must turn to there departments. regarding the discussion about hiring lawyers and accountants. profit centers. tax department is the most profitable section of the business. companies need complex financial engineering tactics to minimize revenue lost. through various transfer pricing arrangements they can allocate income and capital to different countries to minimize tax liabilities and improve competitiveness. exhaustive economic research proves the more you tax

capitol or labor the less you get an makes clear that incentives matter. successful reform is sort of a fundamentally knew thing. if you tax something you will get less of it. if there trying to raise the corporate tax rate they want less corporations. if it trying to raise the capitol gains rate they must want less capitol. if it trying to raise marginal tax rates that they were working too much and should take more time off and not work. that is the basic theory of economics that some people don't seem to get. we talk about special interest loopholes. we should not be raising taxes. taxes, we should be lowering, not raising. there are discussions now. we're not having the discussion we need to have a better taxa better tax system that encourages jobs and growth and focus on the spending side. how much taxes he won't willing to pay? and then how do you get the

best revenue system? right now we basically have politicians thing we will tax you here what you view this much benefit and so we have these giant deficits as a result. what are you willing to pay in taxes. we're not having a discussion today. this is an idea. economic plans the tax increase of 1 percent of gdp reduces output by nearly 3 percent. raising taxes results in less economic output. tax rates. i have a chart i will put out. i will forward it around here he basically realize the excess burden of taxation varies with the square of the tax rate. disproportionate beneficial economic gains from rate of reduction and economic losses. deadweight loss, if you double the tax rate you don't just double the deadweight loss increases exponentially. we have towe have to think about tax policy and the foreign act financial benefits. part about the idea of rate

reduction of capitol accumulation. a one-for-one trade-off but a multiplier which is important to keep in mind. i would also.out that there are a lot of legislative efforts attempting to treat the symptoms and not the cause. those that do are doomed to fail. policies are trying to prevent corporate versions but trying to penalize them and will only exacerbate the problem and move corporations overseas. us competitiveness we will continue to languish creating troublesome results and the further erosion of the us corporate tax base. the continuation of harmful tax policies are harmful and will only hurt economic growth. to sum up and conclude there

is broad consensus amongst economic research as to which key policies are most likely to promote solid, sustainable economic growth and revenue and which are most likely to fail. lower rates are key. exhaustive economic exhaustive economic research repeatedly proves this. the more you tax the less you get. so successful reform will always lower the corporate rate on both sides. ..

[applause] >> good morning. david introduced me as the recovering tax attorney, and you probably think i'm going 0 to start off with a lawyer joke, and i know a lot of them, but i quit using them because i found two things to be true. one is, it irritated any lawyers in the audience, and the second is everybody else thought they were true. so i am here as a proponent and have been for 25 years of getting rid of the income tax system we now have of corporate and personal, gift tax and skeet tax, and going to national retail sales tax. it started off in the '90s with the schaffer plan, and then the fair tax 23% national retail sales tax on goods and services.

and you can learn about it if you want at fair tax.org. i won't going into the mechanics. i'll be happy to answer questions. i think we're all talking about taxing consumption. i'm talking about what i consider to be the purist way of taxing consumption which is at the retail level. now, there are a couple of things that have been said that i really believe are important. most of the other -- in fact all of the other plans which involve using the income tax as a part of a way to do this, require each of you in the audience as individuals to file a return. i don't know whether you remember dick army used to -- i debate him -- his one-payment tax return, and i would hold up mine. because individuals don't have a tax return. corporations no longer have the

dead weight cost of having to supply comply with either a vat which they're doing in europe, or the income tax because again, this is a tax collected by retail providers of goods and services. not the people that provide the inputs. as far as the economic growth, think the economic growth from all plans are similar. i'm not an economyi, put i can read and i've read each of -- each of these gentlemen have written very well on the topic and i believe there's no question we'll have more economic growth. i think one of the issues that we probably should look at -- and the doctor bright up -- one of my initial problems with a consumption tax back in the '80s and that was complexity. in the '80s, as a tax attorney, i was very, very concerned with

the enormous cost to economic growth and to, frankly the sanity of some of my clients from the tax code, and i was in favor of a flat tax and i'm stayed that way until i started coming to washington and following what congress did. and i began to believe that may not be the way to go because any kind of an income tax can always be tinkered with, and they've done it every time the reform i would. the issue in the '80s was compliance and it was a concern because obviously you have a lot of people evading the income tax, do you want to have system that can be evaded even more easily in well, times have changed. over 90% across the country of retail sales are actually collected by -- number want to take a guess -- less than ten

percent of the merchants. 90%. think about it a minute. the walmarts, the targets the amazon.com all of these people are collecting for most of these -- for all of them it's an accounting situation that moist important. they're going to collect the tax. you look at the other thing you say, what about the remainder of that 90%? well back in the '90s, away ernie, the vice children of the board of equalization in california which i the agency that collect the tax was telling me they were getting in the high 90s of compliance. i thought that was interesting. last friday, had a conversation with george runner, who is now in the same position, he is the commissioner on the board of equalization the vice-chairman some he sent me -- i asked him.

send me an e-mail. i'd like to get this and also a cite to a study. he says they collect 98% of the sales tax that owed in california. 98%. now, do i think a retail sales tax of 23% is going to result in the same type of collection? probably not. you're probably going to have a lot more incentive to evade. but it's still going to be much better than the income tax we presently have, and that's one of the issues that i have. when i was talking to some of the members here, who were advocating -- not on thy this panel but members of congress -- about the flat income tax as a vehicle for getting to the consumption tax my question was, what are you going to do about evasion? when you run a set of estimates of revenue what is your evasion

factor? let me just ask you a quick question. how many people in the room in the last six months or a year, have had an opportunity or know of one to get a service or a product at a substantial discount for cash? how many? anybody? okay. some hands are going up. do you think that's for -- because it's easier economically? accounting-wise? no. in most of the groups i speak to almost all the hands go up. and they all say no. it's because they're not paying tax. they found a way to do it, and there's a study on the underground economy from the university of wisconsin in madison, where they talk about in 2000 -- either '10 or '11

they felt like it was as much as $600 billion being evaded. and you look at it and say okay i'm going to bring the rate down. i'm going to bring it down to 15%. 20%. from where it is. and that is going to make it more attractive, perhaps, force these people evading to come in except there's one calculation left out. and that is, if you have an evasion of the income tax you're also evading social security. you're also evading any state taxes. so if you bring the rate down to 20% and your self-employed you still got 5 set 3% social security tax and whatever state tax, so you could still be paying 40%. i don't think that is going to significantly reduce the evasion unless you get very draconian in your enforcement, and i don't believe that's possible today.

one of the side effects of obamacare is i know a lot of people who have left corporate employment and are now contracting because they can get much better tax benefits, which maybe that translates into exaggerating deductions, marsh it doesn't. because they can now get their insurance separately. so that is why i believe that a retail sales tax makes more sense. i think it has a lot of things, and primarily, i guess the last thing -- i've said this to curtis in a debate and said it to dan and others, if they were king and could guarantee that the flat tax alternative was going to stay in place for 20 years, i'm resigning as president and chairman and i'm moving over to you. but i asked the question, trying not to embarrass anybody but how many people feel that the flat tax is going to be flat in five

years? and i almost never get a hand that goes up. this is out in the -- i'm here very little compared to my time across the country. the people just don't believe that it's going to stay flat. and i don't believe it's going to stay flat. whereas with the retail says tax it's more transparent much harder to adjust. thank you very much. [applause] >> thank you for coming. it's been a really good discussion. i think steve and jayson and steve and dan hit on all the -- i think we could sit here and talk about tax reform for the rest of the day. just want to hit on a few 0 topicking that -- topics that came up. something dan said at the beginning, he said there's broad sentence that tax rates matter. that's largely true. but there are actually people out there who push back against that simple proposition.

go back a couple years ago the congressional research service which provides congress with data and analysis of legislation, a report in the middle of the 2012 election that said tax rates don't matter. when a few other of us push back to say, wait a minute, this is common sense and pretty well understood that tax rates do matter we were accused of been antiscience and not really being true to the research. will mcbride did that, and i got attacked as well. it was kind of a bizarreo world. we were stating fact and were told that wasn't sentencely true. fast forward a couple years to last summer, the accumulation of capital is going to lead to the ruination of capitalism. spiraling inequality, the way he

proposed to deal with that was to levy tax rates a astro noncal rates, 80% and above taxing capital over 100%, business said the economy will collapse because taxes don't matter. so people will disagree with these simple proposition. that's why it's always important we keep making the case that tax rate does matter, have an impact and best to keep them low. one other thing that has come up through many of the presentations is that there is no one way to get to a consumption tax. you can get there lots of different ways. this happens during presidential campaigns. a lot of fighting among consecutives about the best tax reform plan. part of the effort at heritage is to educate conservatives and the law makers and pock we don't have to effect over what the actual plan -- what it looks like on the surface. like to compare it to a software program. they all execute the same function but they have a

different user interface whether it's the traditional flat tax new flat tax sales tax, or some hybrid. they're all getting us to the same place. so rather than fighting over what we want the user interface or whatever we want at the taxpayers to be -- how actually paying the tax we should be saying that we're all in the same page. we want that consumption tax that low rate, and all understand the benefits that result if we gate system like that. lately the tax reform def bait has shifted somewhat -- debate has shifted interest. for a long time the tax reform -- traditional tax reform was both revenue and distributionly neutral. go back to 2012. governor romney's tax plan was a revenue neutral means meaning raises the same amount of revenue that's current system and didn't shift the tax burden

up or down the income stales. has year there was tax reform bill that was revenue and distribution neutral. coming into this year, however that whole -- that constraint has changed. senators lee and rubio put a tax reform plan that was both a big tax connecticut -- is a big tax cut, unsure about the tax distribution. we'll learn more as we good forward. then senator paul put out a tax reform plan that was a tax cult. i call these the new generation of tax reform, and they have a huge benefit. they can be minute more progrowing than traditional revenue and distribution tax reform. if you look what the tax foundation found they found that senator lee and rubio's tax plan would grow the economy by 15%. they can also -- one thing that happens when you do tax reform, you set winners and losers.

just the nate tower of doing tax reform. when you have revenue neutral tax reform, probably going to end up with more winners and losers but you'll have an awful lot of loser that scream loudly. when you have a tax cutting tax reform you can make loot more people a lot better off and make it easier to pass. all that said, it does come with challenges though. we obviously are in a tight budget environment here in washington, and our friends in the west will immediately point out, as they always do with their reports from the tax policy center, that a tax reform plan like senator's lee and rubio will add to the debt and have all these monumental negative economic impacts because of that. and also point depending on how the tacoma burden is shed, point out that the rich are getting a tax rut and the middle class are paying more. that shouldn't work out that way if they're done correctly. but they're not shy about details to fit their narrative.

in 2012 they did that to governor romney. all that said, these challenges are much easier to deal with if we have a dynamic score. we have a long way to getting dynamic scoring in congress this year. the house is going to use dynamic scoring. the senate, it's questionable. if you have a dynamic scorer of a tax plan it's a heck of a lot easier to deal with issues elm tax foundation found the lee and rubio program is a $1.6 trillion dynamic basis. that's not that big of a cult. gets us back to the average over ten years. we can certainly afford to cut taxes that much. so that dynamic scoring will go a long way to determine whether we can do a successful tax reform plan like these new generations have put together. the last time we did tax reform was 1986 and back then, individual tax reform led the charge. the code was no one can do

their tax return on their own. today it's the opposite. business taxation is leading the charge. we're so far out of step with international norms we have become so uncompetitive but that's the leading factor driving the desire and debate here in washington. part of the reason i think that exists is because -- dr. got into this a little bit with the complexity -- but technology has made it easier to comply with. which means easier for congress to create mischief in the tax code. i don't know -- not too many people do their tax returns by hand? anybody do their tax return by hand? filled them out by hand? you're quite a trooper. i did it once and i deal with taxes every day. i did once. my wife and i moved from one state to another. we ended up with six different tax returns, so i did them all by hand, sent them in and got all six back, two from ther is and is two from each of the different states. i got them all wrong ander in

did them again. tush bow tax is cheap easy, simple i did mine on a snow day with my kids screaming the brown. it was done before i knew it. that has taken a lot of the desire for tax return out of -- on the individual side. we saw this in polling. there just isn't that -- so it's going to come from the business side which creates a new political dynamic. a lot easier to go back to your district or member of congress in your state and say want to reform the dynamics code -- tax code because of the damage it's doing to you and here are the benefits. that a good message. no such an easy missionage to say you're gift ge is debting culled out therer and would going to make sure that ge can do better, or make sure that gm or microsoft or google, whoever -- that's a tough sell, and i think that part of the reason why we're having a hard

time getting going and also because it's hard to do tax reform for corporations and leave tax-free enemies alone and they're uncompetitive as well and they need the reform. but when you go -- you're in the individual code and we're opening up a whole 0 ball of wax that nobody wants to get into, given the current political debate. with that i'll end and i think we can take some questions and answers. [applause] >> we have a reasonable amount of time for questions to the panel. please wait for the mic and give your name and institutional affiliation. questions. peter. wait for a the mic. so the people can hear on the television and the webcast. >> i'm perspective the heartland

institution. my question to you is doesn't the rand paul tax reform plan address a lot of the issues you just raced? >> which one. >> rand paul -- well, the individual side as well as the corporate side, the pass-throughs, all of that is taken care of in one fell swoop here by the rand paul tax reform plan isn't it? >> i think that's important to point out. when i talk about the difficulty in moving the -- starting the corporate side, i'm talking about how tax reform is looked at by people here in washington, we have to fit in the boxes that the revenue neutrality and all the things that go into the tax reform debate here in washington, and it's more of an issue here in the next couple of years because of the dynamic with the white house and congress in terms of really the president said he is only interested in doing corporate tax reform but never said business tax reform.

so do corporations but leave the business alone. you have to do them together, and so we're going to be at loggerheads the next couple of years. if you do a fundamental tax reform like senator paul proposed lee and rubio you saw a another of lows issues because you don't have them. really -- you're pulling out by the roots and start from scratch. >> fit into the box of the washington establishment. you won't ever accomplish anything. the boxes are designed for us to lose from the beginning. and revenue neutrality -- >> could i say something about revenue neutrality. i agree. i'm glad a lot of candidates are talking about tax reform plans that are also tax cuts, and i'm glad we're also talking about dynamic scoring to try to get a more accurate assessment what the revenue implications would be. but let's not forget there's

probably zero chance we'll achieve anything on tax reform unless we also figure out some way to cap and restrain the growth of burden of government spending and that's why it's also encouraging to see there's a mom -- from that the white house but from congress in terms of structural genuine entitlement reform because if we don't get ahold of government spending with the demographic changes, we'll wind like europe and then the only tax reform we get is adding a vat on the current monstrosity of income tax. i don't worry about whether or not we're going to have revenue neutral tax reform but we need to marry or push for tax reform with push for genuine budgetary and entitlement reforms as well. >> next question. >> let me ask a question of the panel. we have not addressed in any detail international tax questions. the united states is the only

major industrialized country that does not have a territorial system. there are a few minor or smaller countries that do. and we also -- our income tax is not border adjusted. do you think international tax consideration should be a major part of fundamental tax reform and what is the major component of positive changes in the international area? maybe just go down the panel. >> the first thing for those that don't have the misfortune 0 of having to toll this stuff little definitional -- world i would taxation means that's irs taxes american companies not only on the income they earn here in the u.s. but we also tax our companies that are earning money overseas. but of course, all those other countries where they're earning money, those other countries are imposing taxes as well. so it's a bizarre form of double taxation and in theory our

companies get a credit for the taxes they pay to foreign governments but never really works out well, and you combine that with very high corporate tax rate, definitely puts u.s. multinationals also a disadvantage, which is why most tax reform plans matter of fact any good reform move to territorial taxation and the common sense notion you tax what is airbeds inside your borders and that's it. and so you should have territorial taxation as one of the key pillars in addition to a low rate in taxing income only one time. it's for only near row subset of people that focus on this, but it's critically important in terms of competitiveness of your >> country. >> a company here who is going to put together a factory should not be influenced by taxes whether they put it here or in canada or here or in europe. the flaw in that argument,

which -- well, let's tax them equally whether they're here or in canada, and i canada has a lower rate, we'll put aned a-on tax so they won't leave. this assumes a certain amount of capitol being formed. if you overtax the factory it might not be created at all or every it's worthwhile to put factory in canada and we put an extra tax on it, we won't put the factory in canada, french firm will come and put the factory in canada instead us. none of that makes my sense at all. each country will build out its capital stock until you have used all the potential profitable opportunities in that country. if that country has a lower tax rate there while be more opportunities and additional capital there that doesn't mean that irelanding stealing capital from germany. if the germans puts the i-tax

rate on the irish subsidiaries of the irish companies the wouldn't be irish subsidiaries -- >> [inaudible] >> the whole thing is based on a misconception. the weirdest thing to me is if an american firm is thinking of buying another american firm for economies of scale french firm can come in and outbid them for the american firm because the french farm won't be paying additional french taxes on the earnings in america. it's just simply bizarre. we're treating foreigners belter than we're treating ourselves. i don't see the point. doesn't get us any money. costs us opportunities to invest abroad and then export to our foreign subsidiaries and it makes us weaker in the world. we're smaller share of the world economy now than we were 30 years ago obviously other countries have caught up after world war ii but we're making i it worse by our shrinking our role in the world with our crazy

tax system. >> it's hard to follow these two. i'll just aide a -- add a point forgot earlier. start think can that tax reform, and need to think about territoriality and lowering the rate. always keep in mind the ideal corporate tax rate is zero. the ideal capital gains tax rate is zero. anything above zero creates inefficiencies so many so look at corporate tax reform, the lower the rate the better. if we had a really, really low rate the worldwide tax wouldn't matter. dan is right looking at reform, not going to get to zero. we have to consider the rate and a territorial tax system and move towards it at the same time. >> well, jason is making a good case for the fair tax because the corporate rate is zero. and that is in fact what some of the economic studies show that you are going to have

exponential attraction of capital coming in because as a recovering tax attorney i will confess when it was legal was a frequent visitor of the bahamass and the cayman islands and and all, and the reason was they did not have an income tax and we set up trusts and different things when it was legal and were able to bring tax payments very very low because of that, because capital is calculating its return also based on what it can take home after taxes and if you have no tax on savings and investment, or on the corporation itself, you're going to have a lot more people looking favorably at the united states to invest capital. the second thing is border adjustability, and the economists here should be explaining this, not me. basically what we do not have under the income tax presently even though we tried and

failed -- is any way to make the type of adjustments that our trading part north america do. when they export goods from countries that have value added or other consumption taxes they rebate the taxes at the border, they come over here, and they're effectively not taxed. it's a very, very, very low rate of tax because we don't tax on the emports. we tax on profits made from selling the imports. what we're talking about with the fair tax and with the other types of corn pratt taxes that are being proposed here, is that there would not be the cost to carry when go overs and when they send products over here they would be subject to the same tax our products are. it's very, very important to have border adjustability. ...

businesses create operations overseas that they would have created here. that's not true. this is open operations abroad to create new opportunities and markets of demand abroad. we want our business is to be chasing new customers and we want them to be selling more. when a company is standing overseas is also standing here.

the company gets more efficient and create synergy and increases jobs here at home. [inaudible] i think there has been a lot of discussion about lessons learned and a reminder the rate of return to capital is greater than the growth of the economy and those invested in the basic market wages of the economy created policy and that love some of the two say c we are right. the rest of us look at and say wait a minute we are trying to increase to tax or form of government regulation and reduce the taxes on labor's are more folks can be current on labor and the second lesson is that r is greater than g why are we doing our best to make it so that more people have access to better savings incentives retirement savings plans so it's interesting how even if you take

the research at face value some folks have problems with it but if r is greater than g we need to change your policies to give more people access to r. >> our problem with that r is greater than g if you reinvest all of it you get the wealth inequality but you don't you live off return for merron capital so they r is being reinvested so the welcome quality isn't rising. the poor guys and they doesn't understand the sunday when retirement have to draw down on the dividends and can't reinvest all of them in that trash this entire argument. our staff ran the plan there are model and it crashed gdp by over 15% and that included a drop in labor income of over 15%. that was on all levels of wages and labor. low income people middle income people high income people. >> i want to emphasize one thing

though all of these consumption-based or income minus consumption-based plans are in effect helping with the capital formations here. they are all in a sense either explicitly or implicitly adjustable to the same degree although one is in the law and the other one simply happens because if you are saving a viewer not consuming it and if you're consuming it falls under the export. they're all better than current law on our international trade in about the same way so that is something the international benefits of doing this perhaps are overstated from just going to a flat taste. the territoriality that gives you the additional cake of not penalizing those trying to invest abroad. that's kind of a different question and a little bit different from my concept of a neutral or flat tax but they are both very important. the business community is not waiting for the congress to get off the dime here.

they are investing more abroad and the necessary spending on subsidiaries and/or arranging for their headquarters to move overseas the do-it-yourself tax reform. they cannot wait for it. burger king a funny case in point burger king has foreign operations they didn't want to have to manage so it spun off tim horton's and tim horton scott bought off of another canadian firm and got bought from burger king. it's not a vicious plot to get around international text world. that happens that the familiar familiar -- the companies were familiar with each other. one of the funniest cases out there but it's going to happen more as time goes on if congress doesn't get off the dime. >> we need to wrap up this panel and our next panelists are here so please join me in thanking our five panelists. [applause]

[inaudible conversations] [inaudible conversations] >> thanks david. now for a last panel today i would like to introduce my colleague steve moore. he is a distinguished fellow in the project for income and growth at the heritage foundation or economic freedom and opportunity. in addition to his wrote the heritage foundation is construed as "the wall street journal" and "fox news"."

mr. moore has served as president of public growth a senior economist at the joint economic committee under former chairman dick armey of texas the grover m. hermann fellow at the yardage foundation is special consultant to the national economic commission and research director of president reagan's commission on privatization. he is a a graduate at the university of illinois and holds a master's degree in economics from george mason university and in 2010 he was awarded the university of illinois alumni of the year. please join me in welcoming steve moore. [applause] >> good afternoon folks. thank you for being here today. we have got the two leading intellectual advocates of the flat tax base ending with art laffer. probably the two most influential people in promoting this idea so it's a pleasure to have art laffer here and you

know art laffer from being the intellectual architect of economics and the man who turned while reagan -- supply-side economics. it tells the story of how arthur laffer and jude wanniski and other intellectual leaders of long long-ago era really turned around the country in terms of promoting their ideas and getting ronald reagan to sign onto these ideas that not just only changed united states to change the world economy so2 that we owe art laffer a great debt of gratitude. he is the author of any including the most recent an inquiry into the nature and cause of the wealthy states that i wrote with arthur and we had to weather authors which is about why some states are going

so much faster than others. without further ado i want to introduce my good friend arthur laffer. [applause] >> are you going to sit right up there steve so i can just sort of -- that's impressive, don't you think alex i can look right at the back of his head the whole time. when i do a facial thing how we be able to recognize my facial movement. i want to have a little fun today if that's her writing go through some of this. how are you, good to see you sir. i thought all of you were dead by now. [laughter] one of the real pleasures when you get to be my age at 75 is all your enemies have died but that's you know hillary is still around i guess. [laughter]

what i want to do was start with three incentives. there are two types of incentives in this world. there are positive incentives and their negative incentives. by way of illustration example i like to use is the tpm the dog. you know where the dog won't be but you have no idea where the dog will be. it will take off like mad but you don't have any idea in what direction. those are the negative incentives. the stove doesn't care where your hand is as long as it's not on it okay but positive incentives tell you what to do. negative incentives tell you what not to do a positive incentives tell you what to do. if you feed a dog you know exactly where the dog will be when it comes to food time feeding time. so you have to look at the world in terms of incentives or money look at taxes taxes are a negative incentive. they tell people what not to do. do not report taxable income.

they don't care how you don't report taxable income. they care that you don't report taxil income, evasion and avoidance underground economy moving to a different location or going out of business. all it is as is a negative so you've got to understand taxes are negative system and when you look at it you understand it intuitively. i mean why do we find speeders on a freeway? to get them to stop speeding. why do you find her why do you tax cigarettes? to get people to stop smoking. why do you tax income? you don't do it to get people to earn less income so when you look at a tax system what you want to make sure you do is you recognize the purpose and the purpose at hand is to raise revenues so what youant to do to avoid the damage is you want to collect your taxes in the

least damaging fashion and obviously spend your proceeds in the most positive fashion. but you got to understand negative than positive. for example you never want to mix a positive and with a negative. you just don't want to have a negative system and try -- a trial tax credit is a perfect example of make in a positive of the negative system. you should never use of child tax read it critic you want to roared people for having children which is perfectly fine if you like to do that. i have six so i'm all for reporting people that have lots of kids but write them a check. don't give them a tax credit. there are lots of people who don't file tax returns who do have children. you get all sorts of distortions of the system but let me if i can go through a couple of these with you because it's really important here. why would you ever ever ever want to cut taxes on people with

high income? instead of cutting tax rates with people with low income? why would you ever want to do that? what on earth would generate some to cut the highest tax rate and not use that to cut the lowest tax rate in the maaco through with you just a couple of things on why you would want to do that. the first thing is if you are looking at a cost benefit analysis and i'm going to use the example of john f. kennedy if i can. john f. kennedy in 1960. think was fast and 63 and 64 the tax bill he cut the tax rate from 90% to 71% and cut the lowest tax rate from 20% to 4014%. all of the with me? if you look at it in percentage terms in cutting at 91 to 70

that's 21 percentage points divided by 91 so that's a 23% cut in the highest tax rate and by cutting the lowest rate from 20 to 14 that's a six percentage point cut out of a base of 20. that's a 30% cut in the lowest tax rate. altogether with me? kennedy cut the highest tax rate from 91 70, 23% cut in the lowest rate from 20 to 14 that's a 30% cut. the taxes world were all that mattered you'd be perfectly correct in saying he cut the lowest tax rate of more than the highest but remember taxes are not these. people don't work to pay taxes. people work to get what they can after a tax. a very personal and private incentives that motivate them which is not exact weight taxes and in fact it's the earnings rate, to the incentive rate that really matters. let me take it to the incentive

rate. a person in the highest tax bracket before kennedy cut the tax rate from 91 to 70 that person earned a dollar they had to pay 91 cents in taxes and their after-tax incentive for earning that dollar was 9 cents. altogether? in the lowest bracket the guy earned a book paid 20 cents in taxes and his or her incentive was 80 cents for earning that dollar. altogether? after the tax cut by cutting the highest rate from 91 to 70 b. after-tax incentive rate for the person in the highest bracket went from 9 cents on the dollar to 30 cents on the dollar. now after the kennedy tax cut they earned a dollar. they paid 70 cents in taxes and their love to keep 30 cents. if you look at it from the standpoint of incentives that take 233% increase in incentives for a 23% cut in tax rates.

that said 110 cost-benefit ratio with a static revenuecentive effects. you get a one to 10 cost-benefit ratio. you follow me on that. if you go to the lowest rate before the tax cut that guy earned about paid 20 cents in taxes his or her incentive was 80 cents on the dollar. after the tax cut going down to 86 cents on the dollar that was the incentive. that is a 7.5% increase for that person. for 30% cut in rates that's a 4- 4-1 cost benefit ratio. when you cut tax rates for higher the tax rates are the greater is the percentage increase in after-tax incentives for doing the work for every given static dollar loss. that is one of the key reasons why you want to cut the highest tax rates the most because you get the greatest trade-off

between cost and benefit from that. are all of you following me on this? please do hope you do. the second day i want to go through is in taxes marginal tax rates are the key order to correct myself. marginal incentive rates are the key for the tax cuts. you always want to look at incentive rates and on the margin. when you look at a tax return in the u.s. every single taxpayer pays the lowest tax rate. every single one of the taxpayers pays the lowest rate and as you go up in the brackets fewer and fewer people pay the higher tax rate and get into the highest tax bracket. if you are the highest tax bracket everyone in that tax bracket is paying that tax rate on the margin. when you look at the actual tax bracket and the filing of tax returns a night to remember what year it is that less than 2% of all taxpayers actually pay the

lowest tax rate as a marginal tax rate. all the rest of the tax cuts are marginal. if you cut the lowest tax rate you will have an incentive effect the changes the marginal rate. the only one where you will have the substitution effect operating art on a very small percentage of those people in that lowest tax bracket. again so the higher in the market to have of cutting the marginal rates of substitution between labor and leisure another reason for cutting the highest tax rate. the last one i want to go through here with you which i think is very important as well his reach people are different the poor people. they have got money. they have got the means to do things the poor people don't have an impact which people have all sorts of ways to do things the poor people don't have.

they have both the ways and the means to change their taxes. they can hire lawyers accountants deferred income specialist, favor grabbers congressman, senators. when you see a group of people hanging with the president don't for a moment think this is a group of street people trying to explain to the president what it's like import. now they are switching positions with goldman sachs in the white house that rich people have the ways of changing. i moved from california to nashville tennessee surely and simply for the income tax. i bought my house in tennessee with my first year's tax savings savings. i had to hang up pictures and i had to do watercolors all over the house of bikini girls and palm trees all over the house. i had salisbury's in every room and sunlamps and beach boys music in the background but i

got over it. after three years the statute of limitation was gone and i could go back. but rich people can change the timing. 401(k) all those sorts of things. they can change the composition of their income. they can go from unrealized capital gains they can change the volume. people who are high income have a far more elastic and forgive me for i don't know how many economists a far more elastic supply of taxable income to the system than lower income people. the reason you cut tax rates in the highest group is not because you love rich people although there's nothing wrong with rich people as long as they help me along. if the heritage foundation is not the place for that stephen don't know what is but if you look because you get more bang for the buck.

number one the cost-benefit ratio is lower than the highest bracket because the higher tax rates are per dollar static revenue loss. in the highest bracket to find a higher brackets you find a lot more people on the margin than he do in the lowest bracket and the highest brackets people have a lot more ways of changing their income. that's why you want to cut. now what you want to do with it is you can see the broader the base it leads you to a flat tax going through this logic. i want to talk to you about redistribution and it's a really important theorem. it's taxes and government that redistribution this is all petty step if you forgive me. redistribution is when you take from someone you get a little bit more and someone gets a little less. if you take from someone does a little bit more you have reduce their incentive for income and

they will produce a little bit less. if you give to someone who is a little bit less they all of a sudden have all turned its source of income -- an alternative sense of income other than work in and they too will work a little bit less. the theorem here is really explicit and on ambiguous. whenever you redistribute income you reduce total income. whenever you do it. redistribution always comes at a cost of lowering total income. that's map, it's not economics to map data when you take from someone who has more they have an incentive to produce less. he give it to someone has less they also have an incentive to produce less and both parties will produce less. the theorem is really simple. whenever you redistribute income you always would get less income income. the more you redistribute the lower your income will fall and an extreme if you redistribute

income completely and totally you will end up with zero income totally and you can see that. if you did redistribute income totally for everyone who earned an average income that person was tax 100% of the excess and anyone who earn below the average income they were subsidized up to the average income. if you actually did that everyone would end up with the same amount of income. it would be exactly even. if i actually did tax above the average income 100% of the excess and i did subsidize everyone below the average income up to the average income of think we can all stipulate today that everyone would be equal at zero. just remember these are the theorems when you go into policy. why do you want to have a flat tax and why you want a flat tax is in comprehensive is all

except for the cigarettes those taxes that you are imposing on the system to change people's behavior the joke i like to use is we americans don't like drunk people smoking while we shoot each other. except for sin taxes which are there to change behavior. what you want to do is do the least damage to the system in collecting the requisite revenues to run the government. that's what you want to do. you want to collect your taxes in the least damaging fashion and spend the money in the most positive fashion and when the last dollar of taxes collected a little bit less painful than the last dollar of money spent is beneficial you stop already. that is where government stop spending. that's the correct optimal conditions. so what you want to do in these taxes if you really want to get to where you the least damage done by collecting less you know

the net supply of low elasticity which obviously none of us does come if you don't the best analysis is to have assumed all factors of the same elasticity so what you want to do is have the lowest possible tax rate on the broadest possible tax base to provide people with the least incentive to evade a void or otherwise not report taxable income and give them the least place to which they can place their income and be exempt from taxation or you want the possible rate on the broadest possible base for a attack system. are you all there? obviously the rest of the program should he government spending is taxation. government doesn't create resources. government redistributes resources. whenever the government tells them out of trouble they are putting someone else into trouble leave me when i tell you you. sound money coming in a town money and i'm not going to go through all of it. you need free.

you need free trade. free trade is wonderful. there are some things america produces better than foreigners in their something as foreigners produce better than americans. we and they would be foolish in the extreme if we didn't sell them the goods we make other than they do in exchange for those goods they make that are than we do. it's called comparative advantage. china is not our enemy. china is her best friend. without china there is no walmart. and without walmart there is no middle class or lower class prosperity. the issue is not china is our enemy. china is her best friend and sanctions on countries don't work. sanctions on north korea to see how they have cause and to see the light? we now see the light of free

markets pro-growth democratic economic capitalism we have got a population that is anti-market forever and ever. when did we start sanctions on cuba? sanctions are the antithesis of how to win friends and influence people. wesley regulations. taxes on those a low rate broad based flat tax and i'm going to stay with you on this one because most people think it doesn't make sense politically. i did a prop proposal long time ago called the complete flat tax which got rid of all federal taxes personal income tax gone, corporate tax gone all payroll taxes both employer and employee gone excise taxes gone medicare and medicaid taxes gone, gone gone. capital gains tax everyone of those gone, tariffs got rid of

all federal taxes with a single exception of sin taxes than they are not large portion of total tax revenue. if you replace static revenue full employment all federal taxes with two flat rate tax is one in business net sales in one of personal adjusted gross income no adjustments in no exclusion she could match all federal taxes today with the tax of total% on each. can any of you imagine if we had no federal taxes in this country except for two flat rates one business net sale and one for small unjust thing, 12%. can any of you imagine what this country would look like? we would be selling cars into central china. we would be the boom of all the centuries. when it is spent and once one is earned that doesn't amount to 20% with certain items like

computers and owner-occupied homes in some of the corporate profits from government corporations but that's where you want to go to grow your taxes. that tax i was able to con the governor of california to do this jerry brown. jerry brown the democratic primary ran on this proposal. he raised 1%. you can tell just looking at him that he likes to spend. the one of flat rate tax of 13% of business net sales on personal unadjusted growth. i think we lost in wisconsin by one vote or so. going into new york jerry brown had bill clinton in his crosshairs. he was going to new york and we were catching up in the polls.

three weeks out of the new york primary jury announces his running mate jesse jackson. needless to say we didn't win but jerry brown literally came in second in the democratic primary in 1992. the first major presidential candidate to run on getting rid of the progressive income tax in history. ..

what we're trying to do we got rid of 14 tax brackets. made it to tax brackets. fifteen and 28. we get rid of exemptions and exclusions. exactly static revenue neutral, exactly. if it raises taxing going to

veto it, and if it costs a hundred bucks are going to veto it. thisthis is about the consolation, not a tax cutter increase. can any of you imagine that bill today? i mean, i don't think there is a republican i would vote for that today let alone any democrat. the vote in 1986 the vote in the senate in 1986 was 97 to three. three senators voted against that bill. simon from illinois state milk or was from maryland, i think, and the left just retired from the senate from michigan. mr. lefty himself over for. my next-door neighbor, dear dear friend he voted for

it. six months ago, the best bill he ever voted for it, but the 20 years of of prosperity. what is his name? bill bradley voted for it. mr. death tax himself, howard musclebound voted for it. what is his name from delaware joe biden voted for. chris dodd voted for it. teddy kennedy voted for it for god sakes. in the house back then barbara boxer voted for it. harry reid voted for it. little dickie durbin voted for. charlie rangel voted for chuck schumer voted for it. why? why? because it was the right thing to do and it was the right thing to do command they voted for it. believe me when you name the north star when you describe the tax codes correctly and you believe in what you are doing you can win that really easily.

we are at a stage in our history where we need to redefine in a star go through the tax code correctly, lower abroad -- entering a broad-based flat tax.tax. there is plenty of time to compromise in the middle of the legislative process. you do not have to compromise before you have even started. describe the north star and let the race be run on the north star. and when you get to legislative process you can compromise. there are a couple of others we should have one. every other other year we should only be allowed to appeal legislation. i also think congressmen and senators ought to be put on commission. i have no problem with them making lots of money as long as i do to. so i would put the men. what i do with every congressman or senator give them my shadow portfolio of 5 million allow them to

keep all the capitol gains tax-free and hold them personally liable for all the capitol losses. believe me, they would never vote the way that they do today. with that, i we will stop. have i done enough damage? thank you. [applause] >> i ami'm just going to make a couple of comments about what you said and then we will get into the discussion. i was asked to talk a little bit about the politics of the flat tax. arthur and the speakers you heard earlier this morning talked about the economic case. the questioncase. the question of course arises, why is it that we have been talking about this issue for at least 25 or 30 years. steve forbes ran for president on the flat tax and did well with it. much closer to the flat tax today than we were when he 1st introduced this idea.

youyou heard today all the economic arguments in terms of why this would dramatically improve the economy and create jobs, but i want to make a few points about how we sell this issue and then arthur and i will engage in conversation on this. as most of you probably know, arthurknow, arthur and i spent many months with rand paul helping him develop a flat tax puzzle. he has come up with something similar to what arthur just described, the complete flat tax. it has a lot of the same characteristics. fourteen and a half to 15 percent flat-rate income tax. it has the 15 percent on the personal income tax. veryvery similar to what arthur just described, essentially a business that sales tax. it has gotten an enormous amount of attention already. his only beenhas only been out for a few weeks. 4 million hits on his website, and it is a daily news. they shut down the website

because somebody hits the 1st week that it came out. even irs agents were interested in this plan because they saw the benefits of it.it. yet even with the polling we have been doing at heritage this concept of the flat tax, a concept, not especially popular. a lot of people like it and a lot of people don't. the question is, what did question is, what do we do? the arguments we should make in favor. i just want to mention two with three. what is the obvious one, the international competitiveness aspect. the idea of the united states having a 15%a 15 percent tax rate when the rest of the world is a 35 or 40 percent would give america an obvious huge competitive advantage in terms of companies locating here. one of theone of the ways that i like to try to emphasize the importance of this because a lot of people on the other side of the aisle do not believe tax

rates matter or don't believe a word that you say. they don't think tax rates have much of an impact on where people or capital or businesses flow. as many of you know i was in las vegas debating paul krugman, the most influential left-wing economist in the country. he writes for the new york times twice a week. when it comes to politics it's hard to.to anyone who has more impact on the way democrats think than paul krugman. what was interesting, we got into this big debate. we have this book out about the fact that people are moving from high tax to low tax, and the evidence is overwhelming that this is happening. but i just showed him this chart, and many of you have seen it. taxes and florida have created over the last 20 years. by the way, no income tax versus california and new york where they have a 13 percent income tax.

and what we found is that for every job that has been created over the last 20 years in new york and california three to four jobs have been created in taxes and florida. i confronted him with this data. howhow do you explain this. so many of these jobs are flowing from states that did exactly what you told them to do and did exactly what arthur laufer told them to do. his response they were moving because of air conditioning. that is a crazy thing to say it was everything. so it is true. all things equal, people, people do move to warmer states, but the.is it is irrefutable that tax rates matter on the state level. there is no question about it. we estimate a thousand people a day. if people move from one state to another because of a 13

percentage.differential, they will move substantially o-uppercase-letter move across borders if you have a 20 or 30.advantage on tax rates that we would have if we have the flat tax. number two, maybetwo, maybe the most important argument right now in terms of convincing the american people why we need a radical change in the tax system for the flat tax or a national sales tax, the major i think selling.is not an economic. it is about anticorruption in washington. if you look at -- i'm not by any means aa supporter of donald trump. i felt what he said this weekend was despicable, but there is no question about it. what he has tapped into his this idea that washington is corrupt incompetent, and there is too much cronyism and we need to take power away from washington. if you want to do that the

epicenter of the power structure in washington is the tax code members of congress by insult tax favors everyday. the.we need to make is that if you wipe out all the special preferences, all these carveouts, special-interest provisions you are going to take power away from washington and replace it to the people. this is a kind of power to the people initiative that i think -- we don't talk enough about it. no longer but these politicians and lobbyists have the power to influence where money flows based upon the tax code. the final command i think we underestimate what is an important topic in terms of selling this concept of the american people. you mentioned the corporate tax.

i don't think you could come up with the worst tax. maybe correct me if i'm wrong. i can't think of a worse tax basically capture and producers and not taxing producers that produce things that bring them in the united states. the thing that is an interesting element to the flat tax, the complete flat tax that i would like you all think about is that when you have a 50% complete flat tax what this plan is is a gap legal 15 percent tariff on anything that spot and. in other words has set of taxing what we produce where now going to tax people on what they consume which is enormous. we canwe can go to blue-collar workers and say look, this is what you wanted a tax system that gives america fair advantage which is what this plan does in spades and is a very powerful message to blue-collar workers across america to make things for basically look at things coming in from china were

coming in from japan or other countries and say wait a minute. we want to at least compete on equal basis. this plan we're talking about would do that. i do think that when you look back at what might happen in 1986 it was a miracle. if you look at america in 2015 it just feels to me that the american people feel that the tax system is so corrupt and filled with special-interest provisions that do not benefit them the benefit the corporations on the street that the time could not possibly be more right. let me start with a question for you, arthur, about this. do you agree with my assessment and the depressing part about what is happening is on the democratic side of the aisle we have a senator from the state of vermont who is basically giving speeches are on the country saying we should go to the 50s or 60s or 70 or 80 or 90 percent tax rate. the economy performed very

well back then when we had tax rates as high. we can have a strong economy with tax rates that i again. how would you advise people to respond to that argument? by the way, he is climbing in the polls. >> bernie sanders high tax rates in the economy prospered. my suggestion we should raise tax rates to almost 100 percent. then drop them down to 70 percent and watch of the economy improves. if you look at the history of the us, it is amazing. high marginal income tax rates. ninety-two and half percent. think about it for a split 2nd. you have the us with the house has to pass a bill the senate has to pass it and the president has to sign it. the marginal income tax, 92 and half percent.

think about the debate in congress. the lefties and righties. okay. okay. ninety-two and a half percent. 95 percent is gouging. yeah, but 90 percent is a giveaway. if youif you look at it it went from 92 92 and a half. harry truman cut it. kennedy cut it. we had a cut down to 28 percent. if you look at the trend in the us and the world, it's moving away. we have awe have a different world today. if you look at union representation back then i mean, we are becoming so much more of a free market free enterprise world. to think that there we will be any major change in that trend is a real mistake. what i think we will happen is in 2016 we will win the election in a landslide. and it may well be a democrat. this is not republican or democrat not liberal or

conservative, left against right. it's basic economics. jack kennedy did it. bill clinton was great. reagan was terrific. it's bipartisan ignorance and blessings. >> some of your critics say the economy performed very well. >> really well. >> clinton raised the tax rate. counter to your theory. >> clinton didn't raise the tax rate. come on. the 1st thing he did pushing nafta through congress against his own party, against theparty, against the unions. seriously. take your hat off and say congratulations, mr. president. he got rid of the retirement tax and social security which used to be when you hit the age of 65 and 72 every dollar of income you learned -- income you are and you lost 50 percent. massive tax cuts on elderly workers. the welfare reform.

oh, my god. the biggest capital gains tax cut in nation's history. think about. the highest rate from 20 to eight to 24eight to 20 but what he really did was exempted all owner-occupied homes from capital gains taxation. that is enormous. but just to save the best for last, bill clinton as president of the united states cut government spending as a share of gdp every year for eight years running. he cut it more than the next four peacetime presidents combined. when you look at clinton to say that he raise tax rates which he did and say that the finds his presidency i mean, that's just not correct. he was a great, great president and his biggest mistake was allowing the personal income tax rate to go up. that by no means offset what

he did in economics. >> how would you respond to what paul krugman was saying about the fact that tax rates don't matter, don't matter in the states don't matter across the world. sweden is a huge success story, and they have high tax rates. what would yourwhat would your response be? >> i don't know what country is talking about. cut the corporate tax rate. i mean,, they are the only ones that didn't do operation, you know, qe one two, and three. it's not part of the euro. denver 90. i mean,, you talk about that i use that as an example for me. but if you look worldwide all your work, those countries that have had the fastest growth, the best performance have cut tax rates for two things matter.

the level of taxes and the change in taxes. >> you mentioned jerry brown a seminal event. a leading liberal democrat talking about the tax. today the democrats a lot of them would support what is talking about 50 60 70 percent. do you see any democrats that those of us who have worked tax reform can work with to get this done? >> if i can take you back in time it's exactly 19841979 1980. at that time neither republicans nor the democrats really believed in anything were talking about. we had a couple of wild one of situations, the tax act. >> as a matter of fact -- >> capitol gains. or 90 cosponsors in the senate. ninety cosponsors. once that went through the

pres. didn't wantpresent didn't want that. but even reagan was very tepid on tax cuts just to be honest. the democrats were not -- i mean, carter was not. but once you start -- and let me tell you once you start with a little bitty tax cut it worked. zero, my god. it becomes an avalanche. it becomes a cascade, a waterfall. by 86 it was 97 to three. everyone was trying to find a thing they could cut attacks on. i mean,, this was the conflagration of tax cuts across the world leading to this enormous prosperity because once this thing starts rolling you can't stop it. it's a hard day. the time has come. these guys about themselves and a quarter, and they cannot go further. now it's our day.

onceonce it starts it is more fun than anything you have done ever. >> we have been working the two of us with some of these presidential candidates to try to get. and we talked about the plan that rand paul has put into play. do you anticipate other republican candidates coming out the flat tax? >> i anticipate every one of them will. i anticipate ted cruz will. i anticipate that -- i mean even huckabee is talking about it. it's not his target area. he's talking about a fair tax. there are all sorts of different ways. >> jeb bush? >> definitely. had a little fun with them. the best of the family. he said, you watch it. watch

it. i come from a standard ram state. [laughter] jeb bush is one of the finest guys going. an impressive man. scott walker. this is a field of candidates. if i can honestly say each and every one of these candidates and there are two i don't know. i don't know donald trump or santorum but i can assure you each of these candidates has the wherewithal to be a great president. and what your looking at in the presidential race -- and forgive me. i know you people think they are born with principles. a group of people united by one characteristic. they all have bad moms. [laughter] you no whether you have done the job we will i not. a great job. no, i didn't. these people do not have an internal compass value system., value system.

they always look to external affirmation to confirm there own self-worth. that is why they sit in front of mirrors for days on end. i would guess ronald reagan spent three hours a day. your receipt a picture of ronald reagan? not perfect. thesethese guys look how the rest of the world looks at them. find a fun one, go to youtube and look up jonathan edwards i feel pretty. if you have not seen that these guys if a politician gives a speech and everyone booze they change the speech. what you have here is the perfect defining down the politicians. these guys are out they're trying ideas with the moneymakers. there going to change their views. i believe the final candidate we will be the one best trained in this process and we will be a huge, huge winner. >> the one candidate who has not really on the republican side of the aisle marco rubio.

he does have this big child tax credit which is not something that we would necessarily support. have you been able to? >> and i don't know about you, but i made mistakes in my life. milton friedman always used to yell at me do not did arthur make a mistake? if you make a mistake make it only once. change it and start making a mistake. i expect a lot of these candidates will learn. you know, these candidates are probably you know, each of them thinks he or she is the single best brain that has ever walked the planet earth and have the correct proposal. let me tell you, i would not go one-on-one with ben carson on brain surgery. i just wouldn't. he really does no how to do it. i would defer. when it comes to tax plans he may not be the right one.

these guys are sitting there figuring out how to give one. theget one. the hubris of some of these candidates because they are young, successful. they think they can define it better than someone who knows what there doing. that we will change as time goes on and they will become more and more mature and learn from the field around them and become better and better candidates that is why we have a primary why young people grow up. ii hated those lines i was young. but it's true. you know, these guys will learn through the process that your going to get a great set of policies out of these candidates. each and every one of them. each and every one of them has the wherewithal to be a great president. some of them are enormously accomplished. if any of you have ever seen ben carson and what he has done separating conjoined twins and both lived.

that is amazing. ted cruz argue nine cases before the supreme court. hello. his 12 years old. but marco rubio is young. speaker of the floor of the house. this guide is amazing stuff. they are allowed to make mistakes. able changing get into the groove. >> all right. we have about seven minutes. time for maybe two or three questions if anyone has any questions. i you going to -- okay. why don't we start with the stillman here. >> high. this question is for doctor laffer. governor walker mentioned in his speech both in his introduction. if you have any comments on

the fact that he mentioned and talked about broadening the tax base. >> i was going to pay him a lot for doing that until i found out who replaced it with a cold curve. if you know scott walker i knew him since he was county executive. he is amazing. wisconsin is a right to work state. hello? this guy was dead how many recalls and elections? scott walker is made out of pure -- i mean, just a phenomenal person. he is in the process. you know, each one of these guys has his own thing. i am just a huge fan. >> we met with scott walker. i think is going to come up on his tax issue with something very big and bold and i think it will include effects. but there is no question that scott walker is the real deal.

he has not come out with one yet, but i think you will be happily surprised to see what he comes up with. >> all right. the kind of tax rates the thomas and bernie want can work as long as it is accompanied by international bombing campaign of all competitors. [laughter] >> look. >> speaks for itself. >> yeah. >> please pull back a little bit. taxes matter and they matter a lot, but they are not the only thing that matters, and they really aren't. terrace folders, restriction on trade matters january 20,20th 1981, the prime interest rate in this wonderful country was 21 half percent. imagine what the country look like today? regulations matter.

back in the 50s we have blue laws which help prices. there were no discount stores. when you look at this world it's not just tax. it is all sorts of things. don't ever forget taxes matter command they matter a lot. >> there is a left-wing ideology the intellectual class of the left. the fact that thomas picardy's lunatic book became a best-seller tells you a lot. i don't think any of us are going to persuade those people. they are hard core income redistribution is an they drink that kool-aid. but the reason i'm not in a wonder if you agree. you talk about the base voters working-class americans they do get this. they understand the importance of tax rates command employer with less money.

it seems like we need to do a better job of communicating that. i just don't see the american people in favor of a 70 or 80 percent tax rate. >> no. of the republican party does not have a leader. they don't speak with one voice. as soon as reagan was nominated in 1980 he was the leader and all of everyone lined up behind them. you cannot believe the power was the republicans have a nominee and a nominee is the leader of the convention you will find all of these disparate's we will come behind the line and you will see the republican party become speaking with one voice. right now it's hard to discern what's going on with how many candidates. eighteen. while. when the ex- governor of virginia is not included in that 18 you have a lot of

candidates. >> hillary is a problem because when she gave her speech less than a week ago today, her whole thing was how we help the middle class the working-class americans, everyday americans how do we help these people? and she had a big problem. the everyday americans she is trying to reach out to have gotten creamed the last six years the people who have been the victims of obama's policies. the census bureau data. the average family in the middle class asthat she says she speaks work has lost a thousand dollars of income during the recovery. that never happened before. oneone of the themes that she talked about over and over again in her speech was how we get businesses reinvesting in america because it is true american businesses healthy.

1 trillion or two of capital. we need these companies to reinvest in the same speech she's talking about raising the capitol gains tax on the very people she wants to invest. if you want less of something taxes. it seems like she has a big inconsistency. one last question. >> thank you. i appreciate your continuing to mentor steve even though he's into his 50s. >> so much anger. so much anger. >> i happen to be hear in 1990s and so this was going on. it was interesting. yes. it reminds me of how -- with the exception of nafta we kind of dragged bill clinton in the all of these tax and spending policies which you mentioned with the exception of nafta. i remember these fights. >> now with the exception of nafta. we did it with reagan. we just cannot get it through.

>> if you and the future want to give this rosie rearview picture of the bill clinton economy, it would be helpful to at least contrast that with the modern democratic leadership in party and say these folks today are not for any of these policies the bill clinton where he sighs the bills on spending cuts and tax cuts are all the stuff. >> forgive me. you are right, completely correct but 19791980 it was not a democrat alive i was in favor. you may not remember tip o'neill and jim wright. they are jokes now, but they were not funny back then. they were the exact same as read, pelosi, obama. when you look today don't think those democrats cannot become us. they can and will. they need a big tent, tent, not a

closed end. we need to accept them into the fold. once they get in it will do what our core said to me six months ago. the best bill i ever voted for 20 years of prosperity. he loves his vote. go read what those guys wrote. and that time and that place in that situation what they said this would do it makes us look like left-wingers. schumer with that. >> it is an important. the reason hillary speech was supported, she basically said if you elect me not going to get a 3rd bill clinton term. you will get a 3rd barack obama term. i don't think the american people want a 3rd barack obama term. the party is clearly being shifted to the left which i think is extremely discouraging. it is so discouraging that those ideas have been cast aside which makes it all the more important we get these guys on the republican side of the aisle to embrace this idea.

enclosing you know, the fact that you have got 18 republican candidates out they're for president and 15 of them are so are talking about these ideas that is a breakthrough because we have trouble getting republicans in favor of these ideas. >> that's true. what i'm asking stay open the democrats will work with them bring them on board. it is all of our country not just one party. please educate them for work with them. every now and then it may have something to teach us. please, it's one country one people one vision for what future. we work and have these things out inthe primaries for the please be that way. >> thank you very much. [applause] >> thank you again to

stephen and thank you everybody for coming. before we close we will have another tax event later this fall in october. stay tuned. therethey're might be sandwiches and drinks and cookies and stuff. help yourself and thank you very much. [applause] >> tonight speak with the "wall street journal" information age columnist on why he thinks washington is a danger zone for innovation >> if you go back to earlier technologies like railroads and the ma bell telephone monopoly those were regulated as common carriers regulators set prices, set terms, rules and we all no what happened. there was little innovation.

and in telephones until they were all deregulated. all those common carrier statutes essentially undone by congress when it was so clear that innovation was being suppressed in the us is falling behind in us competitiveness. that was the backdrop for the bipartisan consensus in the 1990s that the internet was going to be different. this was during the clinton administration. a clear consensus. democrats and republicans that unlike earlier technologies the internet was going to be largely unregulated. >> tonight at 8:00 o'clock eastern on the communicators on c-span2. >> the president of nigeria is in washington this week. today he met with president obama in the oval office and tonight he will speak in the chamber of commerce. his speeches at 8:15 p.m. eastern.

you can watch it live on c-span. two weeks from tonight a forum. partnering with the new hampshire union leader for the newspaper voter 1st forum on monday, august 3. all 17 current and likely candidates have been invited to participate. why for manchester on c-span, to talk radio, and c-span.org at 7:00 p.m. eastern. >> treasury secretary jacklin spoke today at a forum marking the five-year anniversary of president obama signing the dog frank consumer protection act. this is 25 minutes. [applause] ♪ [inaudible conversations] >> sorry for the delay.

there aren't to have the secretary here today on this historic occasion. most of you no his background. confirmed by the united states senate in february of 2013. in that capacity he is chairman of the financial stability oversight council. before becoming treasury secretary he served as white house chief of staff. before that he was director of the office of management and budget. while there are many high-profile activities both have an before treasury that i could mention i wanted to mention one of the many things he has 54 that receives no attention, which is hard to do. nonetheless cftc is one of the most important financial regulators one of the most important jobs in protecting the american people from the dangers of derivatives and it is a small agency that has been consistently under

attack and grossly underfunded. more than $200 million and yet at omb, the whiteomb, the white house, and as treasury secretary secretary lou has consistently fought to prevent cuts and has fought for increased funding and has not received any attention that tells you a lot about his priorities and concerns when he is on the frontlines fighting for an agency is small but important as the cftc which is just one example of many things the secretary as far for that does not get headlines but is incredibly important. we're lucky to have him here today. [applause] >> good afternoon and thank you for that kind introduction and for organizing this event. it is a pleasure to be here

to mark the 5th anniversary of the dodd frank wall street reform and consumer protection act. it is a particular honor to join sen. chris dodd and congressman barney frank the two central architects of the law we gather to celebrate. their tireless efforts along with those of the president and members for both sides of the aisle led to the passage of the most far-reaching and comprehensive financial reform since the great depression. on behalf of everyone i want to thank them for there leadership vision and unrelenting determination. [applause] today, as wetoday, as we mark this anniversary i want to reflect on the progress we have made over the past five years and would like to begin by putting wall street reform in the context of the crisis and what i see as the key ingredient for healthy relationship. when president obama took office our country was in the depth of the worst financial crisis of our

lifetime. during its darkestduring its darkest moments our economy was contracting at the fastest rate in 50 years. companies were shedding with 800,000 jobs a month. unemployment top 10 percent. the american automobile industry nearly collapsed and millions of families lost their home in savings. the recession started with the financial crisis the loss of confidence spiraled into a broad economic crisis that hurt families and businesses on main street as well as wall street. the financial stability can seems like an abstract concept but the crisis demonstrated that excess risk within the financial system can have an impact on the lives of all americans. when people discuss wholesale rollback of wall street reform it is important we remember those that suffer through the worst of the recession, the worst recession of our lifetime the boarded-up storefronts, the surge of foreclosure signs for the lost retirement savings

command all those americans who lost their jobs. make no mistake and unstable financial system harms assault. stability is a critical ingredient of functioning financial system but we also need a system that promotes sustainable long-term economic growth, maintains transparent and do capitol markets and extends credit to creditworthy homeowners, consumers, and small businesses. the wall street reform set out to transform the way the financial system operates so that it is more stable, transparent, and focused on serving customers. five years later with nearly all the major rules written economy is growing, banks and lending command there is no doubt wall street reform is working. first, our financial system is safer, stronger and more resilient. before this law was enacted many financial institutions were undercapitalized, overleveraged, and focused on short-term profit. the incentives were to take

too much risk and it turned out that a significant portion of the risk was ultimately borne by customers, creditors, and taxpayers. wall street reform required banks to manage the business is more prudently and the maintain sufficient buffer so that they could bear the cost of there own failure. during the financial crisis this burden was born by others through private loss of public action. going forward financial reform made clear that that had to change. one of the most significant enhancements is the requirement the banks or more capitol. the additional capitol serves as a shock absorber allowing banks to better whether economic downturn. too often we here well-characterized it well-characterized incorrectly is money the banks hold back and pile up on the sidelines and more listless lending, but the opposite is true. the bank with insufficient

capitol cannot land. bank shareholders have added another 600 billion in capital which is $600 billion more than would be available to those unexpected losses. during theduring the crisis the largest, most complex financial institutions often held the least capitol. their distress threatened the stability of other firms to address the danger posed wall street reform created a tiered and tailored regulatory framework that applies differently to the largest, most complex forms. the regulationthe regulation of all the nations nearly 7,000 banks was approved by wall street reform. only the 31 largest firms with more than 50 billion assets are subject to enhance. heightened requirements heightened requirements include capitol liquidity, living wills, and stress tests designed to ensure that our largest financial institutions can weather severe storms and continue lending to support the economy. wall street reform recognized that risks to financial stability are not

confined to traditional banks. in 2,008 no government entity was accountable for looking across the broader financial system and over the horizon to ask tough questions and monitor emerging threats. there was inadequate regulation of large interconnected non-bank financial firms such as aig and lehman brothers and no accountability to identify and respond to risky practices the balloon across the system. butbut several of these companies experiencing financial distress in the lead up to the financial crisis bishop the stability of the system and damage the economy broadly. to address these gaps in our regulatory framework wall street reform created the financial stability oversight council. they bring together federal and state regulators to monitor the entire financial system and identify and respond to threats to financial stability. the approach has been data-driven and deliberative and has resulted in greater scrutiny of potential risks

posed and a range of activities across the financial system. sincesince its creation they have made actionable recommendations to enhance financial stability and designated eight financial market utilities for additional oversight to help address the risks that they could pose. through the work of fs oc and agencies like the security and exchange commission reform has addressed risk and the money market fund industry. some funds were susceptible to runs. protections were needed. working to put in place additional reforms for these important financial products to keep taxpayers from ever having to step in to save the financial firm again wall street reform ended too big to fail as a matter of policy. regulators also modern,

commonsense tools to protect taxpayers in the event of a crisis or failure. regulators can regulators can seize large financial institutions and winding down in an orderly way. since we no the financial crisis do not respect national borders are also finalizing the knew international standard on total loss absorbing capacity for global banks at the g 20 this year and we have supported changes to financial contracts that we will help prevent fire sales and contagion at home and abroad in the event of future failures. ensuring stability and preventing excessive risk-taking is not enough. a functioning market requires transparency and the free flow of information to ensure safety and fairness which is why wall street reform tackled the faster is market which in 2,008 was notionally valued at more than 600 trillion. prior to reform derivatives were traded privately between two parties leaving market participants and policymakers unable to see or understand the market as a whole. the result was a massive web of invisible interconnections.

losses and potential losses from derivatives led the panic across the market. many market participants were highly leveraged and had to sell they're positions exacerbating the shock. today thanks to wall street reform derivatives are subject to a comprehensive regulatory framework, and many are centrally cleared and traded on exchanges were transparent platforms. transparency requirements are working other aspects of wall street reform as well. for example,. for example, the law now requires that hedge fund advisers register, live and report data to the extruded -- securities and exchange commission. the law seeks to improve corporate governance by increasing transparency. wall street reform created the office of financial research which informs the public by delivering high-quality financial data , standards, and analysis. this office is leading the development of international data standards, and the implementation of a global legal entity identifier

which we will make financial data easier to use and understand. as the system changes we must continue the lookout for knew risks and continue to monitor new dynamics and ensure that markets remain transparent and participants have access to clear and accurate information. safer bankssafer banks and more transparent markets are essential, but they are a means to an end. a financial system that supports a growing economy. before wall street reform many financial institutions and lost sight of his purpose. reformreform encourages banks to take a long-term view in investing decisions and to halt business strategies built around extracting unfair and sometimes hidden fees for mortgage borrowers by making short-term investments in the securities market. one of the cornerstones of wall street reform is the volcker rule the major component of which goes into effect tomorrow. the rule prohibits risky

proprietary trading at the london whale transaction while protecting the liquidity and stability of capital markets and safeguarding taxpayers allowing banks to provide core services to customers protecting core financial activities such as market-making, underwriting, risk mitigating, hedging and training in certain government securities. wall street reform did not just set out to repair capitol markets. it sought to make sure banks are invested in the success of the loans they originate. another cornerstone of reform is the requirement that a lender make aa reasonable good faith determination that the borrower has the ability to repay loan. this approach was to where in the years leading up to the financial crisis. many lenders during the housing bubble loaded mortgages with.and fees to get the compensation upfront for selling alone to a third-party encouraging lenders to steer borrowers

into expensive products when they qualify for lower cost options. these abusive lending practices and unclear underwriting standards resulted in risky mortgages that hurt consumers and ultimately threaten financial stability. wall street reform eliminated these predatory practices and extended protections to all home buyers while maintaining access to credit for borrowers under terms they can understand and afford. to ensure more qualified borrowers have access to safe and affordable mortgages we have been working with the fha and f hfa as they seek to address restrictions in the housing market and provide clarity to lenders on issues like put that risk and strengthen our resolve to pursue comprehensive reform of the housing finance system. reform hasreform has also brought greater fairness to credit markets by improving information. consumersconsumers now benefit from the mortgage disclosure forms which are shorter and less complex and

make borrowing simpler and more understandable. similar reforms have been adopted or are being developed for student loans, auto loans, and payday loans the effect of these reforms is that lenders must now focus on extending credit on fair terms and in good faith , outcompete other lenders by offering better terms not by finding a way to sell consumers products they do not need and can't afford. the independent consumer financial protection bureau, bureau, the 1st regulator solely dedicated to defending americans from financial fraud and deception, is focused on formulating and enforcing these rules of the road

. the work of reform is ongoing, constant, and we must be unyielding in our pursuit. the progress we have made many with each administration, congress generation if we are to avoid another financial crisis

we must fund our regulators so they can keep pace with changing markets. wall street reform increases the

scorch the responsibilities but anyway need a stable source of funding to conduct their work. congress should bring the budget in line with the regulatory peers and allow the agency to fund its operations using fees assessed in primary -- on the primary beneficiaries of their oversight. we also need to protect the ability -- to ask the hard questions and identify potential risks to the financial system wherever those risks reside. it's critical to understanding how new developments change the lapscape of the financial -- landscape of the financial system. today the financial system is growing more through the assets of hedge funds and pension funds and mutual funds than large complex financial instance constitutions. this means we must consider a dust kind of risk and be open to different kinds of policy responses. and we need to always be looking ahead, and asking, what are the risks of the future?

to make sure our financial system is safe. that's why we need to look ahead. and we must finalize important rules like the ones that raise standards on analysts who provide retirement and investment advice and the ones that fix compensation practices we have seen attempts to roll back key safeguards bid slipping complex provisions into the bills. this attempt to crip away at financial reform is unacceptable. this administration will strongly oppose these efforts. faced with bills that then to turn the clock back to 2008 and leave the american people vulnerable to another crippling crisis i will recommend the president veto in closing want to point out that in the aftermath of the 2008 crisis, we saw proof of what we have always known.

the american people are resilient and determined. capable and creative. fiercely independent and profoundly generous. rather than be disheartened. americans took the actions needed to emerge from economic catastrophe. they paid down their debts got an edcaution and expanded their skills. they chose to save up for new homes, start new families and secure they're retirement. they chose to create new businesses and new industry. and they chose to rebuild our nation on a new foundation and lead the world once again. robbed the world the ability of the -- around the world the of the u.s. economy the american people and our political process can bounce back and is admired and serves as an ideal to which others aspire. the purpose of wall street reform is to make sure our financial system is worthy of america's people. that's why five years ago we worked so hard to make wall street reform the law of the land and that's why today tomorrow, and far into the future we will work hard to

keep this law strong, both in statute and in practice. thank you very much. pleasure to be with you here today. [applause] >> thank you very much, secretary lew. please stay in your seats until the secretary left. thank you all for attending and those on c-span for watching. vice-president our web site regularly to stay on top of financial reform and making markets work better for everyone. and don't forget, if you're in the audience, take your copy of the report, and if you're watching on tv it's at our web site better markets.com. where all the other information is too. thank you very much. this concludes our program.