logic in the world, it's not going to do any good. you need to have respected islamic that can talk to them from their own point of view. when i spoke with they had people they captured before they commit the terrorists acts, they had them counseled by a clerk, who is respected and he says to them, why are you doing this, well, kill the enemy where you found them, he says, everything has its time and its place. muslims were per sec -- little

by little you send them back as agents for their intelligent service. i think you need to have somebody who is well versed that can sit down and -- and look at propaganda, counter propaganda. >> very important point. when we talk about the islamic state, again, you can defeat of some capabilities, but you cannot eliminate the ideology. some places like morocco they try to encourage dialogue and train even women to discuss this issue with religions from other

countries. it's a long process. i think the point that you made is a practical, a very important one. we are looking at the clock and the clock is ticking. i'm going to ask general gray to make the final remarkses for today's seminars. i want to add my thanks to what i think was a great panel today and certainly many, many very fine comments. i think, again, we have to remember that, you know, we are a great country and with great people in the united states, but there are other great countries in around the world, all of them have many pluses as well as minuses, all of them have

distinct cultures and distinct languages, as i've said in every seminars, unless we do a far better -- a far better performance in understanding what other people are doing, what they're thinking about and looking at these challenges that we face through their eyes as well as ours, we're not going to be successful as we have to be, and i think this is crucial. our strategy to go forward must be adapted, flexible. it must be on a high moral ground and all that type of thing. i get a kick about all of this on discussion on policy. we heard a very goodies cushion on policy today, every time how many define challenge, define terrorism, define what's legal

and it goes on and on and on. and yet, policy, i believe, is only a guide. you really do what you have to do when you have to do it for the reason you have to do it. i was known for violating policy many different times. i got put on report many times than you need to know about. we thought we were right, and i'm still around. [laughs] >> i think that when i grew up in the military, for example, we had a strategy of both acceptable and unacceptable acts and the like. they weren't good at all. you didn't like them. you didn't want to see them happen. you wanted to try to stop them. you can live with them. there were some that were considered unacceptable like nuclear attacks, et cetera, et cetera, that's when you go out to keep that thing from happening. one of the problems we had with terrorism, first of all, terrorism as i've said is a

tactic, a tactic and nothing else. you can't have a war against tactics and all that kind of thing. you can take actions so that it becomes no reason for them to do it anymore. in other words, they're not getting what they want out of it so they're going to stop. it's been around since we all know since the bible and it's going to be around in the next century as well. it was loaded, we were loaded with terrorist-type tactics in vietnam. in 1965 alone 1,000 chiefs were assassinated. that was terrorism to the first degree. i told a story many times in october, if you were with me you had a little vietnamese girl crying, her father was a chief and was killed the night before

and her arms had been severed at the el -- elbows. you never heard about this in the press and all that. they were out to lunch. the comments of rules of engagement, we have to forget all that kind of stuff. you don't need rules of engagement. the average fighting men or women, all the people in all the elements on national power they understand what's right and what isn't. you don't have to worry about that kind of thing. in 1965 we fired one million shells in south vietnam at the enemy. we killed 20 people by mistake. 20 friendlies and they were killed because south vietnamese tried to fire instead of actually knowing where the enemy was. and yet, you didn't hear those

kinds of things. combat is combat. it's tough. it's nasty. we ought to have a strategy that doesn't say too much about what we are going to do. what we are going to do is different in every situation. it's different because as i met the culture, climate, count -- country, etc. we can't handle all these things in one kind way of doing things. that's one of our great strengths. there are certain things that are unacceptable regardless of rules of engagement, collateral damage or anything else like that because it's totally unacceptable. that's the way it is. you're going to pay the price. that's the way we want to do it. we want to be quiet about it. we want to do what we think when we think we ought to do it, etc. progress -- problem -- prop

>> we are losing the war and it's a way of life and the enemy and all the people that don't like us, they're fueling this with the use of internet and social media. so we have to get smart about that kind of thing. >> i'm not going to say much. >> you want me to sit down? >> i'm not going to sit down so you better say it. we have to get out of here. >> very tough coming after al gray. i'm not going to say anything. i thought the minister had kind of shown us what the terrible dilemmas are.

the book was quite interesting. we have to make problems bigger. probably go beyond the episodes of hostage taking. you have to take as general gray said -- historical moment when these things place. yonah has made pretremendously aware of terrorism. but i agree with the general, i mean, terrorism is a tactic. we're really talking about ultimately kind of the political configuration of this world, and can we really tackle -- i'm a great behavior in the iran nuclear dear because when i'm not suggesting, i know it's going to happen, one of the hopes is that it will change the basic political configuration in

the middle east over time. it's the only way that we get the correlation of forces in turkey, iran and israel that we have a chance. then we could have the seminars, and i also agree with the general that, you know, each case will handle with good judgment. that isn't going to solve the world's problems. it makes me aware of terrorism and interested about underlying situations that create the conditions of terrorism. if i was israeli i wouldn't be as calm as being an american. what i am going to do is thank everybody else except al gray. >> i want to add my thanks to

his thanks. lets get out of here. remember that if there is an emt attack and we >> remember if there is an emp attack and we lose our create, to me that's an unacceptable act. whoever does that is going to lose far more than electronic grid if i have anything to say about it. thanks for being with us. >> thank you. [applause] >> this month marks the 10th anniversary of hurricane katrina which the gulf an east coast in late august forcing more than 1 million from their homes and taking more than 1800 lives. we appl

former federal reserve chairman ben bernanke said monday defense spending cuts could have an adverse affect on the u.s. economy. they spoke the brookings institution. this is 90 minutes. >> good morning, everyone. good morning. welcome to the brookings event. i'm michael o'hanlon from the foreign policy to grandpa, joined by ben bernanke and mark muro. markets with our metropolitan studies program where to dr. daley about defense and the defense sector more generally at its affect on the us economy and vice versa. there's a lot on the table. we are going to talk about everything from defense role

towards economic policy, effect on short-term growth to longer-term issues about defense role in aiding the development of research and develop technology, which defends can help the economy advice service but also the way defense spending is a part of her budget under budget deficit. it runs both ways. my job this morning as moderator first, we need a couple of brought considerations here. introduce them, ask a few questions i will spend have the time to do and then go to you for your questions. i think you all know beyond the broad interest in this question the importance of the subject right now, congress is soon to return home to washington to face the question of how to reverse the potential sequester or even shut down, and defense spending as part of the conversation. we are all watching presidential candidates, and for those of you

who are watching a lot of c-span these days this is not the iowa state fair. [laughter] none of us are running for president although perhaps one of us should be. we're going to talk about defense-related broad economic research and broader national competitiveness in an era when the although these issues, front and foremost in voters minds as they should be. let me before it introduce ben and mark, let me say couple more words to put defense spending in perspective. i'm going to try not to overdo the statistics. you can hear out loud without visual, not wanting to conjuring numbers, a couple of them would be useful. as you probably know, some of you, defense is now representing the defense sector, is representing a little less than 3.5% of our gdp. just under 3.5%, that's a

downward slope from about 4.5% at the very end of the bush years, early obama years when the wars were at their peak and are headed downwards now to perhaps 3% of gross domestic product at the very end of the obama presidency. projections would have it to slide further after although who knows what the world will bring, but the next president and congress will bring. by historical standards this is a modest burden on the u.s. economy. certainly compared to anything in the world war ii our post-world war ii era. in the clinton years we're also around 3% in the reagan years we been up close to 6% of gdp, defense as a fraction of overall national economic activity. in much of the '50s and '60s the figure was often 8%-10%. defense spending is to very big. it's still almost $600 billion per year. still about 15% of the federal budget, much reduced from

earlier periods but still a large fraction of the overall budget to be clear and to be sure. and, therefore, this is certainly one of the main ways in which the federal government interacts with the broader economy. if we frame things in those terms i think we begin to get a sense of the importance of the sector. a few more statistics and then for the real show. even the defensive zone all the more than 3% of national gdp it can be a lot more in certain parts of the country. that's one of things i know mark is going to talk about, and i will say why in just a moment. we're just across the river from virginia. virginia is the highest defense concentration or dependency of any state. 13% of virginia's growth state output is defense spending of one sort or another. when i say defense in this context i'm including intelligence community and i'm including also the nuclear weapons activities of the department of energy. not including veterans affairs, not including homeland security, just to be clear on definition.

although you can bring those into the discussion if you wish a little bit later on. here in d.c. and maryland defense is more like 6% of state or local economic output. so it's substantial. another way to look at it is in terms of defense role in high technology. in promoting manufacturing in research and development. and again here the defense sectors make sure of the national economy than that 3% gdp number would imply. so, for example, a national manufacturing, military procurement is 100 billion a year. national manufacturing output around 2 trillion, so 5% of national manufacturing output and a lot more in certain sectors like aerospace, space launch, some others will talk about today. one last way of looking at it, research and development. research and development spending isometrics defense-related activities are 20% of all national research and

development. that's probably overstates things are not going to bore you with all the details right now but it's probably fair to say as if much of overall national research and development, defense sector attributes, can be a tribute to maybe 10% of total activity in this domain. that's largely government money, also to some extent the money a defense contractors as they're looking to promote new ideas to the future. so as you can see there's a lot going on. the technology better issue could not only aerospace as i mentioned, cyber, propulsion, advanced materials, nanotechnology, a number of other things that are going to be central in our future national competitiveness more broadly defined. that's why today's subject are important and again we are grateful you have come out on a hot august morning to join us. mark, you've been at brookings

about ten years now. like ben he is a harvard grad in which a berkeley for his graduate work and spent time in arizona. sort of one of the up-and-coming states by many measures of advanced industry and i would wonder think we talk about today. he worked as a journalist and as a scholar in arizona before joining the metropolitan studies program. one of my favorite studies he's worked on a brookings is called launch explanation mark that it's about colorado and mutual in a space launch industry in ways in which national government, local government, public and private sector, universities can work together to further the competitive candidate for colorado already has. that's just a case study of the broader dynamics we will be talking about today. he's also done a good deal of writing on advanced industries more generally have attended and on green technology and a few other things. ben bernanke needs no introduction. we are very, very grateful to have him at brookings what he has been a scholar and i think studies at city. he was chairman of the federal reserve from 2006-2014. he and i were both born in augusta, georgia.

i won't claim i knew him then but i've known since the 1980s when he was a professor at princeton when i was a graduate student and he was one of the most supportive, collegial and encouraging professors back then and is personally has not changed in the slightest, despite the thing is achaemenid since that time. he was on the council of economic advisors prior to being chairman of the fed and% of the roles in the pedestal. he was a princeton -- to the 1990s essential as chairman of economic studies, economics department but also at the woodrow wilson school. his ph.d was at mit. for those of you who also have not yet discovered it you should check out ben bernanke's blog. it is one of the most entertaining and sometimes even tricks you into learning macroeconomics along the way so i would national i was reading to do his usual with alexander hamilton should be taken off the $10 bill and other a lot of fiscal policy and monetary policy in the process.

by the way the answer is no but i'm sure he will say more later on. he blogged about the washington national back in july and they shall have more to say about the subject as well. [laughter] but maybe not. before we launch into questions let me, we have the opportunity to thank ben. let me ask you to join me in doing that right now. [applause] >> i'm going to begin within. this is not a sneak preview of his book which will be i think, he wrote economic textbook and an essay on the great depression when he was a professor in an earlier period. and working with the fed here and to the local, on october 4 and it would be unsure much watched but to be different events about that. today is not one of them.

today i'd like to begin by personal thanking again for joining us with this discussion and ask you initially just have to think about the size of the defense budget and the appropriate, from an economic perspective? >> thanks for inviting me to speak on this important topic today. we have known each other a long time. but at princeton and i followed mike's work ever since then. i always found him to be one of the most thoughtful and all is right about national defense. also full disclosure, i'm not a defense expert i'm an economist and hope to bring that perspective to help us understand rules of the military of defense in u.s. economy. you asked about the size of the military and you said before whole bunch of numbers, total spending. those numbers are important,

resources been used in the national defense. i guess i want to start by being at the economic and saying those dollar figures on a message of a good measure of capability and potentiality. one number just to take the opportunity, one number that bothers me a lot is a journalistic tendency to say the trend extends more than the rest of potential competitors combined, therefore we're military secure. i think that's a mistake from a lot of ways. we have different goals, different needs. but in particular there's a problem of making comparisons across the country using exchange rate to try to evaluate qualitative distances. if i'm comparing the living standard of the united states to china, i don't want to look simply at exchange rate adjusted gdp per person. instead of what to do what economists call a purchasing power parity comparison, which is what you take into account that labor is much cheaper in china, therefore haircuts, for

example, are much cheaper and contribute much less to gdp but nevertheless any attempt to compare the standard of living of the united states and china needs to take into account those differences in cost. the same thing applies to the military, and the comparison of labor costs between u.s. and china is a case in point. did a little bit of work before the session to try to figure the relative numbers. we worked on this a little bit. we could find the u.s. military calculates that we spend a $110,000 for each active military member. we're talking now pay and benefits, not talking about training or equipment. just talking sort of the personnel cost. we spend about 90,000 per person for each civilian member of the defense effort.

in comparison, per worker, an urban worker in china earns about $9000 a year so i don't know exactly what the chinese personnel costs are but obviously a lot less than 110,000. such as an example of how looking at dollar figures, these figures can be deceptive. this is something, by the way this is something the defense industry that specials understand, the pentagon, state department, you find for example, under ppp comparisons between 45% of world military spending, u.s. military spending is more like a third of global spending. these comparisons are important to ultimately i think we should understand and i'm the right person to say this, economics can only take us so far. in the end, thinking that size of the military and a resource expenditures we need to think

about our foreign policy goals, and with of course long run of course long run budget constraints we boldly to face. but this is just a small pitch but think about things personal power disparity terms, utilitarian terms rather than $10. i think that's an important initial point to make. >> thank you. i'll come back to the defense budget a little bit later but let me ask you first about something you had to deal with in the last five, six years, which is defense spending coming down at a time when you're trying to figure out a way to get the united states out of the recession. how would those dynamics linked, defense cut complicated task, how much did they affect the we look at the problem? >> so defense spending, military spin is connected to growth, and

you are thinking specifically of what you call the keynesian demand side, how much does spending on military functions, how much does it affect the total demand in the economy. particularly in a situation where you have unemployment, high unemployment, a recession. standard textbook macroeconomics as increased spending will increase activity, by adding demand for goods and services. generally speaking i think it's best to keep the military preparedness goals separate from the short run cyclical considerations, not to say they are not sometimes important. the most obvious example was of course world war ii with this enormous national effort in world war ii brought the u.s. economy out of the great depression and had enormous impact on total output and lasted even beyond the war. a more negative examples would be the 1960s when the vietnam effort contributed to the

overheating of the economy and lead to inflation that we saw 1970s. so it can be important but there's no sense necessarily that the changes in defense spending will be, move in the direction you would want from a clearly cyclical point of view. recently military spending is not a much smaller share of gdp than it was in the '40s or in the '60s. the effects are much smaller but they were mildly negative i think in the last few years, starting around 2010 the decline, the drawdown in military spending were a negative in u.s. gdp growth up to a point of three or four-tenths of growth in gdp. not enormous but noticeable. that was in turn partly due to the drawdown of the wars in afghanistan and iraq, but also in part due to the deliberate

budget cutting that took place in 2010. in fact, the worst year in terms of adverse effects was 2013 which was a very negative year in terms of fiscal contraction and the effects on our economy. i guess i would summarize by saying, first, the effects on the demand side, growth, have been mildly negative. part of it was completely understandable. certainly you wouldn't want to determine the resources devoted to iraq and afghanistan to anyway by cyclical conditions. but the other part i think some was a self-inflicted wound. all these cuts were made for economic reasons which led most in the wrong direction that they were a mild negative economy go that was trying to recover. we'll come back to it i'm sure but that many other connections

between military spending and defense establishment and economic growth. but this particular narrow case of effects on total demand is less than just be because defense spending as a small part of the economy, but i think unwisely the cuts in military spending which were not motivated by defense needs the last few years were actually a negative in terms of our economic recovery. >> specific sectors and didn't into that in more detail of the national research and development. i wondered if your specific thoughts on which technology sectors were most important where defense does contribute or does this, we're talking earlier many people remember of course in previous areas defense had a huge role in creating advanced technologies, promoting everything from nuclear technology in the 1940s, helicopters, advance of jet engines, a number of other

technologies, invention of the internet, many other things. defense was crucial and, of course, nasa contributed as well. think more generally about the government role. today it is much more smaller faction just as a smaller fraction of gdp. do you think those areas are of particular importance? >> broadly, talking about the connection to demand, most important in medium and long-term the most important effects of military spending on these supply-side of the economy. that works to a number of different mechanisms including training and other things but by far the most important serving in the united states the linkages between defense, military, appropriations and broader trends. it's one of the major source of u.s. growth over time. we remain technological leaders from our national strength, and so, for sort of important is to understand the relationship between what the military is doing and what's happening in

terms of productivity and technology. let's specify that is a critical issue we need to understand. from an economist point of view there's a standard argument which says that the government ought to be conducting basic research. and that goes back to the nobel prize winner, larry summers uncle, another qualification he has, the argument basically is that those basic research, scientific research, may have tremendous economic returns but they are very hard for the site is, the engineers to capture because it's a basic, broad basic search. so there's a case for the government to subsidize that kind of basic research through grants or through direct activity and so one. so that's kind of the electoral case for government research. the fact is though if you look

at the competition of federally response research, most of it is not basic fundamental science. what you call mission related research. that is, rather than studying the basic properties of atoms, most of the federal funded research would be about how to incorporate our understanding of nuclear forces into a missile system, or whatever it might be. that's a more subtle question. given that we've much more focus on mission related research, as opposed to basic research, what's the connection the government does and what the private sector does. you pointed out federal united states is big, about 40% of total u.s. r&d, about half the military. it's been coming down but it's still a big component. if you look at this area, a lot of what you get is the anecdote,

but a lot of great stories going back to the manhattan project and so on but many examples of military r&d which has been very productive on the private sector side. example i like is laser technology, which was begun as a military application but there has since something like 55,000 patents related to laser technologies. the things that come out of that include laser surgery and bar codes and dvd players and whole range of things that come out of that. everyone is aware of the nuclear component, the winner of the internet, darpa and so when. obviously, there are plenty of examples where military technology has been extremely important for private sector growth and technology. that being said, economists have tried to identify channels and

there's been work in different directions. on the one hand, spending by the government can create capacity in the economy, create more training for scientists and engineers who can work both in military and nonmilitary areas. pay the fixed cost of underlying research. and a lot of compliments between -- on the other hand, you can think of ways in which military research is counterproductive. for example, a lot of it is secretive for classified reasons that can't be shared easily with the private sector. in some cases it uses up scarce resources, specific scientific resources and obvious if they're used up by the military they are not available for the private sector. so it goes in both ways. a fair summary would be the studies that have looked at the

empirical relationship between r&d spending of the military and r&d spending outside still a positive relationship your somewhat stronger than a substitute affects. every dollar of extra military r&d not going to displace a dollar of private-sector r&d, they probably add 20 or 30 cents because of the things i learned in the military application. i think that you want to make a case that u.s. military preparedness and spending have made a positive impact on u.s. growth, it would probably be through the r&d linkages and spillover which seem to be positive, seem to be beneficial. i think that's important finding and one that probably argues as innocent particularly more basic research which can the economic case is very strong.

but i'll just wrap up on this, i think though whatever you talk about the effect of some, then the program does have asked us to what is the counterfactual? instead of spending money on military purposes at the same money was spent on basic science of plate be a better strategy. but all else equal the evidence, the best thing to do for military r&d spending has had positive spillover on the private sector spending related subject, manufacturing. closely linked in with research and development but i want to ask your thoughts on the defense sectors role of national manufacturing as we all know and please correct me if i'm summarizing incorrectly that u.s. manufacturing output has been kind of small upswing lately, due to the shelf into revolution but over time certain number of manufacturing jobs have gone down because of

robotics and automation. throughout our adult life decline americans compared this in some industries and mark writes about that. to what extent does defense play into this? does it help counter the trend, is only going to be helpful in certain specific areas like aerospace? how do you think about the potential for the american manufacturing-based? >> it's important to understand why manufacturing jobs are going down and you touched on the robotics comment you made. the amount, the share of u.s. output that is manufacturing is actually not changed all that much over time. we remain every big manufacturing economy and exporter. but the number of manufacturing jobs has gone down a lot because productivity has grown so quickly that it is essentially takes far fewer workers to build an automobile today than did 20 years ago or 40 years ago. as a result with a lot of implications, the number of particularly lower skilled manufacturing jobs has been greatly reduced.

think about the relationship of that to defense, other than of course defense is indeed a major industry, one has to be onshore or most of it has to be onshore, i think that it's important understand again what's happening to u.s. manufacturing is not some sense in being gutted out. what's happening instead is that we are increasing productivity with a lower number of jobs created and also moving up the value-added chain. so we don't make a lot of simple manufacturer goods anymore. we make more sophisticated machine tools and specialized equipment and so on. that has a couple of consequences one of which is we are not heading back towards the manufacturing factor to provide jobs for low skilled people.

it's much more so that in the past and industry to provide jobs for higher skilled workers and higher paid workers. what that means is that the relationship between defense and u.s. manufacturing is probably mostly a complementary one but for the same reason i was talking about in terms of r&d, the extent that defense manufacturing leads to more sophisticated products and technological advance, it's going to probably support u.s. manufacture more broadly to some extent but it's not going to take us back to the world of the 1950s when you had assembly lines with hundreds of workers building a car. it is probably a mild positive. it's always a question of what the counterfactual is, what is the money going otherwise but it's not taking us back to the pre-technological revolution of days, much more labor-intensive manufacturing. >> back to the broader question about potential in the labor

market. you just touched on the half concerning manufacturing and production equipment or there's the direct employees of the department of defense to begin those people in this room know a quick reminder, there are three broad categories about -- active duty, less, 1.4 million. they are almost 800,000 full-time civilian employed by the department of defense, old time government workers but not in uniform and then there's about 900 some thousand in the broader reserve component of the to u.s. military, part-time soldiers sailors airmen and marines. so those three categories together represent a couple percent of the u.s. workforce. and, of course, how to think about defense role in the labor market? >> well, we are used to thinking of job creation as a good thing which, of course, it is, but you

want to avoid the mindset of your congressman who wants a base in his district. the creation of jobs for expenditure by the government, is creating jobs, yes, but the output of those workers in some sense, a second shooting to the standard of living. is contributing to a different set of outcomes. clearly the fact that we have whatever 1.4 million active duty soldiers is in some sense a cost. their services, they are important there, not saying they are too many or too few, but their services are being used for defense purposes that are not contributing to the private economy. we shouldn't be confused and say the more people we employ in a military the better. on one hand you are creating jobs. on the other in the output of

those jobs are not contributing to private-sector standard of living. it is a real cost and we have to bear the physical and economic burdens of a large military. may be good reason but it's a cost not a benefit. a related question, one that is important goes back to this issue by the linkages between defense spending and r&d is, when you see the army ads on television a common army, we will train you to get a computer scientist or something and to go out and so there's an important question, one look at, to what extent does army or military experience add to training and skills of those workers so that when they go back to the private sector do they bring with them skills and earning potential that otherwise would not have had? the extent that's the case for individuals, as a bit of an offset for the fact their services were not available to the private sector while they were in the military. there's been a lot of interesting studies that this

and of course in economics nothing is ever finally settled, the evidence appears to be to that there really is not an advantage. if you or, if you go into the military at age 18 versus identical person who stays in the private sector and takes a private sector job, 10 years later if you leave the military your skills and wages are not going to be quite a sight on average as the private sector person. one of the great studies, one of our colleagues at princeton who i taught in graduate macro, he did a great paper where he looked at people based on their draft lottery number. mine was 335 by the way, thank god, so if you had a very low draft number you had a high chance of being drafted.

if you had a high number do not going to be drafted. so by using that as kind of an estimate he was able to figure out how otherwise similar people fared in terms of their long-term labor market each experience. what he found was, people who went into the army and then came back out, that their skills and pay were a little bit below their counterparts for a while that overtime they would move back towards average. it could be well -- from the vietnam era was different from an all-volunteer military, and probably is some difference between having, being trained in combat versus being trained in electronic. there is some difference there but, unfortunately, there doesn't seem to be much evidence that the training implications are all that positive from the military. over all the labor market, the people who go in the military have similar or maybe slightly

worse outcomes. for example, if you are a veteran who left after 2001, your current unemployment rate is about 7.1, 7.2% as opposed to national 5.3%. if you're a veteran of any age your unemployment rate is lower than that. i think the best way to think about it is military takes our young people and uses them for good purposes but it's not adding much to the private sector through training or other experiences. last comment, there's an interesting area which has not seen much research which is worth looking at this irrelevant express of reservists versus longer-term, permanent station people. reservist on the one hand they don't leave the private sector so they can continue to keep network experience. on the other hand, their work experience is disrupted by being

called to duty. i think it's an important question that probably has not gotten enough attention, what's the right combination of an economic point of view? what's the right combination of active duty versus reservist, you know, military and i think that's a question we don't know the answer to yet. >> one last question for you this round. i may ask you later or let others in the crowd get out the issue of comparing the roles of fed reserve chairman to military and chief chairman for some of the sensitivities. we'll save that for later but before going to work want to ask you one more question draft economic session together, which is when you think about the nation's deficit which, of course, has come down but perhaps only temporarily and our debt is fairly big compared to gdp, and defenses role within that. what are your brought observations?

>> it's important to start with a couple of general observations. one is that deficit soared during the recession. of course, because tax revenues went down by so much. so the ratio of national debt held by the public through our gdp went from about 35% before the crisis and recession to about 75% today. a big increase. that has longer implications for our ability to service any kind of government provided expenditures including of course military. but the other thing, a couple of effects understand here point is that while there's a lot of talk about long-term problems of the deficit, they are long run, not the short run. a debt-to-gdp ratio entity is about 75% congressional budget office projects in about 10 years they will be 77%, to 35. deficits are down now to about

2.5% of gdp, pretty low. we are not looking at a big increase in deficits over the next 10 years or so. beyond that time the cbo has increased more significantly. the answer to the question why that's the case, one of the great aphorisms about federal government is the federal government is basically an insurance company with an army. if the insurance part -- the projections of big increase in deficit 10, 20 years down the road are mostly tied to the health care costs, medicare and medicaid, and are based on the projection that help the cause will continue to rise with a rapid rate we've seen over the last, 30 years. that turns out to be the keys in terms of long run deficit planning. if health care costs are not

growing so quickly in recent there's been some good news on that front, and deficits will not be a problem within our lifetime anyway, myself. but if health care issues continue to be severe thing that's going to be a constraint on long-term ability of the government to provide various services. but i think the bottom line to draw from this is that i think it was wrong, it was a mistake with the sequestration of those things that inefficiencies, there were these steps taken to correct the deficit in a very short run that probably had long run cost in terms of preparedness, in terms of canceling systems that were midway. i would just conclude by saying there's nothing in our deficit prospect that should make us distort our defense planning in the near-term and we should be making our decision based on medium-term considerations, what makes the most sense in terms of

efficiency for achieving our objectives. there's no reason for taking draconian steps right now that will have long run costly implications our defense posture just for deficit reasons. has longer an issue. >> very helpful. mark, i want to ask you a couple of questions. you have listened to ben and there's a lot on the table and i just wanted to ask you to react but also specifically to again bring back your interest on advanced industry and on some key geographic sectors in the united states where some of the partnerships are written about me and i'll defense as a player, just how would you observe some of the things a special issue of research and development, advanced manufacturing. >> thanks for having me. great to be here with ben and the whole foreign policy and economics study.

so right off i was just really appreciate the focus on what defense actually is here rather than some of the bumper stickers. i would just add to begin with, no doubt it's an important component everywhere, for the most part but i do want to make the point that those are 4000 bases out there and hundreds and hundreds of communities across the country, defense itself varies widely from place to place. i'm with the metropolitan policy program. we are very interested in subnational variation, and you touched on it but if you look at the projected defense purchases detail but industry and state, dod publication, you do get quite wide variation of the local importance of this economy. i think you touched on this a little bit. we don't think where defense

doesn't matter very much too often but, in fact, new york, oregon, minnesota, michigan, west virginia it's less than 1%. and then as you alluded to virginia, hawaii, maine, mississippi, d.c., alabama, kentucky, alaska, it's six-6.5%, so we're having a conversation. we need to have multiple conversation, talk about economics. it's not a uniform, it's not flat across space. it's spiky, hugely important in a short list of places, massively crucial in places like virginia, for instance, or kentucky, colorado. so many places absolute right to be thinking about, very concerned about the local economic impacts, but many places not so much. i'm less worried about these

aspects of the economy, defense economy, than the extent to which u.s. military expenditures in the absence of systematic thinking about our economic base remain the nation's main driver or significance, significant driver has been suggested of high-value industrial activity, especially technology innovation. i think while the effects may be declining over time, we're talking about 70, 80, 90 years history of investments and experimentations that have left us with a critical sense, set of industries. we need to think about, and what i'm going to argue is that if we think about the size of the military posture, consider the rest of our economic strategy to ensure that we protect and build these industries.

my group here has identified what we call a nation advanced industries, 50 high r&d, high stem, stem intensive industries in normally enter the economy. that's not just a claim. inordinately high drive patenting, inordinately high drive innovation, or activity growth, exports until the. they really are, only about 10% of the economy in terms of employment but a significant driver of our global prosperity. so ranging from aerospace, semiconductors, medical device manufacturer but also a number of energy initiatives, renewables, fracking is critical here, and high tech services like computer systems.

so the point here though is, these reflect decades of productive interaction between the military and the private sector, including those secret pieces, including inadvertent spillovers of knowledge. they reflect decades of strategic capacity building, maybe inefficient, maybe not. and decades of directive dod procurement. so here i'm looking at a different channel of rejection. i'll go further. in the absence of consistent, urgent nonmilitary industry strategy such as competitors, whether it's germany, south korea, china has had, defense expenditures as a function something as a stealth international policy.

for better or worse, i'm arguing on balance they have been helpful to the defense budget has turned out to be the only place that one could argue for and deliver certain kinds of useful economic industry innovations. because somewhat beyond criticism for a long time. so in that sense since world war ii, it is argued been the nation's steadiest most creative supporter of technology progress. you know, i won't bore you with a lot of the anecdotes that i think ben alluded to, but world war ii, key source of funding for foundational scientific research, manhattan project created a national lab system, arguably one of our most important distributive networks in a core case of the innovation system. darpa with these experiments and

new formats of the blue sky inventive thinking, establishing in many respects started as an idea, promoting decentralized networks and innovation, you know, sophisticated kind of initiative. that is i think not just in spending or in science led to structural approaches, structural innovations. and thirdly, recent heavy investment in emerging fields whether it's computer science, materials science, solid-state atomic movements, data analytics, robotics, the list goes on. and then it's deployed huge procurement budget. this is a different, in this sense, not just early stage r&d but creating markets for new technologies.

my friend dan from arizona state university stresses special attributes of military innovation. this is a focused mission, enduring ties to the private sector, a distinctive feature of the military enterprise. and then this role as an early customer for advanced technology. whether it be nano for microprocessors, artificial intelligence software, data analytics, to some extent the military continues not just make the early investment but to be a discerning strategic early customer. so that's what i worry about. and the question isn't simply to maintain the military effort at its highest or perhaps inefficient to maintain perhaps

inefficient innovation and industry benefits, but it's about making sure that we look at the overall economy and consider other maybe civilian interventions that would parallel. ..

the defense budget is simply kind of planning to veto complaining. but i don't think it would be. [inaudible] we want to involve all of you in the discussion as well. it sounds like you are impressed by the way that it's contributed to the national economic growth but one of the common defense is coming down as a percentage in

the second i've read your reports on the industry and you're not that happy where you stand internationally. so am i correct that you would like to see keep apart complemented. >> of the economy point is somewhat agnostic. are we going to maintain an economic posture and an economic stance. but it is about a degree of public investment and public creativity in partnership.

hispanic couple highlights that you write about in colorado is the case study to follow up with and you could maybe tell a little bit about what is in that report. we came on the scene at a time of consternation in 2011 with concern about the discretion of the sequestration [inaudible] and professors of democratic governors are concerned about threats to the complex basis at

the high-end communications capabilities. it created the kind of side effect that can go up around the complexes not for economic reasons but that it's is the nature aerospace defense complex to then move towards the new commercial applications and they have begun to devolve away from a government contracting. so we arrived and looked at this especially and recommended the

toleration wherever possible to move into the commercial space where they have companies delivering thoughts and technologies that you are using on your cell phones into the services are being hung off of the other technology and launch capability we are allowing a significant commercial goal. so, the strategy and emerged and this is a state that wants to make sure that it continues that evolution and wants to protect the base also in the commercial applications and kind of diversification strategy. and i would hold this up as another factor which is going to

be the kind of response of the national actors around this and the state created the industry champion to watch the military budget but also into creating the 200 million-dollar x. operator for the small startups in this space. this is another factor that we are going to see at the national response in the divisions of labor and quite productive.

when you look at the regional development the question is how much of the motivation is basically a zero-sum game where parts of the country are looking for additional federal funding and ultimately at the expense. they have events involving the products in the universities. so i think that i agree with you that this is an example of the positive defense spending. so you take the regional benefits and the national international benefits and it's not always the same. >> and the desire to diversify in the movement and the

commercial adjacent opportunities and clearly that is the dimension in the base and the the accent in colorado seems to be on diversification. and we see this in many of the places. please identify yourself with one question if you could. >> thank you so much. do you think is if needed and do

you think that the new to the value exacerbates the u.s. trade deficit and is there any negative impact and will it lead to raise the interest rates and also is there an exchange? >> i'm going to say one thing any question he doesn't want to answer answer that isn't vertically needed topics might be relevant to the book launch but having said that you are confusing me with the chairman of the fed. [laughter] >> they are doing what we've asked them to do in the currency and that is we are seeing the

currency appreciate considerably because it pressure on the economy. this is moving that direction with the exchange rate and it's something the u.s. has asked for for a long time. hispanic what impact did they have on the high-tech industries and what have you found is the best way to leverage the skills and talents to contribute to the national defense and the economic growth. >> great question. let me provide one note of history which is to an extent in a number of circumstances, the military actually created the university departments, for instance in the computer science or investing and building the

high-level academic knowledge. so that has been another beneficial side of activities in this ongoing interaction between the big government in the form of the military and the private universities. so clearly it is building the skill sets and creating much of the fuel that is assisting. i think that it is absolutely crucial and if there's any continue to dynamic and we see the interaction between the defense early purchasing program development of people coming out of universities. as we look at this dynamic to

create these industries ecosystems as well as. >> at top universities in the world. we are interacting between the universities and the department sectors. we are working out those patterns and that's becoming a standard way of operating.

>> what is the situation in the middle east and also africa and [inaudible] one of the things speaking amateur here that one of the obvious things about warfare is how little of it is between the large national armies and how much is dealing with the information. so in the southern technologies you have to adapt to the

challenge. oil prices that have taken a dive to sustain that. [inaudible] it's some some of the answers but i am still stunned. second, i'm also somewhat surprised because we haven't changed the defense posture very much. each roll down and continue very modestly in a downward or action and by general odierno it might be to some extent the army is in the blunt blood of these reductions and that hasn't

changed. your question is primarily about the last year or two years. that would be the second point. my third and final is pushing in the other directions and most of the political energy is going to be to push in the right term and we will see the candidates advertising at least modest increases in defense spending recognizing that about ukraine. we don't have to be so rushed and concerned about bringing down the deficit to know what might be needed for national security purposes. but we will see growth proposed by the candidates.

the next thing that's interesting in washington is the sequester. there hasn't been a better effort to make sure we don't sequester at this juncture and it would be counterproductive. thank you for your time. i'm with u.s. news and world report. i like how you said they are not good at the uncertain investment [inaudible] to make the promising projects quicker and make sure that the projects don't continue longer than they need to because they

have a lifetime that need money really fast in the process can take too long for them. how do you think that the procurement process would be more like a startup model. >> i don't know the answer to the question but i would like to know the following. one of them is a complex activity. they way they managed this with congress is that at least ideally they've called an independent which means they get to make the decision about how its objectives are met. however the congress sets the objectives and ideally doesn't interfere in the interest rate policy are likely but it says we are charging you with achieving

price stability into the have to explain how they will achieve those objectives and a long-term perspective. we can't use the same model. so you can't really say to the pentagon you decide how to do it. we can't do that obviously. but you could move in the direction of congress and its oversight body specifying the particular objectives and goals in the capacity at once the military to have and getting more scope to the end partial commissions were other groups to sort of think some of those decisions that you're not having politically determined base locations and procurement decisions.

but we could live in the direction of the commission. so the example of having more independent objective analysis. so if there was more flexibility to the planners to meet their objectives subject to the constraints and so long that it would be more opportunity for them to have the flexibility that otherwise too much intervention in the decisions is blocking. >> first it is the mission oriented agencies that may provide the hint of where this could go with more focus on the actual delivered capabilities. i would also note in the defense courses, there have been successful experiment that the

cia ventured that's built on speed and in fact influencing other agencies and the private sector so i think so much has been spent and so much has been attested in the military history that it's almost like the answers are within the military system. >> the answer is starting to very in the reform for the department of defense in april and the undersecretary of defense i asked him how well do you think we are doing a.

it's so the u.s. army and the italian space and. at the cost overruns and delays are sometimes unfortunate that you produce a great system in the end. so the kind of things are those specific technologies are where we need to find better ways.

i will just begin by saying some parts of the problem are more serious than others and the overall system is not broken. there are parts of it that are broken in my judgment. it's been in the u.s. ability to project power into the economic powers. so in your view at what point did that become such an issue that actually impact your ability to predict the power? >> you said the u.s. debt?

i said earlier i didn't think that was right to distort your term of planning because of the deficit because it is a longer-term issue. it's a first approximation, whatever additional spending we do we have to pay for somehow and essentially the higher debt to gdp ratio. so i can't give you a number that is beyond a certain history of trying to pick the numbers where things will go wrong but i don't maintain 5 p.m. and we have to think about the long run policy in the resources and i

don't think we are at that point now that we should be distorting the decisions but we do need to think about what objectives are in the country in the and the policy and the military objectives and understand it is a complicated relationship between the growth in the relationships and we also know that we worked on the great power and it can become overextended to the military purposes to be very negative for the economy to object to power. so short run i think we are trying that in the longer term we have to think about the strength in our economy to make sure that we are not undertaking commitments globally that the economy cannot sustain in the

long term. >> i'm asking how you look at things around 20 of eight, 2009, 2010. obviously the main concern is to provide the second great depression. you try to find creative ways to save the economy but in our political science and foreign-policy they were writing how china was perceived and the perception was going even faster so to what extent did those enter into your respects? >> thinking about the short-term and the long-term one of the reasons we have so much doubt in the political arena they didn't

know if it was a bad recession so that is what is the long run capacity going to be and what we have seen this a lot, not all it was a recovery in the outdated employment. at the implications are in 20 of eight and in particular i did make this point consistently notwithstanding the numbers we were seeing 10% of the gdp.

in the short run we needed to give the economy a chance to recover before we started cutting so in the short run my advice was at the time let's let the economy recover in obviously at the same time we are thinking about the recovery in the contribution we also need to think about the long-run trade-off. >> we will take two at a time now to get two more questions before we run out of time. so why don't we meet with this chairman here and then respond together. there has been a push in the industry to raise the minimum wage to $15 for the full time

employee about $40,000 a year. in contrast the college education in the low 30,000 the military personnel is about 18,000 what you discuss how the minimum wage would impact the military cost especially with 1.4 personnel? >> can you talk about the consolidation in the defense industry and whether you think that is ongoing to order that comes consolidation lead the price of their own and adjust the economies of scale that would bring and how do you address those? >> on the minimum wage, how much

of that countries the local conditions in different parts of the country that wouldn't be very far from the work we do get into their parts might be very high out of employments of the military has to maintain the wages and having done a study i can the study i can give exact numbers but my impression is that the military pay is pretty competitive and they are able to impact good quality recruits and relatively skilled workers. so i'm turning to my colleagues on this one but it's not my impression at this point that maybe they are preventing the military from meeting its needs

so i'm not going to address the broader question. you are probably familiar with that into the last one looked at a typical person in uniform in the educational level and private sector is that about the 80th percentile but the lines for the housing and health care benefits and doesn't involve the calculation. that's not to say it's enough. it's whether they are doing enough. but in terms of the power and

the labor market so far the economic recovery you may have some recruiting issues that in the recent years we have to keep an eye on that very carefully. >> we have seen the calculus between places and consolidation and in certain places but i think the larger question is the structure to deliver the products and the question is about maintaining sufficient competitiveness and there has

been a lot of consolidation already. the question is whether it is the right spot. >> that's probably okay. we have basically two companies making a single consolidated effort associated with the nuclear two different states. so sector by sector we usually have a couple and we have a big decision moving about the long-range bomber. there are two main competitors, billing and lockheed are involved in that they are the companies making a lot into

other kinds of aircraft as well. northrop grumman make a lot as well but the future mandates to the large extent i would be somewhat concerned that that is the kind that you have to ask yourself and baby you are willing to pay a bit of a premium for the capability that you can find in the reasonable economic deal. now, the aircraft carriers don't do that because it is too much. and that is it for the country, and in the hope to deliver we have to say they do deliver well but they are not make her a pie that trend so this is where you do worry about the proposition and there is no perfect answer

and if we continue to have the defense budget is about the same or shrink a little you will have more and more of these to make and i'm still sorting through the dimensions of that. >> future science foundation. my question is getting back to the topic of the defense and the civilian economy. what do you think of the prospect of maintaining the input we get from the defense and the manufacturing and bringing more of that kind of expenditure of the activity domestically such as expanding the role of the army corps of engineers and the size and scope or creating programs returning soldiers to engage in actual nationbuilding type of activities such that you close

the cycle of input and output but the final product is expended here itself in the infrastructure gap that we currently have. stomach i will go in the back. >> first you had all of your comments so far. i know the principle of the measures in the case that the budget gets to be a very serious issue in the gdp. i wonder what the problem of the sequestered the sequester that we heard following is that the problem now? that's in the problem of britain and the situation will give you what it wants in the principle of the catch and kerry.

that would make one last question in the final round. >> you spoke about the implications for labor and workers and you talked about how they trained workers and i'm curious as you look at the sort of long-term cutbacks or future increases in the defense spending what others would've implications does that have for the quality of the jobs for the low skilled folks are high skilled folks in the to talk about the different metro areas

in terms of that issue. >> on the first two questions i would point out we are doing well and it is an export oriented. most of the money in the budget is spent in the united states and just more room to look at another example and say you need to do better here but we also have to maintain a sense of fair trade because we are trying to persuade other customers and if you think about buying the bears does it cost to maintain the

culture so overall i am less concerned about the broader picture and i think it is an advantage for the american economy right now. we do more exporting than importing. there are some good debates to be had. so we are getting a lot. i think it is too much because i don't want to support the category but it's not so much for the reason that you mentioned that we had of course afghanistan where we will have to keep doing that for a number of years. not so much high-technology weaponry that a little bit of both, the ongoing help to israel but they make their own decisions about the weapons. and the gulf states by then with the money that they earned from the economy and the same thing

with their own revenues in different ways but they are capable so you can have good debates about the foreign-policy point of view to be getting as much money to afghanistan, to egypt, israel but we are asking very much right now but i don't think it is fundamentally a big problem. most depend on the defense industry and its running a lot of contracts with paying customers largely in the middle east and asia and europe already >> the last point about cutbacks going back to the question having a large military is an economic burden ultimately for the most part that impacts money

to be used but to the extent it has benefits i think we've identified a two-day under the spillovers martin was pointing out it seems easier to get some of these things funded in the context of the defense spending and it would be in a more general. let's rename technically competitive and that affects workers differently of course but it does affect the overall prosperity of the economy and ultimately most workers ability in the country to produce at a high level of productivity. we are reducing the reliance on the federal oriented r&d and it

is coming down as the share of total r&d. there is an economic case for the government support to basically search and service broad-based spillovers into the extended cut back at research that is something to be concerned about. >> on a parallel basis, the military anchor to the creation of the baseline work in the country and we are seeing the shrinkage of that. i think parallel to what he has been saying there's also a transition in the training foster both for the military, and i think it's an important site for the military but we've been arguing for the

competitiveness of the nation. the manufacturing base that we are seeing the technology site is now listed in a factoring-based to the extent it is not more competitive than it was even though it is not hiring so there is a tradition here about the trend for the defense budget and are there other sources for delivering. >> i think that we will recognize more topics so please

stay tuned. we have a full agenda. thank you for being here. as the candidate spoke the fairgrounds in the speak at the one register soapbox. this morning senator marco rubio

at 11:30 and governor john kasich at 5:00. wednesday )-right-paren he will speak at 11. friday afternoon at 2:30, senator ted cruz and saturday, republican governors chris christie at noon and bobby jindal at 1:00. join the conversation at #dmrsoapbox. next the cia general general counsel and assistant attorney general for national security on terrorist threats and with law-enforcement agencies are doing to try to protect the u.s.. the asp the aspen security forum hosted this conference. [inaudible conversations] >> good afternoon, everyone.

hopefully we can get everybody back from lunch. my name is chris young terry on the senior vice president at intel and a general manager for the intel security business. some of you may know it as mcafee. i have the pleasure to introduce the next panel entitled the role of the law and law enforcement in securing our nation. and in the justice department and the cia, we have to have the government agencies that are most engaged in preventing terrorists from attacking the homeland area but the challenge of securing the homeland has grown so has public scrutiny of some components of that effort including surveillance and detention of suspects. this panel is going to be moderated by ken at the associated press. before his work at eight p., he covered national security for the la times for usa today and the philadelphia inquirer where among his many interesting

assignments, he was both operating as an embedded and independent reporter during the iraq war. this topic is an interest to all of us and i'm looking forward to the subject and i would now like to turn it over to ken. ' >> thinks everybody. it is an honor to be here with the career public servants. to my left is caroline crass. her job includes writing on demand those like drone targeted the most sensitive intelligence issues most of which we cannot talk about today but we will try. before that she was the deputy assistant attorney general in the office of legal counsel in the department the department of justice and had many years of government service and is a graduate of the law school and stanford undergrad.

next is john carlin who we confirmed retired from the national security april 14. he's been in the surveillance of the counterterrorism, cybersecurity and he joined in 2011 after serving as chief chief of staff chief of staff and senior counsel to the former director bob mueller. he got his ba from williams college and i was on the football team which explains why i'm asking the questions and he's answering them. [laughter] so i want to open up a may be talking about the nature of the threats to the homeland, which has gotten a lot of discussion. and maybe you can start by talking because you are overseeing these efforts against homegrown radical. talk about what you are seeing and how the credit has changed. >> despite the introduction it's

great to be back at aspen. we are seeing a fundamental shift in the threats towards the homeland and what we are seeing is they've changed their business model. the business model now is to use the social media to target the young and vulnerable and those that are mentally ill and this is a shift from al qaeda from ipod to have a cadre of individuals. they tended to be older late 20s or in their 30s. they look to looked to plan for months or years to conduct large-scale attacks. in this business model is encouraging people to commit attacks wherever they are and then whether or not they have any other connections they will

claim credit for the attack so how does that reflect what we are seeing in the homeland? we've seen a dramatic increase in the number of arrests related to the threat. is that over 50 for the current all prosecutions for the last 18 months they tended to be fighters to go overseas to commit mayhem and more recently we are seeing individuals in the united states who want to conduct the attacks here at home and they are being encouraged to do so. and links to the fact it is the social media we are seeing a change in the demographics of those who are. it younger so we are seeing the need to rest around 80% of 30-years-old or younger and of those, about 40% are

21-years-old or younger and that is a serious problem we are confronting. we had a first public juvenile case. they are targeting our children and doing so where they stay these days it isn't in the playground on the street and if into the desert where they are forming the relationship online and in social media so that's why you hear such a concerted effort to increase the efforts both in the government and in the private sector to make sure the places are safe and not vulnerable to these trying to radicalize them. >> can you talk about how the cases are being dealt is it through surveillance, human hits, how do we find this? >> it is a combination thereof by law enforcement in the united

states and elements of the intelligence community overseas and with our foreign partners. it's not just america. and per capita it's smaller than the closest partners so that shows around 250 individuals in the united states have either attempted to travel to the region's and have returned if you compare that number to western europe is over 4,000 individuals and worldwide we are talking about 25,000 individuals who go over the fighters and the number continues to grow and that's not counting the number of individuals inspired by bees type of techniques. so that is what can be incredibly hard trying to find individuals in the basement at home and parents don't know but when they've gone on social

media they formed a new friend and that is the terrorists overseas who is very sophisticated that slowly walking them through the process of radicalization with the goal to get them to join the group for commit an attack at home so that means we need to get better at identifying where those come from animals or when we have legal practice being able to service the companies to identify the company needs to get better at making their platform safe to keep the terrorists off of them and it also means we need to get our message out to the community to parents and to the friends of those children and community leaders they trust to say it's not just whether you are seeing outside. you need to figure out who they are talking to. i want to come back to some of these issues issues but maybe you can talk about what the cia is doing to connect the actors

abroad with the idea of how your office fits into all of that. >> i want to thank you for moderating the panel then we have all the lawyers here. and to at the aspen institute for hosting this. it's really amazing the lineup as well but we've already seen as well as the lineup that we have coming. to step back for a minute in terms of how we work closely with john and his team and the fbi the way the agency is helping to confront the threat is through the foreign intelligence collection and that's one of our primary missions and all of the things we do have that link to them. unlike the prosecutors and the

fbi who worries about the rules of evidence when we are trying to get the foreign intelligence we don't have to worry about that rule where they have to be concerned about hearsay, we love hearsay. we love to get information from human sources such as one of the main ways we get intelligence. the operational folks have a tradecraft and/or get it - are good at getting people to talk to the reporters in the room. we don't have to worry that things like the chain of custody rules. you can imagine how hard it would be to apply that rule sets to the situation you have documents drop under the park bench. so the rules are more flexible. while we are working with human services what we are doing is less intrusive and so we are

working closely with the rest of the government to combat the threat posed. thanks in part to some of the reform we were able to share intelligence with the fbi freely as long as we have the purpose if you have for example the incident in the united states and the understandable desire to find out right away that connected to the foreign terrorist we can help the fbi find out in terms of whether we have any information already that might link that incident to an overseas group of actors and we can also go out and talk to the people we know overseas to get more information and try to help the fbi but for that. >> so they are not on the ground operating in the controlled areas. so how good is the coverage of isil writenow? stanek it is a challenge because of the difficulty.

we tried to take advantage of that to learn more about the man share that information - and share that information. >> the social media abroad the collection you can look at everything. >> we have a regimen of rules and it depends how the information was collected. but all of the information is either collected in the u.s. were concerning u.s. persons to the guidelines under executive order 12333 to approve the guidelines. it would be surprising to some but over 150 lawyers in the office were incredibly dedicated and one big area where they are careful to make sure that we are applying those rules

appropriately. >> can you walk us through the recruitment where isis is communicating in the united states and it starts out over twitter. >> what we are seeing is what the terrorist group will do is put their message out on the platform that they know are accessed by the largest possible. people are accessing this website. they banned are bombarded with thousands and thousands of messages every day of the again the agenda. we are familiar with the shocking images but what they are also doing is bombarding the same audience of micro- targeted

messages the same way advertisers do so they will show a handsome video showing out candy to children and in the corner will be the plan isil the way it might be with some other television show or brand. another video will show the armed soldiers of the armed terrorist with a gun in one hand and in the the other holding a kitten. and the other messages showing pending out candy to children and images of the life here in the caliphate. so we look to see whether they can in this large-scale bombardment of images can they get someone on the hook if they get someone they think is interested, but they will do what they will do if they will move off of public forum, and then again the u.s. built and provided technology with many positive purposes the children

are using to talk to each other. they will use those chat services that are encrypted to get into the one-on-one conversations with these individuals who may be very young. like i said, 80%, 30 and under. 40%, 21 and under and we are seeing juveniles and those are the individuals that are arrested inside the united states. all of the partners are seeing the kids hooked in by this approach and what they will do is then directly communicate in some of the individuals and encourage them along the path and try to get them inspired to commit the terrorist acts in the united states to kill soldiers and police officers and community leaders. but then what they will also do and this is a blended threat, it used to be a divide between those inspired by those that are with the terrorist group. now it will be some hybrid where

they get the general direction candidate by the specific date and then when they have the one-on-one conversations for the social media with the terrorist overseas they've never met in person to give specific guidance on how to combat that attack. and the problem that we are starting to face in this arena is that the agencies will come to my office and be able to meet the predicate to get a court order. we will see that its probable cause. we will get the court order or can get a court order from the judge. so when you go to service on the company, they are technically incapable of processing the order that means we can't, law-enforcement - they know they are talking to a person inside of in sight of the united states but they can't see what they are saying. ..