committee, i have the reoccurring frustration that there is a tend enis toy overlook the solution to that health care problem which is actually very well under way in the private sector already in places like gunderson and kaiser and mayo and intermountain and others which is to quote my ranking member turn our system, our health care system from one that is -- used in a different context. but inefficient and wasteful to something had a is healthy, lean, and productive. and because that's a cultural transformation, because it requires turning a few corners, because it requires an element as one day of experimentation and innovation, it's not something that lends itself to scoring. and scoring is always the coin of the realm in the budget discussions. so what i urged you and our off

the record meeting when i urged you again here today is as you're discussing this problem, please don't overlook that element of a potential solution which would not only help with medicare and medicaid costs into the future, but help would health care cost as cross the board which are burdening our famili the entire american economy. that's my worry. because you can't score it, ca a systemic nature, we tend not to talk about it. simpson and bowles came here. yeah, absolutely critical. rivlin and domenici came here, you're right, krit about it because you can't score it. please don't let the fed be a place in which this message gets lost because you can't score it. mr. chairman? >> well, senator, i actually spoke about health care cost as a major fa today. and i agree with everything

said. we have a system that is excellent in a lot of dimensions and less than ndllosts a lot. and finding ways to control the costs is absolutely essential. not just to the federal budget although it's critical to the federal budget but as you say, for broad economy. and we've had numbers -- a number of meetings that brought in kmests to talk to them about what the approaches are. of course, there aren't any, again, am approaches. one principal which might be set the stage for discussion is that one way of looking at our system today, we have a fee for service system and third party pay. there is nobody who's making the economic decision about the effectiveness of care. and that's an essential element of an effective system. there are many ways to address.

that but that's one of the issues. >> thank you. i appreciate you coming in. we'll let you go. could i have two minute more? >> absolutely. >> i just would like to -- if we can show on the screen some of the numbers. this goes back two administrations. but the numbers indicate that even though unemployment rate looks like it's moving down and maybe that number on the right moved up a little bit, we are still having fewer people working today than in 2001. and that is pretty significant since the population in the working age has increased. would you agree? >> couldn't agree more. >> and then the other chart is

the labor participation rate which is looking at the percentage of people in the working age cohort who are working. and that is a steady downward trend. and all of us need to be thinking about how to do that. i think one factor we talked about is depth. it may be having a crowding out. but if we can think of ways to increase productivity without increasing our debt, would you not agree that would be important. and if these trends continue, it would indicate that the united states is weakening as a nation economically? >> well, some of these trends are demographically related one way or another. but clearly, if we increase opportunity, more people will want to come back out of being out of the labor force and come back into -- the unemployment

rate is based on a number of people actually implying. but the number of people who dropped out is significant and these figures show that. this number right here is based considering the demographic and age factors. it says within the cohort of people that should be within the working age, we've got fewer working and all of us need -- both parties need to focus on that. it's one reason the middle class is feeling a lot of pain right now. >> well, let's reflect on the fact that there is a long way left to go. we have gone from an economy that was losing over 700,000 jobs a month by the administration took office to one that gains nearly a quarter million in the last report. so there's a lot left to do. but things seem to be getting -- we're adding jobs. >> you have to add more than how many that actually have gained

on that chart right there. how many are added? do you know off hand? the number of people that are added to the cohort? if you don't add at least that number of jobs, you're falling behind? >> the numbers -- normally you need to grow 2%, 2. 22 2.5%, 110,000 jobs a month to keep it stable in terms of the unemployment rate. >> we're above that now. >> yeah. >> thank you very much, mr. chairman. we prappreciate your testimony. >> thank you. snifrment

there are two meetings taking place on the keystone pipeline that is expected to route oil from canada to texas. the meetings taking place today. a house energy and commerce panel is marking up legislation directing the federal energy regulatory committee to approve the pipeline within 30 days. the senate finance committee will be meeting on the pipeline this afternoon. that house meeting is in recess roogt now. we do plan to bring you live coverage whether they resume. that will happen about 12:30, about 20 minutes from now.

while we wait for that to get under way, we'll bring you remarks from earlier today from ben bernanke as he talks about the economic outlook for this year. >> on page four of your statement, you had testified that the current estimates of the longer run, normal rate of unemployment is between 5.2% and 6%. how does that compare to unemployment during the go-go years of the 1990s? unemployment did reach below that in the 2000s as well. we're concerned that over the past few years that there has been some modest increase in the sustainable rate of unemployment.

one of the factors contributing to that is the fact that as i mentioned in my remarks that about 40% of the unemployed have been unemployed for six months or month. and those folks whose skills, it's more difficult for them to find steady employment in the longer term. i would like to emphasize that in estimating that sustainable long-run rate of unemployment, we in no way are saying this is a desirable state of events, state of circumstances. other policies affecting the labor market, fiscal policy, trade, all kinds of other policies could affect and bring back that sustainable rate of employment. i hope congress will consider ways to address that problem. >> we've started to see a

revival of the manufacturing sector. 50,000 jobs added last month. is there anything that you would suggest to do to hasten the return of the manufacturing jobs? >> with, the recovery in the manufacturing sector is an encouraging development. it led this recovery very significantly. one reason that it's doing so is that american manufacturing have become increasingly competitive on the global stage. as emerging markets and other countries grow quickly, they represent a source of demand for our manufacturing goods and our services. so clearly maintaining open trade with other countries and maintaining those markets is an important step. i think another area that is important is trying to insure that the u.s. remains a leader

in advanced education, research and development and technology and the like. because many of our manufacturing firms, for example, high-tech firms which are often clustered around universities are producing the most sophisticated, most technologically advance products. that is where we have an advantage in the united states. and maintaining our technological leadership would certainly be a boost to our ability to export. >> you know the decisions we're going to have to make coming up. and you know that there were all these attempts to get agreement between the white house and the congress last year that did not make it. there was one plan that a number

of us were even held a press conference. i think some 40 of us in the senate wanting the super committee to go big with a $4 trillion cut in the deficit over the next ten years. you would recommend going forward, since all of that failed, steep cuts that only hit at a happenndful of the safety programs. or do you believe we should place more on reducing future deficits over the long term in a more broadway while being fiscally conscious of the recovery efforts in the near term? >> mr. chairman, i would support being aggressive. a number like four trillion was the cbo's estimate of what would be needed to stabilize the

ratios over the next decade. that is an important objective, obviously. but i would like to urge the committee not to be solely attentive to the cbo with that. most of the problems in our fiscal path arise after the next ten years going out 15, 20, 30 years as our population ages and health care costs rise and so on. so what i would advocate is, you know, looking broadly. having a broad base discussion. but in particular, looking at the ability over the long run. i think that's going to take a lot of work on the part of congress. it's really not my place to make detailed recommendations about the specific components of the budget. but i do urge the congress and i

heard many people on this committee express the same thing that we need a long term plan to put our debt to gdp ratio, our jefr all burden on a sustainable path. >> thank you. >> thank you, mr. chairman, and chairman bernanke. thank you. your remarks have been very insightful. and we all have differences of opinions. i think you're pretty close to what we need to be doing. and we value that. i would yield to senator grassley. >> personal note, i want to compliment you on your movements towards transparency. do of that and do it not just for the sake of letting people know about the economic impact of your policies. so that there's not -- so that there's not the obscurity that

exists. but to do it for the purpose of educating the public more about the important role of the federal reserve. you're too important for people to think that there is some conspiracy aspect to everything the flal the federal reserve does. this comes up too often in my town meetings. the more you can tell people about what your role is very important. my xwe baquestion is based upon congress fails to act on january 1st, 2013, our nation is going to see the largest tax increase in the history of the country and people don't understand this. that is going to happen even without a vote of congress. the congressional budget office estimated the economic impacts of this tax increase along with a few other policies, cbo estimate that's the unemployment rate end of 2013 could be as

much as 2% higher and that the gtb -- gdp growth could be as much as 3% lower. do you agree with cbo that the failure to prevent this tax increase will have a serious negative impact on our economy in terms of gdp growth and unemployment and, secondly, if so, at what point in 2012 will the uncertainty of the tax increase begin to hinder economic growth? >> senator, first, thank you for the comments on transparency. on the role of the federal reserve, i have agreed to give a series of lectures at george washington university next month as part of the class. i'll be talking exactly about that issue. i agree basically with the cbo's analysis w no action taken on january 1st, 2013 between expiration of tax cuts, administration and a number of other measures, there is a very sharp change in the fiscal stance of the federal

government. which by itself would -- with no compensating action would indeed slow the recovery. cbo predicts a 1.1% growth and increase in unemployment in that year. that is based entirely on their current law assumptions. so they're assuming that that will take place. so i want to be very clear that i in no way stepping back from my strong advocacy of maintaining fiscal sustainability longer term. it's krcritically important tha whatever actions are taken to mitigate the short run impacts of some of these changes that they be combined with a credible plan for longer term return to sustainability. but i think there is a concern there that this very sharp change in the fiscal position in a very short time would -- might slow the recovery. i don't know exactly when the uncertainty would become a

factor. but surely, as we get closer to january 1st and congress is not given a clear road map for how it plans to proceed that would certainly affect planning business decisions, household decisions as they look ahead to the next year. >> okay. my second question will have to be my last one. you recently announced that the federal open market committee's goal of the inflation target of 2% core inflation currently stands above the fed's target at 2.2%. separately you also announced that the federal funds rate will likely be held near zero through 2014. this question come from the point of view that you said if there is a tradeoff between the decision making on unemployment and on inflation, at least as i read it, unemployment would have a higher priority. is the federal -- is the fed sending a signal that keeping inflation in check is a secondary priority to achieving full employment and to what extent is the fed willing to act

should inflation continue to rise? >> senator, it's true that a 12-month backward look at inflation shows inflation a bit above 2%. but as you look forward and as the fact that the energy price increases last year have not reoccurred, our projections are that inflation is going to remain he is subdued, below our target going into 2012 and 2013. so our best -- monetary policy works with a lag. we have to think about where inflation is going to be, not where it's been in the past. inflation has been averaging two years aefr 2% a year over my tenure as chairman. we expect it to be at 2% or below in the next couple of years. so we think that is consistent with the policy. now i want to say there is a priority for maximum

unemployment. we take a balanced approach. congress gave us a duel mandate. we work to bring both sides of the mandate back towards the target. the main goal of that statement is not to announce any change in policy. the main goal is to give greater clarity about how we define the objectives. but we are certainly going to be working to bring both parts of our mandate towards desired levels. >> i think it's good you're going to the university of george washington university. but if you'd want to am could to the university of northern iowa, i'd be happy to arrange it for you. >> thank you. it will be streamed online. it's open. >> thank you very much. >> thank you, senator grassley. >> thank you, chairman nelson. thank you, chairman bernanke. i want to ask you more about the shock to the economy that you have been discussing. you talk about the pace of the

recovery being slow and particularly for the millions of people who are hurting, unemployed, underemployed, and that all of this really comes together as part of a sluggish expansion that left the country vulnerable and in shock. so i can see plenty of shock. the payroll tax debate bogging down into a quagmire and talking about two months or another short term effort. we mentioned europe as another one. we mentioned the question of sequestration and, you know, to me, that alone puts a very negative spectacle out because it would mean that in a lame duck session of 2012 in congress, uyou'd see the flailig that you did after 2010. so my first question to you on the shock issue is doesn't this

serve to shock our economic system just to have all this delay and week after week of bickering and inability to get decisions on the payroll taxes for others? isn't that in and of itself a shock to the system in term of what it does to business confidence and predictability and uncertainty? >> well, policy uncertainty is certainly one of the things that businesses complain about. it makes it harder to plan. you know, we face the same issue as regulators with regulatory uncertainty. and, obviously, there is greater clarity. it would be helpful to the economy. >> and is it fair to describe that as yet another shock to the system? because to me, everything i've been trying to do -- i'll get to tax reform in a minute. we have to try to figure out how to force action early.

because when you don't, what you're most likely, at a time in the sluggish expansion, is to see the shocks and predictability and the like. so it fair to say that the delay in this kind of climate, payroll tax issue worked out and others, that that in and of itself is a shock to the system? >> well, i would cite the example of the debt ceiling debate last summer which was clearly a shot. very pobbly effect consumer confidence and financial markets. more generally, loss of confidence that agreement will be reached or uncertainty about what agreement will be reached is a negative for con stance. >> let me ask you about the question and the antidote to economic shock or the cushion, the kinds of cushion that started the road, predictable, more certain kinds of

opportunities to promote economic growth and tax reform strikes me right up at the top of the list. super committee, you know, we have senator portman has done very good work on this to get night the super committee. a lot of that work has been done now. i mean there are tough, tough political calls to be made, of course, to address this tax reform. but the principles are pretty clear. much of what we've done in 1986 cleaned out a lot of the junk, especially interest breaks, the hold down rates and keeps progressist. wouldn't long perm predictable tax reform be the kind of cushion that would help address the shock that you're concerned about from the economy? >> predictability is good and a good tax code promotes growth. most economists agree that a simpler, fair ir, brofarreifair

is better. wouldn't peace meal change it? again, you go to another round of temporary credit, temporary extensions, modifications to this provision, that provision. wouldn't that contribute to the uncertainty and the lack of predictability that make it hard for us to grow? >> well, senator, as you fully appreciate policy is complicated and sometimes not everything is feasible from a political point of view. but from an economic point of view, obviously, more comprehensive and clean this tax reforms or spending reforms can be, the more likely that they'll be good from an economic point of view and the more likely they'll reduce uncertainty. >> i think your points are well taken, mr. chairman. my concern is absent the comprehensive reform that i

think would be a strong cushion, the shock that you're talking about, i just hope that the country will see how important it is to steer away from yet more piecemeal kind of change that's grows a tax system more dysfunctional and don't give businesses and consumers the predictability they need to generate the growth that you are talking about. thank you, mr. chairman. good ben bettrnanke earlier tod. can you watch the entire hearing on our website in just a bit. we'll also have it in the entirety tonight on the c-span networks. in just a bit, we'll bring you live coverage of a hearing looking at a bill that is designed to force approval of the keystone xl poil pipeline running from canada to texas. that hearing is in recess at the moment. we'll take you there live once they resume. until then, a discussion on congressional earmarks from

today's "washington journal." >> some used earmarks droekt millions of dollars to federal money to projects that are near properties they own. it starts off like this. the u.s. senator from alabama directed $100 million to renovate downtown. the congressman from georgia secured $6.3 million in taxpayer funds to replenish the beach, 900 feet from his island vacation cottage. representative from michigankede lane to a bridge within walking distance of her home. 33 members of congress have districted more $300 million in earmarks, another spending provisions to dozens of public projects that are next to or at least within two miles of the lawmakers own property according to a "washington post" investigation. under the ethics rule, congress has written for self, this is both legal and undisclosed. the post analyzes public records in all members of congress and

compared them with the earmarks they sought for pet projects. most of them since 2008. as we go deep near the story, you can see a profile under the congress and look at the projects they have sent home to their own neighborhoods, their own areas of interest. we can look at one profile representative john w.overn, democrat of massachusetts. the post reports that during the past six years, he secured nearly $100 million in earmarks for an array of projects against the western massachusetts district ranging from bus terminals to phoenix byways. these days all the earmarks can be seen in amherst if you call itd a town where krntors are realigning a stretch of road leading to a new intersection near ham p speier college. it is funded by $500 million worth of earmarks is near property owned with